CHANGE IN CONTROL SEVERANCE AGREEMENT
                      -------------------------------------


         THIS CHANGE IN CONTROL SEVERANCE AGREEMENT  ("Agreement")  entered into
this 1 st day of January,  1997 ("Effective Date"), by and between Third Federal
Savings Bank (the "Savings Bank") and Thomas J. Sposito, II, (the "Employee").

         WHEREAS,  the Employee is  currently  employed by the Savings Bank as a
Senior Vice  President and Retail  Banking  Manager,  and is  experienced in all
phases of the business of the Savings Bank; and

         WHEREAS, the parties desire by this writing to set forth the rights and
responsibilities  of the Savings  Bank and  Employee if the Savings  Bank should
undergo a change in control (as defined  hereinafter in the Agreement) after the
Effective Date.

         NOW, THEREFORE, it is AGREED as follows:

         1.  Employment.  The  Employee is employed in the  capacity as a Senior
Vice  President and Retail  Banking  Manager of the Savings  Bank.  The Employee
shall render such administrative and management services to the Savings Bank and
TF  Financial  Corporation  ("Parent")  as  are  currently  rendered  and as are
customarily  performed by persons situated in a similar executive capacity.  The
Employee's  other duties shall be such as the Board of Directors for the Savings
Bank (the  "Board of  Directors"  or "Board")  may from time to time  reasonably
direct, including normal duties as an officer of the Savings Bank.

         2.  Term of  Agreement.  The  term of this  Agreement  shall be for the
period  commencing  on the  Effective  Date and ending  twenty-four  (24) months
thereafter.  Additionally,  on, or before, each annual anniversary date from the
Effective Date, the term of this Agreement may be extended for an additional one
year period beyond the then effective  expiration date upon a determination  and
resolution of the Board of Directors  that the  performance  of the Employee has
met the  requirements  and  standards  of the  Board,  and that the term of such
Agreement shall be extended.


         3.       Termination of Employment in Connection  with or Subsequent to
                  --------------------------------------------------------------
                  a Change in Control.
                  -------------------

         (a) Notwithstanding any provision herein to the contrary,  in the event
of the involuntary  termination of Employee's  employment  under this Agreement,
absent Just Cause, in connection with, or within  twenty-four (24) months after,
any Change in Control  of the Bank or Parent,  Employee  shall be paid an amount
equal to two (2) times the prior three (3)  calendar  year (or lesser  period if
not employed for such 3 year period) average  compensation  paid to the Employee
by the Bank (whether said amounts were received or

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deferred by the Employee) and the costs  associated  with  maintaining  coverage
under the Bank's  medical and dental  insurance  reimbursement  plans similar to
that in effect on the date of termination of employment for a period of one year
thereafter. Said sum shall be paid, at the option of Employee, either in one (1)
lump sum within thirty (30) days of such  termination  discounted to the present
value of such payment  using as the discount  rate the "prime rate" as published
in the Wall Street Journal  Eastern Edition as of the date of such payment minus
100 basis  points,  or in periodic  payments  over the next 24 months,  and such
payments shall be in lieu of any other future  payments which the Employee would
be otherwise entitled to receive. Notwithstanding the forgoing, all sums payable
hereunder  shall be  reduced in such  manner and to such  extent so that no such
payments made  hereunder when  aggregated  with all other payments to be made to
the  Employee  by the Bank or the Parent  shall be deemed an  "excess  parachute
payment" in accordance with Section 280G of the Internal  Revenue Codes of 1986,
as amended  (the  "Code")  and be subject to the excise tax  provided at Section
4999(a) of the Code.  The term "Change in Control" shall mean: (i) the execution
of an agreement for the sale of all, or a material portion, of the assets of the
Bank  or the  Parent;  (ii)  the  execution  of an  agreement  for a  merger  or
recapitalization  of the Bank or the  Parent or any  merger or  recapitalization
whereby the Bank or the Parent is not the  surviving  entity;  (iii) a change in
control of the Bank or the Parent,  as otherwise  defined or  determined  by the
Office of  Thrift  Supervision  or  regulations  promulgated  by it; or (iv) the
acquisition,  directly or indirectly,  of the beneficial  ownership  (within the
meaning of that term as it is used in Section 13(d) of the  Securities  Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the  outstanding  voting  securities of the Bank or the
Parent  by any  person,  trust,  entity  or group.  The term  "person"  means an
individual  other  than the  Employee,  or a  corporation,  partnership,  trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.

         (b)  Notwithstanding  any  other  provision  of this  Agreement  to the
contrary except as provided at Sections 4(b),  4(c),  4(d), 4(e) and 5, Employee
may voluntary  terminate his employment under this Agreement within  twenty-four
(24) months  following a Change in Control of the Bank or Parent,  and  Employee
shall  thereupon  be entitled to receive the payment and  benefits  described in
Section 3(a) of this Agreement,  upon the occurrence, or within ninety (90) days
thereafter,  of any of the following events, which have not been consented to in
advance by the  Employee in writing:  (i) if Employee  would be required to move
his personal  residence or perform his principal  executive  functions more than
fifty (50) miles from the  Employee's  primary  office as of the signing of this
Agreement;  (ii) if in the  organizational  structure  of the  Bank  or  Parent,
Employee would be required to report to a person or persons

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deemed to be at a management  level below the management level to which Employee
was  reporting  to prior to the Change in  Control;  (iii) if the Bank or Parent
should fail to maintain the  Employee's  base  compensation  in effect as of the
date of the Change in Control and existing  employee  benefits plans,  including
material fringe benefit, stock option and retirement plans, except to the extent
that such  reduction  in benefit  programs is part of an overall  adjustment  in
benefits for all employees of the Bank or Parent and does not disproportionately
adversely  impact the Employee;  (iv) if Employee  would be assigned  duties and
responsibilities  other than those  normally  associated  with his  position  as
referenced at Section 1, herein, for a period of more than six months; or (v) if
Employee's  responsibilities  or  authority  have  in any  way  been  materially
diminished or reduced for a period of more than six months.

         4.       Other Changes in Employment Status.
                  ----------------------------------

         (a) Except as provided for at Section 3, herein, the Board of Directors
may terminate the Employee's  employment at any time, but any termination by the
Board of Directors other than  termination  for Just Cause,  shall not prejudice
the Employee's right to compensation or other benefits under the Agreement.  The
Employee shall have no right to receive  compensation  or other benefits for any
period  after  termination  for Just Cause.  Termination  for "Just Cause" shall
include termination because of the Employee's personal dishonesty, incompetence,
willful  misconduct,   breach  of  fiduciary  duty  involving  personal  profit,
intentional failure to perform stated duties, willful violation of any law, rule
or  regulation  (other than  traffic  violations  or similar  offenses) or final
cease- and-desist order, or material breach of any provision of the Agreement.

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

         (c) If the Savings Bank is in default (as defined in Section 3(x)(1) of
FDIA) all  obligations  under this Agreement  shall  terminate as of the date of
default,  but  this  paragraph  shall  not  affect  any  vested  rights  of  the
contracting parties.

         (d) All obligations under this Agreement shall be terminated, except to
the extent  determined that  continuation of this Agreement is necessary for the
continued  operation of the Savings  Bank:  (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal  Deposit  Insurance  Corporation  ("FDIC") or the  Resolution  Trust
Corporation

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enters into an  agreement to provide  assistance  to or on behalf of the Savings
Bank under the  authority  contained  in Section  13(c) of FDIA;  or (ii) by the
Director of the OTS, or his or her  designee,  at the time that the  Director of
the OTS,  or his or her  designee  approves  a  supervisory  merger  to  resolve
problems  related to  operation  of the Savings Bank or when the Savings Bank is
determined  by the Director of the OTS to be in an unsafe or unsound  condition.
Any  rights of the  parties  that have  already  vested,  however,  shall not be
affected by such action.

         (e) Notwithstanding  anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned   upon  compliance  with  12  USC  ss.1828(k)  and  any  regulations
promulgated thereunder.

         5.  Suspension  of  Employment . If the  Employee is  suspended  and/or
temporarily  prohibited from  participating in the conduct of the Savings Bank's
affairs  by a notice  served  under  Section  8(e)(3)  or (g)(1) of the FDIA (12
U.S.C.  1818(e)(3)  and  (g)(1)),  the  Savings  Bank's  obligations  under  the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate proceedings. If the charges in the notice are dismissed, the Savings
Bank shall, (i) pay the Employee all or part of the compensation  withheld while
its  contract   obligations  were  suspended  and  (ii)  reinstate  any  of  its
obligations which were suspended.

         6.       Successors and Assigns.
                  ----------------------

         (a) This  Agreement  shall inure to the benefit of and be binding  upon
any  corporate  or other  successor  of the Savings  Bank which  shall  acquire,
directly or indirectly, by merger, consolidation,  purchase or otherwise, all or
substantially all of the assets or stock of the Savings Bank.

         (b) The Employee  shall be precluded  from  assigning or delegating his
rights or duties  hereunder  without first  obtaining the written consent of the
Savings Bank.

         7.  Amendments.  No amendments or additions to this Agreement  shall be
binding  upon the  parties  hereto  unless  made in  writing  and signed by both
parties, except as herein otherwise specifically provided.

         8.  Applicable  Law. This  agreement  shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of  Pennsylvania,  except to the extent that Federal law shall
be deemed to apply.

         9.  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.

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         10. Arbitration. Any controversy or claim arising out of or relating to
this  Agreement,  or the breach  thereof,  shall be settled  by  arbitration  in
accordance  with the rules then in effect of the district office of the American
Arbitration  Association ("AAA") nearest to the home office of the Savings Bank,
and  judgment  upon the  award  rendered  may be  entered  in any  court  having
jurisdiction thereof,  except to the extent that the parties may otherwise reach
a mutual  settlement of such issue. The Savings Bank shall incur the cost of all
fees and expenses associated with filing a request for arbitration with the AAA,
whether such filing is made on behalf of the Savings Bank or the  Employee,  and
the costs and  administrative  fees associated with employing the arbitrator and
related  administrative  expenses  assessed  by the  AAA.  Each  party  shall be
responsible  for any fees  incurred  on its own  behalf  with  respect  to other
expenses,  including attorneys' fees, arising from such dispute,  proceedings or
actions.

         11.      Confidentiality.
                  ---------------

                  (a) Employee agrees that, at all times hereafter, he will keep
all  confidential and proprietary  business and marketing  strategies of Savings
Bank and any and all other  information  which he learned  regarding the Savings
Bank  during  the  course  of his  employment  by  Savings  Bank,  in  strictest
confidence  and will not disclose  any part or aspect  thereof to anyone for any
reason unless required by law to do so.

                  (b)  All  marketing  and  business   materials,   existing  or
prospective customer lists or statements,  seminar materials, drawings, designs,
books, cards,  records,  accounts,  audio visual reports,  slides, files, notes,
memoranda,  and other papers, and any software,  computer programs, or data base
information  or any other  information  obtained  from Savings Bank or connected
with or arising  from any affairs of Savings  Bank or his  employment  hereunder
(the  "Records"),  in the charge or possession or knowledge of Employee shall be
and  remain  the  exclusive  property  of  Savings  Bank and  shall not be used,
transferred  or  disclosed  in  any  way by  Employee  except  in  the  ordinary
performance  of Employee's  duties for Savings Bank while an employee of Savings
Bank.  Upon the  termination  of Employee's  employment,  any and all Records of
whatever  kind  and in  whatever  form  maintained,  as well as all  copies  and
reproductions  thereof in the  possession or control of Employee shall be turned
over and delivered by Employee to Savings Bank without any hesitancy or delay.

         12. Entire Agreement. This Agreement together with any understanding or
modifications  thereof as agreed to in writing by the parties,  shall constitute
the entire agreement between the parties hereto.


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