UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 8-K

                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

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

        DATE OF REPORT (Date of earliest event reported): August 1, 2007

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

                           FIRST MERCHANTS CORPORATION
             (Exact name of registrant as specified in its charter)

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

         INDIANA                     0-17071                     35-1544218
(State or other jurisdiction   (Commission file number)        (IRS Employer
     of incorporation)                                       Identification No.)

                             200 East Jackson Street
                                  P.O. Box 792
                              Muncie, IN 47305-2814
          (Address of principal executive offices, including zip code)

                                 (765) 747-1500
              (Registrant's telephone number, including area code)

                                  Not Applicable
          (Former name or former address, if changed since last report)

Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
    230.425)

[ ] Soliciting material pursuant to  Rule 14a-12 under  the Exchange Act (17 CFR
    240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
    Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
    Act (17 CFR 240.13e-4(c))

<PAGE>
Item 1.01.        Entry into a Material Definitive Agreement.

     (a) On July 24, 2007, the Board of Directors of First Merchants Corporation
(the  "Corporation")  approved the establishment of the 2007 Directors' Deferred
Compensation  Plan (the "Plan") for the purpose of permitting  the  non-employee
directors  of  the  Corporation  and  the  non-employee   directors  of  certain
affiliates  of the  Corporation  to elect to defer  until a future date all or a
portion  of the  fees  payable  to them for  their  services  as board  members.
Effective as of August 1, 2007, the  definitive  Plan document was finalized and
executed by the  Corporation.  A copy of the Plan is attached  hereto as Exhibit
10.1.

The Plan provides that participating  non-employee directors may choose to defer
receipt until future  periods of the fees payable to them based on their service
as directors.  The Plan outlines several criteria for how deferral elections are
to be  made,  the  parameters  for how long  receipt  can be  deferred,  and the
occurrences  that will accelerate  payment of the deferred fees. Upon payment of
the fees under the Plan,  the director  will  receive the  deferred  amount plus
interest  at a variable  rate equal to the greater of: (i) the Fed Funds Rate or
(ii) the Five-Year  Treasury  Interest  Rate, but in no event shall the interest
rate exceed 120 percent of the  Applicable  Long Term  Federal  Rate for monthly
compounding.

The Corporation also intends to establish a "rabbi trust" in connection with the
Plan and to make  contributions  to the trust to provide itself with a source of
funds to assist it in  meeting  its  liabilities  under the Plan.  However,  the
Corporation's  obligations  under the Plan will  remain an  unsecured,  unfunded
promise  to pay  benefits  to the  participants  in  accordance  with the Plan's
provisions.

Item 9.01.        Financial Statements and Exhibits.

     (d) (10.1) 2007 Directors'  Deferred  Compensation Plan, dated as of August
1, 2007.
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

DATE:  August 15, 2007

                                      FIRST MERCHANTS CORPORATION

                                      By: /s/Mark K. Hardwick
                                         -------------------------------
                                            Mark K. Hardwick,
                                            Executive Vice President and
                                            Chief Financial Officer


<PAGE>

                                 EXHIBIT INDEX

10.1  2007 Directors' Deferred Compensation Plan, dated as of August 1, 2007


<PAGE>
                                  Exhibit 10.1

                           FIRST MERCHANTS CORPORATION

                   2007 DIRECTORS' DEFERRED COMPENSATION PLAN

                        (Effective as of August 1, 2007)





                                Krieg DeVault LLP
                         One Indiana Square, Suite 2800
                           Indianapolis, IN 46204-2079
                              www.kriegdevault.com



<PAGE>






                                   ADOPTION OF
                          FIRST MERCHANTS CORPORATION
                   2007 DIRECTORS' DEFERRED COMPENSATION PLAN


         Pursuant to resolutions adopted by the Board of Directors of First
Merchants Corporation (the "Company"), the undersigned officers of the Company
hereby adopt the First Merchants Corporation 2007 Directors' Deferred
Compensation Plan, effective as of August 1, 2007, on behalf of the Company, in
the form attached hereto.

         Dated this 24th  day of July, 2007.



                           FIRST MERCHANTS CORPORATION



                                By: /s/Michael C. Rechin
                                    --------------------------------
                                    Michael C. Rechin, President and
                                    Chief Executive Officer


ATTEST:
/s/Mark K. Hardwick
-------------------------------------
Mark K. Hardwick, Executive Vice President and
Chief Financial Officer




<PAGE>

                           FIRST MERCHANTS CORPORATION
                   2007 DIRECTORS' DEFERRED COMPENSATION PLAN

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                       <C>    <C>    <C>    <C>    <C>    <C>
                                                                                                               PAGE

ARTICLE I INTRODUCTION............................................................................................1

         Section 1.1           Purpose............................................................................1
         Section 1.2           Effective Date; Plan Year..........................................................1
         Section 1.3           Administration.....................................................................1
         Section 1.4           Affiliates.........................................................................1
         Section 1.5           Supplements........................................................................1
         Section 1.6           Definitions........................................................................1

ARTICLE II ELIGIBILITY AND PARTICIPATION..........................................................................2

         Section 2.1           Eligibility........................................................................2
         Section 2.2           Deferral Election Form.............................................................2

ARTICLE III CONTRIBUTIONS AND ALLOCATIONS.........................................................................2

         Section 3.1           Participant Deferral Contributions.................................................2
         Section 3.2           Deferral Elections.................................................................2
         Section 3.3           Plan Account.......................................................................4
         Section 3.4           Investment Credits.................................................................4
         Section 3.5           Account Allocations................................................................4

ARTICLE IV BENEFIT PAYMENTS.......................................................................................5

         Section 4.1           Time of Payment of Benefits........................................................5
         Section 4.2           Method of Payment..................................................................5
         Section 4.3           Method of Payment Elections........................................................5
         Section 4.4           Vesting............................................................................6
         Section 4.5           Change in Control..................................................................6
         Section 4.6           Unforeseeable Emergency............................................................7
         Section 4.7           Acceleration of Time of Payment....................................................8

ARTICLE V PLAN ADMINISTRATION....................................................................................10

         Section 5.1           Appointment of the Committee......................................................10
         Section 5.2           Powers and Responsibilities of the Committee......................................10
         Section 5.3           Liabilities.......................................................................10

ARTICLE VI BENEFIT CLAIMS........................................................................................11


ARTICLE VII FUNDING AND TRANSFERS................................................................................11

         Section 7.1           Unfunded Status...................................................................11
         Section 7.2           Trust.............................................................................11

ARTICLE VIII AMENDMENT AND TERMINATION OF THE PLAN...............................................................11

         Section 8.1           Amendment of the Plan.............................................................11
         Section 8.2           Termination of the Plan...........................................................11

ARTICLE IX PARTICIPATION BY AFFILIATES...........................................................................11

         Section 9.1           Affiliate Participation...........................................................11
         Section 9.2           Company Action Binding on Other Employers.........................................12

ARTICLE X MISCELLANEOUS..........................................................................................12

         Section 10.1          Governing Law.....................................................................12
         Section 10.2          Headings and Gender...............................................................12
         Section 10.3          Withholding of Taxes..............................................................12
         Section 10.4          Spendthrift Clause................................................................12
         Section 10.5          Counterparts......................................................................12
         Section 10.6          No Enlargement of Rights..........................................................12
         Section 10.7          Limitations on Liability..........................................................12
         Section 10.8          Incapacity of Participant or Beneficiary..........................................12
         Section 10.9          Evidence..........................................................................13
         Section 10.10         Action by Company.................................................................13
         Section 10.11         Severability......................................................................13
         Section 10.12         Information to be Furnished by a Participant......................................13
         Section 10.13         Binding on Successors.............................................................13
</TABLE>
<PAGE>
                                    ARTICLE I

                                  INTRODUCTION

     Section  1.1  Purpose.  The purpose of the First Merchants Corporation 2007
Directors'  Deferred  Compensation  Plan (the "Plan") is to permit  non-employee
members of the Board of Directors (the "Board") of First  Merchants  Corporation
(the "Company") and non-employee members of the board of directors of Affiliates
who adopt the Plan with the Company's consent in accordance with Section 9.1, to
elect to defer all or a portion of the fees  payable to them for their  services
as board  members.  It is the intention of the Company and  Affiliates  that the
Plan constitute a deferred  compensation  arrangement that complies with Section
409A  of  the  Internal   Revenue  Code  of  1986,   as  amended  (the  "Code").
Consequently,  the Plan  will be  administered  and its  provisions  interpreted
consistently with that intention.

     Section 1.2  Effective Date; Plan Year. The "Effective Date" of the Plan is
August 1, 2007. The "Plan Year" is the 12-month period beginning on each January
1 and ending on the next following December 31.

     Section 1.3  Administration.   The  Plan  will  be  administered   by   the
Compensation Committee of the Board (the "Committee").  The Committee, from time
to time, may adopt any rules and procedures it deems  necessary or desirable for
the proper and efficient administration of the Plan that are consistent with the
terms of the Plan. The Committee may also delegate day-to-day  administration to
individual employees of First Merchants Bank. Any notice or document required to
be  given  or  filed  with  the  Committee  will be  properly  given or filed if
delivered to or mailed,  by registered  mail,  postage paid, to the Compensation
Committee  of the Board of  Directors,  First  Merchants  Corporation,  200 East
Jackson, Muncie, Indiana 47308, Attention: Human Resource Department.

     Section  1.4  Affiliates.  Any  corporation  or  trade  or  business  whose
employees  are  treated as being  employed by the  Company  under Code  Sections
414(b),  414(c),  414(m) or 414(o) (an  "Affiliate") may adopt the Plan with the
Company's consent in accordance with Section 9.1.

     Section  1.5  Supplements.  The  provisions  of the Plan may be modified by
supplements to the Plan. The terms and provisions of each  supplement are a part
of the  Plan and  supersede  any  other  provisions  of the  Plan to the  extent
necessary to eliminate any inconsistencies  between the supplement and any other
Plan provisions.

     Section  1.6  Definitions.  The following  terms are defined in the Plan in
the following Sections:
<TABLE>
<CAPTION>
<S>                <C>                                                          <C>
                   Term                                                         Plan Section

                   Acceleration Event........................................   4.7
                   Account...................................................   3.3
                   Affiliate.................................................   1.4
                   Board.....................................................   1.1
                   Change in Control.........................................   4.5
                   Code......................................................   1.1
                   Committee.................................................   1.3
                   Company...................................................   1.1
                   Director..................................................   2.1
                   Effective Date............................................   1.2
                   ERISA.....................................................   7.2
                   Fees......................................................   3.1
                   Participant...............................................   2.2
                   Participant Deferral Contribution.........................   3.1
                   Plan......................................................   1.1
                   Plan Year.................................................   1.2
                   Separation from Service...................................   4.1(b)
                   Total and Permanent Disability............................   3.2(e)(ii)
                   Trust.....................................................   7.2
                   Unforeseeable Emergency...................................   3.2(e)(i)
</TABLE>

<PAGE>
                                   ARTICLE II

                          ELIGIBILITY AND PARTICIPATION

     Section 2.1  Eligibility. Any duly elected and serving  non-employee member
of the Board or board of  directors  of an  Affiliate  that has adopted the Plan
under Article IX ("Director") is eligible to become a Participant in the Plan as
of the  later  of the  Effective  Date or the  date  the  individual  becomes  a
Director.

     Section 2.2  Deferral Election Form. A Director will become a "Participant"
by  completing a deferral  election  form pursuant to Article III. A Participant
will cease to be an active  Participant  effective as of the earlier of the date
the Plan is terminated  or the date the  Participant  is no longer  serving as a
Director, so that he or she will not be entitled to make deferrals under Article
III on or after that date.

                                   ARTICLE III

                          CONTRIBUTIONS AND ALLOCATIONS

     Section 3.1  Participant Deferral  Contributions.  Subject to the terms and
limitations  of this Article III, a Participant  may elect,  pursuant to Section
3.2, to have all or a portion of his Fees  payable in any Plan Year  withheld by
the Company and  credited as a  "Participant  Deferral  Contribution"  under the
Plan.  The  term  "contribution"  is  used  for  ease  of  reference;   however,
contributions  are merely  credits  to each  Participant's  Account,  which is a
bookkeeping  account.  The term "Fees," for purposes of the Plan, means the fees
payable by the Company or an Affiliate to the Participant for the  Participant's
services as a Director,  including  retainer  fees for  attendance  at regularly
scheduled  meetings,  special  meetings  called from time to time,  and fees for
attendance  at any and all meetings of  committees  of the  applicable  board of
directors.

     Section 3.2  Deferral Elections. Participant Deferral Contributions will be
withheld from a  Participant's  Fees in accordance  with the following terms and
conditions.

(a)  Requirement for Deferral Elections.  As a condition  to the Company's or an
     Affiliate's obligation to withhold and the Committee's obligation to credit
     Participant  Deferral  Contributions  for  the  benefit  of  a  Participant
     pursuant to Section 3.1, the Participant  must complete and file a deferral
     election form with the Committee (in a format prescribed by the Committee).

(b)  Timing  of  Execution and Delivery of  Elections.  To be effective to defer
     any portion of a Participant's Fees, a deferral election form must be filed
     with  the  Committee  on or prior  to the  last  day of the  calendar  year
     preceding  the initial Plan Year in which the  services  giving rise to the
     Fees are performed.  This Fee deferral  election will remain  effective for
     all future years unless the Participant files a new Fee deferral  election,
     terminating  or amending  the  Participant's  Fee  deferral  election.  For
     example,  to defer Fees payable with respect to director services performed
     during the 2008 and subsequent  Plan Years, an election must be filed on or
     before  December 31, 2007.  This  deferral  election will apply in the 2008
     Plan Year and all  subsequent  Plan Years until  terminated or amended with
     respect to a future Plan Year.

(c)  Initial  Eligibility.  In  the  case of  the  first  Plan  Year in which an
     individual becomes eligible to participate,  the deferral election form may
     be filed  at any time  within  30 days of the  date  the  individual  first
     becomes  eligible to  participate  (rather  than the date  specified  under
     subsection 3.2(b)).  This initial election will only apply to Fees paid for
     services  performed  after the filing of the deferral  election form.  This
     special initial eligibility election rule will not apply if the Director is
     or has been a participant in a deferred  compensation  arrangement required
     to be aggregated with this Plan under the rules of Code Section 409A.

(d)  Change of Deferral  Elections.  Subject  to  the  provisions  of subsection
     3.2(e),  as of December 31 of each year, a deferral  election made for Fees
     payable in a  subsequent  Plan Year will remain in effect for the Plan Year
     and all future  Plan Years,  unless and until the  election is revoked or a
     new election filed,  effective solely for future Plan Years. The revocation
     or new  election  must be filed in  accordance  with  the  requirements  of
     subsection 3.2(b). No deferral election may be changed for Fees payable for
     a Plan  Year  after  the  last  day of the  election  period  described  in
     subsection 3.2(b). For example, any election in place for 2008 Fees may not
     be  changed  after  December  31,2007,   however,   in  December  2009  the
     Participant  may submit a new deferral  election that terminates or changes
     the amount of the deferral for the year 2010.

(e)  Cancellation of Elections.

     (i)  Unforeseeable  Emergency.  The Committee, in its sole discretion,  may
          cancel  a  Participant's  election  to  defer  Fees  if the  Committee
          determines the Participant has suffered an  "Unforeseeable  Emergency"
          or has taken a hardship  distribution  pursuant to Treasury Regulation
          1.401(k)-1(d)(3)  from a plan qualified under Code Section 401(k). The
          cancellation   will  apply  to  the  period   after  the   Committee's
          determination.  The Participant  must submit a signed statement of the
          facts causing the severe financial  hardship and any other information
          required  by the  Committee,  in its sole  discretion.  "Unforeseeable
          Emergency"  means  a  severe  financial  hardship  of the  Participant
          resulting  from  an  illness  or  accident  of  the  Participant,  the
          Participant's   spouse,   the   Participant's   beneficiary,   or  the
          Participant's  dependent (as defined in Code Section  152(a),  without
          regard to Code Sections 152(b)(1),  (b)(2) and (d)(1)(B)); loss of the
          Participant's  property due to casualty (including the need to rebuild
          a home following damage to a home not otherwise  covered by insurance,
          for  example,  not  as a  result  of  a  natural  disaster);  imminent
          foreclosure of or eviction from the Participant's  primary  residence;
          the  need  to  pay  for  medical  expenses,  including  non-refundable
          deductibles, as well as for the costs of prescription drug medication;
          the need to pay for the  funeral  expenses  of a spouse or a dependent
          (as defined in Code Section 152(a)) or other similar extraordinary and
          unforeseeable  circumstances  arising as a result of events beyond the
          control of the Participant.

     (ii) Total and Permanent Disability.  The Committee in its sole discretion,
          may  also  cancel  a  Participant's  election  to  defer  fees  if the
          Committee  determines  that the  Participant has incurred a "Total and
          Permanent  Disability."  The  determination  of  Total  and  Permanent
          Disability will be made by a physician approved by the Committee.  Any
          cancellation   will  apply  to  the  period   after  the   Committee's
          determination.  A "Total  and  Permanent  Disability"  is a  medically
          determinable   physical  or  mental   impairment   resulting   in  the
          Participant's  inability  to perform the duties of his or her position
          or any substantially  similar  position,  where such impairment can be
          expected  to  result  in  death  or  can be  expected  to  last  for a
          continuous period of not less than six months.

     Section 3.3  Plan  Account.  The Committee  will  establish and maintain an
"Account"  under the Plan for each  Participant and will increase and decrease a
Participant's Account as provided in Section 3.5.

     Section 3.4  Investment Credits. A Participant's  Account will be increased
or  decreased  to reflect  the  increase or decrease in the value of the Account
established  for the  Participant.  The  amount  of  interest  credited  will be
determined  by  treating  the  Participant's  Account  as if such  balance  were
invested in the greater of the Fed Funds Rate or the Five-Year Treasury Interest
Rate  determined  as of the first  business  day of each quarter of the calendar
year, but not to exceed 120 percent of the Applicable Long Term Federal rate for
monthly compounding.  In the event any Participant is entitled to a distribution
of the Account  under  Article IV, the  increase or decrease in the value of the
Account  will  be  allocated  as of the  last  day of  the  quarter  immediately
preceding the quarter in which the payment to the Participant will be made.

     Section  3.5  Account  Allocations.   As  of  each  accounting  date,  each
Participant's Account will be:

      (i) Increased  by the amount  credited  to the Account  under  Section 3.1
          since the last accounting;

     (ii) Increased  or decreased by the amount  determined  under  Section 3.4
          since the last accounting; and

    (iii) Decreased by any payment made under Article IV.

The  accounting  date  under this  Section  will be any date  determined  by the
Committee.  However, the accounting required under this Section must be made, at
a minimum, as of the last day of each Plan Year.

                                   ARTICLE IV

                                BENEFIT PAYMENTS

     Section  4.1  Time of Payment of  Benefits.  Except as provided in Sections
4.5 through 4.7, a Participant  will receive or will begin to receive payment of
his Account  balance (as determined  under Article III) within 90 days following
the date  specified  for  payment or the  commencement  of  payment  effectively
elected by the Participant, as provided in subsection 4.1(a).

(a)  Timing of Execution and Delivery of Election. A  Participant  may elect the
     date  his  Account  balance  will  be  paid  or  will  begin  to be paid by
     completing  and filing with the Committee a payment  election form approved
     by the Committee. To be effective,  the election under this Section must be
     filed  with the  Committee  no later  than the later  of:  (i) the time the
     Participant  first makes a deferral  election under this Plan (or under any
     other  plan  required  to be  aggregated  with  this Plan  pursuant  to the
     requirements  of Code Section 409A);  or (ii) December 31, 2007. If no date
     is specified,  payment will be made or commenced  within 90 days  following
     the Participant's Separation from Service.

(b)  Separation  from Service.  "Separation  from  Service"  means  the  date on
     which the Participant ceases to be a Director.


(c)  Change of Payment  Election.  An election as to the date  payment  will  be
     made or commenced may be changed by a  Participant  by filing a new payment
     election form with the  Committee;  provided,  however,  that:  (i) the new
     election  will not take effect  until at least 12 months after the date the
     new election is filed, (ii) the single lump sum payment or the commencement
     of installment  payments will be delayed for a period of not less than five
     years from the date the payment or first payment would  otherwise have been
     made,  and (iii) the new  election is filed with the  Committee at least 12
     months prior to the date of the first scheduled payment under the Plan.

Section 4.2  Method of Payment. Except as provided in Sections 4.5 through  4.7,
a Participant may elect, in accordance with Section 4.3, to have  the balance of
his or her Account distributed in cash in:

(a)  A single lump sum payment; or

(b)  Annual installment payments over a period of 2 to 10 years.

Section 4.3  Method of Payment Elections.

(a)  Initial Election. A Participant may elect the manner in which his Account
     balance will be paid to him under Section 4.2 in accordance  with the terms
     and  conditions of this Section.  To make an election,  a Participant  must
     file an election with the  Committee (on a form or forms  prescribed by the
     Committee).  To be effective, the election under this Section must be filed
     with the Committee no later than the later of: (i) the time the Participant
     first makes a deferral  election under the Plan; or (ii) December 31, 2007.
     If no election is made or if the  election is not timely or properly  made,
     distribution will be made in the form of a single lump sum payment.

(b)  Change  of Method of Payment  Election.  An  election as to the manner of
     payment may not be changed after the payment has been made or payments have
     commenced.  Prior to that time,  a  Participant  may change his election by
     filing a new election form with the Committee; provided, however, that: (i)
     the new  election  will not take effect  until at least 12 months after the
     date the new  election  is filed;  (ii) the single  lump sum payment or the
     commencement of installment payments with respect to which such election is
     made must be  deferred  for a period of not less than five  years  from the
     date  such  payment  would  otherwise  have  been  made;  and (iii) the new
     election  is  filed  at least  12  months  prior  to the date of the  first
     scheduled payment under the Plan.

(c)  Installments.  If  installment  distributions  are  elected,  the initial
     annual  installment amount will be the Account balance otherwise payable in
     a single sum  multiplied  by a fraction,  the numerator of which is one and
     the denominator of which is the total number of installment  distributions.
     Subsequent  annual  installments  will  also be a  fraction  of the  unpaid
     Account  balance,  the numerator of which is always one but the denominator
     of which is the denominator  used in calculating  the previous  installment
     minus one. For example,  if five annual  installment  payments are elected,
     the initial  installment will be one-fifth of the vested single sum Account
     balance, the second installment will be one-fourth of the remaining Account
     balance  and the  third  installment  will be  one-third  of the  remaining
     Account balance, and so on.

     Section 4.4  Vesting.  A Participant will be fully  "vested" in his Account
balance at all times.

     Section 4.5  Change  in  Control. In  the event a Change in Control occurs,
the  Participant's  Account will be  distributed no later than 90 days following
such  determination,  in a single lump sum payment.  A "Change in Control" means
any of the following:

(a)  A  change in the  ownership  of the  Company  occurs on the date that any
     person, or group of persons, as defined below,  acquires ownership of stock
     of the  Company  that,  together  with  stock  held by the person or group,
     constitutes  more than 50 percent of the total fair  market  value or total
     voting power of the stock of the Company.  However,  if any person or group
     is considered to own more than 50 percent of the total fair market value or
     total voting power of the stock, the acquisition of additional stock by the
     same person or group is not  considered  to cause a change in the ownership
     of the  Company  (or to  cause a change  in the  effective  control  of the
     Company as defined in subsection  4.5(b)). An increase in the percentage of
     stock owned by any person or group,  as a result of a transaction  in which
     the Company  acquires its stock in exchange for property will be treated as
     an acquisition of stock for purposes of this  subsection.  This  subsection
     only  applies when there is a transfer of stock of the Company (or issuance
     of stock of a  corporation)  and stock in the Company  remains  outstanding
     after the transaction.

          For purposes of this  subsection and subsection  4.5(b),  persons will
     not be considered  to be acting as a group solely  because they purchase or
     own  stock of the  Company  at the same  time,  or as a result  of the same
     public  offering.  However,  persons will be  considered  to be acting as a
     group if they are  owners  of a  corporation  that  enters  into a  merger,
     consolidation,  purchase  or  acquisition  of  stock  or  similar  business
     transaction with the Company. If a person,  including an entity, owns stock
     in both corporations that enter into a merger,  consolidation,  purchase or
     acquisition of stock or similar transaction, such shareholder is considered
     to be acting as a group with other  shareholders  only with  respect to the
     ownership in that  corporation  before the  transaction  giving rise to the
     change  and  not  with  respect  to the  ownership  interest  in the  other
     corporation.

(b)  Change in the Effective  Control.  A change in the effective control of the
     Company will occur when: (i) any person or group acquires,  or has acquired
     during  the  12-month  period  ending  on  the  date  of  the  most  recent
     acquisition by such person(s), ownership of stock of the Company possessing
     30 percent or more of the total voting power; or (ii) a majority of members
     of the Board is replaced  during any  12-month  period by  directors  whose
     appointment or election is not endorsed by a majority of the members of the
     board  of  directors  prior  to the date of the  appointment  or  election.
     However,  if any person or group is considered to  effectively  control the
     Company,  the acquisition of additional  control of the Company by the same
     person(s) is not considered to cause a change in the effective control.

(c)  Change in the Ownership of a Substantial Portion of the Company's Assets.
     A change in the ownership of a substantial  portion of the Company's assets
     occurs  on the date  that any  person or group  acquires,  or has  acquired
     during  the  12-month  period  ending  on  the  date  of  the  most  recent
     acquisition  by such  person(s),  assets from the Company that have a total
     gross fair market value equal to or more than 40 percent of the total gross
     fair market value of all of the assets of the Company  immediately prior to
     such acquisition(s).  Gross fair market value means the value of the assets
     of the Company,  or the value of the assets being  disposed of,  determined
     without regard to any liabilities associated with such assets.

          However,  there is no Change in  Control  under this  subsection  when
     there is a transfer to an entity that is controlled by the  shareholders of
     the Company  immediately  after the  transfer.  A transfer of assets by the
     Company is not treated as a change in the  ownership  of such assets if the
     assets are  transferred  to: (i) a shareholder of the Company  (immediately
     before the asset  transfer)  in exchange  for or with respect to its stock;
     (ii) an entity,  50 percent or more of the total  value or voting  power of
     which is owned, directly or indirectly,  by the Company; (iii) a person, or
     group of persons, that owns, directly or indirectly,  50 percent or more of
     the total value or voting power of all the outstanding stock of the Company
     or (iv) an entity,  at least 50 percent of the total value or voting  power
     of which is owned, directly or indirectly,  by a person described in (iii).
     For purposes of this subsection,  except as otherwise provided,  a person's
     status is  determined  immediately  after the  transfer of the assets.  For
     example,  a transfer to a corporation in which the Company has no ownership
     interest before the transaction,  but which is a majority-owned  subsidiary
     of the  Company  after the  transaction,  is not treated as a change in the
     ownership of the assets of the Company.

          For purposes of this subsection,  persons will not be considered to be
     acting as a group solely because they purchase assets of the Company at the
     same time.  However,  persons will be considered to be acting as a group if
     they are owners of a corporation that enters into a merger,  consolidation,
     purchase or acquisition of assets, or similar business transaction with the
     Company. If a person,  including an entity shareholder,  owns stock in both
     corporations  that  enter  into  a  merger,   consolidation,   purchase  or
     acquisition  of  assets,  or  similar  transaction,   such  shareholder  is
     considered to be acting as a group with other shareholders in a corporation
     only  to the  extent  of the  ownership  in  that  corporation  before  the
     transaction giving rise to the change and not with respect to the ownership
     interest in the other corporation.

          Notwithstanding the foregoing,  the acquisition of common stock of the
     Company by any  retirement  plan  sponsored  by the Company or an Affiliate
     will not constitute a Change in Control.

     Section 4.6  Unforeseeable Emergency. In the event the Committee determines
in its sole  discretion  that a Participant  has  experienced  an  Unforeseeable
Emergency,  all or a portion of a  Participant's  Account may be  distributed no
later than 90 days following such  determination,  in a single lump sum payment.
The Participant  must submit a signed  statement of the facts causing the severe
financial hardship and any other information  required by the Committee,  in its
sole  discretion.  Payment  under  this  Section  is  subject  to the  following
conditions:

(a)  The emergency must not be able to be relieved  through  reimbursement  or
     compensation   from   insurance  or  otherwise,   by   liquidation  of  the
     Participant's  assets,  to the extent  liquidation of such assets would not
     cause severe  financial  hardship,  or by cessation of deferrals under this
     Plan.

(b)  The amount of the distribution  must be limited to the amount  reasonably
     necessary  to  satisfy  the  emergency  need  (which  may  include  amounts
     necessary  to pay any  Federal,  state or local  income  taxes or penalties
     reasonably  anticipated to result from the distribution) and must take into
     account any  additional  compensation  available due to  cancellation  of a
     deferral election under subsection 3.2(e).

     Section  4.7  Acceleration  of Time  of  Payment.  Except  as  provided  in
Sections  4.5,  4.6 or this  Section,  the  time or  schedule  of  payment  of a
Participant's   Account  provided  in  Sections  4.1  through  4.4  may  not  be
accelerated.  The time or schedule of payment of a Participant's  Account may be
accelerated in the following  circumstances,  each of which is an  "Acceleration
Event,"  to a time  that is no  later  than 90 days  following  the  Committee's
determination that one of the Acceleration Events has occurred:

(a)  Domestic  Relations  Order.  The time or  schedule  of a  payment  from a
     Participant's Account may be accelerated to make a payment to an individual
     other  than the  Participant  as may be  necessary  to  fulfill a  domestic
     relations order (as defined in Code Section 414(p)(1)(B)).

(b)  Conflicts  of  Interest.  The  time  or  schedule  of a  payment  from  a
     Participant's Account may be accelerated to the extent reasonably necessary
     to avoid the violation of an applicable  Federal,  state,  local or foreign
     ethics law or conflicts of interest  law  (including  where such payment is
     reasonably  necessary  to permit the  service  provider to  participate  in
     activities in the normal course of his or her position in which the service
     provider  would  otherwise not be able to  participate  under an applicable
     rule). A payment is reasonably necessary to avoid the violation of Federal,
     state,  local or foreign  ethics laws or  conflicts  of interest law if the
     payment  is a  necessary  part  of a  course  of  action  that  results  in
     compliance with a Federal,  state, local or foreign ethics law or conflicts
     of  interest  law that  would be  violated  absent  such  course of action,
     regardless of whether  other  actions would also result in compliance  with
     the Federal,  state,  local or foreign  ethics law or conflicts of interest
     law.

(c)  Income  Inclusion  Under Code  Section  409A.  The time or  schedule of a
     payment from a  Participant's  Account may be accelerated to pay the income
     tax,  interest  and  penalties  imposed  if the  Plan  fails  to  meet  the
     requirements  of Code  Section  409A  and  related  regulations;  provided,
     however, such payment will not exceed the amount required to be included in
     income as a result of the failure to comply with the  requirements  of Code
     Section 409A and related regulations.

(d)  Plan  Termination.  The time or  schedule of payment or  commencement  of
     payments from a Participant's  Account may be accelerated  when the Plan is
     terminated in accordance with one of the following:

     (i)  The Company terminates  the  Plan  within  12  months  of a  corporate
          dissolution  taxed under Code  Section  331, or with the approval of a
          bankruptcy court pursuant to 11 U.S.C. ss.503(b)(1)(A),  provided that
          the amounts deferred under the Plan are included in the  Participants'
          gross  incomes in the latest of the  following  years (or, if earlier,
          the taxable year in which the amount is constructively received).

          (A)  The calendar year in which the Plan  termination  and liquidation
               occurs;

          (B)  The first  calendar year in which the amount is no longer subject
               to a substantial risk of forfeiture; or

          (C)  The first calendar year in which the payment is  administratively
               practicable.

     (ii) The Company's irrevocable action to terminate and liquidate the Plan
          within the 30 days  preceding  or the 12 months  following a change in
          control as defined in Treasury Regulation 1.409A-3(i)(5). For purposes
          of this subsection 4.7(e)(ii),  the Plan may be terminated only if all
          agreements, methods, programs, and other arrangements sponsored by the
          Company and all participating Affiliates immediately after the time of
          the change in control with respect to which  deferrals of compensation
          are treated as having been deferred under a single plan under Treasury
          Regulation  1.409A-1(c)(2)  are terminated and liquidated with respect
          to each Participant  that  experienced the change in control,  so that
          under  the  terms  of  the   termination   and  liquidation  all  such
          Participants  are  required  to receive  all  amounts of  compensation
          deferred under the Plan and other arrangements within 12 months of the
          date the Company  irrevocably  takes all necessary action to terminate
          and liquidate the Plan and other arrangements.

     (iii)The Company's termination and liquidation of the Plan, provided that:

          (A)  The  termination  and  liquidation  does not occur proximate to a
               downturn in the financial health of the Company;

          (B)  The Company  terminates and liquidates all agreements,  programs,
               and other  arrangements  that would be aggregated  under Treasury
               Regulation  ss.1.409A-1(c)  if the  Participant  had deferrals of
               compensation under all of the agreements,  methods, programs, and
               other arrangements that are terminated and liquidated;

          (C)  No payments in  liquidation of the Plan are made within 12 months
               of the date the Company takes all necessary action to irrevocably
               terminate  and  liquidate the plan other than payments that would
               be payable under the terms of the Plan if the action to terminate
               and liquidate the Plan had not occurred;

          (D)  All  payments  are made  within 24 months of the date the Company
               takes all necessary action to irrevocably terminate and liquidate
               the Plan; and

          (E)  The Company does not adopt a new plan or  arrangement  that would
               be  aggregated   with  any  terminated  and  liquidated  plan  or
               arrangement under Treasury Regulation  ss.1.409A-1(c) if the same
               Participant  participated in both plans or  arrangements,  at any
               time within three years  following the date the Company takes all
               necessary action to irrevocably terminate and liquidate the Plan.

     (iv) Such other events and conditions as the Internal Revenue Service may
          prescribe in generally  applicable  guidance published in the Internal
          Revenue Bulletin.

                                    ARTICLE V

                               PLAN ADMINISTRATION


     Section  5.1  Appointment  of  the  Committee.  The  Committee,  or a  duly
authorized  officer or officers of the Company empowered by the Committee to act
on its behalf, will be responsible for administering the Plan, and the Committee
will be charged with the full power and the responsibility for administering the
Plan in all its details.

     Section 5.2  Powers and Responsibilities of the Committee.

(a)  Committee  Powers.  The  Committee  will  have all  powers  necessary  to
     administer the Plan, including the power to construe and interpret the Plan
     documents; to decide all questions relating to an individual's  eligibility
     to participate  in the Plan; to determine the amount,  manner and timing of
     any  distribution of benefits or withdrawal  under the Plan; to resolve any
     claim for benefits in accordance  with Article VI, and to appoint or employ
     advisors,  including legal counsel, to render advice with respect to any of
     the  Committee's   responsibilities   under  the  Plan.  Any  construction,
     interpretation,  or application of the Plan by the Committee will be final,
     conclusive and binding.

(b)  Records and Reports.  The Committee will be responsible  for  maintaining
     sufficient   records  to  determine  each   Participant's   eligibility  to
     participate  in the Plan,  and for  purposes of  determining  the amount of
     contributions that may be made on behalf of the Participant under the Plan.

(c)  Rules  and  Decisions.  The  Committee  may adopt  such rules as it deems
     necessary, desirable, or appropriate in the administration of the Plan. All
     rules  and  decisions  of the  Committee  will  be  applied  uniformly  and
     consistently to all  Participants in similar  circumstances.  When making a
     determination  or calculation,  the Committee will be entitled to rely upon
     information  furnished by a Participant or beneficiary,  the Company or the
     legal counsel of the Company.

(d)  Application  for Benefits.  The  Committee  may require a Participant  or
     beneficiary to complete and file with it an application for a benefit,  and
     to furnish all  pertinent  information  requested by it. The  Committee may
     rely  upon  all  such   information  so  furnished  to  it,  including  the
     Participant's or beneficiary's current mailing address.

(e)  Delegation.  The  Committee  may  authorize  one or more  officers of the
     Company to perform administrative  responsibilities on its behalf under the
     Plan. Any such duly  authorized  officer will have all powers  necessary to
     carry  out the  administrative  duties  delegated  to such  officer  by the
     Committee.

     Section 5.3  Liabilities.  The individual  members of the Committee will be
indemnified  and held harmless by the Company with respect to any alleged breach
of responsibilities performed or to be performed hereunder.

                                   ARTICLE VI

                                 BENEFIT CLAIMS

     While a  Participant  or  beneficiary  need not file a claim to receive his
benefit  under the Plan,  if he wishes to do so, a claim must be made in writing
and filed with the Committee.  If a claim is denied,  the Committee will furnish
the  claimant  with  written  notice of its  decision.  A claimant may request a
review of the denial of a claim for  benefits by filing a written  request  with
the Committee.  The Committee will afford the claimant a full and fair review of
such request.

                                   ARTICLE VII

                              FUNDING AND TRANSFERS

     Section 7.1  Unfunded Status. The Plan will be maintained in such a fashion
that at all  times  for  purposes  of the  Code it will  be  unfunded  and  will
constitute a mere  promise by the Company to make Plan  benefit  payments in the
future. Any and all rights created under this Plan will be unsecured contractual
rights against the Company.

     Section 7.2  Trust.  Notwithstanding the  provisions  of Section  7.1,  the
Committee  may,  in its  discretion,  satisfy  all or any part of the  Company's
obligations under the Plan from a trust established by the Company in connection
with the Plan  ("Trust")  or from an  insurance  contract,  annuity  or  similar
vehicle owned by the Company or by setting aside and investing  amounts deferred
under the Plan as an asset of the Company.  Any such Trust or other vehicle will
constitute  solely a means  to  assist  the  Company  in  meeting  its  promised
obligations  under the Plan and will not  constitute a funded account within the
meaning of the  Employee  Retirement  Income  Security  Act of 1974,  as amended
("ERISA") or the Code, nor will it create a security interest for the benefit of
any  Participant  or  beneficiary.  Any Trust created  hereunder will conform in
substantially  all  respects to the terms of the Model  Trust,  as  described in
Revenue Procedure 92-64.

                                  ARTICLE VIII

                      AMENDMENT AND TERMINATION OF THE PLAN

     Section 8.1  Amendment of  the Plan.  The Company may amend the Plan at any
time in its sole discretion.  Notwithstanding the foregoing, the Company may not
amend the Plan to reduce a  Participant's  Account  balance as determined on the
day preceding the effective date of the amendment.

     Section 8.2  Termination of the Plan. The Company may terminate the Plan at
any time in its sole  discretion.  Absent an  amendment  to the  contrary,  Plan
benefits that had accrued prior to the termination will be paid at the times and
in the manner provided for by the Plan at the time of the termination.

                                   ARTICLE IX

                           PARTICIPATION BY AFFILIATES

     Section 9.1  Affiliate Participation.  Any Affiliate may adopt the Plan and
become a participating Company under the Plan by filing with the Committee:

(a)  A  certified  copy of a  resolution  of its board of  directors  to that
     effect; and

(b)  A written  document  signed by an  authorized  officer of the Company which
     indicates the consent of the Company to that action.

     Notwithstanding any provision herein to the contrary, First Merchants Bank,
N.A.,  First  Merchants Bank of Central  Indiana,  N.A.,  First  Merchants Trust
Company,  N.A., Commerce National Bank and Lafayette Bank and Trust, N.A., shall
automatically be participating Affiliates as of the Effective Date.

     Section  9.2  Company  Action  Binding on Other  Employers.  As long as the
Company  is the  sponsor  of the  Plan,  it is  empowered  to act for any  other
participating Affiliate in all matters relating to the Plan or the Committee.

                                    ARTICLE X

                                 MISCELLANEOUS

     Section 10.1  Governing  Law. The Plan shall be  construed,  regulated  and
administered according to the laws of the State of Indiana, without reference to
that state's choice of law  principles,  except in those areas  preempted by the
laws of the  United  States  of  America  in which  case the  federal  laws will
control.

     Section 10.2  Headings and Gender. The headings and subheadings in the Plan
have been  inserted for  convenience  of reference  only and will not affect the
construction  of  the  Plan  provisions.  In  any  necessary  construction,  the
masculine will include the feminine and the singular the plural, and vice versa.

     Section  10.3  Withholding  of Taxes.  The Company will  withhold  from any
amount  payable  under this Plan all  federal,  state,  city and local  taxes as
legally required.

     Section 10.4  Spendthrift  Clause. No  benefit  or interest available under
the Plan will be  subject  in any  manner  to  anticipation,  alienation,  sale,
transfer,  assignment,   pledge,  encumbrance,   attachment  or  garnishment  by
creditors of a Participant or a Participant's beneficiary, either voluntarily or
involuntarily.

     Section  10.5  Counterparts.  This Plan may be  executed  in any  number of
counterparts,  each one constituting but one and the same instrument, and may be
sufficiently evidenced by any one counterpart.

     Section 10.6  No  Enlargement of Rights.  Nothing contained in the Plan may
be construed as a contract of employment between the Company and any person, nor
may the Plan be deemed to give any person the right to be retained as a director
or limit the right of the Company to dismiss a director.

     Section 10.7  Limitations on Liability. Notwithstanding any other provision
of the Plan,  neither the Company  nor any  individual  acting as an employee or
agent of the Company will be liable to a Participant or any  beneficiary for any
claim,  loss,  liability or expense incurred in connection with the Plan, except
when the same has been judicially  determined to be due to the gross  negligence
or willful misconduct of that person.

     Section  10.8  Incapacity  of  Participant  or  Beneficiary.  If any person
entitled  to receive a  distribution  under the Plan is  physically  or mentally
incapable of personally receiving and giving a valid receipt for any payment due
(unless a prior  claim for the  distribution  has been made by a duly  qualified
guardian or other legal representative),  then, unless and until a claim for the
distribution  has  been  made  by a  duly  appointed  guardian  or  other  legal
representative of the person,  the Committee may provide for the distribution to
be made to any other  individual  or  institution  then  contributing  toward or
providing for the care and  maintenance of the person.  Any payment made for the
benefit of the person  under this  Section  will be a payment for the account of
such person and a complete  discharge  of any  liability  of the Company and the
Plan.

     Section  10.9  Evidence.  Evidence required of anyone under the Plan may be
by  certificate,  affidavit,  document  or other  information  which the  person
relying on the evidence considers  pertinent and reliable,  and signed,  made or
presented by the proper party or parties.

     Section  10.10  Action  by Company.  Any action required of or permitted by
the  Company  under  the  Plan  will  be by  resolution  of  the  Board,  by the
Compensation  Committee of the Board,  or by a person or persons  authorized  by
resolution of the Compensation Committee or the Board.

     Section  10.11  Severability.  In the event any  provisions of the Plan are
held to be illegal or invalid for any reason,  the illegality or invalidity will
not affect the remaining  parts of the Plan,  and the Plan will be construed and
endorsed as if the illegal or invalid provisions had never been contained in the
Plan.

     Section 10.12  Information to be Furnished by a Participant. A Participant,
or any other  person  entitled  to  benefits  under the Plan,  must  furnish the
Committee with any and all documents,  evidence,  data or other  information the
Committee  considers necessary or desirable for the purpose of administering the
Plan. Benefit payments under the Plan are conditioned on a Participant (or other
person who is entitled to benefits)  furnishing  full,  true and complete  data,
evidence or other  information to the Committee,  and on the prompt execution of
any document  reasonably  related to the administration of the Plan requested by
the Committee.

     Section  10.13  Binding  on  Successors.  The Plan will be binding upon and
inure to the benefit of the  Company and its  successors  and  assigns,  and the
successors,  assigns, designees and estates of a Participant. The Plan will also
be  binding  upon  and  inure  to  the  benefit  of any  successor  organization
succeeding to substantially  all of the assets and business of the Company,  but
nothing in the Plan will preclude the Company from merging or consolidating into
or with, or  transferring  all or  substantially  all of its assets to,  another
organization  which  assumes  the  Plan  and  all  obligations  of  the  Company
hereunder.  The Company agrees that it will make  appropriate  provision for the
preservation of a  Participant's  rights under the Plan in any agreement or plan
which it may enter into to effect any merger,  consolidation,  reorganization or
transfer  of  assets.  Upon such a  merger,  consolidation,  reorganization,  or
transfer of assets and assumption of Plan  obligations of the Company,  the term
"Company"  will refer to such other  organization  and the Plan will continue in
full force and effect.