Document:

EXHIBIT 10H

                              EMPLOYMENT AGREEMENT
                              --------------------

     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this 12th day of August, 2003 by and between PennFed Financial Services, Inc.
(the "Company") and Claire M. Chadwick (the "Employee").

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

     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 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.

<PAGE>

          (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 August 12, 2003.

          (e) The term  "Involuntary  Termination"  means the termination of the
employment of Employee (i) by either the Company or the Bank or both without her
express  written  consent;  or (ii) by the  Employee  by  reason  of a  material
diminution of or  interference  with her 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 her
as Executive  Vice  President and Chief  Financial  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 her from any of such offices,
or the failure of the board of  directors  of the Bank (or any  successor of the
Bank) to elect her as Executive  Vice President and Chief  Financial  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  her  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.

          (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  her  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,

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<PAGE>

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 November 28 of each year,
the  term  shall  be  extended  for a  period  of one  year in  addition  to the
then-remaining  term (so that on each  November  28  there  shall be five  years
remaining under this Agreement), 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  un-satisfactory  performance  review by either
the Board of Directors or the board of directors of the Bank.

     3. Employment. The Employee is employed as the Executive Vice President and
        ----------
Chief  Financial  Officer of the Company and as the Executive Vice President and
Chief  Financial  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 her executive  position.
The Employee shall devote her best efforts and reasonable  time and attention to
the business and affairs of the Company and the Bank to the extent  necessary to
discharge  her  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 her responsibilities hereunder.

     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.

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<PAGE>

          (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 her Date of  Termination  unless  her  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.

     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.

                                       4
<PAGE>

     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.

<PAGE>

     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 or 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 her 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
her in effect immediately prior to such Involuntary Termination (the "Employee's
Health Coverage").

          (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 she  becomes  entitled to
liquidated  damages pursuant to Section 7(a),  throughout the Liquidated  Damage
Period,  she shall promptly inform the Company of the nature and amounts of cash
income and the type of health

                                       5
<PAGE>

benefits  and  coverage  which she 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 she shall die while employed
during such interim period,  then her 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.

     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 her
attributable to such excise tax) equals the amount of such payments and value of
such  benefits  as she would  receive in the  absence of such excise tax and any
federal,  state and local tax on the Company's  payment to her  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

                                       6

<PAGE>

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  her 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 her  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).

          (e) Voluntary  Termination.  The Employee may terminate her employment
              ----------------------
voluntarily at any time by a notice pursuant to Section 8 of this Agreement.  In
the event that the Employee voluntarily  terminates her 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 her 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 she 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
she had continued to be employed,  pro-rated in  accordance  with the portion of
the fiscal year prior to her 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 her ability to perform  substantially  her
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
her  duties  and  responsibilities  under  this  Agreement  for a period  of 180
consecutive

                                       7

<PAGE>

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;.

          (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 her 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 her 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  she  has  experienced  an  Involuntary   Termination  of  her
employment,  she  shall  send a  written  notice  to  the  Company  stating  the
circumstances  that  constitute such  Involuntary  Termination and the date upon
which her employment shall have ceased due to such Involuntary  Termination.  In
the event that the Employee desires to effect a Voluntary Termination, she 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
-------------

                                       8
<PAGE>

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.

     10. Non-Disclosure and Non-Solicitation.
         -----------------------------------

          (a) Non-Disclosure.  The Employee  acknowledges that she 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,  she shall not, during
the term of her 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  her 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 her  possession or under her 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.

                                        9
<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.

                                       10
<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

                                                --------------------------------
                                                Claire M. Chadwick

                                       11PENN FEDERAL SAVINGS BANK
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                                       1
<PAGE>

                            PENN FEDERAL SAVINGS BANK
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                             EFFECTIVE MARCH 1, 2003

                                     Purpose
                                     -------

     The purpose of the Plan is to provide supplemental retirement benefits to a
select group of employees who  contribute  materially  to the continued  growth,
development  and future  business  success of Penn Federal  Savings Bank and its
Affiliates.  The Plan shall be unfunded  for tax  purposes  and for  purposes of
Title I of ERISA.

                                    ARTICLE I
                                   Definitions
                                   -----------

     For  purposes  of the Plan,  unless  otherwise  clearly  apparent  from the
context,  the  following  phrases or terms  shall have the  following  indicated
meanings:

          "Affiliates"  shall  mean any entity  that,  directly  or  indirectly,
           ----------
          through one or more intermediaries,  controls, is controlled by, or is
          under common control with the Company.

          "Annual Benefit" shall mean with respect to any Participant, an annual
           --------------
          benefit  equal to the  percentage of the  Participant's  Final Average
          Compensation   set   forth   in  a   Participant's   Plan   Agreement.
          Notwithstanding the foregoing,  where the Plan Agreement expresses the
          Annual  Benefit as a unit  benefit,  then the Annual  Benefit shall be
          equal to the percent of the Participant's  Final Average  Compensation
          set forth in the Participant's  Plan Agreement times the number of the
          Participant's  Years of Credited  Service set forth in a Participant's
          Plan Agreement,  calculated through the last day of the month in which
          the   Participant   experiences  a  Termination   of   Employment.   A
          Participant's  Annual  Benefit  shall not  exceed any  maximum  Annual
          Benefit set forth in his Plan Agreement,  nor be less than any minimum
          Annual Benefit set forth in his Plan Agreement.

          "Beneficiary"  shall  mean  one or  more  persons,  estates  or  other
           -----------
          entities,  designated in accordance  with Article 9, that are entitled
          to receive benefits under the Plan upon the death of a Participant.

          "Beneficiary  Designation  Form" shall mean the form  established from
           ------------------------------
          time to time by the Committee that a Participant completes,  signs and
          returns to the Committee to designate one or more Beneficiaries.

          "Board" shall mean the board of directors of the Company.
           -----

          "Change  in  Control"  shall  have the same  meaning  as set  forth in
           -------------------
          Participant's  employment  contract  as  currently  in effect.  If the
          Participant  does not have an employment  contract,  or the employment
          contract does not include a definition of Change of Control,  then the
          term Change in Control  shall have the same  meaning as under  Section
          280G of the Code and the regulations thereunder.

                                       2
<PAGE>

         "Claimant" shall have the meaning set forth in Section 13.1.
          --------

          "Code" shall mean the Internal Revenue Code 1986, as it may be amended
           ----
          from time to time.

          "Committee" shall mean the committee described in Article12.
           ---------

          "Company" shall mean Penn Federal Savings Bank.
           -------

          "Compensation"  shall mean the annual  cash  compensation  relating to
           ------------
          services performed by a Participant for the Company and its Affiliates
          during any calendar year, whether or not paid in such calendar year or
          included on the Federal  Income Tax Form W-2 for such  calendar  year,
          excluding  bonuses  of any  type or  nature,  fringe  benefits,  stock
          options,   other  stock  based  compensation,   relocation   expenses,
          non-monetary  awards,  and automobile and other  allowances  paid to a
          Participant  for  employment  services  rendered  (whether or not such
          allowances   are  included  in  the   Participant's   gross   income).
          Compensation  shall be calculated  before  reduction for  compensation
          voluntarily deferred or contributed by the Participant pursuant to all
          qualified or non-qualified plans of the Company and its Affiliates and
          shall be calculated to include  amounts not otherwise  included in the
          Participant's gross income;  provided,  however, that all such amounts
          will be included in  compensation  only to the extent that,  had there
          been no such plan,  the amount  would have been payable in cash to the
          Participant.

          "Early  Retirement Date" shall mean the later of (i) the date that the
           ----------------------
          Participant  elects in his Plan Agreement to have his Monthly  Benefit
          commence  under  this Plan,  which date is prior to the  Participant's
          Normal  Retirement  Date and no earlier than the date the  Participant
          will attain age 55, and (ii) the date of the Participant's Termination
          of Employment.

          "Early  Retirement  Monthly Benefit" shall mean a monthly amount equal
           ----------------------------------
          to the  Participant's  Monthly Benefit at his Normal  Retirement Date,
          reduced by .16666%  (or the  appropriate  fraction  thereof)  for each
          month or portion thereof by which the  Participant's  Early Retirement
          Date precedes his Normal Retirement Date (2 percent annually).  By way
          of illustration,  if a Participant  elects to receive his Plan benefit
          at age 55 rather  than age 65, and his  Monthly  Benefit at his Normal
          Retirement Date is 5.83 percent of Compensation (70 percent annually),
          then his Early  Retirement  Monthly  Benefit will be 4.1666 percent of
          Compensation (50 percent annually) ((70% - (2% times 10)/12).

          "Employee" shall mean a person who is classified as an employee of the
           --------
          Company or its Affiliates.

                                       3

<PAGE>

          "Equivalent Actuarial Value" shall mean, unless otherwise specified in
           --------------------------
          the Plan Agreement,  a benefit of equivalent  value to another form of
          benefit, computed on the basis of an interest rate factor of 7 percent
          per annum.  Notwithstanding  the foregoing,  the Equivalent  Actuarial
          Value of any payment  made on account of a Change in Control  shall be
          determined  by  using  the  discount  rate  under  Proposed   Treasury
          Regulation  Section  1.280G-1,  Q&A 32,  or the  successor  regulation
          thereto on the date of the payment (i.e.,  as of the effective date of
          the Plan,  120 percent of the  applicable  Federal rate as  determined
          under  Section  1274(d)  and the  regulations  thereunder,  compounded
          semiannually). For purposes of Section 3.2 (regarding death benefits),
          Equivalent  Actuarial  Value shall be determined  using the applicable
          long-term  Federal  rate under  Section  1274(d)  and the  regulations
          thereunder,  compounded semiannually,  as in effect on the date of the
          Participant's death.

          "ERISA"  shall mean the  Employee  Retirement  Income  Security Act of
           -----
          1974, as it may be amended from time to time.

          "Final  Average  Compensation"  shall  mean the amount  determined  by
           -----
          dividing by two the Participant's  aggregate  Compensation  during the
          two Plan  Years  (whether  or not  consecutive)  in the five Plan Year
          period  immediately  prior to his  Termination  of  Employment  (or if
          Termination  of  Employment  occurs  during the month of December then
          including the Plan Year in which  Termination  of  Employment  occurs)
          that results in the largest total.

         "Holding Company shall mean PennFed Financial Services, Inc.
         ----------------

          "Monthly  Benefit" shall mean one twelfth (1/12) of the  Participant's
           ----------------
          Annual Benefit.

          "Normal  Retirement  Date" shall mean the later of (i) the date of the
           ------------------------
          Participant's  Termination  of  Employment  or (ii) the  Participant's
          attainment of age sixty-five (65).

          "Participant"   shall  mean  any  Employee  (i)  who  is  selected  to
           -----------
          participate in the Plan,  (ii) who signs a Plan  Agreement,  and (iii)
          whose signed Plan Agreement is accepted by the Committee.  A spouse or
          former spouse of a  Participant  shall not be treated as a Participant
          in the Plan or have an Annual  Benefit  under the Plan,  even if he or
          she has an interest in the Participant's  benefits under the Plan as a
          result of applicable law or property settlements  resulting from legal
          separation or divorce.

          "Payout Period" shall mean the number of consecutive  months set forth
           -------------
          as the Payout Period in a Participant's Plan Agreement,  commencing on
          the first day of the calendar month next  following the  Participant's
          Normal  Retirement  Date,  except as  otherwise  provided  in  Section
          3.2(a).  Notwithstanding  the  foregoing,  the Payout  Period for Plan
          benefits  commencing on an Early  Retirement Date shall be extended by
          one  month  for  each  full  month by which  the  Participant's  Early
          Retirement Date precedes his Normal Retirement Date. To illustrate, if
          a  Participant  with a  Payout  Period  of 180  months  on his  Normal
          Retirement  Date elects an Early  Retirement  Date of age 62, then the
          Payout Period will be 216 months (180, plus 1 times 36 months).

                                       4

<PAGE>

          "Plan" shall mean this Supplemental  Executive  Retirement Plan, which
           ----
          shall be evidenced by this instrument and by each Plan  Agreement,  as
          they may be amended from time to time.

          "Plan  Agreement"  shall mean a written  agreement,  as may be amended
           ---------------
          from time to time,  which is entered  into by and  between the Company
          and a Participant.  Should there be more than one Plan Agreement,  the
          Plan  Agreement  bearing the latest date of  acceptance by the Company
          shall  supersede  all previous Plan  Agreements in their  entirety and
          shall govern such entitlement.  The terms of any Plan Agreement may be
          different for any  Participant,  and any Plan  Agreement may limit the
          benefits otherwise provided under the Plan.

          "Plan  Year"  shall have the same  meaning  as the fiscal  year of the
           ----------
          Company.

          "Termination  for  Cause" or  "Terminated  for  Cause"  shall mean the
           -----------------------       ----------------------
          involuntary  termination  of  service of a  Participant  on account of
          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  final  cease-and-desist  order.  No act or  failure  to act by the
          Participant  shall be considered  willful unless the Participant 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 Participant  shall not be deemed to have
          been  Terminated  for Cause  unless  and until  there  shall have been
          delivered to the  Participant 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
          Participant and an opportunity for the Participant,  together with the
          Participant's  counsel, to be heard before the Board), stating that in
          the good faith opinion of the Board of Directors the  Participant  has
          engaged in conduct described in the preceding  sentence and specifying
          the particulars thereof in detail.

          "Termination of Employment" shall mean the severing of employment with
           -------------------------
          the Company and its Affiliates.

          "Trust" shall mean any trust  established  between the Company and the
           -----
          trustee named therein to provide benefits  hereunder,  as amended from
          time to time.

          "Years of Credited  Service" shall mean the total number of Plan Years
           --------------------------
          (or fraction thereof  determined on a months basis) taken into account
          under a Participant's  Plan Agreement for purposes of calculating such
          Participant's Annual Benefit.

                                       5

<PAGE>

                                    ARTICLE 2
                       Selection, Enrollment, Eligibility
                       ----------------------------------

2.1  Selection  by  Committee.  Participation  in the Plan shall be limited to a
     ------------------------
     select group of management and highly compensated Employees,  as determined
     by the Committee in its sole discretion from time to time. From that group,
     the  Committee  shall  select,   in  its  sole  discretion,   Employees  to
     participate in the Plan.

2.2  Enrollment  Requirements.  As a condition to  participation,  each selected
     ------------------------
     Employee  shall  complete,  execute  and  return  to the  Committee  a Plan
     Agreement.  In addition,  the Committee  shall  establish from time to time
     such other enrollment  requirements as it determines in its sole discretion
     are necessary or appropriate.

2.3  Eligibility;  Commencement of Participation.  Provided an Employee selected
     -----------   -----------------------------
     to participate in the Plan has met all enrollment requirements set forth in
     the Plan and required by the  Committee,  including  returning all required
     documents to the Committee,  that Employee shall commence  participation in
     the Plan on the date his Plan Agreement is executed by the Company.

2.4  Termination  of  Participation.  If the Committee  determines in good faith
     ------------------------------
     that a  Participant  no longer  qualifies  as a member of a select group of
     management or highly compensated employees,  as membership in such group is
     determined in accordance with Sections  201(2),  301(a)(3) and 401(a)(1) of
     ERISA, the Committee shall have the right, in its sole  discretion,  to (i)
     cease further benefit accruals hereunder and/or (ii) immediately distribute
     in a single lump sum the Equivalent Actuarial Value of the Monthly Benefits
     for the Payout  Period,  determined  as if the  Participant  experienced  a
     Termination of Employment,  and terminate the  Participant's  participation
     herein.

                                    ARTICLE 3
                                    Benefits
                                    --------

3.1  Retirement  Benefits.  Upon a  Participant's  Normal  Retirement  Date, the
     --------------------
     Company shall pay the Monthly Benefit to him during the Payout Period. Upon
     a  Participant's  Early  Retirement  Date,  the Company shall pay the Early
     Retirement Monthly Benefit to him during the Payout Period.

3.2  Death Benefits.
     --------------

          (a) If the Participant dies before having commenced receiving benefits
     under  Section 3.1,  then his  Beneficiary  shall receive no later than 120
     days after the  Committee  is notified of and  confirms  the  Participant's
     death, a lump sum cash payment equal to the Equivalent  Actuarial  Value of
     the  Participant's  Monthly  Benefit.  If the Participant dies after he has
     commenced receiving benefits under Section 3.1, then the remaining payments
     to  the  Participant  shall  continue  to  be  made  to  the  Participant's
     Beneficiary  commencing  on the  first  day  of  the  month  in  which  the
     Participant's death occurs.

                                       6

<PAGE>

          (b) In addition to the death benefit  provided in Section 3.2(a),  but
     subject  to,  and  limited  by,  all of the  provisions  of  this  Plan,  a
     Participant's Beneficiary shall, upon the death of the Participant, receive
     a lump sum death benefit  equal to $600,000.  This benefit shall be paid to
     the Participant's  Beneficiary as soon as practicable following the date of
     the Participant's death.

3.3  Acceleration of Benefits;  Lump Sum Payments.  The Committee may accelerate
     --------------------------------------------
     the payment of a  Participant's  Monthly  Benefits at such time and in such
     manner  as the  Committee  may  determine,  in which  case the  accelerated
     benefit  shall be equal to the  Equivalent  Actuarial  Value of such unpaid
     Monthly Benefits.

3.4  Tax  Withholding  from  Distributions.  The Company,  an Affiliate,  or the
     -------------------------------------
     trustee of the Trust,  if any,  shall  withhold from any payments made to a
     Participant all federal, state and local income, employment and other taxes
     required to be withheld by the Company, an Affiliate, or the trustee of the
     Trust, in connection  with such payments,  in amounts and in a manner to be
     determined in the sole  discretion of the Company and, if  applicable,  the
     trustee of the Trust.

                                    ARTICLE 4
                    In-Service Withdrawals and Distributions
                    ----------------------------------------

    No in-service withdrawals or distributions are permitted under the Plan.

                                    ARTICLE 5
                                     Vesting
                                     -------

     Unless the Participant's Plan Agreement provides otherwise, the Participant
shall be fully vested in his Monthly Benefit after the completion of 10 Years of
Service. For this purpose, Years of Service credited prior to the effective date
of this Plan shall be taken into account.

                                    ARTICLE 6
                            Participant Contributions
                            -------------------------

Participant contributions are neither permitted nor required under the Plan.

                                    ARTICLE 7
                                     Funding
                                     -------

7.1  Funding Generally.  The Company's and its Affiliate's obligations under the
     -----------------
     Plan shall be an unfunded and unsecured promise to pay. The Company and its
     Affiliates  shall  not be  obligated  under  any  circumstances  to fund in
     advance its obligations under the Plan, and when the benefit amount is paid
     it shall be  expensed  out of the  general  assets of the  Company  and its
     Affiliates.

                                       7
<PAGE>

7.2  Option to Fund Informally. Notwithstanding Section 7.1, the Company and its
     -------------------------
     Affiliates  may, at its sole option,  or by agreement,  informally fund its
     obligations under the Plan in whole or in part, provided,  however, that in
     no event shall such informal funding be construed to create any trust fund,
     escrow  account or other security for any  Participant  with respect to the
     payment of any benefit under the Plan,  other than as permitted by Internal
     Revenue  Service and Department of Labor rules and regulations for unfunded
     supplemental retirement plans.

                                    ARTICLE 8
                              Regulatory Provisions
                              ---------------------

     The obligations of the Company to a Participant  under the Plan are subject
to the following restrictions:

8.1  Termination  for  Cause.  If a  Participant's  service  as an  Employee  is
     -----------------------
     Terminated  for Cause,  no benefits shall be paid to him under the Plan. If
     the  Participant  has  commenced  receiving  his Monthly  Benefit and it is
     subsequently  determined that he was Terminated for Cause, then his Monthly
     Benefit shall  immediately  cease and the Participant shall be obligated to
     return to the Company or the Holding Company,  whichever is applicable, the
     cumulative amount of the Monthly Benefit previously paid under the Plan.

8.2  Temporary  Suspension or Prohibition.  If a Participant is suspended and/or
     ------------------------------------
     temporarily  prohibited from  participating in the conduct of the Company's
     affairs by a notice served under  Section  8(e)(3) or (g)(1) of the Federal
     Deposit Insurance Act ("FDIA"),  12 U.S.C.  ss.1818(e)(3)  and (g)(1),  the
     Company's obligations to such Participant under the Plan shall be suspended
     as of the date of  service of such  notice,  unless  stayed by  appropriate
     proceedings. If the charges in the notice are dismissed, the Company may in
     its discretion  reinstate in whole or in part any of its obligations  which
     were suspended.

8.3  Permanent  Suspension or  Prohibition.  If a Participant  is removed and/or
     -------------------------------------
     permanently  prohibited from  participating in the conduct of the Company's
     affairs by an order issued under Section  8(e)(4) or (g)(1) of the FDIA, 12
     U.S.C.  ss.1818(e)(4)  and (g)(1),  all  obligations of the Company to such
     Participant  under the Plan shall terminate as of the effective date of the
     order, but vested rights of the contracting parties shall not be affected.

8.4  Default. If the Company is in default (as defined in Section 3(x)(1) of the
     -------
     FDIA),  all  obligations of the Company to Participants  and  Beneficiaries
     under  the  Plan  shall  terminate  as of the  date of  default,  but  this
     provision shall not affect any vested rights of the contracting parties.

8.5  Termination by Regulators.  All  obligations of the Company to Participants
     -------------------------
     and Beneficiaries under the Plan shall be terminated,  except to the extent
     determined  that  continuation  of the Plan is necessary  for the continued
     operation  of the  Company:  (i) by the  Director  of the  Office of Thrift
     Supervision  (the "OTS Director") or his designee,  at the time the Federal
     Deposit  Insurance   Corporation   enters  into  an  agreement  to  provide
     assistance to or on behalf of the Company under the authority  contained in
     Section 13(c) of the FDIA; or (ii) by the OTS Director or his designee,  at
     the time the OTS Director or his designee approves a supervisory  merger to
     resolve problems related to operation of the Company or when the Company is
     determined by the OTS 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
<PAGE>

8.6  Other Regulatory Restrictions on Payment.  Notwithstanding  anything herein
     ----------------------------------------
     to the contrary,  (1) any payments made by the Company under the Plan shall
     be subject to and conditioned upon compliance with 12 U.S.C. ss.1828(k) and
     any regulations  promulgated thereunder and (2) payments contemplated to be
     made by the Company under the Plan shall not be immediately  payable to the
     extent such  payments are barred or prohibited by an action or order issued
     by the Federal Deposit Insurance Corporation.

                                    ARTICLE 9
                             Beneficiary Designation
                             -----------------------

9.1  Beneficiary.  Each  Participant  shall  have the  right,  at any  time,  to
     -----------
     designate  his  Beneficiary(ies)  (both primary as well as  contingent)  to
     receive  any  benefits  payable  under  the  Plan  upon  the  death  of the
     Participant.  The Beneficiary  designated under the Plan may be the same as
     or different from the  Beneficiary  designated  under any other plan of the
     Company or its Affiliates in which the Participant participates.

9.2  Beneficiary  Designation:  Change;  Spousal  Consent.  A Participant  shall
     ------------------------   --------------------------
     designate  his  Beneficiary  by  completing  and  signing  the  Beneficiary
     Designation  Form and returning it to the  Committee.  A Participant  shall
     have the right to change a Beneficiary by completing, signing and otherwise
     complying  with  the  terms  of the  Beneficiary  Designation  Form and the
     Committee's  rules and  procedures,  as in effect from time to time. If the
     Participant names someone other than his spouse as a Beneficiary, a spousal
     consent,  in the form  designated by the Committee,  must be signed by that
     Participant's spouse and returned to the Committee.  Upon the acceptance by
     the  Committee  of a new  Beneficiary  Designation  Form,  all  Beneficiary
     designations  previously  filed shall be canceled.  The Committee  shall be
     entitled  to rely on the last  Beneficiary  Designation  Form  filed by the
     Participant and accepted by the Committee prior to his death.

9.3  Acknowledgment.  No  designation  or change in designation of a Beneficiary
     --------------
     shall be  effective  until  received  and  acknowledged  in  writing by the
     Committee.

9.4  No  Beneficiary  Designation.   If  a  Participant  fails  to  designate  a
     ----------------------------
     Beneficiary  as  provided  in  Sections  9.1,  9.2 and 9.3 above or, if all
     designated  Beneficiaries predecease a Participant or die prior to complete
     distribution of the Participant's benefits, then a Participant's designated
     Beneficiary  shall be deemed to be his surviving  spouse.  If a Participant
     has no surviving spouse,  the benefits  remaining

                                       9
<PAGE>

     under  the  Plan  to be paid  to a  Beneficiary  shall  be  payable  to the
     Participant's estate.

9.5  Doubt as to  Beneficiary.  If the  Committee has any doubt as to the proper
     ------------------------
     Beneficiary to receive  payments  pursuant to the Plan, the Committee shall
     have the right, exercisable in its discretion, to cause the Company and its
     Affiliates to withhold  such payments  until this matter is resolved to the
     Committee's satisfaction.

9.6  Discharge  of  Obligations.  The  payment of  benefits  under the Plan to a
     --------------------------
     Beneficiary  shall  fully and  completely  discharge  the  Company  and its
     Affiliates  and the Committee from all further  obligations  under the Plan
     with respect to the Participant.

                                   ARTICLE 10
                                Leave of Absence
                                ----------------

     If a Participant  is authorized  by the Company or its  Affiliates  for any
reason  to take a leave of  absence  from  employment  with the  Company  or its
Affiliates,  such  Participant  shall continue to be considered  employed by the
Company  during such leave of absence (and  therefore not to have  experienced a
Termination  of  Employment)  and service  during the leave of absence  shall be
credited  for  purposes  of  determining  the  Participant's  Years of  Credited
Service.

                                   ARTICLE 11
                     Termination, Amendment or Modification
                     --------------------------------------

11.1 Termination.  Although the Company  anticipates  that it will continue as a
     -----------
     sponsor of the Plan for an indefinite period of time, there is no guarantee
     that it will  continue as a sponsor of the Plan or will not  terminate  its
     sponsorship of the Plan at any time in the future. Accordingly, the Company
     reserves the right to  terminate  its  sponsorship  of the Plan at any time
     with  respect  to any or all of its  Participants,  by action of the Board.
     Upon termination of sponsorship of the Plan by the Company,  the Annual and
     Monthly Benefit of each affected  Participant  shall be determined as if he
     had experienced a Termination of Employment on the date Plan sponsorship is
     terminated.  Monthly  Benefits  shall be paid to affected  Participants  as
     follows: Prior to a Change in Control, the Company shall have the right, in
     its sole discretion, to pay or require its Affiliates to pay the Equivalent
     Actuarial  Value of the Monthly  Benefits  for the Payout  Period in a lump
     sum; otherwise payments shall be made as provided for in Article 3. After a
     Change in Control,  the Company and its Affiliates shall be required to pay
     the  Equivalent  Actuarial  Value of the  Monthly  Benefits  for the Payout
     Period in a lump  sum;  provided,  however,  that if a  Participant's  Plan
     Agreement  provides  for the  payment  of Plan  benefits  after a Change in
     Control,  then the timing and amount of the Participant's  Monthly Benefits
     shall  be  made  as  provided  for in  the  Participant's  Plan  Agreement.
     Notwithstanding  the preceding  sentence,  payments due to a Participant in
     connection  with a Change in Control  may, at the  written  election of the
     Participant,  be distributed to the Participant in a cash lump sum equal to
     the Equivalent Actuarial Value of the Participant's  Monthly Benefit. If an
     Affiliate  terminates its sponsorship of the Plan, the Plan shall terminate

                                       10

<PAGE>

     with respect to Participants employed by that Affiliate. The termination of
     sponsorship of the Plan or the  termination of the Plan shall not adversely
     affect  any  Participant  who has  become  entitled  to the  payment of any
     benefits under the Plan as of the date of termination;  provided,  however,
     that the  Company  shall have the right to  accelerate  payments  without a
     premium or prepayment  penalty by paying the Equivalent  Actuarial Value of
     the remaining benefits in a lump sum.

11.2 Amendment.  The Company may, at any time, amend or modify the Plan in whole
     ---------
     or in part by action of the Board; provided,  however, that no amendment or
     modification  shall be  effective  to decrease  or restrict  the value of a
     Participant's  Annual  Benefit  determined  at the  time the  amendment  or
     modification  is made,  calculated as if the  Participant had experienced a
     Termination  of  Employment  as of the  effective  date of the amendment or
     modification.  The amendment or  modification  of the Plan shall not affect
     any  Participant  who has become  entitled to the payment of benefits under
     the  Plan  as of the  date  of the  amendment  or  modification;  provided,
     however,  that  the  Company  or an  Affiliate  shall  have  the  right  to
     accelerate  payments without a premium or prepayment  penalty by paying the
     Equivalent Actuarial Value of the unpaid Monthly Benefits in a lump sum.

11.3 Effect of Payment.  The full payment of the  applicable  benefit  under the
     -----------------
     Plan shall  completely  discharge all  obligations to a Participant and his
     designated Beneficiaries under the Plan.

                                   ARTICLE 12
                                 Administration
                                 --------------

12.1 Committee Duties. The Plan shall be administered by a Committee which shall
     ----------------
     consist of the Board, or such committee as the Board shall appoint. Members
     of the Committee may be  Participants  under the Plan. The Committee  shall
     also have the discretion and authority to (i) make, amend,  interpret,  and
     enforce all appropriate rules and regulations for the administration of the
     Plan  and  (ii)  decide  or  resolve  any  and  all   questions   including
     interpretations  of the Plan, as may arise in connection with the Plan. Any
     individual on the  Committee who is a Participant  shall not vote or act on
     any matter  relating  solely to  himself.  When making a  determination  or
     calculation,  the  Committee  shall  be  entitled  to rely  on  information
     furnished by a Participant or the Company.

12.2 Agents. In the  administration of the Plan, the Committee may, from time to
     ------
     time, employ agents and delegate to them such  administrative  duties as it
     sees fit (including acting through a duly appointed representative) and may
     from time to time  consult  with  counsel who may be counsel to the Company
     and its Affiliates.

12.3 Binding  Effect of Decisions.  The decision or action of the Committee with
     ----------------------------
     respect  to  any  question  arising  out  of  or  in  connection  with  the
     administration,  interpretation  and  application of the Plan and the rules
     and  regulations  promulgated  hereunder  shall be final and conclusive and
     binding upon all persons having any interest in the Plan.

<PAGE>

12.4 Indemnity of Committee.  The Company shall  indemnify and hold harmless the
     ----------------------
     members  of the  Committee,  and any  person  to  whom  the  duties  of the
     Committee may be delegated,  against any and all claims,  losses,  damages,
     expenses  or  liabilities  arising  from any  action or failure to act with
     respect  to the  Plan,  except  in the  case  of  gross  misconduct  by the
     Committee or any of its members or any such delegate.

12.5 Information.  To enable the Committee to perform its functions, the Company
     -----------
     and  its  Affiliates  shall  supply  full  and  timely  information  to the
     Committee as the Committee may reasonably request.

                                   ARTICLE 13
                          Other Benefits and Agreements
                          -----------------------------

     The benefits  provided for a Participant  under the Plan are in addition to
any other benefits available to such Participant under any other plan or program
sponsored by the Company or its Affiliates.  The Plan shall supplement and shall
not  supersede,  modify or amend any other  such plan or  program  except as may
otherwise be expressly provided therein.

                                   ARTICLE 14
                                Claims Procedures
                                -----------------

14.1 Presentation of Claim. Any Participant  (such Participant being referred to
     ---------------------
     below as a  "Claimant")  may deliver to the Committee a written claim for a
     determination  with respect to the amounts  distributable  to such Claimant
     from the Plan. If such a claim relates to the contents of a notice received
     by the  Claimant,  the claim must be made  within 60 days after such notice
     was received by the Claimant. All other claims must be made within 180 days
     of the date on which the event that caused the claim to arise occurred. The
     claim  must  state  with  particularity  the  determination  desired by the
     Claimant.

14.2 Notification of Decision.  The Committee shall consider a Claimant's  claim
     ------------------------
     within a reasonable time, and shall notify the Claimant in writing:

     (a)  that the Claimant's  requested  determination  has been made, and that
          the claim has been allowed in full; or

     (b)  that the Committee has reached a conclusion  contrary,  in whole or in
          part, to the Claimant's requested determination,  and such notice must
          set forth in a manner calculated to be understood by the Claimant:

          (i) the specific reason(s) for the denial of the claim, or any part of
          it;

          (ii) specific  reference(s)  to pertinent  provisions of the Plan upon
          which such denial was based;

                                       12

<PAGE>

          (iii)  a  description  of  any  additional   material  or  information
          necessary for the Claimant to perfect the claim, and an explanation of
          why such material or information is necessary; and

          (iv) an explanation of the claim review procedure set forth in Section
          13.3 below.

14.3 Review of a Denied  Claim.  With 60 days after  receiving a notice from the
     -------------------------
     Committee that a claim has been denied, in whole or in part, a Claimant (or
     the Claimant's duly authorized  representative) may file with the Committee
     a written request for a review of the denial of the claim. Thereafter,  but
     not later than 30 days after the review  procedure  began, the Claimant (or
     the Claimant's duly authorized representative):

     (a) may review pertinent documents;

     (b) may submit written comments or other documents; and/or

     (c) may request a hearing, which the Committee, in its sole discretion, may
     grant.

14.4 Decision  on Review.  The  Committee  shall  render its  decision on review
     -------------------
     promptly,  and not later than 60 days after the filing of a written request
     for  review  of the  denial,  unless a  hearing  is held or  other  special
     circumstances  require  additional  time,  in which  case  the  Committee's
     decision  must be rendered  within 120 days after such date.  Such decision
     must be written in a manner  calculated  to be  understood by the Claimant,
     and it must contain:

     (a)  specific reasons for the decision;

     (b)  specific  reference(s) to the pertinent Plan provisions upon which the
          decision was based; and

     (c)  such other matters as the Committee deems relevant.

14.5 Legal Action. A Claimant's compliance with the foregoing provisions of this
     ------------
     Article 14 is a mandatory  prerequisite  to a Claimant's  right to commence
     any legal action with respect to any claim for benefits under the Plan.

                                   ARTICLE 15
                                      Trust
                                      -----

15.1 Establishment of the Trust. The Company or its Affiliates may establish the
     --------------------------
     Trust upon such terms as it deems appropriate.

                                       13

<PAGE>

15.2 Interrelationship  of the Plan and the Trust.  The  provisions of the Plan,
     ---------------------------------------------
     including a Participant's  Plan Agreement,  shall govern the rights of such
     Participant to receive  distributions  pursuant to the Plan. The provisions
     of the Trust  shall  govern  the  rights of the  Company,  its  Affiliates,
     Participants  and the  creditors of the Company and its  Affiliates  to the
     assets  transferred to the Trust.  The Company and its Affiliates  shall at
     all times remain liable to carry out its obligations under the Plan.

15.3 Investment of Trust Assets.  The trustee of the Trust shall be  authorized,
     --------------------------
     upon written instructions received from the Committee or investment manager
     appointed by the Committee,  to invest and reinvest the assets of the Trust
     in accordance with the applicable trust agreement.

15.4 Distributions  From the Trust. The Company and its Affiliates'  obligations
     -----------------------------
     under the Plan may be satisfied with Trust assets  distributed  pursuant to
     the terms of the Trust and any such distribution shall reduce the Company's
     and its Affiliates' obligations under the Plan.

                                   ARTICLE 16
                                  Miscellaneous
                                  -------------

16.1 Status of Plan.  The Plan is  intended  to be a plan that is not  qualified
     --------------
     within the  meaning of Code  Section  401(a) and that "is  unfunded  and is
     maintained by an employer  primarily for the purpose of providing  deferred
     compensation  for a  select  group  of  management  or  highly  compensated
     employees"  within the  meaning of ERISA  Sections  201(2),  301(a)(3)  and
     401(a)(1).  The Plan shall be  administered  and  interpreted to the extent
     possible in a manner consistent with that intent.

16.2 Unsecured General Creditor.  Participants and their  beneficiaries,  heirs,
     --------------------------
     successors and assigns shall have no legal or equitable  rights,  interests
     or claims in any property or assets of the Company or its  Affiliates.  For
     purposes of the payment of benefits  under the Plan,  any and all assets of
     the Company or its Affiliates  shall be, and remain the general,  unpledged
     and unrestricted  assets of such entity.  The Company's and its Affiliates'
     obligation  under the Plan  shall be merely of an  unfunded  and  unsecured
     promise to pay money in the future.

16.3 Liability.  The Company's or its  Affiliates'  liability for the payment of
     ---------
     benefits shall be defined only by the Plan including a  Participant's  Plan
     Agreement.  The Company or its  Affiliates  shall have no  obligation  to a
     Participant  under  the  Plan  except  as  expressly  provided  in the Plan
     including such Participant's Plan Agreement.

16.4 Nonassignability. Neither a Participant nor any other person shall have any
     ----------------
     right to commute, sell, assign, transfer, pledge,  anticipate,  mortgage or
     otherwise encumber, transfer, hypothecate, alienate or convey in advance of
     actual  receipt,  the  amounts,  if any,  payable  hereunder,  or any  part
     thereof,  which are, and all rights to which are expressly  declared to be,
     unassignable  and  non-transferable.  No part of the amounts payable shall,
     prior to actual payment, be subject to seizure,

                                       14
<PAGE>

     attachment,  garnishment  or  sequestration  for the  payment of any debts,
     judgments,  alimony or separate maintenance allowed by a Participant or any
     other  person,  be  transferable  by  operation  of law in the  event  of a
     Participant's  or  any  other  person's  bankruptcy  or  insolvency  or  be
     transferable to a spouse as a result of a property settlement or otherwise.

16.5 Not a  Contract  of  Employment.  The  terms  and  conditions  of the Plan,
     -------------------------------
     including a Participant's Plan Agreement, shall not be deemed to constitute
     a contract  of  employment  between  the  Company or its  Affiliates  and a
     Participant.  Nothing in the Plan shall be deemed to give a Participant the
     right to be retained in the service of the Company or its  Affiliates or to
     interfere  with the right of the Company or its Affiliates to discipline or
     discharge such Participant at any time.

16.6 Furnishing Information.  A Participant will cooperate with the Committee by
     ----------------------
     furnishing any and all information requested by the Committee and take such
     other actions as may be requested in order to facilitate the administration
     of the Plan and the  payments  of  benefits  hereunder,  including  but not
     limited to,  taking such  physical  examinations  as the Committee may deem
     necessary.

16.7 Terms.  Whenever any words are used herein in the masculine,  they shall be
     -----
     construed as though they were in the feminine in all cases where they would
     so apply;  and whenever any words are used herein in the singular or in the
     plural,  they shall be  construed as though they were used in the plural or
     the singular, as the case may be, in all cases where they would so apply.

16.8 Captions. The captions of the articles, sections and paragraphs of the Plan
     --------
     are for  convenience  only and shall not  control or affect the  meaning or
     construction of any of its provisions.

16.9 Governing  Law.  Subject  to ERISA,  the  provisions  of the Plan  shall be
     --------------
     construed  and  interpreted  according to the internal laws of the State of
     New Jersey without regard to its conflicts of laws and principles.

16.10Notice.  Any  notice or filing  required  or  permitted  to be given to the
     ------
     Committee   under  the  Plan  shall  be   sufficient   if  in  writing  and
     hand-delivered,  or sent by  registered  or certified  mail, to the address
     below.

              Board of Directors
              Penn Federal Savings Bank
              622 Eagle Rock Avenue
              West Orange, New Jersey   07052-2989

     Such  notice  shall  be  deemed  given as of the date of  delivery  or,  if
     delivery  is made by mail,  as of the date  shown  on the  postmark  on the
     receipt for registration or certification. Any notice or filing required or
     permitted to be given to a  Participant  under the Plan shall be sufficient
     if in  writing  and  hand-delivered,  or sent by mail,  to the  last  known
     address of such Participant.

                                       15
<PAGE>

16.11Successors.  The provisions of the Plan shall bind and inure to the benefit
     ----------
     of the Company or its Affiliates,  and their successors and assigns and the
     Participant and the Participant's designated Beneficiaries.

16.12Spouse's Interest.  The interest in the benefits hereunder of a spouse of a
     -----------------
     Participant who has predeceased the Participant shall automatically pass to
     the  Participant and shall not be transferable by such spouse in any manner
     including,  but not limited to, such spouse's will, nor shall such interest
     pass under the laws of intestate succession.

16.13Validity.  In case any  provision  of the Plan  shall be illegal or invalid
     --------
     for any  reason,  said  illegality  or  invalidity  shall  not  affect  the
     remaining  parts hereof,  but the Plan shall be constructed and enforced as
     if such illegal or invalid provision had never been inserted herein.

16.14Incompetent.  If the Committee  determines in its discretion that a benefit
     -----------
     under the Plan is to be paid to a minor, a person  declared  incompetent or
     to a  person  incapable  of  handling  the  disposition  of  that  person's
     property, the Committee may direct payment of such benefit to the guardian,
     legal  representative  or person having the care and custody of such minor,
     incompetent  or  incapable  person.  The  Committee  may  require  proof of
     minority,  incompetence,   incapacity  or  guardianship,  as  it  may  deem
     appropriate prior to distribution of the benefit.  Any payment of a benefit
     shall be a  payment  for the  account  of the  Participant,  and shall be a
     complete discharge of any liability under the Plan for such payment amount

16.15Court Order.  The Committee is authorized to make any payments  directed by
     -----------
     court order in any action in which the Plan or the Committee has been named
     as a party.  In  addition,  if a court  determines  that a spouse or former
     spouse of a Participant has an interest in the Participant's benefits under
     the  Plan in  connection  with a  property  settlement  or  otherwise,  the
     Committee, in its sole discretion shall have the right, notwithstanding any
     election made by the Participant, to immediately distribute the spouse's or
     former spouse's  interest in the  Participant's  benefits under the Plan to
     that spouse or former spouse.

16.16Distribution  in the Event of  Taxation.  If,  for any  reason,  all or any
     ---------------------------------------
     portion of a  Participant's  benefits under the Plan becomes taxable to the
     Participant prior to receipt,  a Participant may petition the Committee for
     a distribution of that portion of his benefit that has become taxable. Upon
     the  grant  of such a  petition,  which  grant  shall  not be  unreasonably
     withheld (and, after a Change in Control, shall be granted), the Company or
     an Affiliate  shall  distribute to the  Participant  immediately  available
     funds in an amount  equal to the  taxable  portion  of his  benefit  (which
     amount shall not exceed such  Participant's  Equivalent  Actuarial Value of
     his unpaid Monthly Benefits). If the petition is granted, the tax liability
     distribution   shall  be  made   within  90  days  of  the  date  when  the
     Participant's  petition is granted.  Such a  distribution  shall affect and
     reduce the benefits to be paid under the Plan.

                                       16
<PAGE>

16.17Insurance.  The Company or its  Affiliates,  on its own behalf or on behalf
     ---------
     of the trustee of the Trust, and, in its sole discretion, may apply for and
     procure  insurance on the life of any  Participant,  in such amounts and in
     such forms as it may choose.  The Company or its  Affiliates or the trustee
     of the Trust,  as the case may be, shall be the sole owner and  beneficiary
     of any such insurance. No Participant shall have any interest whatsoever in
     any such policy or policies,  and a Participant shall at the request of the
     Company  submit to medical  examinations  and supply such  information  and
     execute  such  documents  as may be  required by the  insurance  company or
     companies to whom the Company or its Affiliates has applied for insurance.

16.18Legal Fees To Enforce Rights After Change in Control.  The Company is aware
     ----------------------------------------------------
     that upon the  occurrence  of a Change in Control,  the Board  (which might
     then be  comprised  of new members) or  stockholders  of the  Company,  its
     Affiliates, or of any successor corporation, might then cause or attempt to
     cause the Company,  its  Affiliates,  or such successor to refuse to comply
     with its obligations under the Plan and might cause or attempt to cause the
     Company  or its  Affiliates  to  institute,  or may  institute,  litigation
     seeking to deny Participants the benefits intended under the Plan. In these
     circumstances,  the purpose of the Plan could be  frustrated.  Accordingly,
     if, following a Change in Control, it should appear to any Participant that
     the Company,  its  Affiliates,  or any successor  corporation has failed to
     comply  with  any  of its  obligations  under  the  Plan  or any  agreement
     thereunder,  or, if the Company, its Affiliates,  or any other person takes
     any action to declare  the Plan void or  unenforceable  or  institutes  any
     litigation or other legal action  designed to deny,  diminish or to recover
     from any Participant the benefits intended to be provided, then the Company
     and its  Affiliates  irrevocably  authorizes  such  Participant  to  retain
     counsel of his choice at the  expense of the Company or its  Affiliates  to
     represent such  Participant in connection with the initiation or defense of
     any  litigation or other legal  action,  whether by or against the Company,
     its Affiliates, or any director, officer, stockholder or other Affiliate of
     the Company or any successor thereto in any jurisdiction.

     The Company has signed the Plan as of March 1, 2003.

                                    PENN FEDERAL SAVINGS BANK

                                    By:    ________________________
                                    Name:  ________________________
                                    Title: ________________________

                            PENN FEDERAL SAVINGS BANK
                SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

     Penn  Federal  Savings  Bank  ("Penn  Federal")  is the sponsor of the Penn
Federal Savings Bank Supplemental  Executive Retirement Plan (the "Plan").  Penn
Federal and the undersigned  executive (the  "Employee")  hereby agree, for good
and valuable consideration,  the value of which is hereby acknowledged, that the
Employee  shall  participate in the Plan as such Plan is currently in effect and
as the same may  hereafter  be  modified or amended.  The  Employee  does hereby
acknowledge  that he has been  provided  with a copy of the Plan as currently in
effect and he does specifically agree to the terms and conditions  thereof.  The
Employee  understands  that his  receipt  of  benefits  under the Plan  shall be
subject to all provisions of the Plan. All capitalized  terms not defined herein
shall have the meaning assigned to them under the Plan.

 PROVISIONS REGARDING PLAN BENEFITS, PAYOUT PERIOD AND EARLY RETIREMENT ELECTION

     1.   No  limitations  other than those  contained in the Plan and this Plan
          Agreement shall apply to the Employee's  entitlement to benefits under
          the Plan.

     2.   The Employee's annual benefit  percentage is 70%. This percentage will
          be  multiplied  by  the  Employee's  Final  Average   Compensation  to
          determine the Employee's Annual Benefit.

     3.   The Employee's  maximum Annual Benefit shall be $300,000.  There is no
          minimum Annual Benefit.

     4.   The "Payout  Period" shall be 180 consecutive  months,  subject to the
          modification rules in the Plan for early retirement benefits.

     5.   If elected by the  Employee,  the Payout  Period  shall  commence on a
          designated  Early Retirement Date. The Early Retirement Date shall not
          be earlier than one year  following  the date the  Employee  elects in
          writing to have his benefits commence.  The Employee  acknowledges and
          understands  that (a) no benefit  will be paid on an Early  Retirement
          Date unless a written  election is made, and (b) if benefits  commence
          on an Early Retirement Date, the Employee's  monthly payment under the
          Plan will be smaller than the Monthly  Benefit he would have  received
          had benefits  commenced at his Normal  Retirement Date, to reflect the
          earlier commencement of benefits.

     The Employee  understands  that he may at any time, upon written request to
the Committee, obtain a copy of the Plan as then in effect.

_________________________________                     ---------------------,2003
                       , Employee

PENN FEDERAL SAVINGS BANK

By  ______________________________                    ---------------------,2003
Name:  ___________________________
Title: ___________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}]]