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                                                                    EXHIBIT 10.3

                              EMPLOYMENT AGREEMENT

                  AGREEMENT, dated this 21st day of July 2003, between Citizens
Financial Services, FSB (the "Bank"), a federally chartered savings bank, and
John T. Stephens (the "Executive").

                                   WITNESSETH

                  WHEREAS, the Executive is presently an officer of CFS Bancorp,
Inc. (the "Corporation") and the Bank (together, the "Employers");

                  WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers;

                  WHEREAS, the Corporation and the Bank desire to enter into
separate agreements with the Executive with respect to his employment by each of
the Employers; and

                  WHEREAS, in order to induce the Executive to remain in the
employ of the Employers and in consideration of the Executive's agreeing to
remain in the employ of the Employers, the parties desire to specify the
severance benefits which shall be due the Executive by the Bank in the event
that his employment with the Bank is terminated under specified circumstances;

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

1)       DEFINITIONS.

The following words and terms shall have the meanings set forth below for the
purposes of this Agreement:

         a)       Average Annual Compensation. The Executive's "Average Annual
                  Compensation" for purposes of this Agreement shall be deemed
                  to mean the average level of compensation paid to the
                  Executive by the Employers or any subsidiary thereof during
                  the most recent five taxable years preceding the Date of
                  Termination and which was either (i) included in the
                  Executive's gross income for tax purposes, including but not
                  limited to Base Salary, bonuses and amounts taxable to the
                  Executive under any qualified or non-qualified employee
                  benefit plans of the Employers, or (ii) deferred at the
                  election of the Executive.

         b)       Base Salary. "Base Salary" shall have the meaning set forth in
                  Section 4(a) hereof.

         c)       Cause. Termination of the Executive's employment for "Cause"
                  shall mean termination because of personal dishonesty,
                  incompetence, willful misconduct, breach of fiduciary duty
                  involving personal profit, intentional failure to perform
                  stated duties, willful violation of any law, rule or
                  regulation (other than traffic violations or similar offenses)
                  or final cease-and-desist order or material breach of any
                  provision of this Agreement.

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                                       2

         d)       Change in Control. "Change in Control" means the occurrence of
                  any of the following: (i) an event that would be required to
                  be reported in response to Item 1(a) of Form 8-K or Item 6(e)
                  of Schedule 14A of Regulation 14A pursuant to the 1934
                  Securities and Exchange Act of 1934, as amended (1934 Act), or
                  any successor thereto, whether or not any class of securities
                  of the Corporation is registered under the 1934 Act; (ii) any
                  "person" is or becomes the "beneficial owner" (as defined in
                  Rule 13d-3 under the 1934 Act), directly or indirectly, of
                  securities of the Corporation representing 20% or more of the
                  combined voting power of the Corporation's then outstanding
                  securities; or (iii) during any period of thirty-six
                  consecutive months, individuals who at the beginning of such
                  period constitute the Board of Directors of the Corporation
                  cease for any reason to constitute at least a majority thereof
                  unless the election, or the nomination for election by
                  stockholders, of each new director was approved by a vote of
                  at least two-thirds of the directors then still in office who
                  were directors at the beginning of the period.

                  i)       For purposes of the definition of "Change in
                           Control," a Person or group of Persons does not
                           include the CFS Bancorp, Inc. Employee Stock
                           Ownership Plan Trust which forms a part of the CFS
                           Bancorp, Inc. Employee Stock Ownership Plan (the
                           "ESOP"), or any other employee benefit plan,
                           subsidiary or affiliate of the Corporation, and the
                           outstanding shares of common stock of the
                           Corporation, on a fully diluted basis, include all
                           shares owned by the ESOP, whether allocated or
                           unallocated to the accounts of participants,
                           thereunder.

                  ii)      For purposes of the definition of "Change in
                           Control," the term "Person" means any natural person,
                           proprietorship, partnership, corporation, limited
                           liability company, organization, firm, business,
                           joint venture, association, trust or other entity and
                           any government agency, body or authority.

         e)       Code. "Code" shall mean the Internal Revenue Code of 1986, as
                  amended.

         f)       Date of Termination. "Date of Termination" shall mean (i) if
                  the Executive's employment is terminated for Cause or for
                  Disability, the date specified in the Notice of Termination,
                  and (ii) if the Executive's employment is terminated for any
                  other reason, the date on which a Notice of Termination is
                  given or as specified in such Notice.

         g)       Disability. Termination by the Bank of the Executive's
                  employment based on "Disability" shall mean termination
                  because of any physical or mental impairment which qualifies
                  the Executive for disability benefits under the applicable
                  long-term disability plan maintained by the Employers or any
                  subsidiary or, if no such plan applies, which would qualify
                  the Executive for disability benefits under the Federal Social
                  Security System.

         h)       Good Reason. Termination by the Executive of the Executive's
                  employment for "Good Reason" shall mean termination by the
                  Executive within twenty-four (24) months following a Change in
                  Control of the Corporation based on:

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                  i)       Without the Executive's express written consent, the
                           failure to elect or to re-elect or to appoint or to
                           re-appoint the Executive to the offices of Executive
                           Vice President, Treasurer and Chief Financial Officer
                           of the Employers or a material adverse change made by
                           the Employers in the Executive's functions, duties or
                           responsibilities as Executive Vice President,
                           Treasurer and Chief Financial Officer of the
                           Employers;

                  ii)      Without the Executive's express written consent, a
                           reduction by either of the Employers in the
                           Executive's Base Salary as the same may be increased
                           from time to time or, except to the extent permitted
                           by Section 4(b) hereof, a reduction in the package of
                           fringe benefits provided to the Executive, taken as a
                           whole;

                  iii)     The principal executive office of either of the
                           Employers is relocated outside of the Munster,
                           Indiana area or, without the Executive's express
                           written consent, either of the Employers require the
                           Executive to be based anywhere other than an area in
                           which the Employers' principal executive office is
                           located, except for required travel on business of
                           the Employers to an extent substantially consistent
                           with the Executive's present business travel
                           obligations;

                  iv)      Any purported termination of the Executive's
                           employment for Disability or Retirement which is not
                           effected pursuant to a Notice of Termination
                           satisfying the requirements of paragraph (j) below;
                           or

                  v)       The failure by the Bank to obtain the assumption of
                           and agreement to perform this Agreement by any
                           successor.

         i)       IRS. "IRS" shall mean the Internal Revenue Service.

         j)       Notice of Termination. Any purported termination of the
                  Executive's employment by the Bank for any reason, including
                  without limitation for Cause, Disability or Retirement, or by
                  the Executive for any reason, including without limitation for
                  Good Reason, shall be communicated by written "Notice of
                  Termination" to the other party hereto. For purposes of this
                  Agreement, a "Notice of Termination" shall mean a dated notice
                  which (i) indicates the specific termination provision in this
                  Agreement relied upon, (ii) sets forth in reasonable detail
                  the facts and circumstances claimed to provide a basis for
                  termination of Executive's employment under the provision so
                  indicated, (iii) specifies a Date of Termination, which shall
                  be not less than thirty (30) nor more than ninety (90) days
                  after such Notice of Termination is given, except in the case
                  of the Bank's termination of Executive's employment for Cause,
                  which shall be effective immediately; and (iv) is given in the
                  manner specified in Section 11 hereof.

         k)       Retirement. "Retirement" shall mean voluntary termination by
                  the Executive after the Executive attains the age fifty-five
                  (55), with at least five years of active service.

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                                       4

2)       TERM OF EMPLOYMENT.

         a)       The Bank hereby employs the Executive as Executive Vice
                  President, Treasurer and Chief Financial Officer, and the
                  Executive hereby accepts said employment and agrees to render
                  such services to the Bank on the terms and conditions set
                  forth in this Agreement. The term of this Agreement shall be a
                  period of three years commencing as of the date hereof (the
                  "Commencement Date"), subject to earlier termination as
                  provided herein. Reference herein to the term of this
                  Agreement shall refer to both such initial term and any
                  extended terms. The Board of Directors of the Bank shall
                  review on a periodic basis (and no less frequently than
                  annually) whether to permit further extensions of the term of
                  this Agreement. As part of such review, the Board of Directors
                  shall consider all relevant factors, including the Executive's
                  performance hereunder, and shall either expressly approve
                  further extensions of the time of this Agreement or decide to
                  provide notice to the contrary.

         b)       During the term of this Agreement, the Executive shall perform
                  such executive services for the Bank as may be consistent with
                  his titles and from time to time assigned to him by the Bank's
                  Board of Directors. The Executive further agrees to serve
                  without additional compensation as an officer and director of
                  any of the Bank's subsidiaries and agrees that any amounts
                  received from such corporation may be offset against the
                  amounts due hereunder. In addition, it is agreed that the Bank
                  may assign the Executive to one of its subsidiaries for
                  payroll purposes.

3)        LOYALTY, CONFIDENTIALITY AND NON-COMPETITION

         a)       The Executive shall devote his or her full time and best
                  efforts to the performance of his or her employment under this
                  Agreement. During the term of this Agreement, the Executive
                  shall not, at any time or place, either directly or indirectly
                  engage in any business or activity in competition with the
                  business affairs or interests of the Employers or be a
                  director, officer or consultant to any bank, savings and loan
                  association, credit union, thrift, savings bank, or similar
                  institution in the Chicago CMSA.

         b)       For a period of one year from the date of voluntary
                  termination, or termination for Cause, the Executive shall
                  not, at any time or place, either directly or indirectly
                  engage in any business or activity in competition with the
                  business affairs or interests of the Employers or be a
                  director, officer or consultant to any bank, savings and loan
                  association, credit union, thrift, savings bank, or similar
                  institution in the Chicago CMSA.

         c)       For purposes of this Agreement, directly or indirectly
                  engaging in any business activity in competition with the
                  business or affairs of the Employers includes, but is not
                  limited to, serving or acting as an owner, partner, agent,
                  beneficiary, or employee of any person, firm or corporate
                  entity so engaged; except that nothing herein contained shall
                  be deemed to prevent or limit the right of Executive to invest
                  any of his surplus funds in the capital stock or other
                  securities of any corporation whose stock or securities are
                  publicly owned or are regularly traded on any public exchange,
                  nor shall anything herein contained be

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                                       5

                  deemed to prevent employee from investing or limit employee's
                  right to invest his surplus funds in real estate.

         d)       All information relating to business of the Employers
                  including, but not limited to, that business obtained or
                  serviced by Executive and all customer listings, contact
                  lists, expiration cards, asset reports, instruments,
                  documents, papers and other material used in connection with
                  such business, shall be the exclusive property of the
                  Employers. Executive shall keep all such information and
                  material confidential; none of it will be copied, reproduced
                  or duplicated without the express written permission of the
                  Employers, and Executive shall return all material containing
                  such information to Employers upon their request or upon
                  termination of employment. Executive also agrees that he or
                  she will not utilize the confidential information or trade
                  secrets of the Employers, either directly or indirectly, for
                  any purposes except performance of the Executive's
                  responsibilities and in furtherance of the Employers'
                  business, unless otherwise expressly authorized by Employers
                  in writing in advance.

         e)       Executive agrees that, during his employment, and for a period
                  of three (3) years following the date of his involuntary
                  termination of employment for Cause, or his voluntary
                  termination without Good Reason, the Executive:

                  i)       will not solicit any of the Employers' past or
                           current customers or clients for the benefit of
                           anyone other than Employers or their affiliates;

                  ii)      will not divulge the names of any of the Employers'
                           past or then current customers to any other person,
                           corporation or entity;

                  iii)     will not divulge to anyone, except the Employers or
                           their representatives, any information regarding
                           their management strategies, marketing information or
                           goals, policies and/or other information regarding
                           the affairs of the Employers, all of which Executive
                           is hereby obligated to keep secret, however and
                           whenever such information comes to his or her
                           attention; and

                  iv)      will not, either directly or indirectly, induce or
                           solicit any person to leave the employ of the
                           Employers.

4)       COMPENSATION AND BENEFITS.

         a)       The Employers shall compensate and pay the Executive for his
                  services during the term of this Agreement at a minimum base
                  salary of $$223,496 per year ("Base Salary"), which may be
                  increased from time to time in such amounts as may be
                  determined by the Boards of Directors of the Employers and may
                  not be decreased without the Executive's express written
                  consent. In addition to his Base Salary, the Executive shall
                  be entitled to receive during the term of this Agreement such
                  bonus payments as may be determined by the Boards of Directors
                  of the Employers.

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                                       6

         b)       During the term of this Agreement, the Executive shall be
                  entitled to participate in and receive the benefits of any
                  pension or other retirement benefit plan, profit sharing,
                  stock option, employee stock ownership, or other plans,
                  benefits and privileges given to employees and executives of
                  the Employers, to the extent commensurate with his then duties
                  and responsibilities, as fixed by the Boards of Directors of
                  the Employers. The Bank shall not make any changes in such
                  plans, benefits or privileges which would adversely affect the
                  Executive's rights or benefits thereunder, unless such change
                  occurs pursuant to a program applicable to all executive
                  officers of the Bank and does not result in a proportionately
                  greater adverse change in the rights of or benefits to the
                  Executive as compared with any other executive officer of the
                  Bank. Nothing paid to the Executive under any plan or
                  arrangement presently in effect or made available in the
                  future shall be deemed to be in lieu of the salary payable to
                  the Executive pursuant to Section 4(a) hereof.

         c)       During the term of this Agreement, the Executive shall be
                  entitled to paid annual vacation in accordance with the
                  policies as established from time to time by the Boards of
                  Directors of the Employers. The Executive shall not be
                  entitled to receive any additional compensation from the
                  Employers for failure to take a vacation, nor shall the
                  Executive be able to accumulate unused vacation time from one
                  year to the next, except to the extent authorized by the
                  Boards of Directors of the Employers.

         d)       In the event the Executive's employment is terminated due to
                  Disability or Retirement, the Employers shall provide
                  continued life, medical, dental and disability coverage
                  substantially identical to the coverage maintained by the
                  Employers for the Executive immediately prior to his
                  termination. Such coverage shall cease upon the expiration of
                  the remaining term of this Agreement.

         e)       In the event of the Executive's death during the term of this
                  Agreement, the Employers shall provide to the Executive's
                  spouse continued medical and dental coverage substantially
                  identical to the coverage maintained by the Employers for the
                  Executive immediately prior to his death until such spouse
                  attains the age of 65.

         f)       The Executive's compensation, benefits and expenses shall be
                  paid by the Corporation and the Bank in the same proportion as
                  the time and services actually expended by the Executive on
                  behalf of each respective Employer.

         g)       During the term of this Agreement, the Employers shall provide
                  to the Executive, at the Employers' cost, all perquisites
                  which other senior executives of the Employers are generally
                  entitled to receive, including the payment of his or her
                  annual dues at the Briar Ridge Country Club.

         h)       During the term of the Agreement, the Employers will provide
                  suitable office space, desk, chairs, filing cabinets,
                  telephones and other usual and customary office furniture,
                  fixtures

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                                       7

                  and equipment adequate for the efficient performance of the
                  duties assigned to the Executive.

5)       EXPENSES. The Employers shall reimburse the Executive or otherwise
         provide for or pay for all reasonable expenses incurred by the
         Executive in furtherance of or in connection with the business of the
         Employers, including, but not by way of limitation, automobile expenses
         and other traveling expenses, and all reasonable entertainment expenses
         (whether incurred at the Executive's residence, while traveling or
         otherwise), subject to such reasonable documentation and other
         limitations as may be established by the Boards of Directors of the
         Employers. If such expenses are paid in the first instance by the
         Executive, the Employers shall reimburse the Executive therefor.

6)       TERMINATION.

         a)       The Bank shall have the right, at any time upon prior Notice
                  of Termination, to terminate the Executive's employment
                  hereunder for any reason, including without limitation
                  termination for Cause, Disability or Retirement, and the
                  Executive shall have the right, upon prior Notice of
                  Termination, to terminate his employment hereunder for any
                  reason.

         b)       In the event that (i) the Executive's employment is terminated
                  by the Bank for Cause or (ii) the Executive terminates his
                  employment hereunder other than for Disability, Retirement,
                  death or Good Reason, the Executive shall have no right
                  pursuant to this Agreement to compensation or other benefits
                  for any period after the applicable Date of Termination.

         c)       In the event that the Executive's employment is terminated as
                  a result of Disability, Retirement or the Executive's death
                  during the term of this Agreement, the Executive shall have no
                  right pursuant to this Agreement to compensation or other
                  benefits for any period after the applicable Date of
                  Termination, except as provided for in Sections 4(d) and 4(e)
                  hereof.

         d)       In the event that (i) the Executive's employment is terminated
                  by the Bank for other than Cause, Disability, Retirement or
                  the Executive's death or (ii) such employment is terminated by
                  the Executive (a) due to a material breach of this Agreement
                  by the Bank, which breach has not been cured within fifteen
                  (15) days after a written notice of non-compliance has been
                  given by the Executive to the Employers, or (b) for Good
                  Reason, then the Bank shall, subject to the provisions of
                  Section 7 hereof, if applicable:

                  i)       pay to the Executive, in either thirty-six (36) equal
                           monthly installments beginning with the first
                           business day of the month following the Date of
                           Termination or in a lump sum within five business
                           days of the Date of Termination (at the Executive's
                           election), a cash severance amount equal to three (3)
                           times that portion of the Executive's Average Annual
                           Compensation paid by the Bank, and

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                                       8

                  ii)      maintain and provide for a period ending at the
                           earlier of (i) the expiration of the remaining term
                           of employment pursuant hereto prior to the Notice of
                           Termination or (ii) the date of the Executive's
                           full-time employment by another employer (provided
                           that the Executive is entitled under the terms of
                           such employment to benefits substantially similar to
                           those described in this subparagraph (B)), at no cost
                           to the Executive, the Executive's continued
                           participation in all group insurance, life insurance,
                           health and accident insurance, disability insurance
                           and other employee benefit plans, programs and
                           arrangements offered by the Bank in which the
                           Executive was entitled to participate immediately
                           prior to the Date of Termination (excluding (x) stock
                           option and restricted stock plans of the Employers,
                           (y) bonuses and other items of cash compensation
                           included in Average Annual Compensation and (z) other
                           benefits, or portions thereof, included in Average
                           Annual Compensation), provided that in the event that
                           the Executive's participation in any plan, program or
                           arrangement as provided in this subparagraph (B) is
                           barred, or during such period any such plan, program
                           or arrangement is discontinued or the benefits
                           thereunder are materially reduced, the Bank shall
                           arrange to provide the Executive with benefits
                           substantially similar to those which the Executive
                           was entitled to receive under such plans, programs
                           and arrangements immediately prior to the Date of
                           Termination.

7)       LIMITATION OF BENEFITS UNDER CERTAIN CIRCUMSTANCES. If the payments and
         benefits pursuant to Section 6 hereof, either alone or together with
         other payments and benefits which the Executive has the right to
         receive from the Bank, would constitute a "parachute payment" under
         Section 280G of the Code, the payments and benefits payable by the Bank
         pursuant to Section 6 hereof shall be reduced, in the manner determined
         by the Executive, by the amount, if any, which is the minimum necessary
         to result in no portion of the payments and benefits payable by the
         Bank under Section 6 being non-deductible to the Bank pursuant to
         Section 280G of the Code and subject to the excise tax imposed under
         Section 4999 of the Code. The parties hereto agree that the present
         value of the payments and benefits payable pursuant to this Agreement
         to the Executive upon termination shall be limited to three (3) times
         the Executive's Average Annual Compensation. The determination of any
         reduction in the payments and benefits to be made pursuant to Section 6
         shall be based upon the opinion of independent counsel selected by the
         Bank's independent public accountants and paid by the Bank. Such
         counsel shall be reasonably acceptable to the Bank and the Executive;
         shall promptly prepare the foregoing opinion, but in no event later
         than thirty (30) days from the Date of Termination; and may use such
         actuaries as such counsel deems necessary or advisable for the purpose.
         Nothing contained herein shall result in a reduction of any payments or
         benefits to which the Executive may be entitled upon termination of
         employment under any circumstances other than as specified in this
         Section 7, or a reduction in the payments and benefits specified in
         Section 6 below zero.

8)       MITIGATION; EXCLUSIVITY OF BENEFITS.

         a)       The Executive shall not be required to mitigate the amount of
                  any benefits hereunder by seeking other employment or
                  otherwise, nor shall the amount of any such benefits be

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                                       9

                  reduced by any compensation earned by the Executive as a
                  result of employment by another employer after the Date of
                  Termination or otherwise.

         b)       The specific arrangements referred to herein are not intended
                  to exclude any other benefits which may be available to the
                  Executive upon a termination of employment with the Employers
                  pursuant to employee benefit plans of the Employers or
                  otherwise.

9)       WITHHOLDING. All payments required to be made by the Bank hereunder to
         the Executive shall be subject to the withholding of such amounts, if
         any, relating to tax and other payroll deductions as the Bank may
         reasonably determine should be withheld pursuant to any applicable law
         or regulation.

10)      ASSIGNABILITY. The Bank may assign this Agreement and its rights and
         obligations hereunder in whole, but not in part, to any corporation,
         bank or other entity with or into which the Bank may hereafter merge or
         consolidate or to which the Bank may transfer all or substantially all
         of its assets, if in any such case said corporation, bank or other
         entity shall by operation of law or expressly in writing assume all
         obligations of the Bank hereunder as fully as if it had been originally
         made a party hereto, but may not otherwise assign this Agreement or its
         rights and obligations hereunder. The Executive may not assign or
         transfer this Agreement or any rights or obligations hereunder.

11)      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 delivered or mailed by
         certified or registered mail, return receipt requested, postage
         prepaid, addressed to the respective addresses set forth below:

         a) To the Bank:          Secretary
                                  Citizens Financial Services, FSB
                                  707 Ridge Road
                                  Munster, Indiana 46321

         b) To the Corporation:   Secretary
                                  CFS Bancorp, Inc.
                                  707 Ridge Road
                                  Munster, Indiana 46321

         a) To the Executive:     John T. Stephens
                                  1940 Birchwood Court
                                  Munster, Indiana 46321

12)      AMENDMENT; WAIVER. No provisions of this Agreement may be modified,
         waived or discharged unless such waiver, modification or discharge is
         agreed to in writing and signed by the Executive and such officer or
         officers as may be specifically designated by the Board of

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                                      10

         Directors of the Bank to sign on its behalf. No waiver by any party
         hereto at any time of any breach by any other party hereto of, or
         compliance with, any condition or provision of this Agreement to be
         performed by such other party shall be deemed a waiver of similar or
         dissimilar provisions or conditions at the same or at any prior or
         subsequent time.

13)      GOVERNING LAW. The validity, interpretation, construction and
         performance of this Agreement shall be governed by the laws of the
         United States where applicable and otherwise by the substantive laws of
         the State of Indiana.

14)      NATURE OF OBLIGATIONS. Nothing contained herein shall create or require
         the Bank to create a trust of any kind to fund any benefits which may
         be payable hereunder, and to the extent that the Executive acquires a
         right to receive benefits from the Bank hereunder, such right shall be
         no greater than the right of any unsecured general creditor of the
         Bank.

15)      HEADINGS. The section headings contained in this Agreement are for
         reference purposes only and shall not affect in any way the meaning or
         interpretation of this Agreement.

16)      VALIDITY. The invalidity or unenforceability of any provision of this
         Agreement shall not affect the validity or enforceability of any other
         provisions of this Agreement, which shall remain in full force and
         effect.

17)      COUNTERPARTS. This Agreement may be executed in one or more
         counterparts, each of which shall be deemed to be an original but all
         of which together will constitute one and the same instrument.

18)      REGULATORY ACTIONS. The following provisions shall be applicable to the
         parties to the extent that they are required to be included in
         employment agreements between a savings association and its employees
         pursuant to Section 563.39(b) of the Regulations Applicable to All
         Savings Associations, 12 C.F.R. Section 563.39(b), or any successor
         thereto, and shall be controlling in the event of a conflict with any
         other provision of this Agreement, including without limitation
         Section 6 hereof.

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

         b)       If the Executive is removed from office and/or permanently
                  prohibited from participating in the conduct of the Employers'
                  affairs by an order issued under Section 8(e)(4) or Section
                  8(g)(1) of the FDIA (12 U.S.C. Sections 1818(e)(4) and
                  (g)(1)), all obligations of the Employers

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                                      11

                  under this Agreement shall terminate as of the effective date
                  of the order, but vested rights of the Executive and the
                  Employers as of the date of termination shall not be affected.

         c)       If the Bank is in default, as defined in Section 3(x)(1) of
                  the FDIA (12 U.S.C. Section 1813(x)(1)), all obligations under
                  this Agreement shall terminate as of the date of default, but
                  vested rights of the Executive and the Employers as of the
                  date of termination shall not be affected.

         d)       All obligations under this Agreement shall be terminated
                  pursuant to 12 C.F.R. Section 563.39(b)(5) (except to the
                  extent that it is determined that continuation of the
                  Agreement for the continued operation of the Employers is
                  necessary): (i) by the Director of the Office of Thrift
                  Supervision ("OTS"), or his/her designee, at the time the
                  Federal Deposit Insurance Corporation ("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 FDIA
                  (12 U.S.C. Section 1823(c)); or (ii) by the Director of the
                  OTS, or his/her designee, at the time the Director or his/her
                  designee approves a supervisory merger to resolve problems
                  related to operation of the Bank or when the Bank is
                  determined by the Director of the OTS to be in an unsafe or
                  unsound condition, but vested rights of the Executive and the
                  Employers as of the date of termination shall not be affected.

19)      REGULATORY PROHIBITION. Notwithstanding any other provision of this
         Agreement to the contrary, any payments made to the Executive pursuant
         to this Agreement, or otherwise, are subject to and conditioned upon
         their compliance with Section 18(k) of the Federal Deposit Insurance
         Act (12 U.S.C. Section 1828(k)) and the regulations promulgated
         thereunder, including 12 C.F.R. Part 359. In the event of the
         Executive's termination of employment with the Bank for Cause, all
         employment relationships and managerial duties with the Bank shall
         immediately cease regardless of whether the Executive remains in the
         employ of the Corporation following such termination. Furthermore,
         following such termination for Cause, the Executive will not, directly
         or indirectly, influence or participate in the affairs or the
         operations of the Bank.

20)      PAYMENT OF COSTS AND LEGAL FEES AND REINSTATEMENT OF BENEFITS. In the
         event any dispute or controversy arising under or in connection with
         the Executive's termination is resolved in favor of the Executive,
         whether by judgment, arbitration or settlement, the Executive shall be
         entitled to the payment of (a) all legal fees incurred by the Executive
         in resolving such dispute or controversy, and (2) any back-pay,
         including Base Salary, bonuses and any other cash compensation, fringe
         benefits and any compensation and benefits due to the Executive under
         this Agreement.

21)      ENTIRE AGREEMENT. This Agreement embodies the entire agreement between
         the Bank and the Executive with respect to the matters agreed to
         herein. All prior agreements between the Bank and the Executive with
         respect to the matters agreed to herein are hereby superseded and shall
         have no force or effect. Notwithstanding the foregoing, nothing
         contained in this Agreement shall affect the agreement of even date
         being entered into between the Corporation and the Executive.

<PAGE>

                                      12

         IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.

Attest:                              CITIZENS FINANCIAL SERVICES, FSB

/s/ Monica F. Sullivan               By: /s/ James W. Prisby
----------------------                   -----------------------------

                                     EXECUTIVE

                                     /s/ John T. Stephens
                                     ---------------------------------
                                     John T. Stephens