<PAGE>

                                                                    EXHIBIT 10.7

                    EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN

                                   AGREEMENT

     This Agreement, made and entered into this 6th day of May, 1999, by and
between Ameriana Bank of Indiana, FSB, a Bank organized and existing under the
laws of the State of Indiana, hereinafter referred to as "the Bank", and Harry
J. Bailey, a Key Employee and the Executive of the Bank, hereinafter referred to
as "the Executive".

     The Executive has been in the employ of the Bank and has now and for years
past faithfully served the Bank. It is the consensus of the Board of Directors
of the Bank (the Board) that the Executive's services have been of exceptional
merit, in excess of the compensation paid and an invaluable contribution to the
profits and position of the Bank in its field of activity. The Board further
believes that the Executive's experience, knowledge of corporate affairs,
reputation and industry contacts are of such value and his continued services
are so essential to the Bank's future growth and profits that it would suffer
severe financial loss should the Executive terminate his services.

     Accordingly, it is the desire of the Bank and the Executive to enter into
this Agreement under which the Bank will agree to make certain payments to the
Executive upon the Executive's retirement and, alternatively, to the Executive's
beneficiary(ies) in the event of the Executive's premature death while employed
by the Bank.

     It is the intent of the parties hereto that this Agreement be considered an
arrangement maintained primarily to provide supplemental retirement benefits for
the Executive, as a member of a select group of management or highly-compensated
employees of the Bank for purposes of the Employee Retirement Security Act of
1974 (ERISA). The Executive is fully advised of the Bank's financial status and
has been fully advised to his satisfaction regarding the design and operation of
this benefit plan.

     Therefore, in consideration of the Executive's services performed in the
past and those to be performed in the future and based upon the mutual promises
and covenants herein contained, the Bank and the Executive, agree as follows:

I.   DEFINITIONS

     A.   Effective Date:
          --------------

          The Effective Date of this Agreement shall be February 23, l999.

     B.   Plan Year:
          ----------

          Any reference to "Plan Year" shall mean a calendar year from January 1
          to December 31. In the year of implementation, the term "Plan Year"
          shall mean the period from the effective date to December 31 of the
          year of the effective date.
<PAGE>

     C.   Retirement Date:
          ----------------

          Retirement Date shall mean retirement from service with the Bank which
          becomes effective on the first day of the calendar month following the
          month in which the Executive reaches the Executive's sixty-fifth (65)
          birthday, or such earlier or later date as the Board may approve as
          the Executive's Retirement Date.

     D.   Termination of Service:
          ----------------------

          Termination of Service shall mean voluntary resignation of service by
          the Executive or the Bank's discharge of the Executive without cause
          ("cause" defined in Subparagraph III (D) hereinafter), prior to the
          Normal Retirement Age (described in Subparagraph I (J) hereinafter).

     E.   Pre-Retirement Account:
          -----------------------

          A Pre-Retirement Account shall be established as a liability reserve
          account on the books of the Bank for the benefit of the Executive.
          Prior to termination of service or the Executive's retirement, such
          liability reserve account shall be increased or decreased each Plan
          Year (including the Plan Year in which the Executive ceases to be
          employed by the Bank) by an amount equal to the annual earnings or
          loss for that Plan Year determined by the Index (described in
          Subparagraph I (G) hereinafter), less the Cost of Funds Expense for
          that Plan Year (described in Subparagraph I (H) hereinafter).

     F.   Index Retirement Benefit:
          -------------------------

          The Index Retirement Benefit for the Executive for any year shall be
          equal to the excess of the annual earnings (if any) determined by the
          Index [Subparagraph I (G)] for that Plan Year over the Cost of Funds
          Expense [Subparagraph I (H)] for that Plan Year.

     G.   Index:
          ------

          The Index for any Plan Year shall be the aggregate annual after-tax
          income from the life insurance contracts described hereinafter as
          defined by FASB Technical Bulletin 85-4. This Index shall be applied
          as if such insurance contracts were purchased on the effective date
          hereof.

                                       2
<PAGE>

          Insurance Company:             Alexander Hamilton
          Policy Form:                   Flexible Premium Adjustable Life
          Policy Name:                   Executive Security Plan IV
          Insured's Age and Sex:         56, Male
          Riders:                        None
          Ratings:                       According to health of proposed insured
          Option:                        Level Death Benefit
          Face Amount:                   $2,298,000
          Premiums Paid:                 $1,410,000
          Number of premium Payments:    One
          Assumed Purchase Date:         February 23, 1999

          Insurance Company:             Jefferson-Pilot
          Policy Form:                   Flexible Premium Adjustable Life
          Policy Name:                   Executive Security Plan IV
          Insured's Age and Sex:         56, Male
          Riders:                        None
          Ratings:                       According to health of proposed insured
          Option:                        Level Death Benefit
          Face Amount:                   $2,298,000
          Premiums Paid:                 $1,410,000
          Number of premium Payments:    One
          Assumed Purchase Date:         February 23, 1999

          If such contracts of life insurance are actually purchased by the Bank
          then the actual policies as of the dates they were purchased shall be
          used in calculations under this Agreement. If such contracts of life
          insurance are not purchased or are subsequently surrendered or lapsed,
          then the Bank shall receive annual policy illustrations that assume
          the above-described policies were purchased from the above named
          insurance company(ies) on the Effective Date from which the increase
          in policy value will be used to calculate the amount of the Index.

          In either case, references to the life insurance contract are merely
          for purposes of calculating a benefit. The Bank has no obligation to
          purchase such life insurance and, if purchased, the Executive and the
          Executive's beneficiary(ies) shall have no ownership interest in such
          policy and shall always have no greater interest in the benefits under
          this Agreement than that of an unsecured general creditor of the Bank.

     H.   Cost of Funds Expense:
          ----------------------

          The Cost of Funds Expense for any Plan Year shall be calculated by
          taking the

                                       3
<PAGE>

          sum of the amount of premiums set forth in the Indexed policies
          described above plus the amount of any after-tax benefits paid to the
          Executive pursuant to this Agreement (Paragraph III hereinafter) plus
          the amount of all previous years after-tax Costs of Funds Expense, and
          multiplying that sum by the average after-tax cost of funds as
          published in the third quarter Office of Thrift Supervision Annual
          Thrift Financial Report of the Ameriana Bank of Indiana, FSB.

     I.   Change of Control:
          -----------------

          A Change of Control shall be deemed to have occurred if, at any time
          during the period of employment of the Executive, more than twenty
          five percent (25%) of the Parent's or Bank's outstanding Common Stock.
          or equivalent in voting power of any class or classes of outstanding
          securities of the Parent or Bank ordinarily entitled to vote in
          elections of directors of Parent or Bank, shall be acquired by any
          other corporations or other person or group. "Group" shall mean
          persons who act in concert as described in Section 13 (d) of the
          Securities Exchange Act of 1934, as amended.

     J.   Normal Retirement Age:
          ---------------------

          Normal Retirement Age shall mean the date on which the Executive
          attains age sixty-five (65).

II.  EMPLOYMENT

     No provision of this Agreement shall be deemed to restrict or limit any
     existing employment agreement by and between the Bank and the Executive,
     nor shall any conditions herein create specific employment rights to the
     Executive nor limit the right of the Employer to discharge the Executive
     with or without cause. In a similar fashion, no provision shall limit the
     Executive's rights to voluntarily sever his employment at any time.

III. INDEX BENEFITS

     The following benefits provided by the Bank to the Executive are in the
     nature of a fringe benefit and shall in no event be construed to effect nor
     limit the Executive's current or prospective salary increases, cash bonuses
     or profit-sharing distributions or credits.

     A.   Retirement Benefits:
          --------------------

          Should the Executive continue to be employed by the Bank until "Normal
          Retirement Age" defined in Subparagraph I (J), the Executive shall be
          entitled to receive the balance in his Pre-Retirement Account [as
          defined in Subparagraph I

                                       4
<PAGE>

          (E)] in ten (10) equal annual installments commencing thirty (30) days
          following the Executive's Retirement Date. In addition to these
          payments, commencing with the Plan Year in which the Executive attains
          the Executive's Retirement Date, the Index Retirement Benefit (as
          defined in Subparagraph I (F) above) for each year shall be paid to
          the Executive until the Executive's death.

     B.   Termination of Service:
          -----------------------

          Subject to Subparagraph III (D) hereinafter, should the Executive
          suffer a Termination of Service [defined in Subparagraph I (D)], the
          Executive shall be entitled to receive five percent (5%) times the
          number of full years the Executive has served the Bank from the
          Executive's fifth anniversary of service from the Effective Date of
          this Agreement (to a maximum of 100%), times the balance in the
          Pre-Retirement Account paid over ten (10) years in equal installments
          commencing at the Normal Retirement Age [Subparagraph I (J)]. In
          addition to these payments and commencing in the Plan Year in which
          the Executive attains Normal Retirement Age, five percent (5%) times
          the number of full years the Executive has served the Bank from the
          Executive's fifth anniversary of service from the Effective Date of
          this Agreement (to a maximum of 100%), times the Index Retirement
          Benefit for each year shall be paid to the Executive until the
          Executive's death.

     C.   Death:
          -----

          Should the Executive die prior to having received the full balance of
          the Pre-Retirement Account, the unpaid balance of the Pre-Retirement
          Account shall be paid in a lump sum to the beneficiary selected by the
          Executive and filed with the Bank. In the absence of or a failure to
          designate a beneficiary, the unpaid balance shall be paid in a lump
          sum to the personal representative of the Executive's estate.

     D.   Discharge for Cause and Termination of Service:
          -----------------------------------------------

          Should the Executive be discharged prior to five (5) full years of
          employment from the Effective Date of this Agreement or be discharged
          for cause at any time, all Benefits under this Agreement shall be
          forfeited.

          A termination for "cause" shall include termination because of the
          Executive'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, or material breach of any provision of
          this Agreement.

                                       5
<PAGE>

     E.   Disability Benefit:
          ------------------

          In the event the Executive becomes disabled prior to Termination of
          Service, and the Executive's employment is terminated because of such
          disability, he shall immediately begin receiving the benefits in
          Subparagraph III (A) above. Such benefit shall begin without regard to
          the Executive's Normal Retirement Age and the Executive shall be one
          hundred percent (100%) vested in the entire benefit amount. The term
          "disability" shall mean the complete inability of the Executive to
          perform the Executive's duties as determined by an independent
          physician selected with the approval of the Bank and the Executive.

     F.   Death Benefit:
          -------------

          Except as set forth above, there is no death benefit provided under
          this Agreement.

IV.  RESTRICTIONS UPON FUNDING

     The Bank shall have no obligation to set aside, earmark or entrust any fund
     or money with which to pay its obligations under this Agreement. The
     Executive, the Executive's beneficiary(ies) or any successor in interest to
     the Executive shall be and remain simply a general creditor of the Bank in
     the same manner as any other creditor having a general claim for matured
     and unpaid compensation.

     The Bank reserves the absolute right, at its sole discretion, to either
     fund the obligations undertaken by this Agreement or to refrain from
     funding the same and to determine the exact nature and method of such
     funding. Should the Bank elect to fund this Agreement, in whole or in part,
     through the purchase of life insurance, mutual funds, disability policies
     or annuities, the Bank reserves the absolute right, in its sole discretion,
     to terminate such funding at any time, in whole or in part. At no time
     shall the Executive be deemed to have any lien or right, title or interest
     in or to any specific funding investment or to any assets of the Bank.

     If the Bank elects to invest in a life insurance, disability or annuity
     policy upon the life of the Executive, then the Executive shall assist the
     Bank by freely submitting to a physical exam and supplying such additional
     information necessary to obtain such insurance or annuities.

V.   CHANGE OF CONTROL AND COVENANT NOT TO COMPETE

     (i)  Change of Control:
          -----------------

          Upon a Change of Control (as defined in Subparagraph I (I) herein), if
          the Executive's employment is subsequently terminated, except for
          cause, or the

                                       6
<PAGE>

          present capacity or circumstances in which the Executive is employed
          is changed or is reduced the Executive's responsibilities or authority
          or compensation or other benefits provided under this Agreement
          without the Executive's written consent, then the Executive shall
          receive the benefits promised in this Agreement upon attaining Normal
          Retirement Age, as if the Executive had been continuously employed by
          the Bank until the Executive's Normal Retirement Age. The Executive
          will also remain eligible for all promised death benefits in this
          Agreement. In addition, no sale, merger or consolidation of the Bank
          shall take place unless the new or surviving entity expressly
          acknowledges the obligations under this Agreement and agrees to abide
          by its terms.

     (ii) Covenant Not to Compete:
          -----------------------

          Executive agrees during the term hereof and for five (5) years after
          the termination of this Agreement that he will not directly or
          indirectly engage in or become an owner, agent, officer, director or
          shareholder, as defined hereinafter, of any business which competes
          with any of the businesses conducted by Employer, Ameriana Bancorp or
          any of the subsidiaries of either in any of the following states,
          to-wit: Indiana, Ohio, Kentucky, Illinois, and/or Michigan. Employer
          and Employee agree that the term of this Covenant against Competition
          and the geographical area described here are reasonable, given the
          nature of the businesses being conducted by Employer, its parent and
          their subsidiaries, and given the plans for the conduct of business
          which are being made by Employer in its strategic plans. In the event
          Executive breaches this provision, Employer may cancel all benefits
          provided herein upon giving Executive twenty-one (21) days written
          notice and an opportunity to cure said breach. For purposes of this
          paragraph, the Executive shall be deemed a shareholder if the
          Executive acquires five percent (5%) or more of any publicly traded or
          privately held entity.

Vl.  MISCELLANEOUS

     A.   Alienability and Assignment Prohibition:
          ---------------------------------------

          Neither the Executive, his/her surviving spouse nor any other
          beneficiary under this Agreement shall have any power or right to
          transfer, assign, anticipate, hypothecate, mortgage, commute, modify
          or otherwise encumber in advance any of the benefits payable hereunder
          nor shall any of said benefits be subject to seizure for the payment
          of any debts, judgments, alimony or separate maintenance owed by the
          Executive or the Executive's beneficiary(ies), nor be transferable by
          operation of law in the event of bankruptcy, insolvency or otherwise.
          In the event the Executive or any beneficiary attempts assignment,
          commutation, hypothecation, transfer or disposal of the benefits
          hereunder, the Bank's liabilities shall forthwith cease and terminate.

                                       7
<PAGE>

     B.   Binding Obligation of Bank and any Successor in Interest:
          --------------------------------------------------------

          The Bank expressly agrees that it shall not merge or consolidate into
          or with another bank or sell substantially all of its assets to
          another bank, firm or person until such bank, firm or person expressly
          agrees, in writing, to assume and discharge the duties and obligations
          of the Bank under this Agreement. This Agreement shall be binding upon
          the parties hereto, their successors, beneficiary(ies), heirs and
          personal representatives.

     C.   Revocation:
          -----------

          It is agreed by and between the parties hereto that, during the
          lifetime of the Executive, this Agreement may be amended or revoked at
          any time or times, in whole or in part, by the mutual written assent
          of the Executive and the Bank.

     D.   Gender:
          -------

          Whenever in this Agreement words are used in the masculine or neuter
          gender, they shall be read and construed as in the masculine, feminine
          or neuter gender, whenever they should so apply.

     E.   Effect on Other Bank Benefit Plans:
          ----------------------------------

          Nothing contained in this Agreement shall affect the right of the
          Executive to participate in or be covered by any qualified or
          non-qualified pension, profit-sharing, group, bonus or other
          supplemental compensation or fringe benefit plan constituting a part
          of the Bank's existing or future compensation structure.

     F.   Headings:
          ---------

          Headings and subheadings in this Agreement are inserted for reference
          and convenience only and shall not be deemed a part of this Agreement.

     G.   Applicable Law:
          --------------

          The validity and interpretation of this Agreement shall be governed by
          the laws of the State of Indiana.

VII. ERISA PROVISION

     A.   Named Fiduciary and Plan Administrator:
          --------------------------------------

          The "Named Fiduciary and Plan Administrator" of this Plan shall be
          Ameriana Bank of Indiana, FSB until its removal by the Board. As Named
          Fiduciary and

                                       8
<PAGE>

          Administrator, the Bank shall be responsible for the management,
          control and administration of the Salary Continuation Agreement as
          established herein. The Named Fiduciary may delegate to others certain
          aspects of the management and operation responsibilities of the plan
          including the employment of advisors and the delegation of ministerial
          duties to qualified individuals.

     B.   Claims Procedure and Arbitration:
          --------------------------------

          In the event a dispute arises over benefits under this Agreement and
          benefits are not paid to the Executive (or to his beneficiary in the
          case of the Executive's death) and such claimants feel they are
          entitled to receive such benefits, then a written claim must be made
          to the Plan Administrator named above within ninety (90) days from the
          date payments are refused. The Plan Administrator shall review the
          written claim and if the claim is denied, in whole or in part, they
          shall provide in writing within ninety (90) days of receipt of such
          claim their specific reasons for such denial, reference to the
          provisions of this Agreement upon which the denial is based and any
          additional material or information necessary to perfect the claim.
          Such written notice shall further indicate the additional steps to be
          taken by claimants if a further review of the claim denial is desired.
          A claim shall be deemed denied if the Plan Administrator fails to take
          any action within the aforesaid ninety-day period.

          If claimants desire a second review they shall notify the Plan
          Administrator in writing within ninety (90) days of the first claim
          denial. Claimants may review this Agreement or any documents relating
          thereto and submit any written issues and comments they may feel
          appropriate. In its sole discretion, the Plan Administrator shall then
          review the second claim and provide a written decision within ninety
          (90) days of receipt of such claim. This decision shall likewise state
          the specific reasons for the decision and shall include reference to
          specific provisions of this Agreement upon which the decision is
          based.

          If claimants continue to dispute the benefit denial based upon
          completed performance of this Agreement or the meaning and effect of
          the terms and conditions thereof, then claimants may submit the
          dispute to a Board of Arbitration for final arbitration. Said Board
          shall consist of one member selected by the claimant, one member
          selected by the Bank, and the third member selected by the first two
          members. The Board shall operate under any generally recognized set of
          arbitration rules. The parties hereto agree that they and their heirs,
          personal representatives, successors and assigns shall be bound by the
          decision of such Board with respect to any controversy properly
          submitted to it for determination.

          Where a dispute arises as to the Bank's discharge of the Executive
          "for cause", such dispute shall likewise be submitted to arbitration
          as above described and the

                                       9
<PAGE>

          parties hereto agree to be bound by the decision thereunder.

     IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the 6th day of May,
1999 and that, upon execution, each has received a conforming copy.

                                    AMERIANA BANK OF
                                    INDIANA, FSB
                                    New Castle, Indiana


/s/ Nancy A. Rodgers                By: /s/ Paul W. Prior
-----------------------------       ---------------------------------
Witness                                                         Title





/s/ Davena K, Littrell              /s/ Harry J. Bailey
-----------------------------       ---------------------------------
Witness                             Harry J. Bailey
<PAGE>

                                LIFE INSURANCE

                     ENDORSEMENT METHOD SPLIT DOLLAR PLAN

                                   AGREEMENT

Insurer:                            Alexander Hamilton Life Insurance Company
                                    Jefferson-Pilot Life Insurance Company

Policy Number:                      AH5052474
                                    JP5058508

Bank:                               Ameriana Bank of Indiana, FSB

Insured:                            Harry J. Bailey

Relationship of Insured to Bank:    Executive


The respective rights and duties of the Bank and the Insured in the above-
referenced policy shall be pursuant to the terms set forth below:

I.   DEFINITIONS

     Refer to the policy contract for the definition of all terms in this
     Agreement.

II.  POLICY TITLE AND OWNERSHIP

     Title and ownership shall reside in the Bank for its use and for the use of
     the Insured all in accordance with this Agreement. The Bank alone may, to
     the extent of its interest, exercise the right to borrow or withdraw on the
     policy cash values. Where the Bank and the Insured (or assignee, with the
     consent of the Insured) mutually agree to exercise the right to increase
     the coverage under the subject Split Dollar policy, then, in such event,
     the rights, duties and benefits of the parties to such increased coverage
     shall continue to be subject to the terms of this Agreement.

III. BENEFICIARY DESIGNATION RIGHTS

     The Insured (or assignee) shall have the right and power to designate a
     beneficiary or beneficiaries to receive the Insured's share of the proceeds
     payable upon the death of the Insured, and to elect and change a payment
     option for such beneficiary, subject to any right or interest the Bank may
     have in such proceeds, as provided in this Agreement.
<PAGE>

IV.  PREMIUM PAYMENT METHOD

     The Bank shall pay an amount equal to the planned premiums and any other
     premium payments that might become necessary to keep the policy in force.

V.   TAXABLE BENEFIT

     Annually the Insured will receive a taxable benefit equal to the assumed
     cost of insurance as required by the Internal Revenue Service. The Bank (or
     its administrator) will report to the Insured the amount of imputed income
     each year on Form W-2 or its equivalent.

VI.  DIVISION OF DEATH PROCEEDS

     Subject to Paragraph VII herein, the division of the death proceeds of the
     policy is as follows:

     A.   Should the Insured be employed by the Bank, retired from the Bank, or
          from the Bank due to disability at the time of his or her death the
          Insured's beneficiary(ies), designated in accordance with Paragraph
          III, shall be entitled to an amount equal to eighty percent (80%) of
          the net at risk insurance portion of the proceeds. The net at risk
          insurance portion is the total proceeds less the cash value of the
          policy.

     B.   Should the Insured not be employed by the Bank at the time of his or
          her death, the Insured's beneficiary(ies), designated in accordance
          with Paragraph III, shall be entitled to the following percentage of
          the proceeds described in Subparagraph VI (A) hereinabove that
          corresponds to the of full years the Insured has been employed with
          the Bank from the date of this Agreement:

                        Total Years
                       of Employment
                       with the Bank             Vested
                      ---------------            ------
                           0 -4                   0%
                         5 or more       5% per year (to a maximum
                                                 of 100%)


     C.   The Bank shall be entitled to the remainder of such proceeds.

     D.   The Bank and the Insured (or assignees) shall share in any interest
          due on the death proceeds on a pro rata basis as the proceeds due each
          respectively bears to the total proceeds, excluding any such interest.

                                       2
<PAGE>

VII.  DIVISION OF THE CASH SURRENDER VALUE OF THE POLICY

      The Bank shall at all times be entitled to an amount equal to the policy's
      cash value, as that term is defined in the policy contract, less any
      policy loans and unpaid interest or cash withdrawals previously incurred
      by the Bank and any applicable surrender charges. Such cash value shall be
      determined as of the date of surrender or death as the case may be.

VIII. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS

      In the event the policy involves an endowment or annuity element, the
      Bank's right and interest in any endowment proceeds or annuity benefits,
      on expiration of the deferment period, shall be determined under the
      provisions of this Agreement by regarding such endowment proceeds or the
      commuted value of such annuity benefits as the policy's cash value. Such
      endowment proceeds or annuity benefits shall be considered to be like
      death proceeds for the purposes of division under this Agreement.

IX.   TERMINATION OF AGREEMENT

      This Agreement shall terminate upon the occurrence of any one of the
      following:

      1.   The Insured shall leave the employment of the Bank (voluntarily or
           involuntarily) prior to five (5) full years of employment with the
           Bank from the date of this Agreement, or

      2.   The Insured shall be discharged from employment with the Bank for
           cause. A for "cause" shall include termination because of the
           Executive'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, or material breach of any provision of
           this Agreement.

      Upon such termination, the Insured (or assignee) shall have a forty-five
      (45) day option to receive from the Bank an absolute assignment of the
      policy in consideration of a cash payment to the Bank, whereupon this
      Agreement shall terminate. Such cash payment referred to hereinabove shall
      be the greater of:

      1.   The Bank's share of the cash value of the policy on the date of such
           assignment, as defined in this Agreement; or

      2.   The amount of the premiums which have been paid by the Bank prior to
           the date of such assignment.

                                       3
<PAGE>

      If, within said forty-five (45) day period, the Insured fails to exercise
      said option, fails to procure the entire aforestated cash payment, or
      dies, then the option shall terminate, and the Insured (or assignee)
      agrees that all of the Insured's rights, interest and claims in the policy
      shall terminate as of the date of the termination of this Agreement.

      Except as provided above, this Agreement shall terminate upon distribution
      of the death benefit proceeds in accordance with Paragraph VI above.

X.    INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS

      The Insured may not, without the written consent of the Bank, assign to
      any individual, trust or other organization, any right, title or interest
      in the subject policy nor any rights, options, privileges or duties
      created under this Agreement.

XI.   AGREEMENT BINDING UPON THE PARTIES

      This Agreement shall bind the Insured and the Bank, their heirs,
      successors, personal representatives and assigns.

XII.  NAMED FIDUCIARY AND PLAN ADMINISTRATOR

      Ameriana Bank of Indiana, FSB is hereby designated the "Named Fiduciary"
      until resignation or removal by the Board of Directors. As Named
      Fiduciary, the Bank shall be responsible for the management, control, and
      administration of this Split Dollar Plan as established herein. The Named
      Fiduciary may allocate to others certain aspects of the management and
      operation responsibilities of the Plan, including the employment of
      advisors and the delegation of any ministerial duties to qualified
      individuals.

XIII. FUNDING POLICY

      The funding policy for this Split Dollar Plan shall be to maintain the
      subject policy in force by paying, when due, all premiums required.

XIV.  CLAIM PROCEDURES FOR LIFE INSURANCE POLICY AND SPLIT DOLLAR PLAN

      Claim forms or claim information as to the subject policy can be obtained
      by contacting The Benefit Marketing Group, Inc. (770-952-1529). When the
      Named Fiduciary has a claim which may be covered under the provisions
      described in the insurance policy, they should contact the office named
      above, and they will either complete a claim form and forward it to an
      authorized representative of the Insurer or advise the named Fiduciary
      what further requirements are necessary. The Insurer will evaluate and
      make a decision as to payment. If the claim is payable, a benefit check
      will be issued to the Named Fiduciary.

                                       4
<PAGE>

     In the event that a claim is not eligible under the policy, the Insurer
     will notify the Named Fiduciary of the denial pursuant to the requirements
     under the terms of the policy. If the Named Fiduciary is dissatisfied with
     the denial of the claim and wishes to contest such claim denial, they
     should contact the office named above and they will assist in making
     inquiry to the Insurer. All objections to the Insurer's actions should be
     in writing and submitted to the office named above for transmittal to the
     Insurer.

XV.  GENDER

     Whenever in this Agreement words are used in the masculine or neuter
     gender, they shall be read and construed as in the masculine, feminine or
     neuter gender, whenever they should so apply.

XVI. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT

     The Insurer shall not be deemed a party to this Agreement, but will respect
     the rights of the parties as herein developed upon receiving an executed
     copy of this Agreement. Payment or other performance in accordance with the
     policy provisions shall fully discharge the Insurer for any and all
     liability.

Executed at New Castle, Indiana this 6th day of May, 1999.

                                    AMERIANA BANK OF
                                    INDIANA, FSB
                                    New Castle, Indiana



/s/ Nancy A. Rodgers                By:/s/Paul W. Prior
------------------------               --------------------------
Witness                                                     Title

/s/ Davena K. Littrell                 /s/ Harry J. Bailey
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Witness                                Harry J. Bailey


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