Exhibit 10.1


                     PEAPACK-GLADSTONE FINANCIAL CORPORATION
                  1998 Stock Option Plan for Outside Directors
            (As Amended and Restated by Directors on January 1, 2001)
           (As Amended and Restated by Directors on December 8, 2005)

--------------------------------------------------------------------------------

1.    Purpose

      The purpose of the  Peapack-Gladstone  Corporation  (the  "Company")  1998
Stock Option Plan for Outside  Directors  (the  "Directors'  Option Plan" or the
"Plan") is to promote the growth and  profitability  of the Company by providing
Outside  Directors  of the  Company  with  an  incentive  to  achieve  long-term
objectives  of the Company and to attract and retain  non-employee  directors of
outstanding  competence by providing such Outside  Directors with an opportunity
to acquire an equity interest in the Company.

2.    Grant of Options

      (a) The Plan will be  administered  by the  Compensation  Committee of the
Board of Directors (the "Committee").  The Committee shall consist solely of two
or more Non-Employee  Directors,  as such term is defined in Rule 16b-3(b)(3) of
the Exchange Act. The Committee  may, from time to time,  recommend the grant of
options to the Outside  Directors (for purposes of this Directors'  Option Plan,
the term "Outside Director" shall mean a member of the Board of Directors of the
Company not also serving as an employee of the Company)  under this Plan in such
numbers  and upon such terms as it deems  appropriate,  but all  grants  must be
approved by the Company's Board of Directors.

      (b)  Option  Price.  The  purchase  price  per share of the  Common  Stock
           -------------
deliverable  upon  exercise of such option  shall equal the Fair Market Value of
the Common  Stock on the date of the grant of this  option as  determined  under
paragraph  (d) of this  Section  2 and in no event  below  the par  value of the
Common Stock on the Date of Grant.

      (c) Ineligibility. An option under the Directors' Option Plan shall not be
          -------------
granted to any Outside  Director who at any previous time was an employee of the
Company  and in such  capacity  was  eligible to receive any options to purchase
Common Stock.

      (d) Fair Market Value.  For purposes of the Directors'  Option Plan,  when
          -----------------
used in connection  with Common Stock on a certain date, Fair Market Value means
the  average of the high and low prices of known  trades of the Common  Stock on
the relevant  date,  or if the Common Stock was not traded on such date,  on the
next preceding day on which the Common Stock was traded thereon.

3.    Terms and Conditions

      (a) Option  Agreement.  Each option shall be evidenced by a written option
          -----------------
agreement between the Company and the recipient  specifying the number of shares
of Common Stock that may be acquired through

<PAGE>

its  exercise  and  containing  such other  terms and  conditions  which are not
inconsistent with the terms of this grant.

      (b)  Vesting.  Each option  granted  pursuant to Section 2(a) hereof shall
           -------
become  exercisable in five annual  installments  of twenty  percent (20%).  The
first  installment  of options  granted  pursuant to Section 2(a) shall vest one
year from the date of grant and the remaining four annual installments will vest
on successive  anniversary dates, but only if the optionee continues to serve as
an Outside Director at such applicable  vesting date, unless otherwise  provided
in this Plan.  Notwithstanding  the foregoing,  the Committee may accelerate the
vesting and exercisability of any option or portion thereof at any time.

      (c) Manner of Exercise.  The option when exercisable may be exercised from
          ------------------
time to time in whole or in part, by delivering a written  notice of exercise to
the President of the Company signed by the recipient. Such notice is irrevocable
and must be  accompanied by full payment of the exercise price (as determined in
Section 2(b) hereof) in cash or shares of  previously  acquired  common stock of
the Company at the Fair Market Value of such shares  determined  on the exercise
date by the manner described in Section 2(d) above.

      (d)  Transferability.  Each option granted hereby may be exercised only by
           ---------------
the  recipient to whom it is issued,  or in the event of the Outside  Director's
death, his or her legal  representative  or successor(s) in interest pursuant to
the terms of section 3(e) hereof.

      (e) Termination of Service.  Upon the termination of a recipient's service
          ----------------------
for any reason other than  disability,  Change in Control,  death or removal for
cause,  the  participant's  stock options shall be exercisable  only as to those
shares  which  were  immediately  purchasable  by the  recipient  at the date of
termination.  In the event of death or  disability of any  recipient,  all stock
options held by such recipient,  whether or not exercisable at such time,  shall
become  immediately  exercisable  by  the  recipient  or the  recipient's  legal
representatives  or beneficiaries.  Upon termination of the recipient's  service
due to a Change in Control, all stock options held by such recipient, whether or
not exercisable at such time,  shall become  immediately  exercisable.  However,
shares of Common Stock  acquired  through the exercise of options  granted under
Section 2 may not be sold or otherwise disposed of for a period of one year from
the Date of Grant of the option.  For purposes of this plan the following  terms
are defined:

         (i)  "Change  in  Control"  for  purposes  of this  Plan,  a "Change in
Control" of the Company  shall mean an event of a nature that;  (1) any "person"
(as the term is used in Sections 13(d) and 14(d) of the Exchange Act) who is not
now presently but becomes the "beneficial owner" (as defined in Rule 13d-3 under
the  Exchange  Act),  directly  or  indirectly,  of  securities  of the  Company
representing 25% or more of the Company's outstanding  securities except for any
securities purchased by any tax-qualified  employee benefit plan of the Company;
or (2)  individuals  who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof 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  the  Company's
stockholders  was approved by the same  Nominating  Committee  serving  under an
Incumbent Board, shall be, for purposes of this clause (2), considered as though
he were a member of the  Incumbent  Board;  or (3) filing is made for  regulator
approval to implement a plan of reorganization,  merger, consolidation,  sale of
all or substantially all the assets of the Company or similar transaction occurs
in  which  the  Company  is not  the  resulting  entity  or such  plan,  merger,
consolidation,  sale or similar  transaction  occurs;  or (4) a proxy  statement
soliciting  proxies from shareholders of the Company,  by someone other than the
current  management of the Company,

<PAGE>

seeking   stockholder   approval  of  a  plan  of   reorganization,   merger  or
consolidation   of  the  Company  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  for or
converted into cash or property or securities not issued by the Company shall be
distributed;  or (5) a  tender  offer  is made  for  25% or  more of the  voting
securities of the Company.

         (ii) "Disability"  means the permanent and total inability by reason of
mental or physical  infirmity,  or both,  of an Outside  Director to perform the
work  customarily  assigned to him.  Additionally,  a medical doctor selected or
approved by the Board of  Directors  must advise the Board that it is either not
possible to determine  when such  disability  will  terminate or that it appears
probable  that such  disability  will be permanent  during the remainder of said
recipient's lifetime.

      (f)  Termination  of Option.  Each option shall expire upon the earlier of
           ----------------------
(i) one hundred and twenty (120)  months  following  the date of grant,  or (ii)
three (3) years following the date on which the Outside Director ceases to serve
in such  capacity for any reason  other than  removal for cause.  If the Outside
Director dies before fully exercising any portion of an option then exercisable,
such option may be exercised by such Outside  Director's  beneficiary,  personal
representative(s),  heir(s) or  devisee(s) at any time within the three (3) year
period following his or her death; provided, however, that in no event shall the
option be  exercisable  more than one hundred and twenty  (120) months after the
date of its grant.  If the Outside  Director  is removed for cause,  all options
awarded to him shall expire upon such removal.

4.    Common Stock Subject to the Directors' Option Plan

      The shares which shall be issued and  delivered  upon  exercise of options
granted under the Directors'  Option Plan may be either  authorized and unissued
shares of Common Stock or  authorized  and issued shares of Common Stock held by
the Company as treasury stock. The number of shares of Common Stock reserved for
issuance under the Directors'  Option Plan shall not exceed 35,000 shares of the
Common  Stock of the  Company,  no par value per share,  subject to  adjustments
pursuant  to this  Section  4. Any shares of Common  Stock  subject to an option
which for any reason either  terminates  unexercised or expires,  shall again be
available for issuance under the Directors' Option Plan.

      In the event of any change or changes in the  outstanding  Common Stock of
the  Company  by  reason  of any  stock  dividend  or  split,  recapitalization,
reorganization,  merger,  consolidation,  spin-off,  combination  or any similar
corporate  change, or other increase or decrease in such shares effected without
receipt or  payment of  consideration  by the  Company,  the number of shares of
Common Stock which may be issued under the Directors' Option Plan, the number of
shares of Common Stock to options granted under this Directors'  Option Plan and
the option price of such options,  shall be  automatically  and  proportionately
adjusted to prevent  dilution or  enlargement of the rights granted to recipient
under the Directors' Option Plan.

5.    Effective Date of the Plan; Shareholder Ratification

      This Plan was approved by the Board of Directors on February 12, 1998 and,
subject to first  obtaining  approval at the 1998 Annual Meeting of Shareholders
of the  Company  by the  affirmative  vote of at least 66 2/3% of the  shares of
Common Stock of the Company entitled to vote at the 1998 Annual Meeting,

<PAGE>

when accepted by the New Jersey Department of Banking.  This Plan is amended and
restated effective as of January 1, 2001.

6.    Termination of the Plan

      The right to grant options under the Directors' Option Plan will terminate
automatically upon the earlier of ten years after the Effective Date of the Plan
or the issuance of 35,000  shares of Common Stock (the maximum  number of shares
of Common Stock reserved for under this Plan) subject to adjustment  pursuant to
Section 4 hereof.

7.    Amendment of the Plan

      The  Directors'  Option Plan may be amended from time to time by the Board
of  Directors of the Company  provided  that Section 2 and 3 hereof shall not be
amended  more than once every six months other than to comport with the Internal
Revenue Code of 1986, as amended, or the Employee Retirement Income Security Act
of 1974, as amended,  or the rules  thereunder.  Except as provided in Section 4
hereof,  rights and  obligations  under any option  granted  before an amendment
shall not be altered or impaired by such amendment  without the written  consent
of the  optionee.  If  the  Directors'  Option  Plan  is  subject  to 17  C.F.R.
ss.240.16(b)-3  ("Rule 16(b)-3") of the rules and regulations  promulgated under
the Securities  Exchange Act of 1934 and an amendment would require  shareholder
approval  under  such  Rule  16(b)-3  or as  otherwise  may  be  required  under
applicable New Jersey and federal banking law, then subject to the discretion of
the Board of  Directors  of the Company,  such  amendment  shall be presented to
shareholders for  ratification,  provided,  however,  that the failure to obtain
shareholder  ratification  shall  not  affect  the  validity  of this Plan as so
amended and the options granted thereunder.

8.    Applicable Law

      The Plan will be  administered in accordance with the laws of the State of
New Jersey and applicable federal law.

9.    Compliance with Section 16

      If this Plan is qualified under Rule 16b-3,  transactions  under this Plan
are  intended  to comply  with all  applicable  conditions  of Rule 16b-3 or its
successors  under the Exchange Act. To the extent that any provision of the Plan
fails to so comply,  such provision shall be deemed null and void, to the extent
permitted by law.