Document:

FIRST SENTINEL BANCORP, INC.

                             1986 ACQUISITION STOCK

                                  OPTION PLAN

     1. PURPOSE OF THE PLAN. The Plan shall be known as the Pulawski Savings and
Loan  Association,  South River, New Jersey 1986 Stock Option and Incentive Plan
(the  "Plan").  The  purpose  of the  Plan is to  attract  and  retain  the best
available  personnel  as  officers  and  employees  and  to  provide  additional
incentive  to  employees  of  Pulawski   Savings  and  Loan   Association   (the
"Association")  or any present or future parent or subsidiary of the Association
to promote the success of the business.  The Plan is Intended to provide for the
grant of both "Incentive  Stock Options",  within the meaning of Section 422A of
the Internal  Revenue Code of 1954, as amended (the "Code"),  and  Non-Incentive
Stock  Options.  Each and every one of the  provisions  of the Plan  relating to
Incentive  Stock Options shall be Interpreted to conform to the  requirements of
Section 422A of the Code.

     2. DEFINITIONS. As used herein, the following definitions shall apply,

          (a) "Association" shall mean Pulawski Savings and Loan Association.

          (b) "Award" means the grant by the Committee or the Board of Directors
of  an  Incentive  Stock  Option,  a  Non-Incentive   Stock  Option,   or  Stock
Appreciation Right, or any combination thereof, as provided in the Plan.

          (c)  "Board" shall mean the Board of Directors of the Association.

          (d) "Common Stock" shall mean common stock,  par value $1.00 per share
of the Association.

          (e) "Code" shall mean the Internal Revenue Code of 1954, as amended.

          (f) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with paragraph 4(a) of the Plan.

          (g)  "Continuous  Employment"  or  "Continuous  Status as an Employee"
shall mean the absence of any  interruption  or termination of employment by the
Association  or any present or future Parent or  Subsidiary of the  Association.
Employment  shall  not be  considered  interrupted  in the  case of sick  leave,
military leave or any other leave of absence  approved by the  Association or in
the case of transfers  between  payroll  locations of the Association or between
the Association, its Parent, its Subsidiaries or a successor.

          (h)  "Conversion"   shall  mean  the   Association's   mutual-to-stock
conversion pursuant to the Regulations of the Federal Savings and Loan Insurance
Corporation.

          (i)  "Effective  Date"  shall  mean the date  specified  in Section 15
hereof.

          (j) "Employee"  shall mean any person employed on a full-time basis by
the   Association  or  any  present  or  future  Parent  or  Subsidiary  of  the
Association.

          (k)  "Incentive  Stock  Option"  means an  option to  purchase  Shares
granted by the  Committee  pursuant to Section 7 hereof  which is subject to the
limitations  and  restrictions  of Section 7 hereof and is  intended  to qualify
under Section 422A of the Code.

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          (l)  "Non-Incentive  Stock Option" means an option to purchase  Shares
granted  by the  Committee  pursuant  to Section 8 or by the Board  pursuant  to
Section 4 hereof,  which option is not intended to qualify under Section 422A of
the Code.

          (m) "Option"  shall mean an Incentive  or  Non-incentive  Stock Option
granted pursuant to this Plan.

          (n)  "Optioned  Stock" shall mean stock  subject to an Option  granted
pursuant to the Plan.

          (o) "Optionee" shall mean any person who receives an Option.

          (p) "Parent" shall mean any present or future  corporation which would
be a "parent corporation" as defined in Subsections 425(e) and (g) of the Code.

          (q) "Participant" means any director,  officer, or key employee of the
Association  or any Parent or Subsidiary of the  Association or any other person
providing a service to the  Association  who is selected by the Committee or the
Board, acting pursuant to Section 4(a)(ii), to receive an Award.

          (r) "Plan" shall mean the Pulawski  Savings and Loan  Association 1986
Stock Option and Incentive Plan.

          (s) "Related" means (i) in the case of a Stock  Appreciation  Right, a
Stock  Appreciation Right which is granted in connection with, and to the extent
exercisable,  in whole or in part, in lieu of, an Option and (ii) in the case of
an  Option,  an  Option  with  respect  to  which  and to  the  extent  a  Stock
Appreciation Right is exercisable, in whole or in part, in lieu thereof has been
granted.

          (t) "Stock  Appreciation  Right" means a stock appreciation right with
respect to Shares granted by the Committee pursuant to Section 12 hereof.

          (u) "Share" shall mean one share of the Common Stock.

          (v) "Subsidiary"  shall mean any present or future  corporation  which
would be a "subsidiary  corporation" as defined in Subsections 425(f) and (g) of
the Code.

     3.  Shares  Subject  to the  Plan.  Except  as  otherwise  required  by the
provisions of Section 13 hereof,  the aggregate number of Shares with respect to
which Awards may be made  pursuant to the Plan shall not exceed  94,038  shares.
Such Shares may either be authorized but unissued or treasury shares.

     Shares which are subject to Stock  Appreciation  Rights and related Options
shall be counted only once in  determining  whether the maximum number of Shares
with respect to which Awards may be granted under the Plan has been exceeded. An
Award shall not be  considered  to have been made under the Plan with respect to
any Option or Stock  Appreciation  Right which  terminates and new Awards may be
granted  under the Plan with  respect  to the  number of Shares as to which such
termination has occurred.

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<PAGE>

     4. ADMINISTRATION OF THE PLAN.

     (a) (i)  Composition  of the  Committee.  Except as  indicated in paragraph
4(a)(ii) below,  the Plan shall be  administered by the Committee  consisting of
three directors of the Association appointed by the Board. Officers,  directors,
key  employees and other  persons who are  designated by the Committee  shall be
eligible to receive Awards under the Plan, and all persons designated as members
of the Committee  shall be  "disinterested  persons"  within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934. A "disinterested  person" is an
administrator who at the time he exercises  discretion in administering the Plan
is not  eligible  and has not at any time  within  one year prior  thereto  been
eligible for selection as a person to whom stock  options or stock  appreciation
rights  may be granted  pursuant  to any Plan of the  Association  or any of its
affiliates.

          (ii) For the purpose of granting Awards to directors, the selection of
any  director  to whom  Awards may be  granted,  as well as the number of shares
subject to Awards, must be determined by a disinterested  committee,  as defined
in Rule 16b-3 under the Securities Exchange Act of 1934.

     (b) Powers of the Committee.  The Committee is authorized  (but only to the
extent not  contrary to the  express  provisions  of the Plan or to  resolutions
adopted by the Board) to  interpret  the Plan to  prescribe,  amend and  rescind
rules and regulations relating to the Plan, to determine the form and content of
Awards to be issued under the Plan and to make other determinations necessary or
advisable for the  administration  of the Plan,  and shall have and may exercise
such other power and  authority as may be delegated to it by the Board from time
to time. A majority of the entire  Committee  shall  constitute a quorum and the
action of a majority of the members  present at any meeting at which a quorum is
present  shall be  deemed  the  action  of the  Committee.  In no event  may the
Committee revoke outstanding Awards without the consent of the Participant.

     The  President  of the  Association  and such  other  officers  as shall be
designated  by the  Committee  are  hereby  authorized  to  execute  instruments
evidencing Awards on behalf of the Association and to cause them to be delivered
to the Participants.

     (c) Effect of  Committee's  Decision.  All  decisions,  determinations  and
interpretations  of the Committee  shall be final and  conclusive on all persons
affected thereby.

     5. Eligibility. Awards may be granted to officers, directors, key employees
and other persons. The Committee shall from time to time determine the officers,
directors,  key  employees  and other  persons  who shall be granted  options or
Awards  under  the  Plan,  the  number  to be  granted  to each  such  officers,
directors,  key employees and other persons under the Plan, and whether  Options
granted  to each  such  Employee  under  the  Plan  shall  be  Incentive  and/or
Non-Incentive  Stock Options.  In selecting  Participants and in determining the
number of shares of Common Stock to be granted to each such Participant pursuant
to each Award granted  under the Plan,  the Committee may consider the nature of
the services rendered by each such Participant,  each such Participant's current
and  potential  contribution  to the  Company,  and such  other  factors  as the
Committee may, in its sole discretion, deem relevant.  Officers,  directors, key
employees  or other  persons who have been  granted an Award may,  if  otherwise
eligible, be granted additional Options or Awards.

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<PAGE>

     The aggregate  fair market value  (determined  as of the date the Option is
granted)  of the Shares  for which any  Employee  may be granted  Options in any
calendar  year (under all Incentive  Stock Option  plans,  as defined In Section
422A  of the  Code  of the  Association  or any  present  or  future  Parent  or
Subsidiary  of the  Association)  prior to  December  31,  1986 shall not exceed
$100,000,  plus any unused limit  carryover to such year,  as defined In Section
422A(c) of the Code. The aggregate fair market value  (determined as of the date
of the Option is granted) of the Shares with  respect to which  Incentive  Stock
Options granted after December 31, 1986 are exercisable for the first time by an
Employee during any calendar year shall not exceed $100,000. Notwithstanding the
prior provisions of this Section 5, the Committee may grant Options in excess of
the  foregoing   limitations,   provided  said  Options  shall  be  clearly  and
specifically  designated as not being  Incentive  Stock  Options,  as defined in
Section 422A of the Code.

     6. TERM OF PLAN.  The Plan shall  continue in effect for a term of ten (10)
years from the Effective Date, unless sooner terminated  pursuant to Section 18.
No  Option  shall be  granted  under  the Plan  after  ten (10)  years  from the
Effective Date.

     7. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS. Incentive Stock Options
may be granted only to  Participants  who are Employees.  Each  Incentive  Stock
Option granted  pursuant to the Plan shall be evidenced by an instrument in such
form as the Committee shall from time to time approve.  Each and every Incentive
Stock Option granted  pursuant to the Plan shall comply with, and be subject to,
the following terms and conditions:

          (a) Option Price.

               (i) The price  per share at which  each  Incentive  Stock  Option
granted  under  the  Plan  may be  exercised  shall  not,  as to any  particular
Incentive  Stock Option,  be less than the fair market value of the Common Stock
at the time such Incentive  Stock Option is granted.  For such purposes,  if the
Common Stock is traded otherwise than on a national  securities  exchange at the
time of the  granting  of an  Option,  then the price per share of the  Optioned
Stock  shall be not less than the mean  between  the bid and asked  price on the
date the  Incentive  Stock  Option is  granted  or, if there be no bid and asked
price on said date, then on the next prior business day on which there was a bid
and asked price. If no such bid and asked price is available, then the price per
share shall be determined by the  Committee.  If the Common Stock is listed on a
national  securities  exchange at the time of the  granting an  Incentive  Stock
Option,  then the  price per share  shall be not less  than the  average  of the
highest and lowest  selling  price on such  exchange on the date such  Incentive
Stock Option is granted or, if there were no sales on said date,  then the price
shall be not less than the mean between the bid and asked price on such date.

               (ii)  In  the  case  of  an  Employee   who  owns  Common   Stock
representing more than ten percent (10%) of the outstanding  Common Stock at the
time the Incentive  Stock Option is granted,  the  Incentive  Stock Option price
shall not be less than one  hundred  and ten  percent  (110%) of the fair market
value of the Common Stock at the time the Incentive Stock Option is granted.

          (b) Payment.

               Full  payment for each share of Common Stock  purchased  upon the
exercise of any Incentive  Stock Option  granted under the Plan shall be made at
the time of exercise of each such  Incentive  Stock  Option and shall be paid in
cash (in United  States  Dollars),  Common  Stock or a  combination  of cash and
Common Stock. Common

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<PAGE>

Stock utilized in full or partial  payment of the exercise Price shall be valued
at its fair market value at the date of exercise.  The Association  shall accept
full or  partial  payment  in  Common  Stock  only to the  extent  permitted  by
applicable  law. No shares of Common  Stock shall be issued  until full  payment
therefor has been received by the Association, and no Optionee shall have any of
the rights of a shareholder of the Association  until shares of Common Stock are
Issued to him.

          (C) TERM OF INCENTIVE  STOCK OPTION.

               The term of each Incentive  Stock Option granted  pursuant to the
Plan shall be not more ten (10) years  from the date each such  Incentive  Stock
Option is  granted,  provided  that in the case of an  Employee  who owns  stock
representing  more  than 10% of the  Common  Stock  outstanding  at the time the
Incentive Stock Option is granted,  the term of the Incentive Stock Option shall
not exceed five (5) years.

          (d) EXERCISE GENERALLY.

               Except as  otherwise  provided In Section 9 hereof,  no Incentive
Stock Option may be exercised  unless the optionee shall have been in the employ
of the  Association  at all times during the period  beginning  with the date of
grant of any such Incentive Stock Option and ending on the date three (3) months
prior to the date of exercise of any such Incentive Stock Option. The Committee,
may impose  additional  conditions upon the right of an Optionee to exercise any
Incentive  Stock Option granted  hereunder which are not  inconsistent  with the
terms of the Plan or the  requirements  for  qualification as an Incentive Stock
Option under Section 422A of the Code.

          (e) Serial Exercise.

               No Incentive  Stock Option granted  pursuant to the Plan prior to
December 31, 1986 shall be exercised by any Optionee  while there is outstanding
(as such term is defined In Section 422A of the Code) any incentive stock option
which was granted prior to the date of grant of such  Incentive  Stock Option to
such  Optionee,  whether  pursuant  to  the  Plan  or  any  other  plan  of  the
Association.  In the event that any additional Incentive Stock Option is granted
at a later date pursuant to the Plan to any Optionee,  the instrument evidencing
any  such  additional   Incentive  Stock  Option  shall  include  the  following
provisions;

               "This incentive  stock option is not exercisable  while
               there is  outstanding  (within  the  meaning of Section
               422A(c)(7)  of the Internal  Revenue  Code of 1954,  as
               amended) any  Incentive  Stock Option which was granted
               prior to the date of the grant  hereof to the holder of
               this stock option to purchase shares of common stock of
               Pulawski  Savings  and Loan  Association  or any of its
               subsidiaries."

          (f)  Transferability.

               Any incentive Stock Option granted  pursuant to the Plan shall be
exercised  during any  Optionee's  lifetime  only by the Optionee to whom it was
granted and shall not be assignable or transferable otherwise than by will or by
the laws of descent and distribution.

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<PAGE>

     8. Terms and Conditions of Non-Incentive Stock Options.  Each Non-Incentive
Stock option granted pursuant to the Plan shall be evidenced by an instrument in
such  form as the  Committee  shall  from time to time  approve.  Each and every
Non-Incentive Stock Option granted pursuant to the plan shall comply with and be
subject to the following terms and conditions:

          (a)  Options Granted to Directors in Conversion.

               1,000 Non-incentive Stock Options were granted to each person who
was a director immediately upon completion of the Conversion at a price equal to
the fair  market  value of the stock on such date,  which price was equal to the
price indicated on the Association's final Conversion Offering Circular.

          (b)  Option Price.

               The   exercise   price  per  share  of  Common   Stock  for  each
Non-Incentive  Stock Option  granted  pursuant to the Plan shall be any price as
the Committee may determine in its sole discretion. Such price may be below fair
market value and has no minimum,

          (c)  Payment.

               Full  payment for each share of Common Stock  purchased  upon the
exercise of any Non-Incentive  Stock Option granted under the Plan shall be made
at the time of exercise  of each such  Non-Incentive  Stock  Option and shall be
paid in cash (in United States  Dollars),  Common Stock or a combination of cash
and Common  Stock.  Common  Stock  utilized  in full or  partial  payment of the
exercise price shall be valued at its fair market value at the date of exercise.
The Association shall accept full or partial payment in Common Stock only to the
extent  permitted by  applicable  law. No shares of Common Stock shall be issued
until full payment therefor has been received by the Association and no Optionee
shall  have any of the  rights of a  shareholder  of the  Association  until the
shares of Common Stock are issued to him.

          (d)  Term.

               The term of each  Non-Incentive  Stock Option granted pursuant to
the Plan  shall  be not  more  than ten  (10)  years  from  the date  each  such
Non-Incentive Stock Option is granted, provided that, in the case of an Employee
who owns stock  representing  more than 10% of the Common  Stock at the time the
Incentive Stock Option is granted,  the term of the  Non-Incentive  Stock Option
shall not exceed five (5) years.

          (e)  Exercise Generally.

               The Committee may impose additional conditions upon the right any
Participant to exercise any  Non-Incentive  Stock Option granted hereunder which
are not inconsistent with the terms of the Plan.

          (f)  Transferability.

               Any Non-Incentive Stock Option granted pursuant to the Plan shall
be exercised during any Optionee's  lifetime only by the Optionee to whom it was
granted and shall not be assignable or transferable otherwise than by will or by
the laws of descent and distribution.

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<PAGE>

     9. Effect of Termination  of  Employment,  Disability or Death on Incentive
Stock Options.

          (a)  Termination of Employment.

               In the event that any Optionee's  employment by the Company shall
terminate for any reason,  other than  Permanent and Total  Disability  (as such
term is  defined  in Section  105(d)(4)  of the Code) or death,  all of any such
Optionee's  Incentive Stock Options,  and all of any such  Optionee's  rights to
purchase or receive shares of Common Stock pursuant thereto, as the case may be,
shall  automatically  terminate on the date of such  termination  of employment.
However, no termination of an Optionee's Incentive Stock Options shall occur if,
and to the extent that,  the Committee  authorizes  the Optionee to exercise any
such  Incentive  Stock  Options  at any  time  prior to the  earlier  of (i) the
respective  expiration  dates of any such  Incentive  Stock  Options or (ii) the
expiration of not more than three (3) months after the date of such  termination
of employment, but only if, and to the extent that, the Optionee was entitled to
exercise any such  Incentive  Stock Options at the date of such  termination  of
employment.  In the event that a  subsidiary  ceases to be a  subsidiary  of the
Association,  the  employment of all of its  employees  who are not  immediately
thereafter  employees of the  Association  shall be deemed to terminate upon the
date such subsidiary so ceases to be a subsidiary of the Association.

          (b)  Disability.

               In the event that any  Optionee's  employment by the  Association
shall  terminate as the result of the  Permanent  and Total  disability  of such
Optlonee,  such Optionee may exercise any Incentive Stock Options granted to him
pursuant  to the Plan at any time  prior to the  earlier  of (i) the  respective
expiration  dates of any such Incentive  Stock Options or (ii) the date which is
one (1) year after the date of such termination of employment,  but only if, and
to the extent that,  the  Optionee  was entitled to exercise any such  Incentive
Stock Options at the date of such termination of employment.

          (c)  Death.

               In the event of the death of any Optionee,  any  Incentive  Stock
Options  granted to any such  Optionee may be exercised by the person or persons
to whom the  Optionee's  rights under any such  Incentive  Stock Options pass by
will or by the laws of descent and distribution (including the Optionee's estate
during the period of administration) at any time prior to the earlier of (i) the
respective expiration dates of any such Incentive Stock Options or (ii) the date
which is six (6) months after the date of death of such  Optionee (or such later
period not exceeding one (1) year to which the Committee may, in its discretion,
extend such  period),  but only if, and to the extent  that,  the  Optionee  was
entitled to exercise any such Incentive Stock Options at the date of death.  For
purposes of this Section 9(c),  any  Incentive  Stock Option held by an Optionee
shall be considered exercisable at the date of his death if the only unsatisfied
condition  precedent to the exercisability of such Incentive Stock Option at the
date of death is the passage of a specified period of time.

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<PAGE>

          (d)  Incentive Stock Options Deemed Exercisable.

               For purposes of Seetions 9(a), 9(b) and 9(c) above, any Incentive
Stock Option held by any Optionee shall be considered exercisable at the date of
the termination of his employment if, but for the requirement of serial exercise
set forth in Section 7(e)  hereof,  any such  Incentive  Stock Option would have
been exercisable at such date of termination of employment.  Any exercise of any
Incentive  Stock  Option  granted  pursuant  to the  Plan  which  is  considered
exercisable  pursuant to this Section 9(d) shall  nevertheless be subject to the
provisions and restrictions contained In Section 7(e) hereof.

          (e)  Termination of Incentive Stock Options.

               To the extent that any Incentive  Stock Option  granted under the
Plan to any Optionee whose  employment by the Association  terminates  shall not
have been exercised  within the  applicable  period set forth in this Section 9.
any such Incentive Stock Option, and all rights to purchase or receive shares of
Common Stock pursuant  thereto,  as the case may be, shall terminate on the last
day of the applicable period.

     10.  EFFECT  OF  TERMINATION   OF   EMPLOYMENT,   DISABILITY  OR  DEATH  ON
NON-INCENTIVE  STOCK OPTIONS.  The terms and conditions of  Non-Incentive  Stock
Options  relating to the effect of the termination of an Optionee's  employment,
disability of an Optionee or his death shall be such terms and conditions as the
Committee shall, in its sole discretion, determine at the time of termination.

     11. RIGHT OF REPURCHASE AND RESTRICTIONS ON DISPOSITION.  The Committee, in
its sole  discretion,  may include,  as a term of any Incentive  Stock Option or
Non-Incentive  Stock Option,  the right (the  "Repurchase  Right"),  but not the
obligation,  to  repurchase  all or any  amount  of the  Shares  acquired  by an
Optionee  pursuant  to the  exercise  of any such  Options.  The  intent  of the
Repurchase Right is to encourage the continued  employment of the Optionee.  The
Repurchase Right shall provide for, among other things, a specified  duration of
the Repurchase  Right, a specified  price per Share to be paid upon the exercise
of the Repurchase  Right and a restriction  on the  disposition of the Shares by
the Optionee during the period of the Repurchase Right. The Repurchase Right may
permit the  Association to transfer or assign such right to another  party.  The
Association  may exercise the Repurchase  Right only to the extent  permitted by
applicable law.

     12. STOCK  APPRECIATION  RIGHTS. A Stock Appreciation Right shall, upon its
exercise,  entitle the  Participant  to whom such Stock  Appreciation  Right was
granted to  receive a number of Shares or cash or  combination  thereof,  as the
Committee in its discretion shall determine, the aggregate value of which (i.e.,
the sum of the amount of cash and/or the fair market value of such Shares on the
date of exercise) shall equal (as nearly as possible,  it being  understood that
the Association  shall not issue any fractional  shares) the amount by which the
fair  market  value  per Share an the date of such  exercise  shall  exceed  the
exercise  price of such Stock  Appreciation  Right,  multiplied by the number of
Shares  with  respect to which such Stock  Appreciation  Right  shall have been,
exercised.  A Stock  Appreciation  Right may be  related  to an Option or may be
granted independently of any Option as the Committee shall determine whether and
to what extent a Related Stock  Appreciation Right shall be granted with respect
thereto;  provided, however and notwithstanding any other provision of the Plan,
that if the Related  Option is an  Incentive  Stock  Option,  the Related  Stock
Appreciation Right shall satisfy all the restrictions and limitations of Section
7 hereof as if such Related  Stock  Appreciation  Right were an Incentive  Stock
Option.  In the case of a Related Option,  such Related Option shall cease to be
exercisable to the extent of the Shares, with

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<PAGE>

respect to which the Related Stock  Appreciation  Right was exercised.  Upon the
exercise or  termination  of a Related  Option any Related  Stock  Appreciation
Right  shall  terminate  to the extent to the Shares  with  respect to which the
Related Option was exercised or terminated.

     13. Recapitalization,  Merger, Consolidation, Change in Control and Similar
Transactions.

          (a)  Adjustment.

               Subject  to  any  required  action  by  the  shareholders  of the
Association,  the  aggregate  number of shares of Common  Stock for which  stock
options may be granted  hereunder,  the number of shares of Common Stock covered
by each  outstanding  stock Option,  and the exercise  price Per share of Common
Stock of each such stock option,  shall all be Proportionately  adjusted for any
increase or decrease  in the number of issued and  outstanding  shares of Common
Stock resulting from a subdivision or  consolidation of Shares or the Payment of
a stock  dividend  (but  only on the  Common  Stock) or any  other  Increase  or
decrease  in the number of such  shares of Common  Stock  effected  without  the
receipt of consideration by the Association.

          (b)  Change in Control.

               All outstanding  options shall become Immediately  exercisable in
the  event  of a  change  in  control  or  Imminent  change  in  control  of the
Association,  as  determined  by the  Committee.  For purposes of this  Section,
"change in control"  shall mean.  (i) the execution of an agreement for the sale
of all,  or a  material  portion,  of the  assets of the  Association;  (ii) the
execution of an agreement for a merger or recapitalization of the Association or
any merger or  recapitalization  whereby the  Association  is not the  surviving
entity;  (iii) a change of control of the Association,  as otherwise  defined or
determined by the Federal Home Loan Bank Board or regulations promulgated by it;
or (iv) the  acquisition,  directly or indirectly,  of the beneficial  ownership
(within  the  meaning  of  that  term  as it is used  in  Section  13(d)  of the
Securities  Exchange  Act of  1934  and the  rules  promulgated  thereunder)  of
twenty-five  percent (25%) or more of the outstanding  voting  securities of the
Association by any person, trust, entity or group. For purposes of this Section,
"Imminent change in control" shall refer to any offer or  announcement,  oral or
written,  by any person or persons acting as a group,  to acquire control of the
Association.

          (c)  Extraordinary Corporate Action.

               Subject  to  any  required  action  by  the  shareholders  of the
Association,  in the event of any Change in Control,  recapitalization,  merger,
consolidation,  exchange  of shares,  spin-off,  reorganization,  tender  offer,
liquidation or other extraordinary  corporate action or event, the Committee, in
its sole discretion, shall have the power, prior or subsequent to such action or
event to:

               (i)  appropriately  adjust the  number of shares of Common  Stock
subject to each stock option.  the exercise price per share of Common Stock, and
the  consideration  to be given or received by the Association upon the exercise
of any outstanding Option;

               (ii) cancel any or all previously granted Options,  provided that
appropriate  consideration  is paid to the  Optionee  in  connection  therewith;
and/or Optionee in connection therewith; and/or

                                       9
<PAGE>

               (iii) make such other  adjustments in connection with the Plan as
the Committee, in its sole discretion,  or the Board, acting pursuant to Section
4(a)(ii),  deems  necessary,  desirable,  appropriate  or  advisable;  provided,
however,  that no  action  shall be taken by the  Committee  which  would  cause
Incentive  Stock  Options  granted  pursuant  to the  Plan to  fail to meet  the
requirements of Section 422A of the Code.

               Except as expressly  provided in Sections 13(a) and 13(b) hereof,
no  Optionee  shall  have any rights by reason of the  occurrence  of any of the
events described in this Section 13.

          (d)  Acceleration.

               The Committee shall at all times have the power to accelerate the
exercise  date of  Options  previously  granted  under  the  Plan.  In no event,
however,  will such  action  permit  Participants  to exercise  Incentive  Stock
Options in an order other than provided in Section 7(e).

     14. TIME OF GRANTING OPTIONS. The date of grant of an Option under the Plan
shall,  for  all  purposes,  be the  date  on  which  the  Committee  makes  the
determination  of granting  such Option.  Notice of the  determination  shall be
given to each Employee to whom an Option is so granted within a reasonable  time
after the date of such grant.

     15.  EFFECTIVE DATE. The Plan shall become effective upon the completion of
the Association's  conversion from mutual to stock form.  Options may be granted
prior to  ratification  of the Plan by the  stockholders if the exercise of such
Options is subject to such stockholder ratification.

     16. APPROVAL BY SHAREHOLDERS. The Plan shall be approved by stockholders of
the  Association  within  twelve (12) months before or after the date it becomes
effective.

     17.  MODIFICATION OF OPTIONS.  At any time and from time to time, the Board
may authorize  the Committee to direct the execution of an instrument  providing
for the modification of any outstanding  Option,  provided no such modification,
extension  or renewal  shall  confer on the  holder of said  Option any right or
benefit which could not be conferred on him by the grant of a new Option at such
time, or shall not materially  decrease the Optionee's benefits under the Option
without the consent of the holder of the Option  except as  otherwise  permitted
under Section 18 hereof.

     18. AMENDMENT AND TERMINATION OF THE PLAN.

          (a)  Action by the Board.

               The Board may alter, suspend or discontinue the Plan, except that
no action of the Board may  increase  (other than as provided in Section 13) the
maximum  number of Shares  permitted to be optional  under the Plan,  materially
increase  the benefits  accruing to  participants  under the Plan or  materially
modify the  requirements  for eligibility for  participation  in the Plan unless
such action of the Board shall be subject to  approval  or  ratification  by the
shareholders of the Association.

          (b)  Change in  Applicable  Law.

               Notwithstanding any other provision contained in the Plan, in the
event of a change in any federal or state law,  rule or  regulation  which would
make the  exercise of all or part of any  previously  granted  Incentive  and/or
Non-Incentive Stock

                                       10

<PAGE>

Option  unlawful or subject the  Corporation  to any penalty,  the Committee may
restrict any such  exercise  without the consent of the Optionee or other holder
thereof in order to comply with any such law, rule or regulation or to avoid any
such penalty.

     19.  CONDITIONS  UPON  ISSUANCE OF SHARES.  Shares shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation,  the Securities Act of 1933, as amended,  the rules and  regulations
promulgated thereunder, any applicable state securities law and the requirements
of any stock exchange upon which the Shares may then be listed.

     The  inability of the  Association  to obtain from any  regulatory  body or
authority  deemed by the  Association's  counsel to be  necessary  to the lawful
issuance and sale of any Shares  hereunder  shall relieve the Association of any
liability in respect of the non-issuance or sale of such Shares.

     As a condition  to the exercise of an Option, the  Association  may require
the person exercising the Option to make such  representations and warranties as
may  be  necessary  to  assure  the   availability  of  an  exemption  from  the
registration requirements of federal or state securities law.

     20.  RESERVATION OF SHARES.  During the term of the Plan, the  Association,
will  reserve and keep  available a number of Shares  sufficient  to satisfy the
requirements of the Plan.

     21.  UNSECURED  OBLIGATION.  No  Participant  under the Plan shall have any
interest in any fund or special asset of the  Association  by reason of the Plan
or the grant of any  Incentive  or  Non-Incentive  Stock Option to him under the
Plan. No trust fund shall be created in connection with the Plan or any grant of
any  Incentive or  Non-Incentive  Stock Option  hereunder  and there shall be no
required funding of amounts which may become payable to any participant.

     22.  WITHHOLDING  TAX. The Association  shall have the right to deduct from
all amounts paid in cash with  respect to the  exercise of a Stock  Appreciation
Right under the Plan any taxes  required by law to be withheld  with  respect to
such cash  payments.  Where a Participant or other person is entitled to receive
Shares  pursuant  to the  exercise  of an  Option  of Stock  Appreciation  Right
pursuant  to the Plan,  the  Association  shall  have the right to  require  the
Participant or such other person to pay the  Association the amount of any taxes
which the  Association is required to withhold with respect to such Shares,  or,
in lieu  thereof,  to retain,  or sell without  notice,  a number of such Shares
sufficient to cover the amount required to be withheld.

     23.  GOVERNING  LAW.  The  Plan  shall  be  governed  by and  construed  in
accordance  with the laws of the State of New Jersey,  except to the extent that
Federal law shall be deemed to apply.

                                       11FIRST SENTINEL BANCORP, INC.

                       1993 ACQUISITION STOCK OPTION PLAN

     1.  Purpose of the Plan.  The Plan shall be known as Pulse  Bancorp,  Inc.,
1993 Stock Option and Incentive Plan (the "Plan"). The purpose of the Plan is to
attract and retain the best  available  personnel for  positions of  substantial
responsibility and to provide additional  incentives to officers,  directors and
key employees of Pulse Bancorp,  Inc.,  (the  "Corporation"),  or any present or
future  parent or subsidiary  of the  Corporation  to promote the success of the
business.  The Plan is  intended to provide  for the grant of  "Incentive  Stock
Options,"  within the meaning of Section  422 of the  Internal  Revenue  Code of
1986, as amended (the "Code") and Non-Incentive  Stock Options,  options that do
not so qualify.  Each and every one of the  provisions  of the Plan  relating to
Incentive  Stock Options shall be interpreted to conform to the  requirements of
Section 422 of the Code.

     2. Definitions. As used herein, the following definitions shall apply.

          (a) "Award"  means the grant by the  Committee of an  Incentive  Stock
Option or a Non-Incentive Stock Option, or any combination  thereof, as provided
in the Plan.

          (b) "Board" shall mean the Board of Directors of the  Corporation,  or
any successor or parent corporation thereto.

          (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

          (d) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with paragraph 5(a) of the Plan,

          (e) "Common Stock" shall mean common stock, par value $1.00 per share,
of the Corporation, or any successor or parent corporation thereto.

          (f)  "Continuous  Employment"  or  "Continuous  Status as an Employee"
shall mean the absence of any interruption or termination of employment with the
Corporation  or any present or future Parent or  Subsidiary of the  Corporation.
Employment  shall  not be  considered  interrupted  in the  case of sick  leave,
military leave or any other leave of absence  approved by the  Corporation or in
the case of transfers between payroll  locations,  of the Corporation or between
the Corporation, its Parent, its Subsidiaries or a successor.

          (g) "Corporation" shall mean Pulse Bancorp, Inc., and any successor or
parent corporation thereto.

          (h) "Director" shall mean a member of the Board of the Corporation, or
any successor or parent corporation thereto.

          (i)  "Effective  Date"  shall  mean the date  specified  in Section 15
hereof.

          (j) "Employee"  shall mean any person  employed by the  Corporation or
any present or future Parent or Subsidiary of the Corporation.

                                       1
<PAGE>

          (k) "Incentive Stock Option" or "ISO" shall mean an option to purchase
Shares granted by the Committee pursuant to Section 8 hereof which is subject to
the limitations and  restrictions of Section 8 hereof and is intended to qualify
under Section 422 of the Code,

          (l) "Non-Incentive  Stock Option" or "Non-ISO" shall mean an option to
purchase  Shares  granted  pursuant  to  Section 9 hereof,  which  option is not
intended to qualify under Section 422 of the Code.

          (m) "Option"  shall mean an Incentive  or  Non-Incentive  Stock Option
granted pursuant to this plan providing the holder of such Option with the right
to purchase Common Stock.

          (n)  "Optioned  Stock" shall mean stock  subject to an Option  granted
pursuant to the Plan,

          (o)  "Optionee"  shall mean any person who receives an Option or Award
pursuant to the Plan.

          (p) "Parent" shall mean any present or future  corporation which would
be a "parent corporation" as defined in Subsections 424(e) and (g) of the Code.

          (q) "Participant"  means any director,  officer or key employee of the
Corporation  or any Parent or Subsidiary of the  Corporation or any other person
providing  a service to the  Corporation  who is selected  by the  Committee  to
receive an Award, or who by the express terms of the Plan is granted an Award.

          (r) "Plan"  shall  mean Pulse  Bancorp,  Inc.,  1993 Stock  Option and
Incentive Plan.

          (s) "Savings Bank" shall mean Pulawski  Savings Bank, or any successor
corporation thereto.

          (t) "Share" shall mean one share of the Common Stock.

          (u) "Subsidiary"  shall mean any present or future  corporation  which
would be a "subsidiary  corporation" as defined in Subsections 424(f) and (g) of
the Code.

     3.  SHARES  SUBJECT  TO THE  PLAN.  Except  as  otherwise  required  by the
provisions of Section 13 hereof,  the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed  183,921  Shares.
Such Shares may either be authorized but unissued shares or treasury shares.

     An Award shall not be  considered to be made under the Plan with respect to
any Award which terminates prior to its exercise,  and new Awards may be granted
under the Plan with respect to the number of Shares as to which such termination
has  occurred.

                                       2

<PAGE>

     4. SIX MONTH HOLDING PERIOD.

          A total of six months must elapse  between the date of the grant of an
Award and the date of the sale of Common Stock received through such Award.

     5. ADMINISTRATION OF THE PLAN.

          (a) (i) COMPOSITION OF THE COMMITTEE. Except as indicated in paragraph
5(a)(ii) below, the Plan shall be administered by the Committee consisting of at
least three non-employee Directors of the Corporation appointed by the Board and
serving at the pleasure of the Board.  Officers,  Directors,  key  employees and
other persons who are  designated by the Committee  shall be eligible to receive
Awards under the Plan,  and all persons  designated  as members of the Committee
shall be  "disinterested  persons"  within the  meaning of Rule 16b-3  under the
Securities Exchange Act of 1934.

               (ii)  For the  purpose  of  granting  Awards  to  directors,  the
selection of any  Director to whom Awards may be granted,  as well as the number
of Shares subject to Awards, must be determined by a "disinterested  committee",
as defined in Rule 16b-3 under the Securities Exchange Act of 1934.

          (b) Powers of the Committee.  The Committee is authorized (but only to
the extent not contrary to the express  provisions of the Plan or to resolutions
adopted by the Board) to interpret  the Plan,  to  prescribe,  amend and rescind
rules and regulations relating to the Plan, to determine the form and content of
Awards to be issued under the Plan and to make other determinations necessary or
advisable for the  administration  of the Plan,  and shall have and may exercise
such other power and  authority as may be delegated to it by the Board from time
to time. A majority of the entire  Committee  shall  constitute a quorum and the
action of a majority of the members  present at any meeting at which a quorum is
present  shall be  deemed  the  action  of the  Committee.  In no event  may the
Committee revoke outstanding Awards without the consent of the Participant.

          The Chairman of the  Corporation  and such other  officers as shall be
designated  by the  Committee  are  hereby  authorized  to  execute  instruments
evidencing Awards on behalf of the Corporation and to cause them to be delivered
to the Participants.

          (c) EFFECT OF COMMITTEE'S DECISION. All decisions,  determinations and
interpretations  of the Committee  shall be final and  conclusive on all persons
affected  thereby,  subject to  ratification  by the Board by a majority  of its
disinterested members.

     6. ELIGIBILITY.

               (i) Awards may be granted to officers,  Directors,  key employees
and other persons. The Committee shall from time to time determine the officers,
Directors, key employees and other persons who shall be granted Awards under the
Plan, the number to be granted to each such officer,  Director, key employee and
other  persons  under  the  Plan,  and  whether  Awards  granted  to  each  such
Participant  under  the  Plan  shall be  Incentive  and/or  Non-Incentive  Stock
Options.  In selecting  Participants  and in determining the number of Shares of
Common  Stock to be  granted  to each such  Participant  pursuant  to each Award
granted  under the Plan,  the  Committee may consider the nature of the services
rendered by each such Participant, each such Participant's current and potential
contribution  to the Corporation and such other factors as the Committee may, in
its sole discretion, deem relevant. Officers,  Directors, key employees or other
persons who have been  granted an Award may, if otherwise  eligible,  be granted
additional Awards.

                                       3
<PAGE>

               (ii) The aggregate  fair market value  (determined as of the date
the Option is  granted)  of the Shares  with  respect to which  Incentive  Stock
Options are  exercisable for the first time by each Employee during any calendar
year (under all Incentive  Stock Option plans,  as defined in Section 422 of the
Code,  of the  Corporation  or any present or future Parent or Subsidiary of the
Corporation) shall not exceed $100,000.  Notwithstanding the prior provisions of
this  Section 6, the  Committee  may grant  Options  in excess of the  foregoing
limitations,  provided said Options shall be clearly and specifically designated
as not being Incentive Stock Options, as defined in Section 422 of the Code.

               (iii) In no event  shall  Shares  subject to  Options  granted to
Directors  in their  capacity as such,  pursuant  to Section  9(a) herein in the
aggregate  under this Plan  exceed  more than 40% of the Shares  authorized  for
delivery  under this Plan  pursuant  to Section 3 herein.  If such Shares in the
aggregate  are not awarded to Directors  pursuant to Section  9(a) herein,  such
Shares may be awarded to officers or key employees.

     7. TERM OF THE PLAN.  The Plan shall  continue  in effect for a term of ten
(10) years from the Effective Date, unless sooner terminated pursuant to Section
18 hereof.  No Option shall be granted  under the Plan after ten (10) years from
the Effective Date.

     8. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS. Incentive Stock Options
may be granted only to  Participants  who are Employees.  Each  Incentive  Stock
Option granted  pursuant to the Plan shall be evidenced by an instrument in such
form as the Committee shall from time to time approve.  Each and every Incentive
Stock Option granted  pursuant to the Plan shall comply with, and be subject to,
the following terms and conditions:

          (a) Option Price.

               (i) The price  per Share at which  each  Incentive  Stock  Option
granted  under  the  Plan  may be  exercised  shall  not,  as to any  particular
Incentive  Stock Option,  be less than the fair market value of the Common Stock
at the time such Incentive  Stock Option is granted.  For such purposes,  if the
Common Stock is traded otherwise than on a national  securities  exchange at the
time of the  granting  of an  Option,  then the price per Share of the  Optioned
Stock  shall be not less than the mean  between  the bid and asked  price on the
date the  Incentive  Stock  Option is  granted  or, if there is no bid and asked
price on said date, then on the next prior business day on which there was a bid
and asked price. If no such bid and asked price is available, then the price per
Share shall be determined by the  Committee.  If the Common Stock is listed on a
national  securities  exchange at the time of the granting of an Incentive Stock
Option,  then the  price per Share  shall be not less  than the  average  of the
highest and lowest  selling  price on such  exchange on the date such  Incentive
Stock Option is granted or, if there were no sales on said date,  then the price
shall be not less than the mean between the bid and asked price on such date.

               (ii)  In  the  case  of  an  Employee   who  owns  Common   Stock
representing more than ten percent (10%) of the outstanding  Common Stock at the
time the Incentive  Stock Option is granted,  the  Incentive  Stock Option price
shall not be less than one  hundred  and ten  percent  (110%) of the fair market
value of the Common Stock at the time the Incentive Stock Option is granted.

          (b) PAYMENT.  Full  payment for each Share of Common  Stock  purchased
upon the exercise of any Incentive  Stock Option granted under the Plan shall be
made at the time of exercise of each such  Incentive  Stock  Option and shall be
paid in cash (in United States  Dollars),  Common Stock or a combination of cash
and Common  Stock.  Common  Stock  utilized  in full or  partial  payment of the
exercise price shall be valued at its fair market value at the date of exercise.
The Corporation shall accept full or partial payment in Common Stock only to the
extent  permitted by  applicable  law. No Shares of Common Stock shall be issued
until full payment therefor

                                       4

<PAGE>

has been  received by the  Corporation,  and no  Optionee  shall have any of the
rights of a  stockholder  of the  Corporation  until  Shares of Common Stock are
issued to him.

          (c) TERM OF INCENTIVE  STOCK OPTION.  The term of each Incentive Stock
Option  granted  pursuant to the Plan shall be not more than ten (10) years from
the date each such Incentive Stock Option is granted,  provided that in the case
of an Employee who owns stock  representing  more than ten percent  (10%) of the
Common Stock outstanding at the time the Incentive Stock Option is granted,  the
term of the Incentive Stock Option shall not exceed five (5) years.

          (d) EXERCISE  GENERALLY.  Except as, otherwise  provided in Section 10
hereof, no Incentive Stock Option may be execised unless the Optionee shall have
been in the employ of the  Corporation at all times during the period  beginning
with the date of grant of any such Incentive Stock Option and ending on the date
three (3)  months  prior to the date of  exercise  of any such  Incentive  Stock
Option.  The Committee  may impose  additional  conditions  upon the right of an
Optionee to exercise any Incentive Stock Option granted  hereunder which are not
inconsistent with the terms of the Plan or the requirements for qualification as
an Incentive Stock Option under Section 422 of the Code.

          (e) CASHLESS  EXERCISE.  An Optionee.  who has held an Incentive Stock
Option  for at least six months may  engage in the  "cashless  exercise"  of the
Option. In a cashless exercise, an Optionee gives the Corporation written notice
of  the  exercise  of  the  Option  together  with  an  order  to  a  registered
broker-dealer  or  equivalent  third party,  to sell part or all of the Optioned
Stock and to deliver enough of the proceeds to the Corporation to pay the Option
price and any applicable  withholding  taxes.  If the Optionee does not sell the
Optioned Stock through a registered  broker-dealer or equivalent third party, he
can give the  Corporation  written  notice of the exercise of the Option and the
third party  purchaser of the Optioned Stock shall pay the Option price plus any
applicable withholding taxes to the Corporation.

          (f)  TRANSFERABILITY.  Any Incentive Stock Option granted  pursuant to
the Plan shall be exercised  during an Optionee's  lifetime only by the Optionee
to whom it was granted and shalt not be  assignable  or  transferable  otherwise
than by will or by the laws of descent and distribution.

     9. TERMS AND CONDITIONS OF NON-INCENTIVE STOCK OPTIONS.  Each Non-Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such  form as the  Committee  shall  from time to time  approve.  Each and every
Non-Incentive Stock Option granted pursuant to the Plan shall comply with and be
subject to the following terms and conditions,

          (a)  OPTIONS  GRANTED  TO  DIRECTORS.  Subject to the  limitations  of
Section 6(iii),  Non-incentive Stock Options will be granted to each Director as
follows:  Effective  October 22,  1992,  each  Director of the Company  shall be
granted  Options to  purchase  3,000  shares of Common  Stock at the fair market
value of such Common Stock on that date, which was $17,625 per share. On January
1, 1994,  and  annually  thereafter,  each  Director of the Company then serving
shall be granted  additional Options to purchase 3,000 shares of Common Stock at
the fair market value of such Common  Stock on the date of grant.  Such grant of
Options to Directors shall be reduced pro rata to the extent that such number of
Options  available  for grant  shall be less than  3,000 per  Director.  Options
granted pursuant to this paragraph will be exercisable immediately upon the date
it is granted  subject to stockholder  ratification  of the Plan and will remain
exercisable for up to ten years from such date of grant.  The price per Share at
which such Options granted shall be equal to the fair market value of the Common
Stock at the time such Options are  granted.  For such  purposes,  if the Common
Stock is traded otherwise than on a national  securities exchange at the time of
the  granting of the  Options,  then the price per Share of the  Optioned  Stock
shall be not less than the mean between the bid and asked price on the date the

                                       5

<PAGE>

Options are granted or, if there is no bid and asked price on said date, then on
the next prior business day on which there was a bid and asked price. If no such
bid and asked price is  available,  then the price per Share shall be determined
by the  Committee.  If the  Common  Stock is  listed  on a  national  securities
exchange at the time of the  granting  of an  Options,  then the price per Share
shall be not less than the average of the highest  and lowest  selling  price on
such exchange on the date such Options are granted or, if there were no sales on
said date,  then the price  shall be not less than the mean  between the bid and
asked price on such date.  Such Options may be exercised only while the Optionee
is a Director of the  Corporation,  or within one year after  termination of the
Optionee's  status  as a  Director  but not  later  than the date on which  such
Options would  otherwise  expire,  or in the event of such person's death during
the term of his  directorship,  by the personal  representation of his estate or
person or persons to whom his rights under such Option shall have passed by will
or by laws of descent and distribution.  Such Options of a deceased Director may
be exercised within two years from the date of his death, but not later than the
date on which the Option would otherwise expire. Unless otherwise  inapplicable,
or inconsistent with the provisions of this paragraph, the Options to be granted
to Directors  hereunder  shall be subject to all other  provisions of this Plan.
Notwithstanding  anything herein to the contrary,  Options  granted  pursuant to
this Section 9(a) to Directors who are also  Employees at the time of such grant
shall be deemed Incentive Stock Options; provided that if such Options shall not
be exercised within 3 months of the date of termination of employment, except in
the case of disability or death, as noted above,  such Options shall  thereafter
be deemed  Non-Incentive  Stock  Options and shall  remain  exercisable  for the
remaining  term of  exercisability  or  within  one year of  termination  of the
Optionee's  status as a  Director,  whichever  is earlier.  Notwithstanding  the
provisions of Section 9(a),  additional  Awards may be made to Directors who are
serving as Employees within the sole discretion of the Committee.

          (b) OPTION  PRICE.  The  exercise  price per Share of Common Stock for
each Non-Incentive Stock Option granted pursuant to the Plan, other than Options
granted pursuant to Section 9(a) herein, shall be at such price as the Committee
may determine in its sole discretion.

          (c) PAYMENT.  Full  payment for each Share of Common  Stock  purchased
upon the exercise of any Non-Incentive Stock Option granted under the Plan shall
be made at the time of  exercise  of each such  Non-Incentive  Stock  Option and
shall be paid in cash (in United States Dollars),  Common Stock or a combination
of cash and Common Stock.  Common Stock  utilized in full or partial  payment of
the  exercise  price  shall be  valued at its fair  market  value at the date of
exercise.  The Corporation  shall accept full or partial payment in Common Stock
only to the extent  permitted by applicable law. No Shares of Common Stock shall
be issued until full payment  therefor has been received by the  Corporation and
no Optionee  shall have any of the rights of a  stockholder  of the  Corporation
until the Shares of Common Stock are issued to him.

          (d) TERM. The term of each Non-Incentive Stork Option granted pursuant
to the Plan  shall be not more  than ten  (10)  years  from the date  each  such
Non-Incentive Stock Option is granted.

          (e) EXERCISE GENERALLY. The Committee may impose additional conditions
upon the right of any  Participant  to exercise any  Non-Incentive  Stock Option
granted  hereunder  which  is not  inconsistent  with  the  terms of the Plan

          (f) CASHLESS EXERCISE.  An Optionee who has held a Non-Incentive Stock
Option  for at least six months may  engage in the  "cashless  exercise"  of the
Option. In a cashless exercise, an Optionee gives the Corporation written notice
of  the  exercise  of  the  Option  together  with  an  order  to  a  registered
broker-dealer  or  equivalent  third party,  to sell part or all of the Optioned
Stock and to deliver enough of the proceeds to the Corporation to pay the Option
price and any applicable  withholding  taxes.  If the Optionee does not sell the
Optioned Stock through a registered  broker-dealer or equivalent third party, he
can give the  Corporation  written

                                       6

<PAGE>

notice of the  exercise  of the  Option  and the third  Party  purchaser  of the
Optioned Stock shall pay the Option price plus any applicable withholding taxes;
to the Corporation.

          (g)  TRANSFERABILITY.  Any Non-Incentive Stock Option granted pursuant
to the  Plan  shall be  exercised  during  an  Optionee's  lifetime  only by the
Optionee  to whom it was  granted and shall not be  assignable  or  transferable
otherwise than by will or by the laws of descent and distribution.

     10. EFFECT OF TERMINATION  OF EMPLOYMENT,  DISABILITY OR DEATH ON INCENTIVE
STOCK OPTIONS.

          (a)  TERMINATION  OF  EMPLOYMENT.  In the  event  that any  Optionee's
employment  with the  Corporation  shall  terminate  for any reason,  other than
Permanent and Total  Disability (as such term is defined in Section  22(e)(3) of
the Code) or death, all of any such Optionee's  Incentive Stock Options, and all
of any such  Optionee's  rights to  purchase or receive  Shares of Common  Stock
pursuant  thereto,  shall  automatically  terminate  on the  earlier  of (i) the
respective  expiration  dates of any such  Incentive  Stock  Options or (ii) the
expiration of not more than three (3) months after the date of such  termination
of employment, but only if, and to the extent that, the Optionee was entitled to
exercise any such  Incentive  Stock Options at the date of such  termination  of
employment.  In the event that a  subsidiary  ceases to be a  subsidiary  of the
Corporation,  the  employment of all of its  employees  who are not  immediately
thereafter  employees of the  Corporation  shall be deemed to terminate upon the
date such subsidiary so ceases to be a Subsidiary of the Corporation.

          (b) DISABILITY.  In the event that any Optionee's  employment with the
Corporation  shall terminate as the result of the Permanent and Total Disability
of such Optionee, such Optionee may exercise any Incentive Stock Options granted
to him  pursuant  to the  Plan  at any  time  prior  to the  earlier  of (i) the
respective  expiration date of any such Incentive Stock Options or (ii) the date
which is one (1) year after the date of such termination of employment, but only
if, and to the extent  that,  the  Optionee  was  entitled to exercise  any such
Incentive Stock Options at the date of such termination of employment.

          (c) DEATH.  In the event of the death of an  Optionee,  any  Incentive
Stock Options granted to such Optionee may be exercised by the person or persons
to whom the  Optionee's  rights under any such  Incentive  Stock Options pass by
will or by the laws of descent and distribution (including the Optionee's estate
during the period of administration) at any time prior to the earlier of (i) the
respective expiration dates of any such Incentive Stock Options or (ii) the date
which is two (2) years after the date of death of such Optionee but only if, and
to the extent that,  the  Optionee  was entitled to exercise any such  Incentive
Stock  Options at the date of death.  For  purposes of this Section  10(c),  any
Incentive  Stock Option held by an Optionee  shall be considered  exercisable at
the  date of his  death  if the  only  unsatisfied  condition  precedent  to the
exercisability  of such  Incentive  Stock  Option  at the  date of  death is the
passage of a specified period of time. At the discretion of the Committee,  upon
exercise of such Options the Optionee may receive  Shares or cash or combination
thereof.  If cash shall be paid in lieu of  Shares,  such cash shall be equal to
the  difference  between the fair market  value of such Shares and the  exercise
price of such Options on the exercise date.

          (d)  INCENTIVE  STOCK  OPTIONS  DEEMED  EXERCISABLE.  For  purposes of
Sections  10(a),  10(b) and 10(c) above,  any Incentive Stock Option held by any
Optionee  shall be  considered  exercisable  at the date of  termination  of his
employment if any such  Incentive  Stock Option would have been  exercisable  at
such date of  termination  of employment.

          (e)  TERMINATION OF INCENTIVE  STOCK  OPTIONS.  To the extent that any
Incentive Stock Option granted under the Plan to any Optionee,  whose employment
with the  Corporation  terminates  shall  not have  been  exercised  within  the
applicable  peiod set forth in this Section 10, any such Incentive Stock Option,
and all rights

                                       7
<PAGE>

to purchase or receive Shares of Common Stock pursuant thereto,  as the case may
be, shall  terminate on the last day of the  applicable  period.

     11.  EFFECT  OF  TERMINATION   OF   EMPLOYMENT,   DISABILITY  OR  DEATH  ON
NON-INCENTIVE  STOCK OPTIONS.  The terms and conditions of  Non-Incentive  Stock
Options  relating to the effect of the termination of an Optionee's  employment,
disability of an Optionee or his death shall be such terms and conditions as the
Committee shall, in its sole  discretion,  determine at the time of termination,
unless  specifically  provided for by the terms of the  Agreement at the time of
grant of the Award.

     12. RIGHT OF REPURCHASE AND RESTRICTIONS ON DISPOSITION.  The Committee, In
its sole  discretion,  may include,  as a term of any Incentive  Stock Option or
Non-Incentive  Stock Option,  the right (the  "Repurchase  Right"),  but not the
obligation,  to  repurchase  all or any  amount  of the  Shares  acquired  by an
Optionee  pursuant  to the  exercise  of any such  Options.  The  intent  of the
Repurchase Right is to encourage the continued  employment of the Optionee.  The
Repurchase Right shall provide for, among other things, a specified  duration of
the Repurchase  Right, a specified  price per Share to be paid upon the exercise
of the Repurchase  Right and a restriction  on the  disposition of the Shares by
the Optionee during the period of the Repurchase Right. The Repurchase Right may
permit the  Corporation to transfer or assign such right to another  party,  The
Corporation  may exercise the Repurchase  Right only to the extent  permitted by
applicable law.

     13.  RECAPITALIZATION,   MERGER,   CONSOLIDATION  IN  CONTROL  AND  SIMILAR
TRANSACTIONS.

          (a) ADJUSTMENT.  Subject to any required action by the stockholders of
the  Corporation,  within the sole  discretion of the  Committee,  the aggregate
number of Shares of Common Stock for which Options may be granted hereunder, the
number of Shares of Common Stock  covered by each  outstanding  Option,  and the
exercise  price  per Share of Common  Stock of each  such  Option,  shall all be
proportionately  adjusted  for any  increase or decrease in the number of issued
and  outstanding  Shares  of  Common  Stock  resulting  from  a  subdivision  or
consolidation   of  Shares   (whether   by  reason  of  merger,   consolidation,
recapitalization,   reclassification,   split-up,   combination  of  shares,  or
otherwise) or the payment of a stock  dividend (but only on the Common Stock) or
any other  increase or  decrease  in the number of such  Shares of Common  Stock
effected  without the receipt of  consideration  by the Corporation  (other than
Shares held by dissenting stockholders).

                                       8
<PAGE>

          (b)  CHANGE  IN  CONTROL.   Notwithstanding  anything  herein  to  the
contrary,  all outstanding  Awards shall become  immediately  exercisable in the
event of a change in control or imminent  change in control of the  Corporation,
as  determined  by the  Committee.  In the event of such a change in  control or
imminent  Change in  control,  the  Optionee  shall,  at the  discretion  of the
Committee,  be  entitled to receive  cash in an amount  equal to the fair market
value of the Common Stock subject to any Incentive or Non-Incentive Stock Option
over the Option  Price of such  Shares,  in exchange  for the  surrender of such
Options  by the  Optionee  on that date in the event of a change in  control  or
imminent change in control of the Corporation.  For purposes of this Section 13,
"change in control"  shall mean:  (i) the execution of an agreement for the sale
of all,  or a  material  portion,  of the  assets of the  Corporation;  (ii) the
execution of an agreement for a merger or recapitalization of the Corporation or
any merger or  recapitalization  whereby the  Corporation  is not the  surviving
entity;  (iii) a change of control of the Corporation,  as otherwise  defined or
determined by the New Jersey Department of Banking or regulations promulgated by
it; or (iv) the acquisition, directly or indirectly, of the beneficial ownership
(within  the  meaning  of  that  term  as it is used  in  Section  13(d)  of the
Securities  Exchange  Act of 1934  and the  rules  and  regulations  promulgated
thereunder) of ten percent (10%) or more of the outstanding voting securities of
the Corporation by any person, trust, entity or group. This limitation shall not
apply the  purchase  of  shares  by  underwriters  in  connection  with a public
offering of  Corporation  stock,  or the  purchase of shares of up to 25% of any
class of securities of the Corporation by a tax-qualified employee stock benefit
plan. The term "person"  refers to an individual or a corporation,  partnership,
trust,  association,   joint  venture,  pool,  syndicate,  sole  proprietorship,
unincorporated  organization or any other form of entity not specifically listed
herein.  For purposes of this  Section 13,  "imminent  change in control"  shall
refer to any offer or  announcement,  oral or written,  by any person or persons
acting as a group,  to acquire control of the  Corporation.  The decision of the
Committee  as to whether a change in control or  imminent  change in control has
occurred shall be conclusive and binding.

          (c) EXTRAORDINARY  CORPORATE ACTION. Subject to any required action by
the  stockholders  of the  Corporation,  in the event of any change in  control,
recapitalization,   merger,   consolidation,   exchange  of  Shares,   spin-off,
reorganization,  tender  offer,  liquidation  or other  extraordinary  corporate
action or event, the, Committee,  in its sole discretion,  shall have the power,
prior or  subsequent  to such action or event to:

               (i)  appropriately  adjust the  number of Shares of Common  Stock
subject to each Option,  the exercise  price per Share of Common Stock,  and the
consideration  to be given or received by the  Corporation  upon the exercise of
any outstanding Option;

               (ii) cancel any or all previously granted Options,  provided that
appropriate  Consideration  is paid to the  Optionee  in  connection  therewith;
and/or

               (iii) make such other  adjustments in connection with the Plan as
the Committee, in its sole discretion, deems necessary,  desirable,  appropriate
or advisable;  PROVIDED, however, that no action shall be taken by the Committee
which would cause Incentive  Stock Options granted  pursuant to the Plan to fail
to meet the requirements of Section 422 of the Code.

          Except as expressly  provided in Sections  13(a) and 13(b) hereof,  no
Optionee  shall have any rights by reason of the occurrence of any of the events
described in this Section 13,

          (d)  ACCELERATION.  The Committee shall at all times have the power to
accelerate the exercise date of Options previously granted under the Plan.

                                       9
<PAGE>

     14. TIME OF GRANTING OPTIONS. The date of grant of an Option under the Plan
shall,  for  all  purposes,  be the  date  on  which  the  Committee  makes  the
determination  of  granting  such  Option.  Except,  however,  for  purposes  of
compliance  with Section 16 of the Securities  Exchange Act of 1934. the date of
grant of an Option shall be deemed the later of the date of grant or the date of
stockholder approval of the Plan. Notice of the determination of the grant of an
Option shall be given to each  Individual to whom an Option is so granted within
a  reasonable  time  after the date of such  grant in a form  determined  by the
Committee.

     15.  EFECTIVE  DATE.  The  Plan  shall  become  effective  upon the date of
adoption of the Plan by the Board.  Awards may be granted prior to  ratification
of the Plan by the  stockholders  of the Corporation if the granting or exercise
of such Awards is subject to such stockholder ratification.

     16. APPROVAL BY STOCKHOLDERS. The Plan shall be approved by stockholders of
the  Corporation  within  twelve (12)  months  before or after the date the Plan
becomes  effective.

     17.  MODIFICATION OF OPTIONS.  At any time and from time to time, the Board
may authorize  the Committee to direct the execution of an instrument  providing
for the modification of any outstanding  Award,  provided no such  modification,
extension  or  renewal  shall  confer on the  holder of said  Award any right or
benefit  which could not be conferred on him by the grant of a new Award at such
time, or shall not materially  decrease the Optionee's  benefits under the Award
without the  consent of the holder of the Award  except as  otherwise  permitted
under Section 18 hereof.  Notwithstanding  anything herein to the contrary,  the
Committee shall have the authority to cancel outstanding Awards with the consent
of the  Optionee and to reissue new Awards at a low  exercise  price,  but in no
event less than the then fair  market  value per share of Common  Stock,  in the
event that the fair market  value per share of Common Stock at any time prior to
the date of exercise of  outstanding  Awards falls below the  exercise  price of
such Awards.

     18. AMENDMENT AND TERMINATION OF THE PLAN.

          (a) ACTION BY THE BOARD.  The Board may alter,  suspend or discontinue
the  Plan,  except  that no action of the  Board  may  increase  (other  than as
provided  in Section 13 hereof)  the maximum  number of Shares  permitted  to be
awarded  under  the  Plan,   materially   increase  the  benefits   accruing  to
Participants   under  the  Plan  or  materially   modify  the  requirements  for
eligibility for  participation in the Plan unless such action of the Board shall
be subject to approval or ratification by the stockholders of the Corporation.

          (b) CHANGE IN  APPLICABLE  LAW.  Notwithstanding  any other  provision
contained  in the Plan,  in the event of a change in any  federal  or state law,
rule  or  regulation  which  would  make  the  exercise  of all or  part  of any
previously  granted Award or Stock Option unlawful or subject the Corporation to
any penalty, the Committee may restrict any such exercise without the consent of
the Optionee or other holder  thereof in order to comply with any such law, rule
or regulation or to avoid any such penalty.

     19.  CONDITIONS  UPON  ISSUANCE OF SHARES.  Shares shall not be issued with
respect to any Award  granted under the Plan unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation,  the Securities Act of 1933, as amended,  the rules and  regulations
promulgated thereunder, any applicable state securities law and the requirements
of any stock exchange upon which the Shares may then be listed.

     The  inability of the  Corporation  to obtain from any  regulatory  body or
authority  deemed by the  Corporation's  counsel to be  necessary  to the lawful
issuance and sale of any Shares  hereunder  shall relieve the Corporation of any
liability in respect of the non-issuance or sale of such Shares.

                                       10
<PAGE>

     As a condition to the exercise of an Award the  Corporation may require the
person exercising the Award make such  representations  and warranties as may be
necessary  to assure the  availability  of an  exemption  from the  registration
requirements of federal or state securities law.

     20.  RESERVATION OF SHARES.  During the term of the Plan,  the  Corporation
will  reserve and keep  available a number of Shares  sufficient  to satisfy the
requirements of the Plan.

     21.  UNSECURED  OBLIGATION.  No  Participant  under the Plan shall have any
interest in any fund or special asset of the  Corporation  by reason of the Plan
or the grant of any Award  under the Plan.  No trust  fund  shall be  created in
connection  with the Plan or any grant of any Award hereunder and there shall be
no required funding of amounts which may become payable to any Participant.

     22.  WITHHOLDING  TAX. The Corporation  shall have the right to deduct from
all amounts  paid in cash with  respect to the  cashless  exercise of Options or
other Award under the Plan any taxes required by law to be withheld with respect
to such cash  payments.  Where a  Participant  or other  person is  entitled  to
receive  Shares  pursuant to the exercise of an Award  pursuant to the Plan, the
Corporation shall have the right to require the Participant or such other person
to pay the Corporation the amount of any taxes which the Corporation is required
to withhold with respect to such Shares, or, in lieu thereof, to retain, or sell
without notice, a number of such Shares  sufficient to cover the amount required
to be withheld.

     23.  GOVERNING  LAW.  The  Plan  shall  be  governed  by and  construed  in
accordance  with the laws of the State of Now Jersey,  except to the extent that
federal law shall be deemed to apply.

                                       11

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