EXHIBIT 10H


                              EMPLOYMENT AGREEMENT
                              --------------------


     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this 12th day of August, 2003 by and between PennFed Financial Services, Inc.
(the "Company") and Claire M. Chadwick (the "Employee").

     WHEREAS,  the Employee  serves as the  Executive  Vice  President and Chief
Financial Officer of the Company and of the Company's  wholly-owned  subsidiary,
Penn Federal Savings Bank (the "Bank");

     WHEREAS,  the board of directors of the Company (the "Board of  Directors")
believes it is in the best interests of the Company and its subsidiaries for the
Company  to enter  into  this  Agreement  with the  Employee  in order to assure
continuity of management of the Company and its subsidiaries; and

     WHEREAS,  the Board of Directors has approved and  authorized the execution
of this Agreement with the Employee;

     NOW,  THEREFORE,  in  consideration  of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:

     1.   Definitions.
          -----------

          (a)  The  term  "Change  in  Control"  means  (1)  an  acquisition  of
securities  of the  Company  or the  Bank  that is  determined  by the  Board of
Directors to  constitute  an  acquisition  of control of the Company or the Bank
within the meaning of the Change in Bank Control Act, 12 U.S.C.  ss. 1817(j) and
the Savings and Loan Holding  Company Act,  12U.S.C.  ss.1467a,  and  applicable
regulations  thereunder;  (2) an event that would be  required to be reported in
response  to Item 1 of the  current  report  on Form  8-K,  as in  effect on the
Effective Date,  pursuant to Section 13 or 15(d) of the Securities  Exchange Act
of 1934 (the  "Exchange  Act");  (3) any person (as the term is used in Sections
13(d) and 14(d) of the  Exchange  Act) is or becomes  the  beneficial  owner (as
defined  in Rule  13d-3  under the  Exchange  Act)  directly  or  indirectly  of
securities of the Company or the Bank  representing  25% or more of the combined
voting  power  of  the  Company's  or the  Bank's  outstanding  securities;  (4)
individuals who are members of the Board of Directors on the Effective Date (the
"Incumbent  Board")  cease for any  reason  to  constitute  at least a  majority
thereof,  provided  that  any  person  becoming  a  director  subsequent  to the
          --------------
Effective Date whose election was approved by a vote of at least  three-quarters
of the  directors  comprising  the  Incumbent  Board,  or whose  nomination  for
election by the Company's  stockholders  was approved by a nominating  committee
serving under an Incumbent Board,  shall be considered a member of the Incumbent
Board;   or  (5)  approval  by  the   Company's   stockholders   of  a  plan  of
reorganization,  merger  or  consolidation  of  the  Company,  sale  of  all  or
substantially all of the assets of the Company,  a similar  transaction in which
the  Company is not the  resulting  entity;  provided  that the term  "change in
                                             --------------
control" shall not include an  acquisition of securities by an employee  benefit
plan of the Bank or the Company.  In the  application of  regulations  under the
Change  in Bank  Control  Act or the  Savings  and  Loan  Holding  Company  Act,
determinations  to be made by the applicable  federal banking regulator shall be
made by the Board of Directors.



<PAGE>


          (b) The term  "Consolidated  Subsidiaries"  means  any  subsidiary  or
subsidiaries  of  the  Company  (or  its  successors)   that  are  part  of  the
consolidated  group of the Company (or its  successors)  for federal  income tax
reporting.

          (c) The term  "Date of  Termination"  means  the date  upon  which the
Employee's  employment with the Company or the Bank or both ceases, as specified
in a notice of termination pursuant to Section 8 of this Agreement.

          (d) The term "Effective Date" means August 12, 2003.

          (e) The term  "Involuntary  Termination"  means the termination of the
employment of Employee (i) by either the Company or the Bank or both without her
express  written  consent;  or (ii) by the  Employee  by  reason  of a  material
diminution of or  interference  with her duties,  responsibilities  or benefits,
including (without  limitation) any of the following actions unless consented to
in writing by the Employee:  (1) a requirement that the Employee be based at any
place other than West Orange, New Jersey, or within 35 miles thereof, except for
reasonable  travel on Company or Bank business;  (2) a material  demotion of the
Employee;  (3) a material  reduction  in the number or  seniority  of  personnel
reporting to the Employee or a material  reduction in the frequency  with which,
or in the nature of the  matters  with  respect to which such  personnel  are to
report to the Employee,  other than as part of a Bank- or Company-wide reduction
in staff; (4) a reduction in the Employee's  salary or a material adverse change
in the Employee's perquisites,  benefits, contingent benefits or vacation, other
than  prior  to a  Change  in  Control  as part of an  overall  program  applied
uniformly and with equitable  effect to all members of the senior  management of
the Bank or the Company; (5) a material permanent increase in the required hours
of work or the  workload  of the  Employee;  or (6) the  failure of the Board of
Directors  (or a board of  directors of a successor of the Company) to elect her
as Executive  Vice  President and Chief  Financial  Officer of the Company (or a
successor of the Company) or any action by the Board of Directors (or a board of
directors of a successor of the Company)  removing her from any of such offices,
or the failure of the board of  directors  of the Bank (or any  successor of the
Bank) to elect her as Executive  Vice President and Chief  Financial  Officer of
the Bank (or any successor of the Bank) or any action by such board (or board of
a  successor  of the  Bank)  removing  her  from any of such  offices.  The term
"Involuntary  Termination" does not include Termination for Cause or termination
of employment due to death or permanent  disability  pursuant to Section 7(g) of
this  Agreement,  or  suspension  or  temporary or  permanent  prohibition  from
participation  in the conduct of the affairs of a depository  institution  under
Section 8 of the Federal Deposit Insurance Act.

          (f) The terms  "Termination for Cause" and "Terminated for Cause" mean
termination  of the  employment  of the Employee  with either the Company or the
Bank, as the case may be,  because of the Employee's  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 the Bank) or final  cease-and-desist  order, or (except
as provided below) material breach of any provision of this Agreement. No act or
failure to act by the Employee  shall be considered  willful unless the Employee
acted or failed to act with an absence of good  faith and  without a  reasonable
belief  that  her  action  or  failure  to act was in the best  interest  of the
Company.  The  Employee  shall not be deemed to have been  Terminated  for Cause
unless and until there  shall have been  delivered  to the  Employee a copy of a
resolution,


                                       2
<PAGE>


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  Employee  and  an
opportunity for the Employee,  together with the Employee's counsel, to be heard
before  the  Board),  stating  that in the good  faith  opinion  of the Board of
Directors  the  Employee  has  engaged in  conduct  described  in the  preceding
sentence and specifying the  particulars  thereof in detail.  The opportunity of
the  Employee  to be heard  before  the Board  shall not affect the right of the
Employee to arbitration as set forth in paragraph 17.

     2.  Term;  Termination  of  Prior  Employment  Agreement.  The term of this
         -----------------------------------------------------
Agreement  shall be a period of five years  commencing  on the  Effective  Date,
subject to earlier  termination as provided herein. On November 28 of each year,
the  term  shall  be  extended  for a  period  of one  year in  addition  to the
then-remaining  term (so that on each  November  28  there  shall be five  years
remaining under this Agreement), provided that the Company has not given notice
                                 -------------
to the Employee in writing at least 90 days prior to such  anniversary  that the
term of this Agreement shall not be extended further,  and provided further that
                                                           ---------------------
the Employee has not received an  un-satisfactory  performance  review by either
the Board of Directors or the board of directors of the Bank.

     3. Employment. The Employee is employed as the Executive Vice President and
        ----------
Chief  Financial  Officer of the Company and as the Executive Vice President and
Chief  Financial  Officer  of the  Bank.  As such,  the  Employee  shall  render
administrative and management  services as are customarily  performed by persons
situated in similar executive  capacities,  and shall have such other powers and
duties  as the Board of  Directors  or the  board of  directors  of the Bank may
prescribe  from time to time.  The  Employee  shall also render  services to any
subsidiary  or  subsidiaries  of the  Company  or the Bank as  requested  by the
Company or the Bank from time to time  consistent  with her executive  position.
The Employee shall devote her best efforts and reasonable  time and attention to
the business and affairs of the Company and the Bank to the extent  necessary to
discharge  her  responsibilities  hereunder.  The  Employee  may  (i)  serve  on
corporate  or  charitable  boards  or  committees,   and  (ii)  manage  personal
investments,  so  long as  such  activities  do not  interfere  materially  with
performance of her responsibilities hereunder.

     4. Cash Compensation.
        -----------------

          (a) Salary.  The Company agrees to pay the Employee during the term of
              ------
this  Agreement a base salary (the "Company  Salary") the  annualized  amount of
which shall be not less than the annualized  aggregate  amount of the Employee's
base salary from the Company and any Consolidated  Subsidiaries in effect at the
Effective  Date;  provided  that any  amounts  of  salary  actually  paid to the
                  --------------
Employee by any Consolidated  Subsidiaries shall reduce the amount to be paid by
the Company to the Employee. The Company Salary shall be paid no less frequently
than monthly and shall be subject to customary  tax  withholding.  The amount of
the  Employee's  Company  Salary shall be increased  (but shall not be decreased
other than prior to a Change in  Control as part of an overall  program  applied
uniformly and with equitable  effect to all members of senior  management of the
Company or the Bank) from time to time in accordance  with the amounts of salary
approved  by the  Board of  Directors  or the board of  directors  of any of the
Consolidated Subsidiaries after the Effective Date.


                                       3
<PAGE>


          (b)  Bonuses.  The  Employee  shall be entitled to  participate  in an
               -------
equitable  manner with all other executive  officers of the Company and the Bank
in such  performance-based and discretionary  bonuses, if any, as are authorized
and declared by the Board of Directors for executive officers of the Company and
by the board of directors of the Bank for executive officers of the Bank.

          (c)  Expenses.  The  Employee  shall be  entitled  to  receive  prompt
               --------
reimbursement for all reasonable expenses incurred by the Employee in performing
services  under this  Agreement in accordance  with the policies and  procedures
applicable to the executive officers of the Company and the Bank,  provided that
                                                                   -------------
the Employee  accounts  for such  expenses as required  under such  policies and
procedures.

          (d)  Deferral of  Non-Deductible  Compensation.  In the event that the
               -----------------------------------------
Employee's aggregate  compensation  (including  compensatory  benefits which are
deemed  remuneration for purposes of Section 162(m) of the Internal Revenue Code
of  1986 as  amended  (the  "Code"))  from  the  Company  and  the  Consolidated
Subsidiaries for any calendar year exceeds the greater of (i) $1,000,000 or (ii)
the  maximum  amount of  compensation  deductible  by the  Company or any of the
Consolidated  Subsidiaries in any calendar year under Section 162(m) of the Code
(the "maximum allowable amount"),  then any such amount in excess of the maximum
allowable  amount shall be mandatorily  deferred with interest thereon at 8% per
annum,  compounded annually,  to a calendar year such that the amount to be paid
to the Employee in such calendar year,  including  deferred amounts and interest
thereon, does not exceed the maximum allowable amount. Subject to the foregoing,
deferred  amounts  including  interest  thereon shall be payable at the earliest
time permissible.  All unpaid deferred amounts shall be paid to the Employee not
later  than her Date of  Termination  unless  her  Date of  Termination  is on a
December 31st, in which case, the unpaid  deferred  amounts shall be paid to the
Employee on the first  business day of the next  succeeding  calendar  year. The
provisions of this  subsection  shall survive any  termination of the Employee's
employment and any termination of this Agreement.

     5. Benefits.
        --------

          (a)  Participation in Benefit Plans. The Employee shall be entitled to
               ------------------------------
participate,  to the same  extent as  executive  officers of the Company and the
Bank  generally,  in all plans of the Company and the Bank  relating to pension,
retirement,  thrift,  profit-sharing,  savings,  group or other life  insurance,
hospitalization,  medical and dental  coverage,  travel and accident  insurance,
education,   cash  bonuses,   and  other  retirement  or  employee  benefits  or
combinations  thereof.  In  addition,  the  Employee  shall  be  entitled  to be
considered for benefits under all of the stock and stock option related plans in
which the  Company's  or the Bank's  executive  officers  are eligible or become
eligible to participate.

          (b) Fringe Benefits. The Employee shall be eligible to participate in,
              ---------------
and receive benefits under, any other fringe benefit plans or perquisites  which
are or may become  generally  available to the Company's or the Bank's executive
officers,  including  but not  limited  to  supplemental  retirement,  incentive
compensation,  supplemental  medical or life insurance plans, company cars, club
dues, physical examinations, financial planning and tax preparation services.



                                       4
<PAGE>


     6. Vacations; Leave. The Employee shall be entitled to annual paid vacation
        ----------------
in accordance  with the policies  established  by the Board of Directors and the
board of directors  of the Bank for  executive  officers,  in no event less than
four weeks per year,  and to voluntary  leaves of absence,  with or without pay,
from  time to time at such  times  and  upon  such  conditions  as the  Board of
Directors may determine in its discretion.



<PAGE>


     7. Termination of Employment.
        -------------------------

          (a)   Involuntary   Termination.   If  the  Employee   experiences  an
                -------------------------
Involuntary Termination,  such termination of employment shall be subject to the
Company's  obligations  under this  Section  7. In the event of the  Involuntary
Termination of the Employee,  if the Employee has offered to continue to provide
the services  contemplated  by and on the terms  provided in this  Agreement and
such offer has been  declined,  subject to Section 7(b) of this  Agreement,  the
Company shall,  during the lesser period of the remaining term of this Agreement
or  three  years  following  the Date of  Termination  (the  "Liquidated  Damage
Period"),  as liquidated damages (i) pay to the Employee monthly  one-twelfth of
the Company Salary at the annual rate in effect immediately prior to the Date of
Termination  and one-twelfth of the average annual amount of cash bonus and cash
incentive  compensation  of the Employee,  based on the average  amounts of such
compensation  earned by the  Employee  from the Company and the Bank for the two
full  fiscal  years  preceding  the  Date  of  Termination;  and  (ii)  maintain
substantially  the same group life or key man life  insurance,  hospitalization,
medical,  dental,  prescription  drug and other health  benefits,  and long-term
disability insurance (if any) for the benefit of the Employee and her dependents
and beneficiaries who would have been eligible for such benefits if the Employee
had not suffered Involuntary Termination and on terms substantially as favorable
to the Employee including amounts of coverage and deductibles and other costs to
her in effect immediately prior to such Involuntary Termination (the "Employee's
Health Coverage").

          (b) Reduction of the Company's Obligations Under Section 7(a).
              ---------------------------------------------------------

          (1) In the event that the  Employee  becomes  entitled  to  liquidated
damages pursuant to Section 7(a), (i) the Company's  obligation  thereunder with
respect to cash damages  shall be reduced by the amount of the  Employee's  cash
income,  if any, earned from providing  personal  services during the Liquidated
Damage Period;  and (ii) the Company's  obligation to maintain  Health  Coverage
shall be  reduced  to the  extent,  if any,  that  the  Employee  receives  such
benefits,  on  no  less  favorable  terms,  from  another  employer  during  the
Liquidated  Damage  Period.  For purposes of this Section  7(b),  the term "cash
income" shall include amounts of salary, wages, bonuses,  incentive compensation
and fees paid to the  Employee  in cash but shall not  include  shares of stock,
stock options,  stock appreciation rights or other earned income not paid to the
Employee  in cash.  To the extent the  provisions  of this  Section  7(b)(1) are
applicable and an overpayment has been made to the Employee as of the expiration
of Liquidated  Damage  Period,  the Employee  shall  reimburse the Company in an
amount  equal to the  after  tax  benefit  realized  by the  Employee  from such
overpayment (i.e. amount realized net of all federal,  state, local,  employment
and  medicare  taxes).  In  making  the  reimbursement  calculation  it shall be
presumed that the Employee is subject to the highest  marginal federal and state
income tax rates.

          (2) The  Employee  agrees  that in the event she  becomes  entitled to
liquidated  damages pursuant to Section 7(a),  throughout the Liquidated  Damage
Period,  she shall promptly inform the Company of the nature and amounts of cash
income and the type of health



                                       5
<PAGE>


benefits  and  coverage  which she earns or  receives  from  providing  personal
services,  and shall  provide  such  documentation  of such cash income and such
health benefits and coverage as the Company may request. In the event of changes
to such cash income or such health  benefits or coverage from time to time,  the
Employee shall inform the Company of such changes, in each case within five days
after the change  occurs,  and shall provide such  documentation  concerning the
change as the Company may request.

     (c) Change in  Control;  Cut Back;  and Tax Gross Up. In the event that the
         ------------------------------------------------
Employee  experiences an Involuntary  Termination within the 6 months preceding,
at the time of, or within 24 months  following a Change in Control,  in addition
to the Company's  obligations under Section 7(a) of this Agreement,  the Company
shall pay to the Employee in cash, within 30 days after the later of the date of
such Change in Control or the Date of  Termination,  an amount  equal to 299% of
the Employee's  "base amount" as determined under Section 280G of the Code, less
the  acceleration  and lapse  value of options  granted to the  Employee  by the
Company that are taken into account in the determination of "parachute payments"
under 280G(b)(2) of the Code by virtue of vesting acceleration or deemed vesting
acceleration  in  connection  with  such  Change  in  Control.  In the event the
Employee is requested in  connection  with or at the time of a Change in Control
to continue  employment  for an interim  period and she shall die while employed
during such interim period,  then her estate, or such person as the Employee may
have previously  designated in writing,  shall be entitled to the full Change in
Control payment described in this paragraph.

     While it is not contemplated  that the Employee will receive any amounts or
benefits that will constitute "excess parachute  payments" under Section 280G of
the Code, in the event that any payments or benefits  provided or to be provided
to the Employee  pursuant to this  Agreement,  in  combination  with payments or
benefits, if any, from other plans or arrangements  maintained by the Company or
any of the Consolidated  Subsidiaries,  constitute  "excess parachute  payments"
under Section 280G of the Code that are subject to excise tax under Section 4999
of the Code, the Company shall pay to the Employee in cash an additional  amount
equal to the amount of the Gross Up Payment (as hereinafter defined). The "Gross
Up  Payment"  shall be the  amount  needed  to  ensure  that the  amount of such
payments and the value of such  benefits  received by the Employee  (net of such
excise tax and any federal,  state and local tax on the Company's payment to her
attributable to such excise tax) equals the amount of such payments and value of
such  benefits  as she would  receive in the  absence of such excise tax and any
federal,  state and local tax on the Company's  payment to her  attributable  to
such excise tax. The Company shall pay the Gross Up Payment within 30 days after
the Date of Termination.  For purposes of determining the amount of the Gross Up
Payment,  the value of any non-cash  benefits and deferred  payments or benefits
shall be determined by the Company's independent auditors in accordance with the
principles of Section  280G(d)(3) and (4) of the Code. In the event that,  after
the Gross Up Payment is made,  the amount of the excise tax is  determined to be
less than the amount  calculated  in the  determination  of the actual  Gross Up
Payment made by the Company,  the  Employee  shall repay to the Company,  at the
time that such reduction in the amount of excise tax is finally determined,  the
portion of the Gross Up Payment attributable to such reduction, plus interest on
the amount of such repayment at the  applicable  federal rate under Section 1274
of the Code from the date of the Gross Up Payment to the date of the  repayment.
The amount of the reduction of the Gross Up Payment shall reflect any subsequent
reduction  in excise taxes  resulting  from such  repayment.  In the event that,
after the



                                       6

<PAGE>

Gross Up Payment is made,  the amount of the excise tax is  determined to exceed
the amount  anticipated  at the time the Gross Up Payment was made,  the Company
shall pay to the Employee, in immediately available funds, at the time that such
additional  amount of excise tax is finally  determined,  an additional  payment
("Additional  Gross Up Payment") equal to such  additional  amount of excise tax
and any federal, state and local taxes thereon, plus all interest and penalties,
if any, owned by the Employee with respect to such  additional  amount of excise
and other tax. The Company shall have the right to challenge,  on the Employee's
behalf,  any excise  tax  assessment  against  her as to which the  Employee  is
entitled to (or would be entitled if such assessment is finally determined to be
proper) a Gross Up Payment or  Additional  Gross Up Payment,  provided  that all
costs and  expenses  incurred in such a challenge  shall be borne by the Company
and the Company  shall  indemnify  the  Employee  and hold her  harmless,  on an
after-tax basis, from any excise or other tax (including  interest and penalties
with respect  thereto) imposed as a result of such payment of costs and expenses
by the Company.

          (d) Termination for Cause. In the event of Termination for Cause, the
              ----------------------
Company shall have no further  obligation to the Employee  under this  Agreement
after the Date of Termination other than deferred amounts under Section 4(d).

          (e) Voluntary  Termination.  The Employee may terminate her employment
              ----------------------
voluntarily at any time by a notice pursuant to Section 8 of this Agreement.  In
the event that the Employee voluntarily  terminates her employment other than by
reason of any of the  actions  that  constitute  Involuntary  Termination  under
Section 1(e)(ii) of this Agreement ("Voluntary Termination"),  the Company shall
be obligated  to the Employee for the amount of her Company  Salary and benefits
only through the Date of Termination, at the time such payments are due, and the
Company shall have no further  obligation to the Employee  under this  Agreement
except as provided in Section 4(d).

          (f) Death.  In the event of the death of the Employee  while  employed
              -----
under this Agreement and prior to any  termination  of  employment,  the Company
shall pay to the  Employee's  estate,  or such person as the  Employee  may have
previously  designated  in  writing,  (i)  the  Company  Salary  which  was  not
previously  paid to the Employee  through the last day of the calendar  month in
which  Employee's  death  occurred  and,  if  applicable,  the Change in Control
payment set forth in the first paragraph of Section 7(c), provided Employee died
within six months prior or 24 months following such change in control;  (ii) the
amounts of any benefits or awards which, pursuant to the terms of any applicable
plan or plans, were earned with respect to the fiscal year in which the Employee
died and which the  Employee  would  have been  entitled  to  receive if she had
continued to be employed,  and the amount of any bonus or incentive compensation
for such fiscal year which the Employee  would have been  entitled to receive if
she had continued to be employed,  pro-rated in  accordance  with the portion of
the fiscal year prior to her death,  provided that such amounts shall be payable
                                     -------------
when and as ordinarily  payable under the applicable plans; and (iii) the unpaid
deferred amounts under Section 4(d).

          (g) Permanent  Disability.  For purposes of this  Agreement,  the term
              ---------------------
"permanently  disabled"  means  that  the  Employee  has a  mental  or  physical
infirmity which  permanently  impairs her ability to perform  substantially  her
duties  and  responsibilities  under  this  Agreement  and which  results in (i)
eligibility of the Employee under the long-term  disability  plan of the Company
or the Bank, if any; or (ii) inability of the Employee to perform  substantially
her  duties  and  responsibilities  under  this  Agreement  for a period  of 180
consecutive



                                       7

<PAGE>

days. Either the Company or the Bank or both may terminate the employment of the
Employee after having established that the Employee is permanently disabled.

          (h) Regulatory  Action.  Notwithstanding  any other provisions of this
              ------------------
Agreement:


          (1) If the  Employee is removed  and/or  permanently  prohibited  from
participating  in the conduct of the affairs of a depository  institution  by an
order issued under Section  8(e)(4) or (g)(1) of the Federal  Deposit  Insurance
Act ("FDIA"),  12 U.S.C.  ss.  1818(e)(4)  and (g)(1),  all  obligations  of the
Company under this  Agreement  shall  terminate as of the effective  date of the
order, but vested rights of the contracting parties shall not be affected;.

          (2) If the Bank is in default  (as  defined in Section  3(x)(1) of the
FDIA), all obligations of the Company under this Agreement shall terminate as of
the date of default,  but this  provision  shall not affect any vested rights of
the contracting parties; and

          (3) All  obligations  of the  Company  under this  Agreement  shall be
terminated,  except to the extent determined that continuation of this Agreement
is necessary for the continued operation of the Bank: (i) by the Director of the
Office of Thrift  Supervision  (the  "Director") or her or her designee,  at the
time the Federal  Deposit  Insurance  Corporation  enters into an  agreement  to
provide assistance to or on behalf of the Bank under the authority  contained in
Section 13(c) of the FDIA;  or (ii) by the Director or her or her  designee,  at
the time the Director or his or her designee  approves a  supervisory  merger to
resolve problems related to operation of the Bank or when the Bank is determined
by the  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.

     8. Notice of  Termination.  In the event that the  Company or the Bank,  or
        ----------------------
both, desire to terminate the employment of the Employee during the term of this
Agreement,  the Company or the Bank,  or both,  shall  deliver to the Employee a
written notice of  termination,  stating  whether such  termination  constitutes
Termination  for Cause or Involuntary  Termination,  setting forth in reasonable
detail the facts and circumstances  that are the basis for the termination,  and
specifying the date upon which employment  shall terminate,  which date shall be
at least 30 days after the date upon which the  notice is  delivered,  except in
the case of Termination for Cause. In the event that the Employee  determines in
good  faith  that  she  has  experienced  an  Involuntary   Termination  of  her
employment,  she  shall  send a  written  notice  to  the  Company  stating  the
circumstances  that  constitute such  Involuntary  Termination and the date upon
which her employment shall have ceased due to such Involuntary  Termination.  In
the event that the Employee desires to effect a Voluntary Termination, she shall
deliver a written notice to the Company,  stating the date upon which employment
shall terminate,  which date shall be at least 30 days after the date upon which
the notice is delivered, unless the parties agree to a date sooner.

     9.  Attorneys  Fees.  The  Company  shall  pay all legal  fees and  related
         ---------------
expenses (including the costs of experts,  evidence and counsel) incurred by the
Employee  as a  result  of  (i)  the  Employee's  contesting  or  disputing  any
termination of employment,  or (ii) the Employee's  seeking to obtain or enforce
any  right  or  benefit  provided  by this  Agreement  or by any  other  plan or
arrangement  maintained by the Company (or its  successors) or the  Consolidated
Subsidiaries under which the Employee is or may be entitled to receive benefits;
provided that the Company's
-------------



                                       8
<PAGE>

obligation to pay such fees and expenses is subject to the Employee's prevailing
with  respect to the matters in dispute in any action  initiated by the Employee
or the Employee's  having been  determined to have acted  reasonably and in good
faith with respect to any action initiated by the Company or the Bank.

     10. Non-Disclosure and Non-Solicitation.
         -----------------------------------

          (a) Non-Disclosure.  The Employee  acknowledges that she has acquired,
              --------------
and  will  continue  to  acquire  while  employed  by  the  Company  and/or  any
Consolidated Subsidiary,  special knowledge of the business, affairs, strategies
and plans of the Company and the  Consolidated  Subsidiaries  which has not been
disclosed  to the  public and which  constitutes  confidential  and  proprietary
business  information  owned by the Company and the  Consolidated  Subsidiaries,
including but not limited to,  information about the customers,  customer lists,
software,  data,  formulae,  processes,  inventions,  trade  secrets,  marketing
information  and  plans,  and  business   strategies  of  the  Company  and  the
Consolidated Subsidiaries, and other information about the products and services
offered or developed or planned to be offered or developed by the Company and/or
the Consolidated Subsidiaries ("Confidential Information").  The Employee agrees
that,  without the prior written  consent of the Company,  she shall not, during
the term of her employment or at any time thereafter,  in any manner directly or
indirectly  disclose any Confidential  Information to any person or entity other
than  the  Company  and  the  Consolidated  Subsidiaries.   Notwithstanding  the
foregoing,  if the Employee is requested or required  (including but not limited
to by oral questions, interrogatories,  requests for information or documents in
legal proceeding, subpoena, civil investigative demand or other similar process)
to disclose any Confidential  Information the Employee shall provide the Company
with  prompt  written  notice of any such  request  or  requirement  so that the
Company  and/or a Consolidated  Subsidiary may seek a protective  order or other
appropriate  remedy and/or waive  compliance with the provisions of this Section
10(a).  If, in the absence of a protective  order or other remedy or the receipt
of a waiver from the Company,  the Employee is nonetheless  legally compelled to
disclose  Confidential  Information  to any  tribunal  or else stand  liable for
contempt or suffer other censure or penalty, the Employee may, without liability
hereunder,  disclose  to such  tribunal  only that  portion of the  Confidential
Information  which  is  legally  required  to be  disclosed,  provided  that the
Employee  exercise  her best  efforts to  preserve  the  confidentiality  of the
Confidential  Information,  including without limitation by cooperating with the
Company  and/or a Consolidated  Subsidiary to obtain an  appropriate  protective
order or other reliable  assurance that confidential  treatment will be accorded
the Confidential  Information by such tribunal. On the Date of Termination,  the
Employee shall promptly  deliver to the Company all copies of documents or other
records  (including  without  limitation   electronic  records)  containing  any
Confidential  Information  that is in her  possession or under her control,  and
shall retain no written or electronic record of any Confidential Information.

          (b) Non-Solicitation.  During the three year period next following the
              ----------------
Date of  Termination,  the Employee  shall not directly or  indirectly  solicit,
encourage,   or  induce  any  person  while  employed  by  the  Company  or  any
Consolidated Subsidiary to (i) leave the Company or any Consolidated Subsidiary,
(ii) cease his or her employment with the Company or any Consolidated Subsidiary
or (iii) accept employment with another entity or person.

         The provisions of this Section 10 shall survive any termination of the
Employee's employment and any termination of this Agreement.




                                        9
<PAGE>


     11. No Assignments.
         --------------

          (a) This  Agreement  is personal to each of the  parties  hereto,  and
neither party may assign or delegate any of its rights or obligations  hereunder
without  first  obtaining  the  written  consent of the other  party;  provided,
however,  that the Company shall require any successor or assign (whether direct
or indirect, by purchase,  merger,  consolidation or otherwise) by an assumption
agreement  in form and  substance  satisfactory  to the  Employee,  to expressly
assume and agree to perform  this  Agreement  in the same manner and to the same
extent that the Company would be required to perform it if no such succession or
assignment had taken place.  Failure of the Company to obtain such an assumption
agreement prior to the  effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle the Employee to compensation and
benefits  from the  Company in the same amount and on the same terms as provided
for  an  Involuntary  Termination  under  Section  7  hereof.  For  purposes  of
implementing  the provisions of this Section  11(a),  the date on which any such
succession becomes effective shall be deemed the Date of Termination.

          (b) This  Agreement  and all rights of the  Employee  hereunder  shall
inure to the benefit of and be enforceable by the Employee's  personal and legal
representatives,  executors,  administrators,  successors,  heirs, distributees,
devisees and legatees.

     12.  Notice.  For the  purposes  of this  Agreement,  notices and all other
          ------
communications  provided for in this Agreement  shall be in writing and shall be
deemed to have been duly given when  personally  delivered  or sent by certified
mail,  return receipt  requested,  postage  prepaid,  to the Company at its home
office,  to the attention of the Board of Directors with a copy to the Secretary
of the Company,  or, if to the  Employee,  to such home or other  address as the
Employee has most recently provided in writing to the Company.

     13.  Amendments.  No  amendments  or additions to this  Agreement  shall be
          ----------
binding unless in writing and signed by both parties, except as herein otherwise
provided.

     14.  Headings.  The headings used in this Agreement are included solely for
          --------
convenience  and  shall  not  affect,   or  be  used  in  connection  with,  the
interpretation of this Agreement.

     15.  Severability.  The  provisions  of  this  Agreement  shall  be  deemed
          ------------
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions hereof.

     16.  Governing  Law.  This  Agreement  shall be governed by the laws of the
          --------------
State of New Jersey.

     17. Arbitration.  Any dispute or controversy arising under or in connection
         -----------
with this Agreement (other than relating to the enforcement of the provisions of
Section 10) shall be settled  exclusively by arbitration in accordance  with the
rules of the American  Arbitration  Association then in effect.  Judgment may be
entered on the arbitrator's award in any court having jurisdiction.




                                       10
<PAGE>


     18.  Equitable  and  Other  Judicial  Relief.  In the event of an actual or
          ---------------------------------------
threatened  breach by the Employee of any of the  provisions  of Section 10, the
Company shall be entitled to equitable  relief in the form of an injunction from
a court of competent  jurisdiction  and such other equitable and legal relief as
such court deems appropriate under the circumstances. The parties agree that the
Company shall not be required to post any bond in  connection  with the grant or
issuance of an injunction  (preliminary,  temporary and/or permanent) by a court
of competent  jurisdiction,  and if a bond is nevertheless required, the parties
agree that it shall be in a nominal  amount.  The parties  further agree that in
the event of a breach by the  Employee of any of the  provisions  of Section 10,
the  Company  will suffer  irreparable  damage and its remedy at law against the
Employee is inadequate to compensate it for such damage.


     IN WITNESS WHEREOF,  the parties have executed this Agreement as of the day
and year first above written.

     THIS  AGREEMENT  CONTAINS  A  BINDING  ARBITRATION  PROVISION  WHICH MAY BE
ENFORCED BY THE PARTIES.

Attest:                                         PennFed Financial Services, Inc.



---------------------                           --------------------------------
Secretary                                       By:   William C. Anderson
                                                Its:  Chairman


                                                Employee



                                                --------------------------------
                                                Claire M. Chadwick



                                       11