EMPLOYEE RETENTION AGREEMENT


                  This EMPLOYEE RETENTION AGREEMENT ("Agreement") is made and
entered into as of the 26th day of September, 1996, by and among HOME FEDERAL
SAVINGS AND LOAN ASSOCIATION OF ELGIN, a mutual savings and loan association
organized and operating under the federal laws of the United States and having
its executive offices at 16 North Spring Street, Elgin, Illinois 60120
("Association"); HOME BANCORP OF ELGIN, INC., a business corporation organized
and existing under the laws of the State of Delaware and also having its
executive offices at 16 North Spring Street, Elgin, Illinois 60120 ("Holding
Company"); and DAVID G. TOWE, an individual residing at 10N768 Williamsburg,
Elgin, Illinois 60123 ("Employee").


                              W I T N E S S E T H :
                              ---------------------


                  WHEREAS, effective as of the date of this Agreement, the
Association has converted from a federal mutual savings and loan association to
a federal stock savings and loan association and has become a wholly-owned
subsidiary of the Holding Company; and

                  WHEREAS, the Association desires to secure for itself the
continued availability of the Employee's services; and

                  WHEREAS, the Association recognizes that a third party may at
some time in the future pursue a Change of Control of the Association or the
Holding Company and that this possibility may result in the departure or
distraction of the Association's employees; and

                  WHEREAS, the Association has determined that appropriate steps
should be taken to encourage the continued attention and dedication of the
Association's employees, including the Employee, to their duties for the
Association without the distraction that may arise from the possibility of a
Change of Control of the Association or the Holding Company; and

                  WHEREAS, the Association believes that, by assuring certain
employees, including the Employee, of reasonable financial security in the event
of a Change of Control of the Association or the Holding Company, such employees
will be in a position to perform their duties free from financial self-interest
and in the best interests of the Association and its shareholders; and

                  WHEREAS, for purposes of securing the Employee's services for
the Association, the Board of Directors of the Association ("Board") has
authorized the proper employees of the Association to enter into an employee
retention agreement with the Employee on the terms and conditions set forth
herein; and

                  WHEREAS, the Board of Directors of the Holding Company has
authorized the Holding Company to guarantee the Association's obligations under
such an employee retention agreement; and



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                                       -2-


                  WHEREAS, the Employee is willing to make his services
available to the Association on the terms and conditions set forth herein;

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and obligations hereinafter set forth, the Association, the
Holding Company and the Employee hereby agree as follows:


                  SECTION 1.        EFFECTIVE DATE.

                  (a) This Agreement shall be effective as of the date first
above written and shall remain in effect during the term of this Agreement which
shall be for a period of three (3) years commencing on the date of this
Agreement, plus such extensions as are provided pursuant to section 1(b);
PROVIDED, HOWEVER, that if the term of this Agreement has not otherwise
terminated, the term of this Agreement will terminate on the date of the
Employee's termination of employment with the Association; and PROVIDED,
FURTHER, that the obligations under section 8 of this Agreement shall survive
the term of this Agreement if payments become due hereunder.

                  (b) Prior to each anniversary date of this Agreement, the
Board shall consider the advisability of an extension of the term in light of
the circumstances then prevailing and may, in its discretion, approve an
extension to take effect as of the upcoming anniversary date. If an extension is
approved, the term of this Agreement shall be extended so that it will expire
three (3) years after such anniversary date.

                  (c) Notwithstanding anything herein contained to the contrary:
(i) the Employee's employment with the Association may be terminated at any
time, subject to the terms and conditions of this Agreement; and (ii) nothing in
this Agreement shall mandate or prohibit a continuation of the Employee's
employment following the expiration of the Assurance Period upon such terms and
conditions as the Association and the Employee may mutually agree upon.

                  SECTION 2.        ASSURANCE PERIOD.

                  (a) The assurance period ("Assurance Period") shall be for a
period commencing on the date of a Change of Control, as defined in section 10
of this Agreement, and ending on the second (2nd) anniversary of the date on
which the Assurance Period commences, plus such extensions as are provided
pursuant to the following sentence. The Assurance Period shall be automatically
extended for one (1) additional day each day, unless either the Association or
the Employee elects not to extend the Assurance Period further by giving written
notice to the other party, in which case the Assurance Period shall become fixed
and shall end on the second (2nd) anniversary of the date on which such written
notice is given; PROVIDED, HOWEVER, that if, following a Change of Control, the
Office of Thrift Supervision (or its successor) is the Association's primary
federal regulator, the Agreement shall be subject to extension not more
frequently than annually and only upon review and approval of the Board.



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                                       -3-


                  (b) Upon termination of the Employee's employment with the
Association, any daily extensions provided pursuant to the preceding sentence,
if not theretofore discontinued, shall cease and the remaining unexpired
Assurance Period under this Agreement shall be a fixed period ending on the
later of the second (2nd) anniversary of the date of the Change of Control, as
defined in section 10 of this Agreement, or the second (2nd) anniversary of the
date on which the daily extensions were discontinued.

                  SECTION 3.        DUTIES.

                  During the period of the Employee's employment that falls
within the Assurance Period, the Employee shall: (a) except to the extent
allowed under section 6 of this Agreement, devote his full business time and
attention (other than during weekends, holidays, vacation per iods, and periods
of illness, disability or approved leaves of absence) to the business and
affairs of the Association and use his best efforts to advance the Association's
interests; (b) serve in the position to which the Employee is appointed by the
Association, which, during the Assurance Period, shall be the position that the
Employee held on the day before the Assurance Period commenced or any higher
office at the Association to which he may subsequently be appointed; and (c)
subject to the direction of the Board and the By-laws of the Association, have
such functions, duties, responsibilities and authority commonly associated with
such position.

                  SECTION 4.        COMPENSATION.

                  In consideration for the services rendered by the Employee
during the Assurance Period, the Association shall pay to the Employee during
the Assurance Period a salary at an annual rate equal to the greater of:

                  (a) the annual rate of salary in effect for the Employee on
         the day before the Assurance Period commenced; or

                  (b) such higher annual rate as may be prescribed by or under
         the authority of the Board;

PROVIDED, HOWEVER, that in no event shall the Employee's annual rate of salary
under this Agreement in effect at a particular time during the Assurance Period
be reduced without the Employee's prior written consent. The annual salary
payable under this section 4 shall be subject to review at least once annually
and shall be paid in accordance with the Association's customary payroll
practices. Nothing in this section 4 shall be deemed to prevent the Employee
from receiving additional compensation other than salary for his services to the
Association, or additional compensation for his services to the Holding Company,
upon such terms and conditions as may be prescribed by or under the authority of
the Board or the Board of Directors of the Holding Company.



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                                       -4-


                  SECTION 5.        EMPLOYEE BENEFIT PLANS AND PROGRAMS.

                  Except as otherwise provided in this Agreement, the Employee
shall, during the Assurance Period, be treated as an employee of the Association
and be eligible to participate in and receive benefits under any qualified or
non-qualified defined benefit or defined contribution retirement plan, group
life, health (including hospitalization, medical and major medical), dental,
accident and long term disability insurance plans, and such other employee
benefit plans and programs, including, but not limited to, any incentive
compensation plans or programs (whether or not employee benefit plans or
programs), any stock option and appreciation rights plan, em ployee stock
ownership plan and restricted stock plan, as may from time to time be maintained
by, or cover employees of, the Association, in accordance with the terms and
conditions of such employee benefit plans and programs and compensation plans
and programs and with the Association's customary practices.

                  SECTION 6.        BOARD MEMBERSHIPS.

                  The Employee may serve as a member of the boards of directors
of such business, community and charitable organizations as he may disclose to
and as may be approved by the Board (which approval shall not be unreasonably
withheld), and he may engage in personal business and investment activities for
his own account; PROVIDED, HOWEVER, that such service and personal business and
investment activities shall not materially interfere with the performance of his
duties under this Agreement.

                  SECTION 7.        WORKING FACILITIES AND EXPENSES.

                  During the Assurance Period, the Employee's principal place of
employment shall be at the Association's executive offices at the address first
above written, or at such other location within a 25-mile radios thereof at
which the Association shall maintain its principal executive offices, or at such
other location as the Association and the Employee may mutually agree upon. The
Association shall provide the Employee, at his principal place of employment,
support servic es and facilities suitable to his position with the Association
and necessary or appropriate in connection with the performance of his assigned
duties under this Agreement. The Association shall reimburse the Employee for
his ordinary and necessary business expenses, including, without limitation, the
Employee's travel and entertainment expenses, incurred in connection with the
performance of the Employee's duties under this Agreement, upon presentation to
the Association of an itemized account of such expenses in such form as the
Association may reasonably require.

                  SECTION 8.        TERMINATION OF EMPLOYMENT WITH ASSOCIATION
                                    LIABILITY.

                  (a) In the event that the Employee's employment with the
Association shall terminate during the Assurance Period, or prior to the
commencement of the Assurance Period but within three (3) months of and in
connection with a Change of Control as defined in section 10 of this Agreement,
on account of:



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                                       -5-


                  (i) The Employee's voluntary resignation from employment with
         the Association within ninety (90) days following:

                           (A) the failure of the Association to appoint or
                  re-appoint or elect or re-elect the Employee to serve in the
                  same position in which the Employee was serving on the day
                  before the Assurance Period commenced, or a more senior
                  office;

                           (B) the expiration of a thirty (30) day period
                  following the date on which the Employee gives written notice
                  to the Association of its material failure, whether by
                  amendment of the Association's Organization Certificate or
                  By-laws, action of the Board or the Holding Company's
                  stockholders or otherwise, to vest in the Employee the
                  functions, duties, or responsibilities vested in the Employee
                  on the day before the Assurance Period commenced (or the
                  functions, duties and responsibilities of a more senior office
                  to which the Employee may be appointed), unless during such
                  thirty (30) day period, the Association fully cures such
                  failure;

                           (C) the failure of the Association to cure a material
                  breach of this Agreement by the Association, within thirty
                  (30) days following written notice from the Employee of such
                  material breach;

                           (D) a reduction in the compensation provided to the
                  Employee, or a material reduction in the benefits provided to
                  the Employee under the Association's program of employee
                  benefits, compared with the compensa tion and benefits that
                  were provided to the Employee on the day before the Assurance
                  Period commenced;

                           (E) a change in the Employee's principal place of
                  employment outside of a 25-mile radius of his principal place
                  of employment immediately prior to the Change of Control that
                  would require a relocation of his residence in order to be
                  able to commute to such new place of employment within a
                  one-way commuting time not in excess of the greater of (I) 60
                  minutes or (II) the Employee's commuting time immediately
                  prior to such change; or

                  (ii) the discharge of the Employee by the Association for any
         reason other than for "cause" as provided in section 9(a);

then, subject to section 21, the Association shall provide the benefits and pay
to the Employee the amounts provided for under section 8(b) of this Agreement;
PROVIDED, HOWEVER, that if benefits or payments become due hereunder as a result
of the Employee's termination of employment prior to the commencement of the
Assurance Period, the benefits and payments provided for under section 8(b) of
this Agreement shall be determined as though the Employee had remained in the


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                                       -6-


service of the Association (upon the terms and conditions in effect at the time
of his actual termination of service) and had not terminated employment with the
Association until the date on which the Employee's Assurance Period would have
commenced.

                  (b) Upon the termination of the Employee's employment with the
Association under circumstances described in section 8(a) of this Agreement, the
Association shall pay and provide to the Employee (or, in the event of the
Employee's death, to the Employee's estate):

                  (i) the Employee's earned but unpaid compensation (including,
         without limitation, all items which constitute wages under applicable
         law and the payment of which is not otherwise provided for under this
         section 8(b)) as of the date of the termination of the Employee's
         employment with the Association, such payment to be made at the time
         and in the manner prescribed by law applicable to the payment of wages
         but in no event later than thirty (30) days after termination of
         employment;

                  (ii) the benefits, if any, to which the Employee is entitled
         as a former employee under the employee benefit plans and programs and
         compensation plans and programs maintained for the benefit of the
         Association's officers and employees;

                  (iii) continued group life, health (including hospitalization,
         medical and major medical), dental, accident and long-term disability
         insurance benefits, in addition to that provided pursuant to section
         8(b)(ii) and after taking into account the coverage provided by any
         subsequent employer, if and to the extent necessary to provide for the
         Employee, for the remaining unexpired Assurance Period, coverage
         equivalent to the coverage to which the Employee would have been enti
         tled under such plans (as in effect on the date of his termination of
         employment, or, if his termination of employment occurs after a Change
         of Control, on the date of such Change of Control, whichever benefits
         are greater) if the Employee had con tinued working for the Association
         during the remaining unexpired Assurance Period at the highest annual
         rate of compensation achieved during the Employee's period of actual
         employment with the Association, it being understood that the
         Employee's "qualifying event" for purposes of continuation coverage
         under the Consolidated Budget Reconciliation Act ("COBRA") shall occur
         at the expiration of this period;

                  (iv) within thirty (30) days following the Employee's
         termination of employment with the Association, a lump sum payment, in
         an amount equal to the present value of the salary that the Employee
         would have earned if the Employee had continued working for the
         Association during the remaining unexpired Assurance Period at the
         highest annual rate of salary achieved during the Employee's period of
         employment with the Association beginning three years before the date
         of the Change of Control and ending on the date of termination of


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                                       -7-


         employment, where such present value is to be determined using a
         discount rate equal to the applicable short-term federal rate
         prescribed under section 1274(d) of the Internal Revenue Code of 1986
         ("Code"), compounded using the compounding periods corresponding to the
         Association's regular payroll periods for its employees, such lump sum
         to be paid in lieu of all other payments of salary provided for under
         this Agreement in respect of the period following any such termination;

                  (v) within thirty (30) days following the Employee's
         termination of employment with the Association, a lump sum payment in
         an amount equal to the excess, if any, of:

                           (A) the present value of the aggregate benefits to
                  which the Employee would be entitled under any and all
                  qualified and non-qualified defined benefit pension plans
                  maintained by, or covering employees of, the Association if
                  the Employee were 100% vested thereunder and had con tinued
                  working for the Association during the remaining unexpired
                  Assurance Period, such benefits to be determined as of the
                  date of termination of employment by adding to the service
                  actually recognized under such plans an additional period
                  equal to the remaining unexpired Assurance Period and by
                  adding to the compensation recognized under such plans for the
                  year in which termination of employment occurs all amounts
                  payable under sections 8(b)(i) and (vii); over

                           (B) the present value of the benefits to which the
                  Employee is actually entitled under such defined benefit
                  pension plans as of the date of his termination;

         where such present values are to be determined using the mortality
         tables prescribed under section 415(b)(2)(E)(v) of the Code and a
         discount rate, compounded monthly, equal to the annualized rate of
         interest prescribed by the Pension Benefit Guaranty Corporation for the
         valuation of immediate annuities payable under terminating
         single-employer defined benefit plans for the month in which the
         Employee's termination of employment occurs ("Applicable PBGC Rate");
         and

                  (vi) within thirty (30) days following his termination of
         employment with the Association, a lump sum payment in an amount equal
         to the present value of the additional employer contributions (or if
         greater in the case of a leveraged employee stock ownership plan or
         similar arrangement, the additional assets allocable to him through
         debt service, based on the fair market value of such assets at
         termination of employment) to which he would have been entitled under
         any and all qualified and non-qualified defined contribution plans
         maintained by, or covering employees of, the Association, as if he were
         100% vested thereunder and had continued


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                                       -8-


         working for the Association during the Remaining Unexpired Employment
         Period at the highest annual rate of compensation achieved during that
         portion of the Employment Period which is prior to the Employee's
         termination of employment with the Association, and making the maximum
         amount of employee contributions, if any, required under such plan or
         plans, such present value to be determined on the basis of a discount
         rate, compounded using the compounding period that corresponds to the
         frequency with which employer contributions are made to the relevant
         plan, equal to the Applicable PBGC Rate; and

                  (vii) the payments that would have been made to the Employee
         under any cash bonus or long-term or short-term cash incentive
         compensation plan maintained by, or covering employees of, the
         Association, if he had continued working for the Association during the
         remaining unexpired Assurance Period and had earned in each calendar
         year that ends during the remaining unexpired Assurance Period a bonus
         in an amount equal to the highest annual bonus or incentive award
         actually paid to him in any calendar year ending during the period
         beginning three years prior to the Change of Control and ending on the
         date of termination of employment.

The Association and the Employee hereby stipulate that the damages which may be
incurred by the Employee following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 8(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to the Employee's efforts, if any, to
mitigate damages.

                  SECTION 9.        TERMINATION WITHOUT ADDITIONAL ASSOCIATION
                                    LIABILITY.

                  In the event that the Employee's employment with the
Association shall terminate during the Assurance Period on account of:

                  (a) the discharge of the Employee for "cause," which, for
purposes of this Agreement shall mean 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 any material breach of this Agreement, in each case as
measured against standards generally prevailing at the relevant time in the
savings and community banking industry; PROVIDED, HOWEVER, that the Employee
shall not be deemed to have been discharged for cause unless and until the
following procedures shall have been followed:

                           (i) the Board shall adopt a resolution duly approved
                  by affirmative vote of a majority of the entire Board at a
                  meeting called and held for such purpose calling for the
                  Employee's termination for cause and


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                                       -9-


                  setting forth the purported grounds for such termination
                  ("Proposed Termination Resolution");

                           (ii) as soon as practicable, and in any event within
                  five (5) days, after adoption of such resolution, the Board
                  shall furnish to the Employee a written notice of termination
                  which shall be accompanied by a certified copy of the Proposed
                  Termination Resolution ("Notice of Proposed Termination");

                           (iii) the Employee shall be afforded a reasonable
                  opportunity to make oral and written presentations to the
                  members of the Board, on his own behalf, or through a
                  representative, who may be his legal counsel, to refute the
                  grounds set forth in the Proposed Termination Resolution at
                  one or more meetings of the Board to be held no sooner than
                  fifteen (15) days and no later than thirty (30) after the
                  Employee's receipt of the Proposed Termination Notice
                  ("Termination Hearings"); and

                           (iv) within ten (10) days following the end of the
                  Termination Hearings, the Board shall adopt a resolution duly
                  approved by affirmative vote of a majority of the entire Board
                  at a meeting called and held for such purpose (A) finding that
                  in the good faith opinion of the Board the grounds for
                  termination set forth in the Proposed Termination Resolution
                  exist and (B) terminating the Employee's employment
                  ("Termination Resolution"); and

                           (v) as promptly as practicable, and in any event
                  within one (1) business day after adoption of the Termination
                  Resolution, the Board shall furnish to the Employee written
                  notice of termination, which notice shall include a copy of
                  the Termination Resolution and specify an effective date of
                  termination that is not later than the date on which such
                  notice is given;

                  (b) the Employee's voluntary resignation from employment with
the Association for reasons other than those specified in section 8(a)(i); or

                  (c) the Employee's death; or

                  (d) a determination that the Employee is eligible for
long-term disability benefits under the Association's long-term disability
insurance program or, if there is no such program, under the federal Social
Security Act;

then the Association shall have no further obligations under this Agreement,
other than the payment to the Employee (or, in the event of his death, to his
estate) of his earned but unpaid salary as of the date of the termination of his
employment, and the provision of such other benefits, if any, to which the
Employee is entitled as a former employee under the employee


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                                      -10-


benefit plans and programs and compensation plans and programs maintained by, or
covering employees of, the Association.

                  (e) For purposes of section 9(a), no act or failure to act, on
the part of the Employee, shall be considered "willful" unless it is done, or
omitted to be done, by the Employee in bad faith or without reasonable belief
that the Employee's action or omission was in the best interests of the
Association. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the written advice of
counsel for the Association shall be conclusively presumed to be done, or
omitted to be done, by the Employee in good faith and in the best interests of
the Association. The cessation of employment of the Employee shall not be deemed
to be for "cause" within the meaning of section 9(a) unless and until there
shall have been delivered to Employee a copy of a resolution duly adopted by the
affirmative vote of three-fourths of the non-employee members of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
is provided to Employee and Employee is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, Employee is guilty of the conduct described in section 9(a) above,
and specifying the particulars thereof in detail.

                  SECTION 10.       CHANGE OF CONTROL.

                  (a) A Change of Control of the Association ("Change of
Control") shall be deemed to have occurred upon the happening of any of the
following events:

                  (i) approval by the stockholders of the Association of a
         transaction that would result in the reorganization, merger or
         consolidation of the Association, respectively, with one or more other
         persons, other than a transaction following which:

                           (A) at least 51% of the equity ownership interests of
                  the entity resulting from such transaction are beneficially
                  owned (within the meaning of Rule 13d-3 promulgated under the
                  Securities Exchange Act of 1934, as amended "Exchange Act") in
                  substantially the same relative proportions by persons who,
                  immediately prior to such transaction, beneficially owned
                  (within the meaning of Rule 13d-3 promulgated under the
                  Exchange Act) at least 51% of the outstanding equity ownership
                  interests in the Association; and

                           (B) at least 51% of the securities entitled to vote
                  generally in the election of directors of the entity resulting
                  from such transaction are beneficially owned (within the
                  meaning of Rule 13d-3 promulgated under the Exchange Act) in
                  substantially the same relative proportions by persons who,
                  immediately prior to such transaction, beneficially owned
                  (within the meaning of Rule 13d-3 promulgated under the
                  Exchange Act) at least 51%


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                                      -11-


                  of the securities entitled to vote generally in the election
                  of directors of the Association;

                  (ii) the acquisition of substantially all of the assets of the
         Association or beneficial ownership (within the meaning of Rule 13d-3
         promulgated under the Exchange Act) of 25% or more of the outstanding
         securities of the Association entitled to vote generally in the
         election of directors by any person or by any persons acting in
         concert, or approval by the stockholders of the Association of any
         transaction which would result in an acquisition; or

                  (iii) a complete liquidation or dissolution of the
         Association, or approval by the stockholders of the Association of a
         plan for such liquidation or dissolution;

                  (iv) the occurrence of any event if, immediately following
         such event, at least fifty percent (50%) of the members of the board of
         directors of the Association do not belong to any of the following
         groups:

                           (A) individuals who were members of the board of
                  directors of the Association on the date of this Agreement; or

                           (B) individuals who first became members of the board
                  of directors of the Association after the date of this
                  Agreement either:

                                    (I) upon election to serve as a member of
                           the such board by affirmative vote of three-quarters
                           (3/4) of the members of such board, or a nominating
                           committee thereof, in office at the time of such
                           first election; or

                                    (II) upon election by the stockholders of
                           the Association to serve as a member of such board,
                           but only if nominated for election by affirmative
                           vote of three-quarters (3/4) of the members of such
                           board, or of a nominating committee thereof, in
                           office at the time of such first nomination;

         PROVIDED, HOWEVER, that such individual's election or nomination did
         not result from an actual or threatened election contest (within the
         meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange
         Act) or other actual or threatened solicitation of proxies or consents
         (within the meaning of Rule 14a-11 of Regulation 14A promulgated under
         the Exchange Act) other than by or on behalf of the Board of the
         Association;

                  (v) any event which would be described in section 10(a)(i),
         (ii), (iii) or (iv) if the term "Holding Company" were substituted for
         the term "Association" therein.


<PAGE>


                                      -12-


                  (b) In no event, however, shall a Change of Control be deemed
to have occurred as a result of any acquisition of securities or assets of the
Holding Company, the Association or any subsidiary of either of them, by the
Holding Company, the Association or any subsidiary of either of them, or by any
employee benefit plan maintained by any of them. For purposes of this section
10, the term "person" shall have the meaning assigned to it under sections
13(d)(3) or 14(d)(2) of the Exchange Act.

                  SECTION 11.       NO EFFECT ON EMPLOYEE BENEFIT PLANS OR
                                    PROGRAMS.

                  The termination of the Employee's employment during the
Assurance Period or thereafter, whether by the Association or by the Employee,
shall have no effect on the rights and obligations of the parties hereto under
the Association's Pension Plan, group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability insurance
plans or such other employee benefit plans or programs, or compensation plans or
programs (whether or not employee benefit plans or programs) and any defined
contribution plan, employee stock ownership plan, stock option and appreciation
rights plan, and restricted stock plan, as may be maintained by, or cover
employees of, the Association from time to time; PROVIDED, HOWEVER, that nothing
in this Agreement shall be deemed to duplicate any compensation or benefits
provided under any agreement, plan or program covering the Employee to which the
Association or the Holding Company is a party and any duplicative amount payable
under any such agreement, plan or program shall be applied as an offset to
reduce the amounts otherwise payable hereunder.

                  SECTION 12.       SUCCESSORS AND ASSIGNS.

                  This Agreement will inure to the benefit of and be binding
upon the Employee, his legal representatives and testate or intestate
distributees, and the Association and the Holding Company, their respective
successors and assigns, including any successor by merger or consolidation or a
statutory receiver or any other person or firm or corporation to which all or
substantially all of the respective assets and business of the Association or
the Holding Company may be sold or otherwise transferred.

                  SECTION 13.       NOTICES.

                  Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:



<PAGE>


                                      -13-


                  If to the Employee:

                           David G. Towe
                           10N768 Williamsburg
                           Elgin, Illinois 60123


                  If to the Association:

                           Home Federal Savings and Loan Association
                           16 North Spring Street
                           Elgin, Illinois  60120

                           Attention:  CORPORATE SECRETARY


                  WITH A COPY TO:

                           Thacher Proffitt & Wood
                           Two World Trade Center
                           New York, New York 10048

                           Attention:  W. EDWARD BRIGHT, ESQ.


                  If to the Holding Company:

                           Home Bancorp of Elgin, Inc.
                           16 North Spring Street
                           Elgin, Illinois  60120

                           Attention:  BOARD OF DIRECTORS


                  WITH A COPY TO:

                           Thacher Proffitt & Wood
                           Two World Trade Center
                           New York, New York 10048

                           Attention:  W. EDWARD BRIGHT, ESQ.



<PAGE>


                                      -14-


                  SECTION 14.       INDEMNIFICATION AND ATTORNEYS' FEES.

                  The Association shall indemnify, hold harmless and defend the
Employee against reasonable costs, including legal fees, incurred by the
Employee in connection with or arising out of any action, suit or proceeding in
which the Employee may be involved, as a result of the Employee's efforts, in
good faith, to defend or enforce the terms of this Agreement; provided, however,
that the Employee shall have substantially prevailed on the merits pursuant to a
judgment, decree or order of a court of competent jurisdiction or of an
arbitrator in an arbitration proceeding, or in a settlement. For purposes of
this Agreement, any settlement agreement which provides for payment of any
amounts in settlement of the Association's obligations hereunder shall be
conclusive evidence of the Employee's entitlement to indemnification hereunder,
and any such indemnification payments shall be in addition to amounts payable
pursuant to such settlement agreement, unless such settlement agreement
expressly provides otherwise. This provision shall be inoperative if and to the
extent that, but only if and to the extent that, it shall be determined that
compliance herewith would violate any applicable law or regulation.

                  SECTION 15.       SEVERABILITY.

                  A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.

                  SECTION 16.       WAIVER.

                  Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.

                  SECTION 17.       COUNTERPARTS.

                  This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.

                  SECTION 18.       GOVERNING LAW.

                  This Agreement shall be governed by and construed and enforced
in accordance with the federal laws of the United States, and in the absence of
controlling federal law, the laws of the State of Illinois, without reference to
conflicts of law principles.



<PAGE>


                                      -15-


                  SECTION 19.       HEADINGS AND CONSTRUCTION.

                  The headings of sections in this Agreement are for convenience
of reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this Agreement,
unless otherwise stated.

                  SECTION 20.       ENTIRE AGREEMENT; MODIFICATIONS.

                  This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or rep resentations relating to the subject
matter hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.

                  SECTION 21.       REQUIRED REGULATORY PROVISIONS.

                  The following provisions are included for the purposes of
complying with various laws, rules and regulations applicable to the
Association:

                  (a) Notwithstanding anything herein contained to the contrary,
         in no event shall the aggregate amount of compensation payable to the
         Employee under section 8(b) hereof (exclusive of amounts described in
         section 8(b)(i)) exceed the lesser of (i) three times the Employee's
         average annual total compensation for the last five consecutive
         calendar years to end prior to his termination of employment with the
         Association (or for his entire period of employment with the
         Association if less than five calendar years) and (ii) the maximum
         amount that may be paid without producing an "excess parachute payment"
         (as such term is defined in section 280G of the Code or any successor
         provision), the applicability of such provision to the Employee and any
         such maximum amount to be determined in good faith by the firm of
         independent certified public accountants regularly retained to audit
         the Association's books and records.

                  (b) Notwithstanding anything herein contained to the contrary,
         any payments to the Employee by the Association, whether pursuant to
         this Agreement or otherwise, are subject to and conditioned upon their
         compliance with section 18(k) of the Federal Deposit Insurance Act
         ("FDI Act"), 12 U.S.C. ss.1828(k), and any regulations promulgated
         thereunder.

                  (c) Notwithstanding anything herein contained to the contrary,
         if the Employee is suspended from office and/or temporarily prohibited
         from participating in the conduct of the affairs of the Association
         pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI
         Act, 12 U.S.C. ss.1818(e)(3) or 1818(g)(1), the Association's
         obligations under this Agreement shall be suspended as of the date of
         service of such notice, unless stayed by appropriate proceedings. If
         the charges in such notice are dismissed, the Association, in its
         discretion, may


<PAGE>


                                      -16-


         (i) pay to the Employee all or part of the compensation withheld while
         the Association's obligations hereunder were suspended and (ii)
         reinstate, in whole or in part, any of the obligations which were
         suspended.

                  (d) Notwithstanding anything herein contained to the contrary,
         if the Employee is removed and/or permanently prohibited from
         participating in the conduct of the Association's affairs by an order
         issued under section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C.
         ss.1818(e)(4) or (g)(1), all prospective obligations of the Association
         under this Agreement shall terminate as of the effective date of the
         order, but vested rights and obligations of the Association and the
         Employee shall not be affected.

                  (e) Notwithstanding anything herein contained to the contrary,
         if the Association is in default (within the meaning of section 3(x)(1)
         of the FDI Act, 12 U.S.C. ss.1813(x)(1), all prospective obligations of
         the Association under this Agreement shall terminate as of the date of
         default, but vested rights and obligations of the Association and the
         Employee shall not be affected.

                  (f) Notwithstanding anything herein contained to the contrary,
         all prospective obligations of the Association hereunder shall be
         terminated, except to the extent that a continuation of this Agreement
         is necessary for the continued operation of the Association: (i) by the
         Director of the Office of Thrift Supervision ("OTS") or his designee at
         the time the Federal Deposit Insurance Corporation enters into an
         agreement to provide assistance to or on behalf of the Association
         under the authority contained in section 13(c) of the FDI Act, 12
         U.S.C. ss.1823(c); (ii) by the Director of the OTS or his designee at
         the time such Director or designee approves a supervisory merger to
         resolve problems related to the operation of the Association or when
         the Association is determined by such Director to be in an unsafe or
         unsound condition. The vested rights and obligations of the parties
         shall not be affected.

If and to the extent that any of the foregoing provisions shall cease to be
required or apply by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.

                  SECTION 22.       GUARANTY.

                  The Holding Company hereby irrevocably and unconditionally
guarantees to the Employee the payment of all amounts, and the performance of
all other obligations, due from the Association in accordance with the terms of
this Agreement as and when due without any requirement of presentment, demand of
payment, protest or notice of dishonor or nonpayment.




<PAGE>


                                      -17-


                  IN WITNESS WHEREOF, the Association and the Holding Company
have caused this Agreement to be executed and the Employee has hereunto set his
hand, all as of the day and year first above written.



                                      /s/ David G. Towe
                                      ------------------------------------------
                                          DAVID G. TOWE



ATTEST:                               HOME FEDERAL SAVINGS AND LOAN
                                       ASSOCIATION OF ELGIN



By /s/ Kathleen A. Schroeder
   -------------------------
       Secretary                     By /s/ Leigh C. O'Connor
                                       ----------------------------------------
                                        NAME:  Leigh C. O'Connor
                                        TITLE: Chairman, Compensation Committee

[Seal]



ATTEST:                               HOME BANCORP OF ELGIN, INC.



By /s/ Kathleen A. Schroeder
   -------------------------
       Secretary                     By /s/ Leigh C. O'Connor
                                       ----------------------------------------
                                        NAME:  Leigh C. O'Connor
                                        TITLE: Chairman, Compensation Committee

[Seal]


<PAGE>


                                      -18-


STATE OF ILLINOIS                   )
                                    : ss.:
COUNTY OF                           )

                  On this 15th day of January, 1998, before me personally came
David G. Towe, to me known, and known to me to be the individual described in
the foregoing instrument, who, being by me duly sworn, did depose and say that
he resides at the address set forth in said instrument, and that he signed his
name to the foregoing instrument.



                                   /s/ Ruth E. Bart
                                   ------------------------------
                                       Notary Public


          [Seal]


STATE OF ILLINOIS                   )
                                    : ss.:
COUNTY OF                           )

                  On this 15th day of January, 1998 before me personally came
LEIGH C. O'CONNOR, to me known, who, being by me duly sworn, did depose and say
that he resides at 366 Hamilton Ave., Elgin, IL 60123, that he is a member of
the Board of Directors of Home Federal Savings and Loan Association of Elgin,
the savings association described in and which executed the foregoing
instrument; that he knows the seal of said savings association; that the seal
affixed to said instrument is such seal; that it was so affixed by authority of
the Board of Directors of said savings association; and that he signed his name
thereto by like authority.


                                   /s/ Ruth E. Bart
                                   ------------------------------
                                       Notary Public


          [Seal]


STATE OF ILLINOIS                   )
                                    : ss.:
COUNTY OF                           )

                  On this 15th day of January, 1998, before me personally came
LEIGH C. O'CONNOR, to me known, who, being by me duly sworn, did depose and say
that he resides at 366 Hamilton Ave., Elgin, IL 60123, that he is a member of
the Board of Directors of Home Bancorp of Elgin, Inc., the corporation described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such seal; that it was
so affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.



                                   /s/ Ruth E. Bart
                                   ------------------------------
                                       Notary Public


          [Seal]