Document:

EMPLOYMENT AGREEMENT

         This  Agreement,  made and dated as of January 19, 2000, by and between
First Federal Savings Bank of Marion, a federal savings bank  ("Employer"),  and
Larry G. Phillips, a resident of Grant County, Indiana ("Employee").

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

         WHEREAS,  Employee is employed by Employer as its Senior Vice President
and has made valuable  contributions to the profitability and financial strength
of Employer;

         WHEREAS,  Employer  desires to  encourage  Employee to continue to make
valuable  contributions  to Employer's  business  operations  and not to seek or
accept employment elsewhere;

         WHEREAS,   Employee   desires  to  be  assured  of  a  secure   minimum
compensation from Employer for his services over a defined term;

         WHEREAS,  Employer desires to assure the continued services of Employee
on  behalf  of  Employer  on  an  objective  and  impartial  basis  and  without
distraction  or conflict of interest in the event of an attempt by any person to
obtain  control of Employer  or Marion  Capital  Holdings,  Inc.  (the  "Holding
Company"),  the Indiana corporation which owns all of the issued and outstanding
capital stock of Employer;

         WHEREAS,  Employer  recognizes  that when faced  with a proposal  for a
change of control of  Employer  or the  Holding  Company,  Employee  will have a
significant  role in helping  the Boards of  Directors  assess the  options  and
advising the Boards of  Directors on what is in the best  interests of Employer,
the Holding Company,  and its shareholders,  and it is necessary for Employee to
be able to provide  this  advice and counsel  without  being  influenced  by the
uncertainties of his own situation;

         WHEREAS,  Employer  desires to provide fair and reasonable  benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;

         WHEREAS,  Employer  desires  reasonable  protection of its confidential
business  and  customer  information  which it has  developed  over the years at
substantial  expense and assurance  that Employee will not compete with Employer
for a  reasonable  period  of time  after  termination  of his  employment  with
Employer, except as otherwise provided herein.

         NOW,  THEREFORE,   in  consideration  of  these  premises,  the  mutual
covenants and  undertakings  herein  contained  and the continued  employment of
Employee by Employer as its Senior Vice President,  Employer and Employee,  each
intending to be legally bound, covenant and agree as follows:

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         1. Upon the  terms  and  subject  to the  conditions  set forth in this
Agreement,  Employer employs Employee as Employer's  Senior Vice President,  and
Employee accepts such employment.

         2. Employee agrees to serve as Employer's  Senior Vice President and to
perform  such  duties in that  office as may  reasonably  be  assigned to him by
Employer's  Board of  Directors;  provided,  however,  that such duties shall be
performed  in or from the  offices  of  Employer  currently  located  at Marion,
Indiana,  and shall be of the same  character as those  previously  performed by
Employee and  generally  associated  with the office held by Employee.  Employee
shall not be required to be absent from the location of the principal  executive
offices  of  Employer  on travel  status or  otherwise  more than 45 days in any
calendar  year.  Employer  shall not,  without the written  consent of Employee,
relocate or transfer  Employee to a location more than 25 miles from  Employer's
primary  office.  Employee  shall  render  services  to  Employer as Senior Vice
President in substantially  the same manner and to substantially the same extent
as Employee  rendered  his services to Employer  before the date  hereof.  While
employed by Employer,  Employee shall devote substantially all his business time
and efforts to Employer's  business during regular  business hours and shall not
engage in any other related business.

         3. The term of this  Agreement  shall begin on the date set forth above
(the "Effective  Date") and shall end on the date which is three years following
such date; provided, however, that such term shall be extended automatically for
an additional year on each anniversary of the Effective Date if Employer's Board
of Directors  determines by resolution  that the performance of the Employee has
met the Board's  requirements  and standards and that this  Agreement  should be
extended prior to such  anniversary of the Effective  Date,  unless either party
hereto gives  written  notice to the other party not to so extend  within ninety
(90)  days  prior  to such  anniversary,  in  which  case no  further  automatic
extension  shall  occur  and the  term of this  Agreement  shall  end two  years
subsequent  to the  anniversary  as of which the  notice  not to  extend  for an
additional  year is given (such term,  including  any  extension  thereof  shall
herein be referred to as the "Term").

         4.  Employee  shall  receive  an annual  salary of  $105,000.00  ("Base
Compensation") payable at regular intervals in accordance with Employer's normal
payroll practices now or hereafter in effect.  Employer may consider and declare
from time to time increases in the salary it pays Employee and thereby increases
in his Base  Compensation.  Prior  to a Change  of  Control,  Employer  may also
declare  decreases in the salary it pays  Employee if the  operating  results of
Employer are significantly  less favorable than those for the fiscal year ending
June 30, 1999,  and Employer  makes  similar  decreases in the salary it pays to
other executive officers of Employer. After a Change in Control,  Employer shall
consider and declare salary increases based upon the following standards:

         Inflation;

         Adjustments to the salaries of other senior management personnel; and

         Past performance of Employee and the contribution  which Employee makes
         to the business and profits of Employer during the Term.

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Any and all increases or decreases in Employee's salary pursuant to this section
shall cause the level of Base  Compensation  to be increased or decreased by the
amount of each such  increase or decrease  for purposes of this  Agreement.  The
increased or decreased  level of Base  Compensation  as provided in this section
shall  become the level of Base  Compensation  for the  remainder of the Term of
this  Agreement  until  there  is  a  further   increase  or  decrease  in  Base
Compensation as provided herein.

         5. So  long as  Employee  is  employed  by  Employer  pursuant  to this
Agreement,  he shall be  included  as a  participant  in all  present and future
employee  benefit,  retirement,  and compensation  plans generally  available to
employees of Employer, consistent with his Base Compensation and his position as
Senior Vice President of Employer, including, without limitation,  Employer's or
the Holding  Company's  pension  plan,  401(k)  plan,  Stock  Option  Plan,  and
hospitalization,  disability  and  group  life  insurance  plans,  each of which
Employer  agrees to  continue  in effect on terms no less  favorable  than those
currently in effect as of the date hereof (as  permitted by law) during the Term
of this Agreement  unless prior to a Change of Control the operating  results of
Employer are significantly  less favorable than those for the fiscal year ending
June 30, 1999, and unless  (either before or after a Change of Control)  changes
in the accounting,  legal, or tax treatment of such plans would adversely affect
Employer's  operating results or financial  condition in a material way, and the
Board  of  Directors  of  Employer  or  the  Holding   Company   concludes  that
modifications to such plans need to be made to avoid such adverse effects.

         6. So  long as  Employee  is  employed  by  Employer  pursuant  to this
Agreement, Employee shall receive reimbursement from Employer for all reasonable
business  expenses  incurred in the course of his  employment by Employer,  upon
submission to Employer of written  vouchers and  statements  for  reimbursement.
Employee shall attend, upon the prior approval of Employer's Board of Directors,
those professional meetings, conventions, and/or similar functions that he deems
appropriate and useful for purposes of keeping  abreast of current  developments
in the industry and/or promoting the interests of Employer.  So long as Employee
is employed by Employer pursuant to the terms of this Agreement,  Employer shall
continue in effect  vacation  policies  applicable to Employee no less favorable
from his point of view than those  written  vacation  policies  in effect on the
date  hereof.  So long as Employee  is  employed  by  Employer  pursuant to this
Agreement,  Employee shall be entitled to office space and working conditions no
less favorable than were in effect for him on the date hereof.

         7. Subject to the  respective  continuing  obligations  of the parties,
including but not limited to those set forth in subsections 9(A), 9(B), 9(C) and
9(D) hereof,  Employee's  employment by Employer may be terminated  prior to the
expiration of the Term of this Agreement as follows:

         (A)      Employer, by action of its Board of Directors and upon written
                  notice to Employee,  may terminate Employee's  employment with
                  Employer   immediately   for  cause.   For  purposes  of  this
                  subsection  7(A),  "cause"  shall be defined  as (i)  personal
                  dishonesty, (ii) incompetence,  (iii) willful misconduct, (iv)
                  breach  of  fiduciary  duty  involving  personal  profit,  (v)
                  intentional  failure to perform  stated  duties,  (vi) willful
                  violation of any law, rule, or regulation  (other than traffic
                  violations or similar offenses) or final

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                  cease-and-desist  order,  or (vii) any material  breach of any
                  provision of this Agreement.

         (B)      Employer,  by action of its Board of Directors  may  terminate
                  Employee's employment with Employer without cause at any time;
                  provided, however, that the "date of termination" for purposes
                  of determining  benefits  payable to Employee under subsection
                  8(B) hereof shall be the date which is 60 days after  Employee
                  receives written notice of such termination.

         (C)      Employee,  by written  notice to Employer,  may  terminate his
                  employment with Employer  immediately for cause.  For purposes
                  of this subsection  7(C),  "cause" shall be defined as (i) any
                  action by Employer's Board of Directors to remove the Employee
                  as  Senior  Vice  President  of  Employer,  except  where  the
                  Employer's Board of Directors properly acts to remove Employee
                  from such  office for  "cause" as defined in  subsection  7(A)
                  hereof,  (ii) any action by  Employer's  Board of Directors to
                  materially limit, increase, or modify Employee's duties and/or
                  authority  as Senior Vice  President  of  Employer,  (iii) any
                  failure of Employer to obtain the assumption of the obligation
                  to  perform   this   Agreement   by  any   successor   or  the
                  reaffirmation of such obligation by Employer,  as contemplated
                  in section 20 hereof;  (iv) any material breach by Employer of
                  a term,  condition  or  covenant  of this  Agreement  or (v) a
                  relocation  of  Employee's  principal  office of employment by
                  more than 25 miles from its location at the effective  date of
                  this Agreement.

         (D)      Employee, upon sixty (60) days written notice to Employer, may
                  terminate his employment with Employer without cause.

         (E)      Employee's  employment  with Employer  shall  terminate in the
                  event of Employee's death or disability.  For purposes hereof,
                  "disability"  shall be  defined  as  Employee's  inability  by
                  reason of illness or other  physical or mental  incapacity  to
                  perform  the  duties   required  by  his  employment  for  any
                  consecutive One Hundred Eighty (180) day period, provided that
                  notice of any  termination  by Employer  because of Employee's
                  "disability"  shall have been given to  Employee  prior to the
                  full resumption by him of the performance of such duties.

         8. In the event of termination of Employee's  employment  with Employer
pursuant to section 7 hereof, compensation shall continue to be paid by Employer
to Employee as follows:

         (A)      In the event of  termination  pursuant to  subsection  7(A) or
                  7(D),   compensation   provided  for  herein  (including  Base
                  Compensation)  shall  continue to be paid,  and Employee shall
                  continue to participate in the employee  benefit,  retirement,
                  and  compensation  plans and other  perquisites as provided in
                  sections  5 and 6  hereof,  through  the  date of  termination
                  specified in the notice of termination.  Any benefits  payable
                  under  insurance,  health,  retirement  and  bonus  plans as a
                  result of Employee's

                                                        -4-

<PAGE>

                  participation  in such plans  through  such date shall be paid
                  when due under those plans. The date of termination  specified
                  in any notice of termination pursuant to subsection 7(A) shall
                  be no later than the last  business  day of the month in which
                  such notice is provided to Employee.

         (B)      In the event of  termination  pursuant to  subsection  7(B) or
                  7(C),   compensation   provided  for  herein  (including  Base
                  Compensation)  shall  continue to be paid,  and Employee shall
                  continue to participate in the employee  benefit,  retirement,
                  and  compensation  plans and other  perquisites as provided in
                  sections  5 and 6  hereof,  through  the  date of  termination
                  specified in the notice of termination.  Any benefits  payable
                  under  insurance,  health,  retirement  and  bonus  plans as a
                  result of Employee's  participation in such plans through such
                  date shall be paid when due under those  plans.  In  addition,
                  Employee  shall  be  entitled  to  continue  to  receive  from
                  Employer his Base  Compensation  at the rates in effect at the
                  time of termination (1) for three additional  l2-month periods
                  if the termination  follows a Change of Control or (2) for the
                  remaining  Term of the Agreement if the  termination  does not
                  follow a Change of Control. In addition,  during such periods,
                  Employer  will  maintain  in full  force  and  effect  for the
                  continued  benefit of Employee each employee  welfare  benefit
                  plan and each employee pension benefit plan (as such terms are
                  defined in the  Employee  Retirement  Income  Security  Act of
                  1974,   as  amended)  in  which   Employee   was  entitled  to
                  participate  immediately prior to the date of his termination,
                  unless an essentially equivalent and no less favorable benefit
                  is provided by a subsequent employer of Employee. If the terms
                  of any  employee  welfare  benefit  plan or  employee  pension
                  benefit plan of Employer do not permit continued participation
                  by  Employee,  Employer  will arrange to provide to Employee a
                  benefit  substantially similar to, and no less favorable than,
                  the benefit he was entitled to receive  under such plan at the
                  end of the period of coverage. For purposes of this Agreement,
                  a "Change of Control"  shall mean an  acquisition of "control"
                  of the Holding Company or of Employer within the meaning of 12
                  C.F.R.ss.574.4(a)  (other  than a change of control  resulting
                  from a trustee  or other  fiduciary  holding  shares of Common
                  Stock under an employee benefit plan of the Holding Company or
                  any  of its  subsidiaries).  Notwithstanding  anything  to the
                  contrary in the  foregoing,  any benefits  payable  under this
                  subsection  8(B)  shall  be  subject  to  the  limitations  on
                  severance benefits set forth in Regulatory Bulletin 27a of the
                  Office of Thrift  Supervision,  as in effect on the  Effective
                  Date.

         (C)      In the  event of  termination  pursuant  to  subsection  7(E),
                  compensation provided for herein (including Base Compensation)
                  shall  continue to be paid,  and  Employee  shall  continue to
                  participate   in  the  employee   benefit,   retirement,   and
                  compensation  plans  and  other  perquisites  as  provided  in
                  sections 5 and 6 hereof, (i) in the event of Employee's death,
                  through the date of death,  or (ii) in the event of Employee's
                  disability, through the date of proper notice of disability as
                  required  by  subsection  7(E).  Any  benefits  payable  under
                  insurance, health, retirement and bonus plans as a

                                                        -5-

<PAGE>

                  result of Employer's  participation in such plans through such
                  date shall be paid when due under those plans.

         (D)      Employer    will    permit    Employee    or   his    personal
                  representative(s)  or heirs,  during a period of three  months
                  following Employee's termination of employment by Employer for
                  the  reasons  set forth in  subsections  7(B) or (C),  if such
                  termination  follows a Change of Control, to require Employer,
                  upon  written  request,  to  purchase  all  outstanding  stock
                  options  previously  granted  to  Employee  under any  Holding
                  Company  stock option plan then in effect  whether or not such
                  options are then exercisable at a cash purchase price equal to
                  the amount by which the  aggregate  "fair market value" of the
                  shares  subject to such options  exceeds the aggregate  option
                  price for such  shares.  For purposes of this  Agreement,  the
                  term  "fair  market  value"  shall  mean the higher of (1) the
                  average of the highest asked prices for Holding Company shares
                  in the  over-the-counter  market  as  reported  on the  NASDAQ
                  system if the  shares  are  traded on such  system  for the 30
                  business days preceding such  termination,  or (2) the average
                  per share price actually paid for the most highly priced 1% of
                  the Holding  Company  shares  acquired in connection  with the
                  Change of  Control  of the  Holding  Company  by any person or
                  group acquiring such control.

         9. In order to induce Employer to enter into this  Agreement,  Employee
hereby agrees as follows:

         (A)      While  Employee is  employed  by Employer  and for a period of
                  three years after  termination of such  employment for reasons
                  other than those set forth in subsections  7(B) or (C) of this
                  Agreement,  Employee  shall not  divulge or furnish  any trade
                  secrets (as defined in IND.  CODEss.  24-2-3-2) of Employer or
                  any confidential information acquired by him while employed by
                  Employer  concerning  the  policies,   plans,   procedures  or
                  customers  of  Employer to any  person,  firm or  corporation,
                  other than  Employer or upon its written  request,  or use any
                  such trade  secret or  confidential  information  directly  or
                  indirectly  for  Employee's  own benefit or for the benefit of
                  any person,  firm or corporation  other than  Employer,  since
                  such  trade   secrets   and   confidential   information   are
                  confidential  and shall at all times  remain the  property  of
                  Employer.

         (B)      For a period of three years after  termination  of  Employee's
                  employment  by Employer for reasons other than those set forth
                  in subsections  7(B) or (C) of this Agreement,  Employee shall
                  not directly or  indirectly  provide  banking or  bank-related
                  services to or solicit the banking or bank-related business of
                  any  customer  of Employer  at the time of such  provision  of
                  services or solicitation which Employee served either alone or
                  with others  while  employed  by  Employer in any city,  town,
                  borough,  township,  village or other place in which  Employee
                  performed  services  for  Employer  while  employed  by it, or
                  assist any  actual or  potential  competitor  of  Employer  to

                                                        -6-

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                  provide  banking or  bank-related  services  to or solicit any
                  such customer's  banking or bank-related  business in any such
                  place.

         (C)      While Employee is employed by Employer and for a period of one
                  year after  termination  of Employee's  employment by Employer
                  for reasons other than those set forth in subsections  7(B) or
                  (C)  of  this  Agreement,  Employee  shall  not,  directly  or
                  indirectly,  as principal,  agent, or trustee,  or through the
                  agency of any  corporation,  partnership,  trade  association,
                  agent  or  agency,  engage  in  any  banking  or  bank-related
                  business  which  competes  with the  business  of  Employer as
                  conducted  during  Employee's  employment by Employer within a
                  radius of twenty-five (25) miles of Employer's main office.

         (D)      If Employee's employment by Employer is terminated for reasons
                  other than those set forth in subsections  7(B) or (C) of this
                  Agreement,  Employee will turn over immediately  thereafter to
                  Employer  all  business   correspondence,   letters,   papers,
                  reports,   customers'  lists,  financial  statements,   credit
                  reports or other  confidential  information  or  documents  of
                  Employer or its  affiliates  in the  possession  or control of
                  Employee,  all of which  writings are and will  continue to be
                  the sole and exclusive property of Employer or its affiliates.

If  Employee's  employment  by  Employer is  terminated  during the Term of this
Agreement for reasons set forth in  subsections  7(B) or (C) of this  Agreement,
Employee  shall have no  obligations  to Employer with respect to trade secrets,
confidential information or noncompetition under this section 9.

         10.  Any   termination  of  Employee's   employment  with  Employer  as
contemplated  by section 7 hereof,  except in the  circumstances  of  Employee's
death,  shall  be  communicated  by  written  "Notice  of  Termination"  by  the
terminating  party to the  other  party  hereto.  Any  "Notice  of  Termination"
pursuant  to  subsections  7(A),  7(C)  or  7(E)  shall  indicate  the  specific
provisions  of this  Agreement  relied  upon and shall  set forth in  reasonable
detail  the  facts  and  circumstances  claimed  to  provide  a basis  for  such
termination.

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

         12.  If  Employee  is  removed  and/or   permanently   prohibited  from
participating  in the conduct of  Employer's  affairs by an order  issued  under
section  8(e)(4) or (g)(1) of the Federal  Deposit  Insurance  Act (12 U.S.C.ss.
1818(e)(4) or (g)(1)),  all  obligations of Employer under this Agreement  shall

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<PAGE>

terminate  as of the  effective  date of the  order,  but  vested  rights of the
parties to the Agreement shall not be affected.

         13. If Employer  is in default  (as  defined in section  3(x)(1) of the
Federal  Deposit  Insurance  Act), all  obligations  under this Agreement  shall
terminate  as of the date of default,  but this  provision  shall not affect any
vested rights of Employer or Employee.

         14. All obligations  under this Agreement shall be terminated except to
the extent  determined  that the  continuation of the Agreement is necessary for
the continued operation of Employer: (i) by the Director of the Office of Thrift
Supervision  or his or her designee  (the  "Director"),  at the time the Federal
Deposit Insurance  Corporation enters into an agreement to provide assistance to
or on behalf of Employer  under the authority  contained in Section 13(c) of the
Federal Deposit  Insurance Act; or (ii) by the Director at the time the Director
approves a  supervisory  merger to resolve  problems  related  to  operation  of
Employer or when  Employer is  determined by the Director to be in an unsafe and
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

         15. Anything in this Agreement to the contrary notwithstanding,  in the
event that the  Employer's  independent  public  accountants  determine that any
payment by the Employer to or for the benefit of the  Employee,  whether paid or
payable pursuant to the terms of this Agreement,  would be non-deductible by the
Employer for federal income tax purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then the amount payable to or for
the benefit of the Employee pursuant to this Agreement shall be reduced (but not
below zero) to the Reduced Amount. For purposes of this section 15, the "Reduced
Amount" shall be the amount which  maximizes the amount payable  without causing
the payment to be  non-deductible by the Employer because of Section 280G of the
Code. Any payments made to Employee pursuant to this Agreement or otherwise, are
subject to and conditional upon their  compliance with 12 U.S.C.  ss.1828(k) and
any  regulations  promulgated  thereunder,  to the  extent  applicable  to  such
parties.

         16. If a dispute arises regarding the termination of Employee  pursuant
to section 7 hereof or as to the interpretation or enforcement of this Agreement
and  Employee  obtains a final  judgment  in his  favor in a court of  competent
jurisdiction  or his claim is settled by Employer  prior to the  rendering  of a
judgment by such a court,  all  reasonable  legal fees and expenses  incurred by
Employee in contesting or disputing any such termination or seeking to obtain or
enforce  any  right or  benefit  provided  for in this  Agreement  or  otherwise
pursuing his claim shall be paid by Employer, to the extent permitted by law.

         17.  Should  Employee  die after  termination  of his  employment  with
Employer  while any amounts are payable to him hereunder,  this Agreement  shall
inure  to  the  benefit  of  and  be   enforceable   by  Employee's   executors,
administrators,  heirs,  distributees,  devisees  and  legatees  and all amounts
payable  hereunder  shall be paid in accordance with the terms of this Agreement
to  Employee's  devisee,  legatee  or  other  designee  or,  if there is no such
designee, to his estate.

                                                        -8-

<PAGE>

         18.  For   purposes   of  this   Agreement,   notices   and  all  other
communications  provided  for herein  shall be in writing and shall be deemed to
have  been  given  when  delivered  or mailed by  United  States  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:

         If to Employee:            Larry G. Phillips
                                    3281 N. Frances Slocum Trail
                                    Marion, Indiana   46952

         If to Employer:            First Federal Savings Bank of Marion
                                    100 West Third Street
                                    Marion, Indiana   46952

or to such address as either party hereto may have  furnished to the other party
in writing in  accordance  herewith,  except  that  notices of change of address
shall be effective only upon receipt.

         19. The validity,  interpretation,  and  performance  of this Agreement
shall be  governed  by the laws of the State of  Indiana,  except  as  otherwise
required by mandatory operation of federal law.

         20.  Employer shall require any successor  (whether direct or indirect,
by purchase, merger,  consolidation or otherwise) to all or substantially all of
the  business  or  assets  of  Employer,  by  agreement  in form  and  substance
satisfactory to Employee to expressly assume and agree to perform this Agreement
in the same manner and same extent that Employer would be required to perform it
if no such  succession  had taken  place.  Failure of  Employer  to obtain  such
agreement prior to the  effectiveness of any such succession shall be a material
intentional breach of this Agreement and shall entitle Employee to terminate his
employment  with Employer  pursuant to subsection  7(C) hereof.  As used in this
Agreement,  "Employer"  shall mean  Employer  as  hereinbefore  defined  and any
successor to its business or assets as aforesaid.

         21.  No  provision  of  this  Agreement  may  be  modified,  waived  or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by Employee and Employer. No waiver by either party hereto at any time of
any breach by the other party hereto of, or  compliance  with,  any condition or
provision of this  Agreement to be performed by such other party shall be deemed
a waiver  of  dissimilar  provisions  or  conditions  at the  same or any  prior
subsequent time. No agreements or representation,  oral or otherwise, express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party which are not set forth expressly in this Agreement.

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

         23. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.

                                                        -9-

<PAGE>

         24. This  Agreement  is personal  in nature and  neither  party  hereto
shall,  without  consent of the other,  assign or transfer this Agreement or any
rights or obligations  hereunder except as provided in section 17 and section 20
above. Without limiting the foregoing,  Employee's right to receive compensation
hereunder shall not be assignable or transferable,  whether by pledge,  creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or  distribution  as set forth in section 17 hereof,  and in the
event of any  attempted  assignment  or  transfer  contrary  to this  paragraph,
Employer  shall have no liability to pay any amounts so attempted to be assigned
or transferred.

         IN  WITNESS  WHEREOF,  the  parties  have  caused the  Agreement  to be
executed and delivered as of the day and year first above set forth.

                                        FIRST FEDERAL SAVINGS BANK OF MARION

                                        By: /s/ Steven L. Banks
                                           ------------------------
                                           Steven L. Banks, President
                                           "Employer"

                                           /s/ Larry G. Phillips
                                           ------------------------
                                           Larry G. Phillips
                                           "Employee"

         The  undersigned,  Marion Capital  Holdings,  Inc., sole shareholder of
Employer,  agrees  that if it  shall  be  determined  for any  reason  that  any
obligations  on the part of Employer to continue to make any  payments due under
this  Agreement  to Employee is  unenforceable  for any reason,  Marion  Capital
Holdings, Inc., agrees to honor the terms of this Agreement and continue to make
any such  payments  due  hereunder  to  Employee  pursuant  to the terms of this
Agreement.

                                                 MARION CAPITAL HOLDINGS, INC.

                                                 By: /s/ Steven L. Banks
                                                    --------------------
                                                    Steven L. Banks, President

                                      -10-PROMISSORY NOTE

$5,420,000.00                                                 Pensacola, Florida
                                                                    May 21, 1998

    FOR VALUE RECEIVED,  HOME STAY LODGE 1, LTD., a Florida limited partnership,
(hereinafter  referred to as "Borrower") promises to pay to the order of BANK OF
PENSACOLA,  its  successors and assigns  (referred to herein,  together with any
other holder  hereof,  as the "Lender"),  at 400 West Garden Street,  Pensacola,
Florida  32501.  or at such  other  place as the  Lender  may from  time to time
designate,  the  principal  sum of FIVE MILLION  FOUR HUNDRED  TWENTY AND 00/100
DOLLARS  ($5,420,000.00) in lawful money of the United States of America.  or so
much of that sum as may be  advanced  under  this Note or  pursuant  to the Loan
Agreement (hereinafter defined), together with interest thereon from the date of
this Note until this Note is paid in full,  said  principal  and interest  being
calculated  and  payable  in the  amounts,  at the  times and upon the terms and
conditions provided in this Note.

    1.  DEFINITIONS.  As used in this Note,  the following  terms shall have the
indicated meanings:

    A. "Loan" shall mean that  certain loan made by Lender to Borrower  pursuant
to the Loan Agreement, as evidenced by this Note.

    B. "Loan Agreement" shall mean that certain Construction and Term Loan
Agreement of even date herewith  between  Borrower and Lender  concerning a loan
from Lender to Borrower in the original principal amount of $5,420,000.00.

    C.  "Loan  Commitment"  shall  mean  that  certain  loan  commitment  letter
concerning the Loan dated May 7,1998.

    D. "Loan Documents" shall mean,  collectively,  this Note, the Mortgage, the
Loan Agreement,  the Loan Commitment and all other  assignments,  guaranties and
instruments evidencing, securing or relating to the Loan.

    E. "Maturity Date" shall mean February 14, 2004.

    F.  "Mortgage"  shall mean that certain  Mortgage and Security  Agreement of
even date herewith from Borrower to Lender securing this Note.

    G. "Premises" shall mean the real property in Escambia,  Florida,  described
in and subject to the Mortgage.

    2. INTEREST RATE. For the first 270 days of the term of this Note,  interest
shall  accrue  on the  outstanding  principal  balance  at the  rate  of Bank of
Pensacola Prime (as that rate may be adjusted from day to day) plus  one-quarter
percent  (.25%).  For all days  during the term of this Note after the first 270
days, interest shall accrue and be payable on the outstanding  principal balance
of this  Note at the  rate of eight  and  one-half  percent  (8.5%)  per  annum.
Interest  during  the term of this  Note  shall be  computed  on the  basis of a
360-day year for the actual number of days the principal is  outstanding  during
each month.

    3.  PAYMENT.  For the  first  270 days of this  Note,  payments  of  accrued
interest only on the outstanding principal balance of this Note shall be payable
every thirty (30) days, commencing on June 19, 1998, and continuing every thirty
(30) days thereafter.  Payments of $47,472.21 (including principal and interest)

<PAGE>

shall be payable  monthly  commencing  on March 14, 1999 and  continuing  on the
fourteenth day of each succeeding month until the maturity date. On the Maturity
Date, all principal,  unpaid accrued interest and other charges  hereunder shall
be due and payable in full.  Each such payment will be applied  first to accrued
but unpaid interest and then to unpaid principal.

    4. AFTER-DEFAULT INTEREST. Notwithstanding the foregoing, from and after any
Event of Default under this Note, interest on the outstanding  principal balance
shall  accrue  and be  payable  at the rate of  thirteen  and  one-half  percent
(13.5%).

    5. INTEREST  LIMITATION.  Nothing contained in this Note, the Mortgage,  the
Loan  Agreement  or in any of the Loan  Documents  shall be  construed  or shall
operate,  either  presently  or  prospectively,  to require the  Borrower to pay
interest in excess of the maximum  interest rate allowable  under any statute or
law  applicable  to this  transaction  or to  make  any  payments  or do any act
contrary to law, nor shall the Borrower be obligated or required to pay interest
on the  outstanding  principal  balance at a rate which could subject  Lender to
either civil or criminal liability as a result of being in excess of the maximum
rate which the Borrower is  permitted  by law to contract,  agree to pay or pay.
Any  interest  paid in excess of the  maximum  rate  allowed  by law  shall,  at
Lender's option,  be (i) refunded to the Borrower,  (ii) applied to reduction of
the principal balance under this Note, or (iii) credited to amounts then due and
owing by the Borrower under this Note,  the Mortgage,  the Loan Agreement or any
of the Loan  Documents;  provided.  however.  that if the  excessive  amount  of
interest paid by Borrower  exceeds the sums outstanding  hereunder,  the portion
exceeding  the  sums  outstanding  hereunder  shall be  refunded  in cash to the
Borrower.  Any such  crediting  or  refund  shall not cure or waive any Event of
Default by Borrower  hereunder or under any of the Loan Documents.  Further,  if
the terms of this Note would  otherwise  require  or  obligate  Borrower  to pay
interest on the principal  balance  hereunder at a rate in excess of the maximum
rate allowed by law, then the rate of interest  under this Note shall IPSO FACTO
be deemed to be  reduced to such  maximum  lawful  rate,  and  interest  payable
hereunder  shall be  computed  at such  maximum  lawful  rate  and all  payments
theretofore or thereafter  accruing  hereunder shall be likewise computed on the
basis of such maximum lawful rate. Borrower agrees, however, that in determining
whether or not any interest payable  hereunder  exceeds the maximum rate allowed
by law, any non-principal payment (except payments specifically stated herein to
be "interest"),  including without limitation late charges,  shall be deemed, to
the extent  permitted by law, to be an expense,  fee,  premium or penalty rather
than interest.

    6. PREPAYMENT.

    A.  VOLUNTARY  PREPAYMENT.  Principal  outstanding  under  this  Note may be
prepaid in full or in part at any time and from time to time without  penalty or
premium.  No such  partial  prepayment  of  principal  will  have the  effect of
postponing,   satisfying,   reducing  or  otherwise   affecting   any  scheduled
installment  of interest or principal  and interest  before the principal of and
interest  on this  Note,  together  with all  other  charges  due under the Loan
Documents, are paid in full.

    7. LATE  CHARGE.  If any  installment  of interest or of any escrow or other
payment required to be made under this Note or any of the Loan Documents (except
for the  principal  payment due on the Maturity  Date) is not received by Lender
within ten (10) days after the date on which the  installment  or payment became
due, then Borrower  shall pay to Lender a late charge equal to five percent (5%)
of such  installment  or  payment  amount.  Nothing  contained  herein  shall be
construed as creating any grace period or additional grace period for the making
of any such installment or payment.

    8. DEFAULT. The occurrence of any of the following shall constitute an Event
of Default under this Note:

    A. If Borrower fails to make any monetary  payment required by this Note, as
and when due,  and such  failure  continues  for a period of five (5) days after
receipt by Borrower of written notice by Lender to Borrower: or

    B. If there  occurs any other Event of Default  under or specified in any of
the Loan Documents.

    9. ACCELERATION.  Upon the occurrence of any Event of Default as hereinabove
defined,  the entire principal  balance of this Note,  together with all accrued
interest and other sums due hereunder or under the Loan Documents,  shall become
immediately  due and payable  without  notice,  demand or legal process,  at the
option of Lender.

                                       2

<PAGE>
    10. LOAN  DOCUMENTS.  This Note is referred to in and arises out of the Loan
Agreement,  and this Note is  secured  by,  among  other  instruments,  the Loan
Documents.   Said  Loan  Documents   contain   additional   provisions  for  the
acceleration of the maturity of this Note.

    11.  ADDITIONAL  WAIVERS  AND  AGREEMENT.   With  respect  to  any  and  all
obligations under this Note or under any of the Loan Documents, Borrower and all
co-signers, sureties, endorsers and guarantors of this Note, hereby:

    A.  Waive  demand,  presentment,  protest,  notice  of  protest,  notice  of
dishonor,  notice of  acceleration  of maturity,  suit against any party and all
other notices and  requirements  necessary to charge or hold the Borrower or any
such co-signer, surety, endorser or guarantor on any such obligation;

    B. Agree to continue and remain bound for the payment of principal, interest
and all  other  sums  payable  hereunder  or under  any of the  Loan  Documents,
notwithstanding  any change or changes by way of addition,  release,  surrender,
exchange  or  substitution  of any  security  for this  Note or of any  party or
parties  liable  hereunder or by way of any  extension or extensions of time for
the payment of any sums due hereunder or under any of the Loan  Documents or any
other  changes  or  modifications  to any of the  Loan  Documents  agreed  to by
Borrower,  and waive all and every kind of notice of such  change or changes and
all defenses on the ground of such change or changes and agree that the same may
be made without notice to or consent of any of them;

    C. Waive the right to interpose any setoff or  counterclaim of any nature or
description (except a setoff or counterclaim directly related to or arising from
the Loan or the Loan  Documents)  in any  litigation in which the Lender and the
Borrower and/or such co-signers,  sureties,  endorsers and guarantors, or any of
them, shall be parties;

    D. Agree that any  obligations  of  Borrower or such  co-signers,  sureties,
endorsers or guarantors  hereunder  may, from time to time, in whole or in part,
be renewed, extended, modified, accelerated, compromised, discharged or released
by  Lender,  and any  collateral,  lien and  right of setoff  securing  any such
obligations  may, from time to time, in whole or in part, be exchanged,  sold or
released, all without notice to or further reservations of rights against any of
said parties and all without in any way  affecting or releasing the liability of
any of said parties;

    E.  Agree to pay all  filing  fees,  taxes  and all costs of  collecting  or
securing or  attempting to collect or secure any  obligations  under the Note or
any of the Loan  Documents  (except for  current  interest  billing),  including
without  limitation  reasonable  attorney's fees,  whether or not any lawsuit is
filed; and

    F. BORROWER AND ALL CO-SIGNERS,  SURETIES,  ENDORSERS AND GUARANTORS OF THIS
NOTE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AGREE THAT:

         (1) THEY AND EACH OF THEM  HEREBY  WAIVE  THE RIGHT TO TRIAL BY JURY IN
ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, CROSS-CLAIM OR OTHER ACTION OR PROCEEDING
ARISING FROM OR BASED UPON THIS NOTE OR ANY OF THE LOAN  DOCUMENTS,  AND NEITHER
THE BORROWER, NOR BORROWERS HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS OR ASSIGNS,
NOR ANY CO-SIGNER,  SURETY,  GUARANTOR,  ENDORSER OR OTHER OBLIGOR OBLIGATED FOR
THE  INDEBTEDNESS  EVIDENCED BY THIS NOTE, OR SUCH  PERSON'S OR ENTITY'S  HEIRS,
LEGAL  REPRESENTATIVES,  SUCCESSORS  OR ASSIGNS,  SHALL SEEK A JURY TRIAL IN ANY
LAWSUIT,  PROCEEDING,  COUNTERCLAIM,  CROSS-CLAIM  OR OTHER ACTION OR PROCEEDING
ARISING FROM OR BASED UPON THIS NOTE OR ANY OF THE LOAN DOCUMENTS.

         (2) NEITHER THE BORROWER,  NOR BORROWERS HEIRS. LEGAL  REPRESENTATIVES,
SUCCESSORS OR ASSIGNS, NOR ANY CO-SIGNER,  SURETY, GUARANTOR,  ENDORSER OR OTHER
OBLIGOR OBLIGATED FOR THE INDEBTEDNESS EVIDENCED BY THIS NOTE, NOR SUCH PERSON'S
OR ENTITY'S HEIRS, LEGAL  REPRESENTATIVES,  SUCCESSORS OR ASSIGNS, SHALL SEEK TO
CONSOLIDATE ANY CLAIM AS TO WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY CLAIM IN
WHICH A JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED.

                                       3
<PAGE>

         (3) THE PROVISIONS OF THIS SUBSECTION (F) HAVE BEEN FULLY NEGOTIATED BY
LENDER, BORROWER AND ANY AND ALL CO-SIGNERS, SURETIES, GUARANTORS, ENDORSERS AND
OTHER OBLIGORS OBLIGATED FOR THE INDEBTEDNESS  EVIDENCED BY THIS NOTE, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.

         (4) NEITHER LENDER NOR ANY OFFICER, EMPLOYEE,  ATTORNEY, AGENT OR OTHER
REPRESENTATIVE  OF LENDER HAS IN ANY WAY AGREED WITH OR REPRESENTED TO BORROWER,
OR ANY CO-SIGNER,  SURETY, GUARANTOR,  ENDORSER OR ANY OTHER PARTY OBLIGATED FOR
THE  INDEBTEDNESS  EVIDENCED BY THIS NOTE THAT THE PROVISIONS OF THIS SUBSECTION
(F) WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

         (5) THIS  SUBSECTION  (F) IS A MATERIAL  INDUCEMENT FOR LENDER TO ENTER
INTO  THE  LOAN  AND  OTHER  TRANSACTIONS  EVIDENCED  BY THIS  NOTE AND THE LOAN
DOCUMENTS.

    12. MISCELLANEOUS.

    A.  All amounts payable  under this Note are payable in lawful  money of the
United  States at the main office of the Lender in Pensacola,  Florida.  A check
shall  constitute  payment  when  actually  received  by Lender,  provided it is
subsequently  honored and collected in the ordinary  course of business  without
having been  returned to Lender for  insufficient  funds or other  reasons.  Any
payment received by Lender after 2:00 p.m., Pensacola,  Florida, time on any day
shall be deemed to have been received by Lender on the next succeeding day which
is not a  Saturday,  Sunday  or legal  holiday  under  the laws of the  State of
Florida or the United States of America.

    B.  Lender may,  but shall not be  required to, apply, on or after maturity,
to the payment of this debt, any funds or credit  held by Lender on  deposit, in
trust or otherwise, for the account of the Borrower or of any co-signer, surety,
endorser or guarantor hereof.

    C.  As used herein, the  singular  shall be deemed to include the plural and
vice versa, and each gender shall be deemed to include all other genders, unless
a contrary intention clearly appears.  If the Borrower consists of more than one
person or entity,  the obligations and liabilities of each such person or entity
hereunder shall be joint and several.

    D.  Lender shall not by any act,  delay,  omission or otherwise be deemed to
have  waived  any of its rights or  remedies,  and no waiver of any kind nor any
modification of this Note shall be valid unless in writing and signed by Lender.
All  rights  and  remedies  of Lender  under the  terms of this  Note,  the Loan
Documents  and any  statutes  or rules of law  shall  be  cumulative  and may be
exercised  successively  or  concurrently.  Borrower agrees that Lender shall be
entitled to all the rights of a holder in due course of a negotiable instrument.

    E. This Note has been executed and delivered in the State of Florida,  is to
be performed in the State of Florida,  and shall be governed by and construed in
accordance with the laws of the State of Florida.

    F. If any  provision of this Note shall be  unenforceable  or invalid  under
applicable law, then the remaining provisions of this Note shall not be affected
thereby but shall remain in full force and effect.

    G. The Borrower  shall be liable for all  indebtedness  represented  by this
Note and has  subscribed  its name  hereto  without  condition  that anyone else
should sign or become  bound  hereon and without  any other  condition  whatever
being made.  The  provisions of this Note are binding on, and shall inure to the
benefit of, the Borrower and the. heirs, executors, administrators,  assigns and
successors of the Borrower.

    H. All  notices  and other  communications  required  hereunder  shall be in
writing and shall be delivered  personally,  or by registered or certified mail,
return receipt requested,  postage prepaid, or by Federal Express,  Express Mail
or Air Courier, fees prepaid. Such notices shall be deemed to have been received
(i) upon  delivery,  if  personally  delivered;  (ii) upon the earlier of actual

                                       4
<PAGE>

receipt or the fourth day after  mailing,  if mailed by  registered or certified
mail, return receipt requested,  postage prepaid; and (iii) on the next business
day if sent by Federal Express,  Express Mail or Air Courier,  fees prepaid. The
address for delivery of such notices shall be as follows:

     (a)  To Lender at:     BANK OF PENSACOLA

                            400 West Garden Street
                            Pensacola, Florida 32501
                            Attn: Ashley H. Schubert, Jr.

          with copy to:     Charles L. Hoffman, Jr., of
                            Shell, Fleming, Davis & Menge
                            Post Office Box 1831
                            Pensacola, Florida 32598-1831

     (b)  To Borrower at:   HOME STAY LODGE I, LTD.
                            4040 North McArthur Boulevard, Suite 100
                            Irving, Texas 75038
                            Attn: Edward R. McMurphy

          with copy to:     Tilman J. "Skip" Falgout, III
                            4040 North McArthur Boulevard, Suite 100
                            Irving, Texas 75038

    In Witness  Whereof,  Borrower has caused this  instrument to be executed in
its name by its duly  authorized  officer with an effective  date as of the date
and year first above written.

                                HOME STAY LODGE I, LTD., a Florida
                                limited partnership

                                By: Home Stay Lodge, Inc.

                                      By: /s/ Edward R. McMurphy
                                               Its: President

                                Its Sole General Partner

STATE OF FLORIDA

COUNTY OF ESCAMBIA

    The foregoing  instrument  was  acknowledged  before me this 21st day of May
1998, by Edward R.  McMurphy the  President of Home Stay Lodge,  Inc., a Florida
corporation,  the sole  general  partner of HOME STAY  LODGE I, LTD.,  a Florida
limited  partnership,  on behalf of said partnership ( ) who is personally known
to me or (x) who produced Texas driver license as identification.

                                /s/ Charles L. Hoffman, Jr.
                                NOTARY PUBLIC - STATE OF FLORIDA
                                Typed Name: Charles L. Hoffman, Jr.
                                My Commission Expires:  02-28-01

                                       5

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