PENN FEDERAL SAVINGS BANK
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

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                            PENN FEDERAL SAVINGS BANK
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                             EFFECTIVE MARCH 1, 2003

                                     Purpose
                                     -------

     The purpose of the Plan is to provide supplemental retirement benefits to a
select group of employees who  contribute  materially  to the continued  growth,
development  and future  business  success of Penn Federal  Savings Bank and its
Affiliates.  The Plan shall be unfunded  for tax  purposes  and for  purposes of
Title I of ERISA.

                                    ARTICLE I
                                   Definitions
                                   -----------

     For  purposes  of the Plan,  unless  otherwise  clearly  apparent  from the
context,  the  following  phrases or terms  shall have the  following  indicated
meanings:

          "Affiliates"  shall  mean any entity  that,  directly  or  indirectly,
           ----------
          through one or more intermediaries,  controls, is controlled by, or is
          under common control with the Company.

          "Annual Benefit" shall mean with respect to any Participant, an annual
           --------------
          benefit  equal to the  percentage of the  Participant's  Final Average
          Compensation   set   forth   in  a   Participant's   Plan   Agreement.
          Notwithstanding the foregoing,  where the Plan Agreement expresses the
          Annual  Benefit as a unit  benefit,  then the Annual  Benefit shall be
          equal to the percent of the Participant's  Final Average  Compensation
          set forth in the Participant's  Plan Agreement times the number of the
          Participant's  Years of Credited  Service set forth in a Participant's
          Plan Agreement,  calculated through the last day of the month in which
          the   Participant   experiences  a  Termination   of   Employment.   A
          Participant's  Annual  Benefit  shall not  exceed any  maximum  Annual
          Benefit set forth in his Plan Agreement,  nor be less than any minimum
          Annual Benefit set forth in his Plan Agreement.

          "Beneficiary"  shall  mean  one or  more  persons,  estates  or  other
           -----------
          entities,  designated in accordance  with Article 9, that are entitled
          to receive benefits under the Plan upon the death of a Participant.

          "Beneficiary  Designation  Form" shall mean the form  established from
           ------------------------------
          time to time by the Committee that a Participant completes,  signs and
          returns to the Committee to designate one or more Beneficiaries.

          "Board" shall mean the board of directors of the Company.
           -----

          "Change  in  Control"  shall  have the same  meaning  as set  forth in
           -------------------
          Participant's  employment  contract  as  currently  in effect.  If the
          Participant  does not have an employment  contract,  or the employment
          contract does not include a definition of Change of Control,  then the
          term Change in Control  shall have the same  meaning as under  Section
          280G of the Code and the regulations thereunder.


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         "Claimant" shall have the meaning set forth in Section 13.1.
          --------

          "Code" shall mean the Internal Revenue Code 1986, as it may be amended
           ----
          from time to time.

          "Committee" shall mean the committee described in Article12.
           ---------

          "Company" shall mean Penn Federal Savings Bank.
           -------

          "Compensation"  shall mean the annual  cash  compensation  relating to
           ------------
          services performed by a Participant for the Company and its Affiliates
          during any calendar year, whether or not paid in such calendar year or
          included on the Federal  Income Tax Form W-2 for such  calendar  year,
          excluding  bonuses  of any  type or  nature,  fringe  benefits,  stock
          options,   other  stock  based  compensation,   relocation   expenses,
          non-monetary  awards,  and automobile and other  allowances  paid to a
          Participant  for  employment  services  rendered  (whether or not such
          allowances   are  included  in  the   Participant's   gross   income).
          Compensation  shall be calculated  before  reduction for  compensation
          voluntarily deferred or contributed by the Participant pursuant to all
          qualified or non-qualified plans of the Company and its Affiliates and
          shall be calculated to include  amounts not otherwise  included in the
          Participant's gross income;  provided,  however, that all such amounts
          will be included in  compensation  only to the extent that,  had there
          been no such plan,  the amount  would have been payable in cash to the
          Participant.

          "Early  Retirement Date" shall mean the later of (i) the date that the
           ----------------------
          Participant  elects in his Plan Agreement to have his Monthly  Benefit
          commence  under  this Plan,  which date is prior to the  Participant's
          Normal  Retirement  Date and no earlier than the date the  Participant
          will attain age 55, and (ii) the date of the Participant's Termination
          of Employment.

          "Early  Retirement  Monthly Benefit" shall mean a monthly amount equal
           ----------------------------------
          to the  Participant's  Monthly Benefit at his Normal  Retirement Date,
          reduced by .16666%  (or the  appropriate  fraction  thereof)  for each
          month or portion thereof by which the  Participant's  Early Retirement
          Date precedes his Normal Retirement Date (2 percent annually).  By way
          of illustration,  if a Participant  elects to receive his Plan benefit
          at age 55 rather  than age 65, and his  Monthly  Benefit at his Normal
          Retirement Date is 5.83 percent of Compensation (70 percent annually),
          then his Early  Retirement  Monthly  Benefit will be 4.1666 percent of
          Compensation (50 percent annually) ((70% - (2% times 10)/12).

          "Employee" shall mean a person who is classified as an employee of the
           --------
          Company or its Affiliates.


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          "Equivalent Actuarial Value" shall mean, unless otherwise specified in
           --------------------------
          the Plan Agreement,  a benefit of equivalent  value to another form of
          benefit, computed on the basis of an interest rate factor of 7 percent
          per annum.  Notwithstanding  the foregoing,  the Equivalent  Actuarial
          Value of any payment  made on account of a Change in Control  shall be
          determined  by  using  the  discount  rate  under  Proposed   Treasury
          Regulation  Section  1.280G-1,  Q&A 32,  or the  successor  regulation
          thereto on the date of the payment (i.e.,  as of the effective date of
          the Plan,  120 percent of the  applicable  Federal rate as  determined
          under  Section  1274(d)  and the  regulations  thereunder,  compounded
          semiannually). For purposes of Section 3.2 (regarding death benefits),
          Equivalent  Actuarial  Value shall be determined  using the applicable
          long-term  Federal  rate under  Section  1274(d)  and the  regulations
          thereunder,  compounded semiannually,  as in effect on the date of the
          Participant's death.

          "ERISA"  shall mean the  Employee  Retirement  Income  Security Act of
           -----
          1974, as it may be amended from time to time.

          "Final  Average  Compensation"  shall  mean the amount  determined  by
           -----
          dividing by two the Participant's  aggregate  Compensation  during the
          two Plan  Years  (whether  or not  consecutive)  in the five Plan Year
          period  immediately  prior to his  Termination  of  Employment  (or if
          Termination  of  Employment  occurs  during the month of December then
          including the Plan Year in which  Termination  of  Employment  occurs)
          that results in the largest total.

         "Holding Company shall mean PennFed Financial Services, Inc.
         ----------------

          "Monthly  Benefit" shall mean one twelfth (1/12) of the  Participant's
           ----------------
          Annual Benefit.

          "Normal  Retirement  Date" shall mean the later of (i) the date of the
           ------------------------
          Participant's  Termination  of  Employment  or (ii) the  Participant's
          attainment of age sixty-five (65).

          "Participant"   shall  mean  any  Employee  (i)  who  is  selected  to
           -----------
          participate in the Plan,  (ii) who signs a Plan  Agreement,  and (iii)
          whose signed Plan Agreement is accepted by the Committee.  A spouse or
          former spouse of a  Participant  shall not be treated as a Participant
          in the Plan or have an Annual  Benefit  under the Plan,  even if he or
          she has an interest in the Participant's  benefits under the Plan as a
          result of applicable law or property settlements  resulting from legal
          separation or divorce.

          "Payout Period" shall mean the number of consecutive  months set forth
           -------------
          as the Payout Period in a Participant's Plan Agreement,  commencing on
          the first day of the calendar month next  following the  Participant's
          Normal  Retirement  Date,  except as  otherwise  provided  in  Section
          3.2(a).  Notwithstanding  the  foregoing,  the Payout  Period for Plan
          benefits  commencing on an Early  Retirement Date shall be extended by
          one  month  for  each  full  month by which  the  Participant's  Early
          Retirement Date precedes his Normal Retirement Date. To illustrate, if
          a  Participant  with a  Payout  Period  of 180  months  on his  Normal
          Retirement  Date elects an Early  Retirement  Date of age 62, then the
          Payout Period will be 216 months (180, plus 1 times 36 months).


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          "Plan" shall mean this Supplemental  Executive  Retirement Plan, which
           ----
          shall be evidenced by this instrument and by each Plan  Agreement,  as
          they may be amended from time to time.

          "Plan  Agreement"  shall mean a written  agreement,  as may be amended
           ---------------
          from time to time,  which is entered  into by and  between the Company
          and a Participant.  Should there be more than one Plan Agreement,  the
          Plan  Agreement  bearing the latest date of  acceptance by the Company
          shall  supersede  all previous Plan  Agreements in their  entirety and
          shall govern such entitlement.  The terms of any Plan Agreement may be
          different for any  Participant,  and any Plan  Agreement may limit the
          benefits otherwise provided under the Plan.

          "Plan  Year"  shall have the same  meaning  as the fiscal  year of the
           ----------
          Company.

          "Termination  for  Cause" or  "Terminated  for  Cause"  shall mean the
           -----------------------       ----------------------
          involuntary  termination  of  service of a  Participant  on account of
          dishonesty,  incompetence,  willful misconduct,  breach of a fiduciary
          duty involving personal profit,  intentional failure to perform stated
          duties,  willful violation of any law, rule, or regulation  (excluding
          violations which do not have a material adverse affect on the Company)
          or  final  cease-and-desist  order.  No act or  failure  to act by the
          Participant  shall be considered  willful unless the Participant acted
          or  failed  to act  with  an  absence  of good  faith  and  without  a
          reasonable  belief  that his  action or failure to act was in the best
          interest of the Company.  The Participant  shall not be deemed to have
          been  Terminated  for Cause  unless  and until  there  shall have been
          delivered to the  Participant a copy of a resolution,  duly adopted by
          the  affirmative  vote  of not  less  than a  majority  of the  entire
          membership  of the Board of  Directors  at a meeting of the Board duly
          called  and held for such  purpose  (after  reasonable  notice  to the
          Participant and an opportunity for the Participant,  together with the
          Participant's  counsel, to be heard before the Board), stating that in
          the good faith opinion of the Board of Directors the  Participant  has
          engaged in conduct described in the preceding  sentence and specifying
          the particulars thereof in detail.

          "Termination of Employment" shall mean the severing of employment with
           -------------------------
          the Company and its Affiliates.

          "Trust" shall mean any trust  established  between the Company and the
           -----
          trustee named therein to provide benefits  hereunder,  as amended from
          time to time.

          "Years of Credited  Service" shall mean the total number of Plan Years
           --------------------------
          (or fraction thereof  determined on a months basis) taken into account
          under a Participant's  Plan Agreement for purposes of calculating such
          Participant's Annual Benefit.

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<PAGE>


                                    ARTICLE 2
                       Selection, Enrollment, Eligibility
                       ----------------------------------

2.1  Selection  by  Committee.  Participation  in the Plan shall be limited to a
     ------------------------
     select group of management and highly compensated Employees,  as determined
     by the Committee in its sole discretion from time to time. From that group,
     the  Committee  shall  select,   in  its  sole  discretion,   Employees  to
     participate in the Plan.

2.2  Enrollment  Requirements.  As a condition to  participation,  each selected
     ------------------------
     Employee  shall  complete,  execute  and  return  to the  Committee  a Plan
     Agreement.  In addition,  the Committee  shall  establish from time to time
     such other enrollment  requirements as it determines in its sole discretion
     are necessary or appropriate.

2.3  Eligibility;  Commencement of Participation.  Provided an Employee selected
     -----------   -----------------------------
     to participate in the Plan has met all enrollment requirements set forth in
     the Plan and required by the  Committee,  including  returning all required
     documents to the Committee,  that Employee shall commence  participation in
     the Plan on the date his Plan Agreement is executed by the Company.

2.4  Termination  of  Participation.  If the Committee  determines in good faith
     ------------------------------
     that a  Participant  no longer  qualifies  as a member of a select group of
     management or highly compensated employees,  as membership in such group is
     determined in accordance with Sections  201(2),  301(a)(3) and 401(a)(1) of
     ERISA, the Committee shall have the right, in its sole  discretion,  to (i)
     cease further benefit accruals hereunder and/or (ii) immediately distribute
     in a single lump sum the Equivalent Actuarial Value of the Monthly Benefits
     for the Payout  Period,  determined  as if the  Participant  experienced  a
     Termination of Employment,  and terminate the  Participant's  participation
     herein.

                                    ARTICLE 3
                                    Benefits
                                    --------

3.1  Retirement  Benefits.  Upon a  Participant's  Normal  Retirement  Date, the
     --------------------
     Company shall pay the Monthly Benefit to him during the Payout Period. Upon
     a  Participant's  Early  Retirement  Date,  the Company shall pay the Early
     Retirement Monthly Benefit to him during the Payout Period.

3.2  Death Benefits.
     --------------

          (a) If the Participant dies before having commenced receiving benefits
     under  Section 3.1,  then his  Beneficiary  shall receive no later than 120
     days after the  Committee  is notified of and  confirms  the  Participant's
     death, a lump sum cash payment equal to the Equivalent  Actuarial  Value of
     the  Participant's  Monthly  Benefit.  If the Participant dies after he has
     commenced receiving benefits under Section 3.1, then the remaining payments
     to  the  Participant  shall  continue  to  be  made  to  the  Participant's
     Beneficiary  commencing  on the  first  day  of  the  month  in  which  the
     Participant's death occurs.



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          (b) In addition to the death benefit  provided in Section 3.2(a),  but
     subject  to,  and  limited  by,  all of the  provisions  of  this  Plan,  a
     Participant's Beneficiary shall, upon the death of the Participant, receive
     a lump sum death benefit  equal to $600,000.  This benefit shall be paid to
     the Participant's  Beneficiary as soon as practicable following the date of
     the Participant's death.

3.3  Acceleration of Benefits;  Lump Sum Payments.  The Committee may accelerate
     --------------------------------------------
     the payment of a  Participant's  Monthly  Benefits at such time and in such
     manner  as the  Committee  may  determine,  in which  case the  accelerated
     benefit  shall be equal to the  Equivalent  Actuarial  Value of such unpaid
     Monthly Benefits.

3.4  Tax  Withholding  from  Distributions.  The Company,  an Affiliate,  or the
     -------------------------------------
     trustee of the Trust,  if any,  shall  withhold from any payments made to a
     Participant all federal, state and local income, employment and other taxes
     required to be withheld by the Company, an Affiliate, or the trustee of the
     Trust, in connection  with such payments,  in amounts and in a manner to be
     determined in the sole  discretion of the Company and, if  applicable,  the
     trustee of the Trust.

                                    ARTICLE 4
                    In-Service Withdrawals and Distributions
                    ----------------------------------------

    No in-service withdrawals or distributions are permitted under the Plan.

                                    ARTICLE 5
                                     Vesting
                                     -------

     Unless the Participant's Plan Agreement provides otherwise, the Participant
shall be fully vested in his Monthly Benefit after the completion of 10 Years of
Service. For this purpose, Years of Service credited prior to the effective date
of this Plan shall be taken into account.

                                    ARTICLE 6
                            Participant Contributions
                            -------------------------

Participant contributions are neither permitted nor required under the Plan.

                                    ARTICLE 7
                                     Funding
                                     -------

7.1  Funding Generally.  The Company's and its Affiliate's obligations under the
     -----------------
     Plan shall be an unfunded and unsecured promise to pay. The Company and its
     Affiliates  shall  not be  obligated  under  any  circumstances  to fund in
     advance its obligations under the Plan, and when the benefit amount is paid
     it shall be  expensed  out of the  general  assets of the  Company  and its
     Affiliates.


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<PAGE>


7.2  Option to Fund Informally. Notwithstanding Section 7.1, the Company and its
     -------------------------
     Affiliates  may, at its sole option,  or by agreement,  informally fund its
     obligations under the Plan in whole or in part, provided,  however, that in
     no event shall such informal funding be construed to create any trust fund,
     escrow  account or other security for any  Participant  with respect to the
     payment of any benefit under the Plan,  other than as permitted by Internal
     Revenue  Service and Department of Labor rules and regulations for unfunded
     supplemental retirement plans.

                                    ARTICLE 8
                              Regulatory Provisions
                              ---------------------

     The obligations of the Company to a Participant  under the Plan are subject
to the following restrictions:

8.1  Termination  for  Cause.  If a  Participant's  service  as an  Employee  is
     -----------------------
     Terminated  for Cause,  no benefits shall be paid to him under the Plan. If
     the  Participant  has  commenced  receiving  his Monthly  Benefit and it is
     subsequently  determined that he was Terminated for Cause, then his Monthly
     Benefit shall  immediately  cease and the Participant shall be obligated to
     return to the Company or the Holding Company,  whichever is applicable, the
     cumulative amount of the Monthly Benefit previously paid under the Plan.

8.2  Temporary  Suspension or Prohibition.  If a Participant is suspended and/or
     ------------------------------------
     temporarily  prohibited from  participating in the conduct of the Company's
     affairs by a notice served under  Section  8(e)(3) or (g)(1) of the Federal
     Deposit Insurance Act ("FDIA"),  12 U.S.C.  ss.1818(e)(3)  and (g)(1),  the
     Company's obligations to such Participant under the Plan shall be suspended
     as of the date of  service of such  notice,  unless  stayed by  appropriate
     proceedings. If the charges in the notice are dismissed, the Company may in
     its discretion  reinstate in whole or in part any of its obligations  which
     were suspended.

8.3  Permanent  Suspension or  Prohibition.  If a Participant  is removed and/or
     -------------------------------------
     permanently  prohibited from  participating in the conduct of the Company's
     affairs by an order issued under Section  8(e)(4) or (g)(1) of the FDIA, 12
     U.S.C.  ss.1818(e)(4)  and (g)(1),  all  obligations of the Company to such
     Participant  under the Plan shall terminate as of the effective date of the
     order, but vested rights of the contracting parties shall not be affected.

8.4  Default. If the Company is in default (as defined in Section 3(x)(1) of the
     -------
     FDIA),  all  obligations of the Company to Participants  and  Beneficiaries
     under  the  Plan  shall  terminate  as of the  date of  default,  but  this
     provision shall not affect any vested rights of the contracting parties.

8.5  Termination by Regulators.  All  obligations of the Company to Participants
     -------------------------
     and Beneficiaries under the Plan shall be terminated,  except to the extent
     determined  that  continuation  of the Plan is necessary  for the continued
     operation  of the  Company:  (i) by the  Director  of the  Office of Thrift
     Supervision  (the "OTS Director") or his designee,  at the time the Federal
     Deposit  Insurance   Corporation   enters  into  an  agreement  to  provide
     assistance to or on behalf of the Company under the authority  contained in
     Section 13(c) of the FDIA; or (ii) by the OTS Director or his designee,  at
     the time the OTS Director or his designee approves a supervisory  merger to
     resolve problems related to operation of the Company or when the Company is
     determined by the OTS Director to be in an unsafe or unsound condition. Any
     rights of the  parties  that have  already  vested,  however,  shall not be
     affected by any such action.



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<PAGE>

8.6  Other Regulatory Restrictions on Payment.  Notwithstanding  anything herein
     ----------------------------------------
     to the contrary,  (1) any payments made by the Company under the Plan shall
     be subject to and conditioned upon compliance with 12 U.S.C. ss.1828(k) and
     any regulations  promulgated thereunder and (2) payments contemplated to be
     made by the Company under the Plan shall not be immediately  payable to the
     extent such  payments are barred or prohibited by an action or order issued
     by the Federal Deposit Insurance Corporation.

                                    ARTICLE 9
                             Beneficiary Designation
                             -----------------------

9.1  Beneficiary.  Each  Participant  shall  have the  right,  at any  time,  to
     -----------
     designate  his  Beneficiary(ies)  (both primary as well as  contingent)  to
     receive  any  benefits  payable  under  the  Plan  upon  the  death  of the
     Participant.  The Beneficiary  designated under the Plan may be the same as
     or different from the  Beneficiary  designated  under any other plan of the
     Company or its Affiliates in which the Participant participates.

9.2  Beneficiary  Designation:  Change;  Spousal  Consent.  A Participant  shall
     ------------------------   --------------------------
     designate  his  Beneficiary  by  completing  and  signing  the  Beneficiary
     Designation  Form and returning it to the  Committee.  A Participant  shall
     have the right to change a Beneficiary by completing, signing and otherwise
     complying  with  the  terms  of the  Beneficiary  Designation  Form and the
     Committee's  rules and  procedures,  as in effect from time to time. If the
     Participant names someone other than his spouse as a Beneficiary, a spousal
     consent,  in the form  designated by the Committee,  must be signed by that
     Participant's spouse and returned to the Committee.  Upon the acceptance by
     the  Committee  of a new  Beneficiary  Designation  Form,  all  Beneficiary
     designations  previously  filed shall be canceled.  The Committee  shall be
     entitled  to rely on the last  Beneficiary  Designation  Form  filed by the
     Participant and accepted by the Committee prior to his death.

9.3  Acknowledgment.  No  designation  or change in designation of a Beneficiary
     --------------
     shall be  effective  until  received  and  acknowledged  in  writing by the
     Committee.

9.4  No  Beneficiary  Designation.   If  a  Participant  fails  to  designate  a
     ----------------------------
     Beneficiary  as  provided  in  Sections  9.1,  9.2 and 9.3 above or, if all
     designated  Beneficiaries predecease a Participant or die prior to complete
     distribution of the Participant's benefits, then a Participant's designated
     Beneficiary  shall be deemed to be his surviving  spouse.  If a Participant
     has no surviving spouse,  the benefits  remaining


                                       9
<PAGE>


     under  the  Plan  to be paid  to a  Beneficiary  shall  be  payable  to the
     Participant's estate.

9.5  Doubt as to  Beneficiary.  If the  Committee has any doubt as to the proper
     ------------------------
     Beneficiary to receive  payments  pursuant to the Plan, the Committee shall
     have the right, exercisable in its discretion, to cause the Company and its
     Affiliates to withhold  such payments  until this matter is resolved to the
     Committee's satisfaction.

9.6  Discharge  of  Obligations.  The  payment of  benefits  under the Plan to a
     --------------------------
     Beneficiary  shall  fully and  completely  discharge  the  Company  and its
     Affiliates  and the Committee from all further  obligations  under the Plan
     with respect to the Participant.

                                   ARTICLE 10
                                Leave of Absence
                                ----------------

     If a Participant  is authorized  by the Company or its  Affiliates  for any
reason  to take a leave of  absence  from  employment  with the  Company  or its
Affiliates,  such  Participant  shall continue to be considered  employed by the
Company  during such leave of absence (and  therefore not to have  experienced a
Termination  of  Employment)  and service  during the leave of absence  shall be
credited  for  purposes  of  determining  the  Participant's  Years of  Credited
Service.

                                   ARTICLE 11
                     Termination, Amendment or Modification
                     --------------------------------------

11.1 Termination.  Although the Company  anticipates  that it will continue as a
     -----------
     sponsor of the Plan for an indefinite period of time, there is no guarantee
     that it will  continue as a sponsor of the Plan or will not  terminate  its
     sponsorship of the Plan at any time in the future. Accordingly, the Company
     reserves the right to  terminate  its  sponsorship  of the Plan at any time
     with  respect  to any or all of its  Participants,  by action of the Board.
     Upon termination of sponsorship of the Plan by the Company,  the Annual and
     Monthly Benefit of each affected  Participant  shall be determined as if he
     had experienced a Termination of Employment on the date Plan sponsorship is
     terminated.  Monthly  Benefits  shall be paid to affected  Participants  as
     follows: Prior to a Change in Control, the Company shall have the right, in
     its sole discretion, to pay or require its Affiliates to pay the Equivalent
     Actuarial  Value of the Monthly  Benefits  for the Payout  Period in a lump
     sum; otherwise payments shall be made as provided for in Article 3. After a
     Change in Control,  the Company and its Affiliates shall be required to pay
     the  Equivalent  Actuarial  Value of the  Monthly  Benefits  for the Payout
     Period in a lump  sum;  provided,  however,  that if a  Participant's  Plan
     Agreement  provides  for the  payment  of Plan  benefits  after a Change in
     Control,  then the timing and amount of the Participant's  Monthly Benefits
     shall  be  made  as  provided  for in  the  Participant's  Plan  Agreement.
     Notwithstanding  the preceding  sentence,  payments due to a Participant in
     connection  with a Change in Control  may, at the  written  election of the
     Participant,  be distributed to the Participant in a cash lump sum equal to
     the Equivalent Actuarial Value of the Participant's  Monthly Benefit. If an
     Affiliate  terminates its sponsorship of the Plan, the Plan shall terminate



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<PAGE>

     with respect to Participants employed by that Affiliate. The termination of
     sponsorship of the Plan or the  termination of the Plan shall not adversely
     affect  any  Participant  who has  become  entitled  to the  payment of any
     benefits under the Plan as of the date of termination;  provided,  however,
     that the  Company  shall have the right to  accelerate  payments  without a
     premium or prepayment  penalty by paying the Equivalent  Actuarial Value of
     the remaining benefits in a lump sum.

11.2 Amendment.  The Company may, at any time, amend or modify the Plan in whole
     ---------
     or in part by action of the Board; provided,  however, that no amendment or
     modification  shall be  effective  to decrease  or restrict  the value of a
     Participant's  Annual  Benefit  determined  at the  time the  amendment  or
     modification  is made,  calculated as if the  Participant had experienced a
     Termination  of  Employment  as of the  effective  date of the amendment or
     modification.  The amendment or  modification  of the Plan shall not affect
     any  Participant  who has become  entitled to the payment of benefits under
     the  Plan  as of the  date  of the  amendment  or  modification;  provided,
     however,  that  the  Company  or an  Affiliate  shall  have  the  right  to
     accelerate  payments without a premium or prepayment  penalty by paying the
     Equivalent Actuarial Value of the unpaid Monthly Benefits in a lump sum.

11.3 Effect of Payment.  The full payment of the  applicable  benefit  under the
     -----------------
     Plan shall  completely  discharge all  obligations to a Participant and his
     designated Beneficiaries under the Plan.

                                   ARTICLE 12
                                 Administration
                                 --------------

12.1 Committee Duties. The Plan shall be administered by a Committee which shall
     ----------------
     consist of the Board, or such committee as the Board shall appoint. Members
     of the Committee may be  Participants  under the Plan. The Committee  shall
     also have the discretion and authority to (i) make, amend,  interpret,  and
     enforce all appropriate rules and regulations for the administration of the
     Plan  and  (ii)  decide  or  resolve  any  and  all   questions   including
     interpretations  of the Plan, as may arise in connection with the Plan. Any
     individual on the  Committee who is a Participant  shall not vote or act on
     any matter  relating  solely to  himself.  When making a  determination  or
     calculation,  the  Committee  shall  be  entitled  to rely  on  information
     furnished by a Participant or the Company.

12.2 Agents. In the  administration of the Plan, the Committee may, from time to
     ------
     time, employ agents and delegate to them such  administrative  duties as it
     sees fit (including acting through a duly appointed representative) and may
     from time to time  consult  with  counsel who may be counsel to the Company
     and its Affiliates.

12.3 Binding  Effect of Decisions.  The decision or action of the Committee with
     ----------------------------
     respect  to  any  question  arising  out  of  or  in  connection  with  the
     administration,  interpretation  and  application of the Plan and the rules
     and  regulations  promulgated  hereunder  shall be final and conclusive and
     binding upon all persons having any interest in the Plan.




<PAGE>


12.4 Indemnity of Committee.  The Company shall  indemnify and hold harmless the
     ----------------------
     members  of the  Committee,  and any  person  to  whom  the  duties  of the
     Committee may be delegated,  against any and all claims,  losses,  damages,
     expenses  or  liabilities  arising  from any  action or failure to act with
     respect  to the  Plan,  except  in the  case  of  gross  misconduct  by the
     Committee or any of its members or any such delegate.

12.5 Information.  To enable the Committee to perform its functions, the Company
     -----------
     and  its  Affiliates  shall  supply  full  and  timely  information  to the
     Committee as the Committee may reasonably request.

                                   ARTICLE 13
                          Other Benefits and Agreements
                          -----------------------------

     The benefits  provided for a Participant  under the Plan are in addition to
any other benefits available to such Participant under any other plan or program
sponsored by the Company or its Affiliates.  The Plan shall supplement and shall
not  supersede,  modify or amend any other  such plan or  program  except as may
otherwise be expressly provided therein.

                                   ARTICLE 14
                                Claims Procedures
                                -----------------

14.1 Presentation of Claim. Any Participant  (such Participant being referred to
     ---------------------
     below as a  "Claimant")  may deliver to the Committee a written claim for a
     determination  with respect to the amounts  distributable  to such Claimant
     from the Plan. If such a claim relates to the contents of a notice received
     by the  Claimant,  the claim must be made  within 60 days after such notice
     was received by the Claimant. All other claims must be made within 180 days
     of the date on which the event that caused the claim to arise occurred. The
     claim  must  state  with  particularity  the  determination  desired by the
     Claimant.

14.2 Notification of Decision.  The Committee shall consider a Claimant's  claim
     ------------------------
     within a reasonable time, and shall notify the Claimant in writing:

     (a)  that the Claimant's  requested  determination  has been made, and that
          the claim has been allowed in full; or

     (b)  that the Committee has reached a conclusion  contrary,  in whole or in
          part, to the Claimant's requested determination,  and such notice must
          set forth in a manner calculated to be understood by the Claimant:

          (i) the specific reason(s) for the denial of the claim, or any part of
          it;

          (ii) specific  reference(s)  to pertinent  provisions of the Plan upon
          which such denial was based;


                                       12

<PAGE>

          (iii)  a  description  of  any  additional   material  or  information
          necessary for the Claimant to perfect the claim, and an explanation of
          why such material or information is necessary; and

          (iv) an explanation of the claim review procedure set forth in Section
          13.3 below.

14.3 Review of a Denied  Claim.  With 60 days after  receiving a notice from the
     -------------------------
     Committee that a claim has been denied, in whole or in part, a Claimant (or
     the Claimant's duly authorized  representative) may file with the Committee
     a written request for a review of the denial of the claim. Thereafter,  but
     not later than 30 days after the review  procedure  began, the Claimant (or
     the Claimant's duly authorized representative):

     (a) may review pertinent documents;

     (b) may submit written comments or other documents; and/or

     (c) may request a hearing, which the Committee, in its sole discretion, may
     grant.

14.4 Decision  on Review.  The  Committee  shall  render its  decision on review
     -------------------
     promptly,  and not later than 60 days after the filing of a written request
     for  review  of the  denial,  unless a  hearing  is held or  other  special
     circumstances  require  additional  time,  in which  case  the  Committee's
     decision  must be rendered  within 120 days after such date.  Such decision
     must be written in a manner  calculated  to be  understood by the Claimant,
     and it must contain:

     (a)  specific reasons for the decision;

     (b)  specific  reference(s) to the pertinent Plan provisions upon which the
          decision was based; and

     (c)  such other matters as the Committee deems relevant.

14.5 Legal Action. A Claimant's compliance with the foregoing provisions of this
     ------------
     Article 14 is a mandatory  prerequisite  to a Claimant's  right to commence
     any legal action with respect to any claim for benefits under the Plan.

                                   ARTICLE 15
                                      Trust
                                      -----

15.1 Establishment of the Trust. The Company or its Affiliates may establish the
     --------------------------
     Trust upon such terms as it deems appropriate.



                                       13

<PAGE>


15.2 Interrelationship  of the Plan and the Trust.  The  provisions of the Plan,
     ---------------------------------------------
     including a Participant's  Plan Agreement,  shall govern the rights of such
     Participant to receive  distributions  pursuant to the Plan. The provisions
     of the Trust  shall  govern  the  rights of the  Company,  its  Affiliates,
     Participants  and the  creditors of the Company and its  Affiliates  to the
     assets  transferred to the Trust.  The Company and its Affiliates  shall at
     all times remain liable to carry out its obligations under the Plan.

15.3 Investment of Trust Assets.  The trustee of the Trust shall be  authorized,
     --------------------------
     upon written instructions received from the Committee or investment manager
     appointed by the Committee,  to invest and reinvest the assets of the Trust
     in accordance with the applicable trust agreement.

15.4 Distributions  From the Trust. The Company and its Affiliates'  obligations
     -----------------------------
     under the Plan may be satisfied with Trust assets  distributed  pursuant to
     the terms of the Trust and any such distribution shall reduce the Company's
     and its Affiliates' obligations under the Plan.

                                   ARTICLE 16
                                  Miscellaneous
                                  -------------

16.1 Status of Plan.  The Plan is  intended  to be a plan that is not  qualified
     --------------
     within the  meaning of Code  Section  401(a) and that "is  unfunded  and is
     maintained by an employer  primarily for the purpose of providing  deferred
     compensation  for a  select  group  of  management  or  highly  compensated
     employees"  within the  meaning of ERISA  Sections  201(2),  301(a)(3)  and
     401(a)(1).  The Plan shall be  administered  and  interpreted to the extent
     possible in a manner consistent with that intent.

16.2 Unsecured General Creditor.  Participants and their  beneficiaries,  heirs,
     --------------------------
     successors and assigns shall have no legal or equitable  rights,  interests
     or claims in any property or assets of the Company or its  Affiliates.  For
     purposes of the payment of benefits  under the Plan,  any and all assets of
     the Company or its Affiliates  shall be, and remain the general,  unpledged
     and unrestricted  assets of such entity.  The Company's and its Affiliates'
     obligation  under the Plan  shall be merely of an  unfunded  and  unsecured
     promise to pay money in the future.

16.3 Liability.  The Company's or its  Affiliates'  liability for the payment of
     ---------
     benefits shall be defined only by the Plan including a  Participant's  Plan
     Agreement.  The Company or its  Affiliates  shall have no  obligation  to a
     Participant  under  the  Plan  except  as  expressly  provided  in the Plan
     including such Participant's Plan Agreement.

16.4 Nonassignability. Neither a Participant nor any other person shall have any
     ----------------
     right to commute, sell, assign, transfer, pledge,  anticipate,  mortgage or
     otherwise encumber, transfer, hypothecate, alienate or convey in advance of
     actual  receipt,  the  amounts,  if any,  payable  hereunder,  or any  part
     thereof,  which are, and all rights to which are expressly  declared to be,
     unassignable  and  non-transferable.  No part of the amounts payable shall,
     prior to actual payment, be subject to seizure,


                                       14
<PAGE>

     attachment,  garnishment  or  sequestration  for the  payment of any debts,
     judgments,  alimony or separate maintenance allowed by a Participant or any
     other  person,  be  transferable  by  operation  of law in the  event  of a
     Participant's  or  any  other  person's  bankruptcy  or  insolvency  or  be
     transferable to a spouse as a result of a property settlement or otherwise.

16.5 Not a  Contract  of  Employment.  The  terms  and  conditions  of the Plan,
     -------------------------------
     including a Participant's Plan Agreement, shall not be deemed to constitute
     a contract  of  employment  between  the  Company or its  Affiliates  and a
     Participant.  Nothing in the Plan shall be deemed to give a Participant the
     right to be retained in the service of the Company or its  Affiliates or to
     interfere  with the right of the Company or its Affiliates to discipline or
     discharge such Participant at any time.

16.6 Furnishing Information.  A Participant will cooperate with the Committee by
     ----------------------
     furnishing any and all information requested by the Committee and take such
     other actions as may be requested in order to facilitate the administration
     of the Plan and the  payments  of  benefits  hereunder,  including  but not
     limited to,  taking such  physical  examinations  as the Committee may deem
     necessary.

16.7 Terms.  Whenever any words are used herein in the masculine,  they shall be
     -----
     construed as though they were in the feminine in all cases where they would
     so apply;  and whenever any words are used herein in the singular or in the
     plural,  they shall be  construed as though they were used in the plural or
     the singular, as the case may be, in all cases where they would so apply.

16.8 Captions. The captions of the articles, sections and paragraphs of the Plan
     --------
     are for  convenience  only and shall not  control or affect the  meaning or
     construction of any of its provisions.

16.9 Governing  Law.  Subject  to ERISA,  the  provisions  of the Plan  shall be
     --------------
     construed  and  interpreted  according to the internal laws of the State of
     New Jersey without regard to its conflicts of laws and principles.

16.10Notice.  Any  notice or filing  required  or  permitted  to be given to the
     ------
     Committee   under  the  Plan  shall  be   sufficient   if  in  writing  and
     hand-delivered,  or sent by  registered  or certified  mail, to the address
     below.

              Board of Directors
              Penn Federal Savings Bank
              622 Eagle Rock Avenue
              West Orange, New Jersey   07052-2989

     Such  notice  shall  be  deemed  given as of the date of  delivery  or,  if
     delivery  is made by mail,  as of the date  shown  on the  postmark  on the
     receipt for registration or certification. Any notice or filing required or
     permitted to be given to a  Participant  under the Plan shall be sufficient
     if in  writing  and  hand-delivered,  or sent by mail,  to the  last  known
     address of such Participant.


                                       15
<PAGE>

16.11Successors.  The provisions of the Plan shall bind and inure to the benefit
     ----------
     of the Company or its Affiliates,  and their successors and assigns and the
     Participant and the Participant's designated Beneficiaries.

16.12Spouse's Interest.  The interest in the benefits hereunder of a spouse of a
     -----------------
     Participant who has predeceased the Participant shall automatically pass to
     the  Participant and shall not be transferable by such spouse in any manner
     including,  but not limited to, such spouse's will, nor shall such interest
     pass under the laws of intestate succession.

16.13Validity.  In case any  provision  of the Plan  shall be illegal or invalid
     --------
     for any  reason,  said  illegality  or  invalidity  shall  not  affect  the
     remaining  parts hereof,  but the Plan shall be constructed and enforced as
     if such illegal or invalid provision had never been inserted herein.

16.14Incompetent.  If the Committee  determines in its discretion that a benefit
     -----------
     under the Plan is to be paid to a minor, a person  declared  incompetent or
     to a  person  incapable  of  handling  the  disposition  of  that  person's
     property, the Committee may direct payment of such benefit to the guardian,
     legal  representative  or person having the care and custody of such minor,
     incompetent  or  incapable  person.  The  Committee  may  require  proof of
     minority,  incompetence,   incapacity  or  guardianship,  as  it  may  deem
     appropriate prior to distribution of the benefit.  Any payment of a benefit
     shall be a  payment  for the  account  of the  Participant,  and shall be a
     complete discharge of any liability under the Plan for such payment amount

16.15Court Order.  The Committee is authorized to make any payments  directed by
     -----------
     court order in any action in which the Plan or the Committee has been named
     as a party.  In  addition,  if a court  determines  that a spouse or former
     spouse of a Participant has an interest in the Participant's benefits under
     the  Plan in  connection  with a  property  settlement  or  otherwise,  the
     Committee, in its sole discretion shall have the right, notwithstanding any
     election made by the Participant, to immediately distribute the spouse's or
     former spouse's  interest in the  Participant's  benefits under the Plan to
     that spouse or former spouse.

16.16Distribution  in the Event of  Taxation.  If,  for any  reason,  all or any
     ---------------------------------------
     portion of a  Participant's  benefits under the Plan becomes taxable to the
     Participant prior to receipt,  a Participant may petition the Committee for
     a distribution of that portion of his benefit that has become taxable. Upon
     the  grant  of such a  petition,  which  grant  shall  not be  unreasonably
     withheld (and, after a Change in Control, shall be granted), the Company or
     an Affiliate  shall  distribute to the  Participant  immediately  available
     funds in an amount  equal to the  taxable  portion  of his  benefit  (which
     amount shall not exceed such  Participant's  Equivalent  Actuarial Value of
     his unpaid Monthly Benefits). If the petition is granted, the tax liability
     distribution   shall  be  made   within  90  days  of  the  date  when  the
     Participant's  petition is granted.  Such a  distribution  shall affect and
     reduce the benefits to be paid under the Plan.

                                       16
<PAGE>

16.17Insurance.  The Company or its  Affiliates,  on its own behalf or on behalf
     ---------
     of the trustee of the Trust, and, in its sole discretion, may apply for and
     procure  insurance on the life of any  Participant,  in such amounts and in
     such forms as it may choose.  The Company or its  Affiliates or the trustee
     of the Trust,  as the case may be, shall be the sole owner and  beneficiary
     of any such insurance. No Participant shall have any interest whatsoever in
     any such policy or policies,  and a Participant shall at the request of the
     Company  submit to medical  examinations  and supply such  information  and
     execute  such  documents  as may be  required by the  insurance  company or
     companies to whom the Company or its Affiliates has applied for insurance.

16.18Legal Fees To Enforce Rights After Change in Control.  The Company is aware
     ----------------------------------------------------
     that upon the  occurrence  of a Change in Control,  the Board  (which might
     then be  comprised  of new members) or  stockholders  of the  Company,  its
     Affiliates, or of any successor corporation, might then cause or attempt to
     cause the Company,  its  Affiliates,  or such successor to refuse to comply
     with its obligations under the Plan and might cause or attempt to cause the
     Company  or its  Affiliates  to  institute,  or may  institute,  litigation
     seeking to deny Participants the benefits intended under the Plan. In these
     circumstances,  the purpose of the Plan could be  frustrated.  Accordingly,
     if, following a Change in Control, it should appear to any Participant that
     the Company,  its  Affiliates,  or any successor  corporation has failed to
     comply  with  any  of its  obligations  under  the  Plan  or any  agreement
     thereunder,  or, if the Company, its Affiliates,  or any other person takes
     any action to declare  the Plan void or  unenforceable  or  institutes  any
     litigation or other legal action  designed to deny,  diminish or to recover
     from any Participant the benefits intended to be provided, then the Company
     and its  Affiliates  irrevocably  authorizes  such  Participant  to  retain
     counsel of his choice at the  expense of the Company or its  Affiliates  to
     represent such  Participant in connection with the initiation or defense of
     any  litigation or other legal  action,  whether by or against the Company,
     its Affiliates, or any director, officer, stockholder or other Affiliate of
     the Company or any successor thereto in any jurisdiction.

     The Company has signed the Plan as of March 1, 2003.


                                    PENN FEDERAL SAVINGS BANK



                                    By:    ________________________
                                    Name:  ________________________
                                    Title: ________________________



                            PENN FEDERAL SAVINGS BANK
                SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

     Penn  Federal  Savings  Bank  ("Penn  Federal")  is the sponsor of the Penn
Federal Savings Bank Supplemental  Executive Retirement Plan (the "Plan").  Penn
Federal and the undersigned  executive (the  "Employee")  hereby agree, for good
and valuable consideration,  the value of which is hereby acknowledged, that the
Employee  shall  participate in the Plan as such Plan is currently in effect and
as the same may  hereafter  be  modified or amended.  The  Employee  does hereby
acknowledge  that he has been  provided  with a copy of the Plan as currently in
effect and he does specifically agree to the terms and conditions  thereof.  The
Employee  understands  that his  receipt  of  benefits  under the Plan  shall be
subject to all provisions of the Plan. All capitalized  terms not defined herein
shall have the meaning assigned to them under the Plan.

 PROVISIONS REGARDING PLAN BENEFITS, PAYOUT PERIOD AND EARLY RETIREMENT ELECTION

     1.   No  limitations  other than those  contained in the Plan and this Plan
          Agreement shall apply to the Employee's  entitlement to benefits under
          the Plan.

     2.   The Employee's annual benefit  percentage is 70%. This percentage will
          be  multiplied  by  the  Employee's  Final  Average   Compensation  to
          determine the Employee's Annual Benefit.

     3.   The Employee's  maximum Annual Benefit shall be $300,000.  There is no
          minimum Annual Benefit.

     4.   The "Payout  Period" shall be 180 consecutive  months,  subject to the
          modification rules in the Plan for early retirement benefits.

     5.   If elected by the  Employee,  the Payout  Period  shall  commence on a
          designated  Early Retirement Date. The Early Retirement Date shall not
          be earlier than one year  following  the date the  Employee  elects in
          writing to have his benefits commence.  The Employee  acknowledges and
          understands  that (a) no benefit  will be paid on an Early  Retirement
          Date unless a written  election is made, and (b) if benefits  commence
          on an Early Retirement Date, the Employee's  monthly payment under the
          Plan will be smaller than the Monthly  Benefit he would have  received
          had benefits  commenced at his Normal  Retirement Date, to reflect the
          earlier commencement of benefits.

     The Employee  understands  that he may at any time, upon written request to
the Committee, obtain a copy of the Plan as then in effect.



_________________________________                     ---------------------,2003
                       , Employee


PENN FEDERAL SAVINGS BANK


By  ______________________________                    ---------------------,2003
Name:  ___________________________
Title: ___________________________