EMPLOYMENT AGREEMENT



     THIS  AGREEMENT,  made  effective  as of  January  1,  2004 by and  between
AMERIANA  BANK AND TRUST,  SB  ("Ameriana"  or the "Bank"),  with its  principal
office in New Castle, Indiana, and Bradley L. Smith ("Executive"), an individual
residing in the State of Indiana.

     WHEREAS,  the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement,  and Executive is willing to serve in the
employ of the Bank on a full-time basis for said period; and

     WHEREAS,  the Board of Directors of the Bank has  determined  that the best
interests of the Bank would be served by providing the Executive with protection
and special benefits following any change of control of the Bank;

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:

     1.   Employment.  The Bank agrees to continue  Executive in its employ, and
          -----------
          Executive  agrees to remain in the employ of the Bank,  for the period
          stated in  paragraph 3 hereof and upon the other terms and  conditions
          herein provided.

     2.   Position  and   Responsibilities.   The  Bank  employs  Executive  and
          ---------------------------------
          Executive  agrees to serve as Chief Financial  Officer of the Bank for
                                        ------------------------
          the term and on the conditions hereinafter set forth. Executive agrees
          to perform such services not  inconsistent  with his position as shall
          from time to time be assigned to him by the Bank's Board of Directors.

     3.   Term and Duties.
          ----------------

          (a)  Term of  Employment.  The term of this  Agreement  shall be for a
               --------------------
               period of thirty-six (36) months and any extensions.  During each
               calendar  year  hereafter,  the  Board of  Directors  of the Bank
               ("Board") shall review the performance of the Executive, and such
               Board shall determine whether to extend the term of the Agreement
               beyond its expiration date.

          (b)  Duties.  During the period of his employment hereunder and except
               -------
               for illnesses, reasonable vacation periods, and reasonable leaves
               of absence,  Executive shall devote his business time, attention,
               skill,  and  efforts to the  faithful  performance  of his duties
               hereunder; provided, however, that with the approval of the Board

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<PAGE>

               of Directors of the Bank, from time to time, Executive may serve,
               or continue to serve, on the boards of directors of, and hold any
               other offices or positions in companies or organizations,  which,
               in such Board's judgment,  will not present any material conflict
               of  interest  with  the  Bank  or  any  of  its  subsidiaries  or
               affiliates or divisions, or unfavorably affect the performance of
               Executive's  duties  pursuant  to this  Agreement,  or  will  not
               violate any applicable statute or regulation.

          4.   Compensation and Reimbursement of Expenses.
               -------------------------------------------

               (a)  Compensation.  The Bank agrees to pay the  Executive  during
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                    the  term  of  this  Agreement  a  salary  at the  rate of
                    $119,000. per annum;  provided, that the rate of such salary
                    --------
                    shall be reviewed by the Board of  Directors of the Bank not
                    less often than annually.  Such rate of salary, or increased
                    rate of salary,  if any,  as the case may be, may be further
                    increased  (but  not  decreased)  from  time to time in such
                    amount  as the  Board in its  discretion  may  decide.  Such
                    salary  shall be payable in  accordance  with the  customary
                    payroll  practices  of  the  Bank,  but  in  no  event  less
                    frequently  than monthly,  and any bonus shall be payable in
                    the  manner  specified  by such  committee  or such Board of
                    Directors at the time any such bonus is awarded.

               (b)  Reimbursement  of Expenses.  The Bank shall pay or reimburse
                    ---------------------------
                    Executive  for all  reasonable  travel  and  other  expenses
                    incurred by Executive in the  performance of his obligations
                    under this Agreement in accordance with the Bank's policy on
                    the date of this  Agreement  or as  approved by the Board of
                    Directors.  The Bank further agrees to provide the Executive
                    with the use of an automobile commensurate with his position
                    during his period of employment.

          5.   Participation  in  Benefit  Plans.   The  payments   provided  in
               ----------------------------------
               paragraphs  4, 7, and 8 hereof are in addition to any benefits to
               which  Executive may be, or may become,  entitled under any group
               hospitalization, health, dental care, or sick leave plan, life or
               other  insurance  or  death  benefit  plan,  travel  or  accident
               insurance,  or executive contingent compensation plan, including,
               without  limitation,  capital  accumulation  and  termination pay
               programs,  restricted or stock purchase plan,  stock option plan,
               retirement income,  qualified pension plan,  supplemental pension
               plan (excess  benefit plan),  executive  supplemental  retirement
               plan, or other present or future group  employee  benefit plan or
               program  of the Bank for  which

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<PAGE>

               executives are or shall become  eligible,  and Executive shall be
               eligible  to receive  during the period of his  employment  under
               this  Agreement,  and during any  subsequent  period for which he
               shall be  entitled  to  receive  payments  from  the  Bank  under
               paragraph 7 or paragraph 8 all benefits and  emoluments for which
               executives  are eligible  under every such plan or program to the
               extent permissible under the general terms and provisions of such
               plans or programs and in accordance with the provisions thereof.

          6.   Vacation and Sick Leave. At such reasonable times as the Board of
               ------------------------
               Directors  shall in its  discretion  permit,  Executive  shall be
               entitled, without loss of pay, to absent himself voluntarily from
               the performance of his employment under this Agreement,  all such
               voluntary absences to count as vacation time; provided that:

               (a)  Executive  shall  be  entitled  to  an  annual  vacation  in
                    accordance with the policies as periodically  established by
                    the Board of Directors  for senior  management  officials of
                    the Bank,  which  shall in no event be less than four  weeks
                    per annum.

               (b)  The timing of  vacations  shall be scheduled in a reasonable
                    manner by the  Board of  Directors.  Executive  shall not be
                    entitled to receive  any  additional  compensation  from the
                    Bank on account of his failure to take a vacation; nor shall
                    he be entitled to accumulate unused vacation from one fiscal
                    year to the next  except  to the  extent  authorized  by the
                    Board of Directors  for senior  management  officials of the
                    Bank.

               (c)  In addition to the aforesaid paid vacations, Executive shall
                    be  entitled,   without  loss  of  pay,  to  absent  himself
                    voluntarily  from the performance of his employment with the
                    Bank for such additional  periods of time and for such valid
                    and  legitimate  reasons  as the Board of  Directors  in its
                    discretion  may determine.  Further,  the Board of Directors
                    shall be entitled to grant to Executive a leave or leaves of
                    absence  with or without  pay at such time or times and upon
                    such terms and  conditions  as the Board of Directors in its
                    discretion may determine.

               (d)  In addition,  Executive  shall be entitled to an annual sick
                    leave as  established  by the Board of Directors  for senior
                    management  officials  of the  Bank.  In the  event any sick
                    leave  time shall not have been used  during any year,  such
                    leave shall  accrue to  subsequent  years only to the extent
                    authorized by the Board of Directors.

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<PAGE>

                    Upon  termination of his employment,  Executive shall not be
                    entitled to receive  any  additional  compensation  from the
                    Bank for unused sick leave.

               7.   Benefits Payable Upon Disability.
                    ---------------------------------

                    (a)  Primary  Disability  Benefits.  In  the  event  of  the
                         ------------------------------
                         disability (as hereinafter  defined) of Executive,  the
                         Bank  shall  continue  to  pay  Executive  the  monthly
                         compensation  provided in paragraph 4 hereof during the
                         period of his disability provided, however, that in the
                         event  Executive is disabled  for a  continuous  period
                         exceeding  eighteen (18) calendar months, the Bank may,
                         at its  election,  terminate  the  Agreement,  in which
                         event  Executive  shall  be  entitled  to  receive  the
                         benefits described in paragraph 7(b).

                         As used in this  Agreement, the term "disability" shall
                         mean the complete inability of Executive to perform his
                         duties  under  this   Agreement  as  determined  by  an
                         independent physician selected with the approval of the
                         Bank and the Executive.

                    (b)  Secondary  Disability  Benefits.  The Bank shall pay to
                         --------------------------------
                         the  Executive a monthly  disability  benefit  equal to
                         sixty (60) percent of his monthly salary at the time he
                         became  disabled.  Payment of such  disability  benefit
                         shall  commence on the last day of the month  following
                         the month for which the final payment  under  paragraph
                         7(a) was made and  cease  with the  earlier  of (i) the
                         payment  for the month in which the  Executive  dies or
                         (ii) the payment for the month  preceding  the month in
                         which occurs  Executive's  normal retirement date under
                         the Bank's pension plan.

                    (c)  Disability  Benefit  Offset.  Any amounts payable under
                         ----------------------------
                         paragraph  7(a) or 7(b) shall be reduced by any amounts
                         paid  to  the  Executive  under  any  other  disability
                         program maintained by the Bank.

                    (d)  Services During Disability. During the period Executive
                         ---------------------------
                         is entitled to receive  payments under  paragraphs 7(a)
                         and (b), the Executive  shall, to the extent that he is
                         physically   and  mentally  able  to  do  so,   furnish
                         information   and  assistance  to  the  Bank,  and,  in
                         addition,  upon reasonable request in writing on behalf
                         of the  Board of  Directors,  or an  executive  officer
                         designated  by such  Board,  from  time to  time,  make
                         himself  available to the Bank to undertake  reasonable
                         assignments  consistent  with the dignity,  importance,

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<PAGE>

                         and scope of his prior  position  and his  physical and
                         mental health. During such period of service, Executive
                         shall be  responsible  and report to, and be subject to
                         the  supervision of, the Board of Directors of the Bank
                         or an executive officer  designated by the Board, as to
                         the method and  manner in which he shall  perform  such
                         assignments,  subject  always to the provisions of this
                         paragraph  7(d),  and shall  keep such  Board,  or such
                         executive  officer,   appropriately   informed  of  his
                         progress in each such assignment.

               8.   Payments to Executive Upon Termination of Employment.
                    -----------------------------------------------------

                    (a)  Event of  Termination.  Upon the occurrence of an Event
                         -----------------------
                         of  Termination  (as  hereinafter  defined)  during the
                         period of Executive's  employment under this Agreement,
                         the provisions of this paragraph 8 shall apply. As used
                         in this Agreement, an "Event of Termination" shall mean
                         that termination by the Bank of Executive's  employment
                         hereunder   for  any  reason   other  than  "cause"  or
                         retirement at or after the normal  retirement age under
                         a  qualified  pension  plan  maintained  by the Bank or
                         termination  pursuant to Paragraph 7. 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.   In  the   event  of
                         termination for cause the Executive shall have no right
                         to  receive  compensation  or  other  benefits  for any
                         period after such termination.

                    (b)  Event of Termination  Without  Change of Control.  Upon
                         -------------------------------------------------
                         the  occurrence of an Event of  Termination  other than
                         after a Change of Control (as hereinafter defined), the
                         Bank  shall  pay to the  Executive  monthly,  or in the
                         event  of  his  subsequent  death,  to  his  designated
                         beneficiary or beneficiaries,  or to his estate, as the
                         case may be, as severance pay or liquidated damages, or
                         both,  during the period below described a sum equal to
                         the  highest   monthly  rate  of  salary  paid  to  the
                         Executive  at  any  time  under  this  Agreement.  Such
                         payments  shall  commence  on the last day of the month
                         following  the date of said  event of  termination  and
                         shall continue until the date this Agreement would have
                         expired but for said  occurrence,  with such occurrence
                         being  viewed  as a  determination  by the  Bank not to
                         extend the

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<PAGE>

                         Agreement as provided for in paragraph 3 of this
                         Agreement.  Notwithstanding the foregoing,  in no event
                         shall all such payments made pursuant to this
                         subparagraph  8(b) exceed  three  times  the final
                         annual rate of salary being paid to Executive as of the
                         date of termination.

                    (c)  Event of  Termination  in  Connection  with  Change  of
                         -------------------------------------------------------
                         Control. If either, (1) after a "Change of Control" (as
                         --------
                         hereinafter   defined)   of  the  Bank  or  Parent  (as
                         hereinafter   defined),   either  (A)  the  Bank  shall
                         terminate the  employment  of the Executive  during the
                         period  of  employment  under  this  Agreement  for any
                         reason  other than  "cause",  as  defined in  Paragraph
                         8(a),  retirement at or after the normal retirement age
                         under a qualified  pension plan  maintained by the Bank
                         or  termination  pursuant to  Paragraph 7, or otherwise
                         change the present  capacity or  circumstances in which
                         the  Executive  is employed as set forth in Paragraph 2
                         of  this   Agreement   or  cause  a  reduction  in  the
                         Executive's    responsibilities    or    authority   or
                         compensation  or other  benefits  provided  under  this
                         Agreement without the Executive's  written consent,  or
                         (B) the Executive voluntarily terminates his employment
                         hereunder  for  any  reason  within  thirty  (30)  days
                         following a Change in Control of the Bank or Parent, or
                         (2)  during  the  period  that  begins  on the date six
                         months before a Change of Control and ends on the later
                         of the first  anniversary  of the  Change of Control or
                         the expiration date of this Agreement, the Bank changes
                         the  present  capacity  or  circumstances  in which the
                         Executive  is employed  as set forth in  Paragraph 2 of
                         this Agreement or causes a reduction in the Executive's
                         responsibilities  or authority or compensation or other
                         benefits  provided  under this  Agreement  without  the
                         Executive's written consent, then in the case of either
                         (1) or (2),  the Bank  shall pay to the  Executive  and
                         provide the Executive, or his beneficiaries, dependents
                         and estate, as the case may be, with the following:

                        (i) The Bank shall promptly pay to the  Executive  a sum
                            equal to 2.99 times the average annual  compensation
                            payable by the Bank and includable by the Executive
                            in gross income for the most recent five taxable
                            years ending  before  the  date on  which  the
                            ownership or control of the Bank or Parent changed
                            or the portion of this period  during which the
                            Executive was an employee of the Bank.

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<PAGE>

                    (ii) During a period  of  thirty-six  (36)  calendar  months
                         beginning with the Event of Termination, the Executive,
                         his dependents, beneficiaries and estate shall continue
                         to be covered  under all employee  benefit plans of the
                         Bank,  including without  limitation the Bank's pension
                         plan, as if the Executive  were still  employed  during
                         such period under this Agreement.

                    (iii)If and to the extent that  benefits  of service  credit
                         for benefits  provided by paragraph  8(c)(ii) shall not
                         be  payable  or  provided  under any such  plans to the
                         Executive, his dependents, beneficiaries and estate, by
                         reason of his no longer  being an  employee of the Bank
                         as a result  of  termination  of  employment,  the Bank
                         shall  itself  pay  or  provide  for  payment  of  such
                         benefits  and  services  credit  for  benefits  to  the
                         Executive,  his dependents,  beneficiaries  and estate.
                         Any such payment  relating to retirement shall commence
                         on a date  selected  by the  Executive  which must be a
                         date on  which  payments  under  the  Bank's  qualified
                         pension plan or successor plan may commence.

                    (iv) If the Executive elects to have benefits commence prior
                         to  the  normal  retirement  age  under  the  qualified
                         pension plan or any  successor  plan  maintained by the
                         Bank and thereby  incurs an actuarial  reduction in his
                         monthly benefits under such plan, the Bank shall itself
                         pay  or  provide  for  payment  to  the  Executive  the
                         difference between the amount that would have been paid
                         if the benefits  commenced at normal retirement age and
                         the  actuarially  reduced  amount  paid  upon the early
                         commencement of benefits.

                    (v)  The Bank  shall pay all legal fees and  expenses  which
                         the  Executive  may  incur  as a  result  of a  contest
                         concerning  the  validity  or  enforceability  of  this
                         Agreement  and  the  Executive  shall  be  entitled  to
                         receive interest thereon for the period of any delay in
                         payment  from the date such payment was due at the rate
                         determined  by adding two hundred  basis  points to the
                         six month Treasury Bill rate.  Notwithstanding anything
                         herein to the  contrary,  in no event shall the Bank be
                         required to: (a) pay legal fees or expenses incurred by
                         Executive  to enforce the  Agreement

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                    unless a court of  competent  jurisdiction  renders  a final
                    judgment in favor of the  Executive;  or (b)  advance  legal
                    fees or  expenses  incurred  by  Executive  to  enforce  the
                    contract  unless the  Executive is  terminated  without Just
                    Cause  after a  change  of  control  of  Bank or its  parent
                    corporation,  Ameriana Bancorp ("Parent") not recommended by
                    Parent's  board of  directors.  Provided  further,  that the
                    Executive  shall be required to  reimburse  the Bank for the
                    legal  fees  and   expenses   advanced   pursuant   to  this
                    subparagraph if a court of competent  jurisdiction  does not
                    render a final judgment in favor of the Executive.

               (vi) The  Executive  shall not be required to mitigate the amount
                    of any payment  provided  for in this  Agreement  by seeking
                    other employment or otherwise nor shall any amounts received
                    from other  employment or otherwise by the Executive  offset
                    in any manner the obligations of the Bank hereunder.

               (vii)Notwithstanding  anything  contained  in this  Section  8(c)
                    herein  to the  contrary,  in no event  shall  payments  and
                    benefits  made  pursuant to this  Section 8(c) be made which
                    would result in such payments being classified as an "excess
                    parachute  payment"  as such term is defined  under  Section
                    280G of the  Internal  Revenue  Code  of  1986,  as  amended
                    ("Code").  In the event that such payments and benefits,  if
                    made, would be considered as an "excess parachute  payment",
                    such  payments  shall be reduced by such dollar amount as is
                    required  so that  the  total  value  of such  payments  and
                    benefits  when made  shall not be  considered  as an "excess
                    parachute payment".

          (d)  Change of Control.  A "Change of  Control"  shall mean any one of
               ------------------
               the following events:  (i) the acquisition of ownership,  holding
               or power to vote  more  than 25% of the  Bank's  or the  Parent's
               voting stock,  (ii) the acquisition of the ability to control the
               election of a majority of the Bank's or the  Parent's  directors,
               (iii)  the  acquisition  of  a  controlling  influence  over  the
               management or policies of the Bank or the Parent by any person or
               by persons  acting as a "group"  (within  the  meaning of Section
               13(d) of the Securities Exchange Act of 1934), or (iv) during any
               period of two consecutive  years,  individuals  (the  "Continuing
               Directors")  who at

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               the beginning of such period constitute the Board of Directors of
               the Bank or the  Parent  (the  "Existing  Board")  cease  for any
               reason to constitute at least two-thirds  thereof,  provided that
               any  individual  whose  election or nomination  for election as a
               member of the  Existing  Board was approved by a vote of at least
               two-thirds of the  Continuing  Directors  then in office shall be
               considered a Continuing Director.  Notwithstanding the foregoing,
               ownership  or control of the Bank by the Parent  itself shall not
               constitute  a Change of  Control.  Further,  "Change of  Control"
               shall not include the  acquisition  of  securities by an employee
               benefit  plan of the Bank or the  Parent.  For  purposes  of this
               paragraph  only,  the term "person"  refers to an individual or a
               corporation,  partnership,  trust,  association,  joint  venture,
               pool, syndicate, sole proprietorship, unincorporated organization
               or any other form of entity not specifically listed herein.

          (e)  Suspension and Special Regulatory Rules.
               ----------------------------------------

               (i)  The Bank's board of directors may terminate the  Executive's
                    employment at any time,  but any  termination  by the Bank's
                    board of directors other than  termination for "Just Cause",
                    shall not prejudice the Executive's right to compensation or
                    other benefits under the Agreement. The Executive shall have
                    no right to receive  compensation  or other benefits for any
                    period after  termination for "Just Cause".  Termination for
                    "Just Cause" shall mean termination for personal dishonesty,
                    incompetence,  willful misconduct,  breach of fiduciary duty
                    involving  personal profit,  intentional  failure to perform
                    stated   duties,   willful   violation  of  any  law,  rule,
                    regulation (other than a law, rule or regulation relating to
                    a   traffic   violation   or   similar    offense),    final
                    cease-and-desist  order, or material breach of any provision
                    of this Agreement. Subject to the provisions of 8(c) and (d)
                    hereof,  in the event this  Agreement is terminated for Just
                    Cause,  the Bank shall only be  obligated to continue to pay
                    Executive his salary up to the date of termination,  and the
                    vested rights of the parties shall not be affected.

               (ii) If the Executive is suspended and/or temporarily  prohibited
                    from participating in the conduct of the Bank's affairs by a
                    notice served under Section 8(e)(3) or (g)(1) of the Federal
                    Deposit

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                    Insurance Act (12 U.S.C.  1818 (e)(3) and (g)(1)) the Bank's
                    obligations under this contract shall be suspended as of the
                    date of service unless stayed by appropriate proceedings. If
                    the charges in the notice are dismissed, the Bank may in its
                    discretion  (i)  pay  the  Executive  all  or  part  of  the
                    compensation  withheld while its contract  obligations  were
                    suspended,  and (ii)  reinstate (in whole or in part) any of
                    its obligations which were suspended.

               (iii)If the Executive is removed  and/or  permanently  prohibited
                    from  participating  in the conduct of the Bank's affairs by
                    an order  issued  under  Sections  8(e)(4) or 8(g)(1) of the
                    Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4)
                    and  (g)(1)),   all  obligations  of  the  Bank  under  this
                    Agreement shall  terminate,  as of the effective date of the
                    order,  but the vested  rights of the  parties  shall not be
                    affected.

               (iv) If the Bank is in default (as defined in Section  3(x)(1) of
                    FDIA), all obligations  under this Agreement shall terminate
                    as of the date of default,  but this subparagraph  shall not
                    affect any vested rights of the parties.

          (f)  Power of the Board of Directors to Terminate the  Executive.  The
               ------------------------------------------------------------
               Board of Directors of the Bank may terminate the Executive at any
               time; in the event of such  termination,  the  provisions of this
               paragraph 8 shall fully apply.

          (g)  Any payments made to the employee pursuant to this agreement,  or
               otherwise,  are subject to and conditioned  upon their compliance
               with 12 USC 1828(k) and any regulations promulgated thereunder.

          (h)  Post-termination  Health Insurance. If the Executive's employment
               -----------------------------------
               terminates  with the Bank for any reason  other than Just  Cause,
               the Executive shall be entitled to purchase from the Bank, at his
               own expense which shall not exceed applicable COBRA rates, family
               medical  insurance  under  any  group  health  plan that the Bank
               maintains for its employees.  This right shall be (i) in addition
               to, and not in lieu of, any other rights that the  Executive  has
               under this  Agreement and (ii) shall continue until the Executive
               first becomes eligible for participation in Medicare.

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     9.   Source of Payments.  All payments  provided in  paragraphs 4, 7, and 8
          -------------------
          shall be paid in cash  from the  general  funds  of the  Bank,  and no
          special or separate fund shall be established and no other segregation
          of assets  shall be made to assure  payment.  Executive  shall have no
          right,  title, or interest whatever in or to any investments which the
          Bank may make to aid the Bank in meeting its obligations hereunder.

     10.  Noncompetition.  The Executive hereby  expressly  covenants and agrees
          ---------------
          that  during the term of this  Agreement  and for a period of one year
          thereafter, he shall not, unless acting with the prior written consent
          of the Bank, directly or indirectly, for himself or on behalf of or in
          conjunction with any other person,  firm,  corporation or entity, own,
          manage,  operate,  join,  control,   finance  or  participate  in  the
          ownership, management operation or control of, or be connected with as
          a director, officer, employee, consultant, partner, stockholder (other
          than to the extent he is a stockholder therein as of the date hereof),
          and excepting any ownership,  solely as an investment,  so long as the
          Executive  is not a member of any  control  group (with the meaning of
          the rules and  regulations of the Securities and Exchange  Commission,
          the Office of Thrift  Supervision or the Federal  Reserve Board of any
          such issue),  any business  engaged in the business of banking or that
          of owning or managing or controlling a bank or banks (which term shall
          include,  but is not limited to, mortgage companies,  savings and loan
          associations  and savings banks),  in any county where the Bank or its
          Parent or any other subsidiary of either,  has an office or branch and
          the contiguous counties thereto.

     11.  Confidential Information. Executive shall not, to the detriment of the
          -------------------------
          Bank,  knowingly  disclose  or reveal to any  unauthorized  person any
          confidential  information  relating to the Bank, its  subsidiaries  or
          affiliates,  or to  any  of  the  businesses  operated  by  them,  and
          Executive  confirms that such  information  constitutes  the exclusive
          property of the Bank.  Executive shall not otherwise  knowingly act or
          conduct  himself  (i) to the  material  detriment  of  the  Bank,  its
          subsidiaries,  or affiliates, or (ii) in a manner which is inimical or
          contrary to the interests thereof.

     12.  Federal  Income  Tax  Withholding.  The  Bank  may  withhold  from any
          ----------------------------------
          benefits  payable under this  Agreement all federal,  state,  city, or
          other taxes as shall be required  pursuant to any law or  governmental
          regulation or ruling.

     13.  Effect  of  Prior  Agreements.  This  Agreement  contains  the  entire
          ------------------------------
          understanding  between the  parties  hereto and

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<PAGE>

          supersedes  any prior  employment  agreement  between  the Bank or any
          predecessor of the Bank and Executive.

     14.  Consolidation,  Merger,  or Sale of Assets.  Nothing in this Agreement
          -------------------------------------------
          shall preclude the Bank from consolidating or merging into or with, or
          transferring  all  or  substantially  all  of its  assets  to  another
          corporation  which  assumes this  Agreement  and all  obligations  and
          undertakings of the Bank hereunder. Upon such a consolidation, merger,
          or  transfer  of assets  or  assumption,  the term "the  Bank" as used
          herein,  shall mean such other  corporation  and this Agreement  shall
          continue in full force and effect.

     15.  General Provisions.
          -------------------

          (a)  Nonassignability.   Neither  this  Agreement  nor  any  right  or
               -----------------
               interest   hereunder  shall  be  assignable  by  Executive,   his
               beneficiaries,  or legal representatives without the Bank's prior
               written  consent;   provided,   however,  that  nothing  in  this
               paragraph  14(a) shall preclude (i) Executive from  designating a
               beneficiary  to receive any benefits  payable  hereunder upon his
               death,  or (ii) the  executors,  administrators,  or other  legal
               representatives  of  Executive or his estate from  assigning  any
               rights hereunder to the person or persons entitled thereto.

          (b)  No  Attachment.  Except as  required  by law, no right to receive
               ---------------
               payments under this Agreement  shall be subject to  anticipation,
               commutation,  alienation, sale, assignment,  encumbrance, charge,
               pledge,  or hypothecation or to execution,  attachment,  levy, or
               similar  process  of  assignment  by  operation  by law,  and any
               attempt,  voluntary  or  involuntary,  to effect any such  action
               shall be null, void, and of no effect.

          (c)  Binding  Agreement.  This  Agreement  shall be binding upon,  and
               -------------------
               inure  to the  benefit  of,  Executive  and the  Bank  and  their
               respective permitted successors and assigns.

     16.  Modification and Waiver.
          ------------------------

          (a)  Amendment of  Agreement.  This  Agreement  may not be modified or
               ------------------------
               amended  except by an instrument in writing signed by the parties
               hereto.

          (b)  Waiver. No term or condition of this Agreement shall be deemed to
               -------
               have been  waived,  nor shall  there be an  estoppel  against the
               enforcement of any provision of

                                       12
<PAGE>

               this Agreement, except by written instrument of the party charged
               with such waiver or  estoppel.  No such  written  waiver shall be
               deemed a continuing  waiver unless  specifically  stated therein,
               and each waiver shall  operate  only as to the  specific  term or
               condition  waived and shall not  constitute a waiver of such term
               or  condition  for the  future or as to any act  other  than that
               specifically waived.

     17.  Severability.  If, for any reason,  any provision of this Agreement is
          -------------
          held invalid,  such invalidity shall not effect any other provision of
          this  Agreement  not held so  invalid,  and each such other  provision
          shall to the full extent  consistent  with law  continue in full force
          and effect.  If any provision of this Agreement  shall be held invalid
          in  part,  such  invalidity  shall in no way  affect  the rest of such
          provision,   which,   together  with  all  other  provisions  of  this
          Agreement,  shall to the full extent  consistent  with law continue in
          full force and effect.  If this Agreement is held invalid or cannot be
          enforced, then to the full extent permitted by law any prior agreement
          between the Bank (or any  predecessor  thereof) and Executive shall be
          deemed reinstated as if this Agreement has not been executed.

     18.  Headings.  The headings of paragraphs  herein are included  solely for
          ---------
          convenience  of  reference  and  shall  not  control  the  meaning  or
          interpretation of any of the provisions of this Agreement.

     19.  Governing  Law. This  Agreement has been executed and delivered in the
          ---------------
          State of Indiana, and its validity,  interpretation,  performance, and
          enforcement shall be governed by the laws of said State, except to the
          extent Federal law is governing.







                                       13


<PAGE>

     IN WITNESS  WHEREOF,  the Bank has caused this Agreement to be executed and
     its seal to be affixed hereunto by its officers  thereunto duly authorized,
     and Executive has signed this  Agreement,  all as of the day and year first
     above written.



                           AMERIANA BANK AND TRUST, SB



                           /s/ Harry J. Bailey
                           Harry J. Bailey
                           President and
                           Chief Executive Officer


ATTEST:


----------------------------



                           /s/ Bradley L. Smith
                           Bradley L. Smith
                           Senior Vice President, Treasurer


WITNESS:


----------------------------


                                       14