RIVER VALLEY BANCORP

                                STOCK OPTION PLAN

         1. Purpose.  The purpose of the River Valley  Bancorp Stock Option Plan
(the "Plan") is to provide to  directors,  officers  and other key  employees of
River  Valley  Bancorp  (the  "Holding  Company")  and  its  majority-owned  and
wholly-owned  subsidiaries  (individually a "Subsidiary"  and  collectively  the
"Subsidiaries"),  including,  but not limited to, Madison First Federal  Savings
and Loan  Association  ("Madison First  Federal") and Citizens  National Bank of
Madison  ("Citizens"),  who are  materially  responsible  for the  management or
operation  of the  business  of the  Holding  Company or a  Subsidiary  and have
provided valuable  services to the Holding Company or a Subsidiary,  a favorable
opportunity to acquire Common Stock,  without par value ("Common Stock"), of the
Holding Company,  thereby providing them with an increased incentive to work for
the success of the Holding Company and its Subsidiaries and better enabling each
such entity to attract and retain capable directors and executive personnel.

         2.  Administration  of  the  Plan.  The  Plan  shall  be  administered,
construed and  interpreted  by a committee  (the  "Committee")  consisting of at
least two members of the Board of Directors of the Holding Company, each of whom
is a "Non-Employee  Director"  within the meaning of the definition of that term
contained in Reg. ss. 16b-3  promulgated  under the  Securities  Exchange Act of
1934,  as amended  (the "1934  Act").  The  members  of the  Committee  shall be
designated  from time to time by the Board of Directors of the Holding  Company.
The decision of a majority of the members of the Committee shall  constitute the
decision  of the  Committee,  and the  Committee  may act either at a meeting at
which a  majority  of the  members of the  Committee  is present or by a written
consent  signed by all members of the  Committee.  The Committee  shall have the
sole, final and conclusive  authority to determine,  consistent with and subject
to the provisions of the Plan:

                  (a)      the individuals (the  "Optionees") to whom options or
                           successive options shall be granted under the Plan;

                  (b)      the time when options shall be granted hereunder;

                  (c)      the  number of shares of Common  Stock to be  covered
                           under each option;

                  (d)      the option price to be paid upon the exercise of each
                           option;

                  (e)      the  period  within  which  each such  option  may be
                           exercised;

                  (f)      the extent to which an option is an  incentive  stock
                           option or a non-qualified stock option; and

                  (g)      the terms and conditions of the respective agreements
                           by which options granted shall be evidenced.

The Committee shall also have authority to prescribe,  amend, waive, and rescind
rules and  regulations  relating to the Plan, to  accelerate  the vesting of any
stock  options  granted  hereunder  (subject  to Office  of  Thrift  Supervision
regulations),  to make amendments or  modifications  in the terms and conditions
(including  exercisability) of the options relating to the effect of termination
of  employment  of the  optionee  (subject  to the last  sentence  of  Section 9
hereof), to waive any restrictions or conditions applicable to any option or the
exercise thereof, and to make all other determinations necessary or advisable in
the administration of the Plan.

         3. Eligibility.  The Committee may, consistent with the purposes of the
Plan,  grant options to officers and other key employees of the Holding  Company
or of a Subsidiary  and to directors  of a Subsidiary  (other than  non-employee
directors of the Holding  Company) who in the opinion of the  Committee are from
time to time  materially  responsible  for the  management  or  operation of the
business of the Holding  Company or of a Subsidiary  and have provided  valuable
services to the Holding Company or a Subsidiary;  provided,  however, that in no
event may any employee who owns (after application of the ownership rules in ss.
425(d) of the Internal  Revenue Code of 1986, as amended (the "Code")) shares of
stock  possessing more than 10 percent of the total combined voting power of all
classes of stock of the Holding Company or any of its Subsidiaries be granted an
incentive stock option  hereunder  unless at the time such option is granted the
option price is at least 110% of the fair market  value of the stock  subject to
the option and such option by its terms is not exercisable  after the expiration
of five (5) years from the date such option is granted. Directors of the Holding
Company who are not employees of the Holding Company ("Outside Directors"),  who
are  serving  as  such  on  the  date  Madison  First   Federal   converts  (the
"Conversion")  from mutual to stock form (the  "Conversion  Date") shall each be
granted on the date of the Holding Company's first Shareholder Meeting following
the Conversion  which shall be held no earlier than six (6) months following the
Conversion (the "First Shareholder Meeting Date"), assuming he or she is serving
as an Outside  Director on such date,  a  non-qualified  option to purchase  the
number of whole  shares of Common  Stock of the Holding  Company  determined  by
multiplying  the total  number of shares  issued by the  Holding  Company on the
Conversion  Date by the  following  percentages,  and rounding  down to the next
whole share:

                                                   Percentage of  Shares
              Outside Director                      Issued In Conversion
               Fred W. Koehler                             .50%
             Michael J. Hensley                            .45%
               Cecil L. Dorten                             .45%
               Earl W. Johann                              .45%
               Jonnie L. Davis                             .30%

          Such options shall have an exercise  price per share equal to the fair
market value of a share of such Common Stock,  as  determined by the  Committee,
consistent with Treas.  Req. ss.  20.2031-2,  on the First  Shareholder  Meeting
Date.  Outside Directors are not entitled to receive any other awards under this
Plan.  Subject to the  foregoing  and the  provisions  of  Section 7 hereof,  an
individual who has been granted an option under the Plan (an "Optionee"),  if he
is otherwise  eligible,  may be granted an  additional  option or options if the
Committee shall so determine.

         4. Stock Subject to the Plan. There shall be reserved for issuance upon
the exercise of options  granted  under the Plan,  shares of Common Stock of the
Holding  Company  equal to 10% of the total  number  of  shares of Common  Stock
issued by the Holding  Company upon the conversion of Madison First Federal from
mutual to stock form,  which may be authorized  but unissued  shares or treasury
shares of the Holding Company. Subject to Section 7 hereof, the shares for which
options  may be  granted  under the Plan shall not exceed  that  number.  If any
option shall expire or terminate or be surrendered for any reason without having
been exercised in full, the unpurchased shares subject thereto shall (unless the
Plan shall have terminated) become available for other options under the Plan.

         5.  Terms of  Options.  Each  option  granted  under the Plan  shall be
subject  to the  following  terms and  conditions  and to such  other  terms and
conditions not  inconsistent  therewith as the Committee may deem appropriate in
each case:

                  (a)  Option  Price.  The price to be paid for  shares of stock
         upon the exercise of each option shall be  determined  by the Committee
         at the time such option is granted, but such price in no event shall be
         less  than  the fair  market  value,  as  determined  by the  Committee
         consistent with Treas.  Reg. ss.  20.2031-2 and any requirements of ss.
         422A of the Code,  of such  stock on the date on which  such  option is
         granted.

                  (b) Period for  Exercise  of  Option.  An option  shall not be
         exercisable  after the  expiration  of such period as shall be fixed by
         the Committee at the time of the grant  thereof,  but such period in no
         event  shall  exceed  ten (10) years and one day from the date on which
         such option is granted;  provided, that incentive stock options granted
         hereunder  shall have terms not in excess of ten (10) years and options
         issued to Outside Directors shall be for a period of ten (10) years and
         one day from the date of grant  thereof.  Options  shall be  subject to
         earlier termination as hereinafter provided.

                  (c)  Exercise  of Options.  The option  price of each share of
         stock purchased upon exercise of an option shall be paid in full at the
         time of such exercise. Payment may be in (i) cash, (ii) if the Optionee
         may do so in conformity with Regulation T (12 C.F.R.  ss.  220.3(e)(4))
         without  violating ss. 16(b) or ss. 16(c)of the 1934 Act, pursuant to a
         broker's cashless exercise procedure, by delivering a properly executed
         exercise notice together with  irrevocable  instructions to a broker to
         promptly  deliver to the Holding Company the total option price in cash
         and,  if  desired,  the  amount  of any taxes to be  withheld  from the
         Optionee's  compensation  as a result of any withholding tax obligation
         of the Holding Company or any of its Subsidiaries, as specified in such
         notice,  or (iii)  beginning  on a date which is three years  following
         Madison First  Federal's  conversion from mutual to stock form and with
         the approval of the Committee, by tendering whole shares of the Holding
         Company's  Common  Stock owned by the  Optionee  and cash having a fair
         market  value  equal to the cash  exercise  price  of the  shares  with
         respect to which the option is being exercised.  For this purpose,  any
         shares so tendered by an Optionee shall be deemed to have a fair market
         value equal to the mean between the highest and lowest  quoted  selling
         prices  for the  shares on the date of  exercise  of the  option (or if
         there  were no sales on such  date the  weighted  average  of the means
         between the highest and lowest quoted  selling prices for the shares on
         the nearest date before and the nearest date after the date of exercise
         of the option as prescribed by Treas. Reg. ss. 20.2031-2),  as reported
         in The Wall  Street  Journal or a similar  publication  selected by the
         Committee.  The  Committee  shall have the  authority to grant  options
         exercisable  in full at any time during their term, or  exercisable  in
         such  installments at such times during their term as the Committee may
         determine;  provided,  however,  that options shall not be  exercisable
         during the first six (6) months of their  term,  and  provided  further
         that,  subject  to the  foregoing  restriction,  options  shall  become
         exercisable at the rate of 20% per year beginning on the anniversary of
         the  date of grant  of such  options.  Installments  not  purchased  in
         earlier  periods  shall be cumulated  and be available  for purchase in
         later periods.  Subject to the other provisions of this Plan, an option
         may be  exercised  at any time or from time to time  during the term of
         the option as to any or all whole shares  which have become  subject to
         purchase  pursuant  to the terms of the option or the Plan,  but not at
         any time as to fewer than one hundred (100) shares unless the remaining
         shares which have become subject to purchase are fewer than one hundred
         (100) shares.  An option may be exercised only by written notice to the
         Holding  Company,  mailed to the attention of its Secretary,  signed by
         the Optionee (or such other person or persons as shall  demonstrate  to
         the  Holding  Company  his or their  right  to  exercise  the  option),
         specifying  the  number  of  shares  in  respect  of  which it is being
         exercised,  and  accompanied  by payment  in full in either  cash or by
         check in the  amount  of the  aggregate  purchase  price  therefor,  by
         delivery of the irrevocable broker instructions  referred to above, or,
         if the  Committee  has  approved  the  use of the  stock  swap  feature
         provided for above,  followed as soon as practicable by the delivery of
         the option price for such shares.

                  (d)  Certificates.  The  certificate or  certificates  for the
         shares  issuable  upon an  exercise  of an  option  shall be  issued as
         promptly as practicable after such exercise. An Optionee shall not have
         any rights of a  shareholder  in respect to the shares of stock subject
         to an option until the date of issuance of a stock  certificate  to him
         for such  shares.  In no case may a fraction of a share be purchased or
         issued  under the Plan,  but if,  upon the  exercise  of an  option,  a
         fractional share would otherwise be issuable, the Holding Company shall
         pay cash in lieu thereof.

                  (e)  Termination  of Option.  If an  Optionee  (other  than an
         Outside   Director  or  a   non-employee   director  of  a   Subsidiary
         ("Subsidiary  Director"))  ceases  to be an  employee  of  the  Holding
         Company  and the  Subsidiaries  for any reason  other than  retirement,
         permanent and total  disability  (within the meaning of ss. 22(e)(3) of
         the  Code),  or  death,  any  option  granted  to him  shall  forthwith
         terminate.  Leave  of  absence  approved  by the  Committee  shall  not
         constitute  cessation  of  employment.  If an  Optionee  (other than an
         Outside Director or a Subsidiary  Director) ceases to be an employee of
         the Holding Company and the  Subsidiaries by reason of retirement,  any
         option  granted  to him may be  exercised  by him in  whole  or in part
         within three (3) years after the date of his retirement,  to the extent
         the option was  otherwise  exercisable  at the date of his  retirement;
         provided, however, that if such employee remains a director or director
         emeritus  of the  Holding  Company,  the  option  granted to him may be
         exercised  by him in whole or in part  until the later of (a) three (3)
         years after the date of his retirement, or (b) six (6) months after his
         service as a director  or  director  emeritus  of the  Holding  Company
         terminates.   (The  term   "retirement"   as  used  herein  means  such
         termination of employment as shall entitle such  individual to early or
         normal retirement  benefits under any then existing pension plan of the
         Holding Company or a Subsidiary.) If an Optionee (other than an Outside
         Director  or  Subsidiary  Director)  ceases  to be an  employee  of the
         Holding  Company and the  Subsidiaries by reason of permanent and total
         disability (within the meaning of ss. 22(e)(3) of the Code), any option
         granted to him may be  exercised  by him in whole or in part within one
         (1) year after the date of his  termination  of employment by reason of
         such disability whether or not the option was otherwise  exercisable at
         the date of such  termination.  Options granted to Outside Directors or
         to Subsidiary  Directors  shall cease to be exercisable  six (6) months
         after the date such  Outside  Director  or  Subsidiary  Director  is no
         longer a director of the Holding Company and the  Subsidiaries  for any
         reason other than death or disability. If an Optionee who is an Outside
         Director  or  Subsidiary  Director  ceases to be a director or director
         emeritus  of the  Holding  Company  and the  Subsidiaries  by reason of
         disability,  any option  granted to him may be exercised in whole or in
         part  within  one (1) year after the date the  Optionee  ceases to be a
         director or director emeritus by reason of such disability,  whether or
         not the option was otherwise  exercisable at such date. In the event of
         the death of an  Optionee  while in the employ or service as a director
         or director emeritus of the Holding Company or a Subsidiary, or, if the
         Optionee is not an Outside  Director  or  Subsidiary  Director,  within
         three (3) years after the date of his  retirement  (or,  if later,  six
         months  following his  termination of service as a director or director
         emeritus  of the  Holding  Company)  or within  one (1) year  after the
         termination  of  his  employment  by  reason  of  permanent  and  total
         disability (within the meaning of ss. 22(e)(3) of the Code), or, if the
         Optionee is an Outside Director or Subsidiary Director,  within six (6)
         months  after he is no longer a director  or  director  emeritus of the
         Holding Company or the  Subsidiaries  for reasons other than disability
         or, within one (1) year after the  termination of his service as such a
         director  by reason of  disability,  any  option  granted to him may be
         exercised in whole or in part at any time within one (1) year after the
         date of such death by the executor or administrator of his estate or by
         the person or persons  entitled to the option by will or by  applicable
         laws of descent and  distribution  until the  expiration  of the option
         term as fixed by the Committee, whether or not the option was otherwise
         exercisable  at the date of his death.  Notwithstanding  the  foregoing
         provisions  of this  subsection  (e),  no option  shall in any event be
         exercisable  after the  expiration of the period fixed by the Committee
         in accordance with subsection (b) above.

                  (f) Nontransferability of Option. No option may be transferred
         by the  Optionee  otherwise  than by will or the  laws of  descent  and
         distribution  or pursuant to a qualified  domestic  relations  order as
         defined  by the  Code or  Title  I of the  Employee  Retirement  Income
         Security Act, or the rules  thereunder,  and during the lifetime of the
         Optionee  options  shall be  exercisable  only by the  Optionee  or his
         guardian or legal representative.

                  (g) No Right to Continued Service.  Nothing in this Plan or in
         any agreement  entered into pursuant  hereto shall confer on any person
         any right to continue  in the employ or service of the Holding  Company
         or its  Subsidiaries  or affect  any  rights  the  Holding  Company,  a
         Subsidiary,  or the  shareholders  of the  Holding  Company may have to
         terminate his service at any time.

                  (h) Maximum Incentive Stock Options. The aggregate fair market
         value of stock with respect to which  incentive  stock options  (within
         the meaning of ss. 422A of the Code) are exercisable for the first time
         by an  Optionee  during any  calendar  year under the Plan or any other
         plan of the  Holding  Company  or its  Subsidiaries  shall  not  exceed
         $100,000.  For this purpose, the fair market value of such shares shall
         be  determined  as of the date  the  option  is  granted  and  shall be
         computed  in such  manner  as shall  be  determined  by the  Committee,
         consistent with the requirements of ss. 422A of the Code.

                  (i) Agreement.  Each option shall be evidenced by an agreement
         between the Optionee and the Holding Company which shall provide, among
         other  things,  that,  with respect to  incentive  stock  options,  the
         Optionee will advise the Holding Company  immediately  upon any sale or
         transfer of the shares of Common Stock  received  upon  exercise of the
         option to the extent  such sale or  transfer  takes  place prior to the
         later of (a) two (2)  years  from the date of grant or (b) one (1) year
         from the date of exercise.

                  (j) Investment  Representations.  Unless the shares subject to
         an option are registered under applicable  federal and state securities
         laws, each Optionee by accepting an option shall be deemed to agree for
         himself and his legal  representatives  that any option  granted to him
         and any and all shares of Common Stock  purchased  upon the exercise of
         the option shall be acquired for  investment and not with a view to, or
         for the sale in connection  with, any  distribution  thereof,  and each
         notice of the exercise of any portion of an option shall be accompanied
         by a  representation  in writing,  signed by the  Optionee or his legal
         representatives,  as the case may be,  that the shares of Common  Stock
         are being acquired in good faith for investment and not with a view to,
         or for sale in connection  with, any  distribution  thereof  (except in
         case of the Optionee's legal representatives for distribution,  but not
         for  sale,  to  his  legal  heirs,   legatees  and  other  testamentary
         beneficiaries).  Any shares issued pursuant to an exercise of an option
         may bear a legend evidencing such representations and restrictions.

         6. Incentive  Stock Options and  Non-Qualified  Stock Options.  Options
granted under the Plan may be incentive stock options under ss. 422A of the Code
or non-qualified stock options, provided,  however, that Outside Directors shall
be granted only non-qualified stock options.  All options granted hereunder will
be clearly  identified as either incentive stock options or non-qualified  stock
options.  In no event will the exercise of an incentive  stock option affect the
right to exercise any non-qualified  stock option, nor shall the exercise of any
non-qualified  stock  option  affect the right to exercise any  incentive  stock
option.  Nothing  in this  Plan  shall be  construed  to  prohibit  the grant of
incentive  stock  options and  non-qualified  stock  options to the same person,
provided,  further, that incentive stock options and non-qualified stock options
shall not be granted in a manner whereby the exercise of one non-qualified stock
option or incentive stock option affects the exercisability of the other.

         7. Adjustment of Shares. In the event of any change after the effective
date of the Plan in the  outstanding  stock of the Holding  Company by reason of
any reorganization,  recapitalization,  stock split, stock dividend, combination
of shares,  exchange of shares,  merger or  consolidation,  liquidation,  or any
other change after the effective date of the Plan in the nature of the shares of
stock of the Holding  Company,  the Committee shall  determine what changes,  if
any, are  appropriate in the number and kind of shares  reserved under the Plan,
and the Committee shall  determine what changes,  if any, are appropriate in the
option  price  under and the  number and kind of shares  covered by  outstanding
options  granted under the Plan. Any  determination  of the Committee  hereunder
shall be conclusive.

         8.  Tax  Withholding.  Whenever  the  Holding  Company  proposes  or is
required to issue or transfer shares of Common Stock under the Plan, the Holding
Company  shall  have the  right to  require  the  Optionee  or his or her  legal
representative  to remit to the Holding Company an amount  sufficient to satisfy
any federal,  state  and/or  local  withholding  tax  requirements  prior to the
delivery of any certificate or certificates for such shares,  and whenever under
the Plan  payments  are to be made in  cash,  such  payments  shall be net of an
amount  sufficient to satisfy any federal,  state and/or local  withholding  tax
requirements.   If  permitted  by  the  Committee  and  pursuant  to  procedures
established  by the  Committee,  an Optionee who is not an Outside  Director may
make a written  election to have shares of Common Stock having an aggregate fair
market value, as determined by the Committee,  consistent with the  requirements
of Treas. Reg. ss. 20.2031-2,  sufficient to satisfy the applicable  withholding
taxes,  withheld from the shares otherwise to be received upon the exercise of a
non-qualified option.

         9. Amendment.  Subject to ss. 13 hereof,  the Board of Directors of the
Holding  Company  may amend the Plan from time to time and,  with the consent of
the Optionee,  the terms and  provisions of his option,  except that without the
approval  of the  holders  of at least a majority  of the shares of the  Holding
Company  voting  in  person  or  by  proxy  at a  duly  constituted  meeting  or
adjournment thereof:

                  (a) the number of shares of stock  which may be  reserved  for
         issuance  under the Plan may not be  increased  except as  provided  in
         Section 7 hereof;

                  (b) the period during which an option may be exercised may not
         be  extended  beyond  ten (10) years and one day from the date on which
         such option was granted; and

                  (c) the class of persons to whom options may be granted  under
         the Plan shall not be modified materially.

         No  amendment  of the Plan,  however,  may,  without the consent of the
Optionees, make any changes in any outstanding options theretofore granted under
the Plan which would adversely affect the rights of such Optionees.

         10.  Termination.  The Board of  Directors  of the Holding  Company may
terminate the Plan at any time and no option shall be granted  thereafter.  Such
termination,  however,  shall not affect the validity of any option  theretofore
granted under the Plan. In any event,  no incentive  stock option may be granted
under the Plan after the date which is ten (10) years from the effective date of
the Plan.

         11.  Successors.  This Plan shall be binding  upon the  successors  and
assigns of the Holding Company.

         12.  Governing Law. The terms of any options granted  hereunder and the
rights and obligations hereunder of the Holding Company, the Optionees and their
successors in interest  shall,  except to the extent governed by federal law, be
governed by Indiana law.

         13.  Government and Other  Regulations.  The obligations of the Holding
Company to issue or transfer and deliver shares under options  granted under the
Plan shall be subject to compliance with all applicable laws, governmental rules
and  regulations  (including  Office of  Thrift  Supervision  regulations),  and
administrative  action.  In  particular,  grants of stock options under the Plan
shall comply with the requirements of 12 C.F.R.  ss.563b.3(g)(4)(vi)  as long as
those  requirements are in effect.  That regulation  currently  requires that no
individual  shall receive stock options for more than 25% of the shares reserved
for  issuance  under the Plan and  Outside  Directors  shall not  receive  stock
options for more than 5%  individually,  or 30% in the aggregate,  of the shares
reserved for issuance under the Plan.

         14.  Effective Date. The Plan shall become  effective on the date it is
approved  by the  holders  of at least a majority  of the shares of the  Holding
Company entitled to vote at a duly constituted  meeting or adjournment  thereof.
The options granted pursuant to the Plan may not be exercised until the Board of
Directors of the Holding  Company has been advised by counsel that such approval
has been obtained and all other applicable legal requirements have been met.