TF FINANCIAL CORPORATION

                           INCENTIVE COMPENSATION PLAN






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                            TF FINANCIAL CORPORATION

                           INCENTIVE COMPENSATION PLAN

                                Table of Contents
                                -----------------


                                                                         PAGE
                                                                         ----

ARTICLE       I.    General Provisions.....................................1
                    1.01     Purpose.......................................1
                    1.02     Effective Date................................1

ARTICLE       II.   Definitions............................................1
                             "Bank"........................................1
                             "Base Salary".................................1
                             "Beneficiary".................................1
                             "Benefits"....................................1
                             "Board"
                             "Bonuses".....................................1
                             "Budget Year".................................1
                             "Change in Control"...........................1
                             "Code"........................................2
                             "Committee....................................2
                             "Common Stock"................................2
                             "Company".....................................2
                             "Director"....................................2
                             "Director Compensation".......................2
                             "Employee"....................................2
                             "ERISA".......................................2
                             "Net Income"..................................2
                             "Budget Plan".................................2
                             "Participant".................................2
                             "Participating Director"......................2
                             "Plan"........................................2
                             "Plan Year"...................................2
                             "Retirement"..................................2
                             "Target Levels"...............................3

ARTICLE       III.  Eligibility and Participation..........................3

ARTICLE       IV.   Benefits...............................................3
                    4.01     Summary.......................................3
                    4.02     Qualification of Incentive Comp Awards........3
                    4.03     Illustration of Incentive Comp Calculation....4
                    4.04     Award Distribution............................4
                    4.05     Extraordinary Events..........................4
                    4.06     Bonus Award...................................4
                    4.07     Revocation for Misconduct.....................5
                    4.08     Payment of Benefits...........................5
                    4.09     Minority, Disability, or Incompetency.........5
                    4.10     Designation of Beneficiary....................5



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ARTICLE       V.    Plan Administration..................................6
                    5.01     The Committee...............................6
                    5.02     Claims Procedure............................6

ARTICLE       VI.   Amendment and Termination............................6
                    6.01     Right to Amend or Terminate.................6

ARTICLE       VII.  General Provisions...................................6
                    7.01     Prohibition Against Alienation..............6
                    7.02     No Enlargement of Employment Rights.........6
                    7.03     Gender......................................6
                    7.04     Applicable Law..............................7
                    7.05     Titles and Headings.........................7
                    7.06     Withholding.................................7

EXHIBIT A


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                            TF FINANCIAL CORPORATION

                           INCENTIVE COMPENSATION PLAN

ARTICLE I. General Provisions
           ------------------

         1.01 Purpose.  This  document  sets forth the TF Financial  Corporation
Incentive  Compensation Plan, as established by the Company and other sponsoring
subsidiary  corporations.  The Plan is  maintained  for the purpose of providing
certain   Participating   Directors  and  selected   Employees   with  incentive
compensation  payable in the form of Bonuses in the event that the  Company  and
its subsidiaries meet certain  performance goals indicative of its profitability
and stability.

         It is  intended  that the Plan  shall be an  unfunded  plan  maintained
primarily for the purpose of providing deferred  compensation for a select group
of  management  or highly  compensated  employees  within the meaning of Section
201(2) of ERISA and the  non-employee  directors of the Company and the Bank and
that benefits provided under the Plan shall be taxable to Participants only when
actually received. The Plan shall be administered, construed, and interpreted in
a manner consistent with the purpose and intent set forth in this Section.

         1.02.  Effective  Date.  The effective date of this Plan is October 18,
2004.


ARTICLE II.  Definitions
             -----------

         Unless the context  clearly  requires  otherwise,  the terms defined in
this  Article  II shall,  for all  purposes  of this Plan,  have the  respective
meanings specified in this Article II.

                  "Bank"  shall mean Third  Federal  Savings  Bank,  a federally
chartered stock savings bank.

                  "Base   Salary"  is  defined  as  the  annual   rate  of  base
compensation  of an employee  exclusive  of  bonuses,  stock  awards,  expensive
reimbursement,  fees earned,  incentive  compensation  payments,  company  stock
dividends and base salary increases that have been granted, but not implemented.
An  officer's  base  salary as of close of  business  December  31st will be the
salary utilized in the incentive compensation calculations.

                  "Beneficiary" shall mean the person or persons designated as a
Participant's beneficiary or beneficiaries in accordance with Section 4.10.

                  "Benefits"  shall  mean  as to any  Participant  any  benefits
provided for under Article IV.

                  "Board"  shall mean the Board of  Directors  of the Company or
other sponsoring subsidiary corporation.

                  "Bonuses" shall mean cash bonuses payable immediately.

                  "Budget  Year" is defined as the  calendar  year,  January 1st
through  December 31st, for which Management has prepared and presented a budget
for approval by the Board  detailing the projected  performance  of the Bank and
Company.  The budget is a one year plan which incorporates  Management's  growth
and performance goals, initiatives and objectives.

                  "Change in  Control"  shall  mean:  (i) the sale of all,  or a
material   portion,   of  the  assets  of  the  Company;   (ii)  the  merger  or
recapitalization  of the Company or any merger or  recapitalization  whereby the
Company is not the surviving  entity;  (iii) a change of control of the Company,
as  otherwise  defined  or  determined  by the Office of Thrift  Supervision  or
regulations promulgated by it; or (iv) the acquisition,  directly



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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 Company by any person, trust, entity or
group. This limitation shall not apply to the purchase of shares by underwriters
in connection with a public offering of Company stock, or the purchase of shares
of up to 25% of any  class  of  securities  of the  Company  by a  tax-qualified
employee stock benefit plan which is exempt from the approval requirements,  set
forth under 12 C.F.R.  574.3(c)(1)(vi)  as now in effect or as may  hereafter be
amended.   The  term  "person"   refers  to  an  individual  or  a  corporation,
partnership,   trust,   association,   joint  venture,  pool,  syndicate,   sole
proprietorship,  unincorporated  organization  or any other  form of entity  not
specifically listed herein.

                  "Code"  means the Internal  Revenue  Code of 1986,  as amended
from time to time.  References to a Code section  shall  include any  comparable
section or sections of future legislation that amends, supplements or supersedes
such section.

                  "Committee"  means  the  Compensation   Committee   previously
appointed by the Board.  Members of the Committee shall serve at the pleasure of
the Board.  In the absence at any time of a duly appointed  Committee,  the Plan
shall be administered by the Board.

                  "Common Stock" means the common stock of the Company.

                  "Company" means TF Financial Corporation.

                  "Director"  means any member of the Board of  Directors of the
Company or the Bank.

                  "Director   Compensation"   defined  as  the  annual  rate  of
compensation derived from directors fees and committee fees of any member of the
Board of  Directors of the Company,  any  subsidiary  of the Company or the Bank
exclusive  of  bonuses,   stock  awards,   expense   reimbursements,   incentive
compensation payments, and company stock dividends.

                  "Employee"  means any individual  who performs  service in the
employ of the Company, or a subsidiary of the Company,  excluding any individual
who performs such services as a self-employed person or solely as a Director.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974, as amended from time to time.

                  "Net Income" shall mean net income of the Company  reported on
a  consolidated  basis for a fiscal year;  provided,  however,  Net Income for a
given  fiscal  year  shall not give  effect  to any  one-time  non-recurring  or
extraordinary payment or event as interpreted by the Committee.

                  "Budget Plan" is defined as the current  Budget Plan presented
to and  approved by the  Company's  Board of  Directors in December of the prior
fiscal year.

                  "Participant" means an Employee or Participating  Director who
has become a Participant in the Plan as provided in Article III.

                  "Participating  Director" shall mean a director serving on the
Board of Directors of the Company or the Bank who is not otherwise an Employee.

                  "Plan"   means   the  TF   Financial   Corporation   Incentive
Compensation  Plan,  as  herein  set  forth  and as it may from  time to time be
amended.

                  "Plan Year" means the 12  consecutive  month period  beginning
January 1st and on each anniversary of that date.

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                  "Retirement"  shall  mean  termination  of  employment  of  an
employee of the Company or Bank following attainment of not less than age 60 and
completion of not less than 15 years of service.

                  "Target Levels" is defined as the  performance  goals selected
by the Compensation  Committee against which the actual performance for the plan
year will be measured. It will be Management's  objective to meet or exceed 100%
of the select performance targets as established in the Board-approved budget.


ARTICLE III.  Eligibility and Participation
              -----------------------------

         (a) Directors of the Company or the Bank who are not Employees shall be
deemed Participating  Directors as of the Effective Date of their appointment to
the Board of  Directors  of the  Company or the Bank.  They shall be entitled to
their  pro-rata  share of their plan payment  based upon the number of days they
served on the Board during the plan year and  conditioned  upon  achievement  of
plan targets.

         (b) On or before the first day of each Plan Year, the Committee, in its
discretion,  shall select the Employee or Employees who shall participate in the
Plan for the Plan Year and each such  Participant's  award  allocation  for such
Plan Year;  provided that for the Plan Year beginning January 1st, the Employees
are  eligible  to  participate  in the  Plan.  The  Committee  may,  in its sole
discretion,  limit  participation in the Plan for any reason including,  but not
limited to,  ensuring that the Plan at all times is a plan  described in Section
201(2) of ERISA.

         Notwithstanding any provision of the Plan inconsistent  herewith,  if a
Participant  terminates service with the Company and the Bank during a Plan Year
for a reason other than his or her disability, death, Retirement, or a Change in
Control,  then the  Participant  shall not be entitled  to receive any  Benefits
payable under the Plan.


ARTICLE IV.  Benefits
             --------

         4.01 Summary.  When the Company  achieves  target levels of performance
detailed in the Budget Plan as determined  by the  Company's  Board of Directors
prior to the  beginning  of the Plan  Year,  each  participant  in the Plan will
receive  an award  equal to their  base  annual  salary,  multiplied  by a Final
Incentive  Program  percentage.   The  Final  Incentive  Program  percentage  is
calculated  at the  end of the  Plan  Year  and is the  sum of  three  component
percentages ("Components") - Number of new Deposit Households,  Consolidated Net
Income,  and Originated  Loans  Outstandings - each of which comprises  separate
Component  Ratio and  Weighting  Factor.  The  Components  are subject to change
annually based upon the goals and objectives of the Company.

Number of new Deposit  Households  from calendar  year-end to calendar  year-end
exclusive of zero balance and certificate of deposit only households.

Consolidated  Net Income is defined as the Net Income of the  Company  excluding
any  extraordinary  factors or events as  identified  and so  designated  by the
Committee and the Board of Directors.

Originated  Loans  Outstandings is defined as the net change in total originated
loans outstandings from calendar year-end to calendar year-end.

Each  Component has a Weighting  Percentage  depending on the importance of that
attribute,  and each  executive  is assigned an  Individual  Target  Participant
Factor as recommended by the Compensation Committee and approved by the Board of
Directors.

Goals will have been met when the  performance  for the current  year equals the
Plan Year's Budget Plan, in which case,  the Resultant  will equal the Component
Target.  However, the Resultant may be greater or less than the Component Target
depending on the ability to reach or exceed the Budget Plan.


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         4.02  Qualification of Incentive Comp Awards. No awards will be granted
unless the Actual Year  Consolidated  Net Income for the Company is at least 90%
of the Budget Year  Consolidated  Net  Income,  after  factoring  in the cost of
payment of all respective Incentive Plan awards.

         4.03 Illustration of Incentive Comp Calculation.  Exhibit A illustrates
the calculations that lead to the Final Incentive Program Percentage.  Note that
Number of Deposit  Households,  Net Income, and Originated Loan Outstandings are
all on a consolidated  basis and, for the example,  a 40% Participant Factor was
used. The columns are identified by number,  e.g. [1], and the discussion refers
to those numbers.

Formula  [1] is  the  comparison,  for  example  in the  first  row,  of  actual
Consolidated Net Income to Budget Plan  Consolidated Net Income.  The goal is to
achieve  Consolidated  Net  Income  equal to the  Budget  Plan,  resulting  in a
Component Ratio [2] of 1.00. The Weighting Factor [3] for this component is 40%.

Multiplying  columns [2] x [3] x the Individual  Target [4] yields the Resultant
[5].  The  Component  Target [6] is not  variable  and shows what the  Resultant
column is if the  Consolidated  Net Income  exactly  equals the Budget Plan. Any
deviation  from the Budget  Plan  Target will be  reflected  by a  corresponding
change in the Resultant percentage for that Incentive Plan Component. The sum of
the  Resultants  for  each  Component  will  yield  the  Final   Incentive  Plan
Percentage.  Multiplication  of the Final  Incentive Plan  Percentage  times the
respective  base salary of the individual  will yield the Incentive Plan payout,
which may be equal to, less than, or more than the Participant's  Incentive Plan
award target,  depending on the  achievement  of the relevant  Components of the
Budget Plan.

         4.04 Award Distribution. Awards will be distributed to all participants
as a percent (%) of Base Salary. Awards will be calculated and paid on an annual
basis.  Interim  reports  will be provided at the close of each quarter upon the
public release of that quarter's financial information.

         All Incentive Plan awards will be based on the Company's performance in
the current year. Regardless of the calculation,  no Resultant shall exceed 150%
of the Component Target.

         The sum of 100% of the Bonus payable to a Participant,  less applicable
federal  and state  income tax  withholding,  for any Plan Year shall be paid in
cash within 45 days of the  completion of the audited  financial  statements for
the Company  and  immediately  upon the closing  date in the case of a Change in
Control.

         4.05 Extraordinary  Events.  Extraordinary  events or occurrences which
significantly  impact  the  Components  in a positive  or adverse  manner may be
excluded or adjusted for by the Committee and the Board of Directors.

         4.06  Bonus Award.

         (a) Aggregate Amount of Bonuses.  Except as otherwise  provided in this
Article,  for each Plan Year,  the  Company  shall pay  Bonuses in cash to those
Participants  eligible to participate in the Plan and to receive a Bonus for the
Plan Year if all conditions as defined within the Plan are met.

         (b) Capitalization Requirement.  Notwithstanding anything herein to the
contrary,  the  aggregate  amount of Bonuses  payable  shall be  proportionately
reduced (to zero,  if  necessary) to the extent that the payment would cause the
Bank to cease to be a well-capitalized institution for the fiscal year.

         (c)  Vesting:   General   Schedule.   Except  as   otherwise   provided
hereinafter,  Benefits shall become 100% earned and  non-forfeitable at the time
of payment to the Participant.

         (d) Vesting:  Exception for  Termination  Due to Retirement,  Death, or
Disability.  Bonuses payable to a Participant  whose service with the Company or
the Bank terminates prior to the conclusion of the current Plan year whether due
to Retirement,  death,  disability  shall be entitled to their pro-rata share of
their plan



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payment  based upon the number of days they were employed or served on the Board
of Director of the  Company or Bank  during the plan year and  conditioned  upon
achievement  of  plan  targets.   Payment  will  be  made  concurrent  with  all
participant plan payments for that plan year.

         (e) Vesting:  Exception for a Change in Control. All Bonuses payable to
a Participant  shall be deemed to be immediately  100% earned and payable on the
closing date in the event of a Change in Control.  The decision of the Committee
as to whether a change in control has occurred  shall be conclusive  and binding
as to all affected Participants.

         4.07 Revocation for Misconduct.  Notwithstanding anything herein to the
contrary,  the  Company's  Board of Directors  may, by  resolution,  immediately
revoke,  rescind and terminate any Benefits earned by Employees or Participating
Directors,  to the extent the  Participant  has not  collected  a Bonus,  if the
Participant  is  discharged  from the service or employ of the Company for Cause
(as  hereinafter  defined),  or is discovered  after  termination  of service or
employment to have engaged in conduct that would have justified  termination for
Cause.  "Cause"  is  defined  as  personal  dishonesty,   incompetence,  willful
misconduct,  breach of fiduciary duty involving  personal  profits,  intentional
failure  to  perform  stated  duties,  willful  violation  of any  law,  rule or
regulation  (other than  traffic  violations  or similar  offenses),  or a final
cease-and-desist  order,  or a material breach of the  Participant's  employment
agreement (if any) with the Company or the Bank. A determination  of Cause shall
be made by the Board of  Directors  of the  Company or the Bank  within its sole
discretion.

         4.08  Payment  of  Benefits.  All  Benefits  under  this Plan  shall be
provided by the Company or the Bank directly to Participants,  and the Committee
shall have no  responsibility  thereto  other than to inform the  Company or the
Bank, as soon as  practicable  after the end of each Plan Year, in writing as to
the Benefits to be provided.

         (a) No Trust or Trust Fund.  The Benefits  payable under the Plan shall
be paid by the  Company or the Bank out of its  general  assets and shall not be
funded by trust or otherwise.  Nothing  contained in this Plan shall constitute,
or be treated as, a trust or create any fiduciary  relationship.  The Company or
the Bank shall be under no obligation to segregate any assets for the purpose of
providing  Benefits  under the Plan and no person or entity which is entitled to
payment  under the  terms of the Plan  shall  have any  claim,  right,  security
interest, or other interest in any fund, trust, account,  insurance contract, or
asset of the Company or the Bank. To the extent that a Participant  or any other
person  acquires a right to receive any Benefit under the Plan, such right shall
be limited  to that of a  recipient  of an  unfunded,  unsecured  promise to pay
amounts in the future and the  Participant's  (or other person's)  position with
respect to such  amounts  shall be that of a general  unsecured  creditor of the
Company or the Bank, as applicable.

         4.09 Minority,  Disability,  or  Incompetency.  If any Benefit  becomes
payable under this Plan to a minor,  to a person under legal  disability or to a
person not  adjudicated  incompetent  but who the  Committee  in its  discretion
determines to be incapable by reason of illness or mental or physical disability
of managing his  financial  affairs,  the Committee may direct that such Benefit
shall be paid to the legal  representative or custodian of such person or to any
relative or friend of such person, or that such amount be paid directly for such
person's  support  and  maintenance.  Payments  so  made  in  good  faith  shall
completely  discharge  the  Committee,  the  Company and the Bank of any and all
obligations and liabilities with respect to such payments.

         4.10  Designation  of  Beneficiary.  A  Participant  may file  with the
Committee a written  designation  of a Beneficiary  who is to receive his vested
benefits in the event of the Participant's  death prior to his or her collection
of said benefits.  Such designation of Beneficiary may be changed at any time by
written notice to the Committee.  The designation  last filed with the Committee
shall be  controlling.  In the  event of the death of a  Participant  and in the
absence of a beneficiary  validly designated under the Plan who is living at the
time of the Participant's  death, the Participant's estate shall be deemed to be
the Beneficiary for purposes of this Plan.

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ARTICLE V.  Plan Administration
            -------------------

         5.01  The  Committee.  In  its  sole  and  absolute  discretion,  which
discretion  when  exercised  shall be final  and  binding  on all  parties,  the
Committee shall have the  responsibility  and authority to control the operation
and  administration of the Plan in accordance with its terms including,  without
limiting  the  generality  of the  foregoing,  the  powers  and  duties:  (i) to
interpret,   apply,  and  administer  the  Plan,  to  decide  all  questions  of
eligibility,  participation,  status,  benefits,  and rights of Participants and
Beneficiaries  under the  Plan;  (ii) to  establish  and  amend  such  rules and
procedures as it deems necessary or appropriate to the proper  administration of
the  Plan;  (iii) to  employ or retain  such  agents  as it deems  necessary  or
advisable to assist in the  administration  of the Plan,  and to delegate to the
extent  permitted by applicable law such powers and duties as it deems necessary
or  advisable;  (iv) to prepare and file all  statements,  returns,  and reports
required  to be filed by the Plan with any agency of  government;  (v) to comply
with all disclosure  requirements  of all applicable  state and federal law; and
(vi) to perform all  functions  otherwise  assigned to it under the terms of the
Plan.

         5.02  Claims  Procedure.  Claims for  Benefits  under the Plan shall be
filed  in  writing  with  the  Committee.  Written  notice  of  the  Committee's
disposition of a claim  generally  shall be furnished to the claimant  within 60
days after the application therefore is filed. However, if special circumstances
exist of which the Committee  notifies the claimant  within such 60-day  period,
the  Committee may extend such period to the extent  necessary,  but in no event
beyond 180 days after the claim is filed. In the event the claim is denied,  the
reasons for the denial  shall be  specifically  set forth in writing,  pertinent
provisions of the Plan shall be cited and, where appropriate,  an explanation as
to how the claimant can perfect the claim will be provided. Any claimant who has
been denied a Benefit  shall be  entitled,  upon  request to the  Committee,  to
appeal  the  denial  of his  claim  within  60 days  following  the  Committee's
determination  described  in the  preceding  sentence.  Upon  such  appeal,  the
claimant,  or  his  representative,  shall  be  entitled  to  examine  pertinent
documents, submit issues and comments in writing to the Committee, and meet with
the  Committee.  The  Committee  shall  review  its  decision  and issue a final
decision to the claimant in writing,  generally  within 60 days  following  such
appeal.  However, if special circumstances exist of which the Committee notifies
the claimant within such 60-day period,  the Committee may extend such period to
the extent necessary, but in no event beyond 120 days following such appeal.


ARTICLE VI.  Amendment and Termination
             -------------------------

         6.01 Right to Amend or Terminate. The Board of Directors of the Company
or the Bank reserves the right at any time to terminate or amend the Plan in any
manner and for any reason;  provided,  that no amendment or  termination  shall,
without the  consent of the  Participant  or, if  applicable,  the  Beneficiary,
adversely  affect such  Participant's  or  Beneficiary's  rights with respect to
Benefits   accrued   as  of  the  date  of  such   amendment   or   termination.
Notwithstanding the foregoing,  the Board or the Committee reserves the right at
any time to terminate the Plan, the  participation of any Participant  and/or to
distribute all sums due under the Plan to any or all Participants in whole or in
part without prior notice or consent.


ARTICLE VII.  General Provisions
              ------------------

         7.01 Prohibition Against Alienation.  Benefits payable to a Participant
or  Beneficiary  under the terms of this Plan shall not be subject in any manner
to alienation,  anticipation, sale, transfer, assignment, pledge, hypothecation,
attachment,  receivership,  or encumbrance of any kind, nor shall it pass to any
trustee in  bankruptcy  or be reached  or applied by any legal  process  for the
payment of any  obligations of the  Participant or  Beneficiary,  except at such
times and in such manner as provided in this Plan.

         7.02 No Enlargement  of Employment  Rights.  Nothing  contained in this
Plan shall give or be construed as giving any Employee or Participating Director
the right to be  retained  in the  service or  employment  of the Company or the
Bank, or shall  interfere with the right of the Company or the Bank to discharge
or otherwise terminate any Participating  Director's or Employee's employment or
service at any time.

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         7.03 Gender.  Whenever any masculine  terminology is used in this Plan,
it  shall be taken  to  include  the  feminine,  unless  the  context  otherwise
indicates.

         7.04  Applicable  Law. This Plan shall be construed and regulated,  and
its validity and effect and the rights hereunder of all parties interested shall
at all times be determined,  in accordance with the laws of the  Commonwealth of
Pennsylvania, except to the extent such state law is preempted by federal law.

         7.05 Titles and Headings.  The titles and headings  included herein are
included for convenience only and shall not be construed as in any way affecting
or modifying the text of this Plan, which text shall control.

         7.06  Withholding.  The  Company  and the Bank  reserves  the  right to
withhold from payments of Benefits  such amounts of income,  payroll,  and other
taxes as it deems advisable.