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

                         As Amended on December 31, 1998

         THIS CHANGE IN CONTROL SEVERANCE AGREEMENT  ("Agreement")  entered into
this 1 st day of January,  1998 ("Effective Date"), by and between Third Federal
Savings Bank (the "Savings Bank") and Earl A. Pace, Jr. (the "Employee").

         WHEREAS,  the Employee is  currently  employed by the Savings Bank as a
Senior  Vice  President  and  Information  Technology  Systems  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 Information  Technology  Systems 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.  Notwithstanding  anything herein to the contrary,
the expiration date of this Agreement  shall be as of December 31, 2000,  except
as may be  extended  beyond that date by future  action of the Board  within its
sole discretion in accordance with this Agreement.

         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

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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 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

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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  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.


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         (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  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 Commonwealth of

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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.

         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.

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         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.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and date first hereinabove written.

                                       THIRD FEDERAL SAVINGS BANK


ATTEST:                                By: /s/John R. Stranford            
       ----------------------------       --------------------------------------
                                       John R. Stranford
                                       President and CEO


WITNESS:


/s/Elizabeth Davidson Maier
-----------------------------------
Elizabeth Davidson Maier
Secretary


WITNESS:


/s/Anne Marie Schickling                   /s/Earl A. Pace, Jr.           
-----------------------------------     ----------------------------------------
Anne Marie Schickling                   Earl A. Pace, Jr.
                                        Employee