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                                                                    EXHIBIT 10.2

                           RENAISSANCE LEARNING, INC.
                              INCENTIVE BONUS PLAN


         1. Purpose. The Compensation Committee of the Board of Directors of
Renaissance Learning, Inc. has adopted this Incentive Bonus Plan to establish a
correlation between the annual incentives awarded to Participants and the
Company's financial performance. Subject to the terms and conditions of this
Plan, Participants will receive an incentive bonus tied to Performance Goals.
The Plan will be applicable to the fiscal year ending December 31, 2003 and
subsequent years unless and until terminated by the Compensation Committee.

         2. Definitions. As used in the Plan, the following terms have the
meanings indicated:

                  (a) "Board" means the Board of Directors of the Company.

                  (b) "Code" means the Internal Revenue Code of 1986, as
         amended.

                  (c) "Committee" means the Compensation Committee of the Board.

                  (d) "Company" means Renaissance Learning, Inc. and its
         consolidated subsidiaries.

                  (e) "Disability" means a condition that meets the requirements
         set forth in Section 22(e)(3) of the Code, as determined by the
         Committee.

                  (f) "Participant" means any executive officer or other
         employee of the Company participating in the Plan for the applicable
         Fiscal Year.

                  (g) "Performance Goal" means a goal established by the
         Committee to measure the performance of the Company for the purpose of
         determining whether, and to what extent, an award will be payable under
         the Plan for the Fiscal Year.

                  (h) "Fiscal Year" means the Company's fiscal year. The initial
         Fiscal Year is the fiscal year ending December 31, 2003.

                  (i) "Plan" means this Renaissance Learning, Inc. Incentive
         Bonus Plan, as amended from time to time.

                  (j) "Retirement" means the termination of employment of a
         Participant after the attainment of age 62 with at least ten years of
         service with the Company, or due to early retirement with the consent
         of the Committee.

                  (k) "Salary" means base salary actually earned by a
         Participant during the applicable Fiscal Year.

         3. Participation. Participation in the Plan for any Fiscal Year shall
be limited to the Participants designated by the Committee by name or position.
At the Committee's discretion, a person who becomes a Participant after the
commencement of a Fiscal Year shall be eligible to receive an award pursuant to
Section 4 on such terms as the Committee may determine.


         4. Determination of Awards.

                  (a) From time to time, the Committee may approve one or more
         Performance Goals and the terms and amount of an award for each
         Participant. Awards are payable in cash and based on a percentage of
         each Participant's Salary for the Fiscal Year, if and to the extent
         that Performance Goals are achieved.




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                  (b) The Committee expressly reserves the right to increase,
         reduce or eliminate entirely any award at any time before it is paid.
         Such determination shall be conclusive and binding on the
         Participant(s) and the Company.

         5. Vesting and Payment of Awards.

                  (a) Subject to the other terms and conditions of this Plan,
         each award granted pursuant to the Plan shall vest 25% per Fiscal Year
         beginning with the last day of the Fiscal Year following the Fiscal
         Year in which Performance Goals are achieved and annually, as of the
         last day of each subsequent Fiscal Year, thereafter. The vested portion
         of each award shall be payable promptly following the date upon which
         such portion of the award vested. All awards under the Plan are subject
         to federal, state and local income and payroll tax withholding.

                  (b) Even if the Performance Goals have been met, a Participant
         shall receive no payment of an award if the Participant's employment
         with the Company terminates prior to the date of payment for any reason
         other than death, Disability or Retirement. A Participant who
         terminates employment for death, Disability or Retirement shall be
         eligible to receive an award based on Salary earned in the applicable
         Fiscal Year through the date of termination, if an award is otherwise
         payable pursuant to Section 4.

                  (c) If a Participant dies and is subsequently entitled to
         receive an award under the Plan, the award shall be paid to the
         Participant's estate.

         6. Administration. The Plan shall be administered by the Committee. The
Committee may adopt rules and regulations for carrying out the Plan, and the
Committee may take such actions as it deems appropriate to ensure that the Plan
is administered in the best interests of the Company. The Committee has the
authority to construe and interpret the Plan, resolve any ambiguities, grant
waivers or exceptions to the terms of the Plan or an award, and make
determinations with respect to the eligibility for or amount and terms of any
award. The interpretation, construction and administration of the Plan by the
Committee shall be final and conclusive. The Committee may consult with counsel,
who may be counsel to the Company, and shall not incur any liability for any
action taken in good faith in reliance upon the advice of counsel. The
Committee, in its discretion, may delegate its authority and duties under the
Plan to the Chief Executive Officer, Chief Financial Officer and/or other senior
officers of the Company under such conditions and/or limitations as the
Committee may establish.

         7. Rights. Participation in the Plan and the right to receive awards
under the Plan shall not give a Participant any proprietary interest in the
Company or any of its assets or create contractual or other legal duties in
favor of a Participant. A Participant shall for all purposes be a general
creditor of the Company. The interests of a Participant cannot be assigned,
anticipated, sold, encumbered or pledged and shall not be subject to the claims
of his or her creditors. Nothing in the Plan shall confer upon any Participant
the right to receive an award, be selected as a Participant or continue in the
employ of the Company, or shall interfere with or restrict in any way the right
of the Company to discharge a Participant at any time for any reason whatsoever,
with or without cause. A person's selection to be a Participant in any Fiscal
Year does not give such person any right to be selected as a Participant in any
other Fiscal Year.

         8. Successors. The Plan shall be binding on the Participants and their
personal representatives. If the Company becomes a party to any merger,
consolidation, reorganization or other corporate transaction, the Plan shall
remain in full force and effect as an obligation of the Company or its successor
in interest.

         9. Amendment and Termination. The Committee may amend or terminate the
Plan or any awards hereunder at any time as it deems appropriate.