UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 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): September 2, 2008

                           FIRST MERCHANTS CORPORATION

             (Exact name of registrant as specified in its charter)

                                     INDIANA

                 (State or other jurisdiction of incorporation)

0-17071                                                      35-1544218
(Commission File Number)                       (IRS Employer Identification No.)

200 East Jackson Street
P.O. Box 792
Muncie, Indiana                                              47305-2814
(Address of principal executive offices)                     (Zip Code)

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

     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:

[X]  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.

     On September 3, 2008, First Merchants  Corporation  ("First Merchants") and
Lincoln  Bancorp  ("Lincoln")  jointly  announced  the  signing of a  definitive
agreement  (the  "Agreement")  pursuant to which Lincoln will be merged with and
into First Merchants (the "Merger").  The Merger has been approved by the Boards
of Directors of each of Lincoln and First Merchants, but is conditioned upon the
approval of the Lincoln  shareholders and certain  regulatory  authorities.  The
Agreement  provides that upon the effective  date of the Merger (the  "Effective
Time"), each shareholder of Lincoln may elect to receive either 0.7004 shares of
First  Merchants'  common  stock  (valued  at $13.93  based on First  Merchants'
September 2, 2008 closing price of $19.89 per share), or $15.76 in cash for each
Lincoln common share owned by such shareholder.  However, no more than 3,576,417
shares of First Merchants' common stock and no more than $16,800,000 in cash may
be  paid  to  the  Lincoln   shareholders   in  the  Merger  and  there  may  be
re-allocations  of cash and  stock to  certain  Lincoln  shareholders  if either
threshold is exceeded.  Based on the closing  price of First  Merchants'  common
stock on September 2, 2008, the  transaction  has an aggregate value between $74
million  and  $77  million,   depending  upon  the  elections  made  by  Lincoln
shareholders.  The  transaction  is expected to be a tax-free stock exchange for
those Lincoln  shareholders  electing to receive First Merchants'  common stock.
The Merger is subject to various  contingencies,  including  the approval of the
holders  of  Lincoln's  outstanding  common  shares  and the  receipt of certain
regulatory approvals.

     The Agreement of  Reorganization  and Merger  between  First  Merchants and
Lincoln  dated  September  2,  2008,  is  attached  hereto  as  Exhibit  2.1 and
incorporated herein by reference.

     This current  report on Form 8-K,  including the exhibit  hereto,  contains
forward-looking statements that involve risk and uncertainty. It should be noted
that a  variety  of  factors  could  cause  the  company's  actual  results  and
experience  to  differ   materially  from  the  anticipated   results  or  other
expectations expressed in the combined company's forward-looking statements.

     The risks and  uncertainties  that may affect the operations,  performance,
development,  growth  projections and results of the combined company's business
include,  but are not  limited  to, the  growth of the  economy,  interest  rate
movements, timely development by the combined company of technology enhancements
for its products and  operating  systems,  the impact of  competitive  products,
services and pricing, customer business requirements,  legislation,  acquisition
cost  savings and revenue  enhancements  and  similar  matters.  Readers of this
report are cautioned not to place undue reliance on  forward-looking  statements
which are  subject to  influence  by the named risk  factors  and  unanticipated
future  events.  Actual  results,   accordingly,   may  differ  materially  from
management expectations.

Item 7.01.        Regulation FD Disclosure.

     In connection  with the  execution of the  Agreement,  First  Merchants and
Lincoln  jointly  issued a press  release  attached  hereto as Exhibit  99.1 and
incorporated herein by reference.

Item 9.01.        Financial Statements and Exhibits.

(d)  (2.1)  Agreement  of  Reorganization  and Merger  between  First  Merchants
     Corporation and Lincoln Bancorp dated September 2, 2008.

     (10.1) Press Release dated September 3, 2008

<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: September 3, 2008.

                                                FIRST MERCHANTS CORPORATION


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










<page>
                                  EXHIBIT INDEX


(2.1)  Agreement of Reorganization and Merger between First Merchants
       Corporation and Lincoln Bancorp dated September 2, 2008.

(10.1) Press Release dated September 3, 2008

<page>
                                   EXHIBIT 2.1

                     AGREEMENT OF REORGANIZATION AND MERGER

                                     BETWEEN

                           FIRST MERCHANTS CORPORATION

                                       AND

                                 LINCOLN BANCORP



     THIS AGREEMENT OF REORGANIZATION AND MERGER (the  "Agreement"),  is entered
as  of  the  2nd  day  of  September,  2008,  by  and  between  FIRST  MERCHANTS
CORPORATION,  an Indiana corporation ("First Merchants") and LINCOLN BANCORP, an
Indiana corporation ("Lincoln").

                              W I T N E S S E T H:

     WHEREAS,  First  Merchants is a registered  bank holding  company under the
Bank  Holding  Company Act of 1956,  as  amended,  with its  principal  place of
business in Muncie,  Delaware  County,  Indiana and with First Merchants Bank of
Central  Indiana,  National  Association,  a  national  bank  ("FMBCI")  as  its
wholly-owned subsidiary;

     WHEREAS,  Lincoln  is a  registered  bank  holding  company  under the Bank
Holding Company Act of 1956, as amended, with its principal place of business in
Plainfield,  Hendricks County, Indiana, with Lincoln Bank, an Indiana state bank
(the "Bank") as its wholly-owned subsidiary;

     WHEREAS, LF Portfolio Services, Inc. ("LF Portfolio") is a corporation duly
organized  and  existing  under  the  laws of the  State  of  Delaware  and is a
wholly-owned  subsidiary of the Bank (the "Bank",  "LF Portfolio",  "LF Service"
(as defined below) and "Citizens" (as defined below) are sometimes  collectively
referred to herein as "Subsidiaries")

     WHEREAS, it is the desire of First Merchants and Lincoln to effect a series
of  transactions  whereby (i) Lincoln will merge with and into First  Merchants,
(ii) the Bank will merge with and into FMBCI, and (iii) LF Portfolio will become
a wholly-owned subsidiary of FMBCI; and

     WHEREAS,  a majority of the entire Boards of Directors of First  Merchants,
FMBCI,  Lincoln and the Bank have  approved this  Agreement,  designated it as a
plan of  reorganization  within the  provisions of  Section 368(a)(1)(A)  of the
Internal  Revenue Code of 1986,  as amended (the  "Code"),  and  authorized  its
execution.

     NOW,  THEREFORE,  in consideration of the mutual promises,  covenants,  and
agreements  herein  contained  and other good and  valuable  consideration,  the
receipt of which is hereby acknowledged, First Merchants and Lincoln hereby make
this  Agreement and prescribe the terms and  conditions of the merger of Lincoln
with and into First  Merchants  and the Bank with and into FMBCI and the mode of
carrying the transactions into effect as follows:
<page>
                                   SECTION 1

                                   The Mergers

     1.01 Lincoln Merger. Subject to the terms and conditions of this Agreement,
on the Effective Date (as defined in Section 11 hereof), Lincoln shall be merged
with and into First Merchants, which shall be the "Continuing Company" and shall
continue  its  corporate  existence  under  the laws of the  State  of  Indiana,
pursuant  to the  provisions  of and with the  effect  provided  in the  Indiana
Business  Corporation Law and  particularly  Indiana Code  Section 23-1-40  (the
"Merger").

     1.02 Bank Merger. Subject to the terms and conditions of this Agreement, on
the Effective Date, or another date subsequent thereto, the Bank shall be merged
with and into FMBCI  pursuant to the terms and  conditions  of the Agreement and
Plan of Merger  attached  hereto as Exhibit A (the "Bank Merger  Agreement") and
otherwise in accordance with 12 USC 215a and The Indiana Financial  Institutions
Act, as amended, together with any regulations promulgated thereunder (the "Bank
Merger").

     1.03 Right to Revise Mergers.  First Merchants may, at any time, change the
method of  effecting  the Merger or the Bank  Merger if and to the extent  First
Merchants deems such change to be desirable,  including,  without limitation, to
provide  for the  merger of  Lincoln  into a  wholly-owned  subsidiary  of First
Merchants  and/or the merger of the Bank and LF Portfolio or either of them into
FMBCI or  wholly-owned  subsidiaries  of First  Merchants  or  FMBCI;  provided,
however,  that no such  change,  modification  or  amendment  shall (a) alter or
change the amount or kind of consideration to be received by the shareholders of
Lincoln  specified  in  Section 3 hereof as a result  of the  Merger,  except in
accordance  with the terms of  Section 3 hereof;  (b)  adversely  affect the tax
treatment  to the  shareholders  of  Lincoln;  (c) alter or change  any of First
Merchant's  covenants specified in Section 8 hereof; or (d) materially impede or
delay receipt of any approvals referred to in this Agreement or the consummation
of the transactions contemplated by this Agreement.

                                   SECTION 2

                              Effect Of The Merger

Upon the Merger becoming effective:

     2.01 General Description. The separate existence of Lincoln shall cease and
the Continuing Company shall possess all of the assets of Lincoln and all of its
rights, privileges,  immunities,  powers, and franchises and shall be subject to
and assume all of the duties and liabilities of Lincoln.


<page>

     2.02 Name,  Offices,  and  Management.  The name of the Continuing  Company
shall continue to be "First Merchants  Corporation."  Its principal office shall
be  located at 200 E.  Jackson  Street,  Muncie,  Indiana.  Except as  otherwise
provided  in Section  8.07  hereof,  the Board of  Directors  of the  Continuing
Company,  until such time as their  successors  have been elected and qualified,
shall consist of the current Board of Directors of First Merchants. The officers
of First Merchants immediately prior to the Effective Date shall continue as the
officers of the Continuing Company.

     2.03  Capital  Structure.  The  amount of capital  stock of the  Continuing
Company shall not be less than the capital stock of First Merchants  immediately
prior to the Effective  Date  increased by the amount of capital stock issued in
accordance with Section 3 hereof.

     2.04 Articles of  Incorporation  and Bylaws.  The Articles of Incorporation
and the  Bylaws  of the  Continuing  Company  shall be those of First  Merchants
immediately  prior to the Effective Date until the same shall be further amended
as provided by law.

     2.05 Assets and Liabilities. The title to all assets, real estate and other
property  owned by First  Merchants  and  Lincoln  shall vest in the  Continuing
Company  without  reversion or impairment.  All  liabilities of Lincoln shall be
assumed by the Continuing Company.

2.06  Additional  Actions.  If,  at any  time  after  the  Effective  Date,  the
Continuing  Company  shall  consider  or be  advised  that  any  further  deeds,
assignments  or  assurances  in law or any other acts are necessary or desirable
(a) to vest,  perfect or  confirm,  of record or  otherwise,  in the  Continuing
Company  its  right,  title  or  interest  in,  to or under  any of the  rights,
properties or assets of Lincoln or the Subsidiaries,  or (b) otherwise carry out
the  purposes  of  this  Agreement,  Lincoln  and  the  Subsidiaries  and  their
respective  officers  and  directors  shall be  deemed  to have  granted  to the
Continuing  Company an irrevocable  power of attorney to execute and deliver all
such deeds,  assignments  or assurances  in law and to do all acts  necessary or
proper to vest,  perfect  or confirm  title to and  possession  of such  rights,
properties  or assets in the  Continuing  Company and otherwise to carry out the
purposes of this  Agreement,  and the officers and  directors of the  Continuing
Company are authorized in the name of Lincoln or the  Subsidiaries  or otherwise
to take any and all such action.

                                    SECTION 3

                               Consideration To Be
                     Distributed To Shareholders Of Lincoln

     3.01  Consideration.  Upon and by reason of the Merger becoming  effective,
the shareholders of Lincoln of record on the Effective Date shall be entitled to
receive in exchange  for the Lincoln  common  shares held and at their  election
(subject to the limitations  and prorations set forth in this Section 3)  either
(i) 0.7004 (the "Conversion  Ratio") shares of First Merchants' common stock for
each Lincoln common share held ("Share  Option"),  or (ii) cash in the amount of
$15.76 for each share of Lincoln's common stock held ("Cash Option"), subject to
the provisions and limitations of Section 3.07. A Lincoln  shareholder  shall be
entitled  to elect the Share  Option  for all shares  held of  record,  the Cash
Option  for all shares  held of record or the Share  Option for a portion of the
shares  held of record and the Cash  Option for a portion of the shares  held of
record.  The  Conversion  Ratio shall be subject to  adjustment  as set forth in
Sections 3.03 and 3.04.
<page>
     3.02  No  Fractional  First  Merchants  Common  Shares.   Certificates  for
fractional  shares of  common  stock of First  Merchants  shall not be issued in
respect of fractional  interests arising from the Conversion Ratio. Each Lincoln
shareholder  who would  otherwise  have been  entitled  to a fraction of a First
Merchants  share,  upon  surrender  of  all  such   shareholder's   certificates
representing  Lincoln's common shares,  shall be paid in cash (without interest)
in an amount  equal to the  fraction of the First  Merchants  Average  Price (as
defined below).  No such  shareholder of Lincoln shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share.

     3.03  Recapitalization.  If,  between  the date of this  Agreement  and the
Effective  Date,  First  Merchants  issues a stock  dividend with respect to its
shares of  common  stock,  combines,  subdivides,  or splits up its  outstanding
shares or takes any similar  recapitalization  action, then the Conversion Ratio
shall be adjusted so that each  Lincoln  shareholder  electing  the Share Option
shall  receive  such number of First  Merchants  shares as  represents  the same
percentage  of  outstanding  shares  of  First  Merchants  common  stock  at the
Effective  Date as would  have been  represented  by the  number of shares  such
shareholder would have received if the recapitalization had not occurred.

     3.04 Termination Rights.

          (a) As used in this  Section  3.04 and Section  7.11,  the term "First
     Merchants Average Price" shall mean the average of the closing price of the
     common  stock of First  Merchants  as reported in  Bloomberg,  L.P. for the
     twenty  (20)  days  that  First  Merchants  common  stock  trades on NASDAQ
     preceding  the fifth (5th)  calendar day prior to the  Effective  Date (the
     "Determination  Date").  The First  Merchants  Average Price and the dollar
     amounts set forth in Sections  3.04(b) and 3.04(c)  shall be  appropriately
     and   proportionately   adjusted  to  reflect  any  share   adjustment   as
     contemplated by Section 3.03 hereof.

          (b) Lincoln may terminate  this Agreement if its Board of Directors so
     determines  by a vote of a majority of the  members of its entire  Board of
     Directors if the First  Merchants  Average Price shall be less than $16.50;
     subject to the following two provisions.  If Lincoln elects to exercise its
     right of termination  pursuant to the immediately  preceding  sentence,  it
     shall give written notice to First Merchants within  forty-eight (48) hours
     of the  Determination  Date.  Within three  business days after the date of
     receipt of such notice,  First Merchants shall have the option of adjusting
     the Conversion  Ratio to equal a number equal to a quotient,  the numerator
     of which is the  product  of $16.50  and the  Conversion  Ratio (as then in
     effect) and the denominator of which is the First Merchants  Average Price.
     If  First  Merchants  makes  an  election  contemplated  by  the  preceding
     sentence,  it shall give prompt  written notice to Lincoln of such election
     and the revised  Conversion  Ratio,  whereupon  no  termination  shall have
     occurred  pursuant to this Section  3.04(b) and this Agreement shall remain
     in effect in  accordance  with its terms  (except as the  Conversion  Ratio
     shall have been so  modified),  and any  references  in this  Agreement  to
     "Conversion  Ratio" shall  thereafter be deemed to refer to the  Conversion
     Ratio as adjusted pursuant to this Section 3.04(b).
<page>
          (c) First  Merchants  may  terminate  this  Agreement  if its Board of
     Directors  so  determines  by a vote of a  majority  of the  members of its
     entire  Board of Directors if the First  Merchants  Average  Price shall be
     greater than $30.00;  subject to the  following  two  provisions.  If First
     Merchants  elects to  exercise  its right of  termination  pursuant  to the
     immediately  preceding  sentence,  it shall give written  notice to Lincoln
     within  forty-eight  (48) hours of the  Determination  Date.  Within  three
     business days after the date of receipt of such notice,  Lincoln shall have
     the option of adjusting the  Conversion  Ratio to equal a number equal to a
     quotient,  the  numerator  of  which  is the  product  of  $30.00  and  the
     Conversion  Ratio (as then in effect) and the  denominator  of which is the
     First Merchants Average Price. If Lincoln makes an election contemplated by
     the  preceding  sentence,  it shall  give  prompt  written  notice to First
     Merchants of such election and the revised  Conversion Ratio,  whereupon no
     termination  shall have occurred  pursuant to this Section 3.04(c) and this
     Agreement  shall remain in effect in  accordance  with its terms (except as
     the  Conversion  Ratio shall have been so modified),  and any references in
     this Agreement to "Conversion Ratio" shall thereafter be deemed to refer to
     the Conversion Ratio as adjusted pursuant to this Section 3.04(c).

     3.05 Election.  An election form (the  "Election  Form") shall be mailed to
each record  holder of Lincoln's  common  shares as of the record date fixed for
the special  shareholders'  meeting at which the Merger will be  submitted  to a
vote of  Lincoln's  shareholders  (the  "Special  Record  Date").  In  addition,
reasonable  efforts  will be made to make the  Election  Form  available  to all
persons who become  shareholders  of Lincoln between the Special Record Date and
the  Election  Deadline  (as defined  below).  The  deadline for receipt of such
Election  Forms shall be the close of business on the first  business  day after
the special meeting at which the Merger will be submitted to a vote of Lincoln's
shareholders,  or such  other  date  mutually  agreed  to by  Lincoln  and First
Merchants (the "Election Deadline").  The Election Forms shall be mailed to each
record holder of Lincoln's common stock as of the Special Record Date along with
the proxy  materials for the special  shareholders'  meeting at which the Merger
will be submitted to a vote of Lincoln's  shareholders.  The Election  Form will
permit each holder of record of Lincoln's  common stock as of the Special Record
Date to elect,  subject to Section  3.07,  to have all of such  holder's  shares
converted  in the Merger  into  either the Share  Option,  the Cash  Option or a
combination  of the Share  Option and the Cash Option.  The Election  Form shall
also permit direct  deposit of cash in each holder's  account in either the Bank
or FMBCI. An election shall be duly made by completing the Election Form and any
other required  documents in accordance with the  instructions set forth therein
and  delivering  them to the Election  Agent (as defined below) or to such other
person or persons mutually agreed upon by Lincoln and First Merchants to receive
elections,  to receive  outstanding  Lincoln shares, to deliver cash or cash and
shares of First  Merchants'  common stock and to carry out the other  procedures
set  forth  herein,  on or before  5:00  p.m.,  Eastern  Time,  on the  Election
Deadline.  Lincoln  common  shares as to which the Share Option has been elected
are referred to in this  Agreement as "Stock  Election  Shares."  Lincoln common
shares as to which the Cash  Option has been  elected  are  referred  to in this
Agreement as "Cash Election  Shares." Lincoln common shares as to which no valid
election  has  been  made  by the  Election  Deadline  are  referred  to in this
Agreement as "Non-Electing Shares."
<page>
     3.06 Election Agent.  First  Merchants and Lincoln hereby appoint  American
Stock Transfer to act as agent (the "Election Agent") of Lincoln's  shareholders
for the purposes of mailing and receiving  the Election  Forms,  tabulating  the
results and notifying First Merchants and Lincoln of the results.

     3.07 Diversity of Payments.

          (a) In the event (i) the number of Cash Election  Shares would entitle
     the  holders  of such  shares  (and  Lincoln  shareholders  receiving  cash
     payments for fractional shares) to receive $16,800,000 or less in cash, and
     (ii) the number of Stock  Election  Shares and  Non-Electing  Shares  would
     entitle the holders of such shares to receive  3,576,417  or less shares of
     common  stock of  First  Merchants  (assuming  for  such  purpose  that all
     Non-Electing Shares were treated as Stock Election Shares),  then all Share
     Option and Cash Option  elections of the holders of Lincoln's common shares
     shall be honored (each in its entirety) and all  Non-Electing  Shares shall
     be treated as Stock Election Shares.

          (b) In the event that the amount of cash to be  received by holders of
     Cash Election Shares and Lincoln  shareholders  receiving cash payments for
     fractional  shares  pursuant to the terms of the Agreement  would result in
     cash payments of more than  $16,800,000,  the Cash Election Shares shall be
     converted into Stock Election  Shares pro rata (based on the number of Cash
     Election Shares held by each Lincoln shareholder) until the total remaining
     number of Cash Election  Shares is such that the Merger will  (i) result in
     cash  payments of no more than  $16,800,000  for Cash  Election  Shares and
     Lincoln  shareholders  receiving cash payments for fractional  shares,  and
     (ii)  satisfy  the  "continuity  of  interest"  requirement  applicable  to
     tax-free reorganizations under the Code. Cash Election Shares which are not
     converted into Stock Election Shares shall remain as Cash Election  Shares,
     and all Non-Electing Shares shall be treated as Stock Election Shares.

          (c) In the event  that the  number of shares of common  stock of First
     Merchants to be received by shareholders  of Lincoln  pursuant to the terms
     of the  Agreement  in respect  of Stock  Election  Shares and  Non-Electing
     Shares  (which,  for purposes of this  calculation,  shall be considered as
     Stock Election Shares) exceeds  3,576,417,  the  Non-Electing  Shares shall
     first be converted into Cash Election  Shares pro rata (based on the number
     of  Non-Electing  Shares held by each Lincoln  shareholder),  and after all
     Non-Electing  Shares have been  converted  into Cash Election  Shares,  the
     Stock Election Shares shall be converted into Cash Election Shares pro rata
     (based  on the  number  of  Stock  Election  Shares  held by  each  Lincoln
     shareholder)  until the total  remaining  number of Stock  Election  Shares
     (and,  if  applicable,  Non-Electing  Shares) is such that the Merger  will
     (i) result in 3,576,417 shares of First Merchants common stock being issued
     to the  shareholders of Lincoln for Stock Election Shares and  Non-Electing
     Shares (if any have not been so  converted) or such lesser number of shares
     as is required in effecting the  adjustment  described in this  subsection,
     and (ii) satisfy the  "continuity  of interest"  requirement  applicable to
     tax-free  reorganizations  under the Code.  Stock Election Shares which are
     not  converted  into Cash  Election  Shares shall remain as Stock  Election
     Shares,  and all  Non-Electing  Shares  which are not  converted  into Cash
     Election Shares shall be treated as Stock Election Shares.
<page>
          (d) Lincoln and First Merchants shall mutually  determine the validity
     of elections submitted by Lincoln's shareholders.

          (e) A  holder  of  Lincoln's  shares  that is a bank,  trust  company,
     security  broker-dealer or other recognized nominee, may submit one or more
     Election Forms for the persons for whom it holds shares as nominee provided
     that such bank, trust company,  security broker-dealer or nominee certifies
     to the satisfaction of Lincoln and First Merchants the names of the persons
     for whom it is so holding shares (the "Beneficial  Owners").  In such case,
     each  Beneficial  Owner for whom an  Election  Form is  submitted  shall be
     treated as a separate  owner for  purposes of the  election  procedure  and
     allocation of shares set forth herein.

          (f) First Merchants and Lincoln may, upon mutual agreement,  apply the
     adjustments  set forth in this Section 3.07 only to such extent and to such
     number  of  Lincoln's  shareholders  as  is  necessary  to  accomplish  the
     objectives  of this Section 3.07 and to assure that the Merger will qualify
     as a tax-free reorganization.

          (g)  Certain  shares of common  stock of  Lincoln  are held  under The
     Lincoln Bank  Employee  Stock  Ownership  Plan and 401(k)  Savings Plan and
     Trust Agreement (the "ESOP").  The Cash Option or Share Option elected with
     respect to the shares held by the ESOP shall be subject to the  adjustments
     described in Sections  3.07(b) and 3.07(c),  but only to the extent that no
     less than "Adequate  Consideration"  (as defined below) will be paid to the
     ESOP for its Lincoln common shares. Accordingly,  the ESOP will participate
     in any pro rata adjustment  required by Sections  3.07(b) and 3.07(c) until
     such  adjustment  would  otherwise  cause  the ESOP to  receive  less  than
     Adequate Consideration, and further adjustments will only be made among the
     Lincoln  shareholders other than the ESOP. For purposes of this subsection,
     "Adequate  Consideration"  shall be as defined in section 3(18) of Employee
     Retirement  Income  Security  Act of 1974,  as  amended  ("ERISA")  and the
     regulations  promulgated  thereunder.  If the  trustee of the ESOP  desires
     application  of  this  subsection  3.07(g),  it  shall  so  instruct  First
     Merchants  in  writing  on or before  the  Effective  Date,  along with its
     written determination that failure to apply this subsection would result in
     less than "Adequate  Consideration" being delivered to the ESOP as provided
     herein.

     3.08 Distribution of First Merchants' Common Stock and Cash.

          (a)  Each  share  of  common  stock  of  First  Merchants  outstanding
     immediately prior to the Effective Date shall remain outstanding unaffected
     by the Merger.

          (b) Following the Effective  Date,  First Merchants shall mail to each
     Lincoln  shareholder a letter of transmittal  (the "Letter of Transmittal")
     providing  instructions  as to the  transmittal  to the  conversion  agent,
     American  Stock  Transfer  (the   "Conversion   Agent"),   of  certificates
     representing shares of Lincoln's common stock and the issuance of shares of
     First Merchants' common stock and cash in exchange therefor pursuant to the
     terms of this Agreement.  Distribution of stock  certificates  representing
     First Merchants'  common stock and cash payments for Lincoln's common stock
     and for fractional  shares shall be made by First  Merchants to each former
     shareholder  of Lincoln  within  fifteen (15) business  days  following the
     later of the Effective Date or the date of such  shareholder's  delivery to
     the  Conversion  Agent  of  such  shareholder's  certificates  representing
     Lincoln  common shares,  accompanied  by a properly  completed and executed
     Letter of Transmittal. Interest shall not accrue or be payable with respect
     to any cash payments.
<page>
          (c) Following  the Effective  Date,  stock  certificates  representing
     Lincoln's  common  shares  shall be  deemed to  evidence  only the right to
     receive  cash and/or  ownership of First  Merchants'  common stock (for all
     corporate  purposes  other  than the  payment  of  dividends)  and cash for
     fractional  shares,  as  applicable.  No dividends  or other  distributions
     otherwise  payable  subsequent  to the  Effective  Date on  stock  of First
     Merchants  shall be paid to any  shareholder  entitled  to receive the same
     until such shareholder has surrendered such shareholder's  certificates for
     Lincoln's   common  shares  to  the   Conversion   Agent  in  exchange  for
     certificates  representing  First Merchants' common stock and/or cash. Upon
     surrender or compliance with the provisions of Section 3.08(b), there shall
     be paid to the record holder of the new certificate(s) evidencing shares of
     First  Merchants'  common  stock  the  amount  of all  dividends  and other
     distributions,  without  interest  thereon,  withheld  with respect to such
     common stock.

          (d) At or after the Effective Date, there shall be no transfers on the
     stock transfer books of Lincoln of any Lincoln common shares. If, after the
     Effective Date,  certificates  are presented for transfer to Lincoln,  such
     certificates  shall be cancelled and exchanged  for the  consideration  set
     forth in Section  3.01  hereof,  as adjusted  pursuant to the terms of this
     Agreement.

          (e) First  Merchants shall be entitled to rely upon the stock transfer
     books of Lincoln to  establish  the persons  entitled  to receive  cash and
     shares of common stock of First  Merchants,  which books, in the absence of
     actual knowledge by First Merchants of any adverse claim thereto,  shall be
     conclusive with respect to the ownership of such stock.

          (f) With respect to any  certificate  for Lincoln  common shares which
     has been lost, stolen, or destroyed, First Merchants shall be authorized to
     issue common stock to the registered owner of such certificate upon receipt
     of  an  affidavit  of  lost  stock  certificate,   in  form  and  substance
     satisfactory  to First  Merchants,  and upon  compliance  by the  Lincoln's
     shareholder  with  all  procedures  historically  required  by  Lincoln  in
     connection with lost, stolen, or destroyed certificates.

                                    SECTION 4

     Dissenters' Rights  Shareholders of Lincoln are not entitled to dissenters'
rights under  Indiana Code  Section 23-1-44,  as amended,  because the shares of
Lincoln common stock are traded on the NASDAQ Global Markets share exchange.
<page>
                                   SECTION 5

                               Representations and
                              Warranties of Lincoln

     Lincoln  represents and warrants to First  Merchants with respect to itself
and the Subsidiaries as follows (For the purposes of this Section, a "Disclosure
Letter" is defined as the letter  referencing  Section 5 of this Agreement which
shall be prepared and executed by an authorized executive officer of Lincoln and
delivered to and initialed by an authorized executive officer of First Merchants
contemporaneously with the execution of this Agreement.):

     5.01  Organization  and Authority.  Lincoln is a corporation duly organized
and validly existing under the laws of the State of Indiana,  the Bank is a bank
duly  organized and validly  existing under the laws of the State of Indiana and
LF Portfolio is a corporation duly organized and validly existing under the laws
of the State of Delaware.  Lincoln,  the Bank and Lincoln's  other  Subsidiaries
have the  power  and  authority  (corporate  and  otherwise)  to  conduct  their
respective  businesses  in the manner and by the means  utilized  as of the date
hereof.  Lincoln's only direct  subsidiary is the Bank.  Other than LF Portfolio
Services,  Inc.,  a Delaware  corporation,  LF Service  Corporation,  an Indiana
corporation  ("LF  Service"),  and  Citizens  Loan and Service  Corporation,  an
Indiana  corporation  ("Citizens"),  which are wholly-owned  Subsidiaries of the
Bank,  Lincoln  has no  indirect  Subsidiaries.  The Bank is  subject to primary
federal  regulatory  supervision and regulation by the Federal Deposit Insurance
Corporation.

     5.02 Authorization.

          (a) Lincoln has the  corporate  power and authority to enter into this
     Agreement and to carry out its obligations hereunder,  subject to obtaining
     certain required regulatory approvals and obtaining  shareholder  approval.
     This Agreement, when executed and delivered, will have been duly authorized
     and will constitute a valid and binding obligation of Lincoln,  enforceable
     in accordance  with its terms except to the extent  limited by  insolvency,
     reorganization,  liquidation, readjustment of debt or other laws of general
     application  relating to or affecting the enforcement of creditors' rights.
     The Board of Directors of the Bank and Lincoln as its sole shareholder have
     approved  the Bank  Merger  pursuant  to the terms and  conditions  of this
     Agreement and the Bank Merger Agreement.

          (b)  Except  as  set  forth  in the  Disclosure  Letter,  neither  the
     execution  of this  Agreement,  nor the  consummation  of the  transactions
     contemplated hereby, does or will (i) conflict with, result in a breach of,
     or constitute a default  under  Lincoln's or any  Subsidiary's  Articles of
     Incorporation  or By-Laws;  (ii) conflict  with,  result in a breach of, or
     constitute  a  default  under any  federal,  foreign,  state or local  law,
     statute,  ordinance,  rule,  regulation or court or administrative order or
     decree, or any note, bond, indenture,  loan, mortgage,  security agreement,
     contract,  arrangement or commitment, to which Lincoln or any Subsidiary is
     subject or bound, the result of which would have a Material Adverse Effect;
     (iii) result in the creation of, or give any person,  corporation or entity
     the right to create, any lien, charge,  encumbrance,  security interest, or
     any  other  rights  of others or other  adverse  interest  upon any  right,
     property or asset of Lincoln or any of the Subsidiaries; (iv) terminate, or
     give any  person,  corporation  or entity  the right to  terminate,  amend,
     abandon, or refuse to perform, any note, bond,  indenture,  loan, mortgage,
     security agreement, contract, arrangement or commitment to which Lincoln or
     any of the  Subsidiaries  is subject or bound; or (v) accelerate or modify,
     or give any party  thereto  the right to  accelerate  or  modify,  the time
     within  which,  or the  terms  according  to which,  Lincoln  or any of the
     Subsidiaries  is to perform any duties or obligations or receive any rights
     or benefits  under any note,  bond,  indenture,  loan,  mortgage,  security
     agreement, contract, arrangement or commitment.
<page>
          For the purpose of this  Agreement,  and in  relation  to  Lincoln,  a
     "Material Adverse Effect" means any effect that (i) is material and adverse
     to the financial position, results of operations or business of Lincoln and
     its Subsidiaries  taken taken as a whole, or (ii) would  materially  impair
     the ability of Lincoln to perform its  obligations  under this Agreement or
     otherwise  materially threaten or materially impede the consummation of the
     Merger and the other transactions contemplated by this Agreement; provided,
     however,  that Material  Adverse  Effect shall not be deemed to include the
     impact of (a) changes in banking and similar laws of general  applicability
     to banks or their holding companies or interpretations thereof by courts or
     governmental  authorities,  (b) changes in  generally  accepted  accounting
     principles or  regulatory  accounting  requirements  applicable to banks or
     their holding  companies  generally,  (c) any  modifications  or changes to
     valuation   policies  and  practices  in  connection  with  the  Merger  or
     restructuring  charges taken in connection with the Merger, in each case in
     accordance with generally accepted  accounting  principles,  (d) effects of
     any action taken with the prior  written  consent of First  Merchants,  (e)
     changes in the general  level of interest  rates  (including  the impact on
     Lincoln's  or  the  Bank's   securities   portfolios)   or   conditions  or
     circumstances  relating to or that affect either the United States economy,
     financial or securities  markets or the banking  industry,  generally,  (f)
     changes  resulting from expenses (such as legal,  accounting and investment
     bankers'  fees)   incurred  in  connection   with  this  Agreement  or  the
     transactions  contemplated herein,  including without limitation payment of
     any amounts due to, or the  provision  of any  benefits to, any officers or
     employees under agreements,  plans or other arrangements in existence of or
     contemplated  by this Agreement and disclosed to First  Merchants,  (g) the
     impact  of  the   announcement  of  this  Agreement  and  the  transactions
     contemplated  hereby,  and compliance  with this Agreement on the business,
     financial   condition  or  results  of   operations   of  Lincoln  and  its
     Subsidiaries,  and (h) the  occurrence of any military or terrorist  attack
     within the United  States or any of its  possessions  or offices;  provided
     that in no event shall a change in the trading price of the Lincoln  Common
     Stock, by itself,  be considered to constitute a Material Adverse Effect on
     Lincoln and its Subsidiaries taken as a whole (it being understood that the
     foregoing  proviso  shall not prevent or otherwise  affect a  determination
     that any effect  underlying such decline has resulted in a Material Adverse
     Effect).

          (c) Other  than the  filing of  Articles  of Merger  with the  Indiana
     Secretary of State for the Merger and the Bank Merger and in  connection or
     in compliance with the banking regulatory approvals contemplated by Section
     9.04 and federal and state  securities  laws and the rules and  regulations
     promulgated  thereunder,  no notice  to,  filing  with,  authorization  of,
     exemption  by, or consent or approval  of, any public body or  authority is
     necessary for the consummation by Lincoln of the transactions  contemplated
     by this Agreement.
<page>
          (d) Other than those filings,  authorizations,  consents and approvals
     referenced  in  Section  5.02(c)  above  and  except  as set  forth  in the
     Disclosure  Letter, no notice to, filing with,  authorization of, exemption
     by, or  consent  or  approval  of,  any third  party is  necessary  for the
     consummation  by Lincoln or the Bank of the  transactions  contemplated  by
     this Agreement.

     5.03 Capitalization.

          (a) As of the date of this Agreement, Lincoln had 20,000,000 shares of
     common stock authorized,  without par value,  5,319,731 shares of which are
     issued and outstanding.  Such issued and outstanding  Lincoln common shares
     have been duly and validly authorized by all necessary  corporate action of
     Lincoln, are validly issued, fully paid and nonassessable and have not been
     issued in violation of any preemptive rights of any  shareholders.  Lincoln
     has no  capital  stock  authorized,  issued or  outstanding  other  than as
     described  in  this  Section  5.03(a)  and,  except  as  set  forth  in the
     Disclosure  Letter,  Lincoln has no intention or obligation to authorize or
     issue additional shares of its common stock.

          (b) As of the date of this  Agreement,  the Bank has  1,000  shares of
     common stock  authorized,  $.01 par value per share,  1,000 shares of which
     are issued and outstanding and held by Lincoln. Such issued and outstanding
     shares of Bank common  stock have been duly and validly  authorized  by all
     necessary corporate action of the Bank, are validly issued,  fully paid and
     nonassessable,  and have not been  issued in  violation  of any  preemptive
     rights of any Bank  shareholders.  Except  as set  forth in the  Disclosure
     Letter,  all the  issued  and  outstanding  Bank  common  stock is owned by
     Lincoln,   free  and  clear  of  all  liens,  pledges,   charges,   claims,
     encumbrances,  restrictions,  security  interests,  options and  preemptive
     rights and of all other rights of any other person,  corporation  or entity
     with respect thereto.  The Bank has no capital stock authorized,  issued or
     outstanding  other than as  described  in this  Section  5.03(b) and has no
     intention or  obligation  to authorize or issue any other shares of capital
     stock.

          (c) All outstanding  shares of capital stock of LF Portfolio are owned
     directly by the Bank. Such shares have been duly and validly  authorized by
     all  necessary  corporate  action,  are  validly  issued,  fully  paid  and
     nonassessable,  and have not been  issued in  violation  of any  preemptive
     rights.  Such  shares  are owned by the Bank,  free and clear of any liens,
     pledges, charges, claims, encumbrances,  restrictions,  security interests,
     options and preemptive  rights and of all other rights of any other person,
     corporation or entity with respect thereto.  LF Portfolio does not have any
     other shares of capital stock authorized,  issued or outstanding  except as
     set forth in the  Disclosure  Letter,  and does not have any  intention  or
     obligation to authorize or issue any other shares of capital stock.

          (d) All outstanding shares of capital stock of LF Service and Citizens
     are owned  directly  by the Bank.  Such  shares  have been duly and validly
     authorized by all necessary  corporate  action,  are validly issued,  fully
     paid  and  nonassessable,  and have not been  issued  in  violation  of any
     preemptive rights. Such shares are owned by the Bank, free and clear of any
     liens,  pledges,  charges,  claims,  encumbrances,  restrictions,  security
     interests,  options and  preemptive  rights and of all other  rights of any
     other  person,  corporation  or entity  with  respect  thereto.  Neither LF
     Service nor  Citizens  have any other shares of capital  stock  authorized,
     issued or  outstanding  except as set forth in the Disclosure  Letter,  and
     neither LF  Service  nor  Citizens  have any  intention  or  obligation  to
     authorize or issue any other shares of capital stock.
<page>
          (e)  Except  as set  forth  in the  Disclosure  Letter,  there  are no
     options, commitments,  calls, agreements,  understandings,  arrangements or
     subscription  rights  regarding the issuance,  purchase or  acquisition  of
     capital stock, or any securities convertible into or representing the right
     to purchase or otherwise  receive the capital stock or any debt securities,
     of Lincoln nor any  Subsidiary by which Lincoln or any Subsidiary is or may
     become  bound.  Neither  Lincoln  nor any  Subsidiary  has any  outstanding
     contractual or other obligation to repurchase,  redeem or otherwise acquire
     any of its respective outstanding shares of capital stock.

          (f) Except as set forth in the Disclosure  Letter, no person or entity
     beneficially owns 5% or more of Lincoln's outstanding common shares.

     5.04 Organizational Documents. The respective Articles of Incorporation and
By-Laws of Lincoln and each  Subsidiary  have been delivered to First  Merchants
and represent true,  accurate and complete copies of such corporate documents of
Lincoln and each Subsidiary in effect as of the date of this Agreement.

     5.05  Compliance  with Law.  Except as set forth in the Disclosure  Letter,
neither  Lincoln nor any  Subsidiary  has engaged in any  activity  nor taken or
omitted to take any action which has resulted or, to the knowledge of "Lincoln's
Management"  (as defined below) could  reasonably be expected to result,  in the
violation of any local, state, federal or foreign law, statute, rule, regulation
or  ordinance  or of any order,  injunction,  judgment or decree of any court or
government  agency or body, the violation of which could  reasonably be expected
to have a Material Adverse Effect. Except as set forth in the Disclosure Letter,
Lincoln and each Subsidiary possess all licenses,  franchises, permits and other
authorizations   necessary  for  the  continued   conduct  of  their  respective
businesses  without  material  interference or  interruption  and such licenses,
franchises,  permits and authorizations  shall be transferred to First Merchants
on the Effective Date without any  restrictions  or  limitations  thereon or the
need to obtain  any  consents  of third  parties.  None of Lincoln or any of the
Subsidiaries  are subject to any agreement or  understanding  with, or order and
directive of, any regulatory agency or government  authority with respect to the
business or operations of Lincoln or any Subsidiary.  Except as set forth in the
Disclosure  Letter,  the Bank has received no  inquiries,  claims or  complaints
since  January  1,  2003 from any  regulatory  agency  or  government  authority
relating to its compliance with the Bank Secrecy Act, the Truth-in-Lending  Act,
the Community  Reinvestment  Act, the  Gramm-Leach-Bliley  Act of 1999,  the USA
Patriot  Act,  the  International  Money  Laundering   Abatement  and  Financial
Anti-Terrorism  Act of 2001,  the  Sarbanes-Oxley  Act of 2002 or any laws  with
respect  to the  protection  of the  environment  or the rules  and  regulations
promulgated  thereunder.  Except as set forth in the Disclosure Letter,  Lincoln
has received no inquiries,  claims or complaints  since January 1, 2003 from any
regulatory  agency or government  authority  relating to its compliance with any
securities, tax or employment laws applicable to Lincoln.
<page>
     5.06 Accuracy of Statements.  This Agreement, the Disclosure Letter and any
certificate  required  to be  furnished  by Lincoln or any  Subsidiary  to First
Merchants  in  connection  with  this  Agreement  or  any  of  the  transactions
contemplated hereby (including,  without limitation, any information which shall
be  supplied  by Lincoln or any  Subsidiary  with  respect to their  businesses,
operations  and  financial  condition for  inclusion in the  regulatory  filings
relating  to the  Merger or the Bank  Merger)  do not or shall not  contain  any
untrue  statement  of a  material  fact or do not or  shall  not omit to state a
material fact necessary to make the statements  contained  herein or therein not
misleading.

     5.07  Litigation  and  Pending  Proceedings.  Except  as set  forth  in the
Disclosure  Letter,  there are no claims of any  kind,  nor any  action,  suits,
proceedings,  arbitrations  or  investigations  pending or to the  knowledge  of
Lincoln's Management  threatened in any court or before any government agency or
body,  arbitration  panel or otherwise (nor does Lincoln's  Management  have any
knowledge of a basis for any claim,  action,  suit,  proceeding,  arbitration or
investigation)  which could  reasonably  be expected to have a Material  Adverse
Effect. There are no material uncured violations,  criticisms or exceptions,  or
violations  with  respect  to which  material  refunds  or  restitutions  may be
required, cited in any report,  correspondence or other communication to Lincoln
or any  Subsidiary as a result of an  examination  by any  regulatory  agency or
body.

     5.08 Financial Statements.

          (a) Lincoln's consolidated audited balance sheets as of the end of the
     two  fiscal  years  ended   December  31,  2006  and  2007,  the  unaudited
     consolidated  balance  sheet for the six months ended June 30, 2008 and the
     related  consolidated  statements of income,  shareholders' equity and cash
     flows for the years or period then ended (hereinafter collectively referred
     to  as  the  "Financial   Information")  present  fairly  the  consolidated
     financial  condition  or  position  of Lincoln as of the  respective  dates
     thereof  and the  consolidated  results of  operations  of Lincoln  for the
     respective  periods  covered  thereby and have been  prepared in conformity
     with  generally  accepted  accounting  principles  applied on a  consistent
     basis.

          (b) All loans  reflected in the Financial  Information  and which have
     been made, extended or acquired since June 30,  2008 (i) have been made for
     good,  valuable  and  adequate  consideration  in the  ordinary  course  of
     business;  (ii) constitute  the legal,  valid and binding obligation of the
     obligor and any  guarantor  named  therein;  (iii) are  evidenced by notes,
     instruments or other evidences of indebtedness  which are true, genuine and
     what  they  purport  to be;  and  (iv) to  the  extent  that the Bank has a
     security  interest in  collateral or a mortgage  securing  such loans,  are
     secured by perfected security interests or mortgages naming the Bank as the
     secured party or mortgagee,  except for such unperfected security interests
     or mortgages  naming the Bank as secured  party or mortgagee  which,  on an
     individual loan basis,  would not materially  adversely affect the value of
     any such loan and the  recovery  of payment on any such loan if the Bank is
     not able to enforce any such security interest or mortgage.
<page>
     5.09 Absence of Certain Changes.  Except for events and conditions relating
to the business and interest rate environment in general, the accrual or payment
of Merger-related expenses, or as set forth in the Disclosure Letter, since June
30 2008, no events have occurred, or to the knowledge of Lincoln, can reasonably
be expected  to occur,  which  could  reasonably  be expected to have a Material
Adverse  Effect.  Between  the  period  from  June 30,  2008 to the date of this
Agreement,  Lincoln  and  each  Subsidiary  have  carried  on  their  respective
businesses in the ordinary and usual course consistent with their past practices
(excluding the incurrence of fees and expenses of professional  advisors related
to this Agreement and the  transactions  contemplated  hereby) and there has not
been  any  declaration,  setting  aside  or  payment  of any  dividend  or other
distribution  (whether in cash,  stock or  property)  with  respect to Lincoln's
common  shares  (other  than  normal  quarterly  cash  dividends)  or any split,
combination or reclassification of any stock of Lincoln or any Subsidiary or any
issuance or the  authorization  of any issuance of any securities in respect of,
or in lieu of, or in substitution for Lincoln's common shares.

     5.10 Absence of Undisclosed Liabilities. Neither Lincoln nor any Subsidiary
is a party to any  agreement,  contract,  obligation,  commitment,  arrangement,
liability,  lease or license  which  individually  exceeds  $100,000 per year or
which may not be  terminated  within  one year from the date of this  Agreement,
except (a) unfunded loan  commitments  made in the ordinary course of the Bank's
business  consistent  with past  practices or (b) as set forth in the Disclosure
Letter,  nor to the  knowledge  of  Lincoln's  Management  does there  exist any
circumstances  resulting from transactions  effected or to be effected or events
which have occurred or may occur or from any action taken or omitted to be taken
which could  reasonably be expected to result in any such  agreement,  contract,
obligation, commitment, arrangement, liability, lease or license.

     5.11 Title to Assets.

          (a) Except as set forth in the  Disclosure  Letter,  Lincoln  and each
     Subsidiary  have good and  marketable  title in fee simple  absolute to all
     personal  property  reflected in the June 30,  2008 Financial  Information,
     good and marketable  title to all other properties and assets which Lincoln
     or any Subsidiary purports to own, good and marketable title to or right to
     use by terms of any lease or contract all other  property used in Lincoln's
     or any Subsidiary's business, and good and marketable title to all property
     and assets  acquired since June 30, 2008,  free and clear of all mortgages,
     liens,  pledges,  restrictions,  security  interests,  charges,  claims  or
     encumbrances of any nature,  except such minor  imperfections  of title, if
     any, as do not  materially  detract from the value of or interfere with the
     use of the property and which would not have a Material Adverse Effect.

          (b) The operation by Lincoln or any Subsidiary of such  properties and
     assets is in compliance  with all applicable  laws,  ordinances,  rules and
     regulations   of  any   governmental   authority   or  third  party  having
     jurisdiction  over such use  except for such  noncompliance  that would not
     have a Material Adverse Effect.

     5.12 Loans and Investments.

          (a) Except as set forth in the Disclosure Letter,  there is no loan of
     the Bank in excess of $250,000 that has been classified by Lincoln applying
     bank regulatory examination standards as "Other Loans Specially Mentioned,"
     "Substandard,"  "Doubtful"  or "Loss," nor is there any loan of the Bank in
     excess of $250,000  that has been  identified  by  accountants  or auditors
     (internal or external) as having a  significant  risk of  uncollectibility.
     The  Bank's  loan  watch  list and all  loans in excess  of  $250,000  that
     Lincoln's Management has determined to be ninety (90) days or more past due
     with respect to principal  or interest or has placed on  nonaccrual  status
     are set forth in the Disclosure Letter.
<page>
          (b) Each of the reserves and  allowances  for possible loan losses and
     the carrying  value for real estate owned which are shown on the  Financial
     Information  is, in the opinion of  Lincoln's  Management,  adequate in all
     material respects under the requirements of generally  accepted  accounting
     principles  applied on a consistent basis to provide for possible losses on
     loans  outstanding  and real estate owned as of the date of such  Financial
     Information.

          (c)  Except  as  set  forth  in the  Disclosure  Letter,  none  of the
     investments  reflected  in  the  Financial  Information  and  none  of  the
     investments  made by  Lincoln  or any  Subsidiary  since  June 30,  2008 is
     subject  to any  restrictions,  whether  contractual  or  statutory,  which
     materially  impairs  the  ability of Lincoln or any  Subsidiary  to dispose
     freely  of  such  investment  at  any  time.  Except  as set  forth  in the
     Disclosure  Letter,  neither  Lincoln nor any  Subsidiary is a party to any
     repurchase agreements with respect to securities.

     5.13 Employee Benefit Plans.

          (a) The Disclosure  Letter contains a list  identifying each "employee
     benefit plan," as defined in Section 3(3) of the Employee Retirement Income
     Security Act of 1974,  as amended  ("ERISA"),  which (i) is  subject to any
     provision  of ERISA,  and (ii) is  currently  maintained,  administered  or
     contributed  to by Lincoln  or any  Subsidiary  and  covers  any  employee,
     director or former employee or director of Lincoln or any Subsidiary  under
     which Lincoln or any Subsidiary has any  liability.  The Disclosure  Letter
     also contains a list of all "employee benefit plans" as defined under ERISA
     which have been  terminated by Lincoln or any Subsidiary  since  January 1,
     2002. Copies of such plans (and, if applicable, related trust agreements or
     insurance contracts) and all amendments thereto and written interpretations
     thereof have been furnished to First Merchants together with the three most
     recent annual  reports  prepared in  connection  with any such plan and the
     current summary plan descriptions.  Such plans are hereinafter  referred to
     individually as a "Lincoln  Employee Plan" and collectively as the "Lincoln
     Employee  Plans."  The  Lincoln   Employee  Plans  which   individually  or
     collectively would constitute an "employee pension benefit plan" as defined
     in Section 3(2)(A) of ERISA are identified in the list referred to above.

          (b) The Lincoln  Employee  Plans comply with and have been operated in
     accordance  with  all  applicable  laws,  regulations,  rulings  and  other
     requirements  the breach or  violation  of which  could  materially  affect
     Lincoln, any Subsidiary,  or a Lincoln Employee Plan. Each Lincoln Employee
     Plan  has  been   administered   in  substantial   conformance   with  such
     requirements and all reports and information  required with respect to each
     Lincoln Employee Plan has been timely filed or given.
<page>
          (c)No "prohibited  transaction," as defined in Section 406 of ERISA or
     Section 4975  of  the  Code,  for  which  no  statutory  or  administrative
     exemption exists, and no "reportable  event," as defined in Section 4043(c)
     of ERISA,  for which a notice is required to be filed,  has  occurred  with
     respect to any Lincoln Employee Plan Neither Lincoln nor any Subsidiary has
     any liability to the Pension Benefit Guaranty Corporation  ("PBGC"), to the
     Internal  Revenue Service ("IRS"),  to the Department of Labor ("DOL"),  to
     the  Employee  Benefits  Security  Administration,  or  to an  employee  or
     Employee Plan beneficiary  under  Section 502 of ERISA, with respect to any
     Lincoln Employee Plan.

          (d) No "fiduciary," as defined in Section 3(21) of ERISA, of a Lincoln
     Employee Plan has failed to comply with the  requirements of Section 404 of
     ERISA.

          (e)  Each of the  Lincoln  Employee  Plans  which  is  intended  to be
     qualified  under  Code  Section 401(a)  has been  amended  to comply in all
     material respects with the applicable  requirements of the Code,  including
     the Tax Reform Act of 1986,  the Revenue  Act of 1987,  the  Technical  and
     Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of
     1989,  the Revenue  Reconciliation  Act of 1990,  the Tax  Extension Act of
     1991, the Unemployment  Compensation Amendments of 1992, the Omnibus Budget
     Reconciliation  Act of 1993,  the  Retirement  Protection  Act of 1994, the
     Uruguay  Round  Agreements  Act,  the  Uniformed  Services  Employment  and
     Reemployment  Rights Act of 1994,  the Small Business Job Protection Act of
     1996,  the  Taxpayer  Relief  Act of 1997,  the  Internal  Revenue  Service
     Restructuring  and Reform Act of 1998, the Community Renewal Tax Relief Act
     of 2000, the Economic Growth and Tax Relief Reconciliation Act of 2001, the
     age 70-1/2 Code  Section 401(a)(9)  model amendments required to be adopted
     by the end of the 2004  plan  year,  and any  rules,  regulations  or other
     requirements  promulgated  thereunder (the "Acts"). In addition,  each such
     Lincoln  Employee  Plan  has  been and is  being  operated  in  substantial
     conformance  with the  applicable  provisions  of ERISA  and the  Code,  as
     amended by the Acts,  including the automatic  rollover  rules which became
     effective  March 28, 2005.  Except as set forth in the  Disclosure  Letter,
     Lincoln and/or any Subsidiary, as applicable, sought and received favorable
     determination letters from the IRS within the applicable remedial amendment
     periods under Code Section  401(b),  and has  furnished to First  Merchants
     copies of the most recent IRS  determination  letters  with  respect to any
     such Lincoln Employee Plan that is an "employee pension benefit plan" under
     ERISA Section 3(2)(A).

          (f) With respect to the Lincoln Bank Employee Stock Ownership Plan and
     401(k) Savings Plan and Trust  Agreement (the "ESOP"),  except as set forth
     on the Disclosure  Letter: (i) the ESOP constitutes a qualified plan within
     the  meaning  of  Section  401(a) of the Code and the trust is exempt  from
     federal income tax under Section 501(a) of the Code; (ii) the ESOP has been
     maintained and operated in substantial  compliance in all material respects
     with all applicable provisions of Sections 409 and 4975 of the Code and the
     regulations and rulings  thereunder;  (iii) all  contributions  required by
     such plan have  been  made or will be made on a timely  basis;  and (iv) no
     termination,  partial  termination or  discontinuance  of contributions has
     occurred  without  a  determination  by the IRS that such  action  does not
     affect the tax-qualified status of such ESOP.
<page>
          (g) Except as set forth in the Disclosure  Letter, no Lincoln Employee
     Plan has incurred an "accumulated  funding deficiency," as determined under
     Code Section 412 and ERISA Section 302.

          (h) Except as set forth in the Disclosure  Letter, no Lincoln Employee
     Plan subject to Title IV of ERISA has been terminated or incurred a partial
     termination  (either  voluntarily  or  involuntarily),  in such a way as to
     cause material additional liability to Lincoln.

          (i) No claims  against an  Employee  Plan,  Lincoln or any  Subsidiary
     (other than normal benefit claims), have been asserted or threatened.

          (j)  Except  as  set  forth  in the  Disclosure  Letter,  there  is no
     contract, agreement, plan or arrangement covering any employee, director or
     former employee or director of Lincoln or any Subsidiary that, individually
     or  collectively,  could give rise to the  payment of any amount that would
     not be deductible by reason of  Section 280G  or  Section 162(a)(1)  of the
     Code.

          (k) To the  knowledge of Lincoln's  Management,  no event has occurred
     that would cause the imposition of the tax described in Code Section 4980B.
     To the knowledge of Lincoln's Management, all requirements of ERISA Section
     601 have been met.

          (l)  The  Disclosure  Letter  contains  a  list  of  each  employment,
     severance or other similar contract, arrangement or policy and each plan or
     arrangement  (written or oral) providing for insurance coverage  (including
     any self-insured arrangements), workers' compensation, disability benefits,
     supplemental unemployment benefits, vacation benefits,  retirement benefits
     or deferred  compensation,  profit sharing,  bonuses,  stock options, stock
     appreciation or other forms of incentive  compensation  or  post-retirement
     insurance,  compensation  or benefits  which (i) is not a Lincoln  Employee
     Plan, (ii) was entered into,  maintained or contributed to, as the case may
     be, by Lincoln or any Subsidiary and (iii) covers any employee, director or
     former employee or director of Lincoln or any  Subsidiary.  Such contracts,
     plans and  arrangements as are described  above,  copies or descriptions of
     all of  which  have  been  furnished  previously  to First  Merchants,  are
     hereinafter referred to collectively as the "Lincoln Benefit Arrangements."
     Each of the Lincoln Benefit Arrangements has been maintained in substantial
     compliance with its terms and with the  requirements  prescribed by any and
     all statutes,  orders,  rules and regulations  which are applicable to such
     Lincoln Benefit Arrangements.

          (m) Except as set forth in the Disclosure Letter,  neither Lincoln nor
     any  Subsidiary  has  any  present  or  future   liability  in  respect  of
     post-retirement  health  and  medical  benefits  for  former  employees  or
     directors of Lincoln or any Subsidiary.

          (n) Except as set forth in the  Disclosure  Letter,  there has been no
     amendment  to,  written  interpretation  or  announcement  (whether  or not
     written) by Lincoln or any  Subsidiary  relating  to, or change in employee
     participation  or  coverage  under,  any Lincoln  Employee  Plan or Lincoln
     Benefit  Arrangement  administered by Lincoln or any Subsidiary which would
     increase  materially the expense of maintaining such Lincoln Employee Plans
     or Lincoln Benefit  Arrangements above the level of the expense incurred in
     respect thereof for the fiscal year ended December 31, 2007.
<page>
          (o) For purposes of this  Section 5.13,  references  to Lincoln or any
     Subsidiary  are deemed to include  (i) all  predecessors  of Lincoln or any
     Subsidiary,  (ii) any  subsidiary of Lincoln or any  Subsidiary,  (iii) all
     members of any controlled group (as determined under Code Section 414(b) or
     (c)) that includes  Lincoln or any Subsidiary,  and (iv) all members of any
     affiliated  service group (as determined under Code  Section 414(m) or (n))
     that includes Lincoln or any Subsidiary.

          (p) With respect to any nonqualified  deferred  compensation plan that
     is  subject  to Code  Section 409A,  such plan has been  identified  on the
     Disclosure Letter. The Disclosure Letter shall also identify to what extent
     and in what years federal employment taxes  (FICA/Medicare)  have been paid
     on any such nonqualified deferred compensation amounts, as required by Code
     Section 3121(v) and the underlying regulations.

     5.14  Obligations  to  Employees.  Except  as set  forth in the  Disclosure
Letter,  all accrued  obligations and liabilities of Lincoln and any Subsidiary,
whether arising by operation of law, by contract or by past custom, for payments
to trust or other funds,  to any government  agency or body or to any individual
director,   officer,  employee  or  agent  (or  his  heirs,  legatees  or  legal
representative)  with respect to  unemployment  compensation  or social security
benefits and all pension,  retirement,  savings,  stock  purchase,  stock bonus,
stock ownership, stock option, restricted stock grant, stock appreciation rights
or profit sharing plan, any employment, deferred compensation, consultant, bonus
or  collective  bargaining  agreement  or  group  insurance  contract  or  other
incentive,  welfare or employee benefit plan or agreement  maintained by Lincoln
or any Subsidiary for their current or former directors, officers, employees and
agents have been and are being paid to the extent required by law or by the plan
or contract,  and adequate  actuarial accruals and/or reserves for such payments
have been and are being made by Lincoln or any  Subsidiary  in  accordance  with
generally accepted accounting and actuarial principles, except where the failure
to pay any such  accrued  obligations  or  liabilities  or to maintain  adequate
accruals and/or  reserves for payment thereof would not have a Material  Adverse
Effect.  Except as set  forth in the  Disclosure  Letter,  all  obligations  and
liabilities  of Lincoln and the  Subsidiaries,  whether  arising by operation of
law, by contract,  or by past custom, for all forms of compensation which are or
may be payable to their  current or former  directors,  officers,  employees  or
agents have been and are being paid, and adequate  accruals  and/or reserves for
payment  therefor  have been and are being  made in  accordance  with  generally
accepted  accounting  principles,  except  where  the  failure  to pay any  such
obligations and liabilities or to maintain adequate accruals and/or reserves for
payment  thereof  would not have a Material  Adverse  Effect.  All  accruals and
reserves referred to in this Section 5.14 are correctly and accurately reflected
and  accounted  for in the books,  statements  and  records  of Lincoln  and the
Subsidiaries,  except where the failure to correctly and accurately  reflect and
account for such accruals and reserves would not have a Material Adverse Effect.
<page>
     5.15 Taxes, Returns and Reports. Lincoln and the Subsidiaries have (a)`duly
filed all federal,  state,  local and foreign tax returns of every type and kind
required to be filed as of the date  hereof,  and each return is true,  complete
and accurate in all material respects;  (b) paid all material taxes, assessments
and other governmental  charges due and payable or claimed to be due and payable
upon them or any of their income, properties or assets; and (c) not requested an
extension  of time for any such  payments  (which  extension is still in force).
Except for taxes not yet due and payable, the reserve for taxes on the Financial
Information  is adequate to cover all of  Lincoln's  and the  Subsidiaries'  tax
liabilities  (including,  without  limitation,  income taxes and franchise fees)
that may  become  payable  in future  years  with  respect  to any  transactions
consummated  prior to June 30,  2008.  Neither  Lincoln nor the Bank has or will
have, any liability for taxes of any nature for or with respect to the operation
of their business,  including the assets of any subsidiary,  from June 30, 2008,
up to and including the Effective Date,  except to the extent reflected on their
Financial  Information  or on financial  statements of Lincoln or any Subsidiary
subsequent  to such  date and as set  forth in the  Disclosure  Letter.  Neither
Lincoln  nor any  Subsidiary  is  currently  under audit by any state or federal
taxing  authority.  Except as set forth in the  Disclosure  Letter,  neither the
federal,  state,  nor local tax returns of Lincoln nor any Subsidiary  have been
audited by any taxing authority during the past five (5) years.

     5.16 Deposit Insurance. The deposits of the Bank are insured by the Federal
Deposit  Insurance  Corporation  ("FDIC") in accordance with the Federal Deposit
Insurance Act, and the Bank has paid all premiums and  assessments  with respect
to such deposit insurance.

     5.17  Reports.  Since  January 1, 2003,  Lincoln and each  Subsidiary  have
timely  filed all  reports,  registrations  and  statements,  together  with any
required amendments thereto, that Lincoln or any Subsidiary was required to file
with (i) the  Indiana  Department of Financial  Institutions,  (ii) the FDIC, or
(iii) any federal,  state, municipal or local government,  securities,  banking,
environmental, insurance and other governmental or regulatory authority, and the
agencies and staffs thereof (collectively, the "Regulatory Authorities"), having
jurisdiction  over the affairs of Lincoln or any  Subsidiary  except  where such
failure  would not have a Material  Adverse  Effect.  All such reports  filed by
Lincoln and the  Subsidiaries  complied in all  material  respects  with all the
rules and regulations  promulgated by the applicable Regulatory  Authorities and
are true,  accurate and complete and were prepared in conformity  with generally
accepted regulatory  accounting principles applied on a consistent basis. Except
as set forth in the  Disclosure  Letter,  there is no unresolved  violation with
respect to any report or statement  filed by, or any  examination of, Lincoln or
the Bank.

     5.18  Absence  of  Defaults.  Neither  Lincoln  nor  any  Subsidiary  is in
violation of its charter  documents or By-Laws or to the  knowledge of Lincoln's
Management in default  under any material  agreement,  commitment,  arrangement,
loan, lease,  insurance policy or other instrument,  whether entered into in the
ordinary  course of business or otherwise and whether written or oral, and there
has not occurred any event known to Lincoln's Management that, with the lapse of
time or giving of notice or both,  would  constitute such a default,  except for
defaults which would not have a Material Adverse Effect.

     5.19 Tax and Regulatory Matters.  Neither Lincoln nor the Bank has taken or
agreed to take any action or has any knowledge of any fact or circumstance  that
would (a) prevent the  transactions  contemplated  hereby from  qualifying  as a
reorganization  within the meaning of Section 368 of the Code or (b)  materially
impede or delay receipt of any regulatory  approval required for consummation of
the transactions contemplated by this Agreement.
<page>
     5.20 Real Property.

          (a) A list of the locations of each parcel of real  property  owned by
     Lincoln or the Bank (other than real property acquired in foreclosure or in
     lieu of foreclosure in the course of the collection of loans and being held
     by Lincoln or the Bank for  disposition as required by law) is set forth in
     the Disclosure Letter under the heading of "Owned Real Property" (such real
     property being herein referred to as the "Owned Real Property").  A list of
     the locations of each parcel of real property leased by Lincoln or the Bank
     is also set forth in the  Disclosure  Letter  under the  heading of "Leased
     Real Property"  (such real property being herein referred to as the "Leased
     Real Property"). Lincoln shall update the Disclosure Letter within ten (10)
     days after  acquiring or leasing any real  property  after the date hereof.
     Collectively,  the Owned Real  Property  and the Leased Real  Property  are
     herein referred to as the "Real Property."

          (b) There is no pending action involving Lincoln or the Bank as to the
     title of or the right to use any of the Real Property.

          (c) Except as set forth in the Disclosure Letter,  neither Lincoln nor
     the Bank has any interest in any other real property except  interests as a
     mortgagee  or any  real  property  acquired  in  foreclosure  or in lieu of
     foreclosure and being held for disposition as required by law.

          (d)  Except as set  forth in the  Disclosure  Letter,  (i) none of the
     buildings,  structures  or other  improvements  located  on the Owned  Real
     Property encroaches upon or over any adjoining parcel of real estate or any
     easement  or  right-of-way  or  "setback"  line  and  all  such  buildings,
     structures; and (ii) improvements are located and constructed in conformity
     with all applicable zoning ordinances and building codes.

          (e)  Except as set  forth in the  Disclosure  Letter,  (i) none of the
     buildings,  structures or  improvements  located on the Owned Real Property
     are the subject of any  official  complaint  or notice by any  governmental
     authority of violation of any applicable zoning ordinance or building code;
     and (ii) there is no zoning  ordinance,  building  code,  use or  occupancy
     restriction or condemnation action or proceeding  pending,  or, to the best
     knowledge of  Lincoln's  Management,  threatened,  with respect to any such
     building,  structure or improvement.  Except as set forth in the Disclosure
     Letter,  the Real Property is in good  condition for its intended  purpose,
     ordinary wear and tear excepted,  and has been maintained (as to the Leased
     Property,  to the extent  required to be maintained by Lincoln or the Bank)
     in accordance with reasonable and prudent business practices  applicable to
     like  facilities.  The Owned Real  Property  has been used and  operated in
     compliance  with all applicable  laws,  statutes,  rules,  regulations  and
     ordinances applicable thereto.
<page>
          (f) Except as may be reflected in the  Financial  Information  or with
     respect to such easements, liens, defects, encumbrances,  real estate taxes
     and assessments or other monetary  obligations  such as contributions to an
     Owner's Association,  as do not individually or in the aggregate materially
     adversely  affect the use or value of the Owned Real Property,  Lincoln and
     the Bank have, and at the Closing Date will have, good and marketable title
     to their  respective  Owned  Real  Property,  free and clear of all  liens,
     mortgages, security interests, encumbrances and restrictions of any kind or
     character.

          (g) Neither Lincoln nor the Bank has caused or allowed the generation,
     treatment,  storage,  disposal or release at any Real Property of any Toxic
     Substance,  except in compliance  with all  applicable  federal,  state and
     local  laws and  regulations  and  except  as set  forth in the  Disclosure
     Letter.   "Toxic  Substance"  means  any  hazardous,   toxic  or  dangerous
     substance,   pollutant,   waste,  gas  or  material,   including,   without
     limitation,  petroleum and petroleum products, metals, liquids, semi-solids
     or solids,  that are regulated  under any federal,  state or local statute,
     ordinance,  rule,  regulation  or other  law  pertaining  to  environmental
     protection, contamination, quality, waste management or cleanup.

          (h) Except as disclosed  in the  Disclosure  Letter,  (i) there are no
     underground  storage tanks located on, in or under any Owned Real Property;
     and (ii) to the  knowledge  of  Lincoln's  Management,  no such  Owned Real
     Property has  previously  contained an  underground  storage tank.  Neither
     Lincoln nor the Bank own or operate  any  underground  storage  tank at any
     Leased Real Property and to the  knowledge of Lincoln's  Management no such
     Leased Real Property has previously  contained an underground storage tank.
     No Owned Real Property is or has been, during Lincoln's  ownership,  listed
     on the CERCLIS.

          (i) To the  knowledge of Lincoln's  Management  and as a result of any
     act of Lincoln or the Bank, no Toxic Substance has been released,  spilled,
     discharged  or disposed at, in, on or under any Owned Real  Property nor to
     the  knowledge of Lincoln's  Management  are there any other  conditions or
     circumstances  affecting any Owned Real Property, in each case, which would
     pose a  significant  risk to the  environment  or the  health  or safety of
     persons or otherwise  pose a material  risk of liability  for  remediation,
     corrective action or clean-up.

          (j)  Except as  disclosed  in the  Disclosure  Letter,  the Owned Real
     Property  is  not   "property"   within  the  definition  of  Indiana  Code
     13-11-2-174.  Neither  Lincoln  nor  the  Bank is  required  to  provide  a
     "disclosure document" to First Merchants as a result of the Merger pursuant
     to the Indiana Responsible Property Transfer Law (I.C. Section 13-25-3-1 et
     seq.).

          (k) To the  knowledge of Lincoln's  Management  and as a result of any
     act of Lincoln or the Bank, there are no mechanic's or materialman's  liens
     against  the Leased  Property,  and no unpaid  claims for labor  performed,
     materials  furnished or services rendered in connection with  constructing,
     improving or repairing the Leased Property in respect of which liens may or
     could be filed against the Leased Property.
<page>
     5.21 Securities Law Compliance.  Lincoln's  common shares are traded on the
NASDAQ  Global  Market  under the symbol of "LNCB."  Lincoln has complied in all
material respects with all state,  federal or foreign securities laws, statutes,
rules,  regulations or orders,  injunctions or decrees of any government  agency
relating thereto.  Lincoln has complied in all material respects with all rules,
regulations,  orders,  injunctions  or decrees of the  National  Association  of
Securities  Dealers,  Inc. and all entities related or affiliated  therewith and
has filed all reports  and  documents  required to be filed with such  entities.
Lincoln  has filed all reports  and other  documents  required to be filed by it
under  the  Securities  Exchange  Act of 1934  and the  Securities  Act of 1933,
including  Lincoln's  Annual Report on Form 10-K for the year ended December 31,
2007,  and  Quarterly  Report on Form 10-Q for the quarter  ended June 30, 2008,
copies of which have  previously  been delivered to First  Merchants.  Except as
would not  reasonably  be expected to have  Material  Adverse  Effect,  all such
Securities and Exchange  Commission filings were true,  accurate and complete in
all  material  respects  as of the  dates of the  filings,  and no such  filings
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements,  at the time and in the light of
the circumstances under which they were made, not false or misleading.

     5.22 Broker's or Finder's Fees. Except for Sandler O'Neill Partners,  L.P.,
no agent,  broker or other person acting on behalf of Lincoln or any  Subsidiary
or under any  authority of Lincoln or any  Subsidiary is or shall be entitled to
any  commission,  broker's or finder's fee or any other form of  compensation or
payment from any of the parties  hereto,  other than  attorneys' or accountants'
fees, in connection with any of the transactions contemplated by this Agreement.

     5.23  Shareholder  Rights Plan.  Except as otherwise  provided in Lincoln's
Articles of  Incorporation  and By-Laws or set forth in the  Disclosure  Letter,
neither  Lincoln nor the Bank has a  shareholder  rights plan or any other plan,
program or agreement  involving,  restricting,  prohibiting  or  discouraging  a
change in control or merger of Lincoln or the Bank or which may be considered an
anti-takeover mechanism.

     5.24  Indemnification  Agreements.  Except as set  forth in the  Disclosure
Letter,  neither  Lincoln  nor  the  Bank  is a  party  to any  indemnification,
indemnity or reimbursement agreement,  contract,  commitment or understanding to
indemnify any present or former  director,  officer,  employee,  shareholder  or
agent against any liability or hold the same harmless from liability  other than
as expressly provided in the Articles of Incorporation or By-Laws of Lincoln and
the Bank.

     5.25 Bring Down of Representations and Warranties.  All representations and
warranties of Lincoln and the Subsidiaries  contained in this Section 5 shall be
true,  accurate  and  correct on and as of the  Effective  Date except for those
representations  and  warranties  which address  matters only as of a particular
date  (which  shall  have been true and  correct  as of such  date) or have been
affected by the  transactions  contemplated by and specified within the terms of
this Agreement.
<page>
     5.26 Nonsurvival of Representations and Warranties. The representations and
warranties contained in this Section 5 shall expire on the Effective Date or the
earlier   termination  of  this  Agreement,   and  thereafter  Lincoln  and  the
Subsidiaries  and all  directors  and  officers of Lincoln and the  Subsidiaries
shall have no further liability with respect thereto unless a court of competent
jurisdiction should determine that any misrepresentation or breach of a warranty
was willfully or intentionally made or is deemed to be fraudulent.
<page>
                                   SECTION 6

                               Representations and
                          Warranties of First Merchants

First Merchants hereby represents and warrants to Lincoln with respect to itself
and its Subsidiaries as follows (For the purposes of this Section, a "Disclosure
Letter" is defined as a letter  referencing  Section 6 of this  Agreement  which
shall be prepared  and  executed  by an  authorized  executive  officer of First
Merchants and delivered to and initialed by an authorized  executive  officer of
Lincoln contemporaneously with the execution of this Agreement.):

     6.01  Organization  and Authority.  First  Merchants is a corporation  duly
organized and validly  existing under the laws of the State of Indiana and FMBCI
is a national  bank duly  organized and validly  existing  under the laws of the
United States of America.  Each has the corporate power and authority to conduct
its  business  in the manner and by the means  utilized  as of the date  hereof.
First Merchants,  FMBCI and the other  Subsidiaries have the power and authority
(corporate or otherwise)  to conduct their  respective  businesses in the manner
and by  the  means  utilized  as of  the  date  hereof.  First  Merchants'  only
subsidiaries  are FMBCI and the other  entities  listed on  Exhibit  21 to First
Merchants'  Annual Report on Form 10-K as of and for the period ending  December
31, 2007 (the  "Subsidiaries").  FMBCI is subject to primary federal  regulatory
supervision and regulation by the Office of the Comptroller of the Currency.

     6.02 Authorization.

          (a) First  Merchants  has the  corporate  power and authority to enter
     into this Agreement and to carry out its obligations  hereunder  subject to
     the conditions  precedent set forth in  Section 9.02.  The Agreement,  when
     executed and delivered,  will have been duly authorized and will constitute
     a valid and binding obligation of First Merchants, subject to the condition
     precedent set forth in Section 9.02 hereof,  enforceable in accordance with
     its terms,  except to the extent  limited  by  insolvency,  reorganization,
     liquidation,  readjustment  of debt,  or other laws of general  application
     relating to or affecting the enforcement of creditor's rights. The Board of
     Directors of First  Merchants  and FMBCI have  approved the Merger and Bank
     Merger  pursuant to the terms and conditions of this Agreement and the Bank
     Merger Agreement.

          (b)  Except  as  set  forth  in the  Disclosure  Letter,  neither  the
     execution  of this  Agreement,  nor the  consummation  of the  transactions
     contemplated  hereby,  subject  to the  condition  precedent  set  forth in
     Section 9.02  hereof does or will (i) conflict with, result in a breach of,
     or constitute a default under Articles of Incorporation or By-laws of First
     Merchants  or  FMBCI;  (ii) conflict  with,  result  in  a  breach  of,  or
     constitute  a default  under any  federal,  foreign,  state,  or local law,
     statute,  ordinance,  rule, regulation, or court or administrative order or
     decree, or any note, bond, indenture,  loan, mortgage,  security agreement,
     contract,  arrangement,  or  commitment,  to which First  Merchants  or any
     Subsidiary  is subject or bound,  the result of which would have a Material
     Adverse  Effect;  (iii) result  in the  creation  of,  or give any  person,
     corporation or entity the right to create, any lien,  charge,  encumbrance,
     security interest,  or any other rights of others or other adverse interest
     upon any  right,  property  or  asset  of  either  First  Merchants  or any
     Subsidiary;  (iv) terminate,  or give any person, corporation or entity the
     right to terminate,  amend,  abandon, or refuse to perform, any note, bond,
     indenture,   mortgage,  security  agreement,   contract,   arrangement,  or
     commitment  to which First  Merchants  or any  Subsidiary  is a party or by
     which  First   Merchants  or  any  Subsidiary  is  subject  or  bound;   or
     (v) accelerate or modify, or give any party thereto the right to accelerate
     or modify,  the time within which, or the terms  according to which,  First
     Merchants  or any  Subsidiary  is to perform any duties or  obligations  or
     receive  any rights or  benefits  under any note,  bond,  indenture,  loan,
     mortgage, security agreement, contract, arrangement, or commitment.
<page>
          For the purpose of this Agreement, and in relation to First Merchants,
     a "Material  Adverse  Effect"  means any effect  that (i) is  material  and
     adverse to the  financial  position,  results of  operations or business of
     First  Merchants  and its  Subsidiaries  taken  as a whole,  or (ii)  would
     materially impair the ability of First Merchants to perform its obligations
     under this Agreement or otherwise  materially threaten or materially impede
     the consummation of the Merger and the other  transactions  contemplated by
     this Agreement;  provided,  however, that Material Adverse Effect shall not
     be deemed to include the impact of (a) changes in banking and similar  laws
     of  general   applicability   to  banks  or  their  holding   companies  or
     interpretations thereof by courts or governmental authorities,  (b) changes
     in  generally  accepted  accounting  principles  or  regulatory  accounting
     requirements applicable to banks or their holding companies generally,  (c)
     any  modifications  or changes  to  valuation  policies  and  practices  in
     connection  with the Merger or  restructuring  charges  taken in connection
     with  the  Merger,  in each  case in  accordance  with  generally  accepted
     accounting  principles,  (d)  effects  of any  action  taken with the prior
     written  consent of Lincoln,  (e) changes in the general  level of interest
     rates  (including  the impact on First  Merchant's  or  FMBCI's  securities
     portfolios) or conditions or  circumstances  relating to or that affect the
     United  States  economy,  financial  or  securities  markets or the banking
     industry,  generally,  (f) changes  resulting from expenses (such as legal,
     accounting and investment  bankers' fees) incurred in connection  with this
     Agreement or the transactions  contemplated  herein,  (g) the impact of the
     announcement of this Agreement and the  transactions  contemplated  hereby,
     and compliance with this Agreement on the business,  financial condition or
     results of operations of First Merchants and its Subsidiaries,  and (h) the
     occurrence of any military or terrorist  attack within the United States or
     any of its possessions or offices; provided that in no event shall a change
     in the trading price of the First  Merchants  Common Stock,  by itself,  be
     considered to constitute a Material  Adverse Effect on First  Merchants and
     its  Subsidiaries  taken as a whole (it being understood that the foregoing
     proviso  shall not prevent or  otherwise  affect a  determination  that any
     effect underlying such decline has resulted in a Material Adverse Effect).

          (c) Other than in connection or in compliance  with the  provisions of
     the Bank  Holding  Company Act of 1956,  the Bank  Merger Act,  federal and
     state securities laws, and applicable  federal and Indiana banking statutes
     and  Indiana  corporate  statutes,  all  as  amended,  and  the  rules  and
     regulations   promulgated   thereunder,   no  notice   to,   filing   with,
     authorization  of, exemption by, or consent or approval of, any public body
     or authority is necessary for the  consummation by First Merchants or FMBCI
     of the transactions contemplated by this Agreement.
<page>
          (d) Other than those filings,  authorizations,  consents and approvals
     referenced in Section  6.02(c) above and filings and approvals  relating to
     the listing of the shares of First  Merchants  common stock to be issued in
     the Merger on the NASDAQ  Global Select  Market,  certain other filings and
     approvals  with  NASDAQ  relating  to the change in the number of shares of
     First  Merchants  outstanding as a result of the Merger,  and except as set
     forth on the Disclosure  Letter,  no notice to, filing with,  authorization
     of,  execution  by, or consent or approval of, any third party is necessary
     for the  consummation  by First  Merchants  or  FMBCI  of the  transactions
     contemplated by this Agreement.

     6.03 Capitalization.

          (a) As of July 31, 2008,  First  Merchants  had  50,000,000  shares of
     common stock  authorized,  no par value,  of which  18,272,085  shares were
     issued  and  outstanding.  Such  issued  and  outstanding  shares  of First
     Merchants'  common  stock  have been  duly and  validly  authorized  by all
     necessary  corporate action of First Merchants,  are validly issued,  fully
     paid  and  nonassessable  and  have not been  issued  in  violation  of any
     preemptive rights of any shareholders.

          (b) First Merchants has 500,000 shares of Preferred Stock  authorized,
     no par value, no shares of which have been issued and no commitments  exist
     to issue any of such shares.

          (c) The shares of First Merchants'  common stock to be issued pursuant
     to the Merger  will be duly  authorized,  fully  paid,  validly  issued and
     nonassessable and subject to no preemptive rights.

          (d) As of the date of this  Agreement,  FMBCI  has  114,000  shares of
     common stock authorized,  $10 par value per share,  114,000 shares of which
     are issued and  outstanding  and held by First  Merchants.  Such issued and
     outstanding  shares  of FMBCI  common  stock  have  been  duly and  validly
     authorized  by all  necessary  corporate  action of the FMBCI,  are validly
     issued, fully paid and nonassessable, and have not been issued in violation
     of any  preemptive  rights of any FMBCI  shareholders.  All the  issued and
     outstanding Bank common stock is owned by First  Merchants,  free and clear
     of  all  liens,  pledges,  charges,  claims,  encumbrances,   restrictions,
     security  interests,  options and preemptive rights and of all other rights
     of any other person,  corporation or entity with respect thereto. FMBCI has
     no capital stock authorized,  issued or outstanding other than as described
     in this Section  6.03(d) and has no intention or obligation to authorize or
     issue any other shares of capital stock.

          (e)  Except  as set  forth  in the  Disclosure  Letter,  there  are no
     options, commitments,  calls, agreements,  understandings,  arrangements or
     subscription  rights  regarding the issuance,  purchase or  acquisition  of
     capital stock, or any securities convertible into or representing the right
     to purchase or otherwise  receive the capital stock or any debt securities,
     of First  Merchants  nor FMBCI by which First  Merchants or FMBCI is or may
     become  bound.  Neither  First  Merchants  nor  FMBCI  has any  outstanding
     contractual or other obligation to repurchase,  redeem or otherwise acquire
     any of its respective outstanding shares of capital stock.
<page>
          (f) Except as set forth in the Disclosure  Letter, no person or entity
     beneficially owns 5% or more of First Merchants' outstanding common shares.

     6.04 Organizational Documents. The respective Articles of Incorporation and
By-Laws  of First  Merchants  and  FMBCI  have been  delivered  to  Lincoln  and
represent  true,  accurate and complete  copies of such  corporate  documents of
First Merchants and FMBCI in effect as of the date of this Agreement.

     6.05  Compliance  with Law.  Except as set forth in the Disclosure  Letter,
neither First Merchants nor any Subsidiary has engaged in any activity nor taken
or omitted to take any action which has resulted or, to the  knowledge of "First
Merchants'  Management"  (as  defined  below)  could  reasonably  be expected to
result, in the violation of any local,  state,  federal or foreign law, statute,
rule, regulation or ordinance or of any order, injunction, judgment or decree of
any court or government  agency or body, the violation of which could reasonably
be  expected  to have a  Material  Adverse  Effect.  Except  as set forth in the
Disclosure  Letter,  First Merchants and each  Subsidiary  possess all licenses,
franchises, permits and other authorizations necessary for the continued conduct
of their respective  businesses  without material  interference or interruption.
Neither First Merchants nor any of the Subsidiaries are subject to any agreement
or  understanding  with,  or order and directive  of, any  regulatory  agency or
government  authority  with  respect  to the  business  or  operations  of First
Merchants  or FMBCI.  Except as set forth in the  Disclosure  Letter,  FMBCI has
received  no  inquiries,  claims or  complaints  since  January 1, 2003 from any
regulatory  agency or government  authority  relating to its compliance with the
Bank Secrecy Act, the Truth-in-Lending Act, the Community  Reinvestment Act, the
Gramm-Leach-Bliley  Act of 1999,  the USA Patriot Act, the  International  Money
Laundering   Abatement   and   Financial   Anti-Terrorism   Act  of  2001,   the
Sarbanes-Oxley  Act of 2002 or any laws with  respect to the  protection  of the
environment or the rules and regulations promulgated  thereunder.  Except as set
forth in the  Disclosure  Letter,  First  Merchants  has received no  inquiries,
claims  or  complaints  since  January  1, 2003  from any  regulatory  agency or
government  authority  relating to its compliance  with any  securities,  tax or
employment laws applicable to First Merchants.

     6.06 Accuracy of Statements.  This Agreement, the Disclosure Letter and any
certificate  required to be furnished by First  Merchants or any  Subsidiary  to
Lincoln  in  connection   with  this  Agreement  or  any  of  the   transactions
contemplated hereby (including,  without limitation, any information which shall
be  supplied  by  First  Merchants  or any  Subsidiary  with  respect  to  their
businesses,  operations and financial  condition for inclusion in the regulatory
filings  relating to the Merger or the Bank  Merger) do not or shall not contain
any untrue  statement of a material  fact or do not or shall not omit to state a
material fact necessary to make the statements  contained  herein or therein not
misleading.

     6.07  Litigation  and  Pending  Proceedings.  Except  as set  forth  in the
Disclosure  Letter,  there are no claims of any  kind,  nor any  action,  suits,
proceedings, arbitrations or investigations pending or to the knowledge of First
Merchants' Management threatened in any court or before any government agency or
body,  arbitration panel or otherwise (nor does First Merchants' Management have
any knowledge of a basis for any claim, action, suit, proceeding, arbitration or
investigation)  which could  reasonably  be expected to have a Material  Adverse
Effect. There are no material uncured violations,  criticisms or exceptions,  or
violations  with  respect  to which  material  refunds  or  restitutions  may be
required,  cited in any report,  correspondence or other  communication to First
Merchants or FMBCI as a result of an  examination  by any  regulatory  agency or
body.
<page>
     6.08 Financial Statements.

          (a) First Merchants' consolidated audited balance sheets as of the end
     of the two fiscal  years ended  December 31, 2006 and 2007,  the  unaudited
     consolidated  balance  sheet for the six months ended June 30, 2008 and the
     related  consolidated  statements of income,  shareholders' equity and cash
     flows for the years or period then ended (hereinafter collectively referred
     to as the  "First  Merchants  Financial  Information")  present  fairly the
     consolidated  financial  condition or position of First Merchants as of the
     respective  dates  thereof and the  consolidated  results of  operations of
     First  Merchants for the respective  periods  covered thereby and have been
     prepared  in  conformity  with  generally  accepted  accounting  principles
     applied on a consistent basis.

          (b) All loans reflected in the First Merchants  Financial  Information
     and which have been made, extended or acquired since June 30, 2008 (i) have
     been made for good,  valuable  and adequate  consideration  in the ordinary
     course of business; (ii) constitute the legal, valid and binding obligation
     of the obligor and any  guarantor  named  therein;  (iii) are  evidenced by
     notes,  instruments  or other  evidences  of  indebtedness  which are true,
     genuine and what they  purport to be; and (iv) to the extent that FMBCI has
     a security  interest in collateral or a mortgage  securing such loans,  are
     secured by perfected  security  interests or mortgages  naming FMBCI as the
     secured party or mortgagee,  except for such unperfected security interests
     or  mortgages  naming  FMBCI as secured  party or  mortgagee  which,  on an
     individual loan basis,  would not materially  adversely affect the value of
     any such loan and the  recovery of payment on any such loan if FMBCI is not
     able to enforce any such security interest or mortgage.

     6.09 Absence of Certain Changes.  Except for events and conditions relating
to the business and interest rate environment in general, the accrual or payment
of Merger-related expenses, or as set forth in the Disclosure Letter, since June
30, 2008,  no events have  occurred,  or to the  knowledge  of First  Merchants'
Management,  can  reasonably  be expected to occur,  which could  reasonably  be
expected  to have a Material  Adverse  Effect.  Between the period from June 30,
2008 to the date of this  Agreement,  First  Merchants and each  Subsidiary have
carried  on  their  respective  businesses  in the  ordinary  and  usual  course
consistent  with their past  practices  (excluding  the  incurrence  of fees and
expenses of professional advisors related to this Agreement and the transactions
contemplated  hereby) and there has not been any  declaration,  setting aside or
payment  of any  dividend  or other  distribution  (whether  in  cash,  stock or
property)  with respect to First  Merchants'  common  shares  (other than normal
quarterly cash dividends) or any split,  combination or  reclassification of any
stock of First Merchants or any Subsidiary or any issuance or the  authorization
of  any  issuance  of any  securities  in  respect  of,  or in  lieu  of,  or in
substitution for First Merchants' common shares.
<page>
     6.10 Absence of Undisclosed  Liabilities.  Neither First  Merchants nor any
Subsidiary  is a  party  to any  agreement,  contract,  obligation,  commitment,
arrangement, liability, lease or license which individually exceeds $100,000 per
year or  which  may not be  terminated  within  one  year  from the date of this
Agreement,  except (a) unfunded loan  commitments made in the ordinary course of
FMBCI's  business  consistent  with  past  practices  or (b) as set forth in the
Disclosure  Letter,  nor to the knowledge of First  Merchants'  Management  does
there exist any  circumstances  resulting  from  transactions  effected or to be
effected or events which have  occurred or may occur or from any action taken or
omitted to be taken  which  could  reasonably  be expected to result in any such
agreement, contract, obligation,  commitment,  arrangement,  liability, lease or
license.

     6.11 Title to Assets.

          (a) Except as set forth in the Disclosure Letter,  First Merchants and
     each  Subsidiary  have good and marketable  title in fee simple absolute to
     all personal property reflected in the June 30, 2008 Financial Information,
     good and  marketable  title to all other  properties and assets which First
     Merchants or any Subsidiary  purports to own, good and marketable  title to
     or right to use by terms of any lease or contract all other  property  used
     in First Merchants' or any Subsidiary's  business,  and good and marketable
     title to all property  and assets  acquired  since June 30, 2008,  free and
     clear of all mortgages, liens, pledges,  restrictions,  security interests,
     charges,   claims  or  encumbrances  of  any  nature,   except  such  minor
     imperfections of title, if any, as do not materially detract from the value
     of or  interfere  with the use of the  property  and which would not have a
     Material Adverse Effect.

          (b)  The  operation  by  First  Merchants  or  any  Subsidiary  of its
     furniture, fixtures, machinery,  equipment, computer software and hardware,
     and  all  other  tangible  personal  property  is in  compliance  with  all
     applicable  laws,  ordinances,  rules and  regulations of any  governmental
     authority or third party having  jurisdiction over such use except for such
     noncompliance that would not have a Material Adverse Effect.

     6.12 Loans and Investments.

          (a) Except as set forth in the Disclosure Letter,  there is no loan of
     any other  Subsidiary  in excess of $250,000  that has been  classified  by
     First Merchants  applying bank regulatory  examination  standards as "Other
     Loans  Specially  Mentioned,"  "Substandard,"  "Doubtful" or "Loss," nor is
     there any loan of FMBCI in excess of $250,000  that has been  identified by
     accountants or auditors (internal or external) as having a significant risk
     of uncollectibility. Any bank Subsidiary's loan watch list and all loans in
     excess of $250,000 that First  Merchants'  Management  has determined to be
     ninety (90) days or more past due with  respect to principal or interest or
     has placed on nonaccrual status are set forth in the Disclosure Letter.

          (b) Each of the reserves and  allowances  for possible loan losses and
     the carrying  value for real estate owned which are shown on the  Financial
     Information is, in the opinion of First Merchants' Management,  adequate in
     all  material  respects  under  the  requirements  of  generally   accepted
     accounting principles applied on a consistent basis to provide for possible
     losses on loans  outstanding  and real estate  owned as of the date of such
     Financial Information.
<page>
          (c)  Except  as  set  forth  in the  Disclosure  Letter,  none  of the
     investments  reflected  in  the  Financial  Information  and  none  of  the
     investments  made by First Merchants or any Subsidiary  since June 30, 2008
     is subject to any  restrictions,  whether  contractual or statutory,  which
     materially  impairs the ability of First  Merchants  or any  Subsidiary  to
     dispose freely of such  investment at any time.  Except as set forth in the
     Disclosure Letter, neither First Merchants nor any Subsidiary is a party to
     any repurchase agreements with respect to securities.

     6.13 Employee Benefit Plans.

          (a) The Disclosure  Letter contains a list  identifying each "employee
     benefit plan," as defined in Section 3(3) of the Employee Retirement Income
     Security Act of 1974,  as amended  ("ERISA"),  which (i) is  subject to any
     provision  of ERISA,  and (ii) is  currently  maintained,  administered  or
     contributed  to by  First  Merchants  or  any  Subsidiary  and  covers  any
     employee, director or former employee or director of First Merchants or any
     Subsidiary under which First Merchants or any Subsidiary has any liability.
     The Disclosure  Letter also contains a list of all "employee benefit plans"
     as defined under ERISA which have been terminated by First Merchants or any
     Subsidiary since January 1, 2002. Copies of such plans (and, if applicable,
     related trust agreements or insurance contracts) and all amendments thereto
     and written interpretations thereof have been furnished to Lincoln together
     with the three most recent annual reports  prepared in connection  with any
     such  plan and the  current  summary  plan  descriptions.  Such  plans  are
     hereinafter  referred to individually as a "First Merchants  Employee Plan"
     and  collectively  as the  "First  Merchants  Employee  Plans."  The  First
     Merchants   Employee  Plans  which   individually  or  collectively   would
     constitute an "employee pension benefit plan" as defined in Section 3(2)(A)
     of ERISA are identified in the list referred to above.

          (b) The  First  Merchants  Employee  Plans  comply  with and have been
     operated in accordance with all applicable laws,  regulations,  rulings and
     other requirements the breach or violation of which could materially affect
     First Merchants, any Subsidiary,  or an First Merchants Employee Plan. Each
     First  Merchants   Employee  Plan  has  been  administered  in  substantial
     conformance with such requirements and all reports and information required
     with respect to each First Merchants Employee Plan has been timely filed or
     given.

          (c) No "prohibited transaction," as defined in Section 406 of ERISA or
     Section 4975  of  the  Code,  for  which  no  statutory  or  administrative
     exemption exists, and no "reportable  event," as defined in Section 4043(c)
     of ERISA,  for which a notice is required to be filed,  has  occurred  with
     respect to any First Merchants  Employee Plan.  Neither First Merchants nor
     any  Subsidiary  has any  liability to the PBGC, to the IRS, to the DOL, to
     the Employee Benefits Security  Administration,  or to an employee or First
     Merchants  Employee  Plan  beneficiary  under  Section 502  of ERISA,  with
     respect to any First Merchants Employee Plan.
<page>
          (d) No "fiduciary," as defined in  Section 3(21)  of ERISA, of a First
     Merchants  Employee  Plan has  failed to comply  with the  requirements  of
     Section 404 of ERISA.

          (e) Each of the First Merchants Employee Plans which is intended to be
     qualified  under  Code  Section 401(a)  has been  amended  to comply in all
     material respects with the applicable  requirements of the Code,  including
     the Tax Reform Act of 1986,  the Revenue  Act of 1987,  the  Technical  and
     Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of
     1989,  the Revenue  Reconciliation  Act of 1990,  the Tax  Extension Act of
     1991, the Unemployment  Compensation Amendments of 1992, the Omnibus Budget
     Reconciliation  Act of 1993,  the  Retirement  Protection  Act of 1994, the
     Uruguay  Round  Agreements  Act,  the  Uniformed  Services  Employment  and
     Reemployment  Rights Act of 1994,  the Small Business Job Protection Act of
     1996,  the  Taxpayer  Relief  Act of 1997,  the  Internal  Revenue  Service
     Restructuring  and Reform Act of 1998, the Community Renewal Tax Relief Act
     of 2000, the Economic Growth and Tax Relief Reconciliation Act of 2001, the
     age 70-1/2 Code  Section 401(a)(9)  model amendments required to be adopted
     by the end of the 2004  plan  year,  and any  rules,  regulations  or other
     requirements  promulgated  thereunder (the "Acts"). In addition,  each such
     First Merchants Employee Plan has been and is being operated in substantial
     conformance  with the  applicable  provisions  of ERISA  and the  Code,  as
     amended by the Acts,  including the automatic  rollover  rules which became
     effective  March 28, 2005.  Except as set forth in the  Disclosure  Letter,
     First Merchants and/or any Subsidiary,  as applicable,  sought and received
     favorable determination letters from the IRS within the applicable remedial
     amendment  periods under Code Section 401(b),  and has furnished to Lincoln
     copies of the most recent IRS  determination  letters  with  respect to any
     such First  Merchants  Employee Plan that is an "employee  pension  benefit
     plan" under ERISA Section 3(2)(A).

          (f) Except as set forth in the Disclosure  Letter,  no First Merchants
     Employee  Plan  has  incurred  an  "accumulated   funding  deficiency,"  as
     determined under Code Section 412 and ERISA Section 302.

          (g) Except as set forth in the Disclosure  Letter,  no First Merchants
     Employee Plan subject to Title IV of ERISA has been  terminated or incurred
     a partial termination (either voluntarily or involuntarily),  in such a way
     as to cause material additional liability to First Merchants.

          (h) No claims against a First Merchants Employee Plan, First Merchants
     or any Subsidiary (other than normal benefit claims), have been asserted or
     threatened.

          (i)  Except  as  set  forth  in the  Disclosure  Letter,  there  is no
     contract, agreement, plan or arrangement covering any employee, director or
     former  employee or director of First  Merchants  or any  Subsidiary  that,
     individually or collectively,  could give rise to the payment of any amount
     that would not be deductible by reason of Section 280G or Section 162(a)(1)
     of the Code.

          (j) To the  knowledge  of First  Merchants'  Management,  no event has
     occurred  that would  cause the  imposition  of the tax  described  in Code
     Section  4980B.  To the  knowledge  of  First  Merchants'  Management,  all
     requirements of ERISA Section 601 have been met.
<page>
          (k)  The  Disclosure  Letter  contains  a  list  of  each  employment,
     severance or other similar contract, arrangement or policy and each plan or
     arrangement  (written or oral) providing for insurance coverage  (including
     any self-insured arrangements), workers' compensation, disability benefits,
     supplemental unemployment benefits, vacation benefits,  retirement benefits
     or deferred  compensation,  profit sharing,  bonuses,  stock options, stock
     appreciation or other forms of incentive  compensation  or  post-retirement
     insurance,  compensation  or benefits  which (i) is not an First  Merchants
     Employee Plan, (ii) was entered into,  maintained or contributed to, as the
     case may be, by First  Merchants or any  Subsidiary  and  (iii) covers  any
     employee, director or former employee or director of First Merchants or any
     Subsidiary.  Such contracts, plans and arrangements as are described above,
     copies or  descriptions  of all of which have been furnished  previously to
     First  Merchants,  are  hereinafter  referred to collectively as the "First
     Merchants  Benefit  Arrangements."  Each  of the  First  Merchants  Benefit
     Arrangements  has been maintained in substantial  compliance with its terms
     and with the requirements prescribed by any and all statutes, orders, rules
     and  regulations  which are  applicable  to such  First  Merchants  Benefit
     Arrangements.

          (l)  Except  as set  forth in the  Disclosure  Letter,  neither  First
     Merchants nor any Subsidiary has any present or future liability in respect
     of  post-retirement  health and medical  benefits  for former  employees or
     directors of First Merchants or FMBCI.

          (m) Except as set forth in the  Disclosure  Letter,  there has been no
     amendment  to,  written  interpretation  or  announcement  (whether  or not
     written) by First  Merchants  or any  Subsidiary  relating to, or change in
     employee participation or coverage under, any First Merchants Employee Plan
     or First Merchants Benefit  Arrangement  administered by First Merchants or
     any Subsidiary  which would increase  materially the expense of maintaining
     such First Merchants Employee Plans or First Merchants Benefit Arrangements
     above the level of the expense  incurred in respect  thereof for the fiscal
     year ended December 31, 2007.

          (n) For purposes of this  Section 6.13,  references to First Merchants
     or any  Subsidiary  are deemed to  include  (i) all  predecessors  of First
     Merchants or any Subsidiary,  (ii) any subsidiary of First Merchants or any
     Subsidiary,  (iii) all members of any controlled group (as determined under
     Code   Section 414(b)   or  (c))  that  includes  First  Merchants  or  any
     Subsidiary,  and  (iv) all  members  of any  affiliated  service  group (as
     determined under Code  Section 414(m) or (n)) that includes First Merchants
     or any Subsidiary.

          (o) With respect to any nonqualified  deferred  compensation plan that
     is  subject  to Code  Section 409A,  such plan has been  identified  on the
     Disclosure Letter. The Disclosure Letter shall also identify to what extent
     and in what years federal employment taxes  (FICA/Medicare)  have been paid
     on any such nonqualified deferred compensation amounts, as required by Code
     Section 3121(v) and the underlying regulations.
<page>
     6.14  Obligations  to  Employees.  Except  as set  forth in the  Disclosure
Letter,  all accrued  obligations  and  liabilities  of First  Merchants and any
Subsidiary,  whether arising by operation of law, by contract or by past custom,
for payments to trust or other funds, to any government agency or body or to any
individual director, officer, employee or agent (or his heirs, legatees or legal
representative)  with respect to  unemployment  compensation  or social security
benefits and all pension,  retirement,  savings,  stock  purchase,  stock bonus,
stock ownership, stock option, restricted stock grant, stock appreciation rights
or profit sharing plan, any employment, deferred compensation, consultant, bonus
or  collective  bargaining  agreement  or  group  insurance  contract  or  other
incentive,  welfare or employee  benefit plan or agreement  maintained  by First
Merchants or any  Subsidiary  for their current or former  directors,  officers,
employees and agents have been and are being paid to the extent  required by law
or by the plan or contract,  and adequate actuarial accruals and/or reserves for
such payments have been and are being made by First  Merchants or any Subsidiary
in accordance  with  generally  accepted  accounting  and actuarial  principles,
except where the failure to pay any such accrued  obligations  or liabilities or
to maintain adequate accruals and/or reserves for payment thereof would not have
a Material  Adverse Effect.  Except as set forth in the Disclosure  Letter,  all
obligations  and  liabilities  of First  Merchants and any  Subsidiary,  whether
arising by operation of law, by  contract,  or by past custom,  for all forms of
compensation  which are or may be payable to their current or former  directors,
officers,  employees  or  agents  have  been and are being  paid,  and  adequate
accruals  and/or  reserves for payment  therefor have been and are being made in
accordance  with  generally  accepted  accounting  principles,  except where the
failure to pay any such  obligations  and  liabilities  or to maintain  adequate
accruals and/or  reserves for payment thereof would not have a Material  Adverse
Effect. All accruals and reserves referred to in this Section 6.14 are correctly
and accurately reflected and accounted for in the books,  statements and records
of First Merchants and any Subsidiary, except where the failure to correctly and
accurately  reflect and account for such accruals and reserves  would not have a
Material Adverse Effect.

     6.15 Taxes, Returns and Reports.  First Merchants and its Subsidiaries have
(a) duly filed all federal,  state,  local and foreign tax returns of every type
and kind  required to be filed as of the date  hereof,  and each return is true,
complete  and accurate in all material  respects;  (b) paid all material  taxes,
assessments and other governmental  charges due and payable or claimed to be due
and payable upon them or any of their income,  properties or assets; and (c) not
requested an extension of time for any such payments  (which  extension is still
in force).  Except for taxes not yet due and  payable,  the reserve for taxes on
the Financial  Information is adequate to cover all of First  Merchants' and the
Subsidiaries' tax liabilities (including,  without limitation,  income taxes and
franchise  fees) that may become  payable  in future  years with  respect to any
transactions  consummated  prior to June 30,  2008.  Neither First Merchants nor
FMBCI  has or will  have,  any  liability  for taxes of any  nature  for or with
respect  to the  operation  of  their  business,  including  the  assets  of any
Subsidiary,  from June 30, 2008, up to and including the Effective Date,  except
to  the  extent  reflected  on  their  Financial  Information  or  on  financial
statements of First  Merchants or any Subsidiary  subsequent to such date and as
set forth in the Disclosure  Letter.  Neither First Merchants nor any Subsidiary
is currently under audit by any state or federal taxing authority. Except as set
forth in the  Disclosure  Letter,  neither  the  federal,  state,  nor local tax
returns of First  Merchants nor any  Subsidiary  have been audited by any taxing
authority during the past five (5) years.
<page>
     6.16  Deposit  Insurance.  The deposits of FMBCI are insured by the FDIC in
accordance  with the  Federal  Deposit  Insurance  Act,  and  FMBCI has paid all
premiums and assessments with respect to such deposit insurance.

     6.17 Reports.  First  Merchants and each  Subsidiary  have timely filed all
reports,  registrations  and statements,  together with any required  amendments
thereto, that they were required to file with the Regulatory Authorities, having
jurisdiction over the affairs of First Merchants or any Subsidiary, except where
such failure would not have a Material Adverse Effect. All such reports filed by
First Merchants and the Subsidiaries  complied in all material respects with all
the rules and regulations  promulgated by the applicable Regulatory  Authorities
and are true,  accurate  and  complete  and were  prepared  in  conformity  with
generally  accepted  regulatory  accounting  principles  applied on a consistent
basis.  Except as set forth in the  Disclosure  Letter,  there is no  unresolved
violation with respect to any report or statement  filed by, or any  examination
of, First Merchants or FMBCI.

     6.18 Absence of Defaults.  Neither First Merchants nor any Subsidiary is in
violation of its Articles of  Incorporation or By-Laws or the knowledge of First
Merchants  Management  in  default  under any  material  agreement,  commitment,
arrangement,  lease, insurance policy or other instrument,  whether entered into
in the ordinary course of business or otherwise and whether written or oral, and
there has not occurred any event known to First Merchants' Management that, with
the lapse of time or giving of notice or both,  would constitute such a default,
except for defaults which would not have a Material Adverse Effect.

     6.19 Tax and  Regulatory  Matters.  Neither  First  Merchants nor FMBCI has
taken  or  agreed  to take  any  action  or has  any  knowledge  of any  fact or
circumstance  that would (a) prevent the transactions  contemplated  hereby from
qualifying as a reorganization  within the meaning of Section 368 of the Code or
(b) materially  impede or delay receipt of any regulatory  approval required for
consummation of the transactions contemplated by this Agreement.

     6.20 Real Property.

          (a) A list of the locations of each parcel of real  property  owned by
     First Merchants or FMBCI (other than real property  acquired in foreclosure
     or in lieu of  foreclosure  in the  course of the  collection  of loans and
     being held by First  Merchants or FMBCI for disposition as required by law)
     is set forth in the  Disclosure  Letter  under the  heading of "Owned  Real
     Property"  (such real property being herein  referred to as the "Owned Real
     Property").  A list of the locations of each parcel of real property leased
     by First  Merchants  or FMBCI is also set  forth in the  Disclosure  Letter
     under the  heading of "Leased  Real  Property"  (such real  property  being
     herein  referred to as the "Leased Real  Property").  First Merchants shall
     update  the  Disclosure  Letter  within ten (10) days  after  acquiring  or
     leasing any real property  after the date hereof.  Collectively,  the Owned
     Real  Property and the Leased Real  Property are herein  referred to as the
     "Real Property."

          (b) There is no pending action  involving  First Merchants or FMBCI as
     to the title of or the right to use any of the Real Property.
<page>
          (c) Neither  First  Merchants  nor FMBCI has any interest in any other
     real  property  except  interests as a  mortgagee,  and except for any real
     property  acquired in foreclosure or in lieu of foreclosure  and being held
     for disposition as required by law.

          (d)  Except as set  forth in the  Disclosure  Letter,  (i) none of the
     buildings,  structures  or other  improvements  located  on the Owned  Real
     Property encroaches upon or over any adjoining parcel of real estate or any
     easement  or  right-of-way  or  "setback"  line  and  all  such  buildings,
     structures; and (ii) improvements are located and constructed in conformity
     with all applicable zoning ordinances and building codes.

          (e)  Except as set  forth in the  Disclosure  Letter,  (i) none of the
     buildings,  structures or  improvements  located on the Owned Real Property
     are the subject of any  official  complaint  or notice by any  governmental
     authority of violation of any applicable zoning ordinance or building code;
     and (ii) there is no zoning  ordinance,  building  code,  use or  occupancy
     restriction or condemnation action or proceeding  pending,  or, to the best
     knowledge of First Merchants' Management,  threatened,  with respect to any
     such  building,  structure  or  improvement.  Except  as set  forth  in the
     Disclosure  Letter, the Real Property is in good condition for its intended
     purpose,  ordinary wear and tear excepted,  and has been  maintained (as to
     the Leased  Property,  to the intent  required  to be  maintained  by First
     Merchants or FMBCI) in  accordance  with  reasonable  and prudent  business
     practices  applicable to like facilities.  The Owned Real Property has been
     used and operated in compliance with all applicable laws, statutes,  rules,
     regulations and ordinances applicable thereto.

          (f) Except as may be reflected in the  Financial  Information  or with
     respect to such easements, liens, defects, encumbrances,  real estate taxes
     and assessments or other monetary  obligations  such as contributions to an
     Owner's Association,  as do not individually or in the aggregate materially
     adversely  affect  the use or  value  of the  Owned  Real  Property,  First
     Merchants  and FMBCI  have,  and at the  Closing  Date will have,  good and
     marketable title to their respective Owned Real Property, free and clear of
     all liens, mortgages, security interests,  encumbrances and restrictions of
     any kind or character.

          (g)  Neither  First  Merchants  nor FMBCI has  caused or  allowed  the
     generation, treatment, storage, disposal or release at any Real Property of
     any Toxic  Substance,  except in compliance  with all  applicable  federal,
     state  and  local  laws and  regulations  and  except  as set  forth in the
     Disclosure  Letter.  "Toxic  Substance"  means  any  hazardous,   toxic  or
     dangerous substance,  pollutant, waste, gas or material, including, without
     limitation,  petroleum and petroleum products, metals, liquids, semi-solids
     or solids,  that are regulated  under any federal,  state or local statute,
     ordinance,  rule,  regulation  or other  law  pertaining  to  environmental
     protection, contamination, quality, waste management or cleanup.
<page>
          (h) Except as disclosed  in the  Disclosure  Letter,  (i) there are no
     underground  storage tanks located on, in or under any Owned Real Property;
     and (ii) to the  knowledge of First  Merchants'  Management,  no such Owned
     Real Property has previously contained an underground storage tank. Neither
     First  Merchants nor FMBCI own or operate any  underground  storage tank at
     any  Leased  Real  Property  and  to  the  knowledge  of  First  Merchants'
     Management  no such  Leased  Real  Property  has  previously  contained  an
     underground  storage tank.  No Owned Real  Property is or has been,  during
     First Merchants' Management, listed on the CERCLIS.

          (i) To the knowledge of First Merchants' Management and as a result of
     any act of First  Merchants or FMBCI, no Toxic Substance has been released,
     spilled, discharged or disposed at, in, on or under any Owned Real Property
     nor to the  knowledge of First  Merchants'  Management  are there any other
     conditions  or  circumstances  affecting any Real  Property,  in each case,
     which would pose a  significant  risk to the  environment  or the health or
     safety of  persons  or  otherwise  pose a material  risk of  liability  for
     remediation, corrective action or clean-up.

          (j)  Except as  disclosed  in the  Disclosure  Letter,  the Owned Real
     Property  is  not   "property"   within  the  definition  of  Indiana  Code
     13-11-2-174.  Neither  First  Merchants  nor FMBCI is required to provide a
     "disclosure  document" to Lincoln as a result of the Merger pursuant to the
     Indiana Responsible Property Transfer Law (I.C. Section 13-25-3-1 et seq.).

          (k) To the knowledge of First Merchants' Management and as a result of
     any  act  of  First  Merchants  or  FMBCI,   there  are  no  mechanic's  or
     materialman's  liens against the Leased Property,  and no unpaid claims for
     labor  performed,  materials  furnished or services  rendered in connection
     with constructing, improving or repairing the Leased Property in respect of
     which liens may or could be filed against the Leased Property.

     6.21 Securities Law Compliance.  First Merchants' common stock is traded on
the NASDAQ Global Select Market under the symbol of "FRME." First  Merchants has
complied in all material respects with all state,  federal or foreign securities
laws,  statutes,  rules,  regulations  or orders,  injunctions or decrees of any
government agency relating thereto. First Merchants has complied in all material
respects  with all rules,  regulations,  orders,  injunctions  or decrees of the
National  Association of Securities  Dealers,  Inc. and all entities  related or
affiliated  therewith  and has filed all  reports and  documents  required to be
filed  with such  entities.  First  Merchants  has filed all  reports  and other
documents  required to be filed by it under the Securities  Exchange Act of 1934
and the Securities Act of 1933, including First Merchants' Annual Report on Form
10-K for the year ended December 31, 2007, and Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008,  copies of which have previously been delivered
to  Lincoln.  Except as would not  reasonably  be  expected  to have a  Material
Adverse  Effect,  all such SEC filings  were true,  accurate and complete in all
material respects as of the dates of the filings,  and no such filings contained
any  untrue  statement  of a material  fact or omitted to state a material  fact
necessary in order to make the  statements,  at the time and in the light of the
circumstances under which they were made, not false or misleading.
<page>
     6.22 Broker's or Finder's Fees. No agent,  broker or other person acting on
behalf of First  Merchants or under any authority of First Merchants is or shall
be entitled  to any  commission,  broker's or finder's  fee or any other form of
compensation or payment from any of the parties hereto, other than attorneys' or
accountants'  fees, in connection with any of the  transactions  contemplated by
this Agreement.

     6.23 No Shareholder Approval Required.  The approval of the shareholders of
First Merchants is not required for the approval of the Merger,  the Bank Merger
or the other transactions contemplated by this Agreement.

     6.24  Indemnification  Agreements.  Except as set  forth in the  Disclosure
Letter,  neither First  Merchants  nor FMBCI is a party to any  indemnification,
indemnity or reimbursement agreement,  contract,  commitment or understanding to
indemnify any present or former  director,  officer,  employee,  shareholder  or
agent against any liability or hold the same harmless from liability  other than
as  expressly  provided  in the  Articles of  Incorporation  or By-Laws of First
Merchants and FMBCI.

     6.25 Bring Down of Representations and Warranties.  All representations and
warranties  of First  Merchants  and FMBCI  contained in this Section 6 shall be
true,  accurate  and  correct on and as of the  Effective  Date except for those
representations  and  warranties  which address  matters only as of a particular
date  (which  shall  have been true and  correct  as of such  date) or have been
affected by the  transactions  contemplated by and specified within the terms of
this Agreement.

     6.26 Nonsurvival of Representations and Warranties. The representations and
warranties contained in this Section 6 shall expire on the Effective Date or the
earlier termination of this Agreement,  and thereafter First Merchants and FMBCI
and all  directors  and  officers  of First  Merchants  and FMBCI  shall have no
further liability with respect thereto unless a court of competent  jurisdiction
should  determine  that  any  misrepresentation  or  breach  of a  warranty  was
willfully or intentionally made or is deemed to be fraudulent.

                                   SECTION 7

                              Covenants of Lincoln

     Lincoln  covenants and agrees with First Merchants and covenants and agrees
to cause the Subsidiaries to act, as follows:

     7.01  Shareholder  Approval.  Lincoln  shall  submit this  Agreement to its
shareholders  for approval at a meeting to be called and held in accordance with
applicable law and the Articles of  Incorporation  and By-Laws of Lincoln at the
earliest  possible  reasonable date, and the Board of Directors of Lincoln shall
recommend to the  shareholders  of Lincoln that such  shareholders  approve this
Agreement and shall not thereafter withdraw or modify its recommendation, except
as otherwise  provided in Section 7.05 hereof. The Board of Directors of Lincoln
shall use its  commercially  reasonable  best  efforts to obtain any vote of its
shareholders necessary for the approval of this Agreement.
<page>
     7.02 Other  Approvals.  Lincoln and the Bank shall  proceed  expeditiously,
cooperate  fully and use their  commercially  reasonable best efforts to procure
upon reasonable  terms and conditions all consents,  authorizations,  approvals,
registrations, and certificates, to complete all filings and applications and to
satisfy  all  other  requirements  prescribed  by law which  are  necessary  for
consummation  of the  Merger  and the Bank  Merger on the  terms and  conditions
provided in this Agreement at the earliest possible reasonable date on or before
December 31, 2008.

7.03     Conduct of Business.

          (a) On and after the date of this  Agreement  and until the  Effective
     Date or until  this  Agreement  shall be  terminated  as  herein  provided,
     neither Lincoln nor any Subsidiary shall, without the prior written consent
     of First  Merchants,  (i) make  any  changes  in their  capital  structure,
     including,   but  not  limited  to  the   redemption   of  common   shares;
     (ii) authorize  an  additional  class of stock or issue,  or authorize  the
     issuance of, stock; (iii) declare, distribute or pay any dividends on their
     common shares,  or authorize a stock split, or make any other  distribution
     to their  shareholders,  except  for the  payment by the Bank to Lincoln of
     dividends  to pay  Lincoln's  expenses of  operations  and its business and
     payment of fees and expenses  incurred in connection with the  transactions
     contemplated  by this  Agreement  and  Lincoln's  payment of a  $0.14/share
     quarterly dividend in accordance with past practice; (iv) merge, combine or
     consolidate  with or sell their  assets or any of their  securities  to any
     other person,  corporation or entity, effect a share exchange or enter into
     any other transaction not in the ordinary course of business; (v) incur any
     liability or  obligation,  make any  commitment,  payment or  disbursement,
     enter into any contract, agreement,  understanding or arrangement or engage
     in any transaction, or acquire or dispose of any property or asset the fair
     market  value of which  exceeds  $100,000,  in the  aggregate  (except  for
     personal or real property acquired or disposed of in connection with either
     foreclosures  on mortgages or enforcement  of security  interests and loans
     made or sold by the Bank in the ordinary course of business);  (vi) subject
     any of their  properties  or assets to a  mortgage,  lien,  claim,  charge,
     option,  restriction,  security  interest or encumbrance;  (vii) promote or
     increase or decrease the rate of  compensation  (except for  promotions and
     non-material increases in the ordinary course of business and in accordance
     with past  practices) or enter into any agreement to promote or increase or
     decrease the rate of compensation  of any director,  officer or employee of
     Lincoln or any  Subsidiary;  (viii) except  as set forth in the  Disclosure
     Letter or as specifically  authorized by this Agreement,  execute,  create,
     institute,  modify  or  amend  any  pension,  retirement,   savings,  stock
     purchase, stock bonus, stock ownership, stock option, stock appreciation or
     depreciation  right or  profit  sharing  plans,  any  employment,  deferred
     compensation,  consultant,  bonus or collective bargaining agreement, group
     insurance contract or other incentive,  welfare or employee benefit plan or
     agreement for current or former directors, officers or employees of Lincoln
     or any  Subsidiary,  change the level of benefits or payments  under any of
     the  foregoing or increase or decrease any  severance  or  termination  pay
     benefits or any other fringe or employee  benefits or pay any bonuses other
     than  as  required  by  law or  regulatory  authorities;  (ix) amend  their
     Articles of  Incorporation  or By-Laws  from those in effect on the date of
     this Agreement;  (x) modify,  amend or institute new employment policies or
     practices,  or enter  into,  renew or extend any  employment  or  severance
     agreements  with  respect to any present or former  directors,  officers or
     employees of Lincoln or any Subsidiary;  (xi) give,  dispose, sell, convey,
     assign,  hypothecate,  pledge,  encumber or  otherwise  transfer or grant a
     security  interest in any capital  stock of any  Subsidiary;  (xii) fail to
     make additions to the Bank's reserve for loan losses,  or any other reserve
     account,  in the ordinary  course of business and in accordance  with sound
     banking practices and not inconsistent with generally  accepted  accounting
     principles applied on a consistent basis; (xiii) other than in the ordinary
     course of business  consistent with past practice,  incur any  indebtedness
     for  borrowed  money or  assume,  guarantee,  endorse  or  otherwise  as an
     accommodation become responsible or liable for the obligations of any other
     individual,  corporation  or other entity;  and  (xiv) agree  in writing or
     otherwise to take any of the foregoing actions.
<page>
          (b)  Lincoln  and  each  Subsidiary  shall  maintain,  or  cause to be
     maintained,  in full  force and  effect  insurance  on its  properties  and
     operations and fidelity  coverage on its directors,  officers and employees
     in such  amounts  and  with  regard  to such  liabilities  and  hazards  as
     customarily are maintained by other companies operating similar businesses.

          (c)  Lincoln  and  each  Subsidiary  shall  continue  to give to First
     Merchants and its employees,  accountants,  attorneys and other  authorized
     representatives  reasonable  access during regular business hours and other
     reasonable times to all their premises,  properties,  statements, books and
     records.

     7.04 Preservation of Business.  On and after the date of this Agreement and
until  the  Effective  Date or until  this  Agreement  is  terminated  as herein
provided,  Lincoln  and the  Subsidiaries  shall  (a) carry  on  their  business
diligently, substantially in the same manner as heretofore conducted, and in the
ordinary course of business; (b) use commercially reasonable efforts to preserve
their  business  organizations  intact,  to  keep  their  present  officers  and
employees and to preserve their present  relationship  with customers and others
having business  dealings with them; and (c) not do or fail to do anything which
will  cause a  material  breach  of,  or  material  default  in,  any  contract,
agreement, commitment, obligation, understanding,  arrangement, lease or license
to which they are a party or by which they are or may be subject or bound.

     7.05 Other  Negotiations.  Except with the prior written  approval of First
Merchants,  on and after the date of this Agreement and until the Effective Date
or the earlier termination of this Agreement, Lincoln and the Subsidiaries shall
not, and shall not permit or authorize  their  respective  directors,  officers,
employees,  agents or  representatives  to,  directly or  indirectly,  initiate,
solicit,  encourage,  engage in or continue discussions or negotiations with, or
provide  information to, any corporation,  association,  partnership,  person or
other entity or group  concerning  any merger,  consolidation,  share  exchange,
combination,  purchase or sale of substantial  assets, sale of shares of capital
stock (or securities  convertible or exchangeable into or otherwise  evidencing,
or any agreement or instrument evidencing the right to acquire,  capital stock),
tender  offer,  acquisition  of control of Lincoln or any  Subsidiary or similar
transaction   involving   Lincoln  or  any  Subsidiary  (all  such  transactions
hereinafter referred to as an "Acquisition Transaction").  Any letters of intent
or other agreements,  term sheets,  understandings,  negotiations or discussions
covering  potential  Acquisition  Transactions  currently  in  effect  shall  be
terminated  and/or  discontinued  by  Lincoln on or prior to  execution  of this
Agreement.  Lincoln and the  Subsidiaries  shall  promptly  communicate to First
Merchants  the terms of any  proposal,  written  or oral,  which  Lincoln or any
Subsidiary  may  receive  with  respect to an  Acquisition  Transaction  and any
request by or indication of interest on the part of any third party with respect
to initiation of any Acquisition Transaction or discussion with respect thereto.
The above provisions of this Section 7.05 notwithstanding,  nothing contained in
this Agreement shall prohibit  (a) Lincoln  from  furnishing  information to, or
entering into new  discussions or  negotiations  with, any person or entity that
makes an unsolicited proposal of an Acquisition Transaction if and to the extent
that  (i) the  Board of  Directors  of Lincoln,  after  consultation  with legal
counsel, determines in good faith that such action is required for the directors
of Lincoln to fulfill  their  fiduciary  duties  and  obligations  to  Lincoln's
shareholders  and other  constituencies  under  Indiana law, and  (ii) prior  to
furnishing  such  information  to, or entering into  discussions or negotiations
with,  such person or entity,  Lincoln  provides  prompt written notice to First
Merchants to the effect that it is furnishing  information  to, or entering into
discussions or negotiations with, such person or entity, or  (b) notwithstanding
the provisions of  Section 7.01,  the Board of Directors of Lincoln from failing
to make,  withdrawing or modifying its recommendation to shareholders  regarding
the Merger following receipt of a proposal for an Acquisition Transaction if the
Board of Directors of Lincoln, after consultation with and based upon the advice
of legal counsel,  determines in good faith that such action is required for the
directors  of Lincoln to  fulfill  their  fiduciary  duties and  obligations  to
Lincoln's shareholders and other constituencies under Indiana law.
<page>
     7.06  Announcements;  Press  Releases.  In connection with the execution of
this  Agreement,  Lincoln and First  Merchants  intend to jointly  issue a press
release mutually acceptable to the parties. Except as otherwise required by law,
neither  Lincoln nor any Subsidiary  shall issue any additional  press releases,
conduct  interviews,  or make any  other  public  announcements  or  disclosures
relating to the Merger without the prior approval of First Merchants.

     7.07 Disclosure  Letter.  Lincoln shall supplement,  amend and update as of
the Effective Date the Disclosure  Letter with respect to any matters  hereafter
arising  which,  if in  existence  or  having  occurred  as of the  date of this
Agreement,  would  have  been  required  to be set  forth  or  described  in the
Disclosure  Letter. If, at any time prior to the Effective Date, Lincoln becomes
aware of a fact or matter that might  indicate  that any of the  representations
and warranties of Lincoln  herein may be untrue,  incorrect or misleading in any
material  respect,  Lincoln shall promptly disclose such fact or matter to First
Merchants in writing.

     7.08  Confidentiality.  Lincoln and the Subsidiaries shall use commercially
reasonable efforts to cause their respective officers, employees, and authorized
representatives   to  hold  in  strict  confidence  all  confidential  data  and
information  obtained  by them from First  Merchants,  unless  such  information
(a) was already known to Lincoln and the Subsidiaries,  (b) becomes available to
Lincoln and the Subsidiaries from other sources,  (c) is independently developed
by Lincoln and the  Subsidiaries,  (d) is  disclosed  outside of Lincoln and the
Subsidiaries  with and in accordance with the terms of prior written approval of
First  Merchants,  or (e) is or becomes  readily  ascertainable  from  public or
published  information or trade sources or public disclosure of such information
is  required  by law or  requested  by a court  or  other  governmental  agency,
commission, or regulatory body. Lincoln and the Subsidiaries further agree that,
in the event this Agreement is terminated,  they will return to First  Merchants
all information  obtained by Lincoln and the Subsidiaries  from First Merchants,
including all copies made of such  information by Lincoln and the  Subsidiaries.
This provision  shall survive the Effective  Date or the earlier  termination of
this Agreement.
<page>
     7.09 Cooperation.  Lincoln and the Subsidiaries  shall generally  cooperate
with First  Merchants and its officers,  employees,  attorneys,  accountants and
other agents, and, generally, do such other acts and things in good faith as may
be reasonable,  necessary or  appropriate  to timely  effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby,  including,  without limitation,  (a) Lincoln shall cooperate and assist
First Merchants in preparation of and/or filing of all regulatory  applications,
the  "Registration  Statement" (as defined below),  and all other  documentation
required to be prepared for  consummation  of the Merger and the Bank Merger and
obtaining all necessary approvals, and (b) Lincoln shall furnish First Merchants
with all information  concerning itself and each Subsidiary that First Merchants
may reasonably  request in connection with the preparation of the  documentation
referenced above.

     7.10 Letter to Lincoln's Shareholders.  Within five (5) business days after
execution  of this  Agreement  by Lincoln  and First  Merchants,  Lincoln  shall
deposit in the United States mail a letter to each of the shareholders of record
of  Lincoln  as of the  date of  execution  of  this  Agreement  informing  each
shareholder  about the execution of this Agreement and the proposed Merger.  The
terms of such letter to the  shareholders of Lincoln shall be in a form mutually
agreed to by First Merchants and Lincoln.

     7.11 Exercise of Options.

          (a)  From  and  after  the  date  hereof,  Lincoln  covenants  that no
     additional stock options or stock  appreciation  rights shall be granted by
     Lincoln  under any stock  option plans of Lincoln or  otherwise.  Any stock
     options  granted by Lincoln  on or before the date of this  Agreement,  but
     which are currently not vested, may be amended to be immediately vested and
     exercisable.  On or prior to the  Effective  Date,  all  outstanding  stock
     options of Lincoln, disclosed pursuant to Section 5.03(e), may be exercised
     in  accordance  with the stock  option  plan under  which  such  option was
     granted,  and  Lincoln  shall use  reasonable  efforts  to cause such stock
     options to be exercised on or immediately before the Effective Date.

          (b)  On or  prior  to  the  calendar  day  immediately  preceding  the
     Effective  Date, or such other date mutually agreed to by Lincoln and First
     Merchants (the "Option Deadline"),  Lincoln shall take all action necessary
     to terminate all stock option plans of Lincoln outstanding as of the Option
     Deadline and shall use reasonable efforts to obtain necessary consents from
     optionees  to permit such  termination  in  accordance  with the  foregoing
     provisions. No Lincoln stock options shall continue to be outstanding after
     the Option Deadline.  Instead,  as of the Option Deadline,  any outstanding
     Lincoln  stock  options that have not been  previously  exercised are to be
     terminated in return for either (i) or (ii):

               (i) A Cash amount determined using the following equation:

                             [(FMAP x CR) - EP] x OP
<page>
(For purposes of this equation,  FMAP equals the First Merchants  Average Price;
CR equals the  Conversion  Ratio;  EP equals the  applicable  exercise price per
Lincoln common share issuable upon exercise of the applicable stock option;  and
OP equals the number of Lincoln  common  shares  issuable  upon exercise of such
stock option.)

               (ii) The number of Lincoln  common shares  issuable upon exercise
          of such  Lincoln  stock option in exchange for payment of the exercise
          price as required in the applicable stock option. For purposes of this
          item (ii), the required payment can also be made by cashless exercise,
          which also includes an equity swap, all as permitted in the applicable
          election  form.  In the  event  that  the  optionee  fails to pay this
          exercise price in cash or through such cashless  exercise on or before
          the Option  Deadline,  the optionee shall be deemed to have elected to
          receive the cash amount as  referred to in the  immediately  preceding
          item (i).

          (c) An election to receive cash or common stock under Section  7.11(b)
     must be made no later than two (2) days prior to the Option Deadline. If an
     election is not made by such time, a non-electing  optionee shall be deemed
     to have  elected to receive  cash  under  item (i) of Section  7.11(b).  In
     addition,  if the cash amount  calculated under item (i) of Section 7.11(b)
     is  negative,  a  non-electing  optionee  shall be entitled to nothing upon
     termination of the previously unexercised Lincoln stock option.

          (d) In addition to those common  shares  issued upon exercise of stock
     options as provided in this  section 7.11 (the  "Option  Shares"),  Lincoln
     shall have no more than  5,319,731  common shares  outstanding  immediately
     prior  to  the  Effective  Date.  Furthermore,  the  diversity  of  payment
     limitations  contained in section 3.07 shall  otherwise apply to the Option
     Shares,  as well as all other Lincoln  common shares  outstanding as of the
     Effective Date.

     7.12 SEC and Other Reports.

          (a) Promptly  upon its becoming  available,  Lincoln  shall furnish to
     First Merchants one (1) copy of each financial statement,  report,  notice,
     or proxy  statement  sent by Lincoln to its  shareholders  generally and of
     each regular or periodic report, registration statement or prospectus filed
     by Lincoln  with NASDAQ or the SEC or any  successor  agency,  of any order
     issued by any Governmental  Authority in any proceeding to which Lincoln is
     a party, and of any notice or communication received by Lincoln from NASDAQ
     or the SEC. For purposes of this provision,  "Governmental Authority" shall
     mean any government (or any political subdivision or jurisdiction thereof),
     court,  bureau,  agency or other  governmental  entity  having or asserting
     jurisdiction over Lincoln or any of its respective  businesses,  operations
     or properties.

          (b) None of the information  supplied or to be supplied by Lincoln for
     inclusion or incorporation  by reference in (i) the Registration  Statement
     (as defined in Section  8.01  hereof)  will,  at the time the  Registration
     Statement  and  each  amendment  or  supplement  thereto,  if any,  becomes
     effective under the Securities Act of 1933, as amended,  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  contained  therein,  in light of the  circumstances in
     which  they are made,  not  misleading,  and (ii) the Proxy  Statement  (as
     defined in Section 8.01 hereof) and any  amendment  or  supplement  thereto
     will,  at the date of mailing,  contain any untrue  statement of a material
     fact or omit to state a  material  fact  necessary  to make the  statements
     contained  therein,  in light of the  circumstances in which they are made,
     not misleading.
<page>
          7.14  Adverse  Actions.  Lincoln  shall not (a) take any action  while
     knowing that such action  would,  or is  reasonably  likely to,  prevent or
     impede the Merger from qualifying as a reorganization within the meaning of
     Section 368 of the Code; or (b) knowingly  take any action that is intended
     or is  reasonably  likely to result in (i) any of its  representations  and
     warranties  set forth in this  Agreement  being or  becoming  untrue in any
     material respect at any time at or prior to the Effective Date, (ii) any of
     the  conditions  to the Merger set forth in Section 9 not being  satisfied,
     (iii) a material  violation of any provision of this  Agreement,  or (iv) a
     material delay in the  consummation of the Merger except,  in each case, as
     may be required by applicable law or regulation.

          7.15 Bank  Merger  Agreement.  Lincoln  shall  cause  the  appropriate
     officers  of the Bank to execute  and  deliver  the Bank  Merger  Agreement
     contemporaneously herewith.

          7.16 Employee Stock Ownership  Plan.  Lincoln shall establish a freeze
     and termination  date for the ESOP that is no later than the day before the
     Effective  Date. As of the Effective Date, the ESOP shall be frozen and all
     shares of Lincoln stock held by the ESOP shall be converted  into rights to
     receive the Merger Consideration described in Section 3 in respect thereof.
     On or before the ESOP's  receipt of a favorable  determination  letter from
     the  Internal  Revenue  Service  ("IRS")  with regard to  termination,  all
     outstanding  indebtedness of the ESOP shall be repaid, any assets remaining
     in the suspense  fund under the ESOP shall be allocated  among the accounts
     of the ESOP  Participants as additional  earnings as otherwise  provided in
     the ESOP and,  after  receipt  of the such  determination  letter,  the net
     assets of the ESOP shall be promptly  distributed to Participants under the
     ESOP and their  Beneficiaries,  except as otherwise  required by applicable
     law.  Within five (5) business days following the approval of the Merger by
     the  Lincoln   shareholders,   Lincoln  shall  file  the  notifications  or
     applications  with the IRS necessary to comply with the  provisions of this
     Section 7.16. To the extent any  notifications or applications with the IRS
     to comply with the provisions of this Section 7.16 are required to be filed
     after  the  Effective  Date,  First  Merchants  shall  promptly  make  such
     notifications  or  applications.  If for any reason the IRS does not permit
     the ESOP to be  terminated  or  distributions  to be made to  employees  of
     Lincoln and its  Subsidiaries as provided  above,  First Merchants will, in
     its sole  discretion,  either (a) merge the ESOP into its  existing  401(k)
     Plan or (b) amend the ESOP to provide  for the ESOP to be  continued  after
     the Effective  Date for the sole and exclusive  benefit of the  individuals
     participating  therein or having accounts  thereunder  immediately prior to
     the Effective  Date;  provided,  however,  that (i) no such amendment shall
     require or have the effect of requiring First  Merchants,  Lincoln or their
     respective  Subsidiaries to make any  contributions to the ESOP at or after
     the Effective Date, (ii) no such amendment shall require or have the effect
     of requiring First Merchants,  Lincoln or their respective  Subsidiaries to
     make any  contributions  to the ESOP at or prior to the  Effective  Date in
     addition to any contributions  that otherwise would be required,  (iii) any
     such amendment  shall be conditioned  upon its not having an adverse effect
     upon the qualified status of the ESOP under Section 401(a) of the Code, and
     (iv) no such  amendment  shall  require  or have the  effect  of  requiring
     continuation  of the ESOP for more than  three  years  after the  Effective
     Date.  Lincoln and its Subsidiaries shall make no contributions to the ESOP
     between  the  date  hereof  and the  Effective  Date  other  than  elective
     deferrals (Compensation Reduction Amounts), matching contributions (Company
     Matched  Contributions),  but only at rates as  currently  provided  in the
     ESOP,  and such other  contributions  as may be required  to  maintain  the
     tax-qualified  status  of the ESOP or to enable  the ESOP to make  required
     payments on the loans currently outstanding to it.
<page>
     7.17 Lincoln Recognition and Retention Plan.

          (a) As of the date hereof,  32,888 of the  outstanding  Lincoln Common
     Shares are held in trust in the Lincoln  Federal  Savings Bank  Recognition
     and  Retention  Plan and Trust (the "RRP  Plan").  On and after the date of
     this  Agreement,  no further  contributions  shall be made to the RRP Plan.
     However,  on or before the Effective  Date,  but  otherwise  subject to any
     applicable statutory or regulatory  requirements,  Lincoln will: (a) modify
     any or all  outstanding  RRP Plan Awards held by  employees or directors of
     Lincoln  or its  Subsidiaries  to become  fully  vested  on or  before  the
     Effective  Date,  (b) issue fully vested and  previously  unissued RRP Plan
     Awards to  employees  or  directors  of  Lincoln  and its  Subsidiaries  in
     accordance  with the terms  and  conditions  of the RRP Plan,  and (c) make
     distributions of Lincoln Common Shares to applicable recipients as provided
     in the RRP Plan.

          (b) If for any  reason,  the RRP Plan has not been  terminated  by the
     Effective  Date,  First  Merchants  agrees to  promptly  complete  RRP Plan
     distributions  as soon as reasonably  possible  after the Effective Date to
     the designated  participants and beneficiaries of the RRP Plan; however, it
     is  acknowledged  that these final  distributions  will be in cash or First
     Merchants common stock as provided in Section 3.

          (c) As soon as all Lincoln Common Shares and Merger Consideration,  if
     any,  held in the RRP  Plan  have  been  distributed  to the  officers  and
     directors participating in the RRP Plan, it shall terminate.

                                   SECTION 8

                          Covenants of First Merchants

          First  Merchants  covenants  and agrees with Lincoln and covenants and
     agrees to cause its Subsidiaries to act as follows:

     8.01  Approvals.  First  Merchants and FMBCI shall  proceed  expeditiously,
cooperate  fully and use its best efforts to procure upon  reasonable  terms and
conditions   all  consents,   authorizations,   approvals,   registrations   and
certificates,  to complete all filings and applications and to satisfy all other
requirements  prescribed  by law which are  necessary  for  consummation  of the
Merger on the terms and  conditions  provided in this  Agreement at the earliest
possible  reasonable  date.  First  Merchants  agrees to use its best efforts to
raise any  additional  capital  which might be  required to obtain any  required
regulatory  approvals of the Merger.  First Merchants shall provide Lincoln with
copies of proposed  regulatory  filings in connection with the Merger and afford
Lincoln the  opportunity to offer comment on the filings  before filing.  Not in
limitation of the foregoing,  First  Merchants  agrees to prepare a registration
statement  on Form  S-4  (the  "Registration  Statement"),  to be filed by First
Merchants with the SEC in connection with the issuance of First Merchants common
stock in the Merger  (including  the proxy  statements  and prospectus and other
proxy solicitation  materials of Lincoln constituting a part thereof (the "Proxy
Statement")  and all  related  documents).  First  Merchants  agrees  to  advise
Lincoln,  promptly after First Merchants  receives  notice thereof,  of the time
when the  Registration  Statement  has become  effective  or any  supplement  or
amendment has been filed, of the issuance of any stop order or the suspension of
the  qualification  of First Merchants  common stock for offering or sale in any
jurisdiction,  of the  initiation  or  threat  of any  proceeding  for any  such
purpose,  or of any request by the SEC for the  amendment or  supplement  of the
Registration Statement or for additional information.  First Merchants agrees to
use its  reasonable  best efforts to list,  prior to the Effective  Date, on the
Global Select Market System of NASDAQ  (subject to official notice of issuance),
the  shares of First  Merchants  common  stock to be issued  to the  holders  of
Lincoln common shares in the Merger.  The approval of the  shareholders of First
Merchants is not required for the approval of the Merger, the Bank Merger or the
other transactions contemplated by this Agreement.
<page>
     8.02 Preservation of Business.  On and after the date of this Agreement and
until  the  Effective  Date or until  this  Agreement  is  terminated  as herein
provided, First Merchants and the Subsidiaries shall (a) carry on their business
diligently, substantially in the same manner as heretofore conducted, and in the
ordinary course of business; (b) use commercially reasonable efforts to preserve
their  business  organizations  intact,  to  keep  their  present  officers  and
employees and to preserve their present  relationship  with customers and others
having business  dealings with them; and (c) not do or fail to do anything which
will  cause a  material  breach  of,  or  material  default  in,  any  contract,
agreement, commitment, obligation, understanding,  arrangement, lease or license
to which they are a party or by which they are or may be subject or bound.

     8.03 Certain Employee and Officer Matters.

          (a)  As  of  the  Effective  Date,  First  Merchants  will  cover  the
     Subsidiaries'  employees  under  a  tax-qualified   retirement  plan  First
     Merchants maintains for its employees, provided that such an employee meets
     the applicable  participation  requirements,  in lieu of the  Subsidiaries'
     current  tax-qualified  retirement plan.  Following the Effective Date, the
     Subsidiaries'  employees will otherwise  receive employee  benefits that in
     the aggregate are  substantially  similar to the employee benefits provided
     to other employees of First Merchants and its subsidiaries on the Effective
     Date.  For purposes of  determining a Lincoln or  Subsidiaries'  employee's
     service under a First Merchants' Employee Benefit Plan that the employee is
     permitted  to enter,  service  with  Lincoln  or the  Subsidiaries  will be
     treated as service  with  First  Merchants  for all  purposes  except  that
     service  with Lincoln or the  Subsidiaries  shall not be treated as service
     with First Merchants for purposes of benefit accrual of any defined benefit
     plan or the Service-Weighted Contributions under the First Merchants 401(k)
     Plan. First  Merchants,  in its sole  discretion,  shall determine  whether
     Lincoln's  and  the  Subsidiaries'  tax-qualified  retirement  plan(s)  are
     terminated or merged into First Merchants' plan(s).

          (b) Coverage Under First Merchants' Health Plan. With respect to First
     Merchant's  health plans under which employees of the  Subsidiaries  become
     participants under the provisions of Section 8.03(a) above, First Merchants
     agrees  to  waive  all   restrictions   and  limitations  for  pre-existing
     conditions  and  First  Merchants  will use its best  efforts  to cause any
     insurer  providing  a benefit to do the same.  Employees  of Lincoln or its
     subsidiaries who are hired by First Merchants or its subsidiaries shall not
     be subject to a waiting period for coverage under First  Merchants'  Health
     Plan.
<page>
          (c) COBRA.  First  Merchants  shall be responsible for providing COBRA
     continuation  coverage  to any  qualified  employee  or former  employee of
     Lincoln   or  the   Subsidiaries   and  to   their   respective   qualified
     beneficiaries,  on and after the  Effective  Date,  regardless  of when the
     qualifying event occurred.

          (d) Change of Control/Employment Agreements. First Merchants agrees to
     accept  and honor any  obligations  of  Lincoln or the Bank with the eleven
     (11) officers pursuant to their employment and change of control agreements
     previously  disclosed to First  Merchants and  identified in the Disclosure
     Letter.  First  Merchants  and  Lincoln  agree the  Merger is a "change  in
     control" for purposes of such  agreements,  and First  Merchants  agrees to
     make,  within thirty (30) days after the Effective  Date, lump sum payments
     for  such  "change  in  control"  even  though  any  such  officer  has not
     terminated employment as provided in those agreements. Except for Mr. Engle
     and Mr.  Ditmars,  the  payments  shall be in exchange  for the  respective
     employee's  agreement to terminate his or her  employment  and/or change of
     control  agreements as of the Effective Date without  further  liability of
     the Bank, Lincoln, First Merchants and/or FMBCI.

          (e) Restricted  Stock Grants and Options.  Subsequent to the Effective
     Date, in exchange for their continued service to First Merchants and FMBCI,
     First  Merchants  and/or FMBCI will grant to certain  senior  management of
     Lincoln and/or the Bank restricted stock and/or stock options as follows:

               (i)  6,400  restricted  shares  or  24,000  stock  options  or  a
          combination of both to Jerry R. Engle;

               (ii)  6,400  restricted  shares  or  24,000  stock  options  or a
          combination of both to John B. Ditmars; and

               (iii)  19,200  restricted  shares or 72,000  stock  options  or a
          combination  of both in the  aggregate to the  remainder of the senior
          management of Lincoln and/or the Bank as allocated by First Merchants,
          after consultation with Mr. Engle and Mr. Ditmars.

     8.04 Press  Release.  In connection  with the execution of this  Agreement,
Lincoln and First  Merchants  intend to jointly issue a press  release  mutually
acceptable to the parties.  Except as otherwise  required by law,  neither First
Merchants nor FMBCI shall issue any additional  press releases or make any other
public  announcements  or disclosures  relating to the Merger or the Bank Merger
without the prior approval of Lincoln.
<page>
     8.05  Confidentiality.  First Merchants and FMBIC shall,  and shall use its
best efforts to cause its  Subsidiaries,  officers,  employees,  and  authorized
representatives  to,  hold  in  strict  confidence  all  confidential  data  and
information  obtained  by them from  Lincoln,  unless such  information  (i) was
already known to First  Merchants and  Subsidiaries,  (ii) becomes  available to
First  Merchants and  Subsidiaries  from other sources,  (iii) is  independently
developed by First  Merchants and  Subsidiaries,  (iv) is  disclosed  outside of
First Merchants and Subsidiaries  with and in accordance with the terms of prior
written  approval of Lincoln,  or (v) is or becomes readily  ascertainable  from
public or published  information  or trade sources or public  disclosure of such
information  is required by law or  requested  by a court or other  governmental
agency, commission, or regulatory body. First Merchants and Subsidiaries further
agree that in the event this Agreement is terminated,  it will return to Lincoln
all information  obtained by it regarding  Lincoln or any Subsidiary,  including
all copies made of such  information by First Merchants and  Subsidiaries.  This
provision  shall survive the Effective  Date or the earlier  termination of this
Agreement.

     8.06 Board of FMBCI. Upon consummation of the Bank Merger, FMBCI shall be a
national bank organized under the laws of the United States and the officers and
directors of the Bank in office  immediately  prior to the  consummation  of the
Merger shall be the officers and  directors of the Bank at the  Effective  Date.
Notwithstanding  the foregoing,  First Merchants and FMBCI shall take all action
necessary  to nominate  and  approve  such  Directors  of the Bank who desire to
continue to serve on the Board of Directors of FMBCI for at least the  remainder
of the terms to which they have been elected. FMBCI directors will be subject to
First Merchants' policy of mandatory  retirement at age seventy (70);  provided,
however,  the policy of mandatory retirement will not apply to any of the Bank's
current directors until twenty-four (24) months after the Effective Date.

     8.07 Board of First  Merchants.  First  Merchants shall cause all necessary
action to be taken to cause  Jerry R.  Engle and  another  current  Director  of
Lincoln  chosen by First  Merchants,  to either (i) be nominated for election as
members of the First  Merchants' Board of Directors for a three (3) year term at
the first annual meeting of the  shareholders of First  Merchants  following the
Effective Date; or (ii) to be appointed as members of the First Merchants' Board
of  Directors  at the next  meeting of the First  Merchants'  Board of Directors
following  the  Effective  Date to serve until the first  annual  meeting of the
shareholders  of First  Merchants  following the  Effective  Date and then to be
nominated for election as members of the First Merchants' Board of Directors for
a three (3) year term at the first annual meeting of the  shareholders  of First
Merchants  following  the  Effective  Date,  whichever  can  be  effected  first
depending on the timing of the  occurrence  of the Effective  Date.  The two (2)
individuals  from the Board of  Directors  of  Lincoln  elected  to the Board of
Directors  of First  Merchants  shall be subject to First  Merchants'  policy of
mandatory  retirement  at age seventy  (70);  provided,  however,  the policy of
mandatory  retirement will not apply to such individuals  until twenty-four (24)
months after the Effective Date.

     8.08 Directors and Officers Insurance.

          (a) For a period of at least  three  years  from the  Effective  Date,
     First  Merchants  shall  use its  reasonable  best  efforts  to  obtain  an
     endorsement to its director's and officer's  liability  insurance policy to
     cover the present and former officers and directors of Lincoln and the Bank
     (determined  as of the Effective  Date) with respect to claims against such
     directors and officers  arising from facts or events which occurred  before
     the  Effective  Date,  which  insurance  shall  contain  at least  the same
     coverage  and  amounts,   and  contain   terms  and   conditions   no  less
     advantageous,  as that  coverage  currently  provided by Lincoln;  provided
     however, that if First Merchants is unable to obtain such endorsement, then
     Lincoln may purchase tail coverage under its existing  director and officer
     liability  insurance  policy for such claims;  provided  further that in no
     event shall First  Merchants be required to expend in the aggregate  during
     each year in such three-year  period more than two times the current annual
     amount spent by Lincoln (the "Insurance Amount") to maintain or procure its
     current directors' and officers' insurance coverage; provided further, that
     if First Merchants is unable to maintain or obtain the insurance called for
     by this Section 8.07, First Merchants shall use its reasonable best efforts
     to obtain as much  comparable  insurance as is available  for the Insurance
     Amount;  provided,  further,  that officers and directors of Lincoln or the
     Bank  may  be  required   to  make   application   and  provide   customary
     representations  and warranties to First Merchants'  insurance  carrier for
     the purpose of obtaining such insurance.
<page>
          (b) For six years after the Effective  Date,  the  Continuing  Company
     shall  indemnify,  defend and hold harmless the present and former officers
     and  directors  of  Lincoln  and the  Bank  against  all  losses,  expenses
     (including attorneys' fees), claims,  damages or liabilities arising out of
     actions  or  omissions   occurring  on  or  prior  to  the  Effective  Date
     (including,  without  limitation,  the  transactions  contemplated  by this
     Agreement)  to the full extent then  permitted  under the Indiana  Business
     Corporation  Law  and  by  First   Merchants'  or  Lincoln's   Articles  of
     Incorporation as in effect on the date hereof  (whichever is more favorable
     to  the  officers  and  directors  of  Lincoln  and  the  Bank),  including
     provisions  relating to advances of expenses incurred in the defense of any
     action or suit.

          (c) Following the Effective  Date,  First  Merchants  will provide any
     Lincoln or Bank  officers,  directors and  employees  who become  officers,
     directors and employees of the Continuing  Company or its subsidiaries with
     the  same  directors  and  officers   liability   insurance   coverage  and
     indemnification   protections  that  First  Merchants   provides  to  other
     officers, directors and employees of First Merchants or its subsidiaries.

          (d) If First Merchants shall  consolidate with or merge into any other
     entity  and  shall  not be the  continuing  or  surviving  entity  of  such
     consolidation or merger or shall transfer all or  substantially  all of its
     assets to any entity, then and in each case, proper provision shall be made
     so that the  successors  and assigns of First  Merchants  shall  assume the
     obligations set forth in this Section 8.07.

     8.09 SEC and Other Reports.

          (a)  Promptly  upon its  becoming  available,  First  Merchants  shall
     furnish  to  Lincoln  one (1)  copy of each  financial  statement,  report,
     notice,  or proxy  statement  sent by First  Merchants to its  shareholders
     generally and of each regular or periodic report, registration statement or
     prospectus  filed by First Merchants with the SEC or any successor  agency,
     of any order  issued by any  Governmental  Authority in any  proceeding  to
     which  First  Merchants  is a party,  and of any  notice  or  communication
     received by First  Merchants from the SEC. For purposes of this  provision,
     "Governmental  Authority"  shall  mean  any  government  (or any  political
     subdivision  or  jurisdiction  thereof),  court,  bureau,  agency  or other
     governmental  entity having or asserting  jurisdiction over First Merchants
     or any of its respective businesses, operations or properties.
<page>
          (b)  None of the  information  supplied  or to be  supplied  by  First
     Merchants  for  inclusion  or   incorporation   by  reference  in  (i)  the
     Registration  Statement  (as defined in Section 8.01 hereof)  will,  at the
     time the Registration  Statement and each amendment or supplement  thereto,
     if any,  becomes  effective  under the  Securities Act of 1933, as amended,
     contain any untrue statement of a material fact or omit to state a material
     fact necessary to make the statements  contained  therein,  in light of the
     circumstances  in which they are made, not  misleading,  and (ii) the Proxy
     Statement  (as  defined  in  Section  8.01  hereof)  and any  amendment  or
     supplement  thereto  will,  at the  date of  mailing,  contain  any  untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  contained  therein,  in light of the  circumstances in
     which they are made, not misleading.

     8.10 Disclosure Letter. First Merchants shall supplement,  amend and update
as of the  Effective  Date the  Disclosure  Letter  with  respect to any matters
hereafter  arising which,  if in existence or having  occurred as of the date of
this  Agreement,  would have been  required to be set forth or  described in the
Disclosure  Letter. If, at any time prior to the Effective Date, First Merchants
becomes  aware  of a  fact  or  matter  that  might  indicate  that  any  of the
representations  and  warranties  of  First  Merchants  herein  may  be  untrue,
incorrect or misleading in any material respect,  First Merchants shall promptly
disclose such fact or matter to First Merchants in writing.

     8.11 Adverse  Actions.  First Merchants shall not (a) take any action while
knowing that such action would,  or is reasonably  likely to,  prevent or impede
the Merger from qualifying as a reorganization within the meaning of Section 368
of the Code; or (b) knowingly  take any action that is intended or is reasonably
likely to result in (i) any of its  representations  and warranties set forth in
this Agreement  being or becoming  untrue in any respect at any time at or prior
to the  Effective  Date,  (ii) any of the  conditions to the Merger set forth in
Section 9 not being  satisfied,  (iii) a material  violation of any provision of
this  Agreement,  or (iv) a  material  delay in the  consummation  of the Merger
except, in each case, as may be required by applicable law or regulation.

     8.12  Cooperation.  First Merchants shall generally  cooperate with Lincoln
and its officers,  employees,  attorneys,  accountants  and other  agents,  and,
generally,  do such other  acts and  things in good faith as may be  reasonable,
necessary or appropriate  to timely  effectuate the intents and purposes of this
Agreement and the consummation of the transactions  contemplated  hereby.  First
Merchants shall furnish Lincoln with all information  concerning itself and each
of its direct and indirect subsidiaries that Lincoln may reasonably request.
<page>
     8.13 Bank Merger  Agreement.  First  Merchants  shall cause the appropriate
officers of FMBCI to execute and deliver the Bank Merger Agreement upon approval
by FMBCI's Board of Directors.

                                   SECTION 9

             Conditions Precedent To The Merger and the Bank Merger

The  obligation  of each of the parties  hereto to consummate  the  transactions
contemplated by this Agreement is subject to the satisfaction and fulfillment of
each of the following conditions on or prior to the Effective Date:

     9.01 Lincoln Shareholder  Approval.  The shareholders of Lincoln shall have
approved the Merger and confirmed this Agreement as required by applicable law.

     9.02  Registration   Statement   Effective.   First  Merchants  shall  have
registered its shares of common stock to be issued to shareholders of Lincoln in
accordance  with this  Agreement  with the SEC pursuant to the 1933 Act, and all
state securities and "blue sky" approvals and  authorizations  required to offer
and  sell  such  shares  shall  have  been  received  by  First  Merchants.  The
registration  statement with respect thereto shall have been declared  effective
by the SEC and no stop order shall have been issued or threatened. The shares of
First  Merchants  common  stock shall have been listed for trading on the NASDAQ
Global Select Market System (subject to official notice of issuance).

     9.03. Tax Opinions.

          (a) Lincoln  shall have  obtained an opinion of Bose McKinney & Evans,
     LLP dated on or about the  Effective  Date to the  effect  that the  Merger
     effected  pursuant to this  Agreement  shall  constitute  a  reorganization
     within the meaning of Section  368(a) of the Code, and that no gain or loss
     will be  recognized by  shareholders  of Lincoln to the extent they receive
     shares of First Merchants  common stock in the Merger in exchange for their
     Lincoln common  shares,  other than the gain or loss to be recognized as to
     cash  received in lieu of fractional  share  interests and cash received in
     exchange  for Lincoln  common  shares.  Such  opinions  shall be based upon
     factual  representations   received  by  counsel  from  Lincoln  and  First
     Merchants,   which   representations   may  take   the   form  of   written
     certifications.

          (b) First  Merchants  shall have obtained an opinion of Bingham McHale
     LLP dated on or about the  Effective  Date to the  effect  that the  Merger
     effected  pursuant to this  Agreement  shall  constitute  a  reorganization
     within the meaning of Section  368(a) of the Code.  Such opinions  shall be
     based upon  factual  representations  received by counsel  from Lincoln and
     First  Merchants,  which  representations  may  take  the  form of  written
     certifications.

          9.04 Regulatory  Approvals.  The Federal Reserve Board and the Indiana
     Department of Financial Institutions shall have authorized and approved the
     Merger and the transactions  related thereto. In addition,  all appropriate
     orders,  consents,  approvals  and  clearances  from all  other  regulatory
     agencies and governmental authorities whose orders, consents,  approvals or
     clearances  are required by law for  consummation  of the Merger shall have
     been obtained.
<page>
          9.05  Officer's  Certificate.  First  Merchants and Lincoln shall have
     delivered to each other a certificate  signed by their respective  Chairman
     or President and their Secretary, dated the Effective Date, certifying that
     (a) all the representations and warranties of their respective corporations
     are true,  accurate and correct on and as of the Effective  Date except for
     those  representations  and warranties  which address  matters only as of a
     particular date (which shall have been true and correct as of such date) or
     have been affected by the transactions contemplated by and specified within
     the terms of this  Agreement;  (b) all the  covenants  of their  respective
     corporations have been complied with in all material respects from the date
     of this  Agreement  through  and as of the  Effective  Date;  and (c) their
     respective   corporations  have  satisfied  and  fully  complied  with  all
     conditions necessary to make this Agreement effective as to them.

          9.06  Fairness  Opinion.  Lincoln  shall have obtained an opinion from
     Sandler O'Neill Partners,  L.P., to the effect that the consideration  paid
     in the  Merger is fair to the  shareholders  of  Lincoln  from a  financial
     viewpoint.  Such  opinion  shall  be (a) in form and  substance  reasonably
     satisfactory to Lincoln,  (b) dated as of a date not later than the mailing
     date of the Proxy Statement  relating to the Merger and (c) included in the
     Proxy Statement.

          9.07 No Judicial  Prohibition.  Neither  Lincoln,  any  Subsidiary nor
     First  Merchants  or  FMBCI  shall  be  subject  to any  order,  decree  or
     injunction of a court or agency of competent  jurisdiction which enjoins or
     prohibits the consummation of the Merger.

          9.08 Other  Consents and Approvals.  All consents and other  approvals
     required for the transfer of any contracts, agreements, leases, loans, etc.
     as a result of the  Merger  shall  have  been  obtained,  except  where the
     failure to obtain  such  consents  or  approvals  would not have a Material
     Adverse Effect.

          9.09 Options. Except as otherwise provided in section 7.11: (a) all of
     the options  disclosed in Section  5.03(e) of the  Disclosure  Letter shall
     have been  exercised  and/or  terminated,  (b) in  addition  to the  Option
     Shares,  Lincoln shall have no more than  5,319,731  shares of common stock
     issued and  outstanding,  (c) Lincoln shall have no commitment to issue any
     additional  shares  of common  stock,  and (d) all  stock  option  plans of
     Lincoln shall have been terminated.

          9.10 Executive Employment Agreements. FMBCI shall enter into Executive
     Employment   Agreements  with  Jerry  R.  Engle  and  John  B.  Ditmars  in
     substantially   the  forms   attached   hereto  as  Exhibit  B-1  and  B-2,
     respectively,  immediately  prior to the Effective Date that will supersede
     their current  employment  agreements with Lincoln and/or the Bank,  except
     for the  obligation  to make  the lump  sum payments  described  in Section
     8.03(d) above.

          9.11 Opinions. The parties shall have received the respective opinions
     of counsel described in Section 12.04 of this Agreement.

          9.12 Bank Merger Agreement. FMBCI and the Bank shall have entered into
     the Bank Merger Agreement.
<page>
                                   SECTION 10

                              Termination of Merger

     10.01  Manner  of   Termination.   This  Agreement  and  the   transactions
contemplated hereby may be terminated at any time prior to the Effective Date by
written  notice  delivered by First  Merchants to Lincoln or by Lincoln to First
Merchants only for the following reasons:

          (a) By the mutual consent of First Merchants and Lincoln, if the Board
     of Directors of each so  determines by vote of a majority of the members of
     its entire Board;

          (b) By  First  Merchants  or  Lincoln,  if  its  respective  Board  of
     Directors so  determines by vote of a majority of the members of its entire
     Board, in the event of either:  (i) a material breach by the other party of
     any  representation or warranty  contained herein which breach cannot be or
     has not been cured within 30 days after the giving of written notice to the
     breaching  party of such breach;  (ii) a material breach by the other party
     of any of the covenants or agreements contained herein, which breach cannot
     be or has not been cured within 30 days after the giving of written  notice
     to the  breaching  party  of such  breach;  or  (iii)  any  event,  fact or
     circumstance  shall  have  occurred  that  has had or could  reasonably  be
     expected to have a Material Adverse Effect on the other party;

          (c) By Lincoln or First  Merchants,  if it shall determine in its sole
     discretion that the transactions contemplated by this Agreement have become
     inadvisable  or   impracticable  by  reason  of  commencement  of  material
     litigation or proceedings against any of the parties;

          (d) By First Merchants,  if the Merger has not been consummated before
     January 1, 2009  (provided  that First  Merchants  is not then in  material
     breach  of  any  representation,  warranty,  covenant  or  other  agreement
     contained herein);

          (e) By First  Merchants  or  Lincoln,  pursuant  to  their  respective
     termination rights set forth in Section 3.04 hereof;

          (f) By Lincoln,  if the appropriate  discharge of the fiduciary duties
     of the Board of Directors of Lincoln  consistent with Section 7.05 requires
     that Lincoln terminate this Agreement;

          (g) By First Merchants, if Lincoln's Board of Directors fails to make,
     withdraws or modifies its recommendation to Lincoln's  shareholders to vote
     in favor of the  Merger  following  receipt  of a written  proposal  for an
     Acquisition Transaction;

          (h) By First Merchants, if Lincoln fails to give any written notice as
     required by Section  7.05 or if within  twenty (20) days after giving First
     Merchants  written notice pursuant to Section 7.05 of its intent to furnish
     information  to or enter into  discussions  or  negotiations  with  another
     person or entity, Lincoln does not terminate all discussions,  negotiations
     and  information  exchanges  related to such  Acquisition  Transaction  and
     provide First Merchants with written notice of such termination;
<page>
          (i) By either party (provided that the  terminating  party is not then
     in material  breach of any  representation  or warranty  contained  in this
     Agreement  or in  material  breach  of  any  covenant  or  other  agreement
     contained  in this  Agreement)  in the  event  that  any of the  conditions
     precedent to the  obligations of such party to consummate the Merger cannot
     be satisfied or fulfilled by the date specified in Section 10.01(k) of this
     Agreement;

          (j) By Lincoln, if First Merchants enters into a definitive  agreement
     in which it is the target company or the company to be acquired which would
     result  in a change of  control  of First  Merchants  or  require  approval
     pursuant to the Bank Holding Company Act of 1956, as amended; or

          (k) By  Lincoln  or  First  Merchants,  if the  Merger  has  not  been
     consummated  before June 30, 2009 (provided that the  terminating  party is
     not then in material breach of any  representation,  warranty,  covenant or
     other agreement contained herein).

     10.02 Effect of  Termination.  Except as provided  below, in the event that
this Agreement is terminated pursuant to the provisions of Section 10.01 hereof,
no party  shall  have any  liability  to any other  party for  costs,  expenses,
damages or otherwise;  provided, however, that notwithstanding the foregoing, in
the event that this Agreement is terminated pursuant to Section 10.01(b)  hereof
on account of a willful breach of any of the  representations and warranties set
forth herein or any willful  breach of any of the  agreements  set forth herein,
then the non-breaching  party shall be entitled to recover  appropriate  damages
from the breaching party,  including,  without limitation,  reimbursement to the
non-breaching  party of its  costs,  fees and  expenses  (including  attorneys',
accountants'  and  advisors'  fees and  expenses)  incident to the  negotiation,
preparation and execution of this Agreement and related documentation; provided,
however,  that nothing in the  foregoing  proviso  shall be deemed to constitute
liquidated  damages for the breach by a party of the terms of this  Agreement or
otherwise  limit the  rights of the  non-breaching  party.  Notwithstanding  the
foregoing, (i) in the event of termination by Lincoln in accordance with Section
10.01(f) or by First Merchants in accordance with Section  10.01(g) or 10.01(h),
Lincoln shall pay First  Merchants the sum of $3,200,000 as liquidated  damages,
(ii) in the event of termination by Lincoln in accordance with Section 10.01(j),
First Merchants shall pay Lincoln the sum of $3,200,000,  and (iii) in the event
of termination by First  Merchants in accordance  with Section  10.01(d),  First
Merchants shall pay Lincoln the sum of $2,000,000. Such liquidated damages shall
be in lieu of costs,  expenses and damages otherwise recoverable under the first
sentence of this Section 10.02.  Such payment shall be made within ten (10) days
of the date of  notice  of  termination.  Each of First  Merchants  and  Lincoln
acknowledges the reasonableness of such amount in light of the considerable time
and expense  invested  and to be  invested by each of them and their  respective
representatives  in  furtherance  of the Merger.  Such amount was agreed upon by
First Merchants and Lincoln as  compensation  for their time and expense and not
as a penalty,  it being  impossible to ascertain the exact value of the time and
expense to be invested.  The prevailing  party in the event of any litigation to
enforce this Section  10.02 shall be entitled to recover  reasonable  attorneys'
fees.
<page>
                                   SECTION 11

                            Effective Date Of Merger

     Subject to the terms and upon  satisfaction of all  requirements of law and
the conditions specified in this Agreement, the Merger shall become effective at
the close of business on the day  specified in the Articles of Merger of Lincoln
with and into First  Merchants  (the  "Articles  of  Merger")  as filed with the
Secretary  of State of the  State of  Indiana  (the  "Effective  Date").  Unless
otherwise  agreed to by the parties,  the Effective  Date shall be no later than
the last  business  day of the  month  in  which  both  (a) any  waiting  period
following  the last  approval  of the  Merger by a state or  federal  regulatory
agency or governmental authority expires and (b) the conditions precedent to the
Merger  outlined  in  Section 9  have  been  satisfied;  provided,  however  the
Effective Date shall not be before December 31, 2008, unless otherwise agreed by
the parties.

                                   SECTION 12

                                     Closing

     12.01 Closing Date and Place. The closing of the Merger (the "Closing") and
the Bank Merger  shall take place at the main office of First  Merchants  on the
Effective  Date or at such other time and place as  mutually  agreed to by First
Merchants and Lincoln.

     12.02  Merger-Articles  of  Merger.  Subject  to  the  provisions  of  this
Agreement,  on the  Effective  Date,  the Articles of Merger shall be duly filed
with the Secretary of State of the State of Indiana.

     12.03 Bank  Merger-Articles  of Merger.  Subject to the  provisions of this
Agreement,  on the  Effective  Date,  the  articles  of merger or other  filings
necessary to consummate the Bank Merger shall be duly filed.

     12.04  Opinions of Counsel.  At the Closing,  (a) Lincoln  shall deliver an
opinion of its  counsel,  Bose  McKinney & Evans LLP,  to First  Merchants,  and
(b) First Merchants shall deliver an opinion of its counsel,  Bingham McHale LLP
to Lincoln, each dated as of the date of Closing. The form of such opinion shall
be as mutually  agreed to by the parties  hereto and their  respective  counsel;
provided,  however,  the  opinion of  Lincoln's  counsel  shall also  include an
opinion that the ESOP  termination and distribution  contemplated  under Section
7.16 hereof was  conducted in accordance  with all  applicable  plan  documents,
statutes, rules and regulations.

                                   SECTION 13

                                  Miscellaneous

     13.01 Effective  Agreement.  This Agreement shall be binding upon and inure
to the  benefit  of the  parties  hereto  and their  respective  successors  and
permitted assigns, but none of the provisions thereof shall inure to the benefit
of any other person,  firm, or corporation  whomsoever other than Sections 7.11,
7.16,  7.17,  8.03,  8.06, 8.07 and 8.08, which may be enforced by the employees
and officers of Lincoln and Lincoln's  Subsidiaries.  Neither this Agreement nor
any of the rights,  interests,  or  obligations  hereunder  shall be assigned or
transferred  by either party  hereto  without the prior  written  consent of the
other party.
<page>
     13.02 Waiver; Amendment.

          (a)  First  Merchants  and  Lincoln  may,  each  individually,  by  an
     instrument  in  writing  executed  in the same  manner  as this  Agreement:
     (i) extend  the  time  for  the  performance  of any of  the  covenants  or
     agreements  of  the  other  party  under  this  Agreement;  (ii) waive  any
     inaccuracies  in the  representations  or  warranties  of the  other  party
     contained in this Agreement or in any document delivered pursuant hereto or
     thereto;  (iii) waive  the  performance  by the  other  party of any of the
     covenants or agreements to be performed by it or them under this Agreement;
     or  (iv) waive  the  satisfaction  or  fulfillment  of  any  condition  the
     nonsatisfaction  or  nonfulfillment of which is a condition to the right of
     the party so waiving to terminate this  Agreement.  The waiver by any party
     hereto of a breach of any provision of this Agreement  shall not operate or
     be construed as a waiver of any other or subsequent breach hereunder.

          (b) Notwithstanding the prior approval by the shareholders of Lincoln,
     this  Agreement  may be amended,  modified or  supplemented  by the written
     agreement of Lincoln,  First Merchants,  the Bank and FMBCI without further
     approval of such shareholders,  except that no such amendment, modification
     or  supplement  shall  decrease  the  consideration  specified in Section 3
     hereof,  or shall otherwise  materially  adversely affect the rights of the
     shareholders of Lincoln without the further approval of such shareholders.

     13.03  Notices.  Any and all  notices or other  communications  required or
permitted  under this  Agreement  shall be in writing  and shall be deemed to be
given (i) when delivered in person,  or (ii) on the day of  transmission if sent
via  facsimile  transmission  to the  facsimile  number  given  below,  provided
telephonic  confirmation  of receipt is obtained  promptly  after  completion of
transmission,  or (iii) on the  fifth  (5th)  day  after  sent by  certified  or
registered  mail,  postage  prepaid,  return  receipt  requested,  addressed  as
follows:

If to First Merchants:                      With a copy to (which will not
                                            constitute notice):

200 E. Jackson Street                       Bingham McHale LLP
Muncie, IN  47305                           2700 Market Tower
Attn:  Michael C. Rechin,                   10 West Market Street
President and                               Indianapolis, Indiana  46204-2982
Chief Executive Officer                     Attn:  David R. Prechtel, Esq.
(765) 741-7283                              (317) 236-9907


If to Lincoln:                              With a copy to (which will not
                                            constitute notice):

905 Southfield Drive                        Bose McKinney & Evans LLP
Plainfield, Indiana 46168                   111 Monument Circle
Attn:  Jerry R. Engle                       Suite 2700
          Chairman of the Board,            Indianapolis, Indiana 46204
          President and Chief               Attn:  David A. Butcher
          Executive Officer                 (317) 684-5123
(317) 837-6903
<page>

or to such  substituted  address  as any of them  have  given  to the  other  in
writing.  Notwithstanding  the  foregoing,  all  notices  required  to be  given
pursuant to  Sections  3.04(b)  and  3.04(c)  hereof  shall be given in the time
periods  specified  in such  sections  by  either  hand  delivery  or  facsimile
transmission to the specified parties.

     13.04  Headings.  The headings in this Agreement have been inserted  solely
for the ease of reference and should not be considered in the  interpretation or
construction of this Agreement.

     13.05  Severability.  In case any one or more of the  provisions  contained
herein shall, for any reason, be held to be invalid,  illegal,  or unenforceable
in any respect,  such  invalidity,  illegality,  or  unenforceability  shall not
affect  any other  provision  of this  Agreement,  but this  Agreement  shall be
construed as if such invalid,  illegal, or unenforceable provision or provisions
had never been contained herein.

     13.06  Counterparts.  This  Agreement  may be  executed  in any  number  of
counterparts,  each of which shall be an original,  but such counterparts  shall
together constitute one and the same instrument. In addition, this Agreement and
the documents to be delivered  hereunder  may be executed by the parties  hereto
either manually or by facsimile  signatures,  each of which shall  constitute an
original signature.

     13.07  Governing  Law. This Agreement is executed in and shall be construed
in accordance with the laws of the State of Indiana, without regard to choice of
law principles.

     13.08 Entire  Agreement.  This Agreement  supersedes  any other  agreement,
whether oral or written,  between First  Merchants  and Lincoln  relating to the
matters  contemplated  hereby,  and constitutes the entire agreement between the
parties hereto.


     13.09  Expenses.  First  Merchants  and  Lincoln  shall  each pay their own
expenses  incidental to the transactions  contemplated  hereby. It is understood
that the fees of Sandler  O'Neill  Partners,  L.P., and the cost of the fairness
opinion referenced in Section 9.06, shall be borne by Lincoln whether or not the
Merger is  consummated.  This provision  shall survive the Effective Date or the
earlier termination of this Agreement.


     13.10 .Certain Definitions. For purposes of this Agreement, the term:

          "First  Merchants'  Management"  shall mean any of Michael C.  Rechin,
     Mark K. Hardwick and Michael J. Stewart.

          "Knowledge"  as used with  respect to  Lincoln's  Management  or First
     Merchants'  Management  (including references to any such person knowing or
     being aware of a particular matter or any similar  formulation)  shall mean
     matters that are within the actual  conscious  knowledge of any such person
     after due inquiry.
<page>
          "Lincoln's Management" shall mean any of Jerry R. Engle, John Ditmars,
     John Baer and Jonathan D. Slaughter.

          "Subsidiary"  means,  with reference to any corporation,  partnership,
     limited liability  company,  business trust, joint venture or other entity,
     ownership by such entity, directly or indirectly, of fifty percent (50%) or
     more of the voting equity of such entity, the holders of which are entitled
     to vote for the  election  of a majority of the board of  directors  or any
     similar governing body of such corporation,  partnership, limited liability
     company, business trust, joint venture or other entity; and as used in this
     Agreement,  may refer to a direct or indirect  Subsidiary of either Lincoln
     or First Merchants as the context may require.


     13.11 Survival of Contents.  The provisions of Sections 7.08, 8.05,  10.02,
13.09 and this  Section  13.11  shall  survive  beyond the  termination  of this
Agreement.  The provisions of Sections 7.11, 7.16, 7.17, 8.03, 8.06, 8.07, 8.08,
13.01, 13.09 and this Section 13.11 shall survive beyond the Effective Date.





                     [THIS SPACE INTENTIONALLY LEFT BLANK.]

<page>
     IN WITNESS WHEREOF,  First Merchants and Lincoln have made and entered into
this  Agreement as of the day and year first above  written and have caused this
Agreement to be executed and attested by their duly authorized officers.

                                      FIRST MERCHANTS CORPORATION


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


                                      LINCOLN BANCORP


                                      By: /s/ Jerry R. Engle
                                          --------------------------------------
                                          Jerry R. Engle, Chairman of the Board,
                                          President and Chief Executive Officer


     Lincoln Bank hereby joins in this Agreement of Reorganization and Merger as
of the day and year first  above  written  for the  purpose of  covenanting  and
agreeing  to cause its duly  authorized  officer  to  execute  and  deliver  the
Agreement and Plan of Merger contemporaneously herewith.

                                      LINCOLN BANK


                                      By:/s/ Jerry R. Engle
                                         ---------------------------------------
                                         Jerry R. Engle, President
                                         and Chief Executive Officer


     First  Merchants Bank of Central  Indiana hereby joins in this Agreement of
Reorganization  and Merger as of the day and year first  above  written  for the
purpose of  covenanting  and  agreeing to cause its duly  authorized  officer to
execute and deliver the Agreement and Plan of Merger contemporaneously herewith.

                                      FIRST MERCHANTS BANK OF CENTRAL INDIANA


                                      By:/s/ Michael L. Baker
                                         ---------------------------------------
                                         Michael L. Baker, President
                                         and Chief Executive Officer


<page>



                                    EXHIBIT A


                          AGREEMENT AND PLAN OF MERGER
                                     Merging
                                  LINCOLN BANK,
                             an Indiana state bank,
                                  with and into
          FIRST MERCHANTS BANK OF CENTRAL INDIANA, NATIONAL ASSOCIATION
                         a national banking association


     THIS  AGREEMENT AND PLAN OF MERGER (this  "Agreement  and Plan"),  made and
entered  into  as of the  2nd  day of  September,  2008,  by and  between  FIRST
MERCHANTS  BANK OF  CENTRAL  INDIANA,  NATIONAL  ASSOCIATION,  a  national  bank
("FMBCI"),  and LINCOLN BANK, an Indiana state bank (the "Bank")  (FMBCI and the
Bank are sometimes referred to collectively as the "Constituent Companies").

                                   WITNESSETH

     WHEREAS,  the  Constituent  Companies  desire to  consummate  the  business
combination  transaction  outlined in this  Agreement and Plan pursuant to which
the Bank will merge with and into FMBCI  pursuant to the Bank Merger Act, 12 USC
Section 215a (collectively, the "Law");

     WHEREAS,  this Agreement and Plan is being executed in connection with, and
the  consummation  of this Agreement and Plan is expressly  contingent  upon the
closing of, that  certain  Agreement of  Reorganization  and Merger (the "Merger
Agreement") between First Merchants  Corporation ("First Merchants") and Lincoln
Bancorp ("Lincoln") dated September 2, 2008 (the "Holding Company Merger");

     WHEREAS,  the Boards of Directors of both FMBCI and the Bank have  approved
the transactions contemplated by this Agreement;

     WHEREAS, First Merchants, as the sole shareholder of FMBCI, and Lincoln, as
the  sole   shareholder  of  the  Bank,  have  also  approved  the  transactions
contemplated by this Agreement and Plan;

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
provisions,  agreements,  covenants,  conditions  and grants  contained  in this
Agreement  and Plan,  and in  accordance  with the  provisions  of the Law,  the
parties mutually covenant and agree as follows:
<page>
                                    ARTICLE I
                                   The Merger

     1.1. The Merger.  At the Effective Time (as defined below),  the Bank shall
be merged with and into FMBCI in accordance  with  applicable  provisions of the
Law (the "Merger").  The separate existence and company organization of the Bank
shall cease,  and the company  existence of FMBCI,  including  all its purposes,
powers and objectives,  shall continue  unaffected and unimpaired by the Merger.
FMBCI shall continue to be governed by the applicable  laws of The National Bank
Act and the  regulations  promulgated  thereunder  and shall  succeed to all the
rights,  privileges,  immunities,  powers, duties and liabilities of the Bank as
set forth in the Law.

     1.2. Further Assurances. If, after the Effective Time, FMBCI shall consider
or be advised that any further  deeds,  assignments  or assurances in the Law or
any other things are necessary or desirable to (a) vest, perfect or confirm,  of
record or otherwise,  in FMBCI, its right, title or interest in, to or under any
rights,  properties  or  assets  of the  Bank,  or (b)  otherwise  carry out the
purposes of this  Agreement  and Plan,  the Bank and its officers and  directors
shall be deemed to have  granted to FMBCI an  irrevocable  power of  attorney to
execute and deliver all such deeds,  assignments  or assurances in law and to do
all acts necessary or proper to vest, perfect or confirm title to and possession
of such  rights,  properties  or assets in FMBCI and  otherwise to carry out the
purposes of this Agreement and Plan, and the officers and directors of FMBCI are
authorized in the name of the Bank or otherwise to take any and all such action.

     1.3. Offices.  Immediately  following the Merger,  FMBCI's principal office
shall be located at 33 West 10th Street, Anderson,  Indiana 46016 and the Bank's
principal office at 905 Southfield Drive, Plainfield, Indiana 46168 shall become
a branch office of FMBCI.

     1.4. Savings  Accounts.  By virtue of the Merger,  savings accounts held at
the Bank shall automatically,  by operation of law, become savings accounts held
at FMBCI.


                                   ARTICLE II
                   Articles of Incorporation, Code of Bylaws,
                         Board of Directors and Officers

     2.1.  Name.  The name of the  surviving  Indiana state bank shall be "First
Merchants Bank of Central Indiana, National Association."

     2.2. Articles of Incorporation.  The Articles of Association of FMBCI shall
be the Articles of Association of the surviving national bank.

     2.3.  Code of Bylaws.  The Code of Bylaws of FMBCI  (the "Code of  Bylaws")
shall be the Code of Bylaws of the surviving national bank.
<page>
     2.4.  Officers  and  Directors.  The  Directors  of FMBCI  shall all remain
directors of the  surviving  national  bank and shall hold such offices from the
Effective Time until their respective  successors are duly elected and qualified
in the  manner  provided  in the  Code of  Bylaws.  As  required  by the  Merger
Agreement, the Board of Directors of FMBCI will be expanded so that Directors of
the Bank who so desire will be  appointed to the Board of Directors of FMBCI for
at least  the  remainder  of the terms for  which  they have been  elected.  The
officers of FMBCI shall all remain  officers of the surviving  national bank and
shall  hold  such  offices  from  the  Effective  Time  until  their  respective
successors are duly elected and qualified in the manner  provided in the Code of
Bylaws.


                                   ARTICLE III
                  Capital Stock of the Surviving National Bank

     3.1 Shares of the Bank. At the Effective  Time, by virtue of the Merger and
without any further  action on the part of FMBCI or the Bank,  all one  thousand
(1,000) issued and  outstanding  shares of the common capital stock of the Bank,
whose separate  existence shall cease,  shall  automatically and by operation of
law be canceled, void and of no further effect.

     3.2 Shares of FMBCI.  At the  Effective  Time,  by virtue of the Merger and
without any further  action on the part of FMBCI or the Bank, all 114,000 issued
and outstanding shares of the common capital stock of FMBCI, shall represent all
of the  issued  and  outstanding  shares  of the  common  capital  stock  of the
surviving national bank.


                                   ARTICLE IV
                           No Dissenting Shareholders

     First Merchants, as the sole shareholder of FMBCI, and Lincoln, as the sole
shareholder of the Bank, have approved and consented to this Merger.


                                    ARTICLE V
                               General Provisions

     5.1.  Condition  Precedent to Closing.  The  following  conditions  must be
satisfied prior to the closing of the Merger:

          (a) appropriate  approvals must be obtained from or notices filed with
     the Office of the  Comptroller of the Currency,  the Indiana  Department of
     Financial Institutions and the Federal Deposit Insurance Corporation; and

          (b) the merger of First  Merchants  and  Lincoln  contemplated  by the
     Merger Agreement must occur.
<page>
     5.2.  Effective  Time.  The  Merger  shall  become  effective   immediately
following the Holding Company Merger,  or such later time as designated by First
Merchants  and  otherwise  approved  by the  Office  of the  Comptroller  of the
Currency (the "Effective Time").

     5.3.  Manner of Termination.  This Agreement and Plan and the  transactions
contemplated hereby may be terminated at any time prior to the Effective Time:

          (a) by the mutual consent of FMBCI and the Bank; or

          (b)  automatically  and without  further action by either FMBCI or the
     Bank if the Merger Agreement is terminated for any reason.

     5.4.  Effect of Termination.  Upon  termination as provided in Section 5.3,
this  Agreement  and Plan shall be void and of no further  force or effect,  and
there  shall  be no  obligation  on the  part of  FMBCI  or the  Bank  or  their
respective officers, directors,  employees, agents, or shareholders,  except for
payment of their respective expenses.






           [The remainder of this page was intentionally left blank.]

<page>
     IN WITNESS  WHEREOF,  the parties have executed this  Agreement and Plan by
their  respective  officers duly  authorized as of the date and year first above
written.


"FMBCI"                          FIRST MERCHANTS BANK OF CENTRAL
                                 INDIANA, NATIONAL ASSOCIATION,
                                 a national bank,

                                 By: ___________________________________________

                                 Printed: ______________________________________

                                 Its: __________________________________________

ATTEST:_________________________
         Secretary/Cashier


"BANK"                           LINCOLN BANK,
                                 an Indiana state bank,

                                 By: ___________________________________________

                                 Printed: ______________________________________

                                 Its: __________________________________________


ATTEST:_________________________
         Secretary/Cashier


<page>

                                  EXHIBIT B-1



                              Employment Agreement

     This Employment Agreement  ("Agreement") is made and entered into this 31st
day of December,  2008,  by and between  JERRY R. ENGLE  ("Employee")  and FIRST
MERCHANTS BANK OF CENTRAL INDIANA, NATIONAL ASSOCIATION ("Employer"), a national
banking association.

1.   Employment.

     Employer  hereby employs  Employee and Employee  hereby accepts  employment
     upon the terms and conditions set forth in this Agreement.

2.   Term of Agreement.

     Subject to the provisions for termination  hereinafter provided, the "Term"
     of this  Agreement  shall commence on December 31, 2008, and continue for a
     term of twenty-four (24) months.

3.   Duties.

     During  the Term of this  Agreement,  Employee  shall  be the  Indianapolis
     Regional  President and shall  perform all duties  related and necessary to
     that  position;  provided,  however,  that such duties  shall be  regularly
     performed in or from an office of the Employer in the greater  Indianapolis
     area,  as directed by  Employer.  Employee  agrees to abide by all by-laws,
     policies, practices, procedures, and rules of Employer.

     Employee  shall devote all of his  professional  time,  efforts,  skill and
     ability to the business of Employer, and shall not, during the Term of this
     Agreement,  be engaged in any other business activity,  whether or not such
     business activity is pursued for gain, profit or other pecuniary advantage,
     unless  Employee has obtained the prior written  approval of Employer;  but
     this shall not be construed  as  preventing  Employee  from  investing  his
     assets in such form or manner as will not require any  services on the part
     of Employee in the  operation of the affairs of the companies in which such
     investments are made. Further,  this Paragraph 3 shall not prevent Employee
     from participating in charitable or other not-for-profit activities as long
     as such  activities do not materially  interfere with  Employee's  work for
     Employer.

4.   Business Opportunities.

     Employee  will  take no  action  that  deprives  Employer  of any  business
     opportunities  within the scope of Employee's  existing  duties and, should
     Employee  be offered or become  aware of any such  opportunities,  Employee
     shall  advise  Employer in writing,  and  Employer  shall have the right of
     first refusal before Employee pursues such opportunity.
<page>
5.   Compensation and Benefits.

     Employer shall compensate  Employee for services  performed during the Term
     of this Agreement as follows:

     A.   Annual  Salary.  Employer  shall pay Employee a total Annual Salary of
          Two Hundred  Ninety-Seven  Thousand and 00/100  Dollars  ($297,000.00)
          (minus all applicable deductions and withholdings,  including federal,
          state,  and  local  taxes,  and  FICA),  payable  in  accordance  with
          Employer's  normal payroll  policies.  At least annually,  if not more
          often, Employer shall review and may increase Employee's Annual Salary
          as Employer determines to be reasonable and appropriate.

     B.   Employee's  Bonus.  In addition to his Annual Salary,  Employee may be
          paid an Employee Bonus in the sole discretion of Employer.

     C.   Automobile  Allowance.  Employer  shall pay Employee Eight Hundred and
          00/100 Dollars  ($800.00) per month,  less applicable  withholdings to
          compensate  him for the  business  use of his  automobile.  Employee's
          automobile  shall  otherwise  be  owned,  maintained  and  insured  by
          Employee at his sole expense.

     D.   Other  Benefits.  Employee  shall be  entitled  to all other  benefits
          otherwise   provided  to  full-time   employees  of  Employer  and  in
          accordance with Employer's policies. The terms and conditions on which
          Employer  shall  provide  benefits  to  Employee  are  the  same as it
          provides  such  benefits  to its other  management  employees  holding
          positions similar to that of Employee. Employee understands and agrees
          that all  benefits are subject to change from time to time at the sole
          discretion of Employer.

     E.   Stock Options / Restricted  Shares.  Pursuant to the Merger Agreement,
          as defined in  Paragraph  19,  Employee is to be  provided  with 6,400
          restricted  shares or 24,000 stock options or a  combination  of both.
          Employer  will take all steps  necessary to confirm that such forms of
          deferred  compensation  are  promptly  awarded to  Employee  after the
          execution  of  this   Agreement   based  upon  terms  and   conditions
          substantially  similar to those  included  with  awards  made to other
          management  employees  holding  positions  similar to that of Employee
          with Employer or any affiliate of First Merchants Corporation.

6.   Expense Reimbursement.

     Employer shall reimburse Employee for all reasonable out-of-pocket expenses
     that are incurred by Employee in providing services to Employer  hereunder,
     so  long  as  Employee  provides  Employer  with  reasonable  documentation
     necessary to support such expenses. All expense reimbursement shall be paid
     to Employee  consistent with Employer's  expense  reimbursement  policy, in
     effect from time to time.
 <page>
7.   Confidential Information and Return of Property.

     Employee  acknowledges  that in the course of his employment with Employer,
     he will occupy a position of trust and  confidence  and will have access to
     and may develop  Confidential  Information of actual or potential value to,
     or  otherwise  useful  to,  Employer.   "Confidential   Information"  means
     information  that  the  Employer  owns  or  possesses,  that  it uses or is
     potentially useful in its business, that it treats as proprietary,  private
     or confidential,  and that is not generally known to the public, including,
     but not limited to, trade  secrets (as defined by the Indiana Trade Secrets
     Act,  Ind.  Code sec.  24-2-3-1,  et.  seq.),  information  relating to the
     Employer's business plans, financial condition,  operating and other costs,
     sales,  pricing,  marketing,  ideas,  research  records,  plans for service
     improvements  and  development,  lists of  actual or  potential  customers,
     actual and potential  customer usage and  requirements,  customer  records,
     trade secrets, and any other information which derives independent economic
     value,  either actual or potential.  Information  supplied to Employee from
     outside sources will also be presumed to be Confidential Information unless
     and until Employer designates it otherwise.

     Employee agrees to use Confidential Information solely in the course of his
     duties  as an  employee  of  Employer  and  in  furtherance  of  Employer's
     business.   Employee  hereby  further  agrees  that  the   above-referenced
     information will be kept  confidential at all times during the Term of this
     Agreement and  thereafter,  that he will not disclose or communicate to any
     third party any of the  Confidential  Information  and will not make use of
     the Confidential  Information on his own behalf or on the behalf of a third
     party.

     Employee agrees that all  Confidential  Information is and shall remain the
     exclusive property of Employer. Employee agrees to return to Employer on or
     before  Employee's  termination  of  employment  with Employer all Employer
     property,  information and documents, including and without limitation, all
     reports, files, memoranda, records, software, hardware, credit cards, keys,
     computer  access  codes  or  disks,  instruction  or  operational  manuals,
     handbooks or manuals,  written  financial  information,  business  plans or
     other physical and personal property which Employee received or prepared or
     helped  prepare  in  connection  with his  employment  with  Employer;  and
     Employee   agrees  that  he  will  not  retain  any   copies,   duplicates,
     reproductions or excerpts thereof.

     This Paragraph 7 shall survive the termination of this Agreement.

8.   Non-Solicitation.

     A.   Customers.  Employee  shall not,  at any time during the Term or for a
          period  of  one  (1)  year  thereafter,  directly  or  indirectly,  on
          Employee's  own behalf or for any other person,  firm,  corporation or
          other  business  entity:  (1)  solicit,  seek  to  obtain,  divert  or
          otherwise  attempt  to take away any of the  banking  or  bank-related
          service business of any of Employer's customers;  (2) provide services
          to or accept  the  business  of any of  Employer's  customers  for the
          banking or bank-related  service business offered by Employer;  or (3)
          request or advise any of Employer's  customers to  terminate,  reduce,
          limit or  otherwise  change  their  banking  or  bank-related  service
          business  relationship  with  Employer.  For  purposes of this Section
          8.A.,  "Employer's   customers"  shall  mean  those  persons,   firms,
          corporations and other business entities who are customers of Employer
          at the time of Employee's  termination of employment  with Employer or
          who were  customers of Employer at any time during the two year period
          immediately  preceding the  termination of Employee's  employment with
          Employer,  whether  or not  Employee  had  direct  contact  with  such
          customers on behalf of Employer.
<page>
     B.   Employees.  Employee  shall not,  at any time during the Term or for a
          period  of  one  (1)  year  thereafter,  directly  or  indirectly,  on
          Employee's  own behalf or for any other person,  firm,  corporation or
          other business entity, solicit,  induce, request, advise, or otherwise
          attempt to take away or to influence  any of  Employer's  employees to
          terminate his or her employment with Employer.

     C.   Exceptions.  If Employer  terminates this Agreement  without Cause, as
          set forth in Paragraph 10(D), or Employee terminates the Agreement for
          Good Reason,  as provided in Paragraph 10(C), the foregoing  Customers
          and Employees  provisions of this Paragraph 8 shall only apply for the
          shorter of: (i) one (1) year  following  termination of this Agreement
          or (ii) the remaining  portion of the Term (prior to termination)  for
          which Employee is provided the lump sum payment under Paragraph 10D or
          10(C).  If the  Agreement  is not  terminated,  but rather  expires as
          provided in  Paragraph 2 at the  conclusion  of the  twenty-four  (24)
          month period, the foregoing Customers and Employees provisions of this
          Paragraph 8 shall expire contemporaneously therewith.

9.   Breach of Agreement.

     A.   Employee  acknowledges  that any breach of  Paragraphs  7 or 8 of this
          Agreement,  by Employee may cause  irreparable  damage to Employer and
          that the legal  remedies  available  to Employer  will be  inadequate.
          Therefore,  in the  event  of  any  threatened  or  actual  breach  of
          Paragraphs 7 or 8 of this Agreement by Employee,  Employee agrees that
          Employer  shall be entitled to specific  enforcement of this Agreement
          through  injunctive  or other  equitable  relief in  addition to legal
          remedies,  without the need for posting bond. If Employee is found, by
          a court of competent  jurisdiction,  to have breached any of the terms
          of  Paragraphs  7 or 8 of  this  Agreement,  Employee  agrees  to  pay
          Employer  reasonable  attorney's  fees and costs  incurred  in seeking
          relief from Employee's  breach of Paragraphs 7 or 8 of this Agreement.
          If a court of  competent  jurisdiction  declines  to find a breach  by
          Employee of  Paragraphs 7 or 8 has  occurred,  Employer  agrees to pay
          Employee  reasonable  attorney's  fees and costs Employee  incurred in
          responding to Employer's request for relief.

          Employee and Employer hereby submit to the  jurisdiction  and venue of
          the Delaware  County,  Indiana  Courts and the United States  District
          Court for the  Southern  District of Indiana,  as  applicable,  in any
          cause of action to enforce the terms and conditions of Paragraphs 7 or
          8 of this Agreement.
<page>
     B.   Employee and Employer  hereby  agree that any claim,  controversy,  or
          dispute  arising out of or relating  to this  Agreement  or the breach
          thereof,  except those identified in Paragraph 9(A) of this Agreement,
          shall be settled by binding  arbitration in Delaware County,  Indiana.
          Such  arbitration  shall be conducted in accordance  with the rules of
          the American Arbitration Association, then in effect. Each party shall
          bear  their  own  attorney's  fees  and  costs  in  such   proceeding.
          Arbitration  shall be the sole and exclusive  method of resolving such
          claims, controversies, or disputes under this Agreement.

     C.   This Paragraph 9 shall survive the termination of this Agreement.

10.  Termination.

     A.   Termination  Due to Death.  In the  event of  Employee's  death,  this
          Agreement shall terminate as of the date of Employee's  death. If this
          Agreement  is  terminated  because  of  Employee's  death,  Employee's
          benefits  shall  be  determined  in  accordance  with  the  survivor's
          benefits,  insurance,  and other applicable programs of Employer, then
          in effect. Upon Employee's death, Employer's obligations to compensate
          Employee under Paragraph 5 of this Agreement shall immediately expire;
          provided,  however,  that  within  forty-five  (45)  business  days of
          Employee's death, Employer shall pay to Employee's estate that portion
          of his Annual Salary and Bonus as provided in Paragraphs 5(A) and 5(B)
          of this  Agreement  that shall have been  earned  through  the date of
          Employee's  death,  but not yet paid.  Except as  otherwise  set forth
          herein or as  otherwise  required by  applicable  law,  following  the
          termination  date  established   pursuant  to  this  Paragraph  10(A),
          Employer  and  Employee   (including   Employee's  heirs,   executors,
          administrators,  and personal  representatives)  shall have no further
          obligations to each other under this Agreement.

     B.   Termination  Due  to  Disability.  In the  event  Employee  suffers  a
          Disability,  as defined herein,  during the Term of Employment and is,
          therefore,  unable to perform the duties required by the Agreement for
          more than ninety (90) calendar days during any consecutive twelve (12)
          month  period,  Employer  shall  have  the  right  to  terminate  this
          Agreement and Employee's  employment.  Employer shall deliver  written
          notice to Employee of Employer's  intent to terminate  this  Agreement
          pursuant  to this  Paragraph  10(B) and  specifying  in such  notice a
          termination  date not less than  thirty  (30) days after the giving of
          the notice ("Disability Notice Period"). This Agreement and Employee's
          employment shall terminate at the close of business on the last day of
          the Disability Notice Period.

          If this  Agreement is  terminated  because of  Employee's  Disability,
          Employee  shall be  entitled  to  receive  any  applicable  disability
          insurance benefits as allowed under Paragraph 5 (D) of this Agreement.
          Upon  termination of this Agreement  pursuant to this Paragraph 10(B),
          Employer's  obligations to compensate  Employee  under  Paragraph 5 of
          this Agreement  shall  immediately  expire;  provided,  however,  that
          within  forty-five  (45) business days after the  termination  of this
          Agreement,  Employer  shall pay to Employee that portion of his Annual
          Salary  and  Bonus as  provided  in  Paragraphs  5(A) and 5(B) of this
          Agreement  that shall have been earned through the  termination  date,
          but not yet paid. Except as otherwise set forth herein or as otherwise
          required by applicable law, following the termination date established
          pursuant to this Paragraph 10(B),  Employer and Employee shall have no
          further obligations to each other under this Agreement.
<page>
          For purposes of this Agreement only, the term "Disability" shall mean,
          the inability of Employee,  because of injury,  illness,  disease,  or
          bodily  or  mental   infirmity,   to  engage  in  the  performance  of
          substantially  all of the duties  required by this  Agreement  with or
          without a reasonable  accommodation.  Employer  shall  reasonably  and
          fairly  determine such Disability upon receipt of, and in reliance on,
          medical  advice from a licensed  physician or physicians  qualified to
          give professional medical advice.

     C.   Termination by Employee.  Employee may terminate this Agreement at any
          time,  with or without Good  Reason,  by  providing  Employer  written
          notice of his intent to  terminate  this  Agreement  pursuant  to this
          Paragraph  10(C) and specifying in such notice a termination  date not
          less than thirty (30) days after the giving of the notice ("Employee's
          Notice  Period").  This  Agreement  and  Employee's  employment  shall
          terminate  at the  close of  business  on the  last day of  Employee's
          Notice Period.

          For purposes of this Paragraph  10(C),  "Good Reason" shall be defined
          as: (i) any action by  Employer  to remove  Employee  as  Indianapolis
          Regional  President of Employer,  except for  promotions,  if any, and
          except where  Employer  properly acts to remove  Employee for Cause as
          defined in  Paragraph  10(D)  below,  (ii) any action by  Employer  to
          materially   limit,   increase  or  modify  Employee's  duties  and/or
          authority  as  Indianapolis  Regional  President  of  Employer  or  to
          otherwise  change the regular work location of Employee outside of the
          greater Indianapolis area, (iii) any failure of Employer to obtain the
          assumption  of  the  obligation  to  perform  this  Agreement  by  any
          successor  of Employer,  or (iv) any material  breach by Employer of a
          term, condition or covenant of this Agreement.

          If Employee  terminates  this  Agreement  pursuant  to this  Paragraph
          10(C),  Employee  shall  immediately  upon  the  termination  of  this
          Agreement  forfeit all rights and benefits to which he would otherwise
          have been  entitled  under this  Agreement;  provided,  however,  that
          within  fifteen  (15)  business  days  after the  termination  of this
          Agreement pursuant to this Paragraph 10(C),

          1.   If termination by Employee is without Good Reason, Employer shall
               pay to Employee  that portion of his Annual Salary as provided in
               Paragraph  5(A) of this  Agreement  that shall  have been  earned
               through the termination date, but not yet paid; or

          2.   If  termination  by Employee is with Good Reason,  Employer shall
               pay to Employee a lump sum payment equal to remaining  portion of
               Employee's  Annual  Salary as provided in Paragraph  5(A) for the
               Term then in effect,  plus that  portion of  Employee's  Bonus as
               provided in Paragraph 5(B) of this Agreement that shall have been
               earned through the termination date, but not yet paid.
<page>
               Except as otherwise set forth herein or as otherwise  required by
               applicable  law,   following  the  termination  date  established
               pursuant to this  Paragraph  10(C),  Employer and Employee  shall
               have no further obligations to each other under this Agreement.

     D.   Termination by Employer  Without Cause. At any time during the Term of
          Employment,   Employer  may  terminate  this  Agreement  (and,   thus,
          terminate Employee's  Employment) for any reason by providing Employee
          written notice of its intent to terminate  this Agreement  pursuant to
          this Paragraph 10(D) and specifying in such notice a termination  date
          not less  than  thirty  (30)  days  after  the  giving  of the  notice
          ("Employer's Notice Period"). This Agreement and Employee's employment
          shall terminate at the close of business on the last day of Employer's
          Notice Period.

          If this  Agreement is  terminated  pursuant to this  Paragraph  10(D),
          Employee  shall  immediately  upon the  termination  of this Agreement
          forfeit all rights and benefits to which he would  otherwise have been
          entitled under this Agreement;  provided, however, that within fifteen
          (15) business days after the termination of this Agreement pursuant to
          this  Paragraph  10(D),  Employer  shall  pay to  Employee  a lump sum
          payment  equal to remaining  portion of  Employee's  Annual  Salary as
          provided  in  Paragraph  5(A) for the Term then in  effect,  plus that
          portion of  Employee's  Bonus as  provided in  Paragraph  5(B) of this
          Agreement  that shall have been earned through the  termination  date,
          but not yet paid. Except as otherwise set forth herein or as otherwise
          required by applicable law, following the termination date established
          pursuant to this Paragraph 10(D),  Employer and Employee shall have no
          further obligations to each other under this Agreement.

     E.   Termination  by Employer  With  Cause.  At any time during the Term of
          Employment,  Employer may  terminate  this  Agreement  and  Employee's
          Employment  for  "Cause." The term "Cause" as used herein shall mean a
          reasonable determination by Employer that Employee:

          1.   Engaged in willful and continued failure to perform substantially
               Employee's  duties with Employer if such failure  continues for a
               period of thirty  (30) days after  Employer  delivers to Employee
               written   demand  for   substantial   performance,   specifically
               identifying  the manner in which  Employee has not  substantially
               performed his duties;

          2.   Engaged  in  unauthorized  conduct  and  behavior  that  has  the
               likelihood  of  exposing   Employer  to  material   liability  or
               otherwise   significantly    jeopardizing   Employer's   business
               interests;

          3.   Has  been  convicted  of  any  crime  constituting  a  felony  or
               involving moral turpitude or controlled substance;
<page>
          4.   Materially breached any term or condition of this Agreement; or

          5.   As otherwise defined in this Agreement.

               Upon the occurrence of any of the foregoing, Employer may provide
               Employee written notice of its intent to terminate this Agreement
               pursuant  to  this   Paragraph   10(E)  and  this  Agreement  and
               Employee's employment shall terminate at the close of business on
               the date on which Employer provides such notice.

               If this Agreement is terminated pursuant to this Paragraph 10(E),
               Employee shall immediately upon the termination of this Agreement
               forfeit all rights and benefits to which he would  otherwise have
               been  entitled  under this  Agreement;  provided,  however,  that
               Employer  shall pay to Employee  in  accordance  with  Employer's
               normal  payroll  practices,  that  portion of  Employee's  Annual
               Salary as provided in Paragraph 5(A) of this Agreement that shall
               have  been  earned  through  the  termination   date.  Except  as
               otherwise set forth herein or as otherwise required by applicable
               law, following the termination date established  pursuant to this
               Paragraph  10(E),  Employer  and  Employee  shall have no further
               obligations to each other under this Agreement.

     F.   Exception to Loss of Rights and Benefits. Notwithstanding any contrary
          provisions  contained  herein,  termination  of this Agreement for any
          reason shall not  otherwise  terminate the rights and benefits held by
          Employee under any separate  written  agreement  between  Employee and
          Employer or any affiliate of First Merchants  Corporation,  including,
          but not limited to, Employee's rights and benefits under any change in
          control  agreement,  stock  options,  restricted  share awards,  other
          deferred compensation agreements, and the Merger Agreement, as defined
          in Paragraph 19.

11.  Indemnification of Employee.

     Employer  shall  indemnify  Employee to the  fullest  extent  permitted  by
     Employer's  articles of  incorporation,  by-laws and applicable  federal or
     state  laws for all  amounts  (including,  without  limitation,  judgments,
     fines, settlement payments,  expenses and attorneys' fees) incurred or paid
     by  Employee  in  connection  with  any  action,  suit,   investigation  or
     proceeding  arising out of or relating  to the  performance  by Employee or
     services for, or the acting by Employee as a director,  officer or employee
     of, Employer,  any subsidiary of Employer or any other person or enterprise
     at Employer's  request.  Expenses,  including but not limited to attorneys'
     fees  and   disbursements,   incurred  in  defending   any  action,   suit,
     investigation  or  proceeding,  for  which  Employee  may  be  entitled  to
     indemnification  under this  Paragraph  11 upon final  disposition  of such
     action,  shall be paid by Employer in advance of the final disposition,  to
     the maximum extent permitted by applicable laws and regulations;  provided,
     however,  that prior to making any such payments  Employer shall receive an
     undertaking  by or on behalf of Employee to repay such  amounts if it shall
     ultimately be determined that he is not entitled to indemnification.
<page>
12.  Suspension.

     If Employee is suspended and/or  temporarily  prohibited from participating
     in the  conduct of  Employer's  affairs by a notice  served  under  Section
     8(e)(3) or (g)(1) of the Federal Deposit  Insurance Act (12 U.S.C.  Section
     1818(e)(3) and (g)(1)),  Employer's  obligations under this Agreement shall
     be  suspended  as of the date of  service,  unless  stayed  by  appropriate
     proceedings. If the charges in the notice are dismissed, Employer shall (i)
     pay Employee all or part of the compensation withheld while its obligations
     under this  Agreement  were  suspended  and (ii)  reinstate (in whole or in
     part) any of its obligations which were suspended.


13.  Removal or Prohibition.

     If Employee is removed and/or permanently  prohibited from participating in
     the conduct of Employer's  affairs by an order issued under section 8(e)(4)
     or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.Section 1818(e)(4)
     or  (g)(1)),  all  obligations  of  Employer  under  this  Agreement  shall
     terminate as of the  effective  date of the order and shall be considered a
     termination of Employee by Employer for "Cause" pursuant to Paragraph 10(E)
     of this Agreement.

14.  Default of Employer.

     If Employer  is in default  (as  defined in section  3(x)(1) of the Federal
     Deposit   Insurance  Act),  all  obligations  under  this  Agreement  shall
     terminate as of the date of default,  and shall be considered a termination
     of Employee by Employer  for "Cause"  pursuant to  Paragraph  10(E) of this
     Agreement.

15.  Termination by Regulatory Action.

     All obligations under this Agreement may be terminated except to the extent
     determined  that the  continuation  of the  Agreement is necessary  for the
     continued  operation of Employer:  (i) by the Office of the  Comptroller of
     the Currency (the "Controller"),  at the time the Federal Deposit Insurance
     Corporation  enters into an agreement to provide assistance to or on behalf
     of Employer  under the authority  contained in Section 13(c) of the Federal
     Deposit Insurance Act; or (ii) by the Controller at the time the Controller
     approves a supervisory  merger to resolve  problems related to operation of
     Employer  or when  Employer  is  determined  to be in an unsafe and unsound
     condition.

16.  Conflict with Regulations.

     If any of the  provisions in this  Agreement  shall conflict with 12 C.F.R.
     Section 30, Appendix A, or the Controller  policies adopted  thereunder (as
     the  same  may be  amended  from  time to time)  the  requirements  of such
     regulation  shall  supersede  any  contrary  provisions  herein  and  shall
     prevail.
<page>
17.  Successors and Assigns.

     This  Agreement  shall be  binding  upon and  inure to the  benefit  of the
     successors and assigns of Employer,  and unless clearly  inapplicable,  all
     references  herein  to  Employer  shall  be  deemed  to  include  any  such
     successor.  In addition,  this Agreement shall be binding upon and inure to
     the benefit of Employee and his heirs, executors, legal representatives and
     assigns; provided,  however, that the obligations of Employee hereunder are
     personal  in nature  and may not be  delegated  without  the prior  written
     approval of Employer.

18.  Choice of Law.

     This Agreement shall be interpreted, construed, and governed by the laws of
     the State of Indiana, regardless of the place of execution or performance.

19.  Entire Agreement

     This  Agreement  contains the entire  agreement of the parties and replaces
     and  supersedes  all  employment  agreements  between  Employee and Lincoln
     Bancorp or Lincoln Bank, including, but not limited to that certain Amended
     and Restated  Employment  Agreement between Lincoln Bank and Employee dated
     October  1,  2007  and  effective  as of  January  1,  2005  (the  "Lincoln
     Agreements").  Notwithstanding  the  foregoing,  the obligation to make the
     lump sum  payment  upon  Change in  Control,  as  provided  in the  Lincoln
     Agreements  and  reaffirmed in the Agreement of  Reorganization  and Merger
     Between First  Merchants  Corporation and Lincoln Bancorp entered into this
     same date (the "Merger  Agreement"),  shall not be  superseded or replaced,
     but shall continue to be in full force and effect.

     This  Agreement  may not be changed  orally,  but only by an  agreement  in
     writing signed by the party against whom enforcement of any waiver, change,
     modification, extension, or discharge is sought.

     This Agreement may be executed in multiple counterparts,  each of which (or
     a facsimile thereof) shall be deemed an original, but all of which shall be
     considered a single instrument.

20.  Severability.

     If any  provision of this  Agreement  shall be held by a court of competent
     jurisdiction  to be  contrary  to  law  or  public  policy,  the  remaining
     provisions shall remain in full force and effect.

21.  Notice.

     Any notices,  requests,  demands, or other  communications  provided for by
     this  Agreement  shall be  sufficient if in writing and if (i) delivered by
     hand  to the  other  party;  (ii)  sent  by  facsimile  communication  with
     appropriate confirmation of delivery; (iii) sent by registered or certified
     United States Mail, return receipt requested,  with all postage prepaid; or
     (iv) sent by  recognized  commercial  express  courier  services,  with all
     delivery charges prepaid; and addressed as follows:
<page>
                  If to Employer:
                  First Merchants Bank of Central Indiana, National Association
                  _________________________
                  _________________________
                  _________________________
                  _________________________

                  If to Employee:
                  Jerry R. Engle
                  345 South Oakwood Drive
                  Greenwood, Indiana 46142

     or to such other  address as either party hereto may have  furnished to the
     other  party in writing in  accordance  herewith,  except  that  notices of
     change of address shall be effective only upon receipt.

22.  Successor.

     Employer  shall  require any  successor  (whether  direct or  indirect,  by
     purchase,  merger,  consolidation or otherwise) to all or substantially all
     of the business or assets of Employer,  by agreement in form and  substance
     satisfactory  to Employee  to  expressly  assume and agree to perform  this
     Agreement in the same manner and to the same extent that Employer  would be
     required to perform it if no such  succession  had taken place.  Failure of
     Employer to obtain such agreement  prior to the  effectiveness  of any such
     succession  shall be a material  intentional  breach of this  Agreement and
     shall  entitle  Employee  to  terminate  this  Agreement  with Good  Reason
     pursuant to Paragraph 10(C) herein.  Any successor  assuming this Agreement
     shall be  subject  to the  obligations  of this  Paragraph  22,  similar to
     Employer.

23.  Acknowledgement.

     Employee represents and acknowledges that Employee has had adequate time to
     review this  Agreement,  Employee has had the  opportunity to ask questions
     and receive answers from Employer  regarding this  Agreement,  and Employee
     has had the  opportunity  to  consult  with  legal  advisors  of his choice
     concerning the terms and conditions of this Agreement.

     This  Agreement is intended to supersede and replace all prior  agreements,
     understandings  and  arrangements  between or among Employer,  or any agent
     thereof, and the Employee, or any agent thereof, relating to the employment
     of Employee.



        [THIS SPACE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE TO FOLLOW].

<page>
     IN WITNESS  WHEREOF,  the parties  hereto have  voluntarily  executed  this
Agreement as of the day and year first above written.

"EMPLOYER"                                    "EMPLOYEE"
FIRST MERCHANTS BANK OF                       JERRY R. ENGLE
   CENTRAL INDIANA,
   NATIONAL ASSOCIATION


By:___________________________________        __________________________________
                                                Jerry R. Engle
 _____________________________________
(Printed)




The  undersigned,  First Merchants  Corporation,  sole  shareholder of Employer,
agrees that if it shall be determined  for any reason that any obligation on the
part of Employer to continue to make any  payments  due under this  Agreement to
Employee is unenforceable for any reason, First Merchants  Corporation agrees to
honor the terms of this  Agreement  and  continue to make any such  payments due
hereunder to Employee pursuant to the terms of this Agreement.

As otherwise  provided in the  Agreement of  Reorganization  and Merger  Between
First Merchants  Corporation and Lincoln  Bancorp,  entered into this same date,
First Merchants  shall nominate and/or appoint  Employee to serve as a member of
First  Merchant  Corporation's  Board of Directors,  and, as a director of First
Merchants  Corporation,  Employee  shall be  entitled to the same  benefits  and
compensation  for  services  as provided  to other  employee-directors  of First
Merchants Corporation.

                                        FIRST MERCHANTS CORPORATION




                                        _____________________________________
                                        Michael C. Rechin, President and
                                        Chief Executive Officer







<page>



                                   EXHIBIT B-2

                          Ditmars Employment Agreement


     This Employment Agreement  ("Agreement") is made and entered into this 31st
day of December,  2008,  by and between JOHN B. DITMARS  ("Employee")  and FIRST
MERCHANTS BANK OF CENTRAL INDIANA, NATIONAL ASSOCIATION ("Employer"), a national
banking association.

1.   Employment.

     Employer  hereby employs  Employee and Employee  hereby accepts  employment
     upon the terms and conditions set forth in this Agreement.

2.   Term of Agreement.

     Subject to the provisions for termination  hereinafter provided, the "Term"
     of this  Agreement  shall commence on December 31, 2008, and continue for a
     term of twenty-four (24) months.

3.   Duties.

     During  the  Term  of this  Agreement,  Employee  shall  be a  Senior  Vice
     President  and shall  perform  all duties  related  and  necessary  to that
     position;  provided, however, that such duties shall be regularly performed
     in or from an office of the Employer in the greater  Indianapolis  area, as
     directed by Employer.  Employee  agrees to abide by all by-laws,  policies,
     practices, procedures, and rules of Employer.

     Employee  shall devote all of his  professional  time,  efforts,  skill and
     ability to the business of Employer, and shall not, during the Term of this
     Agreement,  be engaged in any other business activity,  whether or not such
     business activity is pursued for gain, profit or other pecuniary advantage,
     unless  Employee has obtained the prior written  approval of Employer;  but
     this shall not be construed  as  preventing  Employee  from  investing  his
     assets in such form or manner as will not require any  services on the part
     of Employee in the  operation of the affairs of the companies in which such
     investments are made. Further,  this Paragraph 3 shall not prevent Employee
     from participating in charitable or other not-for-profit activities as long
     as such  activities do not materially  interfere with  Employee's  work for
     Employer.

4.   Business Opportunities.

     Employee  will  take no  action  that  deprives  Employer  of any  business
     opportunities  within the scope of Employee's  existing  duties and, should
     Employee  be offered or become  aware of any such  opportunities,  Employee
     shall  advise  Employer in writing,  and  Employer  shall have the right of
     first refusal before Employee pursues such opportunity.
<page>
5.   Compensation and Benefits.

     Employer shall compensate  Employee for services  performed during the Term
     of this Agreement as follows:

     A.   Annual  Salary.  Employer  shall pay Employee a total Annual Salary of
          One Hundred  Eighty-Eight  Thousand and 00/100  Dollars  ($188,000.00)
          (minus all applicable deductions and withholdings,  including federal,
          state,  and  local  taxes,  and  FICA),  payable  in  accordance  with
          Employer's  normal payroll  policies.  At least annually,  if not more
          often, Employer shall review and may increase Employee's Annual Salary
          as Employer determines to be reasonable and appropriate.

     B.   Employee's  Bonus.  In addition to his Annual Salary,  Employee may be
          paid an Employee Bonus in the sole discretion of Employer.

     C.   Automobile  Allowance.  Employer  shall pay Employee  Four Hundred and
          00/100 Dollars  ($400.00) per month,  less applicable  withholdings to
          compensate  him for the  business  use of his  automobile.  Employee's
          automobile  shall  otherwise  be  owned,  maintained  and  insured  by
          Employee at his sole expense.

     D.   Other  Benefits.  Employee  shall be  entitled  to all other  benefits
          otherwise   provided  to  full-time   employees  of  Employer  and  in
          accordance with Employer's policies. The terms and conditions on which
          Employer  shall  provide  benefits  to  Employee  are  the  same as it
          provides  such  benefits  to its other  management  employees  holding
          positions similar to that of Employee. Employee understands and agrees
          that all  benefits are subject to change from time to time at the sole
          discretion of Employer.

     E.   Stock Options / Restricted  Shares.  Pursuant to the Merger Agreement,
          as defined in  Paragraph  19,  Employee is to be  provided  with 6,400
          restricted  shares or 24,000 stock options or a  combination  of both.
          Employer  will take all steps  necessary to confirm that such forms of
          deferred  compensation  are  promptly  awarded to  Employee  after the
          execution  of  this   Agreement   based  upon  terms  and   conditions
          substantially  similar to those  included  with  awards  made to other
          management  employees  holding  positions  similar to that of Employee
          with Employer or any affiliate of First Merchants Corporation.

6.   Expense Reimbursement.

     Employer shall reimburse Employee for all reasonable out-of-pocket expenses
     that are incurred by Employee in providing services to Employer  hereunder,
     so  long  as  Employee  provides  Employer  with  reasonable  documentation
     necessary to support such expenses. All expense reimbursement shall be paid
     to Employee  consistent with Employer's  expense  reimbursement  policy, in
     effect from time to time.
<page>
7.   Confidential Information and Return of Property.

     Employee  acknowledges  that in the course of his employment with Employer,
     he will occupy a position of trust and  confidence  and will have access to
     and may develop  Confidential  Information of actual or potential value to,
     or  otherwise  useful  to,  Employer.   "Confidential   Information"  means
     information  that  the  Employer  owns  or  possesses,  that  it uses or is
     potentially useful in its business, that it treats as proprietary,  private
     or confidential,  and that is not generally known to the public, including,
     but not limited to, trade  secrets (as defined by the Indiana Trade Secrets
     Act,  Ind.  Code sec.  24-2-3-1,  et.  seq.),  information  relating to the
     Employer's business plans, financial condition,  operating and other costs,
     sales,  pricing,  marketing,  ideas,  research  records,  plans for service
     improvements  and  development,  lists of  actual or  potential  customers,
     actual and potential  customer usage and  requirements,  customer  records,
     trade secrets, and any other information which derives independent economic
     value,  either actual or potential.  Information  supplied to Employee from
     outside sources will also be presumed to be Confidential Information unless
     and until Employer designates it otherwise.

     Employee agrees to use Confidential Information solely in the course of his
     duties  as an  employee  of  Employer  and  in  furtherance  of  Employer's
     business.   Employee  hereby  further  agrees  that  the   above-referenced
     information will be kept  confidential at all times during the Term of this
     Agreement and  thereafter,  that he will not disclose or communicate to any
     third party any of the  Confidential  Information  and will not make use of
     the Confidential  Information on his own behalf or on the behalf of a third
     party.

     Employee agrees that all  Confidential  Information is and shall remain the
     exclusive property of Employer. Employee agrees to return to Employer on or
     before  Employee's  termination  of  employment  with Employer all Employer
     property,  information and documents, including and without limitation, all
     reports, files, memoranda, records, software, hardware, credit cards, keys,
     computer  access  codes  or  disks,  instruction  or  operational  manuals,
     handbooks or manuals,  written  financial  information,  business  plans or
     other physical and personal property which Employee received or prepared or
     helped  prepare  in  connection  with his  employment  with  Employer;  and
     Employee   agrees  that  he  will  not  retain  any   copies,   duplicates,
     reproductions or excerpts thereof.

     This Paragraph 7 shall survive the termination of this Agreement.

8.   Non-Solicitation.

     A.   Customers.  Employee  shall not,  at any time during the Term or for a
          period  of  one  (1)  year  thereafter,  directly  or  indirectly,  on
          Employee's  own behalf or for any other person,  firm,  corporation or
          other  business  entity:  (1)  solicit,  seek  to  obtain,  divert  or
          otherwise  attempt  to take away any of the  banking  or  bank-related
          service business of any of Employer's customers;  (2) provide services
          to or accept  the  business  of any of  Employer's  customers  for the
          banking or bank-related  service business offered by Employer;  or (3)
          request or advise any of Employer's  customers to  terminate,  reduce,
          limit or  otherwise  change  their  banking  or  bank-related  service
          business  relationship  with  Employer.  For  purposes of this Section
          8.A.,  "Employer's   customers"  shall  mean  those  persons,   firms,
          corporations and other business entities who are customers of Employer
          at the time of Employee's  termination of employment  with Employer or
          who were  customers of Employer at any time during the two year period
          immediately  preceding the  termination of Employee's  employment with
          Employer,  whether  or not  Employee  had  direct  contact  with  such
          customers on behalf of Employer.
<page>
     B.   Employees.  Employee  shall not,  at any time during the Term or for a
          period  of  one  (1)  year  thereafter,  directly  or  indirectly,  on
          Employee's  own behalf or for any other person,  firm,  corporation or
          other business entity, solicit,  induce, request, advise, or otherwise
          attempt to take away or to influence  any of  Employer's  employees to
          terminate his or her employment with Employer.

     C.   Exceptions.  If: (a) Employer terminates this Agreement without Cause,
          as set  forth in  Paragraph  10(D);  or (b)  Employee  terminates  the
          Agreement  for Good  Reason,  as  provided  in  Paragraph  10(C),  the
          foregoing Customers and Employees provisions of this Paragraph 8 shall
          only apply for the shorter of: (i) one (1) year following  termination
          of this Agreement or (ii) the remaining  portion of the Term (prior to
          termination) for which Employee is provided the lump sum payment under
          Paragraph 10D or 10(C). If the Agreement is not terminated, but rather
          expires  as  provided  in  Paragraph  2  at  the   conclusion  of  the
          twenty-four (24) month period,  the foregoing  Customers and Employees
          provisions  of  this   Paragraph  8  shall  expire   contemporaneously
          therewith.

9.   Breach of Agreement.

     A.   Employee  acknowledges  that any breach of  Paragraphs  7 or 8 of this
          Agreement,  by Employee may cause  irreparable  damage to Employer and
          that the legal  remedies  available  to Employer  will be  inadequate.
          Therefore,  in the  event  of  any  threatened  or  actual  breach  of
          Paragraphs 7 or 8 of this Agreement by Employee,  Employee agrees that
          Employer  shall be entitled to specific  enforcement of this Agreement
          through  injunctive  or other  equitable  relief in  addition to legal
          remedies,  without the need for posting bond. If Employee is found, by
          a court of competent  jurisdiction,  to have breached any of the terms
          of  Paragraphs  7 or 8 of  this  Agreement,  Employee  agrees  to  pay
          Employer  reasonable  attorney's  fees and costs  incurred  in seeking
          relief from Employee's  breach of Paragraphs 7 or 8 of this Agreement.
          If a court of  competent  jurisdiction  declines  to find a breach  by
          Employee of  Paragraphs 7 or 8 has  occurred,  Employer  agrees to pay
          Employee  reasonable  attorney's  fees and costs Employee  incurred in
          responding to Employer's request for relief.

          Employee and Employer hereby submit to the  jurisdiction  and venue of
          the Delaware  County,  Indiana  Courts and the United States  District
          Court for the  Southern  District of Indiana,  as  applicable,  in any
          cause of action to enforce the terms and conditions of Paragraphs 7 or
          8 of this Agreement.
<page>
     B.   Employee and Employer  hereby  agree that any claim,  controversy,  or
          dispute  arising out of or relating  to this  Agreement  or the breach
          thereof,  except those identified in Paragraph 9(A) of this Agreement,
          shall be settled by binding  arbitration in Delaware County,  Indiana.
          Such  arbitration  shall be conducted in accordance  with the rules of
          the American Arbitration Association, then in effect. Each party shall
          bear  their  own  attorney's  fees  and  costs  in  such   proceeding.
          Arbitration  shall be the sole and exclusive  method of resolving such
          claims, controversies, or disputes under this Agreement.

     C.   This Paragraph 9 shall survive the termination of this Agreement.

10.  Termination.

     A.   Termination  Due to Death.  In the  event of  Employee's  death,  this
          Agreement shall terminate as of the date of Employee's  death. If this
          Agreement  is  terminated  because  of  Employee's  death,  Employee's
          benefits  shall  be  determined  in  accordance  with  the  survivor's
          benefits,  insurance,  and other applicable programs of Employer, then
          in effect. Upon Employee's death, Employer's obligations to compensate
          Employee under Paragraph 5 of this Agreement shall immediately expire;
          provided,  however,  that  within  forty-five  (45)  business  days of
          Employee's death, Employer shall pay to Employee's estate that portion
          of his Annual Salary and Bonus as provided in Paragraphs 5(A) and 5(B)
          of this  Agreement  that shall have been  earned  through  the date of
          Employee's  death,  but not yet paid.  Except as  otherwise  set forth
          herein or as  otherwise  required by  applicable  law,  following  the
          termination  date  established   pursuant  to  this  Paragraph  10(A),
          Employer  and  Employee   (including   Employee's  heirs,   executors,
          administrators,  and personal  representatives)  shall have no further
          obligations to each other under this Agreement.

     B.   Termination  Due  to  Disability.  In the  event  Employee  suffers  a
          Disability,  as defined herein,  during the Term of Employment and is,
          therefore,  unable to perform the duties required by the Agreement for
          more than ninety (90) calendar days during any consecutive twelve (12)
          month  period,  Employer  shall  have  the  right  to  terminate  this
          Agreement and Employee's  employment.  Employer shall deliver  written
          notice to Employee of Employer's  intent to terminate  this  Agreement
          pursuant  to this  Paragraph  10(B) and  specifying  in such  notice a
          termination  date not less than  thirty  (30) days after the giving of
          the notice ("Disability Notice Period"). This Agreement and Employee's
          employment shall terminate at the close of business on the last day of
          the Disability Notice Period.

          If this  Agreement is  terminated  because of  Employee's  Disability,
          Employee  shall be  entitled  to  receive  any  applicable  disability
          insurance benefits as allowed under Paragraph 5 (D) of this Agreement.
          Upon  termination of this Agreement  pursuant to this Paragraph 10(B),
          Employer's  obligations to compensate  Employee  under  Paragraph 5 of
          this Agreement  shall  immediately  expire;  provided,  however,  that
          within  forty-five  (45) business days after the  termination  of this
          Agreement,  Employer  shall pay to Employee that portion of his Annual
          Salary  and  Bonus as  provided  in  Paragraphs  5(A) and 5(B) of this
          Agreement  that shall have been earned through the  termination  date,
          but not yet paid. Except as otherwise set forth herein or as otherwise
          required by applicable law, following the termination date established
          pursuant to this Paragraph 10(B),  Employer and Employee shall have no
          further obligations to each other under this Agreement.
<page>
          For purposes of this Agreement only, the term "Disability" shall mean,
          the inability of Employee,  because of injury,  illness,  disease,  or
          bodily  or  mental   infirmity,   to  engage  in  the  performance  of
          substantially  all of the duties  required by this  Agreement  with or
          without a reasonable  accommodation.  Employer  shall  reasonably  and
          fairly  determine such Disability upon receipt of, and in reliance on,
          medical  advice from a licensed  physician or physicians  qualified to
          give professional medical advice.

     C.   Termination by Employee.  Employee may terminate this Agreement at any
          time,  with or without Good  Reason,  by  providing  Employer  written
          notice of his intent to  terminate  this  Agreement  pursuant  to this
          Paragraph  10(C) and specifying in such notice a termination  date not
          less than thirty (30) days after the giving of the notice ("Employee's
          Notice  Period").  This  Agreement  and  Employee's  employment  shall
          terminate  at the  close of  business  on the  last day of  Employee's
          Notice Period.

          For purposes of this Paragraph  10(C),  "Good Reason" shall be defined
          as: (i) any  action by  Employer  to remove  Employee  as Senior  Vice
          President of Employer, except for promotions, if any, and except where
          Employer  properly  acts to remove  Employee  for Cause as  defined in
          Paragraph  10(D)  below,  (ii) any action by  Employer  to  materially
          limit, increase or modify Employee's duties and/or authority as Senior
          Vice  President  of Employer or to  otherwise  change the regular work
          location of Employee outside of the greater  Indianapolis  area, (iii)
          any failure of Employer to obtain the  assumption of the obligation to
          perform  this  Agreement by any  successor  of  Employer,  or (iv) any
          material  breach by Employer of a term,  condition or covenant of this
          Agreement.

          If Employee  terminates  this  Agreement  pursuant  to this  Paragraph
          10(C),  Employee  shall  immediately  upon  the  termination  of  this
          Agreement  forfeit all rights and benefits to which he would otherwise
          have been  entitled  under this  Agreement;  provided,  however,  that
          within  fifteen  (15)  business  days  after the  termination  of this
          Agreement pursuant to this Paragraph 10(C),

          1.   If termination by Employee is without Good Reason, Employer shall
               pay to Employee  that portion of his Annual Salary as provided in
               Paragraph  5(A) of this  Agreement  that shall  have been  earned
               through the termination date, but not yet paid; or

          2.   If  termination  by Employee is with Good Reason,  Employer shall
               pay to Employee a lump sum payment equal to remaining  portion of
               Employee's  Annual  Salary as provided in Paragraph  5(A) for the
               Term then in effect,  plus that  portion of  Employee's  Bonus as
               provided in Paragraph 5(B) of this Agreement that shall have been
               earned through the termination date, but not yet paid.
<page>
               Except as otherwise set forth herein or as otherwise  required by
               applicable  law,   following  the  termination  date  established
               pursuant to this  Paragraph  10(C),  Employer and Employee  shall
               have no further obligations to each other under this Agreement.

     D.   Termination by Employer  Without Cause. At any time during the Term of
          Employment,   Employer  may  terminate  this  Agreement  (and,   thus,
          terminate Employee's  Employment) for any reason by providing Employee
          written notice of its intent to terminate  this Agreement  pursuant to
          this Paragraph 10(D) and specifying in such notice a termination  date
          not less  than  thirty  (30)  days  after  the  giving  of the  notice
          ("Employer's Notice Period"). This Agreement and Employee's employment
          shall terminate at the close of business on the last day of Employer's
          Notice Period.

          If this  Agreement is  terminated  pursuant to this  Paragraph  10(D),
          Employee  shall  immediately  upon the  termination  of this Agreement
          forfeit all rights and benefits to which he would  otherwise have been
          entitled under this Agreement;  provided, however, that within fifteen
          (15) business days after the termination of this Agreement pursuant to
          this  Paragraph  10(D),  Employer  shall  pay to  Employee  a lump sum
          payment  equal to remaining  portion of  Employee's  Annual  Salary as
          provided  in  Paragraph  5(A) for the Term then in  effect,  plus that
          portion of  Employee's  Bonus as  provided in  Paragraph  5(B) of this
          Agreement  that shall have been earned through the  termination  date,
          but not yet paid. Except as otherwise set forth herein or as otherwise
          required by applicable law, following the termination date established
          pursuant to this Paragraph 10(D),  Employer and Employee shall have no
          further obligations to each other under this Agreement.

     E.   Termination  by Employer  With  Cause.  At any time during the Term of
          Employment,  Employer may  terminate  this  Agreement  and  Employee's
          Employment  for  "Cause." The term "Cause" as used herein shall mean a
          reasonable determination by Employer that Employee:

          1.   Engaged in willful and continued failure to perform substantially
               Employee's  duties with Employer if such failure  continues for a
               period of thirty  (30) days after  Employer  delivers to Employee
               written   demand  for   substantial   performance,   specifically
               identifying  the manner in which  Employee has not  substantially
               performed his duties;

          2.   Engaged  in  unauthorized  conduct  and  behavior  that  has  the
               likelihood  of  exposing   Employer  to  material   liability  or
               otherwise   significantly    jeopardizing   Employer's   business
               interests;

          3.   Has  been  convicted  of  any  crime  constituting  a  felony  or
               involving moral turpitude or controlled substance;
<page>
          4.   Materially breached any term or condition of this Agreement; or

          5.   As otherwise defined in this Agreement.

               Upon the occurrence of any of the foregoing, Employer may provide
               Employee written notice of its intent to terminate this Agreement
               pursuant  to  this   Paragraph   10(E)  and  this  Agreement  and
               Employee's employment shall terminate at the close of business on
               the date on which Employer provides such notice.

               If this Agreement is terminated pursuant to this Paragraph 10(E),
               Employee shall immediately upon the termination of this Agreement
               forfeit all rights and benefits to which he would  otherwise have
               been  entitled  under this  Agreement;  provided,  however,  that
               Employer  shall pay to Employee  in  accordance  with  Employer's
               normal  payroll  practices,  that  portion of  Employee's  Annual
               Salary as provided in Paragraph 5(A) of this Agreement that shall
               have  been  earned  through  the  termination   date.  Except  as
               otherwise set forth herein or as otherwise required by applicable
               law, following the termination date established  pursuant to this
               Paragraph  10(E),  Employer  and  Employee  shall have no further
               obligations to each other under this Agreement.

     F.   Exception to Loss of Rights and Benefits. Notwithstanding any contrary
          provisions  contained  herein,  termination  of this Agreement for any
          reason shall not  otherwise  terminate the rights and benefits held by
          Employee under any separate  written  agreement  between  Employee and
          Employer or any affiliate of First Merchants  Corporation,  including,
          but not limited to, Employee's rights and benefits under any change in
          control  agreement,  stock  options,  restricted  share awards,  other
          deferred compensation agreements, and the Merger Agreement, as defined
          in Paragraph 19.

11.  Indemnification of Employee.

     Employer  shall  indemnify  Employee to the  fullest  extent  permitted  by
     Employer's  articles of  incorporation,  by-laws and applicable  federal or
     state  laws for all  amounts  (including,  without  limitation,  judgments,
     fines, settlement payments,  expenses and attorneys' fees) incurred or paid
     by  Employee  in  connection  with  any  action,  suit,   investigation  or
     proceeding  arising out of or relating  to the  performance  by Employee or
     services for, or the acting by Employee as a director,  officer or employee
     of, Employer,  any subsidiary of Employer or any other person or enterprise
     at Employer's  request.  Expenses,  including but not limited to attorneys'
     fees  and   disbursements,   incurred  in  defending   any  action,   suit,
     investigation  or  proceeding,  for  which  Employee  may  be  entitled  to
     indemnification  under this  Paragraph  11 upon final  disposition  of such
     action,  shall be paid by Employer in advance of the final disposition,  to
     the maximum extent permitted by applicable laws and regulations;  provided,
     however,  that prior to making any such payments  Employer shall receive an
     undertaking  by or on behalf of Employee to repay such  amounts if it shall
     ultimately be determined that he is not entitled to indemnification.
<page>
12.  Suspension.

     If Employee is suspended and/or  temporarily  prohibited from participating
     in the  conduct of  Employer's  affairs by a notice  served  under  Section
     8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.  Section
     1818(e)(3) and (g)(1)),  Employer's  obligations under this Agreement shall
     be  suspended  as of the date of  service,  unless  stayed  by  appropriate
     proceedings. If the charges in the notice are dismissed, Employer shall (i)
     pay Employee all or part of the compensation withheld while its obligations
     under this  Agreement  were  suspended  and (ii)  reinstate (in whole or in
     part) any of its obligations which were suspended.


13.  Removal or Prohibition.

     If Employee is removed and/or permanently  prohibited from participating in
     the conduct of Employer's  affairs by an order issued under section 8(e)(4)
     or   (g)(1)   of   the   Federal   Deposit   Insurance   Act   (12   U.S.C.
     Section 1818(e)(4)  or (g)(1)),  all  obligations  of  Employer  under this
     Agreement  shall  terminate as of the effective date of the order and shall
     be considered a termination of Employee by Employer for "Cause" pursuant to
     Paragraph 10(E) of this Agreement.

14.  Default of Employer.

     If Employer  is in default  (as  defined in section  3(x)(1) of the Federal
     Deposit   Insurance  Act),  all  obligations  under  this  Agreement  shall
     terminate as of the date of default,  and shall be considered a termination
     of Employee by Employer  for "Cause"  pursuant to  Paragraph  10(E) of this
     Agreement.

15.  Termination by Regulatory Action.

     All obligations under this Agreement may be terminated except to the extent
     determined  that the  continuation  of the  Agreement is necessary  for the
     continued  operation of Employer:  (i) by the Office of the  Comptroller of
     the Currency (the "Controller"),  at the time the Federal Deposit Insurance
     Corporation  enters into an agreement to provide assistance to or on behalf
     of Employer  under the authority  contained in Section 13(c) of the Federal
     Deposit Insurance Act; or (ii) by the Controller at the time the Controller
     approves a supervisory  merger to resolve  problems related to operation of
     Employer  or when  Employer  is  determined  to be in an unsafe and unsound
     condition.

16.  Conflict with Regulations.

     If any of the  provisions in this  Agreement  shall conflict with 12 C.F.R.
     Section 30,  Appendix A,  or the Controller policies adopted thereunder (as
     the  same  may be  amended  from  time to time)  the  requirements  of such
     regulation  shall  supersede  any  contrary  provisions  herein  and  shall
     prevail.
<page>
17.  Successors and Assigns.

     This  Agreement  shall be  binding  upon and  inure to the  benefit  of the
     successors and assigns of Employer,  and unless clearly  inapplicable,  all
     references  herein  to  Employer  shall  be  deemed  to  include  any  such
     successor.  In addition,  this Agreement shall be binding upon and inure to
     the benefit of Employee and his heirs, executors, legal representatives and
     assigns; provided,  however, that the obligations of Employee hereunder are
     personal  in nature  and may not be  delegated  without  the prior  written
     approval of Employer.

18.  Choice of Law.

     This Agreement shall be interpreted, construed, and governed by the laws of
     the State of Indiana, regardless of the place of execution or performance.

19.  Entire Agreement

     This  Agreement  contains the entire  agreement of the parties and replaces
     and  supersedes  all  employment  agreements  between  Employee and Lincoln
     Bancorp or Lincoln Bank, including, but not limited to that certain Amended
     and Restated  Employment  Agreement between Lincoln Bank and Employee dated
     October  1,  2007  and  effective  as of  January  1,  2005  (the  "Lincoln
     Agreements").  Notwithstanding  the  foregoing,  the obligation to make the
     lump sum  payment  upon  Change in  Control,  as  provided  in the  Lincoln
     Agreements  and  reaffirmed in the Agreement of  Reorganization  and Merger
     Between First  Merchants  Corporation and Lincoln Bancorp entered into this
     same date (the "Merger  Agreement"),  shall not be  superseded or replaced,
     but shall continue to be in full force and effect.

     This  Agreement  may not be changed  orally,  but only by an  agreement  in
     writing signed by the party against whom enforcement of any waiver, change,
     modification, extension, or discharge is sought.

     This Agreement may be executed in multiple counterparts,  each of which (or
     a facsimile thereof) shall be deemed an original, but all of which shall be
     considered a single instrument.

20.  Severability.

     If any  provision of this  Agreement  shall be held by a court of competent
     jurisdiction  to be  contrary  to  law  or  public  policy,  the  remaining
     provisions shall remain in full force and effect.

21.  Notice.

     Any notices,  requests,  demands, or other  communications  provided for by
     this  Agreement  shall be  sufficient if in writing and if (i) delivered by
     hand  to the  other  party;  (ii)  sent  by  facsimile  communication  with
     appropriate confirmation of delivery; (iii) sent by registered or certified
     United States Mail, return receipt requested,  with all postage prepaid; or
     (iv) sent by  recognized  commercial  express  courier  services,  with all
     delivery charges prepaid; and addressed as follows:
<page>
                  If to Employer:
                  First Merchants Bank of Central Indiana, National Association
                  _________________________
                  _________________________
                  _________________________
                  _________________________

                  If to Employee:
                  John B. Ditmars
                  _________________________
                  _________________________

     or to such other  address as either party hereto may have  furnished to the
     other  party in writing in  accordance  herewith,  except  that  notices of
     change of address shall be effective only upon receipt.

22.  Successor.

     Employer  shall  require any  successor  (whether  direct or  indirect,  by
     purchase,  merger,  consolidation or otherwise) to all or substantially all
     of the business or assets of Employer,  by agreement in form and  substance
     satisfactory  to Employee  to  expressly  assume and agree to perform  this
     Agreement in the same manner and to the same extent that Employer  would be
     required to perform it if no such  succession  had taken place.  Failure of
     Employer to obtain such agreement  prior to the  effectiveness  of any such
     succession  shall be a material  intentional  breach of this  Agreement and
     shall  entitle  Employee  to  terminate  this  Agreement  with Good  Reason
     pursuant to Paragraph 10(C) herein.  Any successor  assuming this Agreement
     shall be  subject  to the  obligations  of this  Paragraph  22,  similar to
     Employer.

23.  Acknowledgement.

     Employee represents and acknowledges that Employee has had adequate time to
     review this  Agreement,  Employee has had the  opportunity to ask questions
     and receive answers from Employer  regarding this  Agreement,  and Employee
     has had the  opportunity  to  consult  with  legal  advisors  of his choice
     concerning the terms and conditions of this Agreement.

     This  Agreement is intended to supersede and replace all prior  agreements,
     understandings  and  arrangements  between or among Employer,  or any agent
     thereof, and the Employee, or any agent thereof, relating to the employment
     of Employee.


        [THIS SPACE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE TO FOLLOW].
<page>
     IN WITNESS  WHEREOF,  the parties  hereto have  voluntarily  executed  this
Agreement as of the day and year first above written.

"EMPLOYER"                                   "EMPLOYEE"
FIRST MERCHANTS BANK OF                      JOHN B. DITMARS
   CENTRAL INDIANA,
   NATIONAL ASSOCIATION


By:___________________________________       ___________________________________
                                               John B. Ditmars
 _____________________________________
(Printed)




The  undersigned,  First Merchants  Corporation,  sole  shareholder of Employer,
agrees that if it shall be determined  for any reason that any obligation on the
part of Employer to continue to make any  payments  due under this  Agreement to
Employee is unenforceable for any reason, First Merchants  Corporation agrees to
honor the terms of this  Agreement  and  continue to make any such  payments due
hereunder to Employee pursuant to the terms of this Agreement.


                                          FIRST MERCHANTS CORPORATION


                                          _____________________________________
                                          Michael C. Rechin, President and
                                          Chief Executive Officer



<page>

                                  EXHIBIT 10.1
                                  News Release
                                     dated
                               September 3, 2008


N/E/W/S  R/E/L/E/A/S/E
September 3, 2008

For immediate release

For further information, contact:
Mark Hardwick, Executive VP and Chief Financial Officer
First Merchants Corporation                                        765-751-1857

Jerry R. Engle, President and CEO
Lincoln Bancorp                                                    317-839-6539

First Merchants  Corporation  Announces the Signing of a Definitive Agreement to
Acquire Lincoln Bancorp

(Muncie,  Ind.  and  Plainfield,   Ind.,  September  3,  2008)  First  Merchants
Corporation  (NASDAQ:  FRME) and Lincoln Bancorp (NASDAQ:  LNCB) today announced
they have executed a definitive  agreement for First  Merchants  Corporation  to
acquire Lincoln Bancorp through a merger of Lincoln into First Merchants.

First  Merchants  ($3.8  billion) and Lincoln ($890  million) will have combined
assets of $4.7 billion and create the largest financial holding company based in
Central Indiana.  The combined  company will have eighty-two  banking offices in
twenty-three  Indiana and three Ohio counties, a trust company with assets under
management in excess of $1.7 billion, and a multi-line insurance agency.

Mike Rechin,  President and Chief Executive  Officer of First  Merchants,  said,
"Lincoln  Bancorp has a long  history of  deep-rooted  commitment  to  community
banking,  and will become the newest member of the First Merchants  family. As a
company that has been in business  since 1884,  its success has been tied to the
high  value it places  on  relationships  with its  customers  and  communities.
Lincoln's  franchise  fits well with First  Merchants'  strategic  direction and
specifically  its presence in Johnson and Hendricks  counties,  two of Indiana's
fastest growing markets.  With convenience as an intended benefit,  customers in
the Indianapolis  market area may now enjoy access to 30 First Merchants Banking
Centers.  The partnership  between Lincoln and First Merchants  provides Indiana
business  owners  and  consumers  with the  opportunity  to bank with an Indiana
company."

"Our expectation is that this  combination will be mutually  beneficial to First
Merchants and Lincoln  shareholders.  We anticipate  modest dilution to Earnings
Per  Share in 2009,  with  accretive  EPS  growth  in 2010 and  beyond,  through
identified transaction synergies," Rechin stated.
<page>
"First Merchants shares our deep commitment to community  banking.  Our combined
strength will provide the opportunity to offer enhanced products and services to
our customers," stated Jerry R. Engle,  President and Chief Executive Officer of
Lincoln Bancorp.

The merger agreement  provides that  shareholders of Lincoln will have the right
to elect to receive  cash in the  approximate  amount of $15.76  per  share,  or
0.7004 shares of First  Merchants  common stock for each share of Lincoln common
stock owned by them,  subject to proration as a result of a maximum limit on the
aggregate  number of shares  issued  or cash paid to all  Lincoln  shareholders.
Based on First Merchants' September 2, 2008 closing price, the transaction value
is estimated  between $74 million and $77 million  depending on the elections of
shareholders.

The  transaction  is expected  to be  completed  in the fourth  quarter of 2008,
subject to the affirmative vote of Lincoln  shareholders,  regulatory approvals,
and other customary conditions.

The  corporation  further  announced  that Michael J. Stewart,  First  Merchants
Corporation's  Chief Banking Officer,  will also serve as President of the newly
consolidated First Merchants Bank of Central Indiana. Mike Baker and Jerry Engle
will serve as regional  presidents,  with continued  commitment to strengthening
their local market impact.

Sandler O'Neill & Partners,  L.P. served as financial advisor to Lincoln Bancorp
and  rendered a fairness  opinion to the  company's  board of  directors in this
transaction.  Lincoln  Bancorp's  legal  advisor was Bose  McKinney & Evans LLP.
First Merchants Corporation's legal advisor was Bingham McHale LLP.

First Merchants  Corporation is a financial  services holding company focused on
building deep lifelong client  relationships and providing  maximum  shareholder
value.

First Merchants  Corporation  operates four bank subsidiaries  including,  First
Merchants Bank, First Merchants Bank of Central Indiana,  Lafayette Bank & Trust
Company,  and Commerce  National Bank in Columbus,  Ohio.  First Merchants Trust
Company unites the trust and asset  management  services of all affiliate  banks
and is one of Indiana's  largest trust companies.  The Corporation also includes
First  Merchants  Insurance  Services  and is  majority  owner of Indiana  Title
Insurance Company.

Lincoln Bancorp and Lincoln Bank are  headquartered in Plainfield,  Indiana with
additional offices in Avon, Bargersville, Brownsburg, Crawfordsville, Frankfort,
Franklin, Greenwood, Mooresville, Morgantown, Nashville and Trafalgar.  The Bank
also has 2 loan production offices located in Carmel and Greenwood, Indiana.
<page>
Forward-Looking Statements

This  document  contains   forward-looking   statements  about  First  Merchants
Corporation,  Lincoln Bancorp,  the combined  company,  and the proposed merger,
which are within  the safe  harbor  provisions  for  forward-looking  statements
contained  in the  Private  Securities  Litigation  Reform  Act of  1995.  These
forward-looking  statements  include  statements  with  respect to the  expected
timing,  completion  and  effects  of the  proposed  merger  and  the  financial
condition,  results of operations,  plans,  objectives,  future  performance and
business  of  First  Merchants,  Lincoln  and the  combined  company,  including
statements  preceded  by,  followed  by or that  include  the words  "believes,"
"expects,"   "anticipates"  or  similar   expressions.   These   forward-looking
statements  involve  certain  risks  and  uncertainties.  There  are a number of
important  factors  which could  cause First  Merchants'  and  Lincoln's  actual
results  or the  circumstances  and  timing  of the  proposed  merger  to differ
materially  from those  anticipated  by the  forward-looking  statements.  These
factors  include,  but are not  limited  to:  (1)  competitive  pressures  among
depository  institutions increasing  significantly;  (2) changes in the interest
rate environment reducing interest margins;  (3) prepayment activity,  loan sale
volumes,  charge-offs and loan loss provisions; (4) general economic conditions,
either  nationally  or in the states in which  First  Merchants  and  Lincoln do
business,  become less favorable than expected;  (5) expected synergies and cost
savings  are not  achieved  or  achieved  at a slower  pace than  expected;  (6)
integration  problems or delays;  (7)  legislative  or regulatory  changes which
adversely  affect the  businesses  in which  First  Merchants  and  Lincoln  are
engaged;  (8) changes in the  securities  markets;  (9) the  economic  impact of
terrorist  attacks and similar or related  events;  (10)  receipt of  regulatory
approvals without  unexpected delays or conditions;  (11) retention of customers
and critical  employees;  (12) unanticipated  changes in laws,  regulations,  or
other  industry  standards;  and (13)  those  risk  factors  described  in First
Merchants' and Lincoln's Annual Reports on Form 10-K for the year ended December
31, 2007.

                                      * * *

First  Merchants will be filing a Registration  Statement on Form S-4 concerning
the merger with the  Securities  and  Exchange  Commission  ("SEC"),  which will
include the proxy  statement that will be mailed to Lincoln's  shareholders.  WE
URGE  INVESTORS  TO  READ  THESE  DOCUMENTS   BECAUSE  THEY  CONTAIN   IMPORTANT
INFORMATION. Investors will be able to obtain the documents free of charge, when
filed, at the SEC's website,  www.sec.gov. In addition, documents filed with the
SEC by First  Merchants  will be available  free of charge from the Secretary of
First  Merchants at 200 E. Jackson  Street,  Muncie,  IN 47305,  telephone (765)
747-1500.  Documents  filed with the SEC by Lincoln  will be  available  free of
charge from the Secretary of Lincoln at 905  Southfield  Drive,  Plainfield,  IN
46168,  telephone  (317)  839-6539.  INVESTORS  SHOULD READ THE PROXY  STATEMENT
CAREFULLY BEFORE MAKING A DECISION  CONCERNING THE MERGER.  Copies of all recent
proxy  statements  and annual reports are also available free of charge from the
respective companies by contacting the company secretary.

First  Merchants  and  Lincoln  and their  respective  directors  and  executive
officers  may be deemed to be  participants  in the  solicitation  of proxies to
approve the Merger.  Information  about the participants may be obtained through
the SEC's  website from the  definitive  proxy  statement  filed with the SEC on
March 19,  2008,  with  respect  to First  Merchants  and the  definitive  proxy
statement filed with the SEC on March 13, 2008, with respect to Lincoln.