UNIONBANCORP INC
EXHIBIT 10.2
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<TYPE>EX-10.2
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<FILENAME>ex10_2.txt
<DESCRIPTION>EXHIBIT 10.2
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                                                                    EXHIBIT 10.2















                               UNIONBANCORP, INC.



                           INCENTIVE COMPENSATION PLAN















October 2000

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                               UNIONBANCORP, INC.

                           INCENTIVE COMPENSATION PLAN

PURPOSE
The Incentive Compensation Plan (ICP) is intended to sustain management's focus
on the corporation's requirement for strategic long range planning and to
encourage attainment of the annual profitability goals. The ICP supports a
number of objectives which are important to the continued success of the
corporation. These are...

         o    To attract, develop, retain and reward well qualified management
              and executive staff.

         o    To provide long term and short term incentive compensation for key
              employees which reflect two primary considerations.

              >>  Competitive market pay levels for jobs of comparable scope and
                  responsibility
              >>  Internal equity relative to job responsibility, performance
                  and contribution

         o    To motivate key managers and executives through a combination of
              appropriate job challenges, career advancement opportunities and
              financial incentives for performance above expectations.

The primary purpose of the ICP is to provide competitive long term and short
term incentive opportunities directly related to the corporation's annual
financial performance as measured by net income, increases in earnings per
share, return on equity and/or return on assets. The financial performance goals
will be established annually and approved by the Board of Directors.

ICP awards are designed to recognize individual performance and contribution
toward the attainment of corporate goals and objectives.

DEFINITIONS
The terms used in the description of the ICP are defined as follows:

         Base Salary. The annualized regular cash compensation of an employee,
         excluding bonus awards, company contributions to employee benefit
         plans, or other compensation not designated as salary.

         Incentive Target. The percentage of an employee's Base Salary that will
         be paid as an incentive bonus if the specified corporate, subsidiary
         and individual goals are fully achieved.

         Financial Factor. An adjustment (percentage) applied to the Incentive
         Target to reflect the corporation's actual financial performance
         relative to the annual Plan Goal.

         Individual Factor. An adjustment (percentage) applied to the Incentive
         Target to reflect the employee's individual performance relative to a
         set of defined performance expectations.

         Net Income. The corporation's earnings after taxes and after securities
         transactions.

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         Key Employees. Employees who can influence the attainment of corporate
         goals and objectives.

         Short Term Incentives. Usually a cash reward to key employees for
         exceeding expected levels of annual performance.

         Long Term Incentives. Usually takes the form of stock options to
         motivate, retain and reward key employees for increases in long-term
         value of the organization, as measured by share price.

         Plan Goal. A specific amount of Net Income plus the estimated ICP
         payouts, but excluding any income classified as "extraordinary" by an
         independent audit.

         Plan Year. The corporation's fiscal year.

I.       EFFECTIVE DATE

         The Incentive Compensation Plan (the Plan) is effective as of January
         1, 2001. Incentive Compensation Awards (Awards) may be paid for each
         plan year (January 1 to December 31), in accordance with the provisions
         of the Plan.


II.      PURPOSE AND OBJECTIVES

         The Incentive Compensation Plan is designed to attract, retain and
         motivate key employees. The plan seeks to support the management
         planning process and achievement of the subsidiary's operational and
         profitability goals. Within this overall purpose, there are three
         primary objectives:

         o    To focus attention on the establishment and achievement of clearly
              defined goals which are linked to the subsidiary's business plan
              and success factors.

         o    To provide opportunities to earn financial rewards based on
              improved subsidiary performance and individual contributions to
              that performance.

         o    To ensure that total compensation opportunities are competitive
              and variable based upon actual performance compared to
              predetermined goals.


III.     PLAN ADMINISTRATION

         The Plan is administered by the CEO, the Compensation Committee and the
         Board of Directors (Board).

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     A.  Responsibilities of the CEO
         The CEO will provide recommendations to the Compensation Committee
         regarding Plan participants, subsidiary and individual performance
         objectives, subsidiary and individual achievements and awards. The
         CEO's responsibilities also include monitoring the effectiveness of the
         Plan, the payment process and providing recommendations to the Board
         regarding modifications to the Plan.

     B.  Responsibilities of the Compensation Committee
         The Compensation Committee will review and recommend to the Board, for
         approval, eligible participants.

IV.      ELIGIBILITY

         Key employees eligible to participate in the Plan are those who, in the
         opinion of the CEO, hold positions which have the capacity to
         significantly impact performance. Participants are recommended by the
         CEO to the Compensation Committee and approved by the Board.

         Suggested timeframes for the goal-setting and approval process:

               o    October 15:               CEO submits goals and recommended
                                              participants to the Compensation
                                              Committee.

               o    November 15:              The Compensation Committee reviews
                                              and submits to the Board, for
                                              approval, recommended Incentive
                                              Compensation Plan participants.

               o    December Board Meeting:   Board of Directors reviews and
                                              approves goals, targets and
                                              participants for the upcoming
                                              year.

         Eligibility is reviewed annually to assure continued appropriateness.
         Participants are notified by executive management of their
         participation in the Plan. Upon designation as a participant, each
         participant will be given a copy of the Plan. No employee will have the
         automatic right to be selected as a participant for any year or, having
         been selected as a participant for one year, be considered a
         participant for any other year.


V.       SHORT TERM INCENTIVES

         A.   Incentive Award Opportunity.

              Certain positions have a greater and more direct impact than
              others on the achievement of the Company's performance. Those
              differences are recognized by varying the incentive opportunity,
              expressed as a percentage of a participant's base salary
              (Incentive Target).

              Each participating position will be given an Incentive Target.
              These Targets will be based

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              upon competitive practices in the industry for positions of
              comparable responsibility and decision-making authority. Factors
              such as title, current salary, job level, scope of responsibility
              and impact on the corporation's financial performance and
              strategic long-range plan will be considered in establishing
              Incentive Targets.

              Positions may be added during the Plan Year, except that an
              employee may not participate in the ICP until completing six
              months of service in the participating position during the Plan
              Year. Incentive awards will be pro-rated, based on months served,
              for employees with less than 12 months of service in a
              participating position during the Plan Year.

         B.   Performance Measurement Factors

              The Financial Factor will equal 1.0 when actual earnings for the
              Plan Year are equal to the Plan Goal.

              Corporate Key Employees
                100% Corporate Goal     =       100% Financial Factor
              < 100% Corporate Goal     =         0% Financial Factor

<TABLE>
<CAPTION>
              Subsidiary Key Employees
<S>           <C>                                    <C>                         <C>     <C>
                100% (75%) Corporate Goal plus  100% (25%) Subsidiary Goal       =       100% Financial Factor
              < 100% (75%) Corporate Goal plus  100% (25%) Subsidiary Goal       =        25% Financial Factor
              < 100% (75%) Corporate Goal plus <100% (25%) Subsidiary Goal       =         0% Financial Factor
</TABLE>

         C.   Short Term Award Determination

              The Incentive Target is combined with the Financial Factor to
              determine the actual incentive award that will be paid, according
              to the formula shown below.
<TABLE>
<CAPTION>

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

<S>           <C>      <C>   <C>                    <C>             <C>               <C>                <C>
              Level     I    Corporate              Base     X      Incentive    X    Financial    =     Incentive
                                                    Salary          Target            Factor             Compensation
             ------------------------------------------------------------------------------------------------------------
              Level    II   Subsidiary Presidents   Base     X      Incentive    X    Financial    =     Incentive
                                                    Salary          Target            Factor             Compensation
             ------------------------------------------------------------------------------------------------------------
</TABLE>

              The incentive award for the corporate staff will be determined
              solely on the basis of earnings performance using only the
              Corporate Financial Factor. Subsidiary Presidents incentive award
              will be determined using the Corporate Financial Factor plus
              Subsidiary Financial Factor.

              The CEO will be responsible for reviewing all performance ratings
              and award levels to ensure that they are consistent and that they
              accurately reflect the corporation's relative performance for the
              Plan Year.

              Unless otherwise directed by the Board, payments of Awards under
              the Plan shall be made as soon as possible after the Board has
              made a determination regarding the payment of

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              Awards, generally by February 15. Appropriate provisions shall be
              made for any taxes that the subsidiary determines are required to
              be withheld from any Awards under the applicable laws or other
              regulations of any governmental authority, whether Federal, State,
              or Local. The payment of any Award shall be subject to such
              obligations, terms and conditions as the Board may specify in
              making the Award. Acceptance of any Award shall constitute
              agreement by the participant to all obligations, terms, conditions
              and restrictions so imposed.

              Participants who terminate employment for any reason, other than
              death, disability or retirement prior to the end of the plan year
              will not be eligible for an Award. If a participant ceases
              employment after the plan year ends, but before the Board approves
              the Awards, the CEO will recommend to the Board whether the
              participant should receive an award.

              Participants who are hired, transferred or promoted into or out of
              an eligible position prior to July 1 during the plan year may be
              eligible to be considered for a prorated incentive award, based on
              the recommendation of the CEO and approval by the Board.

              Each payment of Short Term Awards must be budgeted and accrued for
              each plan year.

         D.   Subsidiary Incentive Compensation

              o   Each subsidiary should create an incentive pool based on
                  expected goal results.

              o   The incentive pool must be budgeted, Board approved and
                  accrued during the plan year.

              o   At the end of the plan year, the subsidiary president should
                  recommend, to his/her Board, approval to distribute incentive
                  awards to subsidiary employees whom he/she judges to have been
                  instrumental in achieving subsidiary objectives.

VI.      LONG TERM INCENTIVES

         A.   Long Term Award Determination

              The stock option plan key employee participants shall be divided
              into the three groups who are able to affect the long-term
              performance of the organization:

                  o   Corporate Chief Executive Officer
                  o   Corporate President, Chief Operating Officer, Chief
                      Financial Officer
                  o   Corporate Executive Vice Presidents, Subsidiary Presidents

              Each eligible participant would be given an opportunity to earn
              options based on 50% of base salary if defined benchmarks are
              achieved. Benchmarks weighted at:

                  o   Corporate


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                              >> Budgeted Earnings Per Share     -      12.5%
                              >> Budgeted Net Interest Margin    -      12.5%
                              >> Budgeted Efficiency Ratio       -      12.5%
                              >> Budgeted ROA                    -      12.5%

                  o   Personal Goal                              -      25.0%

                  o   Subjective Value                           -      25.0%

         Calculation
         Base Salary x 50% (option opportunity) divided by $11.50 value of stock
              at IPO X (% of benchmarks achieved) = number of stock options

                  o   Fixing the price of the stock at $11.50 (value of stock at
                      IPO) eliminates a key employee from being penalized, in
                      terms of options granted, during times of market
                      appreciation to the stock and being rewarded

VII.     AWARD LIMITATIONS

         The Board of Directors reserves the right to review the total amount of
         all incentive awards and to adjust such amounts to reflect the Board's
         evaluation of the subsidiary's performance for the plan year. These
         evaluations may take into account the impact of interest rate
         fluctuations, peer group comparisons, adjustments for loan losses and
         other similar factors.

VIII.    TERMINATION OR AMENDMENT

         The Plan, in whole or in part, may at any time or from time to time be
         amended, suspended or reinstated and may at any time be terminated by
         action of the Board. Until a determination of Award payment has been
         made by the Board, no participant has a vested right to an Award under
         the Plan.

         No amendment, suspension or termination of the Plan by the Board shall,
         without the consent of the participant, affect the rights of the
         participant to any Award previously determined by the Board which has
         not yet been paid to the participant.

IX.      MISCELLANEOUS PROVISIONS

         A.   Neither the adoption of the Plan nor its operation shall in any
              way affect the right and power of the subsidiary to dismiss any
              employee or otherwise terminate the employment or take other
              action including, but not limited to, removing the employee from
              the incentive-eligible position, at any time, for any reason, with
              or without cause.

         B.   No participant will have the right to alienate, assign, encumber,
              hypothecate or pledge his or her interest in any Award under the
              Plan, voluntarily or involuntarily, and any attempt to do so
              dispose of any such interest will be void.

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         C.   This document is a complete statement of the Plan and as of the
              effective date, supersedes all prior plans, representations and
              proposals written or oral relating to its subject matter. The
              subsidiary will not be bound by or liable to any employee for any
              representation, promise or inducement made by any persons which is
              not embodied in this document.

         D.   The Board has the power and authority to construe, interpret and
              administer the Plan. Any decision arising out of or in connection
              with the construction, interpretation or administration of the
              Plan will lie within the Board's absolute discretion and will be
              binding on all parties.

         E.   Payment of Awards are subject to review and approval by the Board.

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