MONTGOMERY FINANCIAL CORPORATION

                       1997 RECOGNITION AND RETENTION PLAN

         1. Plan Purpose.  The purpose of the Plan is to promote the  long-term,
interests  of the  Corporation  and its  stockholders  by  providing a means for
attracting  and  retaining  directors,  executive  officers and employees of the
Corporation and its Affiliates.

         2. Definitions. The following definitions are applicable to the Plan:

"Award"- means the grant of Restricted  Stock by the  Committee,  as provided in
       the Plan.

         "Affiliate"   -  means  any   "parent   corporation"   or   "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.

         "Association" - means  Montgomery  Savings,  A Federal  Association,  a
savings institution and its successors.

         "Beneficiary" - means the person or persons designated by a Participant
to  receive  any  benefits   payable  under  the  Plan  in  the  event  of  such
Participant's  death.  Such person or persons  shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar  written  notice to the  Committee.  In the absence of a written
designation,  the Beneficiary  shall be the  Participant's  surviving spouse, if
any, or if none, his estate.

         "Code" - means the Internal Revenue Code of 1986, as amended.

         "Committee"  - means the  Committee  of the Board of  Directors  of the
Corporation referred to in Section 7 hereof.

         "Continuous  Service"  -  means  the  absence  of any  interruption  or
termination  of service as a director,  director  emeritus,  advisory  director,
executive officer or employee of the Corporation or any Affiliate. Service shall
not be considered  interrupted in the case of sick leave,  military leave or any
other leave of absence  approved by the  Corporation  or any Affiliate or in the
case of transfers between payroll locations of the Corporation or its Affiliates
or between the Corporation, its Affiliates or its successor. With respect to any
director  emeritus  or  advisory   director,   continuous   service  shall  mean
availability to perform such functions as may be required of such individuals.

         "Conversion  and   Reorganization"   -  means  (i)  the  conversion  of
Montgomery  Mutual Holding  Company from mutual form to a federal  interim stock
savings  association  and its merger  into the  Association  and (ii) the merger
transaction  pursuant  to which  the  Association  will  become  a wholly  owned
subsidiary of the Corporation.

         "Corporation"  - means  Montgomery  Financial  Corporation,  an Indiana
corporation.

         "Disability" - means any physical or mental  impairment which qualifies
an employee,  director,  director  emeritus or advisor  director for  disability
benefits  under any  applicable  long-term  disability  plan  maintained  by the
Association  or an  Affiliate,  or, if no such plan applies to such  individual,
which  renders  such  employee or director,  in the  judgment of the  Committee,
unable to perform his customary duties and responsibilities.
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         "ERISA" - means the Employee Retirement Income Security Act of 1974, as
amended.

         "Non-Employee  Director" - means a director who a) is not  currently an
officer or  employee  of the  Corporation;  b) is not a former  employee  of the
Corporation  who receives  compensation  for prior  services  (other than from a
tax-qualified  retirement  plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other than
as a director;  and e) does not possess an interest in any other transactions or
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.

         "Participant"  -  means  any  director,   director  emeritus,  advisory
director,  executive officer or employee of the Corporation or any Affiliate who
is selected by the Committee to receive an Award.

         "Plan"  -  means  the  1997  Recognition  and  Retention  Plan  of  the
Corporation.

         "Restricted  Period"  -  means  the  period  of  time  selected  by the
Committee for the purpose of determining  when  restrictions are in effect under
Section 3 hereof with respect to Restricted Stock awarded under the Plan.

         "Restricted Stock" - means Shares which have been contingently  awarded
to a Participant  by the Committee  subject to the  restrictions  referred to in
Section 3 hereof, so long as such restrictions are in effect.

         "Shares" - means the common  stock,  par value $0.01 per share,  of the
Corporation.

         3. Terms and Conditions of Restricted  Stock.  The Committee shall have
full and complete  authority,  subject to the  limitations of the Plan, to grant
Awards and, in addition to the terms and conditions  contained in paragraphs (a)
through (f) of this Section 3, to provide such other terms and conditions (which
need not be identical  among  Participants)  in respect of such Awards,  and the
vesting thereof, as the Committee shall determine.

(a)    At the  time  of an  award  of  Restricted  Stock,  the  Committee  shall
       establish for each  Participant a Restricted  Period,  during which or at
       the expiration of which,  as the Committee shall determine and provide in
       the agreement  referred to in paragraph (d) of this Section 3, the Shares
       awarded as  Restricted  Stock shall  vest,  and subject to any such other
       terms and conditions as the Committee shall provide, shares of Restricted
       Stock  may not be  sold,  assigned,  transferred,  pledged  or  otherwise
       encumbered by the Participant, except as hereinafter provided, during the
       Restricted  Period.   Except  for  such  restrictions,   and  subject  to
       paragraphs  (c) and (e) of this  Section  3 and  Section  4  hereof,  the
       Participant  as owner of such  shares  shall  have  all the  rights  of a
       stockholder,  including  but not  limited  to the  right to  receive  all
       dividends  paid on such  shares  and the right to vote such  shares.  The
       Committee shall have the authority, in its discretion,  to accelerate the
       time at which any or all of the restrictions  shall lapse with respect to
       an Award, or to remove any or all of such  restrictions,  whenever it may
       determine  that such  action is  appropriate  by  reason  of  changes  in
       applicable tax or other laws or other changes in circumstances  occurring
       after the commencement of such Restricted Period.
<PAGE>
(b)    Except  as  provided  in  Section 5 hereof,  if a  Participant  ceases to
       maintain  Continuous  Service for any reason (other than death,  total or
       partial  disability  or  retirement  at  age  65 or  later),  unless  the
       Committee  shall  otherwise  determine,  all Shares of  Restricted  Stock
       theretofore  awarded  to such  Participant  and which at the time of such
       termination of Continuous Service are subject to the restrictions imposed
       by  paragraph  (a) of this  Section  3 shall  upon  such  termination  of
       Continuous  Service be forfeited  and returned to the  Corporation.  If a
       Participant  ceases to  maintain  Continuous  Service by reason of death,
       total or partial disability or retirement at age 65 or later,  Restricted
       Stock then still subject to restrictions imposed by paragraph (a) of this
       Section 3 will be free of those restrictions.

(c)    Each  certificate in respect of Shares of Restricted  Stock awarded under
       the Plan shall be registered in the name of the Participant and deposited
       by the Participant,  together with a stock power endorsed in blank,  with
       the Corporation and shall bear the following (or a similar) legend:

                  The  transferability  of this  certificate  and the  shares of
             stock  represented  hereby are subject to the terms and  conditions
             (including  forfeiture)  contained  in  the  1997  Recognition  and
             Retention Plan of Montgomery Financial Corporation.  Copies of such
             Plan are on file in the  offices  of the  Secretary  of  Montgomery
             Financial  Corporation,  119  East  Main  Street,   Crawfordsville,
             Indiana 47933.

(d)    At the time of any Award,  the Participant  shall enter into an Agreement
       with the  Corporation in a form  specified by the Committee,  agreeing to
       the terms and  conditions  of the Award  and such  other  matters  as the
       Committee, in its sole discretion, shall determine (the "Restricted Stock
       Agreement").

(e)    At the time of an award of shares of Restricted Stock, the Committee may,
       in its  discretion,  determine  that the  payment to the  Participant  of
       dividends declared or paid on such shares, or specified portions thereof,
       by  the   Corporation   shall  be  deferred  until  the  lapsing  of  the
       restrictions  imposed under  paragraph (a) of this Section 3 and shall be
       held by the  Corporation  for the account of the  Participant  until such
       time. In the event of such  deferral,  there shall be credited at the end
       of each year (or portion  thereof)  interest on the amount of the account
       at the beginning of the year at a rate per annum as the Committee, in its
       discretion,  may  determine  In the  event  of such  deferral,  upon  the
       forfeiture  of such shares  under  paragraph  (b) of this  Section 3, all
       deferred dividends and interest thereon shall be forfeited.

(f)    At the  lapsing  of the  restrictions  imposed by  paragraph  (a) of this
       Section 3, the Corporation shall deliver to the Participant (or where the
       relevant provision of paragraph (b) of this Section 3 applies in the case
       of a deceased Participant,  to his legal  representative,  beneficiary or
       heir) the  certificate(s)  and stock power  deposited with it pursuant to
       paragraph  (c) of this  Section  3 and  the  Shares  represented  by such
       certificate(s) shall be free of the restrictions referred to in paragraph
       (a) of this Section 3.

       4. Adjustments Upon Changes in Capitalization. In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by reason
of  any   reorganization,   recapitalization,   stock  split,   stock  dividend,
combination or exchange of shares,  merger,  consolidation  or any change in the
<PAGE>
corporate  structure or Shares of the Corporation,  the maximum aggregate number
and class of shares as to which  Awards  may be  granted  under the Plan and the
number and class of shares with  respect to which Awards  theretofore  have been
granted under the Plan shall be appropriately  adjusted by the Committee,  whose
determination  shall be  conclusive.  Any  shares  of stock or other  securities
received as a result of any of the  foregoing by a  Participant  with respect to
Restricted   Stock   shall  be  subject  to  the  same   restrictions   and  the
certificate(s)  or other  instruments  representing or evidencing such shares or
securities  shall be legended and deposited  with the  Corporation in the manner
provided in Section 3 hereof.

       5.  Effect of Change in  Control.  Each of the  events  specified  in the
following  clauses (i) through (iii) of this Section 5 shall be deemed a "change
of  control":  (i) any third  person,  including a "group" as defined in Section
13(d)(3) of the  Securities  Exchange Act of 1934,  shall become the  beneficial
owner of shares of the Corporation or the Association  with respect to which 25%
or more of the total  number of votes may be cast for the  election of the Board
of Directors of the Corporation or the  Association,  (ii) as a result of, or in
connection  with, any cash tender offer,  merger or other  business  combination
sale of assets or contested  election,  or  combination  of the  foregoing,  the
persons who were directors of the Corporation or the Association  shall cease to
constitute  a  majority  of the Board of  Directors  of the  Corporation  or the
Association,  or (iii) the  shareholders  of the  Corporation  shall  approve an
agreement providing either for a transaction in which the Corporation will cease
to be an independent publicly owned entity or for a sale or other disposition of
all or substantially  all the assets of the Corporation or the  Association.  If
the  Continuous  Service of any  Participant  is  involuntarily  terminated  for
whatever  reason,  at any time within  twelve  months after a change in control,
unless the Committee shall have otherwise  provided,  any Restricted Period with
respect to Restricted Stock theretofore  awarded to such Participant shall lapse
upon such  termination  and all Shares awarded as Restricted  Stock shall become
fully vested in the Participant to whom such Shares were awarded.

       6. Assignments and Transfers.  During the Restricted Period, no Award nor
any  right  or  interest  of a  Participant  under  the  Plan in any  instrument
evidencing  any Award under the Plan may be assigned,  encumbered or transferred
except  (i) in the event of the death of a  Participant,  by will or the laws of
descent and  distribution,  or (ii) pursuant to a qualified  domestic  relations
order as defined in the Code or Title I of ERISA or the rules thereunder.

       7.  Administration.  The  Plan  shall  be  administered  by  a  Committee
consisting  of two or  more  members,  each  of  whom  shall  be a  Non-Employee
Director.  The  members  of the  Committee  shall be  appointed  by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete  authority and  discretion,  to
(i) select Participants and grant Awards; (ii) determine the number of Shares to
be subject to types of Awards  generally,  as well as individual  Awards granted
under the Plan; (Ili) determine the terms and conditions upon which Awards shall
be granted  under the Plan;  (iv)  prescribe  the form and terms of  instruments
evidencing such grants;  and (v) establish from time to time regulations for the
administration  of the Plan,  interpret  the Plan,  and make all  determinations
deemed necessary or advisable for the administration of the Plan.

         A majority of the Committee shall constitute a quorum,  and the acts of
a majority of the  members  present at any meeting at which a quorum is present,
or acts  approved in writing by a majority of the  Committee  without a meeting,
shall be acts of the Committee.
<PAGE>
         8. Shares  Subject to Plan.  Subject to  adjustment by the operation of
Section 4 hereof,  the maximum number of Shares with respect to which Awards may
be made  under the Plan  shall be an amount  which,  when added to the number of
Shares under the 1995 Plan, shall equal 4% of the total Shares  outstanding upon
completion  of the  Conversion  and  Reorganization.  The Shares with respect to
which  Awards may be made under the Plan may be either  authorized  and unissued
Shares or issued Shares heretofore or hereafter  reacquired and held as treasury
Shares.  An Award shall not be  considered to have been made under the Plan with
respect to  Restricted  Stock which is  forfeited  and new Awards may be granted
under the Plan with respect to the number of Shares as to which such  forfeiture
has occurred.

         The Corporation's obligation to deliver Shares with respect to an Award
shall,  if the  Committee  so  requests,  be  conditioned  upon the receipt of a
representation  as to the investment  intention of the  Participant to whom such
Shares are to be delivered,  in such form as the Committee shall determine to be
necessary or advisable to comply with the  provisions of the  Securities  Act of
1933 or any other Federal,  state or local securities legislation or regulation.
It may be provided that any representation  requirement shall become inoperative
upon a registration  of the Shares or other action  eliminating the necessity of
such representation  under such Securities Act or other securities  legislation.
The Corporation shall not be required to deliver any Shares under the Plan prior
to (I) the  admission  of such shares to listing on any stock  exchange on which
Shares may then be listed, and (ii) the completion of such registration or other
qualification of such Shares under any state or Federal law, rule or regulation,
as the Committee shall determine to be necessary or advisable.

         9.  Employee  Rights Under the Plan.  No director,  director  emeritus,
advisory  director,  officer or employee  shall have a right to be selected as a
Participant nor, having been so selected,  to be selected again as a Participant
and no director, officer, employee or other person shall have any claim or right
to be granted an Award  under the Plan or under any other  incentive  or similar
plan of the Corporation or any Affiliate.  Neither the Plan nor any action taken
thereunder  shall be construed as giving any officer or employee any fight to be
retained in the employ of the Corporation, the Association or any Affiliate.

         10. Withholding Tax. Upon the termination of the Restricted Period with
respect to any shares of Restricted Stock (or at such earlier time, if any, that
an election is made by the  Participant  under Section 83(b) of the Code, or any
successor  provision  thereto,  to include  the value of such  shares in taxable
income), the Corporation may, in its sole discretion,  withhold from any payment
or distribution  made under this Plan sufficient  Shares or withhold  sufficient
cash to cover any applicable  withholding and employment  taxes. The Corporation
shall have the right to deduct from all dividends paid with respect to shares of
Restricted  Stock the amount of any taxes which the  Corporation  is required to
withhold with respect to such dividend  payments.  No discretion or choice shall
be conferred upon any Participant with respect to the form,  timing or method of
any such tax withholding.

         11.  Amendment or Termination The Board of Directors of the Corporation
may amend,  suspend or  terminate  the Plan or any portion  thereof at any time;
provided,  however,  that no such  amendment,  suspension or  termination  shall
impair  the  rights  of any  Participant,  without  his  consent,  in any  Award
theretofore made pursuant to the Plan.

       12. Term of Plan. The Plan shall become  effective upon its  ratification
by the stockholders of the  Corporation.  It shall continue in effect for a term
of ten years unless sooner terminated under Section 11 hereof.