EXHIBIT 10.1
 
LINCOLN BANCORP INCENTIVE PLAN
 
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LINCOLN BANCORP INCENTIVE PLAN

Lincoln Bank strives to be the best financial institution in which our employees
can work and our customers can do business. Everything we do is for the benefit
of people - our customers, employees and the communities that we serve. We
demonstrate this through our history as a leader in community banking, and we
value our employees and their contributions to our success.

As an employer we believe that it is in the best interest of both the
organization and our employees to reward our workforce for the value of the work
provided. It is our intent to use an incentive based system that will reward
employees based on achievement of Bank performance.

On April 18, 2006, the Board of Directors of Lincoln Bancorp approved the
Lincoln Bancorp Incentive Plan. All Lincoln Bank employees (other than
Commercial Lenders), including the Company’s Named Executive Officers, as
defined by Item 402(a)(3) of the Securities and Exchange Commission’s Regulation
S-K, will participate in the Plan. The Plan will be in effect beginning with the
current fiscal year, which ends December 31, 2006. The Plan will replace the
Performance Incentive Plan adopted March 21, 2000.

Under the Plan, a target percentage will be established for each participant, at
the beginning of each fiscal year, based upon multiple factors, including median
competitive award levels for incentive based compensation within the financial
services industry and pay grades as dictated by the defined pay grade that
governs the range of expected base salary for employees. The pay grade was
established and continues to be managed based on industry specific compensation
analysis performed on an annual basis. The target percentage, after being
adjusted for performance as described below, will be applied to actual base
salary paid for the fiscal year; base salary will include all income as required
under The Fair Labor Standards Act. The target percentages approved by the Board
of Directors for the current fiscal year for each of the Named Executive
Officers are disclosed in the table below.

Employees will be compensated based on Bank performance as measured by the
following factors (the percentage in parenthesis is the weighting assigned to
the factor): Net Income (30%), Deposit Growth (10%), Non-interest Expense (15%),
Non-interest Income (10%), Net Interest Income (25%) and Loan Growth (10%).
Minimum threshold requirements, required for any payment to be made, will be
established for each factor.

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The proposed target percentage payouts for the 2006 fiscal year are as follows:

Named Executive Officer
Incentive Target Percentage
       
Jerry R Engle, President and Chief Executive Officer
30%
 
 
 
 
John M. Baer, Senior Vice President, Chief Financial Officer, Secretary and
Treasurer
30%
 
 
 
 
John Ditmars, Senior Vice President, Administration
30%
 
 
 
 
Jonathan D. Slaughter, Senior Vice President, Chief Credit Officer
30%
 
 
 
 
Bryan Mills, Senior Vice President, Mortgage Lending Manager
30%
 
 
 
 
Pay Grade Band B
25%
 
Pay Grades 7-9
15%
 
Pay Grades 10-12
10%
 
Pay Grades 13-20
5%
 

Awards under the Plan for a fiscal year will be paid in cash to participants
after the awards have been determined and approved by the Compensation
Committee, but in no event later than March 15 of the subsequent fiscal year.
Any taxes required to be withheld by Federal, state, or local regulations will
be deducted from payments made under the Plan. An employee must be actively
employed on the date awards are paid to receive any incentive payment pursuant
to the Plan. The Plan does not give any employee the right to be retained in the
employ of Lincoln Bank; specifically, the Plan does not in any way create an
employment contract or constitute an agreement to employ the employee for any
period of time. All payments will be pro-rated for employees hired during the
plan year. Amounts payable to an employee under this Plan shall be paid solely
from the general assets of Lincoln Bank as they come due from time to time.
Employees’ rights under this Plan are no greater than the right of an unsecured
general creditor and this Plan does not give an employee any security interest,
lien, or claim against any specific asset of Lincoln Bank or Lincoln Bancorp.

The Plan may be amended or discontinued at any time at the election of the
Compensation Committee. To the extent not preempted by Federal law, the Plan
shall be governed by and construed according to the laws of the State of Indiana
without regard to conflict of law principles thereof.

Note: Commercial Lenders are only eligible to participate in the Lincoln Bank
Commercial Lending Incentive Plan.