PENNFED FINANCIAL SERVICES, INC.

            1994 AMENDED AND RESTATED STOCK OPTION AND INCENTIVE PLAN

     1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, officers and employees of the Corporation
and its Affiliates. It is intended that designated Options granted pursuant to
the provisions of this Plan to persons employed by the Corporation or its
Affiliates will qualify as Incentive Stock Options. Options granted to persons
who are not employees will be Non-Qualified Stock Options.

     2. Definitions. The following definitions are applicable to the Plan:

        "Affiliate" - means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.

        "Bank" - means Penn Federal Savings Bank and any successor entity.

        "Award" - means the grant of an Incentive Stock Option, a Non-Qualified
Stock Option, a Stock Appreciation Right or a Limited Stock Appreciation Right,
or any combination thereof, as provided in the Plan.

        "Code" - means the Internal Revenue Code of 1986, as amended.

        "Committee" - means the Committee referred to in Section 3 hereof.

        "Continuous Service" - means the absence of any interruption or
termination of service as a director, advisory director, officer or employee of
the Corporation or an Affiliate, except that when used with respect to persons
granted an Incentive Option means the absence of any interruption or termination
of service as an employee of the Corporation or an Affiliate. Service shall not
be considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Corporation or in the case of transfers between
payroll locations of the Corporation or between the Corporation, its parent, its
subsidiaries or its successor. With respect to any advisory director, continuous
service shall mean availability to perform such functions as may be required of
the Bank's advisory directors.

        "Corporation" - means PennFed Financial Services, Inc., a Delaware
corporation.

        "Employee" - means any person, including an officer or director, who is
employed by the Corporation or any Affiliate.

        "ERISA" - means the Employee Retirement Income Security Act of 1974, as
amended.

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        "Exercise Price" - means (i) in the case of an Option, the price per
Share at which the Shares subject to such Option may be purchased upon exercise
of such Option and (ii) in the case of a Right, the price per Share (other than
the Market Value per Share on the date of exercise and the Offer Price per Share
as defined in Section 10 hereof) which, upon grant, the Committee determines
shall be utilized in calculating the aggregate value which a Participant shall
be entitled to receive pursuant to Sections 9, 10 or 12 hereof upon exercise of
such Right.

        "Incentive Stock Option" - means an option to purchase Shares granted by
the Committee pursuant to Section 6 hereof which is subject to the limitations
and restrictions of Section 8 hereof and is intended to qualify under Section
422 of the Code. Unless otherwise set forth in the Award Agreement, any Option
which does not qualify as an Incentive Stock Option for any reason shall be
deemed ab initio to be a Non-Qualified Stock Option.

        "Limited Stock Appreciation Right" - means a stock appreciation right
with respect to Shares granted by the Committee pursuant to Sections 6 and 10
hereof.

        "Market Value" - means the average of the high and low quoted sales
price on the date in question (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) of a Share on the
Composite Tape for the New York Stock Exchange-Listed Stocks, or, if on such
date the Shares are not quoted on the Composite Tape, on the New York Stock
Exchange, or, if the Shares are not listed or admitted to trading on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed or admitted
to trading, or, if the Shares are not listed or admitted to trading on any such
exchange, the mean between the closing high bid and low asked quotations with
respect to a Share on such date on the National Association of Securities
Dealers, Inc., Automated Quotations System, or any similar system then in use,
or, if no such quotations are available, the fair market value on such date of a
Share as the Committee shall determine.

        "Non-Employee Director" - means a director who a) is not currently an
officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a
tax-qualified retirement plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other than
as a director; and e) does not possess an interest in any other transactions or
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.

        "Non-Qualified Stock Option" - means an option to purchase Shares
granted by the Committee which does not qualify, for any reason, as an Incentive
Stock Option.

        "Option" - means an Incentive Stock Option or a Non-Qualified Stock
Option.

        "Participant" - means any director, advisory director, officer or
employee of the Corporation or any Affiliate who is selected by the Committee to
receive an Award.

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        "Plan" - means the 1994 Stock Option and Incentive Plan of the
Corporation, as amended.

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

        "Right" - means a Limited Stock Appreciation Right or a Stock
Appreciation Right.

        "Shares" - means the shares of common stock of the Corporation.

        "Stock Appreciation Right" - means a stock appreciation right with
respect to Shares granted by the Committee pursuant to Sections 6 and 9 hereof.

        "Ten Percent Beneficial Owner" - means the beneficial owner of more than
ten percent of any class of the Corporation's equity securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934.

     3. Administration. The Plan shall be administered by a Committee consisting
of two or more members, each of whom shall be a Non-Employee Director. The
members of the Committee shall be appointed by the Board of Directors of the
Corporation. Except as limited by the express provisions of the Plan, the
Committee shall have sole and complete authority and discretion to (i) select
Participants and grant Awards; (ii) determine the number of Shares to be subject
to types of Awards generally, as well as to individual Awards granted under the
Plan; (iii) determine the terms and conditions upon which Awards shall be
granted under the Plan; (iv) prescribe the form and terms of instruments
evidencing such grants; and (v) establish from time to time regulations for the
administration of the Plan, interpret the Plan, and make all determinations
deemed necessary or advisable for the administration of the Plan.

     A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee without a meeting, shall
be acts of the Committee.

     4. Participation in Committee Awards. The Committee may select from time to
time Participants in the Plan from those directors, advisory directors, officers
and employees of the Corporation or its Affiliates who, in the opinion of the
Committee, have the capacity for contributing to the successful performance of
the Corporation or its Affiliates.

     5. Shares Subject to Plan. Subject to adjustment by the operation of
Section 11 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 835,623 shares. The Shares with respect to which
Awards may be made under the Plan may be either authorized and unissued shares
or issued shares heretofore or hereafter reacquired and held as treasury shares.
Shares which are subject to Related Rights and Related Options shall be counted
only once in determining whether the maximum number of Shares with respect to
which Awards may be granted under the Plan has been exceeded. An Award shall not
be considered to

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have been made under the Plan with respect to any Option or Right which
terminates, and new Awards may be granted under the Plan with respect to the
number of Shares as to which such termination or forfeiture has occurred.

     6. General Terms and Conditions of Options and Rights. The Committee shall
have full and complete authority and discretion, except as expressly limited by
the Plan, to grant Options and/or Rights and to provide the terms and conditions
(which need not be identical among Participants) thereof. In particular, the
Committee shall prescribe the following terms and conditions: (i) the Exercise
Price of any Option or Right, which shall not be less than the Market Value per
Share at the date of grant of such Option or Right, (ii) the number of Shares
subject to, and the expiration date of, any Option or Right, which expiration
date shall not exceed ten years from the date of grant, (iii) the manner, time
and rate (cumulative or otherwise) of exercise of such Option or Right, and (iv)
the restrictions, if any, to be placed upon such Option or Right or upon Shares
which may be issued upon exercise of such Option or Right. The Committee may, as
a condition of granting any Option or Right, require that a Participant agree
not to thereafter exercise one or more Options or Rights previously granted to
such Participant. Notwithstanding the foregoing, no individual shall be granted
Awards with respect to more than 200,000 Shares in any calendar year.

     7. Exercise of Options or Rights.

        (a) Except as provided herein, an Option or Right granted under the Plan
shall be exercisable during the lifetime of the Participant to whom such Option
or Right was granted only by such Participant and, except as provided in
paragraphs (c) and (d) of this Section 7, no such Option or Right may be
exercised unless at the time such Participant or a permitted transferee
exercises such Option or Right, such Participant has maintained Continuous
Service since the date of grant of such Option or Right.

        (b) To exercise an Option or Right under the Plan, the Participant to
whom such Option or Right was granted shall give written notice to the
Corporation in form satisfactory to the Committee (and, if partial exercises
have been permitted by the Committee, by specifying the number of Shares with
respect to which such Participant elects to exercise such Option or Right)
together with full payment of the Exercise Price, if any and to the extent
required. The date of exercise shall be the date on which such notice is
received by the Corporation. Payment, if any is required, shall be made either
(i) in cash (including check, bank draft or money order) or (ii) by delivering
(A) Shares already owned by the Participant and having a fair market value equal
to the applicable exercise price, such fair market value to be determined in
such appropriate manner as may be provided by the Committee or as may be
required in order to comply with or to conform to requirements of any applicable
laws or regulations, or (B) a combination of cash and such Shares.

        (c) If a Participant to whom an Option or Right was granted shall cease
to maintain Continuous Service for any reason (including total or partial
disability and normal or early retirement, but excluding death and termination
of employment by the Corporation or any Affiliate for cause), such Participant
may, but only within the period of three months immediately succeeding such
cessation of Continuous Service and in no event after the expiration

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date of such Option or Right, exercise such Option or Right to the extent that
such Participant was entitled to exercise such Option or Right at the date of
such cessation, provided, however, that such right of exercise after cessation
of Continuous Service shall not be available to a Participant if the Committee
otherwise determines and so provides in the applicable instrument or instruments
evidencing the grant of such Option or Right. If the Continuous Service of a
Participant to whom an Option or Right was granted by the Corporation is
terminated for cause, all rights under any Option or Right of such Participant
shall expire immediately upon the giving to the Participant of notice of such
termination.

        (d) In the event of the death of a Participant while in the Continuous
Service of the Corporation or an Affiliate or within the three month period
referred to in paragraph (c) of this Section 7, the person to whom any Option or
Right held by the Participant at the time of his death is transferred by will or
the laws of descent and distribution, or in the case of an Award other than an
Incentive Stock Option, pursuant to a qualified domestic relations order, as
defined in the Code or Title 1 of ERISA or the rules thereunder may, but only to
the extent such Participant was entitled to exercise such Option or Right
immediately prior to his death, exercise such Option or Right at any time within
a period of one year succeeding the date of death of such Participant, but in no
event later than ten years from the date of grant of such Option or Right.
Following the death of any Participant to whom an Option was granted under the
Plan, irrespective of whether any Related Right shall have theretofore been
granted to the Participant or whether the person entitled to exercise such
Related Right desires to do so, the Committee may, as an alternative means of
settlement of such Option, elect to pay to the person to whom such Option is
transferred by will or by the laws of descent and distribution, or in the case
of an Option other than an Incentive Stock Option, pursuant to a qualified
domestic relations order, as defined in the Code or Title I of ERISA or the
rules thereunder, the amount by which the Market Value per Share on the date of
exercise of such Option shall exceed the Exercise Price of such Option,
multiplied by the number of Shares with respect to which such Option is properly
exercised. Any such settlement of an Option shall be considered an exercise of
such Option for all purposes of the Plan.

     8. Incentive Stock Options. Incentive Stock Options may be granted only to
Participants who are Employees. Any provision of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the
Corporation and no Incentive Stock Option shall be exercisable more than ten
years from the date such Incentive Stock Option is granted, (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value per
Share on the date such Incentive Stock Option is granted, (iii) any Incentive
Stock Option shall not be transferable by the Participant to whom such Incentive
Stock Option is granted other than by will or the laws of descent and
distribution, and shall be exercisable during such Participant's lifetime only
by such Participant, (iv) no Incentive Stock Option shall be granted to any
individual who, at the time such Incentive Stock Option is granted, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Corporation or any Affiliate unless the Exercise Price
of such Incentive Stock Option is at least 110 percent of the Market Value per
Share at the date of grant and such Incentive Stock Option is not exercisable
after the expiration of five years from the date such Incentive Stock Option is
granted, and (v) the aggregate Market Value (determined as of the time any
Incentive Stock Option is granted) of the

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Shares with respect to which Incentive Stock Options are exercisable for the
first time by a Participant in any calendar year shall not exceed $100,000.

     9. Stock Appreciation Rights. A Stock Appreciation Right shall, upon its
exercise, entitle the Participant to whom such Stock Appreciation Right was
granted to receive a number of Shares or cash or combination thereof, as the
Committee in its discretion shall determine, the aggregate value of which (i.e.,
the sum of the amount of cash and/or Market Value of such Shares on date of
exercise) shall equal (as nearly as possible, it being understood that the
Corporation shall not issue any fractional shares) the amount by which the
Market Value per Share on the date of such exercise shall exceed the Exercise
Price of such Stock Appreciation Right, multiplied by the number of Shares with
respect of which such Stock Appreciation Right shall have been exercised. A
Stock Appreciation Right may be Related to an Option or may be granted
independently of any Option as the Committee shall from time to time in each
case determine. At the time of grant of an Option the Committee shall determine
whether and to what extent a Related Stock Appreciation Right shall be granted
with respect thereto; provided, however, and notwithstanding any other provision
of the Plan, that if the Related Option is an Incentive Stock Option, the
Related Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Stock Appreciation Right were
an Incentive Stock Option and as if other rights which are Related to Incentive
Stock Options were Incentive Stock Options. In the case of a Related Option,
such Related Option shall cease to be exercisable to the extent of the Shares
with respect to which the Related Stock Appreciation Right was exercised. Upon
the exercise or termination of a Related Option, any Related Stock Appreciation
Right shall terminate to the extent of the Shares with respect to which the
Related Option was exercised or terminated.

     10. Limited Stock Appreciation Rights. At the time of grant of an Option or
Stock Appreciation Right to any Participant, the Committee shall have full and
complete authority and discretion to also grant to such Participant a Limited
Stock Appreciation Right which is Related to such Option or Stock Appreciation
Right; provided, however and notwithstanding any other provision of the Plan,
that if the Related Option is an Incentive Stock Option, the Related Limited
Stock Appreciation Right shall satisfy all the restrictions and limitations of
Section 8 hereof as if such Related Limited Stock Appreciation Right were an
Incentive Stock Option and as if all other Rights which are Related to Incentive
Stock Options were Incentive Stock Options. Notwithstanding any other provision
of the Plan, a Limited Stock Appreciation Right shall be exercisable only during
the period beginning on the first day following the date of expiration of any
"offer" (as such term is hereinafter defined) and ending on the forty-fifth day
following such date.

     A Limited Stock Appreciation Right shall, upon its exercise, entitle the
Participant to whom such Limited Stock Appreciation Right was granted to receive
an amount of cash equal to the amount by which the "Offer Price per Share" (as
such term is hereinafter defined) or the Market Value on the date of such
exercise, as shall have been provided by the Committee in its discretion at the
time of grant, shall exceed the Exercise Price of such Limited Stock
Appreciation Right, multiplied by the number of Shares with respect to which
such Limited Stock Appreciation Right shall have been exercised. Upon the
exercise of a Limited Stock Appreciation Right, any Related Option and/or
Related Stock Appreciation Right shall cease to

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

     For the purposes of this Section 10, the term "Offer" shall mean any tender
offer or exchange offer for Shares other than one made by the Corporation,
provided that the corporation, person or other entity making the offer acquires
pursuant to such offer either (i) 25% of the Shares outstanding immediately
prior to the commencement of such offer or (ii) a number of Shares which,
together with all other Shares acquired in any tender offer or exchange offer
(other than one made by the Corporation) which expired within sixty days of the
expiration date of the offer in question, equals 25% of the Shares outstanding
immediately prior to the commencement of the offer in question. The term "Offer
Price per Share" as used in this Section 10 shall mean the highest price per
Share paid in any Offer which Offer is in effect any time during the period
beginning on the sixtieth day prior to the date on which a Limited Stock
Appreciation Right is exercised and ending on the date on which such Limited
Stock Appreciation Right is exercised. Any securities or property which are part
or all of the consideration paid for Shares in the Offer shall be valued in
determining the Offer Price per Share at the higher of (A) the valuation placed
on such securities or property by the corporation, person or other entity making
such Offer or (B) the valuation placed on such securities or property by the
Committee.

     11. Adjustments Upon Changes in Capitalization. In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by reason
of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares and exercise price of the Award, if any, as to which Awards
may be granted under the Plan and the number and class of shares and exercise
price of the Award, if any, with respect to which Awards theretofore have been
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.

     12. Effect of Merger. In the event of any merger, consolidation or
combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing entity and which does not
result in the outstanding Shares being converted into or exchanged for different
securities, cash or other property, or any combination thereof) pursuant to a
plan or agreement the terms of which are binding upon all stockholders of the
Corporation, any Participant to whom an Option or Right has been granted shall
have the right (subject to the provisions of the Plan and any limitation
applicable to such Option or Right), thereafter and during the term of each such
Option or Right, to receive upon exercise of any such Option or Right an amount
equal to the excess of the fair market value on the date of such exercise of the
securities, cash or other property, or combination thereof, receivable upon such
merger, consolidation or combination in respect of a Share over the Exercise
Price of such Right or Option, multiplied by the number of Shares with respect
to which such Option or Right shall have been exercised. Such amount may be
payable fully in cash, fully in one or more of the kind

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or kinds of property payable in such merger, consolidation or combination, or
partly in cash and partly in one or more of such kind or kinds of property, all
in the discretion of the Committee.

     13. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 13 shall be deemed a "change
in control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial
owner of shares of the Corporation with respect to which 25% or more of the
total number of votes for the election of the Board may be cast, (ii) as a
result of, or in connection with, any cash tender offer, merger or other
business combination, sale of assets or contested election, or combination of
the foregoing, the persons who were directors of the Corporation shall cease to
constitute a majority of the Board, or (iii) the stockholders of the Corporation
shall approve an agreement providing either for a transaction in which the
Corporation will cease to be an independent publicly-owned corporation or for a
sale or other disposition of all or substantially all the assets of the
Corporation. If a tender offer or exchange offer for Shares (other than such an
offer by the Corporation) is commenced, or if a change in control shall occur,
unless the Committee shall have otherwise provided in the Award Agreement, all
Options and Rights granted and not fully exercisable shall become exercisable in
full upon the happening of such event. Provided, however, that no Option or
Right which has previously been exercised or otherwise terminated shall become
exercisable.

     14. Assignments and Transfers. No Incentive Stock Option granted under the
Plan shall be transferable other than by will or the laws of descent and
distribution. Any other Award shall be transferable by will, the laws of descent
and distribution, a "domestic relations order," as defined in Section
414(p)(1)(B) of the Code, or a gift to any member of the Participant's immediate
family or to a trust for the benefit of one or more of such immediate family
members. During the lifetime of an Award recipient, an Award shall be
exercisable only by the Award recipient unless it has been transferred as
permitted hereby, in which case it shall be exercisable only by such transferee.
For the purpose of this Section 14, a Participant's "immediate family" shall
mean the Participant's spouse, children and grandchildren.

     15. Employee Rights Under the Plan. No director, officer or employee shall
have a right to be selected as a Participant nor, having been so selected, to be
selected again as a Participant and no director, officer, employee or other
person shall have any claim or right to be granted an Award under the Plan or
under any other incentive or similar plan of the Corporation or any Affiliate.
Neither the Plan nor any action taken thereunder shall be construed as giving
any employee any right to be retained in the employ of the Corporation or any
Affiliate.

     16. Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933 or any other Federal, state or local
securities legislation or regulation. It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or other
action eliminating the necessity of such representation under such Securities
Act or other securities legislation. The Corporation shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such shares to

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listing on any stock exchange on which Shares may then be listed, and (ii) the
completion of such registration or other qualification of such Shares under any
state or Federal law, rule or regulation, as the Committee shall determine to be
necessary or advisable.

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

     18. Amendment or Termination. The Board of Directors of the Corporation may
amend, suspend or terminate the Plan or any portion thereof at any time, but
(except as provided in Section 11 hereof) no amendment shall be made without
approval of the stockholders of the Corporation which shall (i) materially
increase the aggregate number of Shares with respect to which Awards may be made
under the Plan, (ii) materially increase the aggregate number of Shares which
may be subject to Awards to Participants who are not Employees or (iii) change
the class of persons eligible to participate in the Plan; provided, however,
that no such amendment, suspension or termination shall impair the rights of any
Participant, without his consent, in any Award theretofore made pursuant to the
Plan.

     19. Effective Date and Term of Plan. The Plan shall become effective upon
its approval by the stockholders of the Corporation. It shall continue in effect
for a term of ten years unless sooner terminated under Section 18 hereof.

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