Document:

<PAGE>

                                  EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

      This Employment Agreement ("Agreement") is entered into as of this 14th
day of March, 2005 ("Effective Date") between Lannett Company, Inc. ("Company")
and Brian J. Kearns (Executive).

                                    RECITALS

      Company wishes to employ Executive as its Vice President of Finance, Chief
Financial Officer and Treasurer; and Executive wishes to accept such employment
under the terms and conditions set forth in this Agreement

      IT IS AGREED as follows:

  1.    EMPLOYMENT. Company hereby employs Executive as its Vice President
        of Finance, Chief Financial Officer and Treasurer; and Executive accepts
        such employment.

  2.    TERM. The term of employment under this Agreement shall commence on
        the Effective Date and shall continue, unless otherwise terminated
        earlier under Section 9, until the day before the third anniversary of
        the Effective Date, i.e. March 14, 2008 (the "Term"), provided that on
        the day before the third anniversary of the Effective Date, the Term
        shall be automatically extended for successive additional one (1) year
        periods unless at least ninety (90) days prior to such anniversary date,
        either Company or Executive furnishes the other with written notice that
        the term is not to be so extended.

  3.    DUTIES. Executive shall devote his full-time efforts to the proper and
        faithful performance of all duties customarily discharged by a Chief
        Financial Officer for a company doing the type of business engaged in by
        Company and any additional duties assigned to him from time to time by
        the President and/or the Chief Executive Officer of Company and/or the
        Board of Directors of Company. Executive shall report directly to the
        President of the Company. Executive agrees to use his best efforts and
        comply with all fiduciary and professional standards in the performance
        of his duties hereunder. Executive shall provide services to any
        subsidiary or affiliate of Company without additional compensation and
        benefits beyond those set forth in this Agreement, and any compensation
        and benefits provided to Executive for such services shall be a credit
        with regard to amounts due from Company under this Agreement. Executive
        represents and warrants to Company that, at all times prior to the
        Effective Date when he has served as Chief Financial Officer of the
        Company and at all times during the Term, he has either fulfilled or
        will fulfill his duty of loyalty to Company; and he has either acted or
        will act in the best interests of the Company's shareholders.

<PAGE>

  4.    BASE SALARY. Executive shall be paid a minimum base salary of One
        Hundred Seventy Five Thousand Dollars and no cents ($175,000.00) per
        annum for the Term, payable, less applicable withholdings, in
        proportional monthly payments or more frequently in accordance with
        Company's regular practice. Salary for a portion of any period will be
        prorated. The Compensation Committee of the Board of Directors and the
        President will conduct an annual performance review of Executive and, as
        part of such review, will consider increases to the base salary set
        forth herein based on the performance of both Executive and Company.

  5.    STOCK OPTIONS. Company will grant Executive an option to purchase up to
        100,000 shares of Lannett common stock at the fair market value of such
        stock as of the Effective Date. Such options shall vest ratably over a
        36 month period beginning on the Effective Date. These shares are
        guaranteed under this agreement to be provided to the Executive.

  6.    ANNUAL BONUS. Executive shall be eligible to participate in the
        Management Incentive Bonus Plan (the "MIB") administered by the
        Compensation Committee, or any successor annual bonus plan or
        arrangement generally made available to the executive officers of
        Company. The MIB shall provide Executive with a target bonus opportunity
        for each fiscal year of Company (i.e. July 1 to June 30), regardless of
        whether or not a bonus is declared for any fiscal year. Executive shall
        be eligible for a pro-rata portion of his annual bonus for the portions
        of the first and last fiscal years he works for the Company.

  7.    BENEFITS.

        During the Term, Executive shall have the following benefits:

        (a)   Executive may participate in all Company sponsored stock option
              plans, retirement plans, 401(k) plans, life insurance plans,
              medical insurance plans, disability insurance plans, executive
              stock ownership plans and such other benefit plans generally
              available from time to time to other executive employees of
              Company for which he qualifies under the terms of the plans.
              Executive's participation in and benefits under any benefit plan
              shall be on the terms and subject to the conditions specified in
              such plan.

        (b)   Vacation days or personal time off (PTO) shall be granted to
              Executive in accordance with the Company's published vacation or
              PTO policy generally afforded to salaried management employees.

  8.    REIMBURSEMENT OF EXPENSES. Company will reimburse Executive for the
        reasonable and necessary expenses incurred by him in the performance of
        his duties under this Agreement in accordance with Company's policies in
        effect from time to time.

                                       2

<PAGE>

  9.    TERMINATION OF EMPLOYMENT.

        (a)   Executive's employment under this Agreement may be terminated at
              any time by the President, Chief Executive Officer and/or the
              Board of Directors of Company, with or without Cause (as defined
              below). Executive's employment is "at-will."

        (b)   Executive's employment under this Agreement shall terminate upon
              his resignation or death.

        (c)   Executive's employment under this Agreement shall terminate upon
              thirty (30) days written notice by Company to Executive of a
              termination due to Disability, provided such notice is delivered
              during the period of Disability. The term "Disability" shall mean,
              for purposes of this Agreement, the inability of Executive, due to
              injury, illness, disease or bodily or mental infirmity to engage
              in the performance of his material duties of employment with
              Company as contemplated by Section 3 herein for (i) any period of
              ninety (90) consecutive days or (ii) a period of one hundred fifty
              days (150) in any consecutive twelve (12) months, provided that if
              the Executive returns to work in the consecutive 12 month period
              for a period of less than ten (10) consecutive business days in
              duration, such return to work shall not be deemed to interfere
              with a determination of consecutive absent days if the reason for
              absence before and after the interim return are the same. Benefits
              to which Executive is entitled under any disability policy or plan
              provided by Company shall reduce the base salary paid to Executive
              during any period of Disability on a dollar-for-dollar basis.

        (d)   Company shall have the right to terminate Executive's employment
              for Cause. The Executive shall be given written notice and an
              opportunity for sixty (60) days to cure any deficiency or breach
              of this Agreement. For purposes of this Agreement, "Cause" shall
              consist of any of the following:

              (i)    Executive's willful misrepresentation in this Agreement
                     or otherwise or fraud, willful dishonesty or willful breach
                     of a fiduciary duty or duty of loyalty to Company which
                     directly or indirectly results in his or any person's or
                     entity's enrichment, economic or otherwise, at the expense
                     of Company;

              (ii)   Willful misconduct; provided, however, that conduct by
                     Executive in good faith and/or ordinary negligence shall
                     not be considered "Cause";

              (iii)  Willful or reckless conduct of Executive which has an
                     adverse impact (economic or otherwise) on Company;

              (iv)   Willful violation of any law, rule or regulation relating
                     to the operation of Company or any of its subsidiaries or
                     affiliates;

                                       3

<PAGE>

              (v)    The order of any court or supervising governmental agency
                     with jurisdiction over the affairs of Company or any
                     subsidiary or affiliate that specifically directs the
                     termination of Executive

              (vi)   Executive's willful violation of any provision of this
                     Agreement, including without limitation violation of
                     Sections 10, 11, 12 or 13;

              (vii)  Executive's conviction or no contest plea to a felony
                     involving moral turpitude;

              (viii) Abuse of illegal drugs or other controlled substances or
                     habitual intoxication; or

              (ix)   Willful violation by Executive of Company's published
                     business conduct guidelines, code of ethics, conflict of
                     interest or other similar policies.

        (e)   If Executive's employment terminates for Cause or for any reason
              other than as set forth in Section 9(f), Company shall be
              obligated only to continue to pay Executive's salary and, to the
              extent earned, accrued and unpaid, annual cash bonus and long term
              incentive compensation and furnish the then existing benefits
              under Section 7 up to the date of termination (except as otherwise
              set forth in this Agreement).

        (f)   If Executive's employment is terminated by Company without Cause,
              if the company decides not to extend the then current term, or if
              Executive terminates his employment for Good Reason (as defined
              below), in addition to the amounts payable under Section 9(e),
              Executive shall be entitled to receive (i) base salary for a
              period of eighteen (18) months after termination date payable on
              the first day of every month, (ii) insurance coverage provided to
              him equal to such coverage provided to him on the date of
              termination at no cost or, if ineligible for continued coverage
              under Company policies, reimbursement of the cost of comparable
              coverage for a period of eighteen (18) months payable on the first
              day of each month, (iii) a pro rated annual cash bonus for the
              then current fiscal year calculated as if all base targets and
              base goals are achieved (but no other incentive compensation
              beyond the date of termination) at the times and frequency
              regularly paid but in no event later than two and one half months
              of the later of the end of the Company's fiscal year or the
              calendar year in which Executive becomes entitled to receive such
              payment, and (iv) the Company shall cause all outstanding Company
              stock options awarded Executive prior to termination of his
              employment to be one hundred percent (100%) vested at termination.
              As a condition to the salary, insurance continuation, under this
              Section 9(f), Executive must first execute and deliver to Company,
              in a form prepared by Company, a release of all claims against
              Company and other appropriate parties, excluding Company's
              performance under this Section 9(f) and Executive's

                                       4

<PAGE>
              vested rights under Company sponsored retirement plans, 401(k)
              plans and stock ownership plans. The obligation of Company to pay
              Executive's salary as required by Subsection (i) of this Section
              9(f) shall not be subject to offset for earnings from Executive's
              subsequent employment. If the payment of any amount to Executive
              under this paragraph results in the imposition of penalties,
              interest or additional taxes on Executive pursuant to Section 409A
              of the Internal Revenue Code, and all amendments thereto, then the
              Company will enter into an agreement with Executive during a
              period when such payments are still subject to a substantial risk
              of forfeiture to provide for the payment of such amounts at a time
              and manner which will avoid the imposition of such penalties,
              interest or additional taxes on Executive or Company will gross up
              the amount of such payments to Executive so as to provide him with
              the same economic benefit as if he were not subject to such
              penalties, interest or additional taxes pursuant to Section 409A
              of the Internal Revenue Code or any amendments thereto. For
              purpose of this paragraph, the term Good Reason shall mean

              (i)   Executive's being assigned by Company duties or to a
                    position inconsistent in any material respect with the
                    position of Vice President of Finance, Chief Financial
                    Officer and Treasurer of Company;

              (ii)  a change without Executive's consent in the principal
                    location of his office to an office that is more than forty
                    (40) miles from his current residence, such consent not to
                    be unreasonably withheld;

              (iii) Company's failure to pay Executive his compensation or
                    benefits when due, a reduction of Executive's salary, annual
                    bonus earning opportunity or benefits, any other material
                    breach by Company of its obligations under this Agreement;
                    or

              (iv)  Executive's death or disability;

                    provided that in any case (other that item (iv) hereof)
                    Executive provides Company with written notice of his
                    intention to terminate his employment for Good Reason, and
                    gives Company an opportunity for sixty (60) days to cure.

        (g)   The termination of Executive's employment with Company, for any
              reason and irrespective as to whether initiated by Executive or
              Company, shall be considered a contemporaneous resignation by
              Executive from the position of Company's Chief Financial Officer
              and shall be deemed a termination from employment with all
              entities related to Company.

        (h)   The Executive may terminate his employment hereunder at any time
              for any Reason by giving the Company prior written notice not less
              than thirty

                                       5

<PAGE>

              (30) days prior to such termination. Termination by the Executive
              pursuant to this Clause shall be deemed a termination entitling
              the Executive to compensation pursuant to Section 9(e) above.

10. CONFIDENTIAL INFORMATION. During Executive's employment with Company and at
all times after the termination of such employment, regardless of the reason for
such termination, Executive shall hold all Confidential Information relating to
Company in strict confidence and in trust for Company and shall not disclose or
otherwise communicate, provide or reveal in any manner whatsoever any of the
Confidential Information to anyone other than Company without the prior written
consent of Company. "Confidential Information" includes, without limitation,
financial information, related trade secrets (including, without limitation,
Company's business plan, methods and/or practices) and other proprietary
business information of Company which may include, without limitation, market
studies, customer and client lists, referral lists and other items relative to
the business of Company. "Confidential Information" shall not include
information which is or becomes in the public domain through no action by
Executive or information which is generally disclosed by Company to third
parties without restrictions on such third parties.

11. SOLICITATION OF CUSTOMERS. During his employment with Company and for a
period of eighteen (18) months after the termination of Executive's employment,
regardless of the reason for the termination (the "Non-Competition Period"),
Executive shall not, whether directly or indirectly, for his own benefit or for
the benefit of any other person or entity, or as a partner, stockholder, member,
manager, officer, director, proprietor, employee, consultant, representative,
agent of any entity other than Company, solicit, directly or indirectly, any
customer of Company, or induce any customer of Company to terminate any
association with Company, in connection with those certain products being
offered for sale by Company or in its research and development pipeline on the
date of termination of Executive's employment (The "Restricted Products") or
otherwise attempt to provide services to any customer of Company in connection
with the Restricted Products. Executive shall prevent such solicitation to the
extent he has authority to prevent same and otherwise shall not interfere with
the relationship between Company and its customers. This provision shall not be
interpreted to prohibit, prevent or otherwise impair the Executive's ability and
right to seek and obtain employment from a competitor of the Company, even if
said competitor is currently selling products to the Company's customers that
are the same as Company's products. While the Executive shall be unrestricted in
seeking to sell products to the Company's customers that are different than the
Company's products, it is the intent of this paragraph to preclude the Executive
from having said competitor replace the Company as a supplier of a product or
otherwise take existing sales from the Company for the period in question.

12. SOLICITATION OF EXECUTIVES AND OTHERS. During his employment with Company
and during the Non-Competition Period, Executive shall not, whether directly or
indirectly, for his own benefit or for the benefit of any other person or
entity, or as a partner, stockholder, member, manager, officer, director,
proprietor, employee, consultant,

                                       6

<PAGE>

representative, agent of any entity other than Company, solicit, for purposes of
employment or association, any Executive or agent of Company ("Solicited
Person"), or induce any Solicited Person to terminate such employment or
association for purposes of becoming employed or associated elsewhere, or hire
or otherwise engage any Solicited Person as an Executive or agent of an entity
with whom Executive may be affiliated or permit such, or otherwise interfere
with the relationship between Company and its employees and agents. For purposes
of this Agreement, an employee or agent of Company shall mean an individual
employed or retained by Company during the Term and/or who terminates such
association with Company within a period of six (6) months after the termination
of Executive's employment with Company.

13. NON-COMPETITION. Without the written consent of the President or the Chief
Executive Officer, during his employment with Company and during the
Non-Competition Period, Executive shall not directly or indirectly, as an
officer, director, shareholder, member, partner, joint venturer, Executive,
independent contractor, consultant, or in any other capacity:

      (i)   Engage, own or have any interest in;

      (j)   Manage, operate, join, participate in, accept employment with,
            render advice to, or become interested in or be connected with;

      (k)   Furnish consultation or advice to; or

      (l)   Permit his name to be used in connection with;

Any person or entity engaged in a business in the United States or Canada which
is engaged in the manufacture, distribution or sale of the Restricted Products
or which otherwise competes with the business of Company as it exists from time
to time and, in the case of termination of this Agreement, as it exists on the
termination date. Notwithstanding the foregoing, holding one percent (1%) or
less of an interest in the equity, stock options or debt of any publicly traded
company shall not be considered a violation of this Section 12. The Non
Competition period shall extend for a period of twenty four (24) months post the
Executive's departure. Non-Competition in addition to the above is defined as
employment with any generic drug company whether directly or as a consultant
that competes within the USA market.

14. DISCLOSURE AND OWNERSHIP OF WORK PRODUCT AND INFORMATION.

      (a) Executive agrees to disclose promptly to Company all ideas, inventions
      (whether patentable or not), improvements, copyrightable works of original
      authorship (including but not limited to computer programs, compilations
      of information, generation of data, graphic works, audio-visual materials,
      technical reports and the like), trademarks, know-how, trade secrets,
      processes and other intellectual property, developed or discovered by
      Executive in the course of his employment relating to the business of
      Company, or to the prospective business of Company, or which utilizes
      Company's information or staff services (collectively, "Work product").

                                       7

<PAGE>

      (b) Work product created by Executive within the scope of Executive's
      employment, on Company time, or using Company resources (including but not
      limited to facilities, staff, Information, time and funding), belongs to
      Company and is not owned by Executive individually. Executive agrees that
      all works of original authorship created during his employment are "works
      made for hire" as that term is used in connection with the U.S. Copyright
      Act. To the extent that, by operation of law, you retain any intellectual
      property rights in any Work product, Executive hereby assigns to Company
      all right, title and interest in all such Work product, including
      copyrights, patents, trade secrets, trademarks and know-how.

      (c) Executive agrees to cooperate with Company, at Company's expense, in
      the protection of Company's information and the securing of Company's
      proprietary rights, including signing any documents necessary to secure
      such rights, whether during or after your employment with Company, and
      regardless of the fact of any employment with a new company.

15. ENFORCEMENT OF AGREEMENT; INJUNCTIVE RELIEF; ATTORNEYS' FEES AND EXPENSES.
Executive acknowledges that violation of this Sections 10, 11, 12 and 13 of this
Agreement will cause immediate and irreparable damage to Company, entitling it
to injunctive relief. Executive specifically consents to the issuance of
temporary, preliminary, and permanent injunctive relief to enforce the terms of
this Agreement. In addition to injunctive relief, Company is entitled to all
money damages available under the law. If Executive violates this Agreement, in
addition to all other remedies available to Company at law, in equity, and under
contract, Executive agrees that Executive is obligated to pay all Company's
costs of enforcement of this Agreement, including attorneys' fees and expenses.
Company acknowledges that violation of this Agreement will cause immediate and
irreparable damage to Executive, entitling him to injunctive relief. Company
specifically consents to the issuance of temporary, preliminary, and permanent
injunctive relief to enforce the terms of this Agreement. In addition to
injunctive relief, Executive is entitled to all money damages available under
the law. If Company violates this Agreement, in addition to all other remedies
available to Executive at law, in equity, and under contract, Company agrees
that Company is obligated to pay all Executive's costs of enforcement of this
Agreement, including attorneys' fees and expenses.

16. SEVERABILITY AND SAVINGS. Each provision in this Agreement is separate. If
necessary to effectuate the purpose of a particular provision, the Agreement
shall survive the termination of Executive's employment with Company. If any
provision of this Agreement, in whole or in part, is held to be invalid or
unenforceable, the parties agree that any such provision shall be deemed
modified to make such provision enforceable to the maximum extent permitted by
applicable law. As to any provision held to be invalid or unenforceable, the
remaining provisions of this Agreement shall remain in effect.

17. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the
benefit of Company and its successors and assigns. This Agreement shall be
binding upon and

                                       8

<PAGE>

inure to the benefit of Executive, his heirs and personal representatives. This
Agreement is not assignable by Executive.

18. STATUTE OF LIMITATIONS. Executive and Company agree not to initiate any
action or suit relating directly or indirectly to Executive's employment with
Company or the termination of such employment more than one (1) year after the
effective date of termination of employment. Executive and Company expressly
waive any other longer statute of limitations. However, Executive and Company
agree that any shorter statute(s) of limitations remain in effect. For claims
which arise after the termination of Executive's employment, Executive and
Company agree not to initiate any action or suit against the other more than one
(1) year after the date such party knew or should have known of such claim.

19. INDEMNIFICATION. To the fullest extent permitted by applicable law, the
Company shall indemnify, defend and hold harmless the Executive from and against
any and all claims, demands, actions, causes of action, liabilities, losses,
judgments, fines, excise taxes, costs and expenses (including reasonable
attorneys' fees and settlement expenses) arising from or relating to his service
or status as an officer, director, employee, agent or representative of the
Company or any affiliate of the Company or in any other capacity in which the
Executive serves or has served at the request of, or for the benefit of, the
Company or its affiliates. The Company's obligations under this section shall be
in addition to, and not in derogation of, any other rights the Executive may
have against the Company to indemnification or advancement of expenses, whether
by statute, contract or otherwise, and the Company's obligations pursuant to
this Section 19 shall survive termination of the Executive's employment. To the
fullest extent permitted by applicable law, the Company shall pay directly on
Executive's behalf or advance to Executive the amount of all judgments, fines,
costs and expenses (including reasonable attorneys' fees and settlement
expenses) incurred by Executive in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, in which
Executive is made, or threatened to be made, a party, or a witness by reason of
the fact of his service to, at the request of or for the benefit of Company.

20. INSURANCE. Company agrees to maintain a policy of directors and officers
liability insurance in a reasonable amount for the benefit of Executive. The
provisions of this Section shall survive termination of executive's employment.

21. MISCELLANEOUS.

      (a) No provision of this Agreement may be modified, waived or discharged
      unless such waiver, modification or discharge is agreed to in writing and
      signed by Company and Executive. The waiver or non enforcement by Company
      of a breach by Executive of any provision of this Agreement shall not be
      construed as a waiver of any subsequent breach by Executive. This
      Agreement is the parties' entire agreement relating to the subject matter
      hereof and any and all prior

                                       9

<PAGE>

      agreements, representations or promises, oral or otherwise, express or
      implied, are superseded by and/or merged into this Agreement.

      (b) Notices and all other communications provided for in this Agreement
      shall be in writing and shall be delivered personally or sent by
      registered or certified mail, return receipt requested, postage prepaid,
      or sent by facsimile or prepaid overnight courier to the parties at the
      addresses set forth below (or such other addresses as shall be specified
      by the parties by like notice): To Company, Lannett Company, Inc., 9000
      State Road, Philadelphia, PA 19136 Attn.: President; To the Executive:
      Brian J. Kearns, 804 Loveland Road, Moorestown, NJ 08057, with a copy to
      Jeffrey Pasek, Cozen O'Connor, 1900 Market Street, Philadelphia, PA 19103.
      All notices shall be deemed effective upon receipt. The failure to accept
      mail forwarded through the U.S. Postal Service, certified, return receipt
      requested, shall be deemed received as of the earlier of the first date
      such delivery is refused or, alternatively, if notices are provided of
      attempts to deliver, the date on which said first notice was provided to
      the Company.

      (c) This Agreement shall be governed by the laws of the State of
      Pennsylvania.

      (d) Although this Agreement was drafted by Company, the parties agree that
      it accurately reflects the intent and understanding of each party and
      should not be construed against Company for the sole reason that it was
      the drafter if there is any dispute over the meaning or intent of any
      provisions.

      (e) Executive agrees that unless and until the provisions of this
      Agreement are disclosed publicly by Company, this Agreement is
      confidential and Executive will not disclose the terms and conditions of
      this Agreement to any Company employee or other third party, other than
      Executive's attorney, accountant, professional advisors and members of his
      immediate family, except as may be permitted by applicable law.

      (f) This Agreement may be executed in counterparts, which together shall
      constitute one Agreement.

      (g) Executive agrees that this Agreement is the sole Employment Agreement
      between Company and Executive and supersedes any and all prior Employment
      Agreements, Letters of Understandings, Verbal understandings or
      commitments.

      (h) By their signatures below, the parties acknowledge that they have had
      sufficient opportunity to read and consider, and that they have carefully
      read and considered, each provision of this Agreement and that they are
      voluntarily signing this Agreement. The parties have executed this
      Agreement as of the Effective Date.

                                       10

<PAGE>

WITNESS:

  /s/ Patricia Adamson                                /s/ Brian J. Kearns
-------------------------------                     ----------------------------
Patricia Adamson                                    Brian J. Kearns

  /s/ Patricia Adamson                              LANNETT COMPANY, INC.
-------------------------------
Patricia Adamson                                    By   /s/ Arthur Bedrosian
                                                       -------------------------
                                                       Arthur Bedrosian
                                                       Its: President

                                       11Exhibit 10.1

                             FIRST AMENDMENT OF THE
                         DIRECTOR DEFERRED COMPENSATION
                                MASTER AGREEMENT

     This First Amendment  ("Amendment"),  dated as of the 15th day of February,
2005,  hereby  amends  the  Director  Deferred   Compensation  Master  Agreement
effective  November 1, 1993 (the  "Agreement")  of River Valley  Financial  Bank
(formerly Madison First Federal Savings and Loan Association).

A. Freezing of the Agreement as of December 31, 2004.

     With respect to all benefits  vested and earned as of December 31, 2004, by
Directors of River Valley  Financial Bank (the  "Association")  participating in
the Agreement on that date, those benefits shall be governed by the terms of the
Agreement in effect on December 31, 2004.

B. Amendment of the Agreement Effective January 1, 2005.

     With respect to all benefits vested or earned on and after January 1, 2005,
by  Directors of the  Association  participating  in the  Agreement on and after
January 1, 2005,  those benefits shall be governed by the terms of the Agreement
in effect on December 31, 2004, as amended by the following provisions:

     1. Subsection 1.9 shall be amended in its entirety to read as follows:

          Section 1.9 "Disability  Benefit" means the benefit annuity payable to
     the Director  following a determination  in accordance with Subsection 4.2,
     that he is disabled as provided in that Subsection.

     2. A new  Subsection  1.14  shall be  amended  to read in its  entirety  as
follows:

          Section 1.14 "Financial Hardship" means a severe financial hardship to
     the Director  resulting  from an illness or accident of the  Director,  the
     Director's  spouse,  or a dependent  (as  defined in Section  152(a) of the
     Internal  Revenue Code of 1986,  as amended (the  "Code")) of the Director,
     loss  of  the  Director's  property  due  to  casualty,  or  other  similar
     extraordinary and unforeseeable circumstances arising as a result of events
     beyond the control of the Director.

     3. Subsection 1.15 shall be amended to read in its entirety as follows:

          Section  1.15  "Financial  Hardship  Benefit"  means a  withdrawal  or
     withdrawals of an amount or amounts  attributable to a Financial  Hardship;
     provided, however that, consistent with regulations of the Internal Revenue

<PAGE>

     Service,  amounts  distributed with respect to a Financial Hardship may not
     exceed  the  amounts  necessary  to satisfy  such  emergency  plus  amounts
     necessary  to  pay  taxes  reasonably   anticipated  as  a  result  of  the
     distribution of benefits after taking into account the extent to which such
     Financial  Hardship  is  or  may  be  relieved  through   reimbursement  or
     compensation  by insurance or otherwise or by liquidation of the Director's
     assets (to the extent the liquidation of such assets would not itself cause
     a Financial Hardship).

     4. A new Subsection 1.21 shall be added to read as follows:

          Section 1.21 "Joinder  Agreement"  shall mean an agreement in the form
     of Exhibit A hereto which shall be completed and signed as of the Effective
     Date or, as to Directors who elect to participate  in this Agreement  after
     the Effective  Date, by  completing  and signing such Joinder  Agreement no
     later than the  December  31st  preceding  the  January 1st as of which the
     deferral of fees  hereunder  shall be effective.  A director may change the
     amount of fees deferred  hereunder  provided such change is made before the
     end of the year prior to the year in which the  revised  deferral  is to be
     effective. Changes in the Payout Period and Benefit Age must be in writing,
     at least  twelve  (12)  months  prior to the  date of the  first  scheduled
     payment and shall not be  effective  earlier  than twelve (12) months after
     the modification is made. In addition,  such modification  shall extend the
     deferral  period  for a period of at least five  additional  years from the
     date the distribution was scheduled to begin prior to such change.

     5. A new Subsection 1.22 shall be added to read as follows:

          Section 1.22. "Change in Control" shall mean a change in the ownership
     or  effective  control  of  the  Association,  or  in  the  ownership  of a
     substantial  portion  of  the  assets  of  the  Association,  as  shall  be
     prescribed by  regulations  adopted by the Internal  Revenue  Service under
     Section 409A(a)(2)(v) of the Internal Revenue Code of 1986, as amended.

     6. Subsection 4.2 shall be amended to read in its entirety as follows:

          Section 4.2 Disability  Benefit.  Notwithstanding  any other provision
     hereof,  if  requested  by the  Director  and  approved  by the Board,  the
     Director shall be entitled to receive the Disability Benefit hereunder,  in
     any case in which it is determined by a duly licensed physician selected by
     the Association, that the Director has a medically determinable physical or
     mental impairment which can be expected to result in death or to last for a
     continuous period of not less than 12 months and which (1) renders Director
     unable  to engage  in any  substantial  gainful  activity  or (2)  entitles
     Director to income replacement benefits for a period of not less than three
     months  under  an  accident  and  health  plan  covering  employees  of the
     Association.  If the  Director's  service is  terminated  pursuant  to this
     paragraph  and  Board  approval  is  obtained,  the  Director  shall  begin
     receiving  the  Disability   Benefit   annuity  in  lieu  of  any  Deferred
     Compensation Benefit which is not available prior to the Director's Benefit
     Eligibility  Date.  The annuity  shall begin not more than thirty (30) days
     following the above-mentioned  disability determination.  The amount of the
     monthly  benefit shall be the annuitized  value of

<PAGE>

     the  Director's   Elective   Contribution   Account,   measured  upon  such
     determination and payable over the Payout Period. The Interest Factor shall
     be used to annuitize the Elective  Contribution  Account.  In the event the
     Director dies while  receiving  payments  pursuant to this  Subsection,  or
     after   becoming   eligible  for  such   payments  but  before  the  actual
     commencement of such payments, his Beneficiary shall be entitled to receive
     those  benefits  provided  for in  Subsection  5.l(a)  or  5.2(a)  and  the
     Disability  Benefits  provided for in this Subsection  shall terminate upon
     the Director's death.

     7. A new Section 4.5 shall be added to read as follows:

          Section 4.5 Change in Control.  If a Change in Control occurs prior to
     the Director's Benefit  Eligibility Date and either Director's service as a
     director of the  Association  terminates in connection  with such Change in
     Control or the Association directs that such payment be made to Director in
     connection  with the Change in Control,  Director shall be paid his Accrued
     Benefit  hereunder in one lump sum within 30 days following his termination
     of service or the Change in Control, as applicable.

     8. The last  sentence  of  Section  11.5  shall be  amended  to read in its
entirety as follows:

     To the extent  permitted  under  Section 409A of the Code, in the event the
     Beneficiary  has a liability  hereunder,  the  Beneficiary may petition the
     Association  for a  lump  sum  payment  in an  amount  not  to  exceed  the
     Beneficiary's liability hereunder.

     9. A new Section 11.12 shall be added to read in its entirety as follows:

          Section  11.12  Reference  to  Controlled  Group.  With respect to any
     benefit   payable  as  a  result  of  termination  of  or  separation  from
     employment,   termination  of  or  separation  from  employment   shall  be
     determined  by  reference  to  the  Association  and  all  members  of  any
     controlled group (determined under Section 414(b) of the Code) or trades or
     businesses  under common  control  (determined  under Section 414(c) of the
     Code) that includes the Association.

     10. A new Section 11.13 shall be added to read in its entirety as follows:

          Section 11.13. Restrictions on Payment to Key Employees. To the extent
     the Director is a "key  employee" (as defined in Section 416(i) of the Code
     determined  without regard to paragraph (5) thereof) of a corporation whose
     stock is publicly traded on an established  securities market or otherwise,
     within the meaning of Section 409A(a)(2)(B)(i) of the Code, no distribution
     of  benefits  may  commence  before the date which is six months  after the
     Director's date of separation from service (or, if earlier, the date of the
     Director's death).

<PAGE>

     IN WITNESS WHEREOF,  the parties have executed this Amendment as of the day
and year first above written.

                                           RIVER VALLEY FINANCIAL BANK

                                           By:  /s/ Matthew P. Forrester
                                              ----------------------------------
                                                Matthew P. Forrester, President

Accepted and Consented to:

/s/ Matthew P. Forrester                   /s/ Charles J. McKay
------------------------------------       -------------------------------------
Matthew P. Forrester                       Charles J. McKay

/s/ Michael J. Hensley                     /s/ Lonnie D. Collins
------------------------------------       -------------------------------------
Michael J. Hensley                         Lonnie D. Collins

/s/ Frederick W. Koehler
------------------------------------
Frederick W. Koehler

<PAGE>

                           Exhibit A Joinder Agreement
                            DIRECTORS' DEFERRAL PLAN
                     DEFERRAL AND DISTRIBUTION ELECTION FORM

Name of  Plan:  River  Valley  Financial  Bank  Director  Deferred  Compensation
                Agreement

Please  complete the following  accurately  with a ballpoint pen: print clearly.
The  information  you  provide  should  be  current  as of the  date the form is
completed.  All participants who have fulfilled the eligibility  requirements to
participate in the plan must complete all sections of the form.
<TABLE>
<CAPTION>

SECTION I. - General Information  (Please complete and review and correct any information as needed.)
<S>                        <C>                       <C>                        <C>

-------------------------  ------------------------  -------------------------  ---------------------
Last Name                  First Name                MI                         Sex (M or F)

-------------------------  ------------------------  -------------------------  ---------------------
Social Security Number     Date of Birth             Employee #                 Date of Hire
                           (mmddyy)                  (if applicable)            (mmddyy)

-------------------------  ------------------------
Home phone                 Work phone

--------------------------------------------------------------------------------
Street Address

--------------------------------------------------------------------------------
Mailing Address

-------------------------------------------          ---------------------------        -------------
City                                                 State                              Zip
</TABLE>

SECTION II. - Deferral Election (Check Yes & fill in % or check No)

__________     Yes, I want to make pre-tax deferral contributions to the Plan. I
               authorize  the Bank to deduct the following  percentage  (no more
               than 100%) of my  compensation  from each  paycheck and to credit
               that amount to pre-tax deferral portion of my Account:

                    Fee/Salary (if applicable)
         ---------

                    Bonus (if applicable)
         ---------

                    Other
         ---------

__________     No, I do not wish to contribute to the Plan at this time.

SECTION III. - Distribution Election

I hereby  designate a one time election to have any  distribution of the balance
in my Deferred  Compensation  Account paid to me in  installments  as designated
below:

                    one hundred twenty (120) equal monthly installments.
         ---------

<PAGE>

SECTION IV. - Authorization

I  authorize  the Bank to  effect  the  elections  specified  on this  Deferral,
Investment and  Distribution  Election form. Any  modification  or revocation of
this  Distribution  Election as elected by the participant in the signed written
statement  must be in writing at least  twelve (12) months  prior to the date of
the first scheduled  payment and shall not be effective earlier than twelve (12)
months after the modification is made.  Additionally,  such  modification  shall
extend the deferral  period for a period of at least five (5)  additional  years
from the date the  distribution  was  scheduled to begin.  I understand  that my
elections  will  remain  in  effect  until I submit a  change  according  to the
provisions of the Plan.

-------------------------------------   ----------------------------------------
Participant                                                   Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}]]