<PAGE>
 
                               AMERIANA BANCORP
                     1996 STOCK OPTION AND INCENTIVE PLAN
                                  AS AMENDED*


1.     Purpose of the Plan.

       The purpose of this Plan is to advance the interests of the Company
       through providing select key Employees and Directors of the Company and
       its Affiliates with the opportunity to acquire Shares. By encouraging
       such stock ownership, the Company seeks to attract, retain and motivate
       the best available personnel for positions of substantial responsibility
       and to provide additional incentive to Directors and key Employees of the
       Company or any Affiliate to promote the success of the business.

2.     Definitions.

       As used herein, the following definitions shall apply.

       (a)    "Affiliate" shall mean any "parent corporation" or "subsidiary
              corporation" of the Company, as such terms are defined in Section
              424(e) and (f), respectively, of the Code.

       (b)    "Agreement" shall mean a written agreement entered into in
              accordance with Paragraph 5(c).

       (c)    "Awards" shall mean, collectively, Options, SARs, and Deferred
              Stock Awards (unless the context clearly indicates a different
              meaning).

       (d)    "Board" shall mean the Board of Directors of the Company.

       (e)    "Code" shall mean the Internal Revenue Code of 1986, as amended.

       (f)    "Committee" shall mean the Stock Option Committee appointed by the
              Board in accordance with Paragraph 5(a) hereof.

       (g)    "Common Stock" shall mean the common stock of the Company.

       (h)    "Company" shall mean Ameriana Bancorp.

       (i)    "Continuous Service" shall mean the absence of any interruption or
              termination of service as an Employee or Director of the Company
              or an Affiliate. Continuous Service shall not be considered
              interrupted in the case of sick leave, military leave or any other
              leave of absence approved by the Company, in the case of transfers
              between payroll locations of the Company or between the Company,
              an Affiliate or a successor, or in the case of a Director's
              performance of services in an emeritus or advisory capacity.

       (i-A)  "Deferred Stock Award" shall mean an award made pursuant to
              Paragraph 10A of the Plan.

       (j)    "Director" shall mean any member of the Board, and any member of
              the board of directors of any Affiliate that the Board has by
              resolution designated as being eligible for participation in this
              Plan.

------------------------------
* Includes the 1996 Amendment, 1997 Amendment, 1998 Amendment, and Second 1998
  Amendment.
<PAGE>
 
       (k)    "Disability" shall mean a physical or mental condition, which in
              the sole and absolute discretion of the Committee, is reasonably
              expected to be of indefinite duration and to substantially prevent
              a Participant from fulfilling his or her duties or
              responsibilities to the Company or an Affiliate.

       (l)    "Effective Date" shall mean the date specified in Paragraph 14
              hereof.

       (m)    "Employee" shall mean any person employed by the Company or an
              Affiliate.

       (n)    "Exercise Price" shall mean the price per Optioned Share at which
              an Option or SAR may be exercised.

       (o)    "ISO" means an option to purchase Common Stock which meets the
              requirements set forth in the Plan, and which is intended to be
              and is identified as an "incentive stock option" within the
              meaning of Section 422 of the Code.

       (p)    "Market Value" shall mean the fair market value of the Common
              Stock, as determined under Paragraph 7(b) hereof.

       (q)    "Non-Employee Director" shall have the meaning provided in Rule
              16b-3.

       (r)    "Non-ISO" means an option to purchase Common Stock which meets the
              requirements set forth in the Plan but which is not intended to be
              and is not identified as an ISO.

       (s)    "Option" means an ISO and/or a Non-ISO.

       (t)    "Optioned Shares" shall mean Shares subject to an Award granted
              pursuant to this Plan.

       (u)    "Participant" shall mean any person who receives an Award pursuant
              to the Plan.

       (v)    "Plan" shall mean this Ameriana Bancorp 1996 Stock Option and
              Incentive Plan.

       (w)    "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
              Regulations under the Securities Exchange Act of 1934, as amended.

       (x)    "Share" shall mean one share of Common Stock.

       (y)    "SAR" (or "Stock Appreciation Right") means a right to receive the
              appreciation in value, or a portion of the appreciation in value,
              of a specified number of shares of Common Stock.

       (z)    "Year of Service" shall mean a full twelve-month period, measured
              from the date of an Award and each annual anniversary of that
              date, during which a Participant has not terminated Continuous
              Service for any reason.

3.     Term of the Plan and Awards.

       (a)    Term of the Plan. The Plan shall continue in effect for a term of
              ten years from the Effective Date, unless sooner terminated
              pursuant to Paragraph 16 hereof. No Award shall be granted under
              the Plan after five years from the Effective Date.

       (b)    Term of Awards. The term of each Award granted under the Plan
              shall be established by the Committee, but shall not exceed 10
              years; provided, however, that in the case of an Employee who

                                       2
<PAGE>
 
              owns Shares representing more than 10% of the outstanding Common
              Stock at the time an ISO is granted, the term of such ISO shall
              not exceed five years; and provided further that the term of a
              Deferred Stock Award may exceed 10 years if the Agreement granting
              the Deferred Stock Award specifically provides for a term that
              expires no more than 10 years after termination of a Participant's
              Continuous Service.

4.     Shares Subject to the Plan.

       (a)    General Rule. Except as otherwise required under Section 11, the
              aggregate number of Shares deliverable pursuant to Awards shall
              not exceed 320,0001 Shares. Such Shares may either be (i)
              authorized but unissued Shares, (ii) Shares held in treasury, or
              (iii) shares held in a grantor trust maintained by the Company. If
              any Awards should expire, become unexercisable, or be forfeited
              for any reason without having been exercised, the Optioned Shares
              shall, unless the Plan shall have been terminated, be available
              for the grant of additional Awards under the Plan.

       (b)    Special Rule for SARs. The number of Shares with respect to which
              an SAR is granted, but not the number of Shares which the Company
              delivers or could deliver to an Employee or individual upon
              exercise of an SAR, shall be charged against the aggregate number
              of Shares remaining available under the Plan; provided, however,
              that in the case of an SAR granted in conjunction with an Option,
              under circumstances in which the exercise of the SAR results in
              termination of the Option and vice versa, only the number of
              Shares subject to the Option shall be charged against the
              aggregate number of Shares remaining available under the Plan. The
              Shares involved in an Option as to which option rights have
              terminated by reason of the exercise of a related SAR, as provided
              in Paragraph 10 hereof, shall not be available for the grant of
              further Options under the Plan.

5.     Administration of the Plan.

       (a)    Composition of the Committee. The Plan shall be administered by
              the Committee, which shall consist of not less than two (2)
              members of the Board who are Non-Employee Directors. Members of
              the Committee shall serve at the pleasure of the Board. In the
              absence at any time of a duly appointed Committee, the Plan shall
              be administered by those members of the Board who are Non-Employee
              Directors.

       (b)    Powers of the Committee. Except as limited by the express
              provisions of the Plan or by resolutions adopted by the Board, the
              Committee shall have sole and complete authority and discretion
              (i) to select Participants and grant Awards, (ii) to determine the
              form and content of Awards to be issued in the form of Agreements
              under the Plan, (iii) to interpret the Plan, (iv) to prescribe,
              amend and rescind rules and regulations relating to the Plan, and
              (v) to make other determinations necessary or advisable for the
              administration of the Plan. The Committee shall have and may
              exercise such other power and authority as may be delegated to it
              by the Board from time to time. A majority of the entire Committee
              shall constitute a quorum and the action 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 deemed the action of the Committee.

       (c)    Agreement. Each Award shall be evidenced by a written agreement
              containing such provisions as may be approved by the Committee.
              Each such Agreement shall constitute a binding contract between
              the Company and the Participant, and every Participant, upon
              acceptance of such

-----------------------------
/1/ Reflects four-for-three stock split in the form of a stock dividend
    effective March 15, 1996.

                                       3
<PAGE>
 
              Agreement, shall be bound by the terms and restrictions of the
              Plan and of such Agreement. The terms of each such Agreement shall
              be in accordance with the Plan, but each Agreement may include
              such additional provisions and restrictions determined by the
              Committee, in its discretion, provided that such additional
              provisions and restrictions are not inconsistent with the terms of
              the Plan. In particular, the Committee shall set forth in each
              Agreement (i) the Exercise Price of an Option or SAR, (ii) the
              number of Shares subject to, and the expiration date of, the
              Award, (iii) the manner, time and rate (cumulative or otherwise)
              of exercise or vesting of such Award, and (iv) the restrictions,
              if any, to be placed upon such Award, or upon Shares which may be
              issued upon exercise of such Award.

              The Chairman of the Committee and such other Directors and
              officers as shall be designated by the Committee are hereby
              authorized to execute Agreements on behalf of the Company and to
              cause them to be delivered to the recipients of Awards.

       (d)    Effect of the Committee's Decisions. All decisions, determinations
              and interpretations of the Committee shall be final and conclusive
              on all persons affected thereby.

       (e)    Indemnification. In addition to such other rights of
              indemnification as they may have, the members of the Committee
              shall be indemnified by the Company in connection with any claim,
              action, suit or proceeding relating to any action taken or failure
              to act under or in connection with the Plan or any Award, granted
              hereunder to the full extent provided for under the Company's
              governing instruments with respect to the indemnification of
              Directors.

6.     Grant of Options.

       (a)    General Rule. The Committee shall make the Awards required under
              Paragraph 9 of this Plan, and shall otherwise have the discretion
              to make Awards only to Employees (including Employees who are
              Directors) to Directors, and to directors of Affiliates. In
              selecting those Employees to whom Awards will be granted and the
              number of shares covered by such Awards, the Committee shall
              consider the position, duties and responsibilities of the eligible
              individuals, the value of their services to the Company and its
              Affiliates, and any other factors the Committee may deem relevant.

       (b)    Special Rules for ISOs. The aggregate Market Value, as of the
              date the Option is granted, of the Shares with respect to which
              ISOs are exercisable for the first time by an Employee during any
              calendar year (under all incentive stock option plans, as defined
              in Section 422 of the Code, of the Company or any present or
              future Affiliate of the Company) shall not exceed $100,000.
              Notwithstanding the foregoing, the Committee may grant Options in
              excess of the foregoing limitations, in which case such Options
              granted in excess of such limitation shall be Options which are
              Non-ISOs.

7.     Exercise Price for Options.

       (a)    Limits on Committee Discretion. The Exercise Price as to any
              particular Option shall not be less than 50% (100% for ISOs) of
              the Market Value of the Optioned Shares on the date of grant. In
              the case of an Employee who owns Shares representing more than
              10% of the Company's outstanding Shares of Common Stock at the
              time an ISO is granted, the Exercise Price shall not be less than
              110% of the Market Value of the Optioned Shares at the time the
              ISO is granted.

       (b)    Standards for Determining Exercise Price. If the Common Stock is
              listed on a national securities exchange (including the NASDAQ
              National Market System) on the date in question, then the Market
              Value per Share shall be the average of the highest and lowest
              selling price on such

                                       4
<PAGE>
 
              exchange on such date, or if there were no sales on such date,
              then the Exercise Price shall be the mean between the bid and
              asked price on such date. If the Common Stock is traded otherwise
              than on a national securities exchange on the date in question,
              then the Market Value per Share shall be the mean between the bid
              and asked price on such date, or, if there is no bid and asked
              price on such date, then on the next prior business day on which
              there was a bid and asked price. If no such bid and asked price is
              available, then the Market Value per Share shall be its fair
              market value as determined by the Committee, in its sole and
              absolute discretion.

8.     Exercise of Options.

       (a)    Generally. Any Option granted hereunder shall be exercisable at
              such times and under such conditions as shall be permissible under
              the terms of the Plan and of the Agreement granted to a
              Participant. An Option may not be exercised for a fractional
              Share.

       (b)    Procedure for Exercise. A Participant may exercise Options,
              subject to provisions relative to its termination and limitations
              on its exercise, only by (1) written notice of intent to exercise
              the Option with respect to a specified number of Shares, and (2)
              payment to the Company (contemporaneously with delivery of such
              notice) in cash, in Common Stock, or a combination of cash and
              Common Stock, of the amount of the Exercise Price for the number
              of Shares with respect to which the Option is then being
              exercised. Each such notice (and payment where required) shall be
              delivered, or mailed by prepaid registered or certified mail,
              addressed to the Treasurer of the Company at the Company's
              executive offices. Common Stock utilized in full or partial
              payment of the Exercise Price for Options shall be valued at its
              Market Value at the date of exercise, and may consist of Shares
              subject to the Option being exercised. Upon a Participant's
              exercise of an Option, the Company may, in the discretion of the
              Committee, pay to the Participant a cash amount up to but not
              exceeding the amount of dividends, if any, declared on the
              underlying Shares between the date of grant and the date of
              exercise of the Option.

       (c)    Period of Exercisability. Except to the extent otherwise provided
              in the terms of an Agreement, an Option may be exercised by a
              Participant only while he is an Employee and has maintained
              Continuous Service from the date of the grant of the Option, or
              within three months after termination of such Continuous Service
              (but not later than the date on which the Option would otherwise
              expire), except if the Employee's Continuous Service terminates by
              reason of --

              (1)  "Just Cause" which for purposes hereof shall have the meaning
                   set forth in any unexpired employment or severance agreement
                   between the Participant and the Company (and, in the absence
                   of any such agreement, shall mean termination because of the
                   Employee's personal dishonesty, incompetence, willful
                   misconduct, breach of fiduciary duty involving personal
                   profit, intentional failure to perform stated duties, willful
                   violation of any law, rule or regulation (other than traffic
                   violations or similar offenses) or final cease-and-desist
                   order), then the Participant's rights to exercise such Option
                   shall expire on the date of such termination;

              (2)  death, then to the extent that the Participant would have
                   been entitled to exercise the Option immediately prior to his
                   death, such Option of the deceased Participant may be
                   exercised within two years from the date of his death (but
                   not later than the date on which the Option would otherwise
                   expire) by the personal representatives of his estate or
                   person or persons to whom his rights under such Option shall
                   have passed by will or by laws of descent and distribution;

                                       5
<PAGE>
 
              (3)  Disability, then to the extent that the Participant would
                   have been entitled to exercise the Option immediately prior
                   to his or her Disability, such Option may be exercised within
                   one year from the date of termination of employment due to
                   Disability, but not later than the date on which the Option
                   would otherwise expire.

       (d)    Effect of the Committee's Decisions. The Committee's determination
              whether a Participant's Continuous Service has ceased, and the
              effective date thereof, shall be final and conclusive on all
              persons affected thereby.

       (e)    Six-Month Holding Period. Notwithstanding any other provision of
              this Plan to the contrary, Common Stock that is purchased upon
              exercise of an Option or SAR may not be sold within the six-month
              period following the grant date of that Option or SAR, except in
              the event of the Participant's death or Disability, or such other
              event as the Board may specifically deem appropriate.

9.     Grants of Options to Non-employee Directors.

       (a)    Automatic Grants. Notwithstanding any other provisions of this
              Plan, each Director who is not an Employee but is a Director on
              the Effective Date shall receive, on said date, Non-ISOs to
              purchase 8,0002 Shares. The Exercise Price per Share will be equal
              to the Market Value of a Share on the date of grant. Each Director
              who joins the Board after the Effective Date and who is not then
              an Employee shall receive, on the date of joining the Board, Non-
              ISOs to purchase 8,0002 of the Shares reserved under Paragraph
              4(a) of the Plan, at an Exercise Price per Share equal to its
              Market Value on the date of grant.

       (b)    Terms of Exercise. Options received under the provisions of this
              Paragraph may be exercised from time to time by (a) written notice
              of intent to exercise the Option with respect to all or a
              specified number of the Optioned Shares, and (b) payment to the
              Company (contemporaneously with the delivery of such notice), in
              cash, in Common Stock, or a combination of cash and Common Stock,
              of the amount of the Exercise Price for the number of the Optioned
              Shares with respect to which the Option is then being exercised.
              Each such notice and payment shall be delivered, or mailed by
              prepaid registered or certified mail, addressed to the Treasurer
              of the Company at the Company's executive offices. A Director who
              exercises Options pursuant to this Paragraph may satisfy all
              applicable federal, state and local income and employment tax
              withholding obligations, in whole or in part, by irrevocably
              electing to have the Company withhold shares of Common Stock, or
              to deliver to the Company shares of Common Stock that he already
              owns, having a value equal to the amount required to be withheld;
              provided that to the extent not inconsistent herewith, such
              election otherwise complies with those requirements of Paragraphs
              8 and 19 hereof.

              Options granted under this Paragraph shall become exercisable on
              the date that the Plan receives stockholder approval pursuant to
              Paragraph 14 hereof. Such Options shall have a term of ten years
              and expire one year after the date on which a Director terminates
              Continuous Service on the Board, but in no event later than the
              date on which such Options would otherwise expire. In the event of
              such Director's death during the term of his directorship, Options
              granted under this Paragraph shall become immediately exercisable,
              and may be exercised within two years from the date of his death
              by the personal representatives of his estate or person or persons
              to whom his rights under such Option shall have passed by will or
              by laws of descent and distribution, but in no event later than
              the date on which such Options would otherwise expire. In the
              event of such Director's Disability

------------------------
/2/ Reflects four-for-three stock split in the form of a stock dividend
    effective March 15, 1996.

                                       6
<PAGE>
 
              during his or her directorship, the Director's Option shall become
              immediately exercisable, and such Option may be exercised within
              one year of the termination of directorship due to Disability, but
              not later than the date that the Option would otherwise expire.
              Unless otherwise inapplicable or inconsistent with the provisions
              of this Paragraph, the Options to be granted to Directors
              hereunder shall be subject to all other provisions of this Plan.

       (c)    Effect of the Committee's Decisions. The Committee's determination
              whether a Participant's Continuous Service has ceased, and the
              effective date thereof, shall be final and conclusive on all
              persons affected thereby.

10.    SARs (Stock Appreciation Rights).

       (a)    Granting of SARs. In its sole discretion, the Committee may from
              time to time grant SARs to Employees either in conjunction with,
              or independently of, any Options granted under the Plan. An SAR
              granted in conjunction with an Option may be an alternative right
              wherein the exercise of the Option terminates the SAR to the
              extent of the number of shares purchased upon exercise of the
              Option and, correspondingly, the exercise of the SAR terminates
              the Option to the extent of the number of Shares with respect to
              which the SAR is exercised. Alternatively, an SAR granted in
              conjunction with an Option may be an additional right wherein both
              the SAR and the Option may be exercised. An SAR may not be granted
              in conjunction with an ISO under circumstances in which the
              exercise of the SAR affects the right to exercise the ISO or vice
              versa, unless the SAR, by its terms, meets all of the following
              requirements:

              (1)  The SAR will expire no later than the ISO;

              (2)  The SAR may be for no more than the difference between the
                   Exercise Price of the ISO and the Market Value of the Shares
                   subject to the ISO at the time the SAR is exercised;

              (3)  The SAR is transferable only when the ISO is transferable,
                   and under the same conditions;

              (4)  The SAR may be exercised only when the ISO may be exercised;
                   and

              (5)  The SAR may be exercised only when the Market Value of the
                   Shares subject to the ISO exceeds the Exercise Price of the
                   ISO.

       (b)    Exercise Price. The Exercise Price as to any particular SAR shall
              not be less than the Market Value of the Optioned Shares on the
              date of grant.

       (c)    Timing of Exercise. Any election by a Participant to exercise SARs
              shall be made during the period beginning on the 3rd business day
              following the release for publication of quarterly or annual
              financial information and ending on the 12th business day
              following such date. This condition shall be deemed to be
              satisfied when the specified financial data is first made publicly
              available. In no event, however, may an SAR be exercised within
              the six-month period following the date of its grant.

              The provisions of Paragraph 8(c) regarding the period of
              exercisability of Options are incorporated by reference herein,
              and shall determine the period of exercisability of SARs.

       (d)    Exercise of SARs. An SAR granted hereunder shall be exercisable at
              such times and under such conditions as shall be permissible under
              the terms of the Plan and of the Agreement granted to a
              Participant, provided that an SAR may not be exercised for a
              fractional Share. Upon exercise of

                                       7
<PAGE>
 
              an SAR, the Participant shall be entitled to receive, without
              payment to the Company except for applicable withholding taxes, an
              amount equal to the excess of (or, in the discretion of the
              Committee if provided in the Agreement, a portion of the excess
              of) the then aggregate Market Value of the number of Optioned
              Shares with respect to which the Participant exercises the SAR,
              over the aggregate Exercise Price of such number of Optioned
              Shares. This amount shall be payable by the Company, in the
              discretion of the Committee, in cash or in Shares valued at the
              then Market Value thereof, or any combination thereof.

       (e)    Procedure for Exercising SARs. To the extent not inconsistent
              herewith, the provisions of Paragraph 8(b) as to the procedure for
              exercising Options are incorporated by reference, and shall
              determine the procedure for exercising SARs.

10A.   Deferred Stock Awards

       The Committee may in its discretion make Deferred Stock Awards, to
       Employees who are highly compensated within the meaning of Title I of the
       Employee Retirement Income Security Act of 1974 as amended, in the form
       of Shares that will be transferred to such Employees only upon
       satisfaction of (i) any terms and conditions set forth in the Agreement
       effecting the Deferred Stock Award, and (ii) the requirements of
       Paragraph 19 of the Plan.

11.    Effect of Changes in Common Stock Subject to the Plan.

       (a)    Recapitalizations; Stock Splits, Etc. The number and kind of
              shares reserved for issuance under the Plan, and the number and
              kind of shares subject to outstanding Awards, and the Exercise
              Price thereof, shall be proportionately adjusted for any increase,
              decrease, change or exchange of Shares for a different number or
              kind of shares or other securities of the Company which results
              from a merger, consolidation, recapitalization, reorganization,
              reclassification, stock dividend, split-up, combination of shares,
              or similar event in which the number or kind of shares is changed
              without the receipt or payment of consideration by the Company.

       (b)    Transactions in which the Company is Not the Surviving Entity. In
              the event of (i) the liquidation or dissolution of the Company,
              (ii) a merger or consolidation in which the Company is not the
              surviving entity, or (iii) the sale or disposition of all or
              substantially all of the Company's assets (any of the foregoing to
              be referred to herein as a "Transaction"), all outstanding Awards,
              together with the Exercise Prices thereof, shall be equitably
              adjusted for any change or exchange of Shares for a different
              number or kind of shares or other securities which results from
              the Transaction.

       (c)    Special Rule for ISOs. Any adjustment made pursuant to
              subparagraphs (a) or (b)(1) hereof shall be made in such a manner
              as not to constitute a modification, within the meaning of Section
              424(h) of the Code, of outstanding ISOs.

       (d)    Conditions and Restrictions on New, Additional, or Different
              Shares or Securities. If, by reason of any adjustment made
              pursuant to this Paragraph, a Participant becomes entitled to new,
              additional, or different shares of stock or securities, such new,
              additional, or different shares of stock or securities shall
              thereupon be subject to all of the conditions and restrictions
              which were applicable to the Shares pursuant to the Award before
              the adjustment was made.

       (e)    Other Issuances. Except as expressly provided in this Paragraph,
              the issuance by the Company or an Affiliate of shares of stock of
              any class, or of securities convertible into Shares or stock of
              another class, for cash or property or for labor or services
              either upon direct sale or upon the exercise of rights or warrants
              to subscribe therefor, shall not affect, and no adjustment shall
              be

                                       8
<PAGE>
 
              made with respect to, the number, class, or Exercise Price of
              Shares then subject to Awards or reserved for issuance under the
              Plan.

       (f)    Certain Special Dividends. The Exercise Price of shares subject to
              outstanding Awards shall be proportionately adjusted upon the
              payment of a special large and nonrecurring dividend that has the
              effect of a return to capital to the stockholders, except that
              this subparagraph (f) shall not apply to any dividend which is
              paid to the Participant pursuant to Paragraph 8(b) hereof.

12.    Non-Transferability of Awards.

       Awards may not be sold, pledged, assigned, hypothecated, transferred or
       disposed of in any manner other than by will or by the laws of descent
       and distribution. Notwithstanding any other provision of this Plan to the
       contrary, to the extent permissible under Rule 16b-3, a Participant who
       is granted Non-ISOs pursuant to this Plan may transfer such Non-ISOs to
       his or her spouse, lineal ascendants, lineal descendants, or to a duly
       established trust, provided that Non-ISOs so transferred may not again be
       transferred other than to the Participant originally receiving the grant
       of Non-ISOs or to an individual or trust to whom such Participant could
       have transferred Non-ISOs pursuant to this Section 12. Non-ISOs which are
       transferred pursuant to this Section 12 shall be exercisable by the
       transferee subject to the same terms and conditions as would have applied
       to such Non-ISOs in the hands of the Participant originally receiving the
       grant of such Non-ISOs.

13.    Time of Granting Awards.

       The date of grant of an Award shall, for all purposes, be the later of
       the date on which the Committee makes the determination of granting such
       Award, and the Effective Date. Notice of the determination shall be given
       to each Participant to whom an Award is so granted within a reasonable
       time after the date of such grant.

14.    Effective Date.

       The Plan shall become effective immediately upon its approval by the
       Board, provided that the effectiveness of the Plan and any Awards granted
       pursuant to the Plan shall be contingent upon a favorable vote of
       stockholders owning at least a majority of the total votes present, or
       represented, and entitled to be cast at a duly called meeting of the
       Company's stockholders held in accordance with applicable laws.

15.    Modification of Awards.

       At any time, and from time to time, the Board may authorize the Committee
       to direct execution of an instrument providing for the modification of
       any outstanding Award, provided no such modification shall confer on the
       holder of said Award any right or benefit which could not be conferred on
       him by the grant of a new Award at such time, or impair the Award without
       the consent of the holder of the Award.

16.    Amendment and Termination of the Plan.

       The Board may from time to time amend the terms of the Plan and, with
       respect to any Shares at the time not subject to Awards, suspend or
       terminate the Plan.

       No amendment, suspension or termination of the Plan shall, without the
       consent of any affected holders of an Award, alter or impair any rights
       or obligations under any Award theretofore granted.

                                       9
<PAGE>
 
17.    Conditions Upon Issuance of Shares.

       (a)    Compliance with Securities Laws. Shares of Common Stock shall not
              be issued with respect to any Award unless the issuance and
              delivery of such Shares shall comply with all relevant provisions
              of law, including, without limitation, the Securities Act of 1933,
              as amended, the rules and regulations promulgated thereunder, any
              applicable state securities law, and the requirements of any stock
              exchange upon which the Shares may then be listed.

       (b)    Special Circumstances. The inability of the Company to obtain
              approval from any regulatory body or authority deemed by the
              Company's counsel to be necessary to the lawful issuance and sale
              of any Shares hereunder shall relieve the Company of any liability
              in respect of the non-issuance or sale of such Shares. As a
              condition to the exercise of an Option or SAR, the Company may
              require the person exercising the Option or SAR to make such
              representations and warranties as may be necessary to assure the
              availability of an exemption from the registration requirements of
              federal or state securities law.

       (c)    Committee Discretion. The Committee shall have the discretionary
              authority to impose in Agreements such restrictions on Shares as
              it may deem appropriate or desirable, including but not limited to
              the authority to impose a right of first refusal or to establish
              repurchase rights or both of these restrictions.

18.    Reservation of Shares.

       The Company, during the term of the Plan, will reserve and keep available
       a number of Shares sufficient to satisfy the requirements of the Plan.

19.    Withholding Tax.

       The Company's obligation to deliver Shares upon exercise of Options
       and/or SARs shall be subject to the Participant's satisfaction of all
       applicable federal, state and local income and employment tax withholding
       obligations. The Committee, in its discretion, may permit the Participant
       to satisfy the obligation, in whole or in part, by irrevocably electing
       to have the Company withhold Shares, or to deliver to the Company Shares
       that he already owns, having a value equal to the amount required to be
       withheld. The value of the Shares to be withheld, or delivered to the
       Company, shall be based on the Market Value of the Shares on the date the
       amount of tax to be withheld is to be determined. As an alternative, the
       Company may retain, or sell without notice, a number of such Shares
       sufficient to cover the amount required to be withheld.

20.    No Employment or Other Rights.

       In no event shall an Employee's or Director's eligibility to participate
       or participation in the Plan create or be deemed to create any legal or
       equitable right of the Employee, Director, or any other party to continue
       service with the Company or any Affiliate of such corporation. Except to
       the extent provided in Paragraphs 6(b) and 9(a), no Employee or Director
       shall have a right to be granted an Award or, having received an Award,
       the right to again be granted an Award. However, an Employee or Director
       who has been granted an Award may, if otherwise eligible, be granted an
       additional Award or Awards.

21.    Governing Law.

       The Plan shall be governed by and construed in accordance with the laws
       of the State of Indiana, except to the extent that federal law shall be
       deemed to apply.

                                       10