Exhibit 10.1

                         FIRST FEDERAL BANKSHARES, INC.

                              AMENDED AND RESTATED

                             1999 STOCK OPTION PLAN

1.    Purpose

      The purpose of the First Federal Bankshares, Inc. Amended and Restated
1999 Stock Option Plan (the "Plan") is to advance the interests of the Company
and its stockholders by providing Key Employees and Outside Directors of First
Federal Bankshares, Inc. (the "Company") and its Affiliates, including First
Federal Bank, upon whose judgment, initiative and efforts the successful conduct
of the business of the Company and its Affiliates largely depends, with an
additional incentive to perform in a superior manner as well as to attract
people of experience and ability.

2.    Definitions

      The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.

      "Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) or 424(f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.

      "Award" means an Award of Non-Statutory Stock Options, Incentive Stock
Options, Limited Rights, Reload Options and/or Dividend Equivalent Rights
granted under the provisions of the Plan.

      "Bank" means First Federal Bank, or a successor corporation.

      "Beneficiary" means the person or persons designated by a Participant to
receive any benefits payable under the Plan in the event of such Participant's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, his estate.

      "Board" or "Board of Directors" means the board of directors of the
Company or its Affiliate, as applicable.

      "Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.

      "Change in Control" of the Bank or the Company means a change in control
of a nature that: (i) would be required to be reported in response to Item 1(a)
of the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners Loan Act, as amended ("HOLA"), and applicable rules
and regulations promulgated thereunder, as in effect at the time of the Change
in Control; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (a) 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


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representing 25% or more of the combined voting power of Company's outstanding
securities except for any securities purchased by the Bank's employee stock
ownership plan or trust; or (b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof 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 the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction in which the Bank or
Company is not the surviving institution occurs; or (d) a proxy statement
soliciting proxies from stockholders of the Company, by someone other than the
current management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations as a result of which the outstanding shares of the
class of securities then subject to the Plan are to be exchanged for or
converted into cash or property or securities not issued by the Company; or (e)
a tender offer is made for 25% or more of the voting securities of the Company
and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.

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

      "Committee" means a Committee of the Board consisting of either (i) at
least two Non-Employee Directors of the Company, or (ii) the entire Board of the
Company.

      "Common Stock" means shares of the common stock of the Company, par value
$0.01 per share.

      "Company" means First Federal Bankshares, Inc. or a successor corporation.

      "Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee. In
the case of a Key Employee, employment shall not be considered interrupted in
the case of sick leave, military leave or any other leave of absence approved by
the Bank or in the case of transfers between payroll locations of the Bank or
between the Bank, its parent, its subsidiaries or its successor.

      "Date of Grant" means the actual date on which an Award is granted by the
Committee.

      "Director" means a member of the Board.

      "Disability" means the permanent and total inability by reason of mental
or physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director to serve as such. Additionally, in the case of
an employee, a medical doctor selected or approved by the Board must advise the
Committee that it is either not possible to determine when such Disability will
terminate or that it appears probable that such Disability will be permanent
during the remainder of said employee's lifetime.

      "Dividend Equivalent Rights" means the right to receive an amount of cash
based upon the terms set forth in Section 10 hereof.

      "Effective Date" means initially October 21, 1999, the date the Plan was
initially approved by the Company's stockholders. The Effective Date of the
amended and restated Plan shall be the date on which this amendment and
restatement is approved by the Company's stockholders.

      "Fair Market Value" means, when used in connection with the Common Stock
on a certain date, the reported closing price of the Common Stock as reported by
the Nasdaq stock market (as published by the Wall Street Journal, if published)
on the day prior to such date, or if the Common Stock was not traded on the day
prior to such date, on the next preceding day on which the Common Stock was
traded; provided, however, that if the Common


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Stock is not reported on the Nasdaq stock market, Fair Market Value shall mean
the average sale price of all shares of Common Stock sold during the 30-day
period immediately preceding the date on which such stock option was granted,
and if no shares of stock have been sold within such 30-day period, the average
sale price of the last three sales of Common Stock sold during the 90-day period
immediately preceding the date on which such stock option was granted. In the
event Fair Market Value cannot be determined in the manner described above, then
Fair Market Value shall be determined by the Committee. The Committee is
authorized, but is not required, to obtain an independent appraisal to determine
the Fair Market Value of the Common Stock.

      "Incentive Stock Option" means an Option granted by the Committee to a
Participant, which Option is designated as an Incentive Stock Option pursuant to
Section 9.

      "Key Employee" means any person who is currently employed by the Company
or an Affiliate who is chosen by the Committee to participate in the Plan.

      "Limited Right" means the right to receive an amount of cash based upon
the terms set forth in Section 10.

      "Non-Statutory Stock Option" means an Option granted by the Committee to
(i) an Outside Director or (ii) to any other Participant and such Option is
either (A) not designated by the Committee as an Incentive Stock Option, or (B)
fails to satisfy the requirements of an Incentive Stock Option as set forth in
Section 422 of the Code and the regulations thereunder.

      "Non-Employee Director" means, for purposes of the Plan, a Director who
(a) is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.

      "Normal Retirement" means for a Key Employee, retirement at the normal or
early retirement date set forth in the Bank's Employee Stock Ownership Plan, or
any successor plan. Normal Retirement for an Outside Director means a cessation
of service on the Board of Directors for any reason other than removal for
Cause, after reaching 60 years of age and maintaining at least 10 years of
Continuous Service.

      "Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.

      "Option" means an Award granted under Section 8 or Section 9.

      "Participant" means a Key Employee or Outside Director of the Company or
its Affiliates who receives or has received an award under the Plan.

      "Reload Option" means an option to acquire shares of Common Stock
equivalent to the shares (i) used by a Participant to pay for an Option, or (ii)
deducted from any distribution in order to satisfy income tax required to be
withheld, based upon the terms set forth in Section 20.

      "Right" means a Limited Right or a Dividend Equivalent Right.

      "Termination for Cause" means the termination of employment or termination
of service on the Board caused by the individual's personal dishonesty, willful
misconduct, any breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, or the willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), or a final
cease-and-desist order, any of which results in material loss to the Company or
one of its Affiliates.


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<PAGE>

3.    Plan Administration Restrictions

      The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it deems necessary or advisable. All determinations and interpretations made by
the Committee shall be binding and conclusive on all Participants in the Plan
and on their legal representatives and beneficiaries.

      All transactions involving a grant, award or other acquisition from the
Company shall:

      (a) be approved by the Company's full Board or by the Committee;

      (b) be approved, or ratified, in compliance with Section 14 of the
Exchange Act, by either: the affirmative vote of the holders of a majority of
the securities present, or represented and entitled to vote at a meeting duly
held in accordance with the laws of the state in which the Company is
incorporated; or the written consent of the holders of a majority of the
securities of the issuer entitled to vote provided that such ratification occurs
no later than the date of the next annual meeting of shareholders; or

      (c) result in the acquisition of an Option or Limited Right that is held
by the Participant for a period of six months following the date of such
acquisition.

4.    Types of Awards

      Awards under the Plan may be granted in any one or a combination of: (a)
Incentive Stock Options; (b) Non-Statutory Stock Options; (c) Limited Rights;
(d) Dividend Equivalent Rights; and (e) Reload Options.

5.    Stock Subject to the Plan

      Subject to adjustment as provided in Section 18, the maximum number of
shares reserved for issuance under the Plan is 263,500 shares. To the extent
that Options or Rights granted under the Plan are exercised, the shares covered
will be unavailable for future grants under the Plan; to the extent that Options
together with any related Rights granted under the Plan terminate, expire or are
canceled without having been exercised or, in the case of Limited Rights
exercised for cash, new Awards may be made with respect to these shares.

6.    Eligibility

      Key Employees of the Company and its Affiliates shall be eligible to
receive Incentive Stock Options, Non-Statutory Stock Options, Limited Rights,
Reload Options and/or Dividend Equivalent Rights under the Plan. Outside
Directors shall be eligible to receive Non-Statutory Stock Options, Dividend
Equivalent Rights and Reload Options under the Plan.

7.    General Terms and Conditions of Options and Rights

      The Committee shall have full and complete authority and discretion,
except as expressly limited by the Plan, to grant Options and/or Rights and to
provide the terms and conditions (which need not be identical among
Participants) thereof. In particular, the Committee shall prescribe the
following terms and conditions: (i) the Exercise Price of any Option or Right,
which shall not be less than the Fair Market Value per share on the Date of
Grant, (ii) the number of shares of Common Stock subject to, and the expiration
date of, any Option or Right, which expiration date shall not exceed ten years
from the Date of Grant, (iii) the manner, time and rate (cumulative or
otherwise) of exercise of such Option or Right, and (iv) the restrictions, if
any, to be placed upon such Option or Right or upon shares of Common Stock which
may be issued upon exercise of such Option or Right.

8.    Non-Statutory Stock Options

      The Committee may, from time to time, grant Non-Statutory Stock Options to
eligible Key Employees and Outside Directors, and, upon such terms and
conditions as the Committee may determine, grant Non-Statutory Stock


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Options in exchange for and upon surrender of previously granted Awards under
the Plan. Non-Statutory Stock Options granted under the Plan, including
Non-Statutory Stock Options granted in exchange for and upon surrender of
previously granted Awards, are subject to the terms and conditions set forth in
this Section 8.

      (a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Participant specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.

      (b) Price. The purchase price per share of Common Stock deliverable upon
the exercise of each Non-Statutory Stock Option shall be the Fair Market Value
of the Common Stock of the Company on the Date of Grant. Shares may be purchased
only upon full payment of the purchase price in one or more of the manners set
forth in Section 14 hereof, as determined by the Committee.

      (c) Vesting. A Non-Statutory Stock Option granted under the Plan shall
vest in a Participant at the rate or rates determined by the Committee. No
Options shall become vested in a Participant unless the Participant maintains
Continuous Service until the vesting date of such Option, except as set forth
herein.

      (d) Exercise of Options. A vested Option may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Company, or his designee. Such
notice shall be irrevocable and must be accompanied by full payment of the
purchase price in cash or shares of Common Stock at the Fair Market Value of
such shares, determined on the exercise date in the manner described in Section
2 hereof. If previously acquired shares of Common Stock are tendered in payment
of all or part of the exercise price, the value of such shares shall be
determined as of the date of such exercise.

      (e) Term of Options. The term during which each Non-Statutory Stock Option
may be exercised shall be determined by the Committee, but in no event shall a
Non-Statutory Stock Option be exercisable in whole or in part more than 10 years
and one day from the Date of Grant.

      (f) Amount of Awards. Non-Statutory Stock Options may be granted to any
Key Employee or Outside Director in such amounts as determined by the Committee.
In granting Non-Statutory Stock Options, the Committee shall consider such
factors as it deems relevant, which factors may include, among others, the
position and responsibility of the Key Employee or Outside Director, the length
and value of his service to the Bank, the Company or the Affiliate, the
compensation paid to the Key Employee or Outside Director, and the Committee's
evaluation of the performance of the Bank, the Company or the Affiliate,
according to measurements that may include, among others, key financial ratios,
level of classified assets and independent audit findings.

      (g) Termination of Employment or Service. Upon the termination of a Key
Employee's employment or upon termination of an Outside Director's service for
any reason other than death, Disability, Termination for Cause, Normal
Retirement or in connection with a Change in Control, the Participant's
Non-Statutory Stock Options shall be exercisable only as to those shares that
were immediately purchasable on the date of termination and only for one year
following termination. In the event of Termination for Cause, all rights under a
Participant's Non-Statutory Stock Options shall expire upon termination. In the
event of the Participant's termination of service or employment due to death,
Disability, Normal Retirement or in connection with a Change in Control, all
Non-Statutory Stock Options held by the Participant, whether or not exercisable
at such time, shall be exercisable by the Participant or his legal
representative or beneficiaries for five years following the date of such
termination of employment or cessation of service, provided that in no event
shall the period extend beyond the expiration of the Non-Statutory Stock Option
term.

      (h) Transferability. In the discretion of the Board, all or any
Non-Statutory Stock Option granted hereunder may be transferable by the
Participant once the Option has vested in the Participant, provided, however,
that the Board may limit the transferability of such Option or Options to a
designated class or classes of persons.


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9.    Incentive Stock Options

      The Committee may, from time to time, grant Incentive Stock Options to Key
Employees. Incentive Stock Options granted pursuant to the Plan shall be subject
to the following terms and conditions:

      (a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Key Employee specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.

      (b) Price. Subject to Section 18 of the Plan and Section 422 of the Code,
the purchase price per share of Common Stock deliverable upon the exercise of
each Incentive Stock Option shall be not less than 100% of the Fair Market Value
of the Company's Common Stock on the date the Incentive Stock Option is granted.
However, if a Key Employee owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliates
(or under Section 424(d) of the Code is deemed to own stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company or its Affiliates by reason of the ownership of such classes of stock,
directly or indirectly, by or for any brother, sister, spouse, ancestor or
lineal descendent of such Key Employee, or by or for any corporation,
partnership, estate or trust of which such Key Employee is a shareholder,
partner or Beneficiary), the purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option shall not be less
than 110% of the Fair Market Value of the Company's Common Stock on the date the
Incentive Stock Option is granted. Shares may be purchased only upon payment of
the full purchase price in one or more of the manners set forth in Section 14
hereof, as determined by the Committee.

      (c) Vesting. Incentive Stock Options granted under the Plan shall vest in
a Participant at the rate or rates determined by the Committee. No Option shall
become vested in a Participant unless the Participant maintains continuous
service until the vesting date of such Option, except as set forth herein.

      (d) Exercise of Options. Vested Options may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Company or his designee. Such notice
is irrevocable and must be accompanied by full payment of the exercise price in
cash or shares of Common Stock at the Fair Market Value of such shares
determined on the exercise date by the manner described in Section 2.

      The Option comprising each installment may be exercised in whole or in
part at any time after such installment becomes vested, provided that the amount
able to be first exercised in a given year is consistent with the terms of
Section 422 of the Code. To the extent required by Section 422 of the Code, the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Common Stock for which Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year (under all plans of the Company
and its Affiliates) shall not exceed $100,000.

      (e) Amount of Awards. Incentive Stock Options may be granted to any
eligible Key Employee in such amounts as determined by the Committee; provided
that the amount granted is consistent with the terms of Section 422 of the Code.
In granting Incentive Stock Options, the Committee shall consider such factors
as it deems relevant, which factors may include, among others, the position and
responsibilities of the Key Employee, the length and value of his or her service
to the Bank, the Company, or the Affiliate, the compensation paid to the Key
Employee and the Committee's evaluation of the performance of the Bank, the
Company, or the Affiliate, according to measurements that may include, among
others, key financial ratios, levels of classified assets, and independent audit
findings.

      (f) Terms of Options. The term during which each Incentive Stock Option
may be exercised shall be determined by the Committee, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than 10 years
from the Date of Grant. If any Key Employee, at the time an Incentive Stock
Option is granted to him, owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliate
(or, under Section 424(d) of the Code, is deemed to own stock representing more
than 10% of the total combined voting power of all classes of stock, by reason
of the ownership of such classes of stock, directly or indirectly, by or for any
brother, sister, spouse, ancestor or lineal descendent of such Key Employee, or


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<PAGE>

by or for any corporation, partnership, estate or trust of which such Key
Employee is a shareholder, partner or Beneficiary), the Incentive Stock Option
granted to him shall not be exercisable after the expiration of five years from
the Date of Grant.

      (g) Termination of Employment. Upon the termination of a Key Employee's
service for any reason other than Disability, death, Termination for Cause,
Normal Retirement or in connection with a Change in Control, the Key Employee's
Incentive Stock Options shall be exercisable only as to those shares that were
immediately purchasable by such Key Employee at the date of termination and only
for a period of three months following termination. In the event of Termination
for Cause all rights under the Incentive Stock Options shall expire upon
termination.

      Upon termination of a Key Employee's employment due to death, Disability,
Normal Retirement or in connection with a Change in Control, all Incentive Stock
Options held by such Key Employee, whether or not exercisable at such time,
shall be exercisable for a period of five years following the date of his
cessation of employment, provided however, that any such Option shall not be
eligible for treatment as an Incentive Stock Option in the event such Option is
exercised more than one year following termination of employment due to
Disability; and provided further, in order to obtain Incentive Stock Option
treatment for Options exercised by heirs or devisees of an Optionee, the
Optionee's death must have occurred while employed or within three (3) months of
termination of employment. In no event shall the exercise period extend beyond
the expiration of the Incentive Stock Option term.

      (h) Transferability. No Incentive Stock Option granted under the Plan is
transferable except by will or the laws of descent and distribution and is
exercisable during his lifetime only by the Key Employee to which it is granted.

      (i) Compliance with Code. The options granted under this Section 9 are
intended to qualify as Incentive Stock Options within the meaning of Section 422
of the Code, but the Company makes no warranty as to the qualification of any
Option as an Incentive Stock Option within the meaning of Section 422 of the
Code. If an Option granted hereunder fails for whatever reason to comply with
the provisions of Section 422 of the Code, and such failure is not or cannot be
cured, such Option shall be a Non-Statutory Stock Option.

10.   Limited Rights

      The Committee may grant a Limited Right simultaneously with the grant of
any Option to any Key Employee of the Bank, with respect to all or some of the
shares covered by such Option. Limited Rights granted under the Plan are subject
to the following terms and conditions:

      (a) Terms of Rights. In no event shall a Limited Right be exercisable in
whole or in part before the expiration of six months from the date of grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control of the Company.

      The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, provided that the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
Option.

      Upon exercise of a Limited Right, the related Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying Option. The Limited Right is transferable only
when the underlying Option is transferable and under the same conditions.

      (b) Payment. Upon exercise of a Limited Right, the holder shall promptly
receive from the Company an amount of cash equal to the difference between the
Fair Market Value on the Date of Grant of the related Option and the Fair Market
Value of the underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such Limited Right is
being exercised.


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11.   Dividend Equivalent Rights

      Simultaneously with the grant of any Option to a Participant, the
Committee may grant a Dividend Equivalent Right with respect to all or some of
the shares covered by such Option. Dividend Equivalent Rights granted under this
Plan are subject to the following terms and conditions:

      (a) Terms of Rights. The Dividend Equivalent Right provides the
Participant with a cash benefit per share for each share underlying the
unexercised portion of the related Option equal to the amount of any
extraordinary dividend (as defined in Section 11(c)) per share of Common Stock
declared by the Company. The terms and conditions of any Dividend Equivalent
Right shall be evidenced in the Option agreement entered into with the
Participant and shall be subject to the terms and conditions of the Plan. The
Dividend Equivalent Right is transferable only when the related Option is
transferable and under the same conditions.

      (b) Payment. Upon the payment of an extraordinary dividend, the
Participant holding a Dividend Equivalent Right with respect to Options or
portions thereof which have vested shall promptly receive from the Company or
the Bank the amount of cash equal to the amount of the extraordinary dividend
per share of Common Stock, multiplied by the number of shares of Common Stock
underlying the unexercised portion of the related Option. With respect to
Options or portions thereof which have not vested, the amount that would have
been received pursuant to the Dividend Equivalent Right with respect to the
shares underlying such unvested Option or portion thereof shall be paid to the
Participant holding such Dividend Equivalent Right together with earnings
thereon, on such date as the Option or portion thereof becomes vested. Payments
shall be decreased by the amount of any applicable tax withholding prior to
distribution to the Participant as set forth in Section 20.

      (c) Extraordinary Dividend. For purposes of this Section 11, an
extraordinary dividend is any dividend paid on shares of Common Stock where the
rate of the dividend exceeds the Company's weighted average cost of funds on
interest-bearing liabilities for the current and preceding three quarters.

12.   Reload Option

            Simultaneously with the grant of any Option to a Participant, the
Committee may grant a Reload Option with respect to all or some of the shares
covered by such Option. A Reload Option may be granted to a Participant who
satisfies all or part of the exercise price of the Option with shares of Common
Stock (as described in Section 14(c) below). The Reload Option represents an
additional Option to acquire the same number of shares of Common Stock as is
used by the Participant to pay for the original Option. Reload Options may also
be granted to replace Common Stock withheld by the Company for payment of a
Participant's withholding tax under Section 20. A Reload Option is subject to
all of the same terms and conditions as the original Option except that (i) the
exercise price of the shares of Common Stock subject to the Reload Option will
be determined at the time the original Option is exercised and (ii) such Reload
Option will conform to all provisions of the Plan at the time the original
Option is exercised.

13.   Surrender of Option

      In the event of a Participant's termination of employment or termination
of service as a result of death, Disability, Normal Retirement or in connection
with a Change in Control, the Participant (or his or her personal
representative(s), heir(s), or devisee(s)) may, in a form acceptable to the
Committee make application to surrender all or part of the Options held by such
Participant in exchange for a cash payment from the Company of an amount equal
to the difference between the Fair Market Value of the Common Stock on the date
of termination of employment or the date of termination of service on the Board
and the exercise price per share of the Option. Whether the Company accepts such
application or determines to make payment, in whole or part, is within its
absolute and sole discretion, it being expressly understood that the Company is
under no obligation to any Participant whatsoever to make such payments. In the
event that the Company accepts such application and determines to make payment,
such payment shall be in lieu of the exercise of the underlying Option and such
Option shall cease to be exercisable.


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14.   Alternate Option Payment Mechanism

      The Committee has sole discretion to determine what form of payment it
will accept for the exercise of an Option. The Committee may indicate acceptable
forms in the agreement with the Participant covering such Options or may reserve
its decision to the time of exercise. No Option is to be considered exercised
until payment in full is accepted by the Committee or its agent.

      (a) Cash Payment. The exercise price may be paid in cash or by certified
check. To the extent permitted by law, the Committee may permit all or a portion
of the exercise price of an Option to be paid through borrowed funds.

      (b) Cashless Exercise. Subject to vesting requirements, if applicable, a
Participant may engage in a "cashless exercise" of the Option. Upon a cashless
exercise, the Participant shall give the Company written notice of the exercise
of the Option together with an order to a registered broker-dealer or equivalent
third party, to sell part or all of the Common Stock subject to the Option and
to deliver enough of the proceeds to the Company to pay the Option exercise
price and any applicable withholding taxes. If the Participant does not sell the
Common Stock subject to the Option through a registered broker-dealer or
equivalent third party, the Participant can give the Company written notice of
the exercise of the Option and the third party purchaser of the Common Stock
subject to the Option shall pay the Option exercise price plus applicable
withholding taxes to the Company.

      (c) Exchange of Common Stock. The Committee may permit payment of the
Option exercise price by the tendering of previously acquired shares of Common
Stock. All shares of Common Stock tendered in payment of the exercise price of
an Option shall be valued at the Fair Market Value of the Common Stock on the
date prior to the date of exercise. No tendered shares of Common Stock which
were acquired by the Participant upon the previous exercise of an Option or as
awards under a stock award plan (such as the Company's Recognition and Retention
Plan) shall be accepted for exchange unless the Participant has held such shares
(without restrictions imposed by said plan or award) for at least six months
prior to the exchange.

15.   Rights of a Stockholder

      A Participant shall have no rights as a stockholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in the Plan or in
any Award granted confers on any person any right to continue in the employ of
the Company or its Affiliates or to continue to perform services for the Company
or its Affiliates or interferes in any way with the right of the Company or its
Affiliates to terminate his services as an officer, director or employee at any
time.

16.   Agreement with Participants

      Each Award of Options, Reload Options, Limited Rights and/or Dividend
Equivalent Rights will be evidenced by a written agreement, executed by the
Participant and the Company or its Affiliates that describes the conditions for
receiving the Awards, including the date of Award, the purchase price,
applicable periods, and any other terms and conditions as may be required by the
Board or applicable securities laws.

17.   Designation of Beneficiary

      A Participant may, with the consent of the Committee, designate a person
or persons to receive, in the event of death, any Option, Reload Options,
Limited Rights or Dividend Equivalent Rights to which he would then be entitled.
Such designation will be made upon forms supplied by and delivered to the
Company and may be revoked in writing. If a Participant fails effectively to
designate a Beneficiary, then his estate will be deemed to be the Beneficiary.


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<PAGE>

18.   Dilution and Other Adjustments

      In the event of any change in the outstanding shares of Common Stock of
the Company by reason of any stock dividend or split, pro rata return of capital
to all shareholders, recapitalization, or any merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other similar corporate
change, or other increase or decrease in such shares without receipt or payment
of consideration by the Company, the Committee will make such adjustments to
previously granted Awards, to prevent dilution or enlargement of the rights of
the Participant, including any or all of the following:

      (a) adjustments in the aggregate number or kind of shares of Common Stock
that may be awarded under the Plan;

      (b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan; or

      (c) adjustments in the purchase price of outstanding Incentive and/or
Non-Statutory Stock Options, or any Limited Rights attached to such Options.

      No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. With respect to
Incentive Stock Options, no such adjustment shall be made if it would be deemed
a "modification" of the Award under Section 424 of the Code.

19.   Effect of a Change in Control on Option Awards

      In the event of a Change in Control, the Committee and the Board of
Directors will take one or more of the following actions to be effective as of
the date of such Change in Control:

      (a) provide that such Options shall be assumed, or equivalent options
shall be substituted, ("Substitute Options") by the acquiring or succeeding
corporation (or an affiliate thereof), provided that: (A) any such Substitute
Options exchanged for Incentive Stock Options shall meet the requirements of
Section 424(a) of the Code, and (B) the shares of stock issuable upon the
exercise of such Substitute Options shall constitute securities registered in
accordance with the Securities Act of 1933, as amended ("1933 Act") or such
securities shall be exempt from such registration in accordance with Sections
3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered Securities"), or
in the alternative, if the securities issuable upon the exercise of such
Substitute Options shall not constitute Registered Securities, then the
Participant will receive upon consummation of the Change in Control a cash
payment for each Option surrendered equal to the difference between the (1) Fair
Market Value of the consideration to be received for each share of Common Stock
in the Change in Control times the number of shares of Common Stock subject to
such surrendered Options, and (2) the aggregate exercise price of all such
surrendered Options; or

      (b) in the event of a transaction under the terms of which the holders of
Common Stock will receive upon consummation thereof a cash payment (the "Merger
Price") for each share of Common Stock exchanged in the Change in Control
transaction, make or to provide for a cash payment to the Participants equal to
the difference between (1) the Merger Price times the number of shares of Common
Stock subject to such Options held by each Participant (to the extent then
exercisable at prices not in excess of the Merger Price) and (2) the aggregate
exercise price of all such surrendered Options.

20.   Withholding

      There may be deducted from each distribution of cash and/or Common Stock
under the Plan the minimum amount of any federal or state taxes, including
payroll taxes, that are required by any governmental authority to be withheld.
Shares of Common Stock will be withheld where required from any distribution of
Common Stock.

21.   Amendment of the Plan

      The Board may at any time, and from time to time, modify or amend the Plan
in any respect, or modify or amend an Award received by Key Employees and/or
Outside Directors; provided, however, that no such termination, modification or
amendment may affect the rights of a Participant, without his consent, under an


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<PAGE>

outstanding Award. Any amendment or modification of the Plan or an outstanding
Award under the Plan shall be approved by the Committee or the full Board of the
Company.

22.   Effective Date of Plan

      The Plan shall become effective upon the date of, or a date determined by
the Board of Directors following, approval of the Plan by the Company's
stockholders.

23.   Termination of the Plan

      The right to grant Awards under the Plan will terminate upon the earlier
of (i) 10 years after the Effective Date, or (ii) the date on which the exercise
of Options or related rights equaling the maximum number of shares reserved
under the Plan occurs, as set forth in Section 5. The Board may suspend or
terminate the Plan at any time, provided that no such action will, without the
consent of a Participant, adversely affect his rights under a previously granted
Award.

24.   Applicable Law

      The Plan will be administered in accordance with the laws of the State of
Delaware.


     IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the 30th day of October, 2003.

Date Approved by Stockholders:   October 30, 2003
Effective Date:   October 30, 2003




ATTEST:                                    FIRST FEDERAL BANKSHARES, INC.



/s/ Suzette F. Hoevet                      /s/Barry E. Backhaus
---------------------                      -------------------------------------
Secretary                                  Barry E. Backhaus
                                           President and Chief Executive Officer




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