<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
----------
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended DECEMBER 31,1998
----------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______________ to ____________
Commission File No. 0-25023
-------
First Capital, Inc.
-------------------
(Exact name of registrant as specified in its charter)
Indiana 35-2056949
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
220 Federal Drive NW, Corydon, Indiana 47112
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 1-812-738-2198
--------------
Not applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes[X] No[ ]
APPLICABLE ONLY TO CORPORATE ISSUERS; Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: 1,291,824 shares of common stock were outstanding as of
January 31, 1999.
<PAGE>
FIRST CAPITAL, INC.
INDEX
<TABLE>
<CAPTION>
Part I Financial Information Page
----
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1998 (unaudited)
and June 30, 1998 3
Consolidated Statements of Income for the three months
and six months ended December 31, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the six months
ended December 31, 1998 and 1997 (unaudited) 5
Notes to consolidated financial statements (unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-14
Part II. Other Information 15-16
Signatures 17
</TABLE>
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
FIRST CAPITAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
----------- --------
(Unaudited)
ASSETS (In Thousands)
<S> <C> <C>
Cash and due from banks $ 947 $ 895
Interest bearing deposits with banks 8,872 5,240
Securities available for sale, at fair value 10,010 4,848
Securities-held to maturity:
Mortgage-backed securities 1,994 1,473
Other debt securities 500 1,580
Loans receivable, net 77,343 74,887
Federal Home Loan Bank stock, at cost 589 589
Foreclosed real estate - 104
Premises and equipment 3,031 2,601
Accrued interest receivable 606 532
Cash value of life insurance 1,062 1,038
Other assets 241 171
-------- -------
Total Assets $105,195 $93,958
======== =======
LIABILITIES
Deposits $ 81,417 $77,462
Advances from Federal Home Loan Bank 5,250 5,250
Advance payments by borrowers for
taxes and insurance 43 34
Accrued interest payable on deposits 446 373
Accrued expenses and other liabilities 595 498
-------- -------
Total Liabilities 87,751 83,617
-------- -------
STOCKHOLDERS' EQUITY
Preferred stock of $.01 par value per share
Authorized 1,000,000 shares; none issued - -
Common stock of $.01 par value per share
Authorized 5,000,000 shares; issued 1,291,824 shares 13 13
Additional paid-in capital 9,446 2,154
Retained earnings-substantially restricted 8,567 8,171
Unearned ESOP shares (605) -
Accumulated other comprehensive income-net
unrealized gain on securities available for sale 23 3
-------- -------
Total Stockholders' Equity 17,444 10,341
-------- -------
Total Liabilities and Stockholders' Equity $105,195 $93,958
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
PART I - FINANCIAL INFORMATION
FIRST CAPITAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ----------------
1998 1997 1998 1997
INTEREST INCOME (In Thousands, except per share data)
<S> <C> <C> <C> <C>
Loans receivable $ 1,629 $ 1,543 $3,229 $3,068
Mortgage-backed securities 32 30 51 63
Other securities 154 70 277 168
Federal Home Loan Bank dividends 12 11 24 23
Interest bearing deposits with banks 42 47 96 93
------------------ --------------
Total interest income 1,869 1,701 3,677 3,415
INTEREST EXPENSE
Deposits 993 950 1,994 1,897
Advances from Federal Home Loan Bank 77 74 151 176
------------------ --------------
Total interest expense 1,070 1,024 2,145 2,073
Net interest income 799 677 1,532 1,342
Provision for loan losses 9 - 18 -
------------------ --------------
Net interest income after provision for
loan losses 790 677 1,514 1,342
NON-INTEREST INCOME
Loan fees and service charges 12 3 29 20
Gain on sale of premises and equipment - - - 169
Service charges on deposit accounts 41 29 81 57
Other income 13 15 35 33
------------------ --------------
Total non-interest income 66 47 145 279
------------------ --------------
NON-INTEREST EXPENSE
Compensation and benefits 279 230 483 433
Occupancy and equipment 100 72 184 157
Deposit insurance premiums 11 11 22 22
Other operating expenses 104 88 209 196
------------------ --------------
Total non-interest expense 494 401 898 808
------------------ --------------
Income before income taxes 362 323 761 813
Income tax expense 144 122 292 307
------------------ --------------
Net Income 218 201 469 506
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gain on securities:
Unrealized holding gains arising during the period 19 - 20 10
Less: reclassification adjustment - - - -
------------------ --------------
Other comprehensive income 19 - 20 10
------------------ --------------
Comprehensive Income $ 237 $ 201 $ 489 $ 516
================== ==============
Net income per common share, basic $0.17 $0.16 $0.36 $0.39
================== ==============
Net income per common share, dilluted $0.17 $0.15 $0.36 $0.39
================== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
PART I - FINANCIAL INFORMATION
FIRST CAPITAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
-------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES (In Thousands)
<S> <C> <C>
Net income $ 469 $ 506
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of premiums and accretion of discounts (4) -
Depreciation expense 47 18
Gain on sale of premises and equipment - (169)
Deferred income taxes 25 3
Provision for loan losses 18 -
Increase in accrued interest payable 73 112
(Increase) decrease in accrued interest receivable (74) 52
Net change in other assets/liabilities 117 78
-------- -------
Net Cash Provided By Operating Activities 671 600
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest bearing deposits with
banks (3,632) 1,106
Purchase of securities available for sale (8,127) -
Proceeds from maturities of securities available for sale 3,000 -
Proceeds from maturities of securities held to maturity 1,080 3,953
Purchase of securities held to maturity (646) -
Principal collected on mortgage-backed securities 128 -
Net increase in loans receivable (2,474) (3,603)
Proceeds from sale of premises and equipment - 106
Purchase of premises and equipment (477) (182)
Increase in cash value of life insurance (24) (23)
-------- -------
Net Cash Provided (Used) By Investing Activities (11,172) 1,357
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 3,955 1,571
Net increase in advances from Federal Home Loan Bank - (4,000)
Net proceeds from issuance of common stock 6,671 -
Exercise of stock options - 22
Dividends paid (73) (71)
-------- -------
Net Cash Provided (Used) By Financing Activities 10,553 (2,478)
-------- -------
Net Increase (Decrease) in Cash and Due From Banks 52 (521)
Cash and due from banks at beginning of period 895 1,245
-------- -------
Cash and Due From Banks at End of Period $ 947 $ 724
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
FIRST CAPITAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Presentation of Interim Information
First Capital, Inc. ("Company") was incorporated by First Federal Bank, a
Federal Savings Bank ("Bank") in September 1998 in connection with the
conversion from the mutual holding company form of organization to the
stock holding company form of organization. Upon consummation of the
conversion on December 31, 1998, the Company became the holding company for
the Bank and the former mutual holding company, First Capital, Inc., M.H.C.
("MHC") was merged with and into the Bank. Accordingly, the information
presented in this report relates primarily to the Bank's operations.
In the opinion of the management, the unaudited consolidated financial
statements include all normal adjustments considered necessary to present
fairly the financial position as of December 31, 1998, and the results of
operations for the three months and six months ended December 31, 1998 and
1997 and cash flows for the six months ended December 31, 1998 and 1997.
All of these adjustments are of a normal, recurring nature. Interim
results are not necessarily indicative of results for a full year.
The consolidated financial statements and notes are presented as permitted
by Form 10-QSB, and do not contain certain information included in the
Company's annual audited consolidated financial statements.
The consolidated financial statements include the accounts of the Company
and the Bank. All material intercompany balances and transactions have
been eliminated in consolidation.
2. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
------- -------
(In Thousands)
<S> <C> <C>
Cash payments for:
Interest $ 2,072 $ 1,961
Taxes 272 232
</TABLE>
3. Conversion and Stock Offering
On December 31, 1998, the MHC and Bank completed a conversion and stock
offering whereby the MHC was merged with and into the Bank with the Bank
becoming a wholly-owned subsidiary of the Company which offered common
stock to certain current and former depositor and borrower customers of the
Bank in a subscription offering. The Company issued 768,767 shares of
common stock for gross proceeds of $7,687,670 as a result of the offering.
Total expenses in connection with the conversion and offering amounted to
$401,507 and were charged against the proceeds from the offering.
The Company also issued 523,057 common shares in exchange for the 204,015
common shares held by the public stockholders of the Bank pursuant to an
exchange ratio resulting in the public stockholders of the Bank owning in
the aggregate approximately 40.5% of First Capital, Inc. after the
conversion and offering. The conversion was accounted for as a pooling of
interests and accordingly, the June 30, 1998 balance sheet has been
restated.
-6-
<PAGE>
FIRST CAPITAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. Conversion and Stock Offering - continued
In connection with the conversion, the Bank has established a leveraged
employee stock ownership plan (ESOP) which acquired 8% of the common stock
issued in the offering (61,501 common shares) funded by a term loan from
the Company. The Bank will make annual contributions to the ESOP equal to
the debt service requirements of the term loan. The ESOP shares are
pledged as collateral for the loan and as the debt is repaid shares are
released from collateral and allocated to participants. The ESOP shares
pledged as collateral are reported as unearned ESOP shares in the balance
sheet and the Company reports compensation cost equal to the current fair
value of the ESOP shares released from collateral. Dividends on allocated
ESOP shares are recorded as a reduction of retained earnings; dividends on
unallocated ESOP shares are recorded as a reduction of debt and accrued
interest.
4. Comprehensive Income
The Company adopted FASB Statement No. 130, "Reporting Comprehensive
Income," effective July 1, 1998. This Statement established standards for
reporting and displaying comprehensive income and its components.
Comprehensive income is defined as "the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners." Comprehensive income for the Company includes
net income and unrealized gains and losses on securities available for
sale. The following tables set forth the components of other comprehensive
income and the allocated income tax amounts for the three and six months
ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
--------- ------- -------- --------
<S> <C> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding gains
arising during the period $ 31 $ - $ 34 $ 17
Income tax expense (12) - (14) (7)
--------- ------- ----- -----
Net of tax amount 19 - 20 10
--------- ------- ----- -----
Less: reclassification
adjustment for (gains)
losses included in net
income - - - -
Income tax expense (benefit) - - - -
--------- ------- ----- -----
Other comprehensive
income $ 19 $ - $ 20 $ 10
========= ======= ===== =====
</TABLE>
-7-
<PAGE>
FIRST CAPITAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. Supplemental Disclosure for Earnings Per Share
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic:
Earnings:
Net income $ 217,334 $ 200,749 $ 468,566 $ 505,950
---------- ---------- ---------- ----------
Shares:
Weighted average common
shares outstanding 1,291,824 1,291,824 1,291,824 1,291,824
---------- ---------- ---------- ----------
Net income per common share, basic $ 0.17 $ 0.16 $ 0.36 $ 0.39
========== ========== ========== ==========
Diluted:
Earnings: $ 217,334 $ 200,749 $ 468,566 $ 505,950
---------- ---------- ---------- ----------
Shares:
Weighted average common
shares outstanding 1,291,824 1,291,824 1,291,824 1,291,824
Add: Dilutive effect of outstanding options 3,947 4,263 3,947 4,263
---------- ---------- ---------- ----------
Weighted average common
shares outstanding, as adjusted 1,295,771 1,296,087 1,295,771 1,296,087
---------- ---------- ---------- ----------
Net income per common share, diluted $ 0.17 $ 0.15 $ 0.36 $ 0.39
========== ========== ========== ==========
</TABLE>
-8-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRST CAPITAL, INC. AND SUBSIDIARY
Financial Condition
Total assets increased 12% from $94.0 million at June 30, 1998 to $105.2
million at December, 1998, primarily as a result of increases in cash and
interest bearing deposits with banks, securities available for sale and loans
receivable, net, which was funded primarily by the net proceeds from the
issuance of common stock in the conversion, and growth in deposits.
Loans receivable, net, were $74.9 million at June 30, 1998, compared to
$77.3 million at December 31, 1998, a 3.3% increase.
The investment in mortgage-backed securities held-to-maturity increased
from $1.5 million at June 30, 1998 to $2.0 million at December 31, 1998 as a
result of purchases of $646,000 and repayments of $128,000.
Other debt securities held to maturity decreased from $1.6 million at June
30, 1998 to $500,000 at December 31, 1998. During the six month period ended
December 31, 1998, the Company had maturities of other debt securities with a
carrying value of $1.1 million.
Securities available for sale increased $5.2 million from $4.8 million at
June 30, 1998 to $10 million at December 31, 1998 as a result of purchases of
$8.2 million and maturities of $3.0 million.
Cash and interest bearing deposits with banks increased from $6.1 million
at June 30, 1998 to $9.8 million at December 31, 1998 as a result of excess
liquidity funded by the net proceeds from the issuance of common stock and the
growth in deposits.
Total deposits increased from $77.5 million at June 30, 1998 to $81.4
million at December 31, 1998. The increase in deposits resulted primarily from
growth in demand accounts and savings deposit accounts, which management
attributes primarily to its promotional efforts to attract lower cost accounts.
Total stockholders' equity increased from $10.3 million at June 30, 1998 to
$17.4 million at December 31, 1998 as a result of retained net income of
$396,000 and net proceeds from issuance of common stock of $6.7 million.
Results of Operations
Net Income. Net income was $469,000 ($.35 per share diluted) for the six
months ended December 31, 1998 compared to $506,000 ($.39 per share diluted) for
the six months ended December 31, 1997. The results for 1997 included a one-
time gain of $105,000, net of tax, associated with the sale of the Bank's old
main office property. Excluding this one-time gain, net income increased
$68,000 for 1998 compared to 1997 primarily from an increase in net interest
income offset by an increase in non-interest expenses.
Net income for the three months ended December 31, 1998 was $218,000
compared to $201,000 for the three months ended December 31, 1997. The increase
in net income for 1998 compared to 1997 resulted primarily from an increase in
net interest income offset by an increase in non-interest expenses.
-9-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRST CAPITAL, INC. AND SUBSIDIARY
Net interest income for the six month periods ended December 31, 1998 and
1997. Net interest income increased 14.2% from $1.3 million in 1997 to $1.5
million in 1998 as a result of the increase in interest-earning assets during
1998 and a decrease in the average cost of funds in 1998 compared to the same
period in 1997.
Total interest income increased $262,000, or 7.7% to $3.7 million for the
six months ended December 31, 1998 compared to $3.4 million in the prior year as
a result of a higher balance of interest-earning assets. Interest on loans
receivable increased $161,000 and interest on other securities increased
$109,000 as a result of a higher average balance in 1998.
Total interest expense increased $72,000, or 3.5% to $2.2 million for the
six months ended December 31, 1998 compared to $2.1 million for the six months
ended December 31, 1998 as a result of the growth in deposits offset by a
decrease in average borrowings from the Federal Home Loan Bank.
The average yield on interest-earnings assets decreased from 8.14% in 1997
to 8.05% in 1998 while the average cost of interest-bearing liabilities
decreased from 5.44% in 1997 to 5.21% in 1998 because of lower market interest
rates.
Net interest income for the three month periods ended December 31, 1998 and
1997. Net interest income increased from $677,000 for 1997 to $799,000 for 1998
primarily as a result of the increase in interest-earning assets during the
three months ended December 31, 1998 compared to 1997.
Total interest income increased $168,000, or 9.9% to $1.9 million for the
three months ended December 31, 1998 compared to $1.7 million for the three
months ended December 31, 1997.
Total interest expense increased $46,000, or 4.5% to $1.1 million for the
three months ended December 31, 1998 compared to $1.0 million for the three
months ended December 31, 1998 due to the growth in deposits.
Provision for loan losses. The provision for loan losses was $9,000 for
the three month period ending December 31, 1998 and $18,000 for the six month
period ending December 31, 1998. There was no provision for loan losses for the
comparable periods in 1997. Provisions for loan losses are charged to
operations to bring the total allowance for loan losses to a level considered by
management to be adequate to provide for estimated losses based on management's
evaluation of the collectibility of the loan portfolio, including the nature of
the portfolio, credit concentrations, trends in historical loss experience,
specified impaired loans, and economic conditions. The Bank made provisions of
$18,000 for the six months ended December 31, 1998 to increase the allowance for
loan losses to an amount considered reasonable by management based on an
evaluation as of December 31, 1998. The allowance was increased due to an
increase in commercial real estate loans, which possess a higher inherent risk
of loss than one-to-four family residential mortgage loans. Although management
uses the best information available, future adjustments to the allowance may be
necessary due to changes in economic, operating, regulatory and other conditions
that may be beyond the Bank's control. While the Bank maintains its allowance
for loan losses at a level which it considers adequate to provide for estimated
losses, there can be no assurance that further additions will not be made to the
allowance for loan losses and that actual losses will not exceed the estimated
amounts.
-10-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRST CAPITAL, INC. AND SUBSIDIARY
Non-interest income. Non-interest income decreased 48% to $145,000 for
the six months ended December 31, 1998 compared to $279,000 for the six months
ended December 31, 1997. The decrease is primarily the result of a one-time
gain of $169,000 in 1997 associated with the sale of the Bank's old main office
property. Service charges on deposit accounts increased $24,000 for the six
month period in 1998 compared to 1997 due to the growth in transaction accounts
during 1998.
Non-interest expense. Non-interest expense increased by $90,000 for the
six month period ended December 31, 1998. The increase results primarily from
increases in compensation and benefits and occupancy and equipment expenses.
Compensation and benefits expense increased $50,000 due to normal compensation
increases and additional staff in the loan department in 1998. Occupancy and
equipment costs have increased in 1998 compared to 1997 as a result of increased
depreciation charges on the new main office and expenses related to the Year
2000 issue.
Income tax expense. Income tax expense for the six month period ended
December 31, 1998 was $292,000, compared to $307,000 for the same period in
1997. The effective tax rate for 1998 is 38.4% compared to 37.8% for 1997.
Liquidity and Capital Resources
The Bank's primary sources of funds are customer deposits, proceeds from
loan repayments, maturing securities and FHLB advances. While loan repayments
and maturities are a predictable source of funds, deposit flows and mortgage
prepayments are greatly influenced by market interest rates, general economic
conditions and competition. At December 31, 1998, the Bank had cash and
interest-bearing deposits with banks of $9.8 million and securities available-
for-sale with a fair value of $10.0 million. If the Bank requires funds beyond
its ability to generate them internally, it has additional borrowing capacity
with the FHLB of Indianapolis and collateral eligible for repurchase agreements.
The Bank's primary investing activity is the origination of one-to-four
family mortgage loans. The Bank also invests in U.S. Government and agency
securities and mortgage-backed securities issued by U.S. Government agencies.
The Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit withdrawals,
to satisfy financial commitments and to take advantage of investment
opportunities. Historically, the Bank has been able to retain a significant
amount of its deposits as they mature.
Current OTS regulations require savings institutions to maintain an average
daily balance of liquid assets (cash and eligible investments) equal to at least
4.0% of the average daily balance of its net withdrawable deposits and short-
term borrowings. Historically, the Bank has maintained liquidity levels in
excess of regulatory requirements. At December 31, 1998, the Bank's liquidity
was 11.2%.
The Bank is required to maintain specific amounts of capital pursuant to
OTS requirements. As of December 31, 1998, the Bank was in compliance with all
regulatory capital requirements which were effective as of such date with
tangible, core and risk-based capital ratios of 13.68%, 13.68% and 25.13%,
respectively.
-11-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRST CAPITAL, INC. AND SUBSIDIARY
Year 2000 Issues
The Bank is a user of computers, computer software, and equipment utilizing
embedded microcontrollers that will be effected by the Year 2000 ("Y2K") issue.
The Y2K issue exists because many computer systems and applications use two-
digit date fields to designate a year. As the century date change occurs, date
sensitive systems may incorrectly recognize the year 2000. This inability to
recognize or properly treat the Y2K issue may cause systems to process financial
and operational information incorrectly. The Y2K issue presents several
potential risks to the Bank:
1. The banking transactions of the Bank's customers are processed by one or
more computer systems, either internal or external to the Bank. The
failure of one or more of those systems to function as a result of the Y2K
date change could result in the Bank's inability to properly process
customer transactions. If that were to occur, the Bank could lose
customers to other financial institutions, resulting in a loss of revenue.
2. A number of the Bank's borrowers utilize computers and computer software to
varying degrees in conjunction with the operation of their businesses. The
customers and suppliers of those businesses may utilize computers as well.
Should the Bank's borrowers, or the businesses on which they depend,
experience Y2K related computer problems, such borrowers' cash flow could
be disrupted, adversely affecting their ability to repay their loans with
the Bank.
3. Concern on the part of certain depositors that the Y2K related problems
could impair access to their deposit account balances following the Y2K
date change could result in the Bank experiencing a deposit outflow prior
to December 31, 1999.
4. The Bank contracts with several outside third parties for certain of its
data processing and account servicing functions. Should the systems of one
or more of those third parties fail to function properly after December 31,
1999, the Bank could be adversely affected.
5. Should the Y2K related problems occur which cause any of the Bank's
systems, or the systems of the third parties upon which the Bank depends,
to become inoperative, increased personnel costs could be incurred if
additional staff is required to perform functions that the inoperative
systems would have otherwise performed.
6. Certain utility services, such as electrical power and telecommunication
services, could be disrupted if those services experience Y2K related
problems. The Bank's Y2K contingency plan will address such possible
situations.
Management believes it is not possible to estimate the potential lost revenue
due to the Y2K issue, as the extent and longevity of such potential problems
cannot be predicted. The Bank adopted a Y2K Action Plan in November 1997 to
assess all systems to insure that they will function properly in the Y2K. This
process involves separate phases which include: awareness, assessment,
renovation, validation, and implementation.
-12-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRST CAPITAL, INC. AND SUBSIDIARY
During 1997, the Bank completed the systems assessment phase, identifying each
internal system that could potentially be affected by the Y2K issue. Those
systems include the Bank's in-house microcomputer systems and third party
providers as well as equipment such as the alarm system, vault locks, telephone
system, etc., that may contain embedded microprocessors. For each such system,
an action plan was created to set forth the process for determining whether or
not the system is Y2K compliant. Those determinations involved obtaining Y2K
compliant certifications from vendors wherever possible, and by the Bank
conducting its own validation testing.
The Bank has identified major commercial borrowers to assess their Y2K readiness
and has requested information from those borrowers. The Bank expects to receive
responses and evaluate those borrowers by June 30, 1999.
When the results of the Bank's validation testing programs have revealed that a
particular system is not Y2K compliant, a contingency plan is formulated to
either upgrade the system in order to meet the Y2K compliance requirements or
replace the system with one that is certified as Y2K compliant. The Bank is
currently in the validation and implementation phases of this process.
Other third parties upon which the Bank depends for processing include the
Bank's automated teller machine network processor, correspondent banks,
brokerage firms, and the pension plan administrator. These third parties have
indicated their compliance or intended compliance with the Y2K. Should the
testing of any third-party system or service reveal that such system or service
is not Y2K compliant, a specific deadline will be set by which time the system
or service must be brought into Y2K compliance. Should Y2K compliance not be
achieved by the specified deadlines, the Bank has developed a contingency plan
for each such external system or service. Those contingency plans document the
action the Bank will take for each such non-compliant system.
In certain cases, such as the potential loss of electrical power or
telecommunication services due to Y2K problems, testing by the Bank is either
not practical or not possible. In those cases, contingency plans will be
designed by June 30, 1999 that specify how the Bank will deal with such
potential situations. For example, the Bank is considering the purchase or
lease of an electrical power generator with sufficient capacity to allow the
Bank to maintain critical functions in the event power from the electric utility
is interrupted.
The Bank, as a federally chartered thrift institution, is regulated by the
Office of Thrift Supervision. The federal regulators have established specific
guidelines and time tables to follow in addressing the Y2K issue. The Bank is
currently in compliance with the federally mandated Y2K guidelines and time
tables.
-13-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRST CAPITAL, INC. AND SUBSIDIARY
As of December 31, 1998, the Bank is on schedule with its internal Y2K
preparation efforts. All internal systems identified in the assessment phase of
the project that are considered "mission critical" have either been tested for
Y2K compliance or will be tested by March 31, 1999. The Bank's in-house
computer system, its most critical processing system, has been certified by its
respective hardware and software vendors as being Y2K compliant. The Bank has
begun testing the system for Y2K compatibility and the testing to date has
indicated that the system is Y2K compliant. All systems that have been
determined to be Y2K compliant will be retested during 1999 following any
material upgrades or enhancements. The Bank has replaced non-compliant
microcomputer equipment and has installed and tested the related software for
Y2K compliance. Other equipment containing embedded microprocessors have been
certified as Y2K compliant by the applicable vendors. The Bank's estimated
total cost to replace computer equipment, software programs, or other equipment
containing embedded microprocessors that were not Y2K compliant, is
approximately $75,000. As of December 31, 1998, approximately $25,000 has been
incurred. System maintenance or modification costs are being expensed as
incurred, while the cost of new hardware, software, or other equipment, is
capitalized and amortized over their estimated useful lives.
-14-
<PAGE>
PART II
OTHER INFORMATION
FIRST CAPITAL, INC.
Item 1. Legal Proceedings
Periodically, there have been various claims and lawsuits involving the
Bank, mainly as a plaintiff, such as claims to enforce liens,
condemnation proceedings on properties in which the Bank holds security
interests, claims involving the making and servicing of real property
loans and other issues incident to the Bank's business. The Bank is not
a party to any pending legal proceedings that it believes would have a
material adverse affect on it's financial condition or operations.
Item 2. Changes in Securities and Use of Proceeds
The following information is provided in connection with the Company's
sale of its common stock as part of the conversion:
a. The effective date of the Registration Statement on Form SB-2 (File
No. 333-63515) was November 12, 1998.
b. The offering was consummated on December 31, 1998 with the sale of
all securities registered pursuant to the Registration Statement.
Charles Webb & Company acted as marketing agent for the offering.
c. The class of securities registered was common stock, par value $.01
per share. The aggregate amount of such securities registered and
sold was 768,767 shares for an aggregate amount of $7,687,670. The
Company also issued 523,057 common shares in exchange for the
204,015 common shares held by the public stockholders of the Bank.
d. The Company incurred expenses in connection with the conversion and
offering of $401,507, including expenses paid to or for underwriters
of $136,723, attorney and accounting fees of $145,347 and other
expenses of $119,437. The net proceeds to the Company after
deducting expenses and the shares issued to the employee stock
ownership plan were $6,671,153.
e. The Company used $615,010 of the net proceeds to make a term loan to
the Bank's employee stock ownership plan to purchase 61,501 common
shares in the conversion and stock offering.
f. The remaining net proceeds have been invested in interest bearing
deposits with the banks, U.S. government agency securities and
loans.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
-15-
<PAGE>
PART II
OTHER INFORMATION
FIRST CAPITAL, INC.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
--------
3.1 Articles of Incorporation of First Capital, Inc. (incorporated by
reference to Exhibit 3.1 of Registration Statement of Form SB-2, as
amended, File No. 333-63515)
3.2 Bylaws of First Capital, Inc. (incorporated by reference to Exhibit
3.2 of Registration Statement of From SB-2, as amended, File No.
333-63515)
8.1 Employment Agreement with James G. Pendleton
8.2 Employment Agreement with Samuel E. Uhl
8.3 Employment Agreement with M. Chris Frederick
8.4 Employment Agreement with Joel E. Voyles
8.5 Employee Severance Compensation Plan
27 Financial Data Schedule
No reports on Form 8-K were filed during the period covered by this
report.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
FIRST CAPITAL, INC.
(Registrant)
Dated February 11, 1999 BY: /s/James G. Pendleton
------------------------ --------------------------
James G. Pendleton
Chairman and CEO
Dated February 11, 1999 BY: /s/ Michael C. Frederick
------------------------ ---------------------------
Michael C. Frederick
Senior Vice President
and Treasurer
-17-
<PAGE>
Exhibit 8.1
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made effective as of December 31, 1998, by and between
FIRST FEDERAL BANK, A FEDERAL SAVINGS BANK (the "BANK"), FIRST CAPITAL, INC.
(the "COMPANY"), an Indiana corporation; and JAMES G. PENDLETON ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE for
the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve as
Chairman and Chief Executive Officer of the BANK. During said period, EXECUTIVE
also agrees to serve, if elected, as an officer and director of the COMPANY or
any subsidiary or affiliate of the COMPANY or the BANK. Executive shall render
administrative and management duties to the BANK such as are customarily
performed by persons situated in a similar executive capacity.
Specifically, EXECUTIVE shall perform all duties which are commonly
incident to the office of Chairman and Chief Executive Officer of the BANK,
including, but not limited to, (i) managing the day-to-day operations of the
BANK, (ii) oversight of the BANK's compliance with applicable laws and
regulations, (iii) marketing of the BANK and its services, (iv) supervising the
BANK's employees, (v) reporting to the Board on the activities and condition of
the BANK, and (vi) making recommendations to the Board concerning the
strategies, capital structure, tactics and general operations of the BANK.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue through December 31, 1999.
Commencing on the first anniversary date, and continuing at each anniversary
date thereafter, the Board of Directors of the BANK (the "Board") may extend the
Agreement for an additional year or for such shorter period as the Board may
determine. Prior to the extension of the Agreement as provided herein, the
Board of Directors of the BANK will conduct a formal performance evaluation of
EXECUTIVE for purposes of determining whether to extend the Agreement, and the
results thereof shall be included in the minutes of the Board's meeting.
<PAGE>
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
EXECUTIVE may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the BANK,
or materially affect the performance of EXECUTIVE's duties pursuant to this
Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The BANK
shall pay EXECUTIVE as compensation a salary of $90,000 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this
Section 3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all
such other benefits as are provided uniformly to permanent full-time employees
of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this
2
<PAGE>
Agreement and may provide such additional compensation in such form and such
amounts as the Board may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time employment hereunder for any reason other than
a Change in Control, as defined in Section 5(a) hereof; disability, as defined
in Section 6(a) hereof; death; retirement, as defined in Section 7 hereof; or
Termination for Cause, as defined in Section 8 hereof; (ii) EXECUTIVE's
resignation from the BANK's employ, upon (A) unless consented to by EXECUTIVE, a
material change in EXECUTIVE's function, duties, or responsibilities, which
change would cause EXECUTIVE's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Sections 1 and 2, above (any such material change shall be deemed a continuing
breach of this Agreement), (B) a relocation of EXECUTIVE's principal place of
employment by more than 35 miles from its location at the effective date of this
Agreement, or a material reduction in the benefits and perquisites to EXECUTIVE
from those being provided as of the effective date of this Agreement, (C) the
liquidation or dissolution of the BANK, or (D) any material breach of this
Agreement by the BANK. Upon the occurrence of any event described in clauses
(A), (B), (C) or (D), above, EXECUTIVE shall have the right to elect to
terminate his employment under this Agreement by resignation upon not less than
sixty (60) days prior written notice given within a reasonable period of time
not to exceed, except in case of a continuing breach, four (4) calendar months
after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made
pursuant to this Section 4(b) shall be paid in substantially equal monthly
installments over the remaining term of this Agreement following EXECUTIVE's
termination; provided, however, that if the remaining term of the Agreement is
less than one (1) year (determined as of EXECUTIVE's Date of Termination), such
payments and benefits shall be paid to EXECUTIVE in a lump sum within thirty
(30) days of the Date of Termination.
3
<PAGE>
(c) Upon the occurrence of an Event of Termination, the BANK will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall have
occurred a Change in Control of the COMPANY or the BANK. For purposes of this
Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) there occurs a change in control of the BANK or the
COMPANY within the meaning of the Home Owners Loan Act of 1933 and 12 C.F.R.
Part 574, (b) any person (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act) is or becomes the beneficial owner, directly or indirectly,
of securities of the COMPANY or the BANK representing twenty-five percent (25%)
or more of the combined voting power of the COMPANY's or the BANK's then
outstanding securities, (c) the membership of the board of directors of the
COMPANY or the BANK changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24) month
period (whether commencing before or after the date of adoption of this
Agreement) do not constitute a majority of the Board at the end of such period,
or (d) shareholders of the COMPANY or the BANK approve a merger, consolidation,
sale or disposition of all or substantially all of the COMPANY's or the BANK's
assets, or a plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control (as defined herein) has occurred,
EXECUTIVE shall be entitled to the benefits provided in paragraphs (c), (d) and
(e) of this Section 5 upon his subsequent involuntary termination following the
effective date of a Change in Control (or voluntary termination within twelve
(12) months of the effective date of a Change in Control following any material
demotion, loss of title, office or significant authority, material reduction in
his annual compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or the relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 7, termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of (S)280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage
4
<PAGE>
substantially identical to the coverage maintained by the BANK for EXECUTIVE
prior to his severance. Such coverage shall cease upon the expiration of thirty-
six (36) months. In addition, EXECUTIVE shall be entitled to receive the value
of employer contributions that would have been made on EXECUTIVE's behalf over
the remaining term of the agreement to any tax-qualified retirement plan
sponsored by the BANK as of the Date of Termination.
(e) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under (S)280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall be
payable or provided to EXECUTIVE over the minimum period necessary to reduce the
present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times EXECUTIVE's "base amount" under (S)280G(b)(3)
of the Code or (ii) the payments or benefits to be provided under this Section 5
shall be reduced to the extent necessary to avoid treatment as an excess
parachute payment with the allocation of the reduction among such payments and
benefits to be determined by EXECUTIVE.
6. TERMINATION FOR DISABILITY.
(a) If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."
(b) Upon EXECUTIVE's termination of employment for Disability, the BANK
will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to three-
quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the effective
date of such termination. These disability payments shall commence on the
effective date of EXECUTIVE's termination and will end on the earlier of (i) the
date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.
(c) The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii)
5
<PAGE>
EXECUTIVE's attaining the age of sixty-five (65); (iv) EXECUTIVE's death; or (v)
the expiration of the term of this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to him.
Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be entitled to
all benefits under any retirement plan of the BANK or the COMPANY and other
plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE during the
term of this Agreement, the BANK shall pay to EXECUTIVE's estate the
compensation due to EXECUTIVE through the last day of the calendar month in
which his death occurred. Upon the voluntary resignation of EXECUTIVE during
the term of this Agreement, other than in connection with an Event of
Termination, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's 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 infractions) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to EXECUTIVE and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, EXECUTIVE was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after termination for Cause. Any stock options granted to EXECUTIVE
under any stock option plan or any unvested awards granted under any other stock
benefit plan of the BANK, the COMPANY, or any subsidiary or affiliate thereof,
shall become null and void effective upon EXECUTIVE's receipt of Notice of
Termination for Cause pursuant to Section 10 hereof, and shall not be
exercisable by EXECUTIVE at any time subsequent to such Termination for Cause.
6
<PAGE>
9. REQUIRED PROVISIONS.
(a) The BOARD may terminate EXECUTIVE's employment at any time, but any
termination by the BOARD, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while its
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the FDIA),
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his designee at the time the Director or such designee
approves a supervisory merger to resolve problems related to operation of the
BANK or when the BANK is determined by the Director to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of
7
<PAGE>
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of EXECUTIVE's employment under the provision so indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for
Cause, the date specified in the Notice of Termination . In the event of
EXECUTIVE's Termination for Cause, the Date of Termination shall be the same as
the date of the Notice of Termination.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
11. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to
an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not to
compete with the BANK and/or the COMPANY for a period of one (1) year following
such termination in any city, town or county in which the BANK and/or the
COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the BANK and/or the
COMPANY. The parties hereto, recognizing that irreparable injury will result to
the BANK and/or the COMPANY, its business and property in the event of
EXECUTIVE's breach of this Subsection 11(a) agree that in the event of any such
breach by EXECUTIVE, the BANK and/or the COMPANY will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by EXECUTIVE, EXECUTIVE's partners, agents, servants,
employers, employees and all persons acting for or with EXECUTIVE. EXECUTIVE
represents and admits that in the event of the termination of his employment
pursuant to Section 4 hereof, EXECUTIVE's experience and capabilities are such
that EXECUTIVE can obtain employment in a business engaged in other lines and/or
of a different nature than the BANK and/or the COMPANY, and that the enforcement
of a remedy by way of
8
<PAGE>
injunction will not prevent EXECUTIVE from earning a livelihood. Nothing herein
will be construed as prohibiting the BANK and/or the COMPANY from pursuing any
other remedies available to the BANK and/or the COMPANY for such breach or
threatened breach, including the recovery of damages from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK. EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the BANK. In the
event of a breach or threatened breach by EXECUTIVE of the provisions of this
Section, the BANK will be entitled to an injunction restraining EXECUTIVE from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof, or from
rendering any services to any person, firm, corporation, other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting the BANK from
pursuing any other remedies available to the BANK for such breach or threatened
breach, including the recovery of damages from EXECUTIVE.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
9
<PAGE>
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Indiana,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, including , specifically, 12 C.F.R. Section 563.39(b), the
provisions of such law or regulation shall prevail.
10
<PAGE>
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if EXECUTIVE is successful pursuant to a legal
judgment, arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under Indiana law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the BANK (whether or not he continues to be a directors or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgment, court costs and
attorneys' fees and the cost of reasonable settlements. The provisions of 12
C.F.R. 545.121 shall apply to the BANK's obligations under this Section 20.
21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.
11
<PAGE>
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the 31/st/ day of December,
1998.
ATTEST: FIRST FEDERAL BANK,
A FEDERAL SAVINGS BANK
/s/Joel E. Voyles BY:/s/Samuel E. Uhl
- ----------------- ----------------
ATTEST: FIRST CAPITAL, INC.
/s/Joel E. Voyles BY:/s/Samuel E. Uhl
- ----------------- ----------------
WITNESS:
/s/M. Chris Frederick /s/ James G. Pendleton
- --------------------- ----------------------
JAMES G. PENDLETON
12
<PAGE>
Exhibit 8.2
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made effective as of December 31, 1998, by and between
FIRST FEDERAL BANK, A FEDERAL SAVINGS BANK (the "BANK"), FIRST CAPITAL, INC.
(the "COMPANY"), an Indiana corporation; and SAMUEL E. UHL ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE for
the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve as
President of the Bank. EXECUTIVE also agrees to serve, if elected, as an
officer and director of the COMPANY or any subsidiary or affiliate of the
COMPANY or the BANK. Executive shall render administrative and management
duties to the BANK such as are customarily performed by persons situated in a
similar executive capacity.
Specifically, EXECUTIVE shall perform all duties which are commonly
incident to the office of President of the BANK including the direction of the
BANK's retail and lending operations, oversight and direction of branch
operations and property, oversight and direction of human resources and such
other tasks related to the operations of the BANK as may be assigned to
EXECUTIVE by the Chief Executive Officer of the Bank.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for thirty six (36) months
thereafter. Commencing on the first anniversary date, and continuing at each
anniversary date thereafter, the Board of Directors of the BANK (the "Board")
may extend the Agreement for an additional year. Prior to the extension of the
Agreement as provided herein, the Board of Directors of the BANK will conduct a
formal performance evaluation of EXECUTIVE for purposes of determining whether
to extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and
<PAGE>
management of the BANK; provided, however, that, with the approval of the Board,
as evidenced by a resolution of such Board, from time to time, EXECUTIVE may
serve, or continue to serve, on the boards of directors of, and hold any other
offices or positions in, companies or organizations, which, in such Board's
judgment, will not present any conflict of interest with the BANK, or materially
affect the performance of EXECUTIVE's duties pursuant to this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The BANK
shall pay EXECUTIVE as compensation a salary of $85,000 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this
Section 3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all
such other benefits as are provided uniformly to permanent full-time employees
of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
2
<PAGE>
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time employment hereunder for any reason other than
a Change in Control, as defined in Section 5(a) hereof; disability, as defined
in Section 6(a) hereof; death; retirement, as defined in Section 7 hereof; or
Termination for Cause, as defined in Section 8 hereof; (ii) EXECUTIVE's
resignation from the BANK's employ, upon (A) unless consented to by EXECUTIVE, a
material change in EXECUTIVE's function, duties, or responsibilities, which
change would cause EXECUTIVE's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Sections 1 and 2, above (any such material change shall be deemed a continuing
breach of this Agreement), (B) a relocation of EXECUTIVE's principal place of
employment by more than 35 miles from its location at the effective date of this
Agreement, or a material reduction in the benefits and perquisites to EXECUTIVE
from those being provided as of the effective date of this Agreement, (C) the
liquidation or dissolution of the BANK, or (D) any material breach of this
Agreement by the BANK. Upon the occurrence of any event described in clauses
(A), (B), (C) or (D), above, EXECUTIVE shall have the right to elect to
terminate his employment under this Agreement by resignation upon not less than
sixty (60) days prior written notice given within a reasonable period of time
not to exceed, except in case of a continuing breach, four (4) calendar months
after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made
pursuant to this Section 4(b) shall be paid in substantially equal monthly
installments over the remaining term of this Agreement following EXECUTIVE's
termination; provided, however, that if the remaining term of the Agreement is
less than one (1) year (determined as of EXECUTIVE's Date of Termination), such
payments and benefits shall be paid to EXECUTIVE in a lump sum within thirty
(30) days of the Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage
3
<PAGE>
maintained by the BANK for EXECUTIVE prior to his termination. Such coverage
shall cease upon the expiration of the remaining term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall have
occurred a Change in Control of the COMPANY or the BANK. For purposes of this
Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) there occurs a change in control of the BANK or the
COMPANY within the meaning of the Home Owners Loan Act of 1933 and 12 C.F.R.
Part 574, (b) any person (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act) is or becomes the beneficial owner, directly or indirectly,
of securities of the COMPANY or the BANK representing twenty-five percent (25%)
or more of the combined voting power of the COMPANY's or the BANK's then
outstanding securities, (c) the membership of the board of directors of the
COMPANY or the BANK changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24) month
period (whether commencing before or after the date of adoption of this
Agreement) do not constitute a majority of the Board at the end of such period,
or (d) shareholders of the COMPANY or the BANK approve a merger, consolidation,
sale or disposition of all or substantially all of the COMPANY's or the BANK's
assets, or a plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control (as defined herein) has occurred,
EXECUTIVE shall be entitled to the benefits provided in paragraphs (c), (d) and
(e) of this Section 5 upon his subsequent involuntary termination following the
effective date of a Change in Control (or voluntary termination within twelve
(12) months of the effective date of a Change in Control following any material
demotion, loss of title, office or significant authority, material reduction in
his annual compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or the relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 7, termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of (S)280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage
shall cease upon the expiration of thirty-six (36) months. In addition,
4
<PAGE>
EXECUTIVE shall be entitled to receive the value of employer contributions that
would have been made on EXECUTIVE's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the BANK as of the
Date of Termination.
(e) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under (S)280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall be
payable or provided to EXECUTIVE over the minimum period necessary to reduce the
present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times EXECUTIVE's "base amount" under (S)280G(b)(3)
of the Code or (ii) the payments or benefits to be provided under this Section 5
shall be reduced to the extent necessary to avoid treatment as an excess
parachute payment with the allocation of the reduction among such payments and
benefits to be determined by EXECUTIVE.
6. TERMINATION FOR DISABILITY.
(a) If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."
(b) Upon EXECUTIVE's termination of employment for Disability, the BANK
will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to three-
quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the effective
date of such termination. These disability payments shall commence on the
effective date of EXECUTIVE's termination and will end on the earlier of (i) the
date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.
(c) The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii) EXECUTIVE's attaining the age of sixty-five (65); (iv)
EXECUTIVE's death; or (v) the expiration of the term of this Agreement.
5
<PAGE>
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to him.
Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be entitled to
all benefits under any retirement plan of the BANK or the COMPANY and other
plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE during the
term of this Agreement, the BANK shall pay to EXECUTIVE's estate the
compensation due to EXECUTIVE through the last day of the calendar month in
which his death occurred. Upon the voluntary resignation of EXECUTIVE during
the term of this Agreement, other than in connection with an Event of
Termination, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's 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 infractions) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to EXECUTIVE and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, EXECUTIVE was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after termination for Cause. Any stock options granted to EXECUTIVE
under any stock option plan or any unvested awards granted under any other stock
benefit plan of the BANK, the COMPANY, or any subsidiary or affiliate thereof,
shall become null and void effective upon EXECUTIVE's receipt of Notice of
Termination for Cause pursuant to Section 10 hereof, and shall not be
exercisable by EXECUTIVE at any time subsequent to such Termination for Cause.
9. REQUIRED PROVISIONS.
(a) The BOARD may terminate EXECUTIVE's employment at any time, but any
termination by the BOARD, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right
6
<PAGE>
to receive compensation or other benefits for any period after Termination for
Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while its
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the FDIA),
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his designee at the time the Director or such designee
approves a supervisory merger to resolve problems related to operation of the
BANK or when the BANK is determined by the Director to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision so
indicated.
7
<PAGE>
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for
Cause, the date specified in the Notice of Termination. In the event of
EXECUTIVE's Termination for Cause, the Date of Termination shall be the same as
the date of the Notice of Termination.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
11. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to
an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not to
compete with the BANK and/or the COMPANY for a period of one (1) year following
such termination in any city, town or county in which the BANK and/or the
COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the BANK and/or the
COMPANY. The parties hereto, recognizing that irreparable injury will result to
the BANK and/or the COMPANY, its business and property in the event of
EXECUTIVE's breach of this Subsection 11(a) agree that in the event of any such
breach by EXECUTIVE, the BANK and/or the COMPANY will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by EXECUTIVE, EXECUTIVE's partners, agents, servants,
employers, employees and all persons acting for or with EXECUTIVE. EXECUTIVE
represents and admits that in the event of the termination of his employment
pursuant to Section 4 hereof, EXECUTIVE's experience and capabilities are such
that EXECUTIVE can obtain employment in a business engaged in other lines and/or
of a different nature than the BANK and/or the COMPANY, and that the enforcement
of a remedy by way of injunction will not prevent EXECUTIVE from earning a
livelihood. Nothing herein will be construed as prohibiting the BANK and/or the
COMPANY from pursuing any other remedies available to the BANK and/or the
COMPANY for such breach or threatened breach, including the recovery of damages
from EXECUTIVE.
8
<PAGE>
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK. EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the BANK. In the
event of a breach or threatened breach by EXECUTIVE of the provisions of this
Section, the BANK will be entitled to an injunction restraining EXECUTIVE from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof, or from
rendering any services to any person, firm, corporation, other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting the BANK from
pursuing any other remedies available to the BANK for such breach or threatened
breach, including the recovery of damages from EXECUTIVE.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
9
<PAGE>
15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Indiana,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, including , specifically, 12 C.F.R. Section 563.39(b), the
provisions of such law or regulation shall prevail.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if EXECUTIVE is successful pursuant to a legal
judgment, arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest
10
<PAGE>
extent permitted under Indiana law against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved by reason of his having been a
director or officer of the BANK (whether or not he continues to be a directors
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgment, court costs and
attorneys' fees and the cost of reasonable settlements. The provisions of 12
C.F.R. 545.121 shall apply to the BANK's obligations under this Section 20.
21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the 31/st/ day of December,
1998.
ATTEST: FIRST FEDERAL BANK,
A FEDERAL SAVINGS BANK
/s/Joel E. Voyles BY:/s/James G. Pendleton
- ----------------- ---------------------
ATTEST: FIRST CAPITAL, INC.
/s/Joel E. Voyles BY:/s/James G. Pendleton
- ----------------- ---------------------
WITNESS:
/s/M. Chris Frederick /s/Samuel E. Uhl
- --------------------- ----------------
SAMUEL E. UHL
11
<PAGE>
Exhibit 8.3
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made effective as of December 31, 1998, by and between
FIRST FEDERAL BANK, A FEDERAL SAVINGS BANK (the "BANK"), FIRST CAPITAL, INC.
(the "COMPANY"), an Indiana corporation; and M. CHRIS FREDERICK ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE for
the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve as
Senior Vice President/Chief Financial Officer of the BANK. During said period,
EXECUTIVE also agrees to serve, if elected, as an officer of the COMPANY or any
subsidiary or affiliate of the COMPANY or the BANK. Executive shall render
administrative and management duties to the BANK such as are customarily
performed by persons situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for thirty six (36) months
thereafter. Commencing on the first anniversary date, and continuing at each
anniversary date thereafter, the Board of Directors of the BANK (the "Board")
may extend the Agreement for an additional year. Prior to the extension of the
Agreement as provided herein, the Board of Directors of the BANK will conduct a
formal performance evaluation of EXECUTIVE for purposes of determining whether
to extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
EXECUTIVE may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the BANK,
or materially affect the performance of EXECUTIVE's duties pursuant to this
Agreement.
<PAGE>
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The BANK
shall pay EXECUTIVE as compensation a salary of $45,000 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this
Section 3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all
such other benefits as are provided uniformly to permanent full-time employees
of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time employment hereunder for any reason other than
a Change in Control, as defined in Section 5(a) hereof; disability, as defined
in Section 6(a) hereof; death; retirement, as defined in Section 7 hereof; or
Termination for
2
<PAGE>
Cause, as defined in Section 8 hereof; (ii) EXECUTIVE's resignation from the
BANK's employ, upon (A) unless consented to by EXECUTIVE, a material change in
EXECUTIVE's function, duties, or responsibilities, which change would cause
EXECUTIVE's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of EXECUTIVE's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement, or
a material reduction in the benefits and perquisites to EXECUTIVE from those
being provided as of the effective date of this Agreement, (C) the liquidation
or dissolution of the BANK, or (D) any material breach of this Agreement by the
BANK. Upon the occurrence of any event described in clauses (A), (B), (C) or
(D), above, EXECUTIVE shall have the right to elect to terminate his employment
under this Agreement by resignation upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four (4) calendar months after the event giving
rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made
pursuant to this Section 4(b) shall be paid in substantially equal monthly
installments over the remaining term of this Agreement following EXECUTIVE's
termination; provided, however, that if the remaining term of the Agreement is
less than one (1) year (determined as of EXECUTIVE's Date of Termination), such
payments and benefits shall be paid to EXECUTIVE in a lump sum within thirty
(30) days of the Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall have
occurred a Change in Control of the COMPANY or the BANK. For purposes of this
Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) there occurs a change in control of the BANK or the
COMPANY within the meaning of the Home Owners Loan
3
<PAGE>
Act of 1933 and 12 C.F.R. Part 574, (b) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the COMPANY or the BANK
representing twenty-five percent (25%) or more of the combined voting power of
the COMPANY's or the BANK's then outstanding securities, (c) the membership of
the board of directors of the COMPANY or the BANK changes as the result of a
contested election, such that individuals who were directors at the beginning of
any twenty-four (24) month period (whether commencing before or after the date
of adoption of this Agreement) do not constitute a majority of the Board at the
end of such period, or (d) shareholders of the COMPANY or the BANK approve a
merger, consolidation, sale or disposition of all or substantially all of the
COMPANY's or the BANK's assets, or a plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control (as defined herein) has occurred,
EXECUTIVE shall be entitled to the benefits provided in paragraphs (c), (d) and
(e) of this Section 5 upon his subsequent involuntary termination following the
effective date of a Change in Control (or voluntary termination within twelve
(12) months of the effective date of a Change in Control following any material
demotion, loss of title, office or significant authority, material reduction in
his annual compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or the relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 7, termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of (S)280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage
shall cease upon the expiration of thirty-six (36) months. In addition,
EXECUTIVE shall be entitled to receive the value of employer contributions that
would have been made on EXECUTIVE's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the BANK as of the
Date of Termination.
(e) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under (S)280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall be
payable or
4
<PAGE>
provided to EXECUTIVE over the minimum period necessary to reduce the present
value of such payments or benefits to an amount which is one dollar ($1.00) less
than three (3) times EXECUTIVE's "base amount" under (S)280G(b)(3) of the Code
or (ii) the payments or benefits to be provided under this Section 5 shall be
reduced to the extent necessary to avoid treatment as an excess parachute
payment with the allocation of the reduction among such payments and benefits to
be determined by EXECUTIVE.
6. TERMINATION FOR DISABILITY.
(a) If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."
(b) Upon EXECUTIVE's termination of employment for Disability, the BANK
will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to three-
quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the effective
date of such termination. These disability payments shall commence on the
effective date of EXECUTIVE's termination and will end on the earlier of (i) the
date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.
(c) The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii) EXECUTIVE's attaining the age of sixty-five (65); (iv)
EXECUTIVE's death; or (v) the expiration of the term of this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established
5
<PAGE>
with EXECUTIVE's consent with respect to him. Upon termination of EXECUTIVE upon
Retirement, EXECUTIVE shall be entitled to all benefits under any retirement
plan of the BANK or the COMPANY and other plans to which EXECUTIVE is a party.
Upon the death of EXECUTIVE during the term of this Agreement, the BANK shall
pay to EXECUTIVE's estate the compensation due to EXECUTIVE through the last day
of the calendar month in which his death occurred. Upon the voluntary
resignation of EXECUTIVE during the term of this Agreement, other than in
connection with an Event of Termination, the BANK shall pay to EXECUTIVE the
compensation due to EXECUTIVE through his Date of Termination.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's 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 infractions) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to EXECUTIVE and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, EXECUTIVE was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after termination for Cause. Any stock options granted to EXECUTIVE
under any stock option plan or any unvested awards granted under any other stock
benefit plan of the BANK, the COMPANY, or any subsidiary or affiliate thereof,
shall become null and void effective upon EXECUTIVE's receipt of Notice of
Termination for Cause pursuant to Section 10 hereof, and shall not be
exercisable by EXECUTIVE at any time subsequent to such Termination for Cause.
9. REQUIRED PROVISIONS.
(a) The BOARD may terminate EXECUTIVE's employment at any time, but any
termination by the BOARD, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all
6
<PAGE>
or part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate (in whole or in part) any of its obligations that
were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the FDIA),
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to the
extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his designee at the time the Director or such designee
approves a supervisory merger to resolve problems related to operation of the
BANK or when the BANK is determined by the Director to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for
Cause, the date specified in the Notice of Termination. In the event of
EXECUTIVE's Termination for Cause, the Date of Termination shall be the same as
the date of the Notice of Termination.
7
<PAGE>
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
11. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to an
Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not to
compete with the BANK and/or the COMPANY for a period of one (1) year following
such termination in any city, town or county in which the BANK and/or the
COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the BANK and/or the
COMPANY. The parties hereto, recognizing that irreparable injury will result to
the BANK and/or the COMPANY, its business and property in the event of
EXECUTIVE's breach of this Subsection 11(a) agree that in the event of any such
breach by EXECUTIVE, the BANK and/or the COMPANY will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by EXECUTIVE, EXECUTIVE's partners, agents, servants,
employers, employees and all persons acting for or with EXECUTIVE. EXECUTIVE
represents and admits that in the event of the termination of his employment
pursuant to Section 4 hereof, EXECUTIVE's experience and capabilities are such
that EXECUTIVE can obtain employment in a business engaged in other lines and/or
of a different nature than the BANK and/or the COMPANY, and that the enforcement
of a remedy by way of injunction will not prevent EXECUTIVE from earning a
livelihood. Nothing herein will be construed as prohibiting the BANK and/or the
COMPANY from pursuing any other remedies available to the BANK and/or the
COMPANY for such breach or threatened breach, including the recovery of damages
from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK. EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas
8
<PAGE>
which are not solely and exclusively derived from the business plans and
activities of the BANK. In the event of a breach or threatened breach by
EXECUTIVE of the provisions of this Section, the BANK will be entitled to an
injunction restraining EXECUTIVE from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
BANK or affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the BANK from pursuing any other remedies available to the BANK for
such breach or threatened breach, including the recovery of damages from
EXECUTIVE.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
9
<PAGE>
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Indiana,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, including, specifically, 12 C.F.R. Section 563.39(b), the
provisions of such law or regulation shall prevail.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if EXECUTIVE is successful pursuant to a legal
judgment, arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under Indiana law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the BANK (whether or not he continues to be a directors or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgment, court costs and
attorneys' fees and the cost of reasonable settlements. The provisions of 12
C.F.R. 545.121 shall apply to the BANK's obligations under this Section 20.
10
<PAGE>
21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the 31/st/ day of December,
1998.
ATTEST: FIRST FEDERAL BANK,
A FEDERAL SAVINGS BANK
/s/Joel E. Voyles BY:/s/James G. Pendleton
- ----------------- ---------------------
ATTEST: FIRST CAPITAL, INC.
/s/Joel E. Voyles BY:/s/James G. Pendleton
- ----------------- ---------------------
WITNESS:
/s/Helen Strong /s/M. Chris Frederick
- --------------- ---------------------
M. CHRIS FREDERICK
11
<PAGE>
Exhibit 8.4
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made effective as of December 31, 1998, by and between
FIRST FEDERAL BANK, A FEDERAL SAVINGS BANK (the "BANK"), FIRST CAPITAL, INC.
(the "COMPANY"), an Indiana corporation; and JOEL E. VOYLES ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE for
the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve as
Vice President (Operations) of the BANK. During said period, EXECUTIVE also
agrees to serve, if elected, as an officer of the COMPANY or any subsidiary or
affiliate of the COMPANY or the BANK. Executive shall render administrative and
management duties to the BANK such as are customarily performed by persons
situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for thirty six (36) months
thereafter. Commencing on the first anniversary date, and continuing at each
anniversary date thereafter, the Board of Directors of the BANK (the "Board")
may extend the Agreement for an additional year. Prior to the extension of the
Agreement as provided herein, the Board of Directors of the BANK will conduct a
formal performance evaluation of EXECUTIVE for purposes of determining whether
to extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
EXECUTIVE may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the BANK,
or materially affect the performance of EXECUTIVE's duties pursuant to this
Agreement.
<PAGE>
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The BANK
shall pay EXECUTIVE as compensation a salary of $47,500 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this
Section 3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all
such other benefits as are provided uniformly to permanent full-time employees
of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time employment hereunder for any reason other than
a Change in Control, as defined in Section 5(a) hereof; disability, as defined
in Section 6(a) hereof; death; retirement, as defined in Section 7 hereof; or
Termination for
2
<PAGE>
Cause, as defined in Section 8 hereof; (ii) EXECUTIVE's resignation from the
BANK's employ, upon (A) unless consented to by EXECUTIVE, a material change in
EXECUTIVE's function, duties, or responsibilities, which change would cause
EXECUTIVE's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of EXECUTIVE's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement, or
a material reduction in the benefits and perquisites to EXECUTIVE from those
being provided as of the effective date of this Agreement, (C) the liquidation
or dissolution of the BANK, or (D) any material breach of this Agreement by the
BANK. Upon the occurrence of any event described in clauses (A), (B), (C) or
(D), above, EXECUTIVE shall have the right to elect to terminate his employment
under this Agreement by resignation upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four (4) calendar months after the event giving
rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made
pursuant to this Section 4(b) shall be paid in substantially equal monthly
installments over the remaining term of this Agreement following EXECUTIVE's
termination; provided, however, that if the remaining term of the Agreement is
less than one (1) year (determined as of EXECUTIVE's Date of Termination), such
payments and benefits shall be paid to EXECUTIVE in a lump sum within thirty
(30) days of the Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall have
occurred a Change in Control of the COMPANY or the BANK. For purposes of this
Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) there occurs a change in control of the BANK or the
COMPANY within the meaning of the Home Owners Loan
3
<PAGE>
Act of 1933 and 12 C.F.R. Part 574, (b) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the COMPANY or the BANK
representing twenty-five percent (25%) or more of the combined voting power of
the COMPANY's or the BANK's then outstanding securities, (c) the membership of
the board of directors of the COMPANY or the BANK changes as the result of a
contested election, such that individuals who were directors at the beginning of
any twenty-four (24) month period (whether commencing before or after the date
of adoption of this Agreement) do not constitute a majority of the Board at the
end of such period, or (d) shareholders of the COMPANY or the BANK approve a
merger, consolidation, sale or disposition of all or substantially all of the
COMPANY's or the BANK's assets, or a plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control (as defined herein) has occurred,
EXECUTIVE shall be entitled to the benefits provided in paragraphs (c), (d) and
(e) of this Section 5 upon his subsequent involuntary termination following the
effective date of a Change in Control (or voluntary termination within twelve
(12) months of the effective date of a Change in Control following any material
demotion, loss of title, office or significant authority, material reduction in
his annual compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or the relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 7, termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of (S)280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage
shall cease upon the expiration of thirty-six (36) months. In addition,
EXECUTIVE shall be entitled to receive the value of employer contributions that
would have been made on EXECUTIVE's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the BANK as of the
Date of Termination.
(e) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under (S)280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall be
payable or
4
<PAGE>
provided to EXECUTIVE over the minimum period necessary to reduce the present
value of such payments or benefits to an amount which is one dollar ($1.00) less
than three (3) times EXECUTIVE's "base amount" under (S)280G(b)(3) of the Code
or (ii) the payments or benefits to be provided under this Section 5 shall be
reduced to the extent necessary to avoid treatment as an excess parachute
payment with the allocation of the reduction among such payments and benefits to
be determined by EXECUTIVE.
6. TERMINATION FOR DISABILITY.
(a) If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."
(b) Upon EXECUTIVE's termination of employment for Disability, the BANK
will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to three-
quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the effective
date of such termination. These disability payments shall commence on the
effective date of EXECUTIVE's termination and will end on the earlier of (i) the
date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.
(c) The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii) EXECUTIVE's attaining the age of sixty-five (65); (iv)
EXECUTIVE's death; or (v) the expiration of the term of this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established
5
<PAGE>
with EXECUTIVE's consent with respect to him. Upon termination of EXECUTIVE upon
Retirement, EXECUTIVE shall be entitled to all benefits under any retirement
plan of the BANK or the COMPANY and other plans to which EXECUTIVE is a party.
Upon the death of EXECUTIVE during the term of this Agreement, the BANK shall
pay to EXECUTIVE's estate the compensation due to EXECUTIVE through the last day
of the calendar month in which his death occurred. Upon the voluntary
resignation of EXECUTIVE during the term of this Agreement, other than in
connection with an Event of Termination, the BANK shall pay to EXECUTIVE the
compensation due to EXECUTIVE through his Date of Termination.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's 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 infractions) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to EXECUTIVE and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, EXECUTIVE was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after termination for Cause. Any stock options granted to EXECUTIVE
under any stock option plan or any unvested awards granted under any other stock
benefit plan of the BANK, the COMPANY, or any subsidiary or affiliate thereof,
shall become null and void effective upon EXECUTIVE's receipt of Notice of
Termination for Cause pursuant to Section 10 hereof, and shall not be
exercisable by EXECUTIVE at any time subsequent to such Termination for Cause.
9. REQUIRED PROVISIONS.
(a) The BOARD may terminate EXECUTIVE's employment at any time, but any
termination by the BOARD, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all
6
<PAGE>
or part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate (in whole or in part) any of its obligations that
were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the FDIA),
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his designee at the time the Director or such designee
approves a supervisory merger to resolve problems related to operation of the
BANK or when the BANK is determined by the Director to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for
Cause, the date specified in the Notice of Termination . In the event of
EXECUTIVE's Termination for Cause, the Date of Termination shall be the same as
the date of the Notice of Termination.
7
<PAGE>
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
11. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to
an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not to
compete with the BANK and/or the COMPANY for a period of one (1) year following
such termination in any city, town or county in which the BANK and/or the
COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the BANK and/or the
COMPANY. The parties hereto, recognizing that irreparable injury will result to
the BANK and/or the COMPANY, its business and property in the event of
EXECUTIVE's breach of this Subsection 11(a) agree that in the event of any such
breach by EXECUTIVE, the BANK and/or the COMPANY will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by EXECUTIVE, EXECUTIVE's partners, agents, servants,
employers, employees and all persons acting for or with EXECUTIVE. EXECUTIVE
represents and admits that in the event of the termination of his employment
pursuant to Section 4 hereof, EXECUTIVE's experience and capabilities are such
that EXECUTIVE can obtain employment in a business engaged in other lines and/or
of a different nature than the BANK and/or the COMPANY, and that the enforcement
of a remedy by way of injunction will not prevent EXECUTIVE from earning a
livelihood. Nothing herein will be construed as prohibiting the BANK and/or the
COMPANY from pursuing any other remedies available to the BANK and/or the
COMPANY for such breach or threatened breach, including the recovery of damages
from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK. EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas
8
<PAGE>
which are not solely and exclusively derived from the business plans and
activities of the BANK. In the event of a breach or threatened breach by
EXECUTIVE of the provisions of this Section, the BANK will be entitled to an
injunction restraining EXECUTIVE from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
BANK or affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the BANK from pursuing any other remedies available to the BANK for
such breach or threatened breach, including the recovery of damages from
EXECUTIVE.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
9
<PAGE>
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Indiana,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, including, specifically, 12 C.F.R. Section 563.39(b), the
provisions of such law or regulation shall prevail.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if EXECUTIVE is successful pursuant to a legal
judgment, arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under Indiana law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the BANK (whether or not he continues to be a directors or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgment, court costs and
attorneys' fees and the cost of reasonable settlements. The provisions of 12
C.F.R. 545.121 shall apply to the BANK's obligations under this Section 20.
10
<PAGE>
21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the 31/st/ day of December,
1998.
ATTEST: FIRST FEDERAL BANK,
A FEDERAL SAVINGS BANK
/s/Joel E. Voyles BY:/s/James G. Pendleton
- ----------------- ----------------------
ATTEST: FIRST CAPITAL, INC.
/s/Joel E. Voyles BY:/s/James G. Pendleton
- ----------------- ---------------------
WITNESS:
/s/M. Chris Frederick /s/Joel E. Voyles
- --------------------- -----------------
JOEL E. VOYLES
11
<PAGE>
Exhibit 8.5
FIRST FEDERAL BANK, A FEDERAL SAVINGS BANK
EMPLOYEE SEVERANCE COMPENSATION PLAN
PLAN PURPOSE
The purpose of this First Federal Bank, a Federal Savings Bank Employee
Severance Compensation Plan is to assure the services of employees of the Bank
in the event of a Change in Control. The benefits contemplated by the Plan
recognize the value to the Bank of the services and contributions of the
employees of the Bank and the 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 believes that the Plan will also aid the Bank in attracting and retaining
the highly qualified individuals who are essential to its success and that the
Plan's assurance of fair treatment of the Bank's employees will reduce the
distractions and other adverse effects on employees' performance in the event of
a Change in Control.
ARTICLE I
ESTABLISHMENT OF PLAN
1.1 Establishment of Plan
---------------------
As of the Effective Date of the Plan as defined herein, the Bank hereby
establishes an employee severance compensation plan to be known as the First
Federal Bank, a Federal Savings Bank Employee Severance Compensation Plan." The
purposes of the Plan are as set forth above.
1.2 Application of Plan
-------------------
The benefits provided by this Plan shall be available to all employees of
the Bank, who, at or after the Effective Date, meet the eligibility requirements
of Article III, except for those officers of the Bank who have entered into, or
who enter into in the future, and continue to be subject to, an employment or
change in control agreement with the Employer.
1.3 Contractual Right to Benefits
-----------------------------
This plan establishes and vests in each Participant a contractual right to
the benefits to which each Participant is entitled hereunder in the event of a
Change in Control, enforceable by the Participant against the Employer, the
Bank, or both. The Plan does not provide, and should not be construed as
providing, benefits of any kind to any employee except in the event of a Change
in Control and, in the event of a Change in Control, only upon the involuntary
or voluntary termination of an employee in the manner contemplated herein.
<PAGE>
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 Definitions
-----------
Whenever used in the Plan, the following terms shall have the meanings set
forth below.
"Annual Compensation" of a Participant means and includes all wage and
salary paid (including accrued amounts) by an Employer as consideration for the
Participant's service during the 12-month period ending on the last day of the
month preceding the date of a Participant's termination pursuant to Section 4.2.
For purposes of this Plan, a Participant's "Monthly Compensation" shall equal
one-twelfth of a Participant's Annual Compensation as determined in accordance
with this paragraph.
"Bank" means First Federal Bank, a Federal Savings Bank or any successor as
provided for in Article VII hereof.
"Board" means the Board of Directors of the Bank.
"Change in Control" shall mean an event deemed to occur if and when (a) an
offeror other than the Corporation purchases shares of the stock of the
Corporation or the Bank pursuant to a tender or exchange offer for such shares,
(b) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Corporation or the Bank representing twenty-five percent (25%)
or more of the combined voting power of the Corporation's or the Bank's then
outstanding securities, (c) the membership of the board of directors of the
Corporation or the Bank changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24) month
period (whether commencing before or after the date of adoption of this Plan) do
not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Corporation or the Bank approve a merger, consolidation,
sale or disposition of all or substantially all of the Corporation's or the
Bank's assets, or a plan of partial or complete liquidation. If any of the
events enumerated in clauses (a) - (d) occur, the Board shall determine the
effective date of the change in control resulting therefrom, for purposes of the
Plan.
"Company" means First Capital, Inc., an Indiana corporation, the holding
company of the Bank.
"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 must advise the Board 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 said employees lifetime.
"Effective Date" means the date the Plan is approved by the Board of the
Bank, or such other date as the Board shall designate in its resolution
approving the Plan.
<PAGE>
"Employer" means (i) the Bank or (ii) a subsidiary of the Bank or a parent
company of the Bank which has adopted the plan pursuant to Article VI hereof.
"Expiration Date" means a date ten (10) years from the Effective Date
unless earlier terminated pursuant to Section 8.2 or extended pursuant to
Section 8.1.
"Just Cause" shall means termination because of Participant's personal
dishonesty, incompetence, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or other
similar offenses) or any final cease-and desist order.
"Payment" means the payment of severance compensation as provided in
Article IV hereof.
"Participant" means an employee of an Employer who meets the eligibility
requirements of Article III.
"Plan" means this First Federal Bank, a Federal Savings Bank Employee
Severance Compensation Plan.
2.2 Applicable Law
--------------
The laws of the State of Indiana shall be controlling law in all matters
relating to the Plan to the extent not preempted by Federal law.
2.3 Severability
------------
If a provision of this Plan shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
ARTICLE III
ELIGIBILITY
3.1 Participation
-------------
The term "Participant" shall include all employees of an Employer who have
completed at least one (1) year of service with the Employer at the time of any
termination pursuant to Section 4.2 herein. For purposes of this Plan, "years
of service" shall include all years of employment with Bank in which an employee
was credited with at least 500 actual hours of service and "years of service"
shall be determined without regard to any break in service. In addition, the
term "Participant" shall, without regard to years of service, include each
employee who is a vice president, assistant vice president or manager of the
Bank. Notwithstanding the foregoing, an employee who has entered into and
continues to be covered by an individual employment contract or change in
control agreement with an Employer shall not be entitled to participate in this
Plan.
<PAGE>
3.2 Duration of Participation
-------------------------
A Participant shall cease to be a Participant in the Plan when the
Participant ceases to be an employee of an Employer, unless such Participant is
entitled to a Payment as provided in the Plan. A Participant entitled to
receipt of a Payment shall remain a Participant in this Plan until the full
amount of such Payment has been paid to the Participant.
ARTICLE IV
PAYMENTS
4.1 Right to Payment
----------------
A Participant shall be entitled to receive from his or her Employer a
Payment in the amount provided in Section 4.3 if a Change in Control occurs and
if, within one (1) year thereafter, the Participant's employment by an Employer
shall terminate for any reason specified in Section 4.2. A Participant shall
not be entitled to a Payment if termination occurs by reason of death, voluntary
retirement, voluntary termination other than for the reasons specified in
Section 4.2, Disability or for Just Cause.
4.2 Reasons for Termination
-----------------------
Following a Change in Control, a Participant shall be entitled to a Payment
in accordance with Section 4.3 if employment by an Employer is terminated,
voluntarily or involuntary, for any one or more of the following reasons:
(a) The Employer reduces the Participant's base salary or rate of
compensation as in effect immediately prior to the Change in Control, or as the
same may have been increased thereafter.
(b) The Employer materially changes Participant's function, duties
or responsibilities which would cause the Participant's position to be one of
lesser responsibility, importance or scope with the Employer than immediately
prior to the Change in Control.
(c) The Employer requires the Participant to change the location of
the Participant's job or office, so that such Participant will be based at a
location more than thirty-five (35) miles from the location of the Participant's
job or office immediately prior to the Change in Control provided that such new
location is not closer to Participant's home.
(d) The Employer materially reduces the benefits and perquisites
available to the Participant immediately prior to the Change in Control;
provided, however, that a material reduction in benefits and perquisites
generally provided to all employees of the Bank on a nondiscriminatory basis
shall not trigger a Payment pursuant to this Plan.
(e) A successor to the Employer fails or refuses to assume the
Employer's obligations under this Plan, as required by Article VII.
<PAGE>
(f) The Employer, or any successor to the Employer, breaches any
other provisions of this Plan.
(g) The Employer terminates the employment of a Participant at or
after a Change in Control other than for Just Cause.
4.3 Amount of Payment
-----------------
(a) Each Participant who was a vice president of the Bank
immediately prior to the effective date of the Change in Control and entitled to
a Payment under this Plan shall receive from the Bank a lump sum cash payment
equal to the Participant's Annual Compensation.
(b) Each Participant who was an assistant vice president or manager
of the Bank immediately prior to the effective date of the Change in Control and
entitled to a Payment under this Plan shall receive from the Bank a lump sum
cash payment equal to seventy-five (75) percent of the Participant's Annual
Compensation.
(c) Each Participant (other than a Participant entitled to a
benefit under Sections 4.3(a) and (b) of the Plan) entitled to a Payment under
this Plan shall receive from the Employer a lump sum cash payment equal to the
product of fifty percent (50%) of the Participant's Monthly Compensation and the
Participant's years of service (including partial years rounded up to the
nearest full month) from the Participant's date of hire through the date of
termination. Notwithstanding anything herein to the contrary, (i) the maximum
payment under this Section 4.3(c) to a Participant shall not exceed fifty
percent (50%) of the Participant's Annual Compensation and the (ii) minimum
payment under this Section 4.3(c) shall be the Participant's Monthly
Compensation (determined without regard to the Participant's period of service).
(d) The Participant shall not be required to mitigate damages on
the amount of the Payment by seeking other employment or otherwise, nor shall
the amount of such Payment be reduced by any compensation earned by the
Participant as a result of employment after termination of employment hereunder.
4.4 Time of Payment
---------------
The Payment to which a Participant is entitled shall be paid to the
Participant by 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 termination of
the employment but before all amounts have been paid, such unpaid amounts shall
be paid to the Participant's named beneficiary, if living, otherwise to the
personal representative of behalf of or for the benefit of the Participant's
estate.
<PAGE>
4.5 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. (S)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 regulatory capital requirements. Any portion of benefit payments
which have not been suspended will be paid on an equitable basis, pro rata based
upon amounts due each Participant, among all eligible Participants.
ARTICLE V
OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1 Other Benefits
--------------
Neither the provisions of this Plan nor the Payment provided for hereunder
shall reduce any amounts otherwise payable, or in any way diminish the
Participant's rights as an employee of an Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock option, stock bonus,
stock ownership or any employment agreement or other plan or arrangement.
5.2 Employment Status
-----------------
This Plan does not constitute a contract of employment or impose on the
Participant's Employer any obligation to retain the Participant, to maintain the
status of the Participant's employment, or to change the Employer's policies
regarding termination of employment.
ARTICLE VI
PARTICIPATING EMPLOYERS
6.1 Upon approval by the Board of the Bank, this Plan may be adopted by
any subsidiary of the Bank or by the Company. Upon such adoption, the
subsidiary or the Company shall become an Employer hereunder and the provisions
of the Plan shall be fully applicable to the employees of that subsidiary or the
Company. The term "subsidiary" means any corporation in which the Bank,
directly or indirectly, holds a majority of the voting power of its outstanding
shares of capital stock.
ARTICLE VII
SUCCESSOR TO THE BANK
7.1 The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
plan, in the same manner and to the same extent that the Bank would be required
to perform if no such succession or assignment had taken place.
<PAGE>
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION
8.1 Duration
--------
If a Change in Control has not occurred, this Plan shall expire as of the
Expiration Date, unless sooner terminated as provided in Section 8.2, or unless
extended for an additional period or periods by resolution adopted by the Board
of the Bank.
Notwithstanding the foregoing, if a Change in Control occurs this Plan
shall continue in full force and effect, and shall not terminate or expire until
such date as all Participants who become entitled to Payments hereunder shall
have received such Payments in full.
8.2 Amendment and Termination
-------------------------
The Plan may be terminated or amended in any respect by resolution adopted
by a majority of the Board of the Bank, unless a Change in Control has
previously occurred. If a Change in Control occurs, the Plan no longer shall be
subject to amendment, change, substitution, deletion, revocation or termination
in any respect whatsoever.
8.3 Form of Amendment
-----------------
The form of any proper amendment or termination of the Plan shall be a
written instrument signed by a duly authorized officer or officers of the Bank,
certifying that the amendment or termination has been approved by the Board. A
proper termination of the Plan automatically shall effect a termination of all
Participants' rights and benefits hereunder.
8.4 No Attachment
-------------
(a) Except as required by law, no right to receive payments under
this Plan shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect such action shall be null, void,
and of no effect.
(b) This Plan shall be binding upon, and inure to the benefit of,
each employee, the Employer and their respective successors and assigns.
ARTICLE IX
LEGAL FEES AND EXPENSES
9.1 All reasonable legal fees and other expenses paid or incurred by a
party hereto pursuant to any dispute or question of interpretation relating to
this Plan shall be paid or reimbursed by the prevailing party in any legal
judgment, arbitration or settlement.
<PAGE>
ARTICLE X
REQUIRED PROVISIONS
10.1 The Bank may terminate the employee's employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
employee's right to compensation or other benefits under this Agreement if the
employee is otherwise entitled to a benefit. The employee shall not have the
right to receive compensation or other benefits for any period after termination
for Just Cause as defined in Section 2.1 hereinabove.
10.2 If the employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
(S)1818(e)(3) or (g)(1), the Bank's obligations under this Plan to such employee
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 employee all or part of the compensation withheld while
their contract obligations were suspended and (ii) reinstate (in whole or in
part) any of the obligation which were suspended.
10.3 If the employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
(S)1818(e)(4) or (g)(1), all obligations of the Bank under this Plan to the
employee shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
10.4 If the Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. (S)1818(x)(1), all obligations of the
Bank under this Plan shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
10.5 All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Director of the OTS
(or his designee) or (ii) the Federal Deposit Insurance Corporation ("FDIC") at
the time the FDIC enters into an agreement to provide assistance to or on behalf
of the Bank under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act, 12 U.S.C. (S)1823(c); or (ii) by the Director of the OTS
(or his designee) at the time the Director (or his designee) approves a
supervisory merger to resolve problems related to the operations of the Bank or
when the Bank is determined by the Director to be in an unsafe or unsound
condition. Any rights of the parties that have already vested, however, shall
not be affected by such action.
10.6 Any payments made to an employee pursuant to this Plan or otherwise
shall be conditioned upon compliance under 12 U.S.C. (S)1828(k) and any
regulations promulgated thereunder.
<PAGE>
ARTICLE XI
ADMINISTRATION OF THE PLAN
11.1 The Plan shall be administered by the Board (or, by a committee of
non-employee directors designated by the Board). Subject to the other
provisions of the Plan, the Board shall have authority to adopt, amend, alter
and repeal such administrative rules, guidelines and practices governing the
operation of the Plan as it shall from time to time consider advisable, to
interpret the provisions of the Plan and to decide all disputes arising in
connection with the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent it shall deem appropriate to carry the Plan into effect, in its sole and
absolute discretion. The Board's decisions and interpretations shall be final
and binding. Any action of the Board with respect to the administration of the
Plan shall be taken pursuant to a majority vote or by the unanimous written
consent of its members.
Having been adopted by its Board on December 23, 1998, this Plan is
executed by duly authorized officer of the Bank this 31/st/ day of December,
1998.
Attest
/s/Joel E. Voyles /s/James G. Pendleton
- ----------------------------- -----------------------------------
Secretary James G. Pendleton
Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains financial information extracted from the consolidated
financial statements of First Capital, Inc. for the six months ended
December 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 947
<INT-BEARING-DEPOSITS> 8,872
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,010
<INVESTMENTS-CARRYING> 2,494
<INVESTMENTS-MARKET> 0
<LOANS> 77,343
<ALLOWANCE> 534
<TOTAL-ASSETS> 105,195
<DEPOSITS> 81,417
<SHORT-TERM> 5,250
<LIABILITIES-OTHER> 1,084
<LONG-TERM> 0
0
0
<COMMON> 9,459
<OTHER-SE> 7,985
<TOTAL-LIABILITIES-AND-EQUITY> 105,195
<INTEREST-LOAN> 3,229
<INTEREST-INVEST> 352
<INTEREST-OTHER> 96
<INTEREST-TOTAL> 3,677
<INTEREST-DEPOSIT> 1,994
<INTEREST-EXPENSE> 2,145
<INTEREST-INCOME-NET> 1,532
<LOAN-LOSSES> 18
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 898
<INCOME-PRETAX> 761
<INCOME-PRE-EXTRAORDINARY> 761
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 489
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
<YIELD-ACTUAL> 8.05
<LOANS-NON> 223
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 516
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 534
<ALLOWANCE-DOMESTIC> 534
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
