FIRST FEDERAL BANK
                              EMPLOYMENT AGREEMENT

         This AGREEMENT ("Agreement"),  is entered into and made effective as of
September 27, 2000 by and between  First Federal Bank (the "Bank"),  a federally
chartered savings institution,  with its principal administrative offices at 109
East Depot Street, Colchester, Illinois 62326, First Federal Bancshares, Inc., a
corporation  organized  under the laws of the  state of  Delaware,  the  holding
company of the Bank (the "Holding Company") and James J. Stebor ("Executive").

         WHEREAS,  the Bank wishes to assure itself of the services of Executive
for the period provided in this Agreement; and

         WHEREAS,  Executive  is  willing to serve in the employ of the Bank and
its subsidiaries on a full-time basis for the term of this Agreement.

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained,  and upon the other terms and conditions  hereinafter  provided,  the
parties hereby agree as follows:

1. POSITION AND RESPONSIBILITIES.

         During the period of Executive's employment hereunder, Executive agrees
to serve as President of the Bank.  Executive  shall render  administrative  and
management services to the Bank such as are customarily  performed by persons in
a similar executive capacity. During the term of this Agreement,  Executive also
agrees to serve as a director of the Bank.

2. TERMS.

         (a) The period of Executive's  employment under this Agreement shall be
deemed to have  commenced as of the date first written above and shall  continue
for a period of thirty-six (36) full calendar months from that date.  Commencing
on the  first  anniversary  date  of  this  Agreement,  and  continuing  on each
anniversary  thereafter,  the disinterested members of the board of directors of
the Bank  ("Board") may extend the  Agreement an  additional  year such that the
remaining  term of the  Agreement  shall be three (3)  years,  unless  Executive
elects not to extend the term of this  Agreement by giving written notice to the
Bank. The Board will review the Agreement and Executive's  performance  annually
for purposes of  determining  whether to extend the  Agreement and the rationale
and results thereof shall be included in the minutes of the Board's meeting. The
Board shall give notice to Executive as soon as possible after such review as to
whether the Agreement is to be extended.

         (b) During the period of Executive's  employment hereunder,  except for
periods of absence occasioned by illness, vacation periods, and other reasonable
leaves of absence,  Executive  shall  devote  substantially  all of his business
time,  attention,  skill, and efforts to the faithful  performance of his duties
hereunder,  including  activities  and  services  related  to the  organization,
operation and management of the Bank and  participation  in industry,  community
and civic  organizations;  provided,  however,  that,  with the  approval of the
Board, as evidenced by a resolution of the Board,  from time to time,  Executive
may serve, or continue to serve, on the boards of directors



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of, and hold any other  offices or positions  in,  companies  or  organizations,
which, in the Board's  judgment,  will not present any conflict of interest with
the Bank, or materially affect the performance of Executive's duties pursuant to
this Agreement.

         (c) Notwithstanding anything in this Agreement to the contrary,  either
Executive or the Bank may terminate Executive's  employment with the Bank at any
time during the term of this  Agreement,  subject to the terms and conditions of
this Agreement.

3. COMPENSATION AND REIMBURSEMENT.

         (a) The  compensation  specified under this Agreement shall  constitute
consideration paid by the Bank in exchange for the duties described in Section 1
of this Agreement.  The Bank shall pay Executive,  as compensation,  a salary of
not less than $110,000 ("Base Salary"). Base Salary shall include any amounts of
compensation deferred by Executive under any tax-qualified retirement or welfare
benefit plan or any other deferred  compensation  arrangement  maintained by the
Bank.  Base  Salary  shall be payable  in  accordance  with the  normal  payroll
practices of the Bank.  During the period of this  Agreement,  Executive's  Base
Salary  shall be reviewed at least  annually.  Such review shall be conducted by
the Board or by a committee of the Board  delegated such  responsibility  by the
Board.  The committee or the Board may increase  Executive's  Base Salary at any
time. Any increase in Base Salary shall thereafter  become the new "Base Salary"
for purposes of this Agreement.

         (b) Executive shall be entitled to participate in any employee  benefit
plans,  arrangements and perquisites  substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this  Agreement  and the Bank will not,  without
Executive's prior written consent, make any changes in such plans,  arrangements
or perquisites (or any plans,  arrangements or perquisites with respect to which
Executive  begins to participate at any time during the term of this  Agreement)
which would adversely affect Executive's rights or benefits thereunder,  without
separately  providing for an arrangement that ensures Executive receives or will
receive the economic  value that Executive  would  otherwise lose as a result of
such  adverse  effect,  unless such change is general in nature and applies in a
nondiscriminatory  manner to all employees  covered by the plan,  arrangement or
perquisite.  Without limiting the generality of the foregoing provisions of this
Subsection  3(b),  Executive  shall be  entitled to  participate  in and receive
benefits  under any  employee  benefit  plans  including,  but not  limited  to,
retirement  plans (such as pension,  profit sharing and employee stock ownership
plans), supplemental retirement plans, incentive plans, health and welfare plans
and any other employee  benefit plan or  arrangement  made available by the Bank
now or in the future to full-time employees of the Bank and/or senior executives
and key management  employees of the Bank,  subject to and on a basis consistent
with  the  terms,  conditions  and  overall  administration  of such  plans  and
arrangements.  Nothing  paid to Executive  under any such plans or  arrangements
will be  deemed  to be in lieu of  other  compensation  and  benefits  to  which
Executive is entitled under this Agreement.

         (c) The  Bank  shall  pay or  reimburse  Executive  for all  reasonable
expenses  incurred  by  Executive  in  performing  his  obligations  under  this
Agreement.

                                     Page 2

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4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

         (a) Upon the occurrence of an Event of Termination  (as herein defined)
during  Executive's term of employment  under this Agreement,  the provisions of
this Section 4 shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following:  (i) the termination by
the Bank or the Holding Company of Executive's  full-time  employment  hereunder
for any reason  other  than  termination  governed  by  Subsection  5(a) of this
Agreement,  or Termination for Cause, as defined in Section 7 of this Agreement,
or Retirement or  Disability,  as defined in paragraph (e) of this Section 4 or;
(ii) Executive's  resignation  from the Bank's employ,  upon, any (A) failure to
re-elect or re-appoint Executive as President of the Bank or failure to nominate
or re-elect Executive to the Board of Directors of the Bank, unless consented to
by  Executive,   (B)  material  change  in  Executive's  function,   duties,  or
responsibilities with the Bank, which change would cause Executive's position to
become one of lesser responsibility,  importance, or scope from the position and
attributes  thereof  described  in  Section  1 of this  Agreement  (and any such
material change shall be deemed as continuing breach of this Agreement),  unless
consented to by Executive,  (C)  relocation of  Executive's  principal  place of
employment by more than 25 miles from its location at the effective date of this
Agreement,  unless  consented to by  Executive,  (D)  material  reduction in the
benefits,  arrangements  or  perquisites  to  Executive  which is not general in
nature and applicable on a  nondiscriminatory  basis to all employees covered by
such benefits,  arrangements,  or perquisites or, pursuant to Subsection 3(b) of
this  Agreement,  to which  Executive does not consent or for which Executive is
not or will not be provided the economic benefit, (E) liquidation or dissolution
of the Bank or the Holding Company, or (F) breach of this Agreement by the Bank.
Upon the  occurrence of any event  described in clauses (A), (B), (C), (D), (E),
or (F), above,  Executive shall have the right to elect to terminate  employment
under this  Agreement  by  resignation  upon not less than sixty (60) days prior
written notice given within six full calendar months after the event giving rise
to said right to elect.

         (b) Upon the  occurrence  of an  Event of  Termination,  on the Date of
Termination,  as  defined  in  Section 8 of this  Agreement,  the Bank  shall be
obligated to pay Executive,  or, in the event of Executive's  subsequent  death,
his beneficiary or beneficiaries,  or his estate, as the case may be, the amount
of the remaining  payments and benefits that  Executive  would have earned if he
had continued his employment  with the Bank during the remaining  unexpired term
of this Agreement, based on Executive's Base Salary and the benefits provided to
Executive  as of  the  date  of the  Event  of  Termination,  as  set  forth  in
Subsections  3(a) and (b) of this Agreement,  as the case may be, and the amount
still due  Executive  under any  paragraph  of Section 3 for  services  rendered
through the Date of  Termination.  Except as provided for below and in paragraph
(c) of this Section 4, the determination of Executive's  benefits as of the date
of the  Event  of  Termination  shall  be made  based  on (i) the  value  of the
allocation  attributable to employer contributions for the most recent plan year
under any defined  contribution  type plan; (ii) the percentage of salary of any
incentive or bonus  payment for the most  recently-completed  fiscal  year;  and
(iii)  the   employer-provided   cost  of  any  other   benefit   for  the  most
recently-completed  fiscal year. In addition,  for purposes of  determining  his
vested accrued  benefit,  Executive  shall be credited  either under the defined
benefit pension plan maintained by the Bank (whether or not  tax-qualified)  or,
if not  permitted  under  such  plan,  under a  separate  arrangement,  with the
additional "years of service" that he would have earned for vesting


                                     Page 3

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and benefit  accrual  purposes for the  remaining  term of the Agreement had his
employment not terminated. At the election of Executive, which election is to be
made within thirty (30) days of the Date of Termination,  such payments shall be
made in a lump sum (without  discount for early  payment) or paid monthly during
the remaining term of the agreement following  Executive's  termination.  In the
event that no election is made, payment to Executive will be made in a lump sum.
Such  payments  shall  not be  reduced  in the  event  Executive  obtains  other
employment following termination of employment.  Notwithstanding anything to the
contrary  elsewhere  in this  Agreement  to the extent  Executive is entitled to
continued  coverage or benefit  accrual under any retirement or welfare  benefit
plan during the remaining  unexpired term of this Agreement,  the amount payable
under this  Subsection  4(b) shall be adjusted to the extent  necessary to avoid
any duplication of such benefits.

         (c) To the extent that the Bank  continues to offer any life,  medical,
health,  disability or dental  insurance plan or arrangement in which  Executive
participates in on the last day of his employment (each being a "Welfare Plan"),
after an Event of Termination (as herein defined),  Executive and his dependents
shall continue  participating in such Welfare Plans, subject to the same premium
contributions on the part of Executive as were required immediately prior to the
Event of Termination until the earlier of: (i) his death; (ii) his employment by
another  employer other than one of which he is the majority owner; or (iii) the
end of the  remaining  term of this  Agreement.  If the Bank  does not offer the
Welfare Plans (or if for any reason  Executive's  participation in said plans is
prohibited)  after  the  Event  of  Termination,  then the  Bank  shall  provide
Executive  with a payment equal to the  employer-paid  premiums for such benefit
for the  period  which  runs  until the  earlier  of:  (i) his  death;  (ii) his
employment by another employer other than one of which he is the majority owner;
or (iii) the end of the remaining term of this Agreement.

         (d) In the event that Executive is receiving  monthly payments pursuant
to Subsection 4(b) of this Agreement,  on an annual basis,  thereafter,  between
the dates of  January 1 and  January  31 of each  year,  Executive  shall  elect
whether  the balance of the amount  payable  under the  Agreement  for that year
shall be paid in a lump  sum or on a pro  rata  basis.  Such  election  shall be
irrevocable for the year for which such election is made.

         (e)  Termination  of  Executive   based  on  "Retirement"   shall  mean
termination  by written  notice to the Bank from  Executive  specifying an exact
retirement  date or  termination in accordance  with any retirement  arrangement
established with Executive's written consent with respect to him. Termination of
Executive based on Disability shall mean written notice to the Bank by Executive
specifying  an exact date as of which he is unable to perform  all of the duties
and  responsibilities  of his  position.  Upon  termination  of  Executive  upon
Disability,  Executive  shall be entitled to all benefits  under any  disability
plan of the Bank or any  other  plans in which  Executive  is a  participant  in
accordance  with  the  terms  of the  plan or  arrangement.  Executive  shall be
entitled to all  compensation  and  benefits  provided  for in Section 3 of this
Agreement  through the date of his termination of employment as specified in the
notice provided by him.


                                     Page 4

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5. CHANGE IN CONTROL.

         (a) For purposes of this  Agreement,  a "Change in Control" of the Bank
or the  Holding  Company  shall  mean an event of a nature  that:  (i)  would be
required to be reported in response to Item 1 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,  as amended  (the  "Exchange  Act");  or (ii)
results  in a Change in Control of the Bank or the  Holding  Company  within the
meaning of the Home Owners' Loan Act of 1933,  as amended,  the Federal  Deposit
Insurance Act and the Rules and Regulations  promulgated by the Office of Thrift
Supervision ("OTS") (or its predecessor agency), as in effect on the date hereof
(provided,  that in applying the  definition of change in control or presumptive
change in control or acting in concert or  presumptive  acting in concert as set
forth under the rules and  regulations  of the OTS,  ownership  by a person or a
group, including a presumptive group, of at least 15% of the voting stock of the
Bank or the  Holding  Company  shall be  required,  and  provided  further  that
ownership of stock by a tax-qualified  employee  benefit plan of the Bank or the
Holding  Company  shall not be subject to  presumptions  of control or acting in
concert);  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 voting securities of the Bank or the Holding Company representing
25% or more of the Bank's or the Holding Company's outstanding voting securities
or right to acquire such securities except for any voting securities of the Bank
purchased  by the Holding  Company and any voting  securities  purchased  by any
employee benefit plan of the Bank or the Holding Company, or (B) individuals who
constitute  the board of  directors 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 members who were nominated by the Incumbent Board), or whose
nomination for election by the Holding  Company's  stockholders  was approved by
the same Nominating  Committee  serving under an Incumbent Board (or members who
were  nominated by the 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 Holding Company or similar transaction occurs in which
the Bank or the Holding Company is not the resulting entity; provided,  however,
that such an event listed above will be deemed to have  occurred or to have been
effectuated upon the receipt of all required regulatory  approvals not including
the lapse of any statutory waiting periods.

         (b) If any of the events described in Subsection 5(a) of this Agreement
constituting a Change in Control have occurred, or the Board has determined that
a Change in Control has  occurred,  Executive  shall be entitled to the benefits
provided  in  paragraphs  (c),  (d),  (e)  and (f) of this  Section  5 upon  his
termination  of employment on or after the date the Change in Control occurs due
to (i) Executive's dismissal at any time during the term of this Agreement, (ii)
Executive's  resignation  following  any  demotion,  loss of  title,  office  or
significant authority or responsibility, reduction in the annual compensation or
benefits or relocation of Executive's principal place of employment by more than
25 miles from its location  immediately  prior to the Change in Control,  unless
such  termination is because of  Executive's  Termination  for Cause;  provided,
however,


                                     Page 5

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Executive  may  consent in  writing to any such  demotion,  loss,  reduction  or
relocation. The effect of any written consent of Executive under this Subsection
5(b) shall be strictly  limited to the terms specified in such written  consent.
Under no circumstances  can a termination of employment  during the term of this
Agreement  on or after  the date a Change in  Control  occurs  be  considered  a
termination  on account of retirement or disability  for purposes of determining
Executive's  rights to the payment of benefits  provided in paragraphs (c), (d),
(e) and (f) of this Section 5.

         (c) Upon Executive's entitlement to payment pursuant to Subsection 5(b)
of this Agreement,  the Bank shall pay Executive, or in the event of Executive's
subsequent death,  Executive's  beneficiary or beneficiaries,  or estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
three  (3)  times  Executive's  average  annual  compensation  for the five most
recently  completed taxable years of Executive.  In the event the Bank is not in
compliance with its minimum capital requirements or if such payments would cause
the  Bank's  capital  to  be  reduced  below  its  minimum   regulatory  capital
requirements,  such  payments  shall be deferred  until such time as the Bank or
successor  thereto is in capital  compliance.  For  purposes of this  Subsection
5(c), annual compensation shall include Base Salary and any other taxable income
paid by the Bank or its  subsidiaries,  including  but not  limited  to  amounts
related to the granting, vesting or exercise of restricted stock or stock option
awards, commissions,  bonuses, severance payments, retirement benefits, director
or committee  fees and fringe  benefits  paid or to be paid to Executive or paid
for  Executive's  benefit  during  any such  year,  as well as  profit  sharing,
employee stock ownership plan and other  retirement  contributions  or benefits,
including any tax-qualified or non-tax-qualified plan or arrangement (whether or
not  taxable)  made or accrued  on behalf of  Executive  for such  year.  At the
election of  Executive,  which  election is to be made prior to or within thirty
(30) days of the Date of Termination  on or following a Change in Control,  such
payment may be made in a lump sum  (without  discount  for early  payment) on or
immediately following the Date of Termination (which may be the date a Change in
Control  occurs) or paid in equal  monthly  installments  during the thirty- six
(36) months following Executive's termination.  In the event that no election is
made,  payment to Executive  will be made in a lump sum. Such payments shall not
be reduced in the event Executive obtains other employment following termination
of employment.

         (d) Upon the occurrence of a Change in Control  followed by Executive's
termination  of employment,  Executive will be entitled to receive  benefits due
him under or contributed by the Bank on his behalf  pursuant to any  retirement,
incentive,   profit  sharing,  employee  stock  ownership,  bonus,  performance,
disability or other employee benefit plan or other arrangement maintained by the
Bank on Executive's behalf to the extent such benefits are not otherwise paid to
Executive  under a  separate  provision  of this  Agreement.  In  addition,  for
purposes of determining his vested accrued benefit,  Executive shall be credited
either under the defined benefit pension plan maintained by the Bank (whether or
not  tax-qualified)  or, if not  permitted  under  such  plan,  under a separate
arrangement,  with the  additional  "years of service" that he would have earned
for vesting and benefit accrual purposes for the remaining term of the Agreement
had his employment not terminated.

         (e)  Upon  the  occurrence  of a  Change  in  Control  and  Executive's
termination of employment  pursuant to the provisions of Subsection 5(b) of this
Agreement  in  connection  therewith,  the Bank will cause to be  continued  any
Welfare Plan Benefit (as described in Subsection


                                     Page 6

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4(d)  of  this  Agreement)  substantially  identical  to the  benefits  coverage
maintained  by the Bank for Executive  and any of his  dependents  covered under
such plans prior to the Change in Control.  Such  coverage  shall cease upon the
expiration  of  thirty-six  (36)  full  calendar  months  following  the Date of
Termination.  In the event Executive's or Executive's dependent's  participation
in any such plan or  program  is  barred,  the Bank  shall  arrange  to  provide
Executive and his dependents  with benefits  coverage  substantially  similar to
those which  Executive and his dependents  would otherwise have been entitled to
receive under such plans and programs by operation of this  provision or provide
their economic equivalent to Executive and his dependents.

         (f) In the event that Executive is receiving  monthly payments pursuant
to Subsection 5(c) of this Agreement,  on an annual basis,  thereafter,  between
the dates of  January 1 and  January  31 of each  year,  Executive  shall  elect
whether  the balance of the amount  payable  under the  Agreement  for that year
shall be paid in a lump sum pursuant to such  provision.  Such election shall be
irrevocable for the year for which such election is made.

6. CHANGE IN CONTROL RELATED PROVISIONS.

         Notwithstanding  the provisions of Section 5 of this  Agreement,  in no
event  shall the  aggregate  payments  or  benefits  to be made or  afforded  to
Executive  under said  paragraphs  or otherwise  paid or provided by the Bank in
connection with a Change in Control (the "Termination  Benefits")  constitute an
"excess  parachute  payment"  under  Section  280G of the Code or any  successor
thereto,  and in order to avoid such a result, the Termination  Benefits will be
reduced, if necessary, to an amount (the "Non-Triggering  Amount"), the value of
which is one  dollar  ($1.00)  less  than an  amount  equal to three  (3)  times
Executive's  "base amount," as determined in accordance  with said Section 280G.
The  allocation  of any  reduction  required  with  respect  to the  Termination
Benefits shall be determined by Executive.

7. TERMINATION FOR CAUSE.

         The term  "Termination  for Cause"  shall mean  termination  because of
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit,  intentional failure to perform stated
duties,  willful  violation  of any law,  rule,  regulation  (other than traffic
violations or similar offenses), final cease and desist order or material breach
of any provision of this  Agreement.  In determining  incompetence,  the acts or
omissions shall be measured  against the standards for  professional  competence
generally  prevailing for executive officers having comparable  positions in the
savings institution industry. Notwithstanding the foregoing, Executive shall not
be deemed to have been  terminated  for cause  unless and until there shall have
been delivered to Executive a Notice of  Termination  which shall include a copy
of a  resolution  duly  adopted  by  the  affirmative  vote  of  not  less  than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for  Executive,  together with  counsel,  to be heard before the Board and which
such meeting  shall be held not more than 30 days from the date of notice during
which  period  Executive  may be suspended  with pay),  finding that in the good
faith  opinion  of  the  Board,  Executive  was  guilty  of  conduct  justifying
Termination for Cause and specifying the particulars thereof in detail.


                                     Page 7

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Executive shall not have the right to receive compensation or other benefits for
any period  after  Termination  for Cause except for  compensation  and benefits
already  vested.  Any stock  options  and  related  limited  rights  granted  to
Executive  under any stock  option  plan,  or any  unvested  awards  granted  to
Executive  under  any  restricted   stock  benefit  plan  of  the  Bank  or  its
subsidiaries, shall become null and void effective upon Executive's receipt of a
Notice of Termination pursuant to Section 8 of this Agreement,  and shall not be
exercisable  by or  delivered  to  Executive  at any  time  subsequent  to  such
Termination  for Cause except all benefits  shall be deemed to have  remained in
effect if Executive is reinstated.

8. NOTICE.

         (a) Any  purported  termination  by the Bank or by  Executive  shall be
communicated by a Notice of Termination to the other party hereto.  For purposes
of this Agreement,  a "Notice of Termination"  shall mean a written notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

         (b)  Except  as  otherwise  provided  for in this  Agreement,  "Date of
Termination" shall mean the date specified in the Notice of Termination  (which,
in the case of a Termination for Cause,  shall not be less than thirty (30) days
from the date such Notice of Termination is given).

         (c) If,  within  thirty  (30) days after any Notice of  Termination  is
given,  the party receiving such Notice of Termination  notifies the other party
that a  reasonable  dispute  exists  concerning  the  termination,  the  Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal  therefrom  having expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Bank will continue to pay
Executive's  Base Salary and  continue  to cover  Executive  under each  Welfare
Benefit  Plan in which  Executive  participated  at the time of such  notice  in
effect when the notice giving rise to the dispute was given until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Subsection  8(c) are in addition to all other  amounts due under this  Agreement
and shall not be offset  against  or reduce  any other  amounts  due under  this
Agreement.

9. POST-TERMINATION OBLIGATIONS.

         All payments and benefits to Executive  under this  Agreement  shall be
subject to  Executive's  compliance  with this  Section 9 for two (2) full years
after  the  earlier  of the  expiration  of this  Agreement  or  termination  of
Executive's  employment with the Bank.  Executive shall, upon reasonable notice,
furnish such information and assistance to the Bank with regard to matters as to
which he has personal knowledge and as may reasonably be required by the Bank in
connection with


                                     Page 8

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any litigation in which it or any of its  subsidiaries  or affiliates is, or may
become,  a party.  The Bank  shall  reimburse  Executive  for all  out-of-pocket
expenses  incurred and at an hourly rate equivalent to the hourly rate (based on
an  eight-hour  work  day) of his  Base  Salary  in  effect  at the  time of his
termination  from  employment for any time incurred in connection  with services
rendered pursuant to this Section 9.

10. NON-COMPETITION.

         (a) Upon any termination of Executive's  employment  hereunder pursuant
to Section 4 of this  Agreement,  Executive  agrees not to compete with the Bank
for a period of one (1) year  following such  termination  in any city,  town or
county in which  Executive's  normal business office is located and the Bank has
an office or has filed an application  for  regulatory  approval to establish an
office,  determined  as of the  effective  date of such  termination,  except as
agreed to pursuant to a resolution duly adopted by the Board.  Executive  agrees
that during such period and within said cities,  towns and  counties,  Executive
shall not work for or advise,  consult or  otherwise  serve  with,  directly  or
indirectly,  any entity whose business  materially competes with the depository,
lending  or  other  business   activities  of  the  Bank.  The  parties  hereto,
recognizing  that  irreparable  injury will result to the Bank, its business and
property in the event of Executive's  breach of this Subsection 10(a) agree that
in the event of any such  breach by  Executive,  the Bank will be  entitled,  in
addition  to any other  remedies  and damages  available,  to an  injunction  to
restrain  the  violation  hereof by  Executive,  Executive's  partners,  agents,
servants,  employees  and all  persons  acting  for or under  the  direction  of
Executive.  Executive represents and admits that in the event of the termination
of  his  employment  pursuant  to  Section  4  of  this  Agreement,  Executive's
experience and capabilities  are such that Executive can obtain  employment in a
business  engaged in other lines and/or of a different nature than the Bank, and
that the enforcement of a remedy by way of injunction will not prevent Executive
from earning a livelihood.  Nothing herein will be construed as prohibiting  the
Bank from pursuing any other  remedies  available to the Bank for such breach or
threatened breach, including the recovery of damages from Executive.

         (b) Executive  recognizes  and  acknowledges  that the knowledge of the
business  activities  and  plans  for  business  activities  of the Bank and its
affiliates as it may exist from time to time, is a valuable,  special and unique
asset of the business of the Bank.  Executive will not, during or after the term
of Executive's employment,  disclose any knowledge of the past, present, planned
or considered  business activities of the Bank and its affiliates thereof to any
person, firm, corporation,  or other entity for any reason or purpose whatsoever
unless  expressly  authorized  by the Board of  Directors  or  required  by law.
Notwithstanding the foregoing,  Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively  derived from the business  plans and activities of the Bank. In the
event of a breach or  threatened  breach by Executive of the  provisions of this
Section  10, the Bank will be entitled to an  injunction  restraining  Executive
from  disclosing,  in whole or in part,  the  knowledge  of the  past,  present,
planned or considered  business activities of the Bank or its affiliates or from
rendering any services to any person,  firm,  corporation,  other entity to whom
such  knowledge,  in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting


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<PAGE>


the Bank from pursuing any other remedies  available to the Bank for such breach
or threatened breach, including the recovery of damages from Executive.

11. SOURCE OF PAYMENTS.

         (a) All payments provided for in this Agreement shall be timely paid in
cash,  check or other mutually  agreed upon method from the general funds of the
Bank  subject  to  Subsection  11(b) of this  Agreement.  The  Holding  Company,
however,  unconditionally  guarantees  payment and  provision of all amounts and
benefits due  hereunder to Executive  and, if such amounts and benefits due from
the Bank are not timely paid or provided by the Bank,  such amounts and benefits
shall be paid or provided by the Holding Company.

         (b) Notwithstanding any provision herein to the contrary, to the extent
that  payments  and  benefits,  as  provided by this  Agreement,  are paid to or
received by Executive under an employment  agreement in effect between Executive
and the Holding  Company,  such  payments and benefits  paid by the Bank will be
subtracted  from any  amount  due  simultaneously  to  Executive  under  similar
provisions  of this  Agreement.  Payments  pursuant  to this  Agreement  and the
Holding  Company  agreement  shall be  allocated in  proportion  to the level of
activity and the time expended on such  activities by Executive as determined by
the Holding Company and the Bank on a quarterly basis;  provided,  however, that
except for the  reduction  provided  by the first  sentence  of this  Subsection
11(b),  the Bank will be  obligated  to pay 100% of the  amounts  due  Executive
hereunder.

12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.

         This Agreement  contains the entire  understanding  between the parties
hereto and supersedes  any prior  employment  agreement  between the Bank or any
predecessor  of the Bank and  Executive,  except that this  Agreement  shall not
affect or operate to reduce any benefit or compensation  inuring to Executive of
a kind elsewhere  provided.  No provision of this Agreement shall be interpreted
to mean that  Executive  is  subject  to  receiving  fewer  benefits  than those
available to him without reference to this Agreement.

13. NO ATTACHMENT.

         (a) Except as required by law, no right to receive  payments under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.

         (b) This Agreement  shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.


                                     Page 10

<PAGE>


14. MODIFICATION AND WAIVER.

         (a)  This  Agreement  may  not be  modified  or  amended  except  by an
instrument in writing signed by the parties hereto.

         (b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

15. REQUIRED PROVISIONS.

         (a) The Bank may terminate Executive's  employment at any time, but any
termination by the Bank, other than  Termination for Cause,  shall not prejudice
Executive's  right to  compensation  or other  benefits  under  this  Agreement.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 7 hereinabove.

         (b) If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section  8(e)(3) or 8(g)(1) of the  Federal  Deposit  Insurance  Act,  12 U.S.C.
ss.1818(e)(3)  or (g)(1);  the Bank's  obligations  under this contract shall be
suspended as of the date of service,  unless stayed by appropriate  proceedings.
If the charges in the notice are dismissed, the Bank may in its discretion:  (i)
pay  Executive all or part of the  compensation  withheld  while their  contract
obligations were suspended;  and (ii) reinstate (in whole or in part) any of the
obligations which were suspended.

         (c)  If  Executive  is  removed  and/or  permanently   prohibited  from
participating  in the  conduct of the Bank's  affairs by an order  issued  under
Section  8(e)(4) or 8(g)(1) of the  Federal  Deposit  Insurance  Act,  12 U.S.C.
ss.1818(e)(4)  or (g)(1),  all obligations of the Bank under this contract shall
terminate  as of the  effective  date of the  order,  but  vested  rights of the
contracting parties shall not be affected.

         (d) If the Bank is in default  as  defined  in  Section  3(x)(1) of the
Federal Deposit  Insurance Act, 12 U.S.C.  ss.1813(x)(1)  all obligations of the
Bank under this  contract  shall  terminate as of the date of default,  but this
paragraph shall not affect any vested rights of the contracting parties.

         (e)  All   obligations  of  the  Bank  under  this  contract  shall  be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of the institution: (i) by the Director of
the OTS (or his designee), the FDIC or the Resolution Trust Corporation,  at the
time the FDIC enters into an agreement to provide  assistance to or on behalf of
the Bank under the authority  contained in Section 13(c) of the Federal  Deposit
Insurance Act, 12 U.S.C. ss.1823(c);  or (ii) by the Director of the OTS (or his
designee)  at the time the  Director (or his  designee)  approves a  supervisory
merger to resolve problems related to the operations of the Bank


                                     Page 11

<PAGE>



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 such action.

         (f) Any  payments  made to  Executive  pursuant to this  Agreement,  or
otherwise,   are   subject  to  and   conditioned   upon   compliance   with  12
U.S.C.ss.1828(k)   and  12  C.F.R.ss.545.121   and  any  rules  and  regulations
promulgated thereunder.

16. SEVERABILITY.

         If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

17. HEADINGS FOR REFERENCE ONLY.

         The headings of sections and paragraphs  herein are included solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

18. GOVERNING LAW.

         This Agreement  shall be governed by the laws of the State of Illinois,
unless otherwise specified in this Agreement.

19. ARBITRATION.

         Any dispute or  controversy  arising under or in  connection  with this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location  selected by Executive within fifty
(50) miles from the location of the Bank,  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;  provided,  however,  that
Executive shall be entitled to seek specific performance of Executive's right to
be paid until the Date of  Termination  during the  pendency  of any  dispute or
controversy arising under or in connection with this Agreement.

         In the event any dispute or controversy  arising under or in connection
with  Executive's  termination  is  resolved in favor of  Executive,  whether by
judgment, arbitration or settlement,  Executive shall be entitled to the payment
of all  back-pay,  including  salary,  bonuses and any other cash  compensation,
fringe  benefits and any  compensation  and benefits  due  Executive  under this
Agreement.


                                     Page 12

<PAGE>


20. PAYMENT OF LEGAL FEES.

         All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or  reimbursed  by the Bank,  if  Executive  is  successful  pursuant to a legal
judgment, arbitration or settlement.

21. INDEMNIFICATION.

         The  Bank  shall  provide  Executive   (including   Executive's  heirs,
executors and  administrators)  with coverage  under a standard  directors'  and
officers'  liability  insurance  policy  at  its  expense  and  shall  indemnify
Executive (and Executive's heirs,  executors and  administrators) to the fullest
extent  permitted  under  federal  law  against  all  expenses  and  liabilities
reasonably  incurred  by  Executive  in  connection  with or arising  out of any
action,  suit or  proceeding  in which  Executive  may be  involved by reason of
Executive  having  been a director  or  officer of the Bank or its  subsidiaries
(whether or not  Executive  continues to be a director or officer at the time of
incurring  such  expenses or  liabilities),  such  expenses and  liabilities  to
include,  but not to be limited to,  judgments,  court costs and attorneys' fees
and the cost of reasonable settlements.

22. SUCCESSOR TO THE BANK.

         The Bank shall  require any  successor or assignee,  whether  direct or
indirect,  by  purchase,   merger,   consolidation  or  otherwise,   to  all  or
substantially  all  the  business  or  assets  of the  Bank,  to  expressly  and
unconditionally  assume and agree to perform the Bank's  obligations  under this
Agreement,  in the same  manner  and to the same  extent  that the Bank would be
required to perform if no such succession or assignment had taken place.


                                     Page 13

<PAGE>


                                   SIGNATURES


         IN WITNESS  WHEREOF,  First Federal Bank and First Federal  Bancshares,
Inc.  have caused this  Agreement,  to be executed and their seals to be affixed
hereunto  by their duly  authorized  officers  and  Executive  has  signed  this
Agreement on November 13, 2000.


ATTEST:                                   FIRST FEDERAL BANK



/s/ Ronald A. Feld                        By:  /s/ James J. Stebor
-------------------------                      ---------------------------------
Ronald A. Feld                                 For the Entire Board of Directors
Secretary

                  [SEAL]


ATTEST:                                   FIRST FEDERAL BANCSHARES, INC.

                                          (Guarantor)



/s/ Ronald A. Feld                        By:  /s/ James J. Stebor
-------------------------                      ---------------------------------
Ronald A. Feld                                 For the Entire Board of Directors
Secretary

                  [SEAL]

WITNESS:                                  EXECUTIVE

/s/ Cathy D. Pendell                           /s/ James J. Stebor
-------------------------                      ---------------------------------
                                               James J. Stebor
                                               President


                                     Page 14