Document:

FIRST FEDERAL BANK
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

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                               First Federal Bank
                     Supplemental Executive Retirement Plan

                                Table of Contents

Article I - Introduction................................................. 1

Article II - Definitions................................................. 2

Article III - Eligibility and Participation.............................. 5

Article IV - Benefits.................................................... 6

Article V - Accounts..................................................... 8

Article VI - Supplemental Benefit Payments............................... 9

Article VII - Claims Procedures..........................................10

Article VIII - Amendment and Termination.................................12

Article IX - General Provisions..........................................13

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                                    Article I
                                  Introduction

Section 1.01 Purpose, Design and Intent.

(a)  The purpose of the First  Federal Bank  Supplemental  Executive  Retirement
     Plan (the  "Plan") is to assist  First  Federal  Bank (the  "Bank") and its
     affiliates  in  retaining  the  services  of  key  employees   until  their
     retirement,  to induce such  employees to use their best efforts to enhance
     the  business  of the  Bank  and its  affiliates,  and to  provide  certain
     supplemental retirement benefits to such employees.

(b)  The Plan, in relevant  part, is intended to constitute an unfunded  "excess
     benefit plan" as defined in Section 3(36) of the Employee Retirement Income
     Security Act of 1974, as amended. In this respect, the Plan is specifically
     designed to provide  certain key employees  with  retirement  benefits that
     would have been  provided  under  various  tax-qualified  retirement  plans
     sponsored by the Bank but for the applicable limitations placed on benefits
     and  contributions  under such plans by various  provisions of the Internal
     Revenue Code of 1986, as amended.

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                                   Article II
                                   Definitions

Section 2.01 Definitions.  In this Plan, whenever the context so indicates,  the
singular or the plural  number and the  masculine  or feminine  gender  shall be
deemed to include the other,  the terms "he," "his," and "him," shall refer to a
Participant or a beneficiary of a Participant,  as the case may be, and,  except
as otherwise provided, or unless the context otherwise requires, the capitalized
terms shall have the following meanings:

(a) "Affiliate" means any corporation,  trade or business, which, at the time of
reference,  is  together  with the  Bank,  a  member  of a  controlled  group of
corporations,  a group of trades or  businesses  (whether  or not  incorporated)
under common control,  or an affiliated  service group, as described in Sections
414(b), 414(c), and 414(m) of the Code, respectively,  or any other organization
treated as a single employer with the Bank under Section 414(o) of the Code.

(b) "Applicable Limitations" means one or more of the following, as applicable:

     (i)  the maximum limitations on annual additions to a tax-qualified defined
          contribution plan under Section 415(c) of the Code; and

     (ii) the maximum  limitation on the annual amount of compensation that may,
          under  Section  401(a)(17)  of the  Code,  be taken  into  account  in
          determining contributions to and benefits under tax-qualified plans.

(c) "Bank" means First Federal Bank, and its successors.

(d) "Board of Directors" means the Board of Directors of the Bank.

(e) "Change in Control" means, with respect to the Bank or the Company, an event
of a nature that:  (i) would be required to be reported in response to Item 1(a)
of the current report on Form 8-K, as in effect on the date hereof,  pursuant to
Section 13 or 15(d) of the Exchange  Act; or (ii) results in a Change in Control
of the Bank or the Company  within the meaning of the Home  Owners'  Loan Act of
1933,  as  amended,  the  Federal  Deposit  Insurance  Act,  and the  Rules  and
Regulations  promulgated by the Office of Thrift Supervision (or its predecessor
agency) ("OTS), as in effect on the date hereof (provided,  that in applying the
definition of change in control as set forth under the rules and  regulations of
the OTS, the Trustees shall  substitute  their judgment for that of the OTS); or
(iii)  without  limitation  such a Change  in  Control  shall be  deemed to have
occurred at such time as (A) any "person" (as the term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial  owner" (as defined
in Rule  13d-3  under the  Exchange  Act),  directly  or  indirectly,  of voting
securities of the Bank or the Company  representing 20% or more of the Bank's or
the Company's  outstanding voting securities or right to acquire such securities
except for any voting  securities  of the Bank  purchased by the Company and any
voting  securities  purchased by any employee benefit plan of the Company or its
subsidiaries; or (B) individuals who constitute the

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board of directors of the Bank on the date hereof (the "Incumbent  Board") cease
for any reason to  constitute  at least a majority  thereof,  provided  that any
person  becoming a director  subsequent  to the date hereof  whose  election was
approved by a vote of at least  three-quarters  of the directors  comprising the
Incumbent Board (or members who were nominated by the Incumbent Board), or whose
nomination  for  election  by  the  Company's  stockholders  was  approved  by a
Nominating  Committee  solely  composed  of members  which are  Incumbent  Board
members (or members who were  nominated by the Incumbent  Board),  shall be, for
purposes  of this  clause  (B),  considered  as  though  he were a member of the
Incumbent Board; or (C) a plan of reorganization, merger, consolidation, sale of
all or  substantially  all the  assets  of the Bank or the  Company  or  similar
transaction  occurs or is  effectuated  in which the Bank or  Company is not the
resulting  entity;  provided,  however,  that such an event listed above will be
deemed to have  occurred  or to have been  effectuated  upon the  receipt of all
required federal  regulatory  approvals not including the lapse of any statutory
waiting  periods;  or (D) a proxy  statement  has  been  distributed  soliciting
proxies  from  stockholders  of the Company,  by someone  other than the current
management  of  the  Company,   seeking  stockholder   approval  of  a  plan  of
reorganization,  merger or consolidation of the Company or Bank with one or more
corporations  as a result  of  which  the  outstanding  shares  of the  class of
securities  then  subject  to such  plan or  transaction  are  exchanged  for or
converted into cash or property or securities  not issued by the  Institution or
the  Company  shall be  distributed;  or (E) a tender  offer is made by a person
other than the Company for 20% or more of the voting  securities  of the Bank or
Company then outstanding.

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

(g)  "Committee"  means the  person(s)  designated  by the  Board of  Directors,
pursuant to Section 9.02 of the Plan, to administer the Plan.

(h) "Common Stock" means the common stock of the Company.

(i) "Company" means First Federal Bancshares, Inc. and its successors.

(j) "Eligible  Individual"  means any Employee who  participates in the ESOP and
whom the Board of Directors  determines  is one of a "select group of management
or  highly  compensated  employees,"  as such  phrase  is used for  purposes  of
Sections 101, 201, and 301 of ERISA.

(k) "Employee" means any person employed by the Bank or an Affiliate.

(l) "Employer" means the Bank or Affiliate that employs the Employee.

(m) "ERISA"  means the  Employee  Retirement  Income  Security  Act of 1974,  as
amended.

(n) "ESOP" means the First  Federal  Bank  Employee  Stock  Ownership  Plan,  as
amended from time to time.

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(o) "ESOP  Acquisition  Loan" means a loan or other extension of credit incurred
by the trustee of the ESOP in  connection  with the  purchase of Common Stock on
behalf of the ESOP.

(p) "ESOP Valuation Date" means any day as of which the investment experience of
the trust fund of the ESOP is determined  and  individuals'  accounts  under the
ESOP are adjusted accordingly.

(q) "Effective Date" means January 1, 2000.

(r)  "Participant"  means an Eligible Employee who is entitled to benefits under
the Plan.

(s) "Plan" means this First Federal Bank Supplemental Executive Retirement Plan.

(t)  "Supplemental  ESOP Account"  means an account  established by an Employer,
pursuant  to  Section  5.01  of  the  Plan,  with  respect  to  a  Participant's
Supplemental ESOP Benefit.

(u)  "Supplemental  ESOP  Benefit"  means the benefit  credited to a Participant
pursuant to Section 4.01 of the Plan.

(v) "Supplemental  Stock Ownership  Account" means an account  established by an
Employer,  pursuant to Section 5.02 of the Plan, with respect to a Participant's
Supplemental Stock Ownership Benefit.

(w)  "Supplemental  Stock  Ownership  Benefit"  means the benefit  credited to a
Participant pursuant to Section 4.02 of the Plan.

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                                   Article III
                          Eligibility and Participation

Section 3.01 Eligibility and Participation.

(a)  Each Eligible  Employee may  participate in the Plan. An Eligible  Employee
     shall  become a  Participant  in the Plan upon  designation  as such by the
     Board of  Directors.  An  Eligible  Employee  whom the  Board of  Directors
     designates as a Participant in the Plan shall commence  participation as of
     the date  established  by the Board of  Directors.  The Board of  Directors
     shall establish an Eligible  Employee's date of  participation  at the same
     time it designates the Eligible Employee as a Participant in the Plan.

(b)  The Board of Directors may, at any time,  designate an Eligible Employee as
     a  Participant  for any or all  supplemental  benefits  provided  for under
     Article IV of the Plan.

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                                   Article IV
                                    Benefits

Section 4.01 Supplemental ESOP Benefit.

As of the last day of each plan year of the ESOP,  the Employer shall credit the
Participant's  Supplemental  ESOP Account with a Supplemental ESOP Benefit equal
to the excess of (a) over (b), where:

(a)  Equals the annual  contributions  made by the Employer and/or the number of
     shares of Common  Stock  released for  allocation  in  connection  with the
     repayment of an ESOP  Acquisition Loan that would otherwise be allocated to
     the accounts of the Participant under the ESOP for the applicable plan year
     if the  provisions of the ESOP were  administered  without regard to any of
     the Applicable Limitations; and

(b)  Equals the annual  contributions  made by the Employer and/or the number of
     shares of common  stock  released for  allocation  in  connection  with the
     repayment of an ESOP  Acquisition  Loan that are actually  allocated to the
     accounts  of the  Participant  under  the  provisions  of the ESOP for that
     particular  plan  year  after  giving  effect  to  any  reduction  of  such
     allocation  required by the  limitations  imposed by any of the  Applicable
     Limitations.

Section 4.02 Supplemental Stock Ownership Benefit.

(a)  Upon a Change in Control,  the Employer  shall credit to the  Participant's
     Supplemental Stock Ownership Account a Supplemental Stock Ownership Benefit
     equal to (i) less (ii), the result of which is multiplied by (iii), where:

     (i)  Equals the total  number of shares of Common Stock  acquired  with the
          proceeds of all ESOP  Acquisition  Loans (together with any dividends,
          cash proceeds, or other medium related to such ESOP Acquisition Loans)
          that would have been  allocated  or  credited  for the  benefit of the
          Participant  under the ESOP and/or this Plan,  as the case may be, had
          the  Participant  continued in the employ of the Employer  through the
          first ESOP  Valuation  Date  following the last  scheduled  payment of
          principal and interest on all ESOP  Acquisition  Loans  outstanding at
          the time of the Change in Control; and

     (ii) Equals the total  number of shares of Common Stock  acquired  with the
          proceeds of all ESOP  Acquisition  Loans (together with any dividends,
          cash proceeds, or other medium related to such ESOP Acquisition Loans)
          and allocated for the benefit of the Participant under the ESOP and/or
          this  Plan,  as the case may be, as of the first ESOP  Valuation  Date
          following the Change in Control; and

    (iii) Equals the fair market  value of Common  Stock  immediately  preceding
          the Change in Control.

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(b)  For purposes of clause:  (i) of subsection  (a) of this Section  4.02,  the
     total number of shares of Common Stock shall be determined  by  multiplying
     the sum of (i) and (ii) by (iii), where:

     (i)  equals the average of the total shares of Common Stock  acquired  with
          the proceeds of an ESOP Acquisition Loan and allocated for the benefit
          of the  Participant  under  the  ESOP as of  three  most  recent  ESOP
          Valuation  Dates  preceding the Change in Control (or lesser number if
          the  Participant  has not  participated  in the  ESOP for  three  full
          years);

     (ii) equals the average  number of shares of Common  Stock  credited to the
          Participant's Supplemental ESOP Account for the three most recent plan
          years of the ESOP (such that the three recent plan years coincide with
          the three most recent ESOP Valuation  Dates referred to in (i) above);
          and

    (iii) equals the original  number of scheduled  annual  payments on the ESOP
          Acquisition Loans.

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                                    Article V
                                    Accounts

Section 5.01 Supplemental ESOP Benefit Account.

For each  Participant who is credited with a benefit pursuant to Section 4.01 of
the Plan, the Employer shall establish,  as a memorandum account on its books, a
Supplemental  ESOP  Account.  Each  year,  the  Committee  shall  credit  to the
Participant's  Supplemental ESOP Account the amount of benefits determined under
Section 4.01 of the Plan for that year.  The Committee  shall credit the account
with an amount  equal to the  appropriate  number  of shares of Common  Stock or
other  medium  of  contribution  that  would  have  otherwise  been  made to the
Participant's  accounts  under the ESOP but for the  limitations  imposed by the
Code.  Shares of Common Stock shall be valued under this Plan in the same manner
as under the ESOP. Cash contributions  credited to a Participant's  Supplemental
ESOP Account  shall be credited  annually  with  interest at a rate equal to the
combined weighted return provided to the Participant's  non-stock accounts under
the ESOP.

Section 5.02 Supplemental Stock Ownership Account.

The  Employer  shall  establish,  as  a  memorandum  account  on  its  books,  a
Supplemental  Stock Ownership Account.  Upon a Change in Control,  the Committee
shall  credit to the  Participant's  Supplemental  Stock  Ownership  Account the
amount of benefits  determined  under  Section 4.02 of the Plan.  The  Committee
shall  credit the  account  with an amount  equal to the  appropriate  number of
shares of Common Stock or other medium of contribution that would have otherwise
been made to the  Participant's  accounts under the ESOP. Shares of Common Stock
shall be  valued  under  this Plan in the same  manner  as under the ESOP.  Cash
contributions  credited to a Participant's  Supplemental Stock Ownership Account
shall be  credited  annually  with  interest  at a rate  equal  to the  combined
weighted return provided to the Participant's non-stock accounts under the ESOP.

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                                   Article VI
                          Supplemental Benefit Payments

Section 6.01 Payment of Supplemental ESOP Benefit.

(a)  A Participant's  Supplemental ESOP Benefit shall be paid to the Participant
     or in the event of the Participant's death, to his beneficiary, in the same
     form,  time and medium  (i.e.,  cash and/or  shares of Common Stock) as his
     benefits are paid under the ESOP.

(b)  A Participant shall have a  non-forfeitable  right to the Supplemental ESOP
     Benefit credited to him under this Plan in the same percentage as he has to
     benefits  allocated to him under the ESOP at the time the  benefits  become
     distributable to him under the ESOP.

Section 6.02 Payment of Supplemental Stock Ownership Benefit.

(a)  A Participant's  Supplemental  Stock Ownership Benefit shall be paid to the
     Participant or in the event of the Participant's death, to his beneficiary,
     in the same  form,  time and medium  (i.e.,  cash  and/or  shares of Common
     Stock) as his benefits are paid under the ESOP.

(b)  A  Participant  shall  always  have a fully  non-forfeitable  right  to the
     Supplemental Stock Ownership Benefit credited to him under this Plan.

Section 6.03 Alternative Payment of Benefits.

Notwithstanding the other provisions of this Article VI, a Participant may, with
prior written consent of the Committee and upon such terms and conditions as the
Committee  may impose,  request that the  Supplemental  ESOP Benefit  and/or the
Supplemental  Stock Ownership Benefit to which he is entitled be paid commencing
at a  different  time,  over a different  period,  in a  different  form,  or to
different  persons,  than the  benefit  to which  he or his  beneficiary  may be
entitled under the ESOP.

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                                   Article VII
                                Claims Procedures

Section 7.01 Claims Reviewer.

For purposes of handling claims with respect to this Plan, the "Claims Reviewer"
shall be the Committee,  unless the Committee designates another person or group
of persons as Claims Reviewer.

Section 7.02 Claims Procedure.

(a)  An  initial  claim  for  benefits  under  the  Plan  must  be  made  by the
     Participant or his  beneficiary  or  beneficiaries  in accordance  with the
     terms of this Section 7.02.

(b)  Not later than ninety (90) days after  receipt of such a claim,  the Claims
     Reviewer  will  render a written  decision  on the  claim to the  claimant,
     unless special  circumstances  require the extension of such 90-day period.
     If such  extension is  necessary,  the Claims  Reviewer  shall  provide the
     Participant or the Participant's  beneficiary or beneficiaries with written
     notification of such extension  before the expiration of the initial 90-day
     period.  Such notice shall  specify the reason or reasons for the extension
     and the date by which a final  decision can be expected.  In no event shall
     such  extension  exceed a period  of  ninety  (90) days from the end of the
     initial 90-day period.

(c)  In the event the Claims  Reviewer  denies the claim of a Participant or any
     beneficiary in whole or in part, the Claims Reviewer's written notification
     shall specify, in a manner calculated to be understood by the claimant, the
     reason for the denial;  a reference  to the Plan or other  document or form
     that is the basis for the denial; a description of any additional  material
     or  information  necessary  for the  claimant  to  perfect  the  claim;  an
     explanation  as to why such  information  or material is necessary;  and an
     explanation of the applicable claims procedure.

(d)  Should the claim be denied in whole or in part and should the  claimant  be
     dissatisfied  with the  Claims  Reviewer's  disposition  of the  claimant's
     claim,  the  claimant  may have a full and fair  review of the claim by the
     Committee upon written request  submitted by the claimant or the claimant's
     duly authorized  representative  and received by the Committee within sixty
     (60)  days  after  the  claimant  receives  written  notification  that the
     claimant's  claim has been denied.  In  connection  with such  review,  the
     claimant or the claimant's duly authorized representative shall be entitled
     to review  pertinent  documents and submit the  claimant's  views as to the
     issues,  in writing.  The  Committee  shall act to deny or accept the claim
     within sixty (60) days after receipt of the claimant's  written request for
     review unless  special  circumstances  require the extension of such 60-day
     period.  If such  extension is necessary,  the Committee  shall provide the
     claimant with written  notification of such extension before the expiration
     of such initial 60-day period.  In all events,  the Committee  shall act to
     deny or accept the claim  within 120 days of the receipt of the  claimant's
     written  request for review.  The action of the  Committee  shall be in the
     form of a written notice to the claimant and its contents shall include all
     of the requirements for action on the original claim.

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(e)  In no event may a claimant  commence legal action for benefits the claimant
     believes are due the claimant  until the claimant has  exhausted all of the
     remedies and procedures afforded the claimant by this Article VII.

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                                  Article VIII
                            Amendment and Termination

Section 8.01 Amendment of the Plan.

The Bank  may  from  time to time and at any  time  amend  the  Plan;  provided,
however,  that  such  amendment  may not  adversely  affect  the  rights  of any
Participant or  beneficiary  with respect to any benefit under the Plan to which
the Participant or beneficiary may have previously  become entitled prior to the
effective  date of such  amendment  without  the consent of the  Participant  or
beneficiary.  The Committee shall be authorized to make minor or  administrative
changes to the Plan,  as well as amendments  required by  applicable  federal or
state law (or authorized or made desirable by such statutes); provided, however,
that such amendments must subsequently be ratified by the Board of Directors.

Section 8.02 Termination of the Plan.

The Bank may at any time  terminate  the  Plan;  provided,  however,  that  such
termination  may  not  adversely   affect  the  rights  of  any  Participant  or
beneficiary  with respect to any benefit under the Plan to which the Participant
or beneficiary may have  previously  become entitled prior to the effective date
of such termination  without the consent of the Participant or beneficiary.  Any
amounts  credited to the supplemental  accounts of any Participant  shall remain
subject to the provisions of the Plan and no  distribution  of benefits shall be
accelerated because of termination of the Plan.

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                                   Article IX
                               General Provisions

Section 9.01 Unfunded, Unsecured Promise to Make Payments in the Future.

The right of a Participant or any  beneficiary  to receive a distribution  under
this Plan shall be an unsecured  claim against the general assets of the Bank or
its  Affiliates  and neither a Participant  nor his  designated  beneficiary  or
beneficiaries  shall have any rights in or against  any amount  credited  to any
account  under this Plan or any other  assets of the Bank or an  Affiliate.  The
Plan at all times shall be  considered  entirely  unfunded both for tax purposes
and for  purposes  of Title I of  ERISA.  Any  funds  invested  hereunder  shall
continue  for all  purposes to be part of the  general  assets of the Bank or an
Affiliate and  available to its general  creditors in the event of bankruptcy or
insolvency.  Accounts  under  this Plan and any  benefits  which may be  payable
pursuant  to this Plan are not  subject  in any  manner to  anticipation,  sale,
alienation,   transfer,   assignment,   pledge,   encumbrance,   attachment,  or
garnishment by creditors of a Participant or a  Participant's  beneficiary.  The
Plan constitute a mere promise by the Bank or Affiliate to make benefit payments
in the future.  No  interest or right to receive a benefit may be taken,  either
voluntarily or  involuntarily,  for the  satisfaction  of the debts of, or other
obligations or claims against, such Participant or beneficiary, including claims
for alimony, support, separate maintenance and claims in bankruptcy proceedings.

Section 9.02 Committee as Plan Administrator.

(a)  The Plan shall be administered by the Committee  designated by the Board of
     Directors.

(b)  The  Committee  shall have the  authority,  duty and power to interpret and
     construe the provisions of the Plan as it deems appropriate.  The Committee
     shall have the duty and responsibility of maintaining  records,  making the
     requisite calculations and disbursing the payments hereunder.  In addition,
     the  Committee  shall have the  authority  and power to delegate any of its
     administrative  duties to employees of the Bank or  Affiliate,  as they may
     deem  appropriate.  The Committee  shall be entitled to rely on all tables,
     valuations,  certificates,  opinions,  data and  reports  furnished  by any
     actuary,  accountant,  controller,  counsel  or other  person  employed  or
     retained  by the  Bank  with  respect  to the  Plan.  The  interpretations,
     determination, regulations and calculations of the Committee shall be final
     and binding on all persons and parties concerned.

Section 9.03 Expenses.

Expenses  of  administration  of the  Plan  shall  be  paid  by the  Bank  or an
Affiliate.

Section 9.04 Statements.

The Committee shall furnish  individual annual statements of accrued benefits to
each  Participant,  or current  beneficiary,  in such form as  determined by the
Committee or as required by law.

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Section 9.05 Rights of Participants and Beneficiaries.

(a)  The sole rights of a Participant or beneficiary under this Plan shall be to
     have  this  Plan  administered  according  to its  provisions,  to  receive
     whatever benefits he or she may be entitled to hereunder.

(b)  Nothing in the Plan shall be  interpreted  as a guaranty  that any funds in
     any trust which may be established in connection with the Plan or assets of
     the Bank or an Affiliate will be sufficient to pay any benefit hereunder.

(c)  The  adoption  and  maintenance  of this  Plan  shall not be  construed  as
     creating  any  contract  of  employment  or service  between the Bank or an
     Affiliate  and any  Participant  or other  individual.  The Plan  shall not
     affect the right of the Bank or an Affiliate to deal with any  Participants
     in  employment or service  respects,  including  their  hiring,  discharge,
     compensation, and conditions of employment or other service.

Section 9.06 Incompetent Individuals.

The  Committee may from time to time  establish  rules and  procedures  which it
determines  to be necessary  for the proper  administration  of the Plan and the
benefits  payable  to a  Participant  or  beneficiary  in the  event  that  such
Participant or beneficiary  is declared  incompetent  and a conservator or other
person  legally  charged  with  that  Participant's  or  beneficiary's  care  is
appointed.  Except as otherwise provided herein,  when the Committee  determines
that such Participant or beneficiary is unable to manage his financial  affairs,
the  Committee  may pay such  Participant's  or  beneficiary's  benefits to such
conservator,  person legally charged with such  Participant's  or  beneficiary's
care,  or  institution  then  contributing  toward or providing for the care and
maintenance  of  such  Participant  or  beneficiary.   Any  such  payment  shall
constitute a complete discharge of any liability of the Bank or an Affiliate and
the Plan for such Participant or beneficiary.

Section 9.07 Sale, Merger, or Consolidation of the Bank.

The Plan may be  continued  after a sale of assets  of the Bank,  or a merger or
consolidation of the Bank into or with another corporation or entity only if and
to the extent that the  transferee,  purchaser  or  successor  entity  agrees to
continue the Plan. Additionally, upon a merger, consolidation or other change in
control any amounts credited to Participant's  deferral accounts shall be placed
in a grantor trust to the extent not already in such a trust.  In the event that
the Plan is not continued by the transferee, purchaser or successor entity, then
the Plan shall be  terminated  subject to the  provisions of Section 8.02 of the
Plan. Any legal fees incurred by a Participant in determining  benefits to which
such  Participant  is  entitled  under the Plan  following  a sale,  merger,  or
consolidation  of the  Bank or an  Affiliate  of  which  the  Participant  is an
Employee or, if applicable, a member of the Board of Directors, shall be paid by
the resulting or succeeding entity.

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Section 9.08 Location of Participants.

Each  Participant  shall keep the Bank  informed of his current  address and the
current address of his designated  beneficiary or beneficiaries.  The Bank shall
not be obligated to search for any person.  If such person is not located within
three (3) years after the date on which  payment of the  Participant's  benefits
payable  under  this Plan may first be made,  payment  may be made as though the
Participant or his beneficiary had died at the end of such three-year period.

Section 9.09 Liability of the Bank and its Affiliates.

Notwithstanding  any provision herein to the contrary,  neither the Bank nor any
individual  acting as an  employee  or agent of the Bank  shall be liable to any
Participant, former Participant, beneficiary, or any other person for any claim,
loss,  liability  or  expense  incurred  in  connection  with the  Plan,  unless
attributable to fraud or willful  misconduct on the part of the Bank or any such
employee or agent of the Bank.

Section 9.10 Governing Law.

All questions  pertaining to the  construction,  validity and effect of the Plan
shall be determined in accordance  with the laws of the United States and to the
extent not preempted by such laws, by the laws of the state of Illinois.

Having been  ratified by its Board of Directors on August 9, 2000,  this Plan is
executed by its duly authorized officer this 13th day of November, 2000.

                                          FIRST FEDERAL BANK
Attest:

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

                                       15First Federal Bank
                      Employee Severance Compensation Plan

Section 1.01 Purpose.

The purpose of this First Federal Bank Employee Severance Compensation Plan (the
"Plan") is to assure the  services  of  employees  of the Bank in the event of a
Change in  Control  (as  defined  in Section  2.01 of the  Plan).  The  benefits
contemplated  by the Plan  recognize  the value to the Bank of its employees and
the potential effect upon the Bank resulting from the uncertainties of continued
employment,  reduced employee benefits,  management changes and relocations that
may arise in the event of a Change in  Control.  The Board of  Directors  of the
Bank believes  that the Plan will also aid the Bank in attracting  and retaining
the qualified  individuals  essential to the success of the Bank and will reduce
the  distractions  and other adverse  effects on the performance of employees in
the event of a Change in Control.

Section 2.01 Definitions.

In this Plan,  whenever  the context so  indicates,  the  singular or the plural
number and the  masculine  or  feminine  gender  shall be deemed to include  the
other,  the terms  "he,"  "his," and "him,"  shall refer to a  Participant  and,
except as otherwise  provided,  or unless the context  otherwise  requires,  the
capitalized terms shall have the following meanings:

(a)  "Annual  Compensation"  of a  Participant  means and includes all wages and
     salary paid or accrued by the Employer  with  respect to the  Participant's
     service  during the 12  consecutive-month  period ending on the last day of
     the month preceding the date the Participant's employment terminates.

(b)  "Bank" means First Federal Bank, Colchester,  Illinois and any successor to
     First Federal Bank.

(c)  "Board of Directors" means the Board of Directors of the Bank.

(d)  "Change in Control" of the Holding  Company or the Bank shall mean an event
     of a nature that:  (i) would be required to be reported in response to Item
     1(a) of the Current  Report on Form 8-K,  as in effect on the date  hereof,
     pursuant to Section 13 or 15(d) of the Securities  Exchange Act of 1934, as
     amended (the "Exchange  Act");  or (ii) results in a "Change in Control" of
     the Bank or the Holding Company within the meaning of the Home Owners' Loan
     Act of 1933, as amended,  the Federal Deposit  Insurance Act, and the Rules
     and Regulations promulgated by the Office of Thrift Supervision ("OTS") (or
     its predecessor agency), as in effect on the date hereof (provided, that in
     applying the  definition  of change in control as set forth under the rules
     and  regulations  of the OTS, the Board of Directors  shall  substitute its
     judgment  for that of the OTS);  or (iii)  without  limitation  a Change in
     Control  shall be deemed to have  occurred at such time as (A) any "person"
     (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or
     becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
     Act),  directly  or  indirectly,  of voting  securities  of the Bank or the
     Holding  Company  representing  20% or more of the  Bank's  or the  Holding
     Company's

<PAGE>

outstanding voting securities or right to acquire such securities except for any
voting  securities of the Bank  purchased by the Holding  Company and any voting
securities  purchased by any employee benefit plan of the Holding Company or its
subsidiaries,  or (B)  individuals  who constitute the Board of Directors on the
date hereof (the "Incumbent  Board") cease for any reason to constitute at least
a majority thereof,  provided that any person becoming a director  subsequent to
the date hereof whose election was approved by a vote of at least three-quarters
of the  directors  comprising  the  Incumbent  Board,  or whose  nomination  for
election by the Holding  Company's  stockholders  was  approved by a  Nominating
Committee  solely composed of members which are Incumbent  Board members,  shall
be, for  purposes of this clause (B),  considered  as though he were a member of
the Incumbent  Board, or (C) a plan of  reorganization,  merger,  consolidation,
sale of all or  substantially  all the assets of the Bank or the Holding Company
or similar  transaction  occurs or is  effectuated  in which the Bank or Holding
Company  is not the  resulting  entity;  provided,  however,  that such an event
listed above will be deemed to have  occurred or to have been  effectuated  upon
the receipt of all required federal regulatory approvals not including the lapse
of any statutory waiting periods,  or (D) a proxy statement has been distributed
soliciting  proxies from  stockholders of the Holding Company,  by someone other
than the current management of the Holding Company, seeking stockholder approval
of a plan of  reorganization,  merger or consolidation of the Holding Company or
Bank with one or more  corporations as a result of which the outstanding  shares
of the  class  of  securities  then  subject  to such  plan or  transaction  are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Holding Company shall be distributed,  or (E) a tender offer is made
by a  person  other  than  the  Holding  Company  for 20% or more of the  voting
securities of the Bank or Holding Company then outstanding.

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

(f)  "Effective Date" means the date of the Bank's mutual to stock conversion.

(g)  "Employer"  means  (i) the  Bank,  (ii) the  Holding  Company  or (iii) any
     subsidiary  of the Bank or the  Holding  Company  that has adopted the Plan
     pursuant to the provision of Article VI.

(h)  "Holding Company" means First Federal Bancshares, Inc., the holding company
     of the Bank.

(i)  "Participant"  means an employee of an Employer  who meets the  eligibility
     requirements of Article III.

(j)  "Plan" means this First Federal Bank Employee Severance Compensation Plan.

(k)  "Termination  for Cause" means  termination  of  employment  because of the
     Participant's personal dishonesty, incompetence, willful misconduct, breach
     of fiduciary duty involving personal profit,

                                     Page 2

<PAGE>

     intentional failure to perform stated duties, willful violation of any law,
     rule  or  regulation  (other  than  traffic  violations  or  other  similar
     offenses) or any final cease-and-desist order.

Section 3.01 Eligibility.

(a)  Every employee of an Employer shall be eligible to participate in this Plan
     upon the  completion  of a 12  consecutive-month  period  during  which the
     employee has been credited with at least 500 hours of service.

(b)  Notwithstanding  paragraph (a) of this Section  3.01,  any employee who has
     entered into an employment or change in control  agreement with an Employer
     that is in effect at the time the employee's  employment  terminates  shall
     not be entitled to participate in this Plan.

Section 4.01 Right to Benefits.

(a)  If a Change in Control occurs,  a Participant  shall be entitled to receive
     benefits  under this Plan from his Employer if,  within one (1) year of the
     Change  in  Control,  he  terminates  employment  for any of the  following
     reasons:

     (i)  Dismissal  by the  Employer or the  successor  to the Employer for any
          reason other than Termination for Cause;

     (ii) A reduction of the  Participant's  base salary or rate of compensation
          from that in effect immediately prior to the Change in Control or from
          any increase that occurs subsequent to the Change in Control;

    (iii) A  material  change  in  the   Participant's   functions,   duties  or
          responsibilities  which would cause the  Participant's  position to be
          one of lesser responsibility, importance or scope;

     (iv) A relocation  of the  Participant's  principal  place of employment by
          more  than   twenty-five   (25)  miles  from  the   location   of  the
          Participant's  principal place of employment  immediately prior to the
          Change in Control; provided that the place of relocation is not closer
          to the Participant's primary residence;

     (v)  A material reduction in the benefits and perquisites  available to the
          Participant immediately prior to the Change in Control;

     (vi) A successor to the Employer  fails or refuses to assume the Employer's
          obligations under this Plan, as required by Article VII; or

    (vii) The  Employer,  or  any  successor  to  the  Employer,   breaches  any
          provisions of this Plan.

                                     Page 3

<PAGE>

Section 4.02 Determination of Benefits.

(a)  Each  Participant  entitled to a Payment under this Plan shall receive from
     his  Employer or any  successor  to his  Employer,  a lump sum cash payment
     equal  to  one-twenty-sixth  of his or her  Annual  Compensation  for  each
     calendar year or fraction thereof during which he or she was employed by an
     Employer or any  successor to an Employer.  Notwithstanding  the  preceding
     sentence,  a Participant shall not receive a severance benefit in excess of
     100% of his or her Annual Compensation.

(b)  Notwithstanding  the  provisions  of paragraph (a) of this Section 4.02, if
     any of the payments and benefits  provided to a Participant under this Plan
     or  otherwise  constitute  an "excess  parachute  payment"  for purposes of
     Sections  280G and 4999 of the Internal  Revenue Code of 1986,  as amended,
     then the  benefits  provided  under this Plan to the  Participant  shall be
     reduced to the extent that they no longer  constitute  an excess  parachute
     payment.

(c)  A Participant shall not be required to mitigate the benefits provided under
     this Plan in any way, including seeking other employment.

(d)  The benefits provided under this Plan shall not be in lieu of or reduced by
     any  compensation  earned  by the  Participant  as a result  of  employment
     following his termination of employment with his Employer.

(e)  Neither the  provisions  of this Plan nor the  benefits  provided for under
     this Plan shall reduce any amounts otherwise payable to a Participant under
     any plan or arrangement of the Participant's Employer.

Section 4.03 Time of Payment.

Any  Participant  entitled to benefits under this Plan shall receive  payment of
those  benefits from the Employer or the successor to the Employer,  in cash and
in full,  not later than thirty (30) business days after the  termination of the
Participant's  employment. If any Participant should die after becoming entitled
to benefits under this Plan but before he has received  payment of the benefits,
then the Employer or the successor to the Employer  shall pay the  benefits,  in
full, to the Participant's  named beneficiary,  if living, or, if not living, to
the Participant's personal representative on behalf of or for the benefit of the
Participant's estate.

Section 4.04 Suspension of Payment.

Notwithstanding  the  foregoing,  no payments or portions  thereof shall be made
under this Plan,  if such payment or portion would result in the Bank failing to
meet its  minimum  regulatory  capital  requirements  as  required  by 12 C.F.R.
ss.567.2.  Any payments or portions  thereof not paid shall be  suspended  until
such time as their  payment  would not  result in a failure  to meet the  Bank's
minimum

                                     Page 4

<PAGE>

regulatory capital requirements.  Any portion of benefit payments which have not
been suspended will be paid to  Participants  on an equitable  basis,  pro rata,
based upon amounts due each Participant.

Section 5.01 Participating Employers.

Upon approval by the Board of Directors of this Plan, any subsidiary of the Bank
or the Holding  Company  may adopt this Plan for the  benefit of its  employees.
Upon adoption, the subsidiary shall become an Employer for purposes of this Plan
and the  provisions  of the Plan shall be fully  applicable  to the employees of
that subsidiary.  For this purpose,  the term "subsidiary" means any corporation
in which  the Bank or the  Holding  Company,  directly  or  indirectly,  holds a
majority of the voting power of its outstanding shares of capital stock.

Section 5.02 Successors to the Employers.

The Bank and the Holding  Company  shall require that any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or assets  of the Bank or the  Holding
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
obligations of the Employers under this Plan.

Section 6.01 Administration.

The Board of Directors or a committee  appointed by the Board of Directors shall
administer the Plan.  Subject to the specific  provisions of the Plan, the Board
of Directors or the committee  shall have the authority to adopt,  amend,  alter
and repeal any  administrative  rules,  guidelines  or practices it may consider
advisable  with respect to the Plan.  The Board of  Directors  or the  committee
shall also have the  authority to interpret  the  provisions  of the Plan and to
resolve all disputes arising in connection with the Plan. The Board of Directors
or the  committee may correct any defect or supply any omission or reconcile any
inconsistency  in the Plan in the manner and to the extent it deems  appropriate
to carry out the purpose of the Plan. The decisions and  interpretations  of the
Board of Directors or the  committee  shall be final and binding.  Any action of
the Board of Directors or the committee  with respect to the  administration  of
the Plan shall be taken pursuant to a majority vote or by the unanimous  written
consent  of  the  members  of the  Board  of  Directors  or  the  committee,  as
appropriate.

Section 6.02. Claims and Review Procedures.

(a)  Claims  procedure.  If any person  believes  he or she is being  denied any
     rights or benefits under the Plan,  such person may file a claim in writing
     with the Board. If any such claim is wholly or partially denied,  the Board
     will notify such person of its decision in writing.  Such notification will
     be written in a manner  calculated to be understood by such person and will
     contain (i) specific  reasons for the denial,  (ii)  specific  reference to
     pertinent Plan provisions,  (iii) a description of any additional  material
     or  information  necessary  for such  person to  perfect  such claim and an
     explanation  of why such  material or  information  is  necessary  and (iv)
     information as to the steps to be taken if

                                     Page 5

<PAGE>

     the person wishes to submit a request for review. Such notification will be
     given  within 90 days after the claim is  received  by the Board (or within
     180  days,  if  special  circumstances  require  an  extension  of time for
     processing  the  claim,  and  if  written  notice  of  such  extension  and
     circumstances is given to such person within the initial 90 day period). If
     such  notification  is not given  within  such  period,  the claim  will be
     considered  denied as of the last day of such  period  and such  person may
     request a review of his claim.

(b)  Review procedure.  Within 60 days after the date on which a person receives
     a written notice of a denied claim (or, if applicable, within 60 days after
     the date on which such denial is considered to have  occurred)  such person
     (or his duly authorized representative) may (i) file a written request with
     the Board for a review of his denied claim and of pertinent  documents  and
     (ii) submit written issues and comments to the Board. The Board will notify
     such person of its decision in writing.  Such  notification will be written
     in a manner  calculated  to be  understood  by such person and will contain
     specific  reasons  for  the  decision  as well as  specific  references  to
     pertinent  Plan  provisions.  The decision on review will be made within 60
     days after the  request  for review is received by the Board (or within 120
     days, if special  circumstances require an extension of time for processing
     the  requests  such as an election  by the Board to hold a hearing,  and if
     written notice of such extension and  circumstances is given to such person
     within the initial 60 day  period).  If the  decision on review is not made
     within such period, the claim will be considered denied.

Section 6.03 Named Fiduciary.

The Board will be a "named fiduciary" for purposes of Section 402(a)(1) of ERISA
with  authority to control and manage the  operation and  administration  of the
Plan,  and will be  responsible  for  complying  with all of the  reporting  and
disclosure requirements of Part 1 of Subtitle B of Title I of ERISA.

Section 7.01 Amendment and Termination.

(a)  At any time prior to a Change in Control,  the Bank may amend or  terminate
     the Plan by a resolution  adopted by a majority of the Board of  Directors.
     Any amendment or termination of the Plan by the Bank shall apply equally to
     all  Employers.  Further,  at any time  prior to a Change in  Control,  any
     Employer  may  terminate  its  participation  in the  Plan by a  resolution
     adopted by a majority of its board of directors.

(b)  The form of any amendment to the Plan shall be a written  instrument signed
     by a duly authorized  officer or officers of the Bank,  certifying that the
     amendment has been approved by the Board of Directors.

Section 7.02 No Attachment.

(a)  Except as  required by law,  no right to receive  benefits  under this Plan
     shall  be  subject  to   anticipation,   commutation,   alienation,   sale,
     assignment, encumbrance, charge, pledge, or

                                     Page 6

<PAGE>

     hypothecation,  or to execution,  attachment,  levy, or similar  process or
     assignment by operation of law, and any attempt,  voluntary or involuntary,
     to affect such action shall be null, void, and of no effect.

(b)  The provisions of this Plan shall be binding upon, and inure to the benefit
     of, each  Participant,  the Employers and their  respective  successors and
     assigns.

Section 7.03 Legal Fees and Expenses.

All  reasonable  legal fees and other expenses paid or incurred by a Participant
or an  Employer  with  respect  to any claim  under  this Plan  shall be paid or
reimbursed  to the  prevailing  party by the other party in any legal  judgment,
arbitration or settlement.

Section 7.04 Applicable Law.

The  laws of the  State of  Illinois  shall be  controlling  law in all  matters
relating to the Plan to the extent not preempted by federal law.

Section 7.05 Severability.

If any  provision of this Plan is held  illegal or invalid,  the  illegality  or
invalidity of that  provision  shall not affect the remaining  provisions of the
Plan and the Plan shall be  construed  and enforced as if the illegal or invalid
provision had not been included.

Section 7.06 Employment Status.

This Plan does not constitute a contract of employment or impose on any Employer
any  obligation  to  retain  a  Participant,  to  maintain  the  status  of  the
Participant's  employment,  or  to  change  the  Employer's  policies  regarding
termination of employment.

Section 8.01 Required Provisions.

(a)  An Employer may terminate a  Participant's  employment at any time, but any
     termination by the Employer,  other than  Termination for Cause,  shall not
     otherwise  prejudice  the  Participant's  right  to  compensation  or other
     benefits under this Plan.

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

                                     Page 7

<PAGE>

(c)  If  a  Participant   is  removed   and/or   permanently   prohibited   from
     participating in the conduct of the Bank's affairs by an order issued under
     Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
     ss.1818(e)(4) or (g)(1),  all obligations of the Bank under this Plan shall
     terminate as of the effective date of the order.

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

(e)  Any payments made to a Participant pursuant to this Plan, or otherwise, are
     subject to and conditioned upon their compliance with 12 U.S.C.  ss.1828(k)
     and any regulations promulgated thereunder.

Having been  ratified by the Board of Directors on August 9, 2000,  this Plan is
executed by a duly authorized officer of the Bank on this November 13, 2000.

Attest

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

                                     Page 8

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