**Exhibit
      10.2**





**NONQUALIFIED
      STOCK OPTION AGREEMENT**





This
      Nonqualified Stock Option Agreement (“Agreement”) has been entered into as of
      the ___ day of ___, 20___, between LSB Financial Corp., an Indiana corporation
      (the “Company”), and ___, an [employee/director] of the Company or one of its
      affiliates (“Participant”), pursuant to the Company’s 2007 Stock Option and
      Incentive Plan (the “Plan”). Capitalized terms used herein and not defined
      herein have the meanings set forth in the Plan.




WHEREAS,
      the committee of the Board of Directors of the Company appointed to administer
      the Plan (the “Committee”) has determined to grant to Participant an option to
      purchase shares of the Company’s Common Stock pursuant to the terms and
      conditions as provided in the Plan and this Agreement; and




WHEREAS,
      the Company and Participant desire to set forth the terms and conditions of
      the
      option;




NOW,
      THEREFORE, in consideration of the mutual covenants and agreements contained
      in
      this Agreement, the Company and the Participant agree as follows:




Section
      1 . Grant
      of Option and Exercise Price .
      Subject
      to the terms and conditions stated in the Plan and this Agreement as of ___,
      ___
      (the “Date of Grant”), the Committee has granted to Participant an option (the
“Option”) to purchase ___ shares of the Company’s Common Stock (the “Shares”) at
      an exercise price per Share equal to $___ (the “Exercise Price”).




Section
      2 . Nonqualified
      Stock Option .
      The
      Option is not intended to qualify as an incentive stock option under Section
      422
      of the Internal Revenue Code of 1986, as amended.




Section
      3 . Exercise
      of Option .
      The
      Option shall become exercisable as follows or on such earlier date as provided
      in the Plan: ___.




Section
      4 . Term
      of Option .
      Unless
      sooner terminated as provided in the Plan, the Option shall expire ten years
      from the Date of Grant.




Section
      5 . Method
      of Exercise .
      The
      Participant may exercise the Option in the manner stated in the Plan.




Section
      6 . Termination .
      If the
      Participant ceases to maintain Continuous Service for cause, or voluntarily
      for
      any reason other than death, Disability or Retirement, all rights under the
      Option shall terminate immediately upon cessation of Continuous Service. If
      the
      Participant ceases to maintain Continuous Service by reason of death, Disability
      or Retirement, then the Participant may exercise the Option, but only to the
      extent the Participant was entitled to exercise the Option at the date of such
      cessation, at any time during the remaining term of the Option. If the
      Participant ceases to maintain Continuous Service for any reason other than
      those set forth above, Participant may exercise the Option to the extent that
      the Participant was entitled to exercise the Option at the date of such
      cessation for a period of three months immediately succeeding such cessation
      of
      Continuous Service, and in no event after the expiration date of the Option.







Section
      7 . Plan
      Controlling .
      The
      Option and the terms and conditions set forth in this Agreement are subject
      in
      all respects to the terms and conditions of the Plan, which are controlling.
      All
      determinations and interpretations of the Committee shall be binding and
      conclusive upon the Participant and his or her legal representatives.




Section
      8 . Qualification
      of Rights .
      Neither
      this Agreement nor the existence of the Option shall be construed as giving
      the
      Participant any right (a) to be retained as a director or employee of the
      Company or any of its affiliates; or (b) as a shareholder with respect to the
      Shares until the certificates for the Shares have been issued and delivered
      to
      the Participant.




Section
      9 . Governing
      Law .
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Indiana.




Section
      10 . Notices .
      All
      notices and other communications required or permitted under this Agreement
      shall be written and shall be delivered personally or sent by registered or
      certified first-class mail, postage prepaid and return receipt required,
      addressed as follows: if to the Company, to the Company’s executive offices in
      Lafayette, Indiana, and if to the Participant or his or her successor, to the
      address last furnished by the Participant to the Company. Each notice and
      communication shall be deemed to have been given when received by the Company
      or
      the Participant.




Section
      11 . Transferability .
      The
      Participant shall not sell, assign, transfer, pledge or otherwise encumber
      the
      Option, except in the event of death of Participant, by will or laws of descent
      and distribution.




Section
      12 . Representations
      and Warranties of Participant .
      The
      Participant represents and warrants to the Company that he or she has received
      and reviewed a copy of the Plan.




Section
      13 . Withholding .
      In
      connection with the delivery of shares of Common Stock as a result of the
      exercise of the Option, the Company shall have the right to require the
      Participant to pay an amount in cash sufficient to cover any tax, including
      any
      Federal, state or local income tax, required by any governmental entity to
      be
      withheld or otherwise deducted and paid with respect to such delivery
      (“Withholding Tax”), and to make payment to the appropriate taxing authority of
      the amount of such Withholding Tax.




Section
      14 . No
      Waiver .
      The
      failure of a party to insist upon strict adherence to any term of this Agreement
      on any occasion shall not be considered a waiver thereof or deprive that party
      of the right thereafter to insist upon strict adherence to that term or any
      other term of this Agreement.




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




**LSB
                FINANCIAL CORP.**By:NameTitle[Signature
                of Participant]