EMPLOYMENT AGREEMENT



      AGREEMENT made as of this 1st day of January, 1997 between CARNEGIE
BANCORP, a New Jersey corporation having its principal place of business at
619 Alexander Road, Princeton, New Jersey 08540 ("Carnegie") and Thomas L.
Gray, Jr., an individual residing at_____________________________________(the
"Executive").

                             W I T N E S S E T H:

      WHEREAS, Carnegie deems it to be in its best interests to secure and
retain the services of the Executive and the Executive desires to work for
Carnegie upon the terms and conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, the parties hereto, intending to be legally
bound hereby, agree as follows:

      1.    Employment and Term.

            (a)   Carnegie hereby employs the Executive as President and
Chief Executive Officer of Carnegie and Carnegie Bank, N.A.  (collectively,
the "Position") and the Executive agrees to serve in the employ of Carnegie
in the Position, for a term of three years (the "Initial Term"), which shall
commence on the date hereof (the "Effective Date"), and which, subject to
paragraphs 1(b), 1(c) and 1(d) hereof, shall terminate on the third
anniversary of the Effective Date.

            (b)   Unless written notice terminating the term of employment is
given by either Carnegie or the Executive not less than 90 days prior to the
end of the Initial Term or any renewal term, this Agreement shall be
automatically extended, on all of the terms and conditions hereof, for
successive periods of one year.

            (c)   Carnegie shall have the right to terminate the Executive's
employment hereunder prior to the third anniversary of the Effective Date,
but only for cause.  For purposes of this Agreement, "cause" means (i) the
Executive's willful and continued failure substantially to perform the duties
of his Position with Carnegie, (ii) fraud, misappropriation or other
intentional material damage to the property or business of Carnegie, (iii)
the Executive's admission or conviction of, or plea of nolo contendere to,
any felony that, in the judgment of the Board of Directors of Carnegie (the
"Board"), adversely affects Carnegie's reputation or the Executive's ability
to perform his duties hereunder; or (iv) Executive's willful violation of any
law, rule or regulation (other than traffic


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violations or similar offenses) or final cease-and-desist order issued by
or regulatory consent agreement with any banking regulatory agency having
jurisdiction over Carnegie or its subsidiaries.

      (d)   The Executive shall have the right to terminate his employment
hereunder at any time prior to the third anniversary of the Effective Date,
upon giving sixty (60) days' prior written notification to Carnegie.

      2.    Duties.

            (a)   Subject to the ultimate control and discretion of the
Board, the Executive shall serve in the Position and perform all duties and
services of an executive nature commensurate to the Position which the Board
may from time to time reasonably assign to the Executive.

            (b)   The Executive shall, consistent with his position as Chief
Executive Officer of Carnegie, be responsible for the management of Carnegie,
its organizational structure and its personnel, subject to the authority of
the Board.

            (c)   The Executive shall devote all of the Executive's time and
attention during regular business hours to the performance of the Executive's
duties hereunder and, during the term of the Executive's employment
hereunder, shall not engage in any other business enterprise which requires
more than five hours per week of the Executive's personal time or attention,
unless granted the prior permission of the Board.  The foregoing shall not
prevent the Executive's purchase, ownership or sale of investment securities
or of any interest in, any business which competes with the business of
Carnegie or the Executive's involvement in charitable or community
activities, provided that the time and attention which the Executive devotes
to such business and activities does not materially interfere with the
performance of the Executive's duties hereunder.

      3.    Compensation.

            (a)   For all services to be rendered by the Executive under this
Agreement, Carnegie agrees to pay the Executive a salary of not less than
$210,000 per annum during the term of this Agreement ("Base Compensation"),
payable in accordance with Carnegie's normal payroll practices as in effect
from time to time, plus an annual bonus (the "Bonus") equal to not less than
6.0 percent of the net after-tax income of Carnegie calculated before the
Executive's and other executive officers' additional compensation is deducted
and before any dividends or other bonuses are deducted, plus such other
additional compensation as may be awarded from time to time to the Executive
by the Board.

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            (b)   The Executive, in his capacity as a Director of Carnegie,
shall receive a fee of $750 for each Directors meeting and an additional fee
of $300 for each Committee meeting attended.  Said amount shall be increased
in the event the Board increases the per meeting compensation of members of
the Board.

            (c)   The compensation provided for in paragraph 3(a) hereby
shall be in addition to such rights as the Executive may have, during the
Executive's service hereunder or hereafter, to  participate in and receive
benefits from or under any bonus, stock option, pension, profit-sharing,
insurance or other employee benefit plan or plans of Carnegie which may exist
now or hereafter (collectively, the "Plans").

            (d)   If Carnegie terminates the Executive's employment
hereunder, other than in accordance with paragraph 1(c) hereof, prior to the
expiration of the Initial Term, Carnegie shall continue to pay the Executive
the Base Compensation and Bonus provided in paragraph 3(a) hereof, in
accordance with Carnegie's normal payroll practices in effect from time to
time, and maintain or pay for the medical and dental insurance benefits
provided in paragraph 3(d) hereof, for the remainder of the Initial Term.

      4.    Vacations.  The Executive shall be entitled each year to four
weeks of vacation time during which vacation the Executive shall continue to
receive the compensation provided in paragraph 3 hereof.  Each vacation shall
be taken by the Executive at such time or times as the Executive reasonably
determines, taking into account Executive's duties as set forth in Section 2
hereof and Carnegie's business needs at any particular time.

       5.   Expenses.  Carnegie shall promptly reimburse the Executive for
all reasonable expenses paid or incurred by the Executive in connection with
his employment hereunder upon presentation of expense vouchers or appropriate
documentation therefor reasonably requested by Carnegie.

      6.    Death.  If the Executive dies during the Initial Term of this
Agreement, this Agreement shall terminate and Carnegie's sole obligation
hereunder shall be to pay to the Executive's spouse, if such spouse survives
the Executive, or if not, to the Executive's issue in equal amounts, or if
none survive, to his Estate, (a) any accrued but unpaid compensation due the
Executive pursuant to paragraph 3 hereof to the date of the Executive's death
and (b) the Base Compensation and Bonus which would otherwise be payable to
Executive through the end of the 12-month period following the date of the
Executive's death.  Such Base Compensation and Bonus shall be paid in
accordance with Carnegie's normal payroll practices as in effect from time to
time.

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      7.    Indemnification.  Carnegie shall indemnify the Executive, to the
fullest extent permitted by law, for any and all liabilities to which the
Executive may be subject as a result of, in connection with or arising out of
his employment by Carnegie hereunder, as well as the costs and expenses
(including attorneys' fees) of any legal action brought or threatened to be
brought against the Executive or Carnegie as a result of, in connection with
or arising out of such employment.  The Executive shall be entitled to the
full protection of any insurance polices which Carnegie may elect to maintain
generally for the benefit of its directors and officers.

      8.    Change in Control.

            (a)   Upon the occurrence of a Change in Control (as herein
defined) followed at any time during the term of this Agreement by the
involuntary termination of the Executive's employment other than for "cause",
as defined in paragraph 1(c) hereof, or, as provided below, the voluntary
termination of his employment by Executive within eighteen months of such
Change in Control, the Executive shall be entitled to the benefits provided
under paragraph (c).  Upon the occurrence of a Change in Control, the
Executive shall have the right to elect to voluntarily terminate his
employment within eighteen months of such Change in Control following any
demotion, loss of title, office or significant authority, reduction in his
annual compensation or benefits, or relocation of his principal place of
employment by more than thirty miles from its location immediately prior to
the Change in Control.

            (b)   A "Change in Control"  shall mean:

                        (i)  a reorganization, merger, consolidation or sale
                    of all or substantially all of the assets of  Carnegie,
                    or a similar transaction in which  Carnegie is not the
                    resulting entity;

                        (ii) individuals who constitute the Incumbent Board (as
                    herein defined) of Carnegie cease for any reason to
                    constitute a majority thereof;

                        (iii) the acquisition by any party or group acting in
                    concert of control of Carnegie, within the meaning of 12
                    C.F.R. ' 225.2(d)(2);

                        (iv)  an event of a nature that would be required to
                    be reported in response to Item I of the current report
                    on Form 8-K, as in effect on the date hereof, pursuant to
                    Section 13 or 15(d) of the Securities Exchange Act of
                    1934 (the "Exchange Act");

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                        (v)  Without limitation, a change in control shall be
                    deemed to have occurred at such time as any "person" (as
                    the term is used in Section 13(d) and 14(d) of the
                    Exchange Act), excluding the trustee of any employee
                    benefit plans or any employee benefit plans established
                    by Carnegie from time to time, is or becomes a
                    "beneficial owner" (as defined in Rule 139(d) under the
                    Exchange Act) directly or indirectly, of securities of
                    Carnegie representing 25 percent or more of Carnegie's
                    outstanding securities ordinarily having the right to
                    vote at the election of directors;

                        (vi)  A proxy statement soliciting proxies from
                    stockholders of Carnegie is disseminated by someone other
                    than the current management of Carnegie, seeking
                    stockholder approval of a plan of reorganization, merger
                    or consolidation of Carnegie or similar transaction with
                    one or more corporations as a result of which the
                    outstanding shares of the class of securities then
                    subject to the plan or transaction are exchanged or
                    converted into cash or property or securities not issued
                    by Carnegie;

                        (vii)  A tender offer is made for 25 percent or more
                    of the voting securities of Carnegie and the shareholders
                    owning beneficially or of record 25 percent or more of
                    the outstanding securities of Carnegie have tendered or
                    offered to sell their shares pursuant to such tender
                    offer and such tendered shares have been accepted by the
                    tender offeror.

            For these purposes, "Incumbent Board" means the Board of
Directors on the Effective Date, provided that any person becoming a director
subsequent to the Effective Date whose election was approved by a vote of at
least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by members or stockholders was approved by the
same nominating committee serving under an Incumbent Board, shall be
considered as though he were a member of the Incumbent Board.

            (c)     In the event the conditions of paragraph (a) above are
met, Executive shall be entitled to receive the Base Compensation and Bonus
which would otherwise have been payable to Executive through the end of the
thirty (30) month period after such termination.  Such payments will be made
in accordance with Carnegie's normal payroll practices in effect at the time
Executive's termination.  In addition, Carnegie shall continue to provide
Executive with hospital, health, medical and life

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insurance, and any other benefits in effect at the time of such termination
through the end of such period. Executive shall have no duty to mitigate damages
in connection with his termination by Carnegie or its successor without cause.
However, in the event Executive obtains new employment and such new employment
provides for hospital, health, medical and life insurance, and other benefits,
in a manner substantially similar to the benefits payable by Carnegie to
Executive upon the date of such termination, Carnegie may permanently terminate
the duplicative benefits it is obligated to provide hereunder.

      9.    Additional Covenants.

            (a)     Confidential Information.  Except as required in the
performance of his duties hereunder, the Executive shall not use or disclose
any Confidential Information (as hereinafter defined) or any know-how or
experience related thereto without the express prior written authorization of
Carnegie.  Upon termination of his employment, the Executive shall leave with
Carnegie all documents and other items in his possession which contain
Confidential Information.  For purposes of this paragraph 9(a), the term
"Confidential Information" shall mean all information about Carnegie or
relating to any of its services or any phase of its operations not generally
known to any of its competitors with which the Executive becomes acquainted
during the term of his employment.

            (b)     Specific Performance.  Carnegie and the Executive agree
that irreparable damage would occur in the event that the provisions of
paragraph 9(a) hereof were not performed in accordance with their specific
terms or were otherwise breached.  Carnegie and the Executive accordingly
agree that Carnegie shall be entitled to an injunction or injunctions to
prevent a breach of paragraph 9(a) hereof and to enforce specifically the
terms and provisions of paragraph 9(a) hereof in addition to any other remedy
to which Carnegie is entitled at law or in equity.

      10.   Notices.  Any notice required or permitted to be given under this
Agreement shall be sufficient, if in writing and if sent by registered or
certified mail to either party hereto at their respective addresses set forth
above.  All notices shall be deemed given when mailed.

      11.   Assignability.  The services of the Executive hereunder are
personal in nature, and neither this Agreement nor the rights or obligations
of Executive hereunder may be assigned , whether by operation of law or
otherwise.  This Agreement shall be binding upon, and inure to the benefit
of, Carnegie and its permitted successors and assigns hereunder.  This
Agreement shall inure to the benefit of the Executive's heirs, executors,
administrators and other legal representatives.


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      12.   Waiver.  The waiver by Carnegie or the Executive of a breach of
any provision of this Agreement by the other shall not operate or be
construed as a waiver of any subsequent or other breach hereof.

      13.   Applicable Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey without
giving effect to principles of conflict of laws.

      14.   Entire Agreement.  This Agreement contains the entire agreement
of the parties hereto with respect to the subject matter hereof and may not
be amended, waived, changed, modified or discharged, except by an agreement
in writing signed by the parties hereto.

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under their respective hands and seals as of the day and year first above
written.

                                          CARNEGIE BANCORP


Attest:________________________          By:_______________________________  
                                            Bruce A. Mahon       
                                            Chairman of the Board


Witness:_______________________             _______________________________ 
                                            Thomas L. Gray


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