Exhibit 10.26


                              EMPLOYMENT AGREEMENT


                  This EMPLOYMENT AGREEMENT ("Agreement") is made and entered
into as of May 1, 2001 by and between WARWICK COMMUNITY BANCORP, INC., a
business corporation organized and existing under the laws of the State of
Delaware and having an office at 18 Oakland Avenue, Warwick, New York 10990-0591
("Company") and FRED G. KOWAL, an individual residing at 15 Rutland Road, Glen
Rock, New Jersey 07452 ("Executive").

                              W I T N E S S E T H :

                  WHEREAS, the Executive currently serves as Vice Chairman of
the Company and as President and Chief Executive Officer of The Towne Center
Bank, a commercial bank organized and existing under the laws of the State of
New Jersey and a subsidiary of the Company ("Bank"); and

                  WHEREAS, the Company desires to assure for itself and its
subsidiaries and affiliates the continued availability of the Executive's
services as provided in this Agreement and the ability of the Executive to
perform such services with a minimum of personal distraction in the event of a
pending or threatened Change of Control (as hereinafter defined); and

                  WHEREAS, the Executive is willing to serve the Company and its
subsidiaries and affiliates on the terms and conditions hereinafter set forth;

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the Company and the
Executive hereby agree as follows:

                  SECTION 1.        EMPLOYMENT.

                  The Company hereby agrees to continue the employment of the
Executive, and the Executive hereby agrees to continue such employment, during
the period and upon the terms and conditions set forth in this Agreement.

                  SECTION 2.        EMPLOYMENT PERIOD; REMAINING UNEXPIRED
                                    EMPLOYMENT PERIOD.

                  (a) The terms and conditions of this Agreement shall be and
remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of
three years beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement (each, an "Anniversary Date"), plus such
extensions, if any, as are provided pursuant to section 2(b).

                  (b) Except as provided in section 2(c) and subject to section
11(b), beginning on the date of this Agreement, the Employment Period shall
automatically be extended for one additional day each day, unless either the
Company or the Executive elects not to extend the Agreement further by giving
written notice thereof to the other party, in which case the Employment Period
shall end on the third anniversary of the date on which such written notice is
given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Employment
Period shall end on the last day of the month in which the Executive attains the
age of 68. For all purposes of this Agreement, the term


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"Remaining Unexpired Employment Period" as of any date shall mean the period
beginning on such date and ending on the last day of the Employment Period
taking into account any extensions under this section 2(b). Upon termination of
the Executive's employment with the Company for any reason whatsoever, any daily
extensions provided pursuant to this section 2(b), if not theretofore
discontinued, shall automatically cease.

                  (c) Nothing in this Agreement shall be deemed to prohibit the
Company at any time from terminating the Executive's employment during the
Employment Period with or without notice for any reason; PROVIDED, HOWEVER, that
the relative rights and obligations of the Company and the Executive in the
event of any such termination shall be determined under this Agreement.

                  SECTION 3.        DUTIES.

                  The Executive shall serve as Vice Chairman of the Company (as
well as any other positions with the Company and/or its subsidiaries and
affiliates to which he is appointed or elected), having such power, authority
and responsibility and performing such duties as are prescribed by or under the
By-Laws of the Company and as are customarily associated with such position. The
Executive shall devote his full business time and attention (other than during
weekends, holidays, approved vacation periods, and periods of illness or
approved leaves of absence) to the business and affairs of the Company and shall
use his best efforts to advance the interests of the Company.

                  SECTION 4.        CASH COMPENSATION.

                  In consideration for the services to be rendered by the
Executive hereunder, the Company shall pay to him a salary at an annual rate of
one hundred sixty five thousand dollars ($165,000), payable in approximately
equal installments in accordance with the Company's customary payroll practices
for senior officers. The Board of Directors of the Company (the "Board") shall
review the Executive's annual rate of salary at such times during the Employment
Period as it deems appropriate, but not less frequently than once every twelve
months, and may, in its discretion, approve an increase therein. In addition to
salary, the Executive may receive other cash compensation from the Company for
services hereunder at such times, in such amounts and on such terms and
conditions as the Board may determine from time to time.

                  SECTION 5.        EMPLOYEE BENEFIT PLANS AND PROGRAMS.

                  During the Employment Period, the Executive shall be treated
as an employee of the Company (and any of its subsidiaries and affiliates for
whom he works) and shall be entitled to participate in and receive benefits
under any and all qualified or non-qualified retirement, pension, savings,
profit-sharing or stock bonus plans, any and all group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans, and any other employee benefit and compensation
plans (including, but not limited to, any incentive compensation plans or
programs, stock option and appreciation rights plans and restricted stock plans)
as may from time to time be maintained by, or cover employees of, the Company
(and any of its subsidiaries and affiliates), in accordance with the terms and
conditions of such employee benefit plans and programs and compensation plans
and programs and consistent with the Company's customary practices.



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                  SECTION 6.        INDEMNIFICATION AND INSURANCE.

                  (a) During the Employment Period and for a period of six years
thereafter, the Company shall cause the Executive to be covered by and named as
an insured under any policy or contract of insurance obtained by it to insure
its directors and officers against personal liability for acts or omissions in
connection with service as an officer or director of the Company (or any of its
subsidiaries and affiliates) or service in other capacities at the request of
the Company. The coverage provided to the Executive pursuant to this section 6
shall be of the same scope and on the same terms and conditions as the coverage
(if any) provided to other officers or directors of the Company.

                  (b) To the maximum extent permitted under applicable law,
during the Employment Period and for a period of six years thereafter, the
Company shall indemnify the Executive against and hold him harmless from any
costs, liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Company.

                  SECTION 7.        OUTSIDE ACTIVITIES.

                  The Executive may serve as a member of the boards of directors
of such business, community and charitable organizations as he may disclose to
and as may be approved by the Board (which approval shall not be unreasonably
withheld); PROVIDED, HOWEVER, that such service shall not materially interfere
with the performance of his duties under this Agreement. The Executive may also
engage in personal business and investment activities which do not materially
interfere with the performance of his duties hereunder; PROVIDED, HOWEVER, that
such activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Company (or any of its subsidiaries
and affiliates) and generally applicable to all similarly situated Executives.
The Executive may also serve as an officer or director of any subsidiary or
affiliate of the Company on such terms and conditions as the Company and such
subsidiary or affiliate may mutually agree upon, and such service shall not be
deemed to materially interfere with the Executive's performance of his duties
hereunder or otherwise result in a material breach of this Agreement. If the
Executive is discharged or suspended, or is subject to any regulatory
prohibition or restriction with respect to participation in the affairs of any
subsidiary or affiliate of the Company, he shall continue to perform services
for the Company in accordance with this Agreement but shall not directly or
indirectly provide services to or participate in the affairs of any such
subsidiary or affiliate in a manner inconsistent with the terms of such
discharge or suspension or any applicable regulatory order.

                  SECTION 8.        WORKING FACILITIES AND EXPENSES.

                  The Executive's principal place of employment shall be at
either the Company's or the Bank's principal executive offices, at such other
location within 50 driving miles of the address at which the Company maintains
its principal executive office or within 50 driving miles of the address at
which the Bank maintains its principal executive office, as determined by the
Company, or at such other location as the Company and the Executive may mutually
agree upon. The Company shall provide the Executive at his principal place of
employment with a private office, secretarial services and other support
services and facilities suitable to his position with the Company and nec essary
or appropriate in connection with the performance of his assigned duties under
this


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Agreement. The Company shall reimburse the Executive for his ordinary and
necessary business expenses, including, without limitation, the Executive's
travel and entertainment expenses incurred in connection with the performance of
his duties under this Agreement, in each case upon presen tation to the Company
of an itemized account of such expenses in such form as the Company may
reasonably require.

                  SECTION 9.        TERMINATION OF EMPLOYMENT WITH SEVERANCE
                                    BENEFITS.

                  (a) The Executive's shall be entitled to the severance
benefits described in section 9(b) in the event that:

                  (i) his employment with the Company terminates during the
         Employment Period as a result of the Executive's voluntary resignation
         within 90 days following:

                           (A) the failure of the Board, to appoint or
                  re-appoint or elect or re- elect the Executive to the position
                  with the Company stated in section 3 of this Agreement (or a
                  more senior office);

                           (B) if the Executive is a member of the Board, the
                  failure of the shareholders of the Company to elect or
                  re-elect the Executive to the Board or the failure of the
                  Board (or the nominating committee thereof) to nominate the
                  Executive for such election or re-election;

                           (C) the expiration of a 30-day period following the
                  date on which the Executive gives written notice to the
                  Company of its material failure, whether by amendment of the
                  Company's Certificate of Incorporation, the Company's By-Laws,
                  action of the Board or the Company's shareholders or
                  otherwise, to vest in the Executive the functions, duties, or
                  responsibilities prescribed in section 3 of this Agreement
                  with respect to the Company, unless, during such 30-day
                  period, the Company cures such failure;

                           (D) the expiration of a 30-day period following the
                  date on which the Executive gives written notice to the
                  Company of its material breach of any term, condition or
                  covenant contained in this Agreement (including, without
                  limitation any reduction of the Executive's rate of base
                  salary in effect from time to time and any change in the terms
                  and conditions of any compensation or benefit program in which
                  the Executive participates which, either individually or
                  together with other changes, has a material adverse effect on
                  the aggregate value of his total compensation package),
                  unless, during such 30-day period, the Company cures such
                  failure; or

                           (F) a change in the Executive's principal place of
                  employment for a driving distance in excess of 50 miles from
                  both the Company's principal office in Warwick, New York and
                  the Bank's principal office in Lodi, New Jersey;



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                  (ii) the Executive's employment with the Company is terminated
         by the Company for any reason other than for "cause" as provided in
         section 10(a); or

                  (iii) a Change of Control as defined in section 11 has
         occurred.

                  (b) Upon the occurrence of any of the events described in
section 9(a) of this Agreement, the Company shall pay and provide to the
Executive (or, in the event of his death, to his estate):

                  (i) his earned but unpaid salary (including, without
         limitation, all items which constitute wages under applicable law and
         the payment of which is not otherwise provided for in this section
         9(b)) as of the date of the termination of his employment with the
         Company, such payment to be made at the time and in the manner
         prescribed by law applicable to the payment of wages but in no event
         later than 30 days after termination of employment;

                  (ii) the benefits, if any, to which he is entitled as a former
         employee under the employee benefit plans and programs and compensation
         plans and programs maintained for the benefit of the officers and
         employees of the Company (or any of its subsidiaries and affiliates);

                  (iii) continued group life, health (including hospitalization,
         medical and major medical), dental, accident and long term disability
         insurance benefits, in addi tion to that provided pursuant to section
         9(b)(ii), and after taking into account the coverage provided by any
         subsequent employer, if and to the extent necessary to pro vide for the
         Executive, for the Remaining Unexpired Employment Period, coverage
         equivalent to the coverage to which he would have been entitled under
         such plans (as in effect on the date of his termination of employment,
         or, if his termination of employment occurs after a Change of Control,
         on the date of such Change of Control, whichever benefits are greater),
         if he had continued working for the Company during the Remaining
         Unexpired Employment Period at the highest annual rate of salary
         achieved during the Employment Period;

                  (iv) within 30 days following the Executive's termination of
         employment with the Company, a lump sum payment, in an amount equal to
         the present value of the salary (excluding any additional payments made
         to the Executive in lieu of the use of an automobile) that the
         Executive would have earned if he had continued working for the Company
         during the Remaining Unexpired Employment Period at the highest annual
         rate of salary achieved during the Employment Period, where such
         present value is to be determined using a discount rate equal to the
         applicable short- term federal rate prescribed under section 1274(d) of
         the Internal Revenue Code of 1986, as amended ("Code"), compounded
         using the compounding periods corresponding to the Company's regular
         payroll periods for its officers, such lump sum to be paid in lieu of
         all other payments of salary provided for under this Agreement in
         respect of the period following any such termination;



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                  (v) within 30 days following the Executive's termination of
         employment with the Company, a lump sum payment in an amount equal to
         the excess, if any, of:

                           (A) the present value of the aggregate benefits to
                  which he would be entitled under The Warwick Savings Bank
                  Defined Benefit Pension Plan (together with the defined
                  benefit portion of the Benefit Restoration Plan of The Warwick
                  Savings Bank and any other supplemental defined benefit plan)
                  and any and all other qualified and non-qualified defined
                  benefit pension plans maintained by, or covering employees of,
                  the Company (or any of its subsidiaries and affiliates), if he
                  were 100% vested thereunder and had continued working for the
                  Company during the Remaining Unexpired Employment Period at
                  the highest annual rate of salary achieved during the
                  Employment Period; over

                           (B) the present value of the benefits to which he is
                  actually entitled under such defined benefit pension plans as
                  of the date of his termination;

         where such present values are to be determined using the mortality
         tables prescribed under section 415(b)(2)(E)(v) of the Code and a
         discount rate, compounded monthly equal to the annualized rate of
         interest prescribed by the Pension Benefit Guaranty Corporation for the
         valuation of immediate annuities payable under terminating
         single-employer defined benefit plans for the month in which the
         Executive's termination of employment occurs ("Applicable PBGC Rate");

                  (vi) within 30 days following the Executive's termination of
         employment with the Company, a lump sum payment in an amount equal to
         the present value of the additional employer contributions to which he
         would have been entitled under The Warwick Savings Bank 401(k) Savings
         Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp,
         Inc. (together with the defined contribution portion of the Benefit
         Restoration Plan of The Warwick Savings Bank or any other supplemental
         defined contribution plan) and any and all other qualified and non-
         qualified defined contribution plans maintained by, or covering
         employees of, the Company (or any of its subsidiaries and affiliates),
         as if he were 100% vested thereunder and had continued working for the
         Company during the Remaining Unex pired Employment Period at the
         highest annual rate of salary achieved during the Employment Period and
         making the maximum amount of employee contributions, if any, required
         under such plan or plans, such present value to be determined on the
         basis of a discount rate, compounded using the compounding period that
         corresponds to the frequency with which employer contributions are made
         to the relevant plan, equal to the Applicable PBGC Rate;

                  (vii) the payments that would have been made to the Executive
         under any cash or stock bonus or long-term or short-term cash incentive
         compensation plan maintained by, or covering employees of, the Company
         (or any of its subsidiaries and affiliates) if he had continued working
         for the Company during the Remaining


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         Unexpired Employment Period and had earned the maximum bonus or
         incentive award in each calendar year that ends during the Remaining
         Unexpired Employment Period, such payments to be equal to the product
         of:

                           (A) the maximum percentage rate at which an award was
                  ever available to the Executive under such incentive
                  compensation plan; multiplied by

                           (B) the salary that would have been paid to the
                  Executive during each such calendar year at the highest annual
                  rate of salary achieved during the Employment Period;

         such payments to be made (without discounting for early payment) within
         30 days following the Executive's termination of employment;

                  (viii) at the election of the Company made within 30 days
         following the occurrence of the event described in section 9(a), upon
         the surrender of options or ap preciation rights issued to the
         Executive under any stock option and appreciation rig hts plan or
         program maintained by, or covering employees of, the Company (or any of
         its subsidiaries and affiliates), a lump sum payment in an amount equal
         to the product of:

                           (A) the excess of (I) the fair market value of a
                  share of stock of the same class as the stock subject to the
                  option or appreciation right, determined as of the date of
                  termination of employment, over (II) the exercise price per
                  share for such option or appreciation right, as specified in
                  or under the relevant plan or program; multiplied by

                           (B) the number of shares with respect to which
                  options or appreciation rights are being surrendered.

         For purposes of this section 9(b)(viii), the Executive shall be deemed
         fully vested in all options and appreciation rights under any stock
         option or appreciation rights plan or program maintained by, or
         covering employees of, the Company (or any of its subsidiaries and
         affiliates), even if he is not vested under such plan or program; and

                  (ix) at the election of the Company made within 30 days
         following the occurrence of the event described in section 9(a), upon
         the surrender of any shares awarded to the Executive under any
         restricted stock plan maintained by, or covering employees of, the
         Company (or any of its subsidiaries and affiliates), a lump sum payment
         in an amount equal to the product of:

                           (A) the fair market value of a share of stock of the
                  same class of stock granted under such plan, determined as of
                  the date of the Executive's termination of employment;
                  multiplied by



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                           (B) the number of shares which are being surrendered.

         For purposes of this section 9(b)(ix), the Executive shall be deemed
         fully vested in all shares awarded under any restricted stock plan
         maintained by, or covering employees of, the Company (or any of its
         subsidiaries and affiliates), even if he is not vested under such plan.

The Company and the Executive hereby stipulate that the damages which may be
incurred by the Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to the Executive's efforts, if any, to
mitigate damages. The Company and the Executive further agree that the Company
may condition the payments and benefits (if any) due under sections 9(b)(iii),
(iv), (v), (vi) and (vi) on the receipt of the Executive's resignation from any
and all positions which he holds as an officer, director or committee member
with respect to the Company or any of its subsidiaries or affiliates.

                  SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.
In the event that the Executive's employment with the Company shall terminate
during the Employment Period on account of:

                  (a) the discharge of the Executive for "cause," which, for
         purposes of this Agreement, shall mean a discharge because the Board
         determines that the Executive: (i) has willfully and intentionally
         failed to perform his assigned duties under this Agreement (including
         for these purposes, the Executive's inability to perform such duties as
         a result of drug or alcohol dependency); (ii) has willfully and
         intentionally engaged in dishonest or illegal conduct in connection
         with his performance of services for the Company (or any subsidiary or
         affiliate of the Company) or has been convicted of a felony; (iii) has
         willfully violated, in any material respect, any law, rule, regulation,
         written agreement or final cease- and-desist order with respect to his
         performance of services for the Company (or any subsidiary or affiliate
         of the Company), as determined by the Board; or (iv) has willfully and
         intentionally breached the material terms of this Agreement; PROVIDED,
         HOWEVER, that, if the Executive engages in any of the acts described in
         section 10(a)(i) or (a)(iv) above, the Company shall provide the
         Executive with written notice of its intent to discharge the Executive
         for cause, and the Executive shall have 30 days from the date on which
         the Executive receives such notice to cure any such acts; AND PROVIDED,
         FURTHER, that on and after the date that a Change of Control occurs, a
         determination under this section 10 shall require the affirmative vote
         of at least three-fourths of the members of the Board acting in good
         faith and such vote shall not be made prior to the expiration of a
         60-day period following the date on which the Board shall, by written
         notice to the Executive, furnish to him a statement of its grounds for
         proposing to make such determination, during which period the Executive
         shall be afforded a reasonable opportunity to make oral and written
         presentations to the members of the Board, and to be represented by his
         legal counsel at such presentations, to refute the grounds for the
         proposed determination;



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                  (b) the Executive's voluntary resignation from employment with
         the Company for reasons other than those specified in section 9(a)(i);
         or

                  (c) the death of the Executive while employed by the Company
         or the termination of the Executive's employment because of "total and
         permanent disability" within the meaning of the Company's long-term
         disability plan for employees;

then the Company shall have no further obligations under this Agreement, other
than the payment to the Executive of his earned but unpaid salary as of the date
of the termination of his employment and the provision of such other benefits,
if any, to which he is entitled as a former employee under the employee benefit
plans and programs and compensation plans and programs of the Company or its
subsidiaries and affiliates. For purposes of this section 10, no act or failure
to act, on the part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the written advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for
"cause" within the meaning of section 10(a) unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of three- fourths of the members of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in section 10(a)
above, and specifying the particulars thereof in detail.

                  SECTION 11.       TERMINATION UPON OR FOLLOWING A CHANGE OF
                                    CONTROL.

                  (a) A Change of Control of the Company ("Change of Control")
shall be deemed to have occurred upon the happening of any of the following
events:

                  (i) the reorganization, merger or consolidation of the Company
         with one or more other persons, other than a transaction following
         which:

                           (A) at least 51% of the equity ownership interests of
                  the entity resulting from such transaction are beneficially
                  owned (within the meaning of Rule 13d-3 promulgated under the
                  Securities Exchange Act of 1934, as amended ("Exchange Act"))
                  in substantially the same relative proportions by persons who,
                  immediately prior to such transaction, beneficially owned
                  (within the meaning of Rule 13d-3 promulgated under the
                  Exchange Act) at least 51% of the outstanding equity ownership
                  interests in the Company; and

                           (B) at least 51% of the securities entitled to vote
                  generally in the election of directors of the entity resulting
                  from such transaction are beneficially owned (within the
                  meaning of Rule 13d-3 promulgated under the Exchange Act) in
                  substantially the same relative proportions by persons who,


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                  immediately prior to such transaction, beneficially owned
                  (within the meaning of Rule 13d-3 promulgated under the
                  Exchange Act) at least 51% of the securities entitled to vote
                  generally in the election of directors of the Company;

                  (ii) the acquisition of all or substantially all of the assets
         of the Company or beneficial ownership (within the meaning of Rule
         13d-3 promulgated under the Exchange Act) of 25% or more of the
         outstanding securities of the Company entitled to vote generally in the
         election of directors by any person or by any persons acting in
         concert;

                  (iii) a complete liquidation or dissolution of the Company; or

                  (iv) the occurrence of any event if, immediately following
         such event, at least 50% of the members of the Board do not belong to
         any of the following groups:

                           (A) individuals who were members of the Board on the
                  date of this Agreement; or

                           (B) individuals who first became members of the Board
                  after the date of this Agreement either:

                                    (1) upon election to serve as a member of
                           the Board by affirmative vote of three-quarters of
                           the members of such board, or of a nominating
                           committee thereof, in office at the time of such
                           first election; or

                                    (2) upon election by the shareholders of the
                           Board to serve as a member of the Board, but only if
                           nominated for election by affir mative vote of
                           three-quarters of the members of the board of
                           directors of the Board, or of a nominating committee
                           thereof, in office at the time of such first
                           nomination;

                  PROVIDED, HOWEVER, that such individual's election or
                  nomination did not result from an actual or threatened
                  election contest (within the meaning of Rule 14a-11 of
                  Regulation 14A promulgated under the Exchange Act) or other
                  actual or threatened solicitation of proxies or consents
                  (within the meaning of Rule 14a-11 of Regulation 14A
                  promulgated under the Exchange Act) other than by or on behalf
                  of the Board of the Company.

In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, or any
subsidiary of the Company, by the Company, or any subsidiary of the Company, or
by any employee benefit plan maintained by the Company or any subsidiary of the
Company. For purposes of this section 11(a), the term "person" shall have the
meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.



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                  (b) In the event of a Change of Control, the Executive shall
be entitled to the payments and benefits described in section 9(b), regardless
of whether his employment terminates; PROVIDED, HOWEVER, that the term
"Remaining Unexpired Employment Period" shall mean three years beginning on the
effective date of the Change of Control, even if such three-year period extends
beyond the date the Executive attains age 68.

                  (c) Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is terminated
and if it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise arose in
connection with or anticipation of a Change of Control, then for all purposes of
this Agreement the Change of Control shall be deemed to have occurred on the
date immediately prior to the date of such termination of employment.

                  SECTION 12.       TAX INDEMNIFICATION.

                  (a) This section 12 shall apply if the Executive's employment
is terminated upon or following (i) a Change of Control (as defined in section
11 of this Agreement); or (ii) a change "in the ownership or effective control"
of the Company or "in the ownership of a substantial portion of the assets" of
the Company within the meaning of section 280G of the Code. If this section 12
applies, then, if for any taxable year, the Executive shall be liable for the
payment of an excise tax under section 4999 of the Code with respect to any
payment in the nature of compensation made by the Company or any subsidiary or
affiliate of the Company to (or for the benefit of) the Executive, the Company
shall pay to the Executive an amount equal to X determined under the following
formula:


                                     E x P
                  X =  ------------------------------------
                       1 - [(FI x (1 - SLI)) + SLI + E + M]

                  where

                  E =      the rate at which the excise tax is assessed under
                           section 4999 of the Code;

                  P =      the amount with respect to which such excise tax is
                           assessed, determined without regard to this section
                           12;

                  FI =     the highest marginal rate of income tax applicable
                           to the Executive under the Code for the taxable year
                           in question (taking into account any phase-out or
                           loss of deductions, personal exemptions and other
                           similar adjustments);

                  SLI =    the sum of the highest marginal rates of income tax
                           applicable to the Executive under all applicable
                           state and local laws for the taxable year in question
                           (taking into account any phase-out or loss of
                           deductions, personal exemptions and other similar
                           adjustments); and


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                  M =      the highest marginal rate of Medicare tax applicable
                           to the Executive under the Code for the taxable year
                           in question.

With respect to any payment in the nature of compensation that is made to (or
for the benefit of) the Executive under the terms of this Agreement, or
otherwise, and on which an excise tax under section 4999 of the Code will be
assessed, the payment determined under this 12(a) shall be made to the Executive
on the earlier of (i) the date the Company or any subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.

                  (b) Notwithstanding anything in this section 12 to the
contrary, in the event that the Executive's liability for the excise tax under
section 4999 of the Code for a taxable year is subsequently determined to be
different than the amount determined by the formula (X + P) x E, where X, P and
E have the meanings provided in section 12(a), the Executive or the Company, as
the case may be, shall pay to the other party at the time that the amount of
such excise tax is finally determined, an appropriate amount, plus interest,
such that the payment made under section 12(a), when increased by the amount of
the payment made to the Executive under this section 12(b) by the Company, or
when reduced by the amount of the payment made to the Company under this section
12(b) by the Executive, equals the amount that should have properly been paid to
the Executive under section 12(a). The interest paid under this section 12(b)
shall be determined at the rate provided under section 1274(b)(2)(B) of the
Code. To confirm that the proper amount, if any, was paid to the Executive under
this section 12, the Executive shall furnish to the Company a copy of each tax
return which reflects a liability for an excise tax payment made by the Company,
at least 20 days before the date on which such return is required to be filed
with the Internal Revenue Service.

                  SECTION 13.       COVENANT NOT TO COMPETE.

                  The Executive hereby covenants and agrees that, in the event
of his termination of employment with the Company prior to the expiration of the
Employment Period, for a period of one year following the date of his
termination of employment with the Company (or, if less, for the Remaining
Unexpired Employment Period), he shall not, without the written consent of the
Company, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company, or any direct or indirect subsidiary or affiliate
of any such entity, that entails working within Orange, Dutchess, Rockland or
Putnam counties in New York, within Bergen, Passaic, Sussex, Morris, Essex,
Union, Warren, Hudson, Hunterdon, Somerset and Middlesex counties in New Jersey
or within any other county in which the Company or any of its subsidiaries and
affiliates maintains an office; PROVIDED, HOWEVER, that this section 13 shall
not apply if (i) the Executive's employment is terminated for the reasons set
forth in section 9(a) or (ii) the Executive voluntarily resigns within 90 days
after the appointment of a successor Chief Executive Officer of the Company,
other than the Executive, upon Timothy A. Dempsey's retirement or other
termination of employment as Chief Executive Officer of the Company for any
reason.



                                      -12-

<PAGE>



                  SECTION 14.       CONFIDENTIALITY.

                  Unless he obtains the prior written consent of the Company,
the Executive shall keep confidential and shall refrain from using for the
benefit of himself, or any person or entity other than the Company or any entity
which is a subsidiary of the Company or of which the Company is a subsidiary,
any material document or information obtained from the Company, or from its
parent or subsidiaries, in the course of his employment with any of them
concerning their properties, operations or business (unless such document or
information is readily ascertainable from public or published information or
trade sources or has otherwise been made available to the public through no
fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); PROVIDED, HOWEVER, that nothing in this section 14
shall prevent the Executive, with or without the Company's consent, from
participating in or disclosing documents or information in connection with any
judicial or administrative investigation, inquiry or proceeding to the extent
that such participation or disclosure is required under applicable law.

                  SECTION 15.       SOLICITATION.

                  The Executive hereby covenants and agrees that, for a period
of one year following his termination of employment with the Company, he shall
not, without the written consent of the Company, either directly or indirectly:

                  (a) solicit, offer employment to, or take any other action
         intended, or that a reasonable person acting in like circumstances
         would expect, to have the effect of causing any officer or employee of
         the Company or any of its direct or indirect subsidiaries or affiliates
         to terminate his or her employment and accept employment or become
         affiliated with, or provide services for compensation in any capacity
         whatsoever to, any commercial bank, savings bank, savings and loan
         association, bank holding company, savings and loan holding company, or
         any direct or indirect subsidiary or affiliate of any such entity, or
         other company or institution engaged in the business of accepting
         deposits or making loans within the counties specified in section 13;

                  (b) provide any information, advice or recommendation with
         respect to any such officer or employee of any commercial bank, savings
         bank, savings and loan association, bank holding company, savings and
         loan holding company, or any direct or indirect subsidiary of any such
         entity, or other company or institution engaged in the business of
         accepting deposits or making loans within the counties specified in
         section 13; that is intended, or that a reasonable person acting in
         like circumstances would expect, to have the effect of causing any
         officer or employee of the Company or any of its direct or indirect
         subsidiaries or affiliates to terminate such person's employment and
         accept employment or become affiliated with, or provide services for
         compensation in any capacity whatsoever to, any commercial bank,
         savings bank, savings and loan association, bank holding company,
         savings and loan holding company, or any direct or indirect subsidiary
         or affiliate of any such entity, or other company or institution
         engaged in the business of accepting deposits or making loans within
         the counties specified in section 13; or


                                      -13-

<PAGE>



                  (c) solicit, provide any information, advice or recommendation
         or take any other action intended, or that a reasonable person acting
         in like circumstances would expect, to have the effect of causing any
         customer of the Company or its direct or indirect subsidiaries or
         affiliates to terminate an existing business or commercial relationship
         with the Company or its direct or indirect subsidiaries or affiliates.

                  SECTION 16.       NO EFFECT ON EMPLOYEE BENEFIT PLANS OR
                                    PROGRAMS.

                  The termination of the Executive's employment during the term
of this Agreement or thereafter, whether by the Company or by the Executive,
shall have no effect on the rights and obligations of the parties hereto under
the qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Company or its subsidiaries and affiliates from time to time; PROVIDED,
HOWEVER, that nothing in this Agreement shall be deemed to duplicate any
compensation or benefits provided under any agreement, plan or program covering
the Executive to which the Company (or any of its subsidiaries or affiliates) is
a party and any duplicative amount payable under any such agreement, plan or
program shall be applied as an offset to reduce the amounts otherwise payable
hereunder.

                  SECTION 17.       SUCCESSORS AND ASSIGNS.

                  This Agreement will inure to the benefit of and be binding
upon the Executive, his legal representatives and testate or intestate
distributees, and the Company and its successors and assigns, including any
successor by merger or consolidation or a statutory receiver or any other per
son or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Failure of the
Company to obtain from any successor its express written assumption of the
Company's obligations hereunder at least 60 days in advance of the scheduled
effective date of any such succession shall be deemed a material breach of this
Agreement.

                  SECTION 18.       NOTICES.

                  Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:

                  If to the Executive:

                           Fred G. Kowal
                           15 Rutland Road
                           Glen Rock, New Jersey  07452



                                      -14-

<PAGE>



                  If to the Company:

                           Warwick Community Bancorp, Inc.
                           18 Oakland Avenue
                           Warwick, New York 10990-0591

                           Attention: President
                                      ---------

                           WITH A COPY TO:

                           Thacher Proffitt & Wood
                           Two World Trade Center
                           New York, New York 10048

                           Attention:       Douglas J. McClintock, Esq.
                                            ---------------------------

                  SECTION 19.       INDEMNIFICATION FOR ATTORNEYS' FEES.

                  (a) The Company shall indemnify, hold harmless and defend the
Executive against reasonable costs, including legal fees and expenses, incurred
by him in connection with or arising out of any action, suit or proceeding in
which he may be involved, as a result of his efforts, in good faith, to defend
or enforce the terms of this Agreement. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement of
the Company's obligations hereunder shall be conclusive evidence of the
Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly provides
otherwise.

                  (b) The Company's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment. Unless it is determined
that a claim made by the Executive was either frivolous or made in bad faith,
the Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
or in connection with his consultation with legal counsel or arising out of any
action, suit, proceeding or contest (regardless of the outcome thereof) by the
Company, the Executive or others regarding the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in section
7872(f)(2)(A) of the Code. This section 19(b) shall apply whether such
consultation, action, suit, proceeding or contest arises before, on, after or as
a result of a Change of Control.



                                      -15-

<PAGE>



                  SECTION 20.       SEVERABILITY.

                  A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.

                  SECTION 21.       WAIVER.

                  Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.

                  SECTION 22.       COUNTERPARTS.

                  This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all of which shall constitute one
and the same Agreement.

                  SECTION 23.       GOVERNING LAW.

                  Except to the extent preempted by federal law, this Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of New York applicable to contracts entered into and to be performed
entirely within the State of New York.

                  SECTION 24.       HEADINGS AND CONSTRUCTION.

                  The headings of sections in this Agreement are for convenience
of reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this Agreement,
unless otherwise stated. Any reference to a subsidiary or affiliate of the
Company shall include both direct and indirect subsidiaries and affiliates.

                  SECTION 25.       ENTIRE AGREEMENT; MODIFICATIONS.

                  This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or rep resentations relating to the subject
matter hereof, including but not limited to the employment agreement by and
among the Company, the Bank and the Executive, dated October 26, 1999. No
modifications of this Agreement shall be valid unless made in writing and signed
by the parties hereto.

                  SECTION 26.       NON-DUPLICATION.

                  In the event that the Executive shall perform services for the
Bank or any other direct or indirect subsidiary or affiliate of the Company or
the Bank, any compensation or benefits provided to the Executive by such other
employer shall be applied to offset the obligations of the Company


                                      -16-

<PAGE>



hereunder, it being intended that this Agreement set forth the aggregate
compensation and benefits payable to the Executive for all services to the
Company and all of its subsidiaries and affiliates.

                  SECTION 27.       REQUIRED REGULATORY PROVISIONS.

                  Notwithstanding anything herein contained to the contrary, any
payments to the Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. ss.1828(k), and any
regulations promulgated thereunder.

                  SECTION 28.       CONFIDENTIAL INFORMATION.

                  The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company and all of its subsidiaries and affiliates, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its subsidiaries or
affiliates and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
persons designated by it. For purposes of this Agreement, secret and
confidential information, knowledge or data relating to the Company or any of
its subsidiaries or affiliates, and their respective business, shall not include
any information that is public, publicly available or available through trade
association sources (unless such information is made public by the Executive or
representatives of the Executive in violation of this Agreement).
Notwithstanding any other provision of this Agreement to the contrary, the
Executive acknowledges and agrees that in the event of a violation or threatened
violation of any of the provisions of this Section 28, the Company shall have no
adequate remedy at law and shall therefore be entitled to enforce each such
provision by temporary or permanent injunction or mandatory relief obtained in
any court of competent jurisdiction without the necessity of proving damages or
posting any bond or other security, and without prejudice to any other remedies
that may be available at law or in equity.

                  SECTION 29.       ACCESS TO DOCUMENTS.

                  The Executive shall have the right to obtain copies of any
documents of the Company or of its subsidiaries or affiliates that the Executive
reasonably believes, in good faith, are necessary or appropriate in determining
his entitlement to, and the amount of, payments and benefits under this
Agreement.



                                      -17-

<PAGE>



                  IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and the Executive has hereunto set his hand, all as of the day and
year first above written.



                                           /s/ Fred G. Kowal
                                           ----------------------------------
                                           FRED G. KOWAL



                                           WARWICK COMMUNITY BANCORP, INC.

Attest:


By /s/ Nancy L. Sobotor-Littell            By /s/ Timothy A. Dempsey
   ------------------------------             --------------------------------
         Nancy L. Sobotor-Littell                   Timothy A. Dempsey
         Corporate Secretary                        Chairman of the Board and
                                                       Chief Executive Officer


[Seal]



                                      -18-

<PAGE>


STATE OF NEW YORK        )
                         : ss.:
COUNTY OF ORANGE         )

                  On this 1st day of May, 2001, before me personally came FRED
G. KOWAL, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.



                                                /s/ Roseanna Nielsen
                                                --------------------
                                                    Notary Public






STATE OF NEW YORK    )
                     : ss.:
COUNTY OF ORANGE     )

                  On this 1st day of May, 2001, before me personally came
TIMOTHY A. DEMPSEY, to me known, who, being by me duly sworn, did depose and say
that he resides at 36 Waterbury Road, Warwick, New York 10990, that he is a
member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the
Delaware corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said instru
ment is such seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.



                                                 /s/ Roseanna Nielsen
                                                 --------------------
                                                     Notary Public



                                      -19-