Document:

PENNFED FINANCIAL SERVICES, INC.

            1994 AMENDED AND RESTATED STOCK OPTION AND INCENTIVE PLAN

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     7. Exercise of Options or Rights.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       9EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT  AGREEMENT (the "Agreement") is made and entered into as of
this 28th day of November,  2000 by and between PennFed Financial Services, Inc.
(the "Company") and Joseph L. LaMonica (the "Employee").

     WHEREAS,  the Employee serves as the President and Chief Executive  Officer
of the Company and of the Company's wholly-owned subsidiary, Penn Federal Saving
Bank (the "Bank");

     WHEREAS,  the Employee has an existing  employment  agreement with the Bank
entered into as of July 14, 1994 (the "Prior Employment  Agreement") which he is
willing to terminate in consideration of this Agreement becoming effective;

     WHEREAS,  the board of directors of the Company (the "Board of  Directors")
believes it is in the best interests of the Company and its subsidiaries for the
Company  to enter  into  this  Agreement  with the  Employee  in order to assure
continuity of management of the Company and its subsidiaries; and

     WHEREAS,  the Board of Directors has approved and  authorized the execution
of this Agreement with the Employee;

     NOW,  THEREFORE,  in  consideration  of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:

     1. Definitions.

         (a) The term "Change in Control" means (1) an acquisition of securities
of the  Company  or the Bank that is  determined  by the Board of  Directors  to
constitute  an  acquisition  of  control of the  Company or the Bank  within the
meaning of the Change in Bank Control Act, 12 U.S.C. ss. 1817(j) and the Savings
and Loan Holding  Company Act,  12U.S.C.  ss.1467a,  and applicable  regulations
thereunder;  (2) an event that would be  required  to be reported in response to
Item 1 of the current  report on Form 8-K, as in effect on the  Effective  Date,
pursuant  to Section  13 or 15(d) of the  Securities  Exchange  Act of 1934 (the
"Exchange Act"); (3) any person (as the term is used in Sections 13(d) and 14(d)
of the  Exchange  Act) is or becomes  the  beneficial  owner (as defined in Rule
13d-3 under the  Exchange  Act)  directly or  indirectly  of  securities  of the
Company or the Bank representing 25% or more of the combined voting power of the
Company's or the Bank's outstanding securities;  (4) individuals who are members
of the Board of Directors on the Effective  Date (the  "Incumbent  Board") cease
for any reason to  constitute  at least a majority  thereof,  provided  that any
person  becoming a director  subsequent to the Effective Date whose election was
approved by a vote of at least  three-quarters  of the directors  comprising the
Incumbent Board, or whose nomination for election by the Company's  stockholders
was approved by a nominating  committee serving under an Incumbent Board,  shall
be considered a member of the Incumbent  Board; or (5) approval by the Company's
stockholders  of a  plan  of  reorganization,  merger  or  consolidation  of the
Company,  sale of all or  substantially

<PAGE>

all of the assets of the Company, a similar  transaction in which the Company is
not the resulting  entity;  provided that the term "change in control" shall not
include an acquisition of securities by an employee  benefit plan of the Bank or
the Company.  In the application of regulations under the Change in Bank Control
Act or the Savings and Loan Holding  Company Act,  determinations  to be made by
the  applicable  federal  banking  regulator  shall  be  made  by the  Board  of
Directors.

         (b) The  term  "Consolidated  Subsidiaries"  means  any  subsidiary  or
subsidiaries  of  the  Company  (or  its  successors)   that  are  part  of  the
consolidated  group of the Company (or its  successors)  for federal  income tax
reporting.

         (c) The term  "Date of  Termination"  means  the date  upon  which  the
Employee's  employment with the Company or the Bank or both ceases, as specified
in a notice of termination pursuant to Section 8 of this Agreement.

         (d) The term "Effective Date" means November 28, 2000.

         (e) The term  "Involuntarily  Termination" means the termination of the
employment of Employee (i) by either the Company or the Bank or both without his
express  written  consent;  or (ii) by the  Employee  by  reason  of a  material
diminution of or  interference  with his duties,  responsibilities  or benefits,
including (without  limitation) any of the following actions unless consented to
in writing by the Employee:  (1) a requirement that the Employee be based at any
place other than West Orange, New Jersey, or within 35 miles thereof, except for
reasonable  travel on Company or Bank business;  (2) a material  demotion of the
Employee;  (3) a material  reduction  in the number or  seniority  of  personnel
reporting to the Employee or a material  reduction in the frequency  with which,
or in the nature of the  matters  with  respect to which such  personnel  are to
report to the Employee,  other than as part of a Bank- or Company-wide reduction
in staff; (4) a reduction in the Employee's  salary or a material adverse change
in the Employee's perquisites,  benefits, contingent benefits or vacation, other
than  prior  to a  Change  in  Control  as part of an  overall  program  applied
uniformly and with equitable  effect to all members of the senior  management of
the Bank or the Company; (5) a material permanent increase in the required hours
of work or the  workload  of the  Employee;  or (6) the  failure of the Board of
Directors  (or a board of  directors of a successor of the Company) to elect him
as President and Chief  Executive  Officer of the Company (or a successor of the
Company) or any action by the Board of  Directors  (or a board of directors of a
successor of the Company) removing him from any of such offices,  or the failure
of the board of  directors  of the Bank (or any  successor of the Bank) to elect
him as President  and Chief  Executive  Officer of the Bank (or any successor of
the Bank) or any  action by such  board  (or board of a  successor  of the Bank)
removing him from any of such offices.  The term "Involuntary  Termination" does
not include  Termination  for Cause or termination of employment due to death or
permanent  disability pursuant to Section 7(g) of this Agreement,  or suspension
or temporary or permanent  prohibition from  participation in the conduct of the
affairs of a  depository  institution  under  Section 8 of the  Federal  Deposit
Insurance Act.

                                       2

<PAGE>

         (f) The terms  "Termination  for Cause" and "Terminated for Cause" mean
termination  of the  employment  of the Employee  with either the Company or the
Bank, as the case may be,  because of the Employee's  dishonesty,  incompetence,
willful  misconduct,  breach of a  fiduciary  duty  involving  personal  profit,
intentional  failure to perform  stated  duties,  willful  violation of any law,
rule, or regulation  (excluding  violations which do not have a material adverse
affect on the Company or the Bank) or final  cease-and-desist  order, or (except
as provided below) material breach of any provision of this Agreement. No act or
failure to act by the Employee  shall be considered  willful unless the Employee
acted or failed to act with an absence of good  faith and  without a  reasonable
belief  that  his  action  or  failure  to act was in the best  interest  of the
Company.  The  Employee  shall not be deemed to have been  Terminated  for Cause
unless and until there  shall have been  delivered  to the  Employee a copy of a
resolution,  duly adopted by the affirmative vote of not less than a majority of
the entire  membership  of the Board of Directors at a meeting of the Board duly
called and held for such purpose (after reasonable notice to the Employee and an
opportunity for the Employee,  together with the Employee's counsel, to be heard
before  the  Board),  stating  that in the good  faith  opinion  of the Board of
Directors  the  Employee  has  engaged in  conduct  described  in the  preceding
sentence and specifying the  particulars  thereof in detail.  The opportunity of
the  Employee  to be heard  before  the Board  shall not affect the right of the
Employee to arbitration as set forth in paragraph 17.

     2.  Term;  Termination  of  Prior  Employment  Agreement.  The term of this
Agreement  shall be a period of five years  commencing  on the  Effective  Date,
subject to earlier  termination as provided herein.  On each anniversary of this
Agreement the term shall be extended for a period of one year in addition to the
then-remaining  term,  provided  that the  Company  has not given  notice to the
Employee in writing at least 90 days prior to such  anniversary that the term of
this  Agreement  shall not be extended  further,  and provided  further that the
Employee has not  received an  unsatisfactory  performance  review by either the
Board of Directors or the board of directors of the Bank. The  Employee's  Prior
Employment Agreement shall terminate immediately prior to the Effective Date.

     3.  Employment.  The  Employee  is  employed  as the  President  and  Chief
Executive  Officer  of the  Company  and as the  President  and Chief  Executive
Officer of the Bank.  As such,  the  Employee  shall render  administrative  and
management services as are customarily  performed by persons situated in similar
executive  capacities,  and shall have such other powers and duties as the Board
of Directors or the board of  directors of the Bank may  prescribe  from time to
time. The Employee shall also render  services to any subsidiary or subsidiaries
of the Company or the Bank as  requested by the Company or the Bank from time to
time consistent with his executive position.  The Employee shall devote his best
efforts and  reasonable  time and  attention  to the business and affairs of the
Company and the Bank to the extent  necessary to discharge his  responsibilities
hereunder.  The  Employee may (i) serve on  corporate  or  charitable  boards or
committees, and (ii) manage personal investments,  so long as such activities do
not interfere materially with performance of his responsibilities hereunder.

                                       3

<PAGE>

     4. Cash Compensation.

         (a) Salary.  The Company agrees to pay the Employee  during the term of
this  Agreement a base salary (the "Company  Salary") the  annualized  amount of
which shall be not less than the annualized  aggregate  amount of the Employee's
base salary from the Company and any Consolidated  Subsidiaries in effect at the
Effective  Date;  provided  that any  amounts  of  salary  actually  paid to the
Employee by any Consolidated  Subsidiaries shall reduce the amount to be paid by
the Company to the Employee. The Company Salary shall be paid no less frequently
than monthly and shall be subject to customary  tax  withholding.  The amount of
the  Employee's  Company  Salary shall be increased  (but shall not be decreased
other than prior to a Change in  Control as part of an overall  program  applied
uniformly and with equitable  effect to all members of senior  management of the
Company or the Bank) from time to time in accordance  with the amounts of salary
approved  by the  Board of  Directors  or the board of  directors  of any of the
Consolidated Subsidiaries after the Effective Date.

         (b)  Bonuses.  The  Employee  shall be  entitled to  participate  in an
equitable  manner with all other executive  officers of the Company and the Bank
in such  performance-based and discretionary  bonuses, if any, as are authorized
and declared by the Board of Directors for executive officers of the Company and
by the board of directors of the Bank for executive officers of the Bank.

         (c)  Expenses.  The  Employee  shall  be  entitled  to  receive  prompt
reimbursement for all reasonable expenses incurred by the Employee in performing
services  under this  Agreement in accordance  with the policies and  procedures
applicable to the executive officers of the Company and the Bank,  provided that
the Employee  accounts  for such  expenses as required  under such  policies and
procedures.

         (d)  Deferral  of  Non-Deductible  Compensation.  In the event that the
Employee's aggregate  compensation  (including  compensatory  benefits which are
deemed  remuneration for purposes of Section 162(m) of the Internal Revenue Code
of  1986 as  amended  (the  "Code"))  from  the  Company  and  the  Consolidated
Subsidiaries for any calendar year exceeds the greater of (i) $1,000,000 or (ii)
the  maximum  amount of  compensation  deductible  by the  Company or any of the
Consolidated  Subsidiaries in any calendar year under Section 162(m) of the Code
(the "maximum allowable amount"),  then any such amount in excess of the maximum
allowable  amount shall be mandatorily  deferred with interest thereon at 8% per
annum,  compounded annually,  to a calendar year such that the amount to be paid
to the Employee in such calendar year,  including  deferred amounts and interest
thereon, does not exceed the maximum allowable amount. Subject to the foregoing,
deferred  amounts  including  interest  thereon shall be payable at the earliest
time permissible.  All unpaid deferred amounts shall be paid to the Employee not
later  than his Date of  Termination  unless  his  Date of  Termination  is on a
December 31st, in which case, the unpaid  deferred  amounts shall be paid to the
Employee on the first  business day of the next  succeeding  calendar  year. The
provisions of this  subsection  shall survive any  termination of the Employee's
employment and any termination of this Agreement.

                                       4

<PAGE>

         5. Benefits.

         (a)  Participation  in Benefit Plans. The Employee shall be entitled to
participate,  to the same  extent as  executive  officers of the Company and the
Bank  generally,  in all plans of the Company and the Bank  relating to pension,
retirement,  thrift,  profit-sharing,  savings,  group or other life  insurance,
hospitalization,  medical and dental  coverage,  travel and accident  insurance,
education,   cash  bonuses,   and  other  retirement  or  employee  benefits  or
combinations  thereof.  In  addition,  the  Employee  shall  be  entitled  to be
considered for benefits under all of the stock and stock option related plans in
which the  Company's  or the Bank's  executive  officers  are eligible or become
eligible to participate.

         (b) Fringe Benefits.  The Employee shall be eligible to participate in,
and receive benefits under, any other fringe benefit plans or perquisites  which
are or may become  generally  available to the Company's or the Bank's executive
officers,  including  but not  limited  to  supplemental  retirement,  incentive
compensation,  supplemental  medical or life insurance plans, company cars, club
dues, physical examinations, financial planning and tax preparation services.

     6. Vacations; Leave. The Employee shall be entitled to annual paid vacation
in accordance  with the policies  established  by the Board of Directors and the
board of directors  of the Bank for  executive  officers,  in no event less than
four weeks per year,  and to voluntary  leaves of absence,  with or without pay,
from  time to time at such  times  and  upon  such  conditions  as the  Board of
Directors may determine in its discretion.

     7. Termination of Employment.

         (a) Involuntary Termination. If the Employee experiences an Involuntary
Termination,  such  termination of employment  shall be subject to the Company's
obligations under this Section 7. In the event of the Involuntary Termination of
the  Employee,  if the  Employee has offered to continue to provide the services
contemplated  by and on the terms  provided in this Agreement and such offer has
been  declined,  subject to Section 7(b) of this  Agreement,  the Company shall,
during the lesser period of the remaining  term of this Agreement or three years
following  the  Date  of  Termination  (the  "Liquidated  Damage  Period"),   as
liquidated  damages (i) pay to the Employee  monthly  one-twelfth of the Company
Salary at the annual rate in effect immediately prior to the Date of Termination
and  one-twelfth  of the average  annual amount of cash bonus and cash incentive
compensation of the Employee,  based on the average amounts of such compensation
earned by the  Employee  from the  Company  and the Bank for the two full fiscal
years preceding the Date of  Termination;  and (ii) maintain  substantially  the
same group life and key man life insurance,  hospitalization,  medical,  dental,
prescription drug and other health benefits,  and long-term disability insurance
(if any) for the benefit of the Employee and his  dependents  and  beneficiaries
who would have been  eligible for such benefits if the Employee had not suffered
Involuntary  Termination and on terms substantially as favorable to the Employee
including  amounts of coverage and  deductibles and other costs to him in effect
immediately  prior  to such  Involuntary  Termination  (the  "Employee's  Health
Coverage").

                                       5

<PAGE>

         (b) Reduction of the Company's Obligations Under Section 7(a).

            (1) In the event that the Employee  becomes  entitled to  liquidated
damages pursuant to Section 7(a), (i) the Company's  obligation  thereunder with
respect to cash damages  shall be reduced by the amount of the  Employee's  cash
income,  if any, earned from providing  personal  services during the Liquidated
Damage Period;  and (ii) the Company's  obligation to maintain  Health  Coverage
shall be  reduced  to the  extent,  if any,  that  the  Employee  receives  such
benefits,  on  no  less  favorable  terms,  from  another  employer  during  the
Liquidated  Damage  Period.  For purposes of this Section  7(b),  the term "cash
income" shall include amounts of salary, wages, bonuses,  incentive compensation
and fees paid to the  Employee  in cash but shall not  include  shares of stock,
stock options,  stock appreciation rights or other earned income not paid to the
Employee  in cash.  To the extent the  provisions  of this  Section  7(b)(1) are
applicable and an overpayment has been made to the Employee as of the expiration
of Liquidated  Damage  Period,  the Employee  shall  reimburse the Company in an
amount  equal to the  after  tax  benefit  realized  by the  Employee  from such
overpayment (i.e. amount realized net of all federal,  state, local,  employment
and  medicare  taxes).  In  making  the  reimbursement  calculation  it shall be
presumed that the Employee is subject to the highest  marginal federal and state
income tax rates.

            (2) The  Employee  agrees  that in the event he becomes  entitled to
liquidated  damages pursuant to Section 7(a),  throughout the Liquidated  Damage
Period,  he shall promptly  inform the Company of the nature and amounts of cash
income and the type of health  benefits and coverage  which he earns or receives
from providing personal  services,  and shall provide such documentation of such
cash income and such health benefits and coverage as the Company may request. In
the event of changes to such cash  income or such  health  benefits  or coverage
from time to time,  the Employee  shall inform the Company of such  changes,  in
each case  within  five days after the change  occurs,  and shall  provide  such
documentation concerning the change as the Company may request.

         (c) Change in  Control;  Cut Back;  and Tax Gross Up. In the event that
the  Employee  experiences  an  Involuntary  Termination  within  the  6  months
preceding, at the time of, or within 24 months following a Change in Control, in
addition to the Company's obligations under Section 7(a) of this Agreement,  the
Company shall pay to the Employee in cash, within 30 days after the later of the
date of such Change in Control or the Date of  Termination,  an amount  equal to
299% of the  Employee's  "base amount" as  determined  under Section 280G of the
Code, less the  acceleration  and lapse value of options granted to the Employee
by the Company that are taken into account in the  determination  of  "parachute
payments"  under  280G(b)(2)  of the Code by virtue of vesting  acceleration  or
deemed vesting  acceleration in connection  with such Change in Control.  In the
event the Employee is requested in connection with or at the time of a Change in
Control to  continue  employment  for an  interim  period and he shall die while
employed  during such  interim  period,  then his estate,  or such person as the
Employee may have  previously  designated  in writing,  shall be entitled to the
full Change in Control payment described in this paragraph.

                                       6

<PAGE>

         While it is not contemplated that the Employee will receive any amounts
or benefits that will constitute "excess parachute  payments" under Section 280G
of the Code,  in the event  that any  payments  or  benefits  provided  or to be
provided  to the  Employee  pursuant  to this  Agreement,  in  combination  with
payments or benefits, if any, from other plans or arrangements maintained by the
Company or any of the Consolidated  Subsidiaries,  constitute  "excess parachute
payments"  under  Section  280G of the Code that are subject to excise tax under
Section  4999 of the Code,  the  Company  shall pay to the  Employee  in cash an
additional  amount  equal to the amount of the Gross Up Payment (as  hereinafter
defined).  The "Gross Up Payment"  shall be the amount needed to ensure that the
amount of such payments and the value of such benefits  received by the Employee
(net of such excise tax and any  federal,  state and local tax on the  Company's
payment  to him  attributable  to such  excise  tax)  equals  the amount of such
payments and value of such  benefits as he would  receive in the absence of such
excise tax and any federal,  state and local tax on the Company's payment to him
attributable  to such  excise tax.  The  Company  shall pay the Gross Up Payment
within 30 days after the Date of  Termination.  For purposes of determining  the
amount of the Gross Up Payment,  the value of any non-cash benefits and deferred
payments or benefits shall be determined by the Company's  independent  auditors
in accordance with the principles of Section  280G(d)(3) and (4) of the Code. In
the event that, after the Gross Up Payment is made, the amount of the excise tax
is determined to be less than the amount  calculated in the determination of the
actual  Gross Up Payment made by the  Company,  the Employee  shall repay to the
Company,  at the time that such reduction in the amount of excise tax is finally
determined,  the portion of the Gross Up Payment attributable to such reduction,
plus  interest on the amount of such  repayment at the  applicable  federal rate
under Section 1274 of the Code from the date of the Gross Up Payment to the date
of the  repayment.  The amount of the  reduction  of the Gross Up Payment  shall
reflect any subsequent  reduction in excise taxes resulting from such repayment.
In the event that,  after the Gross Up Payment is made, the amount of the excise
tax is  determined  to exceed  the amount  anticipated  at the time the Gross Up
Payment  was  made,  the  Company  shall  pay to the  Employee,  in  immediately
available  funds,  at the time that  such  additional  amount  of excise  tax is
finally determined,  an additional payment ("Additional Gross Up Payment") equal
to such additional  amount of excise tax and any federal,  state and local taxes
thereon,  plus all interest and  penalties,  if any,  owned by the Employee with
respect to such  additional  amount of excise and other tax.  The Company  shall
have the right to challenge, on the Employee's behalf, any excise tax assessment
against  him as to which the  Employee  is  entitled to (or would be entitled if
such  assessment  is  finally  determined  to be  proper) a Gross Up  Payment or
Additional  Gross Up Payment,  provided that all costs and expenses  incurred in
such a challenge  shall be borne by the Company and the Company shall  indemnify
the Employee and hold him harmless,  on an after-tax  basis,  from any excise or
other tax (including  interest and penalties with respect  thereto) imposed as a
result of such payment of costs and expenses by the Company.

         (d) Termination  for Cause. In the event of Termination for Cause,  the
Company shall have no further  obligation to the Employee  under this  Agreement
after the Date of Termination other than deferred amounts under Section 4(d).

                                       7

<PAGE>

         (e) Voluntary  Termination.  The Employee may terminate his  employment
voluntarily at any time by a notice pursuant to Section 8 of this Agreement.  In
the event that the Employee voluntarily  terminates his employment other than by
reason of any of the  actions  that  constitute  Involuntary  Termination  under
Section 1(e)(ii) of this Agreement ("Voluntary Termination"),  the Company shall
be obligated  to the Employee for the amount of his Company  Salary and benefits
only through the Date of Termination, at the time such payments are due, and the
Company shall have no further  obligation to the Employee  under this  Agreement
except as provided in Section 4(d).

         (f) Death.  In the event of the death of the  Employee  while  employed
under this Agreement and prior to any  termination  of  employment,  the Company
shall pay to the  Employee's  estate,  or such person as the  Employee  may have
previously  designated  in  writing,  (i)  the  Company  Salary  which  was  not
previously  paid to the Employee  through the last day of the calendar  month in
which  Employee's  death  occurred  and,  if  applicable,  the Change in Control
payment set forth in the first paragraph of Section 7(c), provided Employee died
within six months prior or 24 months following such change in control;  (ii) the
amounts of any benefits or awards which, pursuant to the terms of any applicable
plan or plans, were earned with respect to the fiscal year in which the Employee
died and which the  Employee  would  have been  entitled  to  receive  if he had
continued to be employed,  and the amount of any bonus or incentive compensation
for such fiscal year which the Employee  would have been  entitled to receive if
he had continued to be employed, pro-rated in accordance with the portion of the
fiscal year prior to his death, provided that such amounts shall be payable when
and as  ordinarily  payable  under the  applicable  plans;  and (iii) the unpaid
deferred amounts under Section 4(d).

         (g)  Permanent  Disability.  For purposes of this  Agreement,  the term
"permanently  disabled"  means  that  the  Employee  has a  mental  or  physical
infirmity which  permanently  impairs his ability to perform  substantially  his
duties  and  responsibilities  under  this  Agreement  and which  results in (i)
eligibility of the Employee under the long-term  disability  plan of the Company
or the Bank, if any; or (ii) inability of the Employee to perform  substantially
his  duties  and  responsibilities  under  this  Agreement  for a period  of 180
consecutive  days.  Either  the  Company or the Bank or both may  terminate  the
employment  of the  Employee  after  having  established  that the  Employee  is
permanently disabled.

         (h) Regulatory  Action.  Notwithstanding  any other  provisions of this
Agreement:

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

                                       8

<PAGE>

            (2) If the Bank is in default (as defined in Section  3(x)(1) of the
FDIA), all obligations of the Company under this Agreement shall terminate as of
the date of default,  but this  provision  shall not affect any vested rights of
the contracting parties; and

            (3) All  obligations  of the Company under this  Agreement  shall be
terminated,  except to the extent determined that continuation of this Agreement
is necessary for the continued operation of the Bank: (i) by the Director of the
Office of Thrift  Supervision  (the  "Director") or his or her designee,  at the
time the Federal  Deposit  Insurance  Corporation  enters into an  agreement  to
provide assistance to or on behalf of the Bank under the authority  contained in
Section 13(c) of the FDIA;  or (ii) by the Director or his or her  designee,  at
the time the Director or his or her designee  approves a  supervisory  merger to
resolve problems related to operation of the Bank or when the Bank is determined
by the  Director  to be in an unsafe or  unsound  condition.  Any  rights of the
parties that have  already  vested,  however,  shall not be affected by any such
action.

     8. Notice of  Termination.  In the event that the  Company or the Bank,  or
both, desire to terminate the employment of the Employee during the term of this
Agreement,  the Company or the Bank,  or both,  shall  deliver to the Employee a
written notice of  termination,  stating  whether such  termination  constitutes
Termination  for Cause or Involuntary  Termination,  setting forth in reasonable
detail the facts and circumstances  that are the basis for the termination,  and
specifying the date upon which employment  shall terminate,  which date shall be
at least 30 days after the date upon which the  notice is  delivered,  except in
the case of Termination for Cause. In the event that the Employee  determines in
good faith that he has experienced an Involuntary Termination of his employment,
he shall send a written  notice to the Company  stating the  circumstances  that
constitute such  Involuntary  Termination and the date upon which his employment
shall have  ceased due to such  Involuntary  Termination.  In the event that the
Employee desires to effect a Voluntary  Termination,  he shall deliver a written
notice to the Company,  stating the date upon which  employment shall terminate,
which  date  shall be at least 30 days  after the date upon  which the notice is
delivered, unless the parties agree to a date sooner.

     9.  Attorneys  Fees.  The  Company  shall  pay all legal  fees and  related
expenses (including the costs of experts,  evidence and counsel) incurred by the
Employee  as a  result  of  (i)  the  Employee's  contesting  or  disputing  any
termination of employment,  or (ii) the Employee's  seeking to obtain or enforce
any  right  or  benefit  provided  by this  Agreement  or by any  other  plan or
arrangement  maintained by the Company (or its  successors) or the  Consolidated
Subsidiaries under which the Employee is or may be entitled to receive benefits;
provided that the Company's  obligation to pay such fees and expenses is subject
to the  Employee's  prevailing  with  respect  to the  matters in dispute in any
action  initiated by the Employee or the  Employee's  having been  determined to
have acted  reasonably and in good faith with respect to any action initiated by
the Company or the Bank.

                                       9

<PAGE>

     10. Non-Disclosure and Non-Solicitation.

         (a) Non-Disclosure. The Employee acknowledges that he has acquired, and
will continue to acquire while employed by the Company  and/or any  Consolidated
Subsidiary,  special knowledge of the business, affairs, strategies and plans of
the Company and the  Consolidated  Subsidiaries  which has not been disclosed to
the  public  and  which  constitutes   confidential  and  proprietary   business
information  owned by the Company and the Consolidated  Subsidiaries,  including
but not limited to, information about the customers,  customer lists,  software,
data, formulae, processes,  inventions, trade secrets, marketing information and
plans, and business strategies of the Company and the Consolidated Subsidiaries,
and other  information  about the products and services  offered or developed or
planned  to be offered  or  developed  by the  Company  and/or the  Consolidated
Subsidiaries ("Confidential Information"). The Employee agrees that, without the
prior  written  consent of the  Company,  he shall  not,  during the term of his
employment  or at any time  thereafter,  in any manner  directly  or  indirectly
disclose  any  Confidential  Information  to any person or entity other than the
Company and the Consolidated Subsidiaries. Notwithstanding the foregoing, if the
Employee  is  requested  or  required  (including  but  not  limited  to by oral
questions,  interrogatories,  requests  for  information  or  documents in legal
proceeding,  subpoena,  civil investigative  demand or other similar process) to
disclose any  Confidential  Information  the Employee  shall provide the Company
with  prompt  written  notice of any such  request  or  requirement  so that the
Company  and/or a Consolidated  Subsidiary may seek a protective  order or other
appropriate  remedy and/or waive  compliance with the provisions of this Section
10(a).  If, in the absence of a protective  order or other remedy or the receipt
of a waiver from the Company,  the Employee is nonetheless  legally compelled to
disclose  Confidential  Information  to any  tribunal  or else stand  liable for
contempt or suffer other censure or penalty, the Employee may, without liability
hereunder,  disclose  to such  tribunal  only that  portion of the  Confidential
Information  which  is  legally  required  to be  disclosed,  provided  that the
Employee  exercise  his best  efforts to  preserve  the  confidentiality  of the
Confidential  Information,  including without limitation by cooperating with the
Company  and/or a Consolidated  Subsidiary to obtain an  appropriate  protective
order or other reliable  assurance that confidential  treatment will be accorded
the Confidential  Information by such tribunal. On the Date of Termination,  the
Employee shall promptly  deliver to the Company all copies of documents or other
records  (including  without  limitation   electronic  records)  containing  any
Confidential  Information  that is in his  possession or under his control,  and
shall retain no written or electronic record of any Confidential Information.

         (b)  Non-Solicitation.  During the three year period next following the
Date of  Termination,  the Employee  shall not directly or  indirectly  solicit,
encourage,   or  induce  any  person  while  employed  by  the  Company  or  any
Consolidated Subsidiary to (i) leave the Company or any Consolidated Subsidiary,
(ii) cease his or her employment with the Company or any Consolidated Subsidiary
or (iii) accept employment with another entity or person.

         The provisions of this Section 10 shall survive any  termination of the
Employee's employment and any termination of this Agreement.

                                       10

<PAGE>

     11. No Assignments.

         (a) This  Agreement  is  personal to each of the  parties  hereto,  and
neither party may assign or delegate any of its rights or obligations  hereunder
without  first  obtaining  the  written  consent of the other  party;  provided,
however,  that the Company shall require any successor or assign (whether direct
or indirect, by purchase,  merger,  consolidation or otherwise) by an assumption
agreement  in form and  substance  satisfactory  to the  Employee,  to expressly
assume and agree to perform  this  Agreement  in the same manner and to the same
extent that the Company would be required to perform it if no such succession or
assignment had taken place.  Failure of the Company to obtain such an assumption
agreement prior to the  effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle the Employee to compensation and
benefits  from the  Company in the same amount and on the same terms as provided
for  an  Involuntary  Termination  under  Section  7  hereof.  For  purposes  of
implementing  the provisions of this Section  11(a),  the date on which any such
succession becomes effective shall be deemed the Date of Termination.

         (b) This Agreement and all rights of the Employee hereunder shall inure
to the  benefit  of and be  enforceable  by the  Employee's  personal  and legal
representatives,  executors,  administrators,  successors,  heirs, distributees,
devisees and legatees.

     12.  Notice.  For the  purposes  of this  Agreement,  notices and all other
communications  provided for in this Agreement  shall be in writing and shall be
deemed to have been duly given when  personally  delivered  or sent by certified
mail,  return receipt  requested,  postage  prepaid,  to the Company at its home
office,  to the attention of the Board of Directors with a copy to the Secretary
of the Company,  or, if to the  Employee,  to such home or other  address as the
Employee has most recently provided in writing to the Company.

     13.  Amendments.  No  amendments  or additions to this  Agreement  shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.

     14.  Headings.  The headings used in this Agreement are included solely for
convenience  and  shall  not  affect,   or  be  used  in  connection  with,  the
interpretation of this Agreement.

     15.  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.

     16.  Governing  Law.  This  Agreement  shall be governed by the laws of the
State of New Jersey.

     17. Arbitration.  Any dispute or controversy arising under or in connection
with this Agreement (other than relating to the enforcement of the provisions of
Section 10) shall be settled  exclusively by arbitration in accordance  with the
rules of the American  Arbitration  Association then in effect.  Judgment may be
entered on the arbitrator's award in any court having jurisdiction.

                                       11

<PAGE>

     18.  Equitable  and  Other  Judicial  Relief.  In the event of an actual or
threatened  breach by the Employee of any of the  provisions  of Section 10, the
Company shall be entitled to equitable  relief in the form of an injunction from
a court of competent  jurisdiction  and such other equitable and legal relief as
such court deems appropriate under the circumstances. The parties agree that the
Company shall not be required to post any bond in  connection  with the grant or
issuance of an injunction  (preliminary,  temporary and/or permanent) by a court
of competent  jurisdiction,  and if a bond is nevertheless required, the parties
agree that it shall be in a nominal  amount.  The parties  further agree that in
the event of a breach by the  Employee of any of the  provisions  of Section 10,
the  Company  will suffer  irreparable  damage and its remedy at law against the
Employee is inadequate to compensate it for such damage.

         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
day and year first above written.

         THIS AGREEMENT  CONTAINS A BINDING  ARBITRATION  PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.

Attest:                         PennFed Financial Services, Inc.

---------------------           ---------------------------
Secretary                       By:   William C. Anderson
                                Its:    Chairman

                                Employee

                                ----------------------------
                                Joseph L. LaMonica

EMPLOYMENT AGREEMENTjoseph l la monica.doc

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