Exhibit 10.1

SEVERANCE AGREEMENT

        This Severance Agreement made as of the 31st day of May, 2005, by and
among Lincoln Bancorp, an Indiana corporation, with its main office located at
1121 E. Main Street, Plainfield, Indiana 46168 (hereinafter, the “Company”),
Lincoln Bank, a federal savings bank with its main office located at 1121 E.
Main Street, Plainfield, Indiana 46168 (the “Bank”), and Rebecca J. Morgan, an
individual whose residence address is 454 South County Road 525 West, Danville,
Indiana 46122 (hereinafter “Employee”).

        In consideration of the mutual provisions of this Agreement, the
Company, the Bank and the Employee agree as follows:

        1.  Employment and Directorships. Employee, the Bank and the Company
agree that Employee’s employment as an employee of the Bank and her authority to
conduct business on behalf of the Company, the Bank, or any of the subsidiaries
of the Bank (the “Bank Subsidiaries”) will terminate on May 31, 2005. In
addition, Employee acknowledges that her positions as an officer of the Company,
as an officer of the Bank, and as an officer of the Bank Subsidiaries will
terminate on May 31, 2005, and that she will vacate her office at the Bank’s
Southfield Drive location on or before May 31, 2005. Employee and the Bank agree
that, in consideration for the agreements reached herein, Employee’s Employment
Agreement with the Bank dated January 16, 2001, shall terminate as of the date
hereof and shall thereafter be void and without further force and effect.
Employee shall continue to receive compensation from the Bank at her current
rate of $114,675.34 per year, payable on a bi-weekly basis during the period
beginning on the date of this Agreement and ending January 15, 2006. Except as
otherwise provided herein, such amounts shall be in full satisfaction of any
remaining payments or consideration owed to the Employee by the Company, the
Bank, or Bank Subsidiaries as a result of Employee’s employment relationship
with the Bank and her relationship as an officer of the Company, the Bank,
and/or the Bank Subsidiaries.

        2.  401(k) Plan. Employee shall cease participating in the Bank’s
Financial Institutions Thrift Plan as of May 31, 2005, and shall be entitled to
the benefits payable to her in accordance with the terms of such plan. As soon
as practicable after January 15, 2006, the Company shall determine the amount of
the Company match that would have been made on behalf of Employee to the thrift
plan had Employee participated in that plan from June 1, 2005, until January 15,
2006, and made contributions to such thrift plan during that period at the same
level at which Employee is currently contributing to that plan. Once that amount
is determined, it shall be paid to Employee in a lump sum by the Bank, reduced
by applicable FICA, FUTA and income tax withholdings.

        3.  ESOP. Employee shall cease participating in the Company’s Employee
Stock Ownership Plan as of May 31, 2005, and shall be entitled to the benefits
payable to her in accordance with the terms of such plan. As soon as practicable
after January 15, 2006, the Company shall determine the portion of the
contribution made or to be made by the Bank to the ESOP for the calendar year
2005 that would have been allocated to Employee’s account under the ESOP for
2005 had Employee remained employed by the Bank through January 15, 2006.

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Once that amount is determined, it shall be paid to Employee in a lump sum by
the Bank, reduced by applicable FICA, FUTA and income tax withholdings.

        4.  Pension Plan. Employee shall cease participating in the Bank’s
Financial Institutions Retirement Plan as of May 31, 2005, and shall be entitled
to the benefits payable to her in accordance with the terms of such plan.

        5.  Health Insurance. The Employee shall be entitled to the benefits to
which she is entitled under the Bank’s group insurance plans and to any COBRA
benefits to which she and her family members may be entitled under law (which
would permit her and her currently covered family members to continue their
current group insurance coverage for the periods specified by COBRA) and/or
retiree health care coverage, as a result of her employment by the Bank through
May 31, 2005. If Employee elects COBRA coverage or retiree health care coverage,
the Bank shall pay or reimburse Employee for the cost of such continued coverage
through January 15, 2006; provided, however, that if Employee receives
comparable coverage elsewhere prior to January 15, 2006, the Bank’s obligation
to pay or reimburse Employee for the cost of such coverage shall terminate.

        6.  Stock Options. Under the Company’s stock option plan, Employee,
because she is eligible for early retirement benefits under the Bank’s Financial
Institutions Retirement Plan, has three years from May 31,2005, to exercise the
stock options she currently holds under that option plan.

        7.  General Release and Waiver of Claims. In consideration for the
payments provided for herein, Employee, for herself, her heirs, executors, and
administrators, hereby releases and discharges the Company, the Bank, and the
Bank Subsidiaries, and their officers, directors, employees, affiliates,
insurers and agents from any claim, demand, action, or cause of action, known or
unknown, which arose at any time from the beginning of time to the date hereof
and waives all rights relating to, arising out of or in any way connected with
her employment with the Bank or the cessation of that employment, or her service
as an officer and director of the Company, the Bank, and the Bank Subsidiaries,
including, without limitation, any claim, demand, action, cause of action or
right, including claims for attorneys’ fees, based on but not limited to:

  (i)   The Age Discrimination in Employment Act of 1967, as amended (“ADEA”),
29 U.S.C. § 621, et seq;

  (ii)   The Americans With Disabilities Act of 1990 (“ADA”), 42 U.S.C. §
12,101, et seq.;

  (iii)   The Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq.;

  (iv)   The Family and Medical Leave Act of 1993 (“FMLA”), 29 U.S.C. § 2601, et
seq.;

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  (v)   The Civil Rights Act of 1866 and 1964, as amended, 42 U.S.C. § 1981;

  (vi)   The Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §
1001, et seq.;

  (vii)   Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 
2000(e), et seq.;

  (viii)   The Older Workers’ Benefits Protection Act of 1990;

  (ix)   The Equal Pay Act of 1963;

  (x)   The Worker Adjustment and Retraining Notification Act of 1989;

  (xi)   The Fair Labor Standards Act of 1938 (“FLSA”), as amended, 29 U.S.C. §
201, et seq.;

  (xii)   Any existing or potential entitlement under any Bank or Company
program or plan, including wages, bonuses, stock options, vacation pay or other
paid leave;

  (xiii)   Any existing or potential agreement, contract, representation,
policy, procedure, or statement (whether any of the foregoing are express or
implied, oral or written);

  (xiv)   Any wage law; and

  (xv)   Claims arising under any other federal, state and local fair employment
practices law, disability benefits law, and any other employee or labor
relations statute, executive order, law or ordinance, and any duty or other
employment-related obligation, claims arising from any other type of statute,
executive order, law or ordinance, claims arising from contract or public
policy, as well as tort, tortious cause of conduct, breach of implied covenant
of good faith and fair dealing, breach of contract, intentional infliction of
emotional distress, negligence, discrimination, harassment, and retaliation,
together with all claims for monetary and equitable relief, punitive and
compensatory relief and attorneys’ fees and costs.

This Agreement shall not apply to rights or claims that may arise after the date
hereof, nor shall any provision within this Agreement be interpreted to preclude
the parties’ opportunity to challenge the validity of the Agreement or limit or
extinguish any entitlements Employee may have in clear and direct contravention
of applicable statutes.

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        8.    Covenant Not to Sue. With regard to any claims, charges, or
complaints which may be filed concerning any events, actions or issues related
to or arising out of her employment and which occurred prior to Employee’s
signing this Agreement, Employee additionally waives and releases any right she
may have to bring, participate in, or recover in any proceeding brought by
Employee, an administrative agency, or any other person on Employee’s behalf.
Employee agrees that she will never sue the Company, the Bank, or the Bank
Subsidiaries, or their officers, directors, employees, insurers or agents
concerning any claim relating to her employment with the Bank, the cessation of
that employment, the compensation or benefits payable in connection with her
employment, or her service as an officer or director of the Company, the Bank or
the Bank Subsidiaries prior to the date hereof. Should Employee bring or
participate in any such lawsuit or proceeding or otherwise breach any portion of
this Agreement, she acknowledges that any such suit, claim, or assertion of
liability is null and void, and must be summarily dismissed. Likewise, Employee
acknowledges and declares under penalties of perjury that she does not currently
have a lawsuit, claim, charge, demand, or other form of asserted liability
against the Company, the Bank, or the Bank Subsidiaries pending before any
court, governmental agency, or other body. Nothing in this paragraph is intended
to limit or preclude any other rights or remedies the Company or the Bank may
have for a breach of this paragraph, nor is anything in this paragraph or
Agreement intended to limit or preclude any rights, claims, or processes that,
by express and unequivocal terms of law, may not under any circumstances be
waived or extinguished.

        Should Employee ever assert liability or file a claim, action, or charge
against the Company or the Bank for any matter, Employee shall be liable for all
expenses, including reasonable costs and attorneys’ fees incurred by the Company
or the Bank in defending each such suit, claim, or assertion of liability or in
seeking enforcement of this Agreement, regardless of the outcome, except for
claims under the ADEA (unless otherwise allowable by law). Employee agrees to
pay such expenses within thirty (30) calendar days of written demand mailed to
Employee’s last known address. This paragraph does not apply to legal action
instituted by Employee for enforcing this Agreement, nor does it apply to any
claims that may arise after the execution of this Agreement. Nothing in this
Agreement releases or restricts claims that may arise after execution of this
Agreement.

        9.  Non-Disparagement. Employee agrees that she will not provide
information, make oral or written statements, or take any action that would
cause the Company, the Bank, or the Bank Subsidiaries embarrassment or
humiliation or otherwise cause or contribute to the Company, the Bank, or the
Bank Subsidiaries being held in disrepute. The Company and the Bank agree that
they will not provide information, make oral or written statements, or take any
action that would cause Employee embarrassment or humiliation or otherwise cause
or contribute to Employee being held in disrepute.

        10.  Knowledge and Understanding. Employee declares, under penalty of
perjury, that:

    (a)   she has been advised to consult with an attorney prior to executing
this Agreement;

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    (b)   she has been given a period of at least 21 days within which to
consider this Agreement; and

    (c)   she is fully aware of her rights and has carefully read and fully
understands all provisions of this Agreement before signing.

        11.  Effective Date. If Employee consents to and signs this Agreement
within twenty-one (21) days of receipt, Employee shall have an additional seven
(7) days after signing the Agreement to revoke it. Employee expressly states
under penalty of perjury, that if she executes this Agreement before the
expiration of the 21-day period, such execution is knowing, voluntary, and done
on the advice of counsel (or with the opportunity to consult with counsel). Any
revocation shall be in writing and addressed/delivered to the attention of
Jennifer Dawson, Director of Human Resources of the Bank. This Agreement shall
not become effective, therefore, and none of the benefits set forth in this
Agreement shall become effective until the 8th day after Employee executes this
Agreement (the “Effective Date”).

        12.  Confidentiality and Non-Compete. Employee agrees that:

    (a)   For a period of three years after May 31, 2005, Employee shall not
divulge or furnish any trade secrets (as defined in IND. CODE § 24-2-3-2) of the
Bank or any confidential information acquired by her while employed by the Bank
concerning the policies, plans, procedures or customers of the Bank to any
person, firm or corporation, other than the Bank 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 the Bank, since such trade secrets and confidential information are
confidential and shall at all times remain the property of the Bank.

    (b)   For a period of three years after May 31, 2005, 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 the Bank at the time of
such provision of services or solicitation which Employee served either alone or
with others while employed by the Bank in any city, town, borough, township,
village or other place in which Employee performed services for the Bank while
employed by it, or assist any actual or potential competitor of the Bank to
provide banking or bank-related services to or solicit any such customer’s
banking or bank-related business in any such place.

    (c)   For a period of one year after May 31, 2005, 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 the
Bank as conducted during Employee’s employment by the Bank within a radius of
twenty-five (25) miles of the Bank’s main office.

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    (d)   Employee agrees to turn over, as soon as practicable after May 31,
2005, to the Bank all business correspondence, letters, papers, reports,
customers’ lists, financial statements, credit reports or other confidential
information or documents of the Bank 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 the Bank or its affiliates. Employee shall also return
to the Bank as soon as practicable after May 31, 2005, all other Bank or Company
property in her possession, including but not limited to, any keys to Company or
Bank property, laptop computer, fax machine, pager, PDA or other equipment or
personal property owned by the Company or the Bank.

Employee agrees that because of her access to trade secrets and confidential
information of the Bank and the uniqueness of her services, her breach of this
section of this Agreement would cause irreparable harm to the Bank and, in
addition to any other remedies, entitle the Bank to temporary, preliminary and
permanent injunctive relief prohibiting her from engaging in such activities in
violation of this agreement. Employee further agrees that the Bank may obtain
such relief without the necessity of posting any bond.

        13.    Authorization. The Company represents and warrants that this
Agreement has been duly authorized by all necessary corporate action on the part
of the Company in accordance with its Articles of Incorporation and Bylaws and
applicable law.

        14.    Successors. This Agreement shall be binding upon, and inure to
the benefit of, the successors, assigns, executors, heirs, administrators and
personal representatives of the parties hereto. Employee shall not have any
right to anticipate, alienate, or assign any of her rights or obligations under
this Agreement and any effort to do so shall be null and void.

        15.    Amendment. This Agreement may be amended only in writing signed
by the parties hereto or their successors in interest. The waiver by either
party of any of the provisions of this Agreement shall not operate or be
construed as a waiver of such provision in any other circumstance or of any
other provision.

        16.    Applicable Law. This Agreement shall be construed and interpreted
pursuant to, and in accordance with, the laws of the State of Indiana or
applicable federal law.

        17.    Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if personally delivered to the
party to whom notice should be given at the addresses set forth above (or at
such other address for a party as shall be specified by notice given pursuant
hereto).

        18.    Attorneys’ Fees. The Bank agrees to pay reasonable legal fees and
expenses of Employee in negotiating and finalizing the terms of this Agreement
up to a maximum of $4,000.00.

        19.    Complete Agreement. This Agreement sets forth the entire
Agreement and understanding between Employee, the Company, and the Bank, and
fully supersedes any and all prior oral or written or implied agreements or
understandings between Employee, the Company

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or the Bank relating to the subject matter hereof. If one or more provisions or
terms of this Agreement shall be determined to be unenforceable, the remainder
of the Agreement shall remain in full force and effect.

        20.    Non-Reliance. This Agreement sets forth the complete agreement
between the parties. Employee represents and acknowledges that in executing this
Agreement she does not rely and has not relied upon any representations or
statements not set forth herein made by the Company or its subsidiaries or any
of their employees, agents, representatives, controlling shareholders, officers,
or directors with regard to the subject matter, basis, or effect of this
Agreement or otherwise.

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

By:  /s/ Rebecca J. Morgan
        ——————————————
        Rebecca J. Morgan

LINCOLN BANCORP

By:  /s/ John M. Baer
        ——————————————
        John M. Baer

LINCOLN BANK

By:  /s/ John M. Baer
        ——————————————
        John M. Baer

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