SCHEDULE 14A

                                 (Rule 14a-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION

                Proxy Statement Pursuant to Section 14(a) of the
               Securities Exchange Act of 1934 (Amendment No.   )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_]  Preliminary Proxy Statement          [_]  Soliciting Material Under Rule
[_]  Confidential, For Use of the              14a-12
     Commission Only (as permitted
     by Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[_]  Definitive Additional Materials




                          First Merchants Corporation
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)


                                 Larry R. Helms
--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)


Payment of Filing Fee (Check the appropriate box):

[X]  No fee required.
[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1)   Title of each class of securities to which transaction applies:

Common Stock
________________________________________________________________________________
2)   Aggregate number of securities to which transaction applies:

________________________________________________________________________________

3)   Per unit price or other underlying value of transaction  computed  pursuant
     to Exchange  Act Rule 0-11 (set forth the amount on which the filing fee is
     calculated and state how it was determined):

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[_]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2)  and identify the filing for which the  offsetting  fee was paid
     previously.  Identify the previous filing by registration statement number,
     or the form or schedule and the date of its filing.

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<PAGE>
                           FIRST MERCHANTS CORPORATION
                             200 EAST JACKSON STREET
                              MUNCIE, INDIANA 47305


                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD APRIL 22, 2004


The annual  meeting of the  shareholders  of First  Merchants  Corporation  (the
"Corporation")  will be held at the Horizon  Convention  Center,  401 South High
Street, Muncie, Indiana 47305, on Thursday, April 22, 2004, at 3:30 p.m. for the
following purposes:

(1)      To elect four directors, to hold office for a term of three years and
         until their successors are duly elected and qualified.

(2)      To act on a proposal to approve the First Merchants Corporation 2004
         Employee Stock Purchase Plan.

(3)      To ratify the appointment of the firm of BKD, LLP as the independent
         public accountants for 2004.

(4)      To transact such other business as may properly come before the
         meeting.

Only those  shareholders of record at the close of business on February 13, 2004
shall be entitled to notice of and to vote at the meeting.


                                              By Order of the Board of Directors


                                              Larry R. Helms
                                              Secretary

Muncie, Indiana
March 5, 2004



                             YOUR VOTE IS IMPORTANT!

        YOU ARE URGED TO SUBMIT YOUR PROXY VIA THE TELEPHONE OR INTERNET,
       OR TO SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED POSTAGE-PAID
        ENVELOPE, AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE VOTED AT
                THE MEETING IN ACCORDANCE WITH YOUR INSTRUCTIONS.



<PAGE>

                                                                   March 5, 2004

                           FIRST MERCHANTS CORPORATION

                               PROXY STATEMENT FOR
                         ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD APRIL 22, 2004

This Proxy  Statement is furnished in connection  with the  solicitation  of the
enclosed proxy by and on behalf of the Board of Directors (the "Board") of First
Merchants  Corporation  (the  "Corporation")  for use at the  annual  meeting of
shareholders of the  Corporation to be held April 22, 2004. The  distribution of
these proxy materials is expected to commence on March 5, 2004.

Please  sign,  date and  return  your  proxy  card or submit  your proxy via the
telephone or Internet as soon as  possible,  so that your shares can be voted at
the  meeting  in  accordance  with  your  instructions.  If you  plan to vote by
telephone or Internet,  you should have your control number,  which is imprinted
on your proxy card, available when you call or access the web page.

         o To vote by telephone, please call toll-free 1-800-PROXIES
         (1-800-776-9437) on a touch-tone telephone and follow the instructions.

         o To vote by Internet, please access the web page "www.voteproxy.com"
         and follow the on-screen instructions.

Similar instructions are included on the enclosed proxy card.

Any shareholder  giving a proxy has the right to revoke it any time before it is
exercised by giving written notice of revocation to the Secretary received prior
to the meeting, by voting again in writing or via the telephone or Internet,  or
by voting in person at the meeting.  The shares  represented  by proxies will be
voted in  accordance  with the  instructions  on the proxies.  In the absence of
specific instructions to the contrary, proxies will be voted for election to the
Board of Directors of all nominees  listed in Item 1 of the proxy,  for approval
of the First  Merchants  Corporation  2004 Employee Stock Purchase Plan, and for
ratification  of the  appointment of BKD, LLP as the  Corporation's  independent
public  accountants  for  2004.  If any  director  nominee  named in this  proxy
statement  shall  become  unable or  declines to serve (an event which the Board
does not  anticipate),  the  persons  named as proxies  will have  discretionary
authority  to vote for a  substitute  nominee  named by the Board,  if the Board
determines to fill such nominee's position.

VOTING SECURITIES

Only  shareholders  of record at the close of business on February 13, 2004 will
be entitled to notice of and to vote at the annual meeting. 18,535,682 shares of
common stock were outstanding and entitled to vote as of February 13, 2004.

Each share of the Corporation's  common stock is entitled to one vote. Directors
are elected by a plurality  of the votes cast by the shares  entitled to vote in
the election at a meeting at which a quorum is present. Shareholders do not have
a right to  cumulate  their  votes  for  directors.  The  affirmative  vote of a
majority  of the shares  present and voting at the meeting in person or by proxy
is required for approval of all items  submitted to the  shareholders  for their
consideration other than the election of directors. The Secretary will count the
votes and announce the results of the voting at the meeting. Abstentions will be
counted  for the purpose of  determining  whether a quorum is present but for no
other purpose. Broker non-votes will not be counted.

<PAGE>

The Corporation's subsidiaries held 1,709,268 shares of the Corporation's common
stock as of  February  13,  2004 in various  fiduciary  capacities,  in regular,
nominee  or  street  name  accounts,  consisting  of 9.22% of the  Corporation's
outstanding shares.  Beneficial ownership of shares so held is disclaimed by the
Corporation.  It is the  practice of the  respective  subsidiaries  when holding
shares as sole trustee or sole executor to vote the shares but, where shares are
held as co-executor or  co-trustee,  approval is obtained from the  co-fiduciary
prior to voting.

ELECTION OF DIRECTORS

Four directors will be elected at the annual meeting.

The  persons  named  below  have been  nominated  for  election  to the Board of
Directors,  with terms expiring as of the 2007 annual  meeting of  shareholders.
All of the nominees are currently members of the Board.
<TABLE>
<CAPTION>

Those persons nominated as directors include:
                                                                                                Director
Name and Age                          Present Occupation                                          Since
------------                          ------------------                                          -----
<S>                                   <C>                                                        <C>

Class I (Terms expire 2007):

Michael L. Cox                        President and Chief Executive Officer of the  Corporation    1984
age 59

Norman M. Johnson                     Chairman of the Board, The Union County National Bank of     1996
age 69                                Liberty ("Union County"), a wholly owned subsidiary of
                                      the Corporation, and retired Executive Vice President of
                                      Stein Roe & Farnham, Investment Counsel


Thomas D. McAuliffe(1)                President and Chief Executive Officer, Commerce National     2003
age 54                                Bank ("Commerce"), a wholly owned subsidiary of the
                                      Corporation

Robert M. Smitson                     Chairman of the Board, Maxon Corporation (Maxon              1982
age 67                                Corporation designs and manufactures specialty industrial
                                      combustion systems and valves.)

Those persons named below continue to serve as directors:

Class II (Terms expire 2005)

Stefan S. Anderson                    Chairman of the Board of the Corporation and First           1982
Age 69                                Merchants Bank, National Association ("First Merchants"),
                                      a wholly owned subsidiary of the Corporation

Frank A. Bracken                      Retired attorney, Bingham McHale LLP                         1994
age 69

Blaine A. Brownell                    CEO, U21pedagogica, Ltd. (U21pedagogica, Ltd. is an          2001
Age 61                                international supplier of quality assurance services to
                                      higher education)
</TABLE>
                                       2
<PAGE>
<TABLE>
<CAPTION>

                                                                                                 Director
Name and Age                          Present Occupation                                          Since
------------                          ------------------                                          -----
<S>                                   <C>                                                        <C>
Thomas B. Clark                       Retired Chairman of the Board, President and Chief           1989
age 58                                Executive Officer, Jarden Corporation (Jarden Corporation
                                      manufactures metal and plastic products.)

Class III (Terms expire 2006)

Roger M. Arwood                       Executive Vice President and Chief Operating Officer of      2000
age 52                                the Corporation

James F. Ault                         Chairman of the Board, The Madison Community Bank,           1999
age 68                                National Association ("Madison"), a wholly owned
                                      subsidiary of the Corporation, and retired executive of
                                      General Motors Corporation

Richard A. Boehning(2)                Attorney, Bennett, Boehning & Clary                          2002
age 66

Barry J. Hudson                       Chairman of the Board, First National Bank of Portland       1999
age 64                                ("First National"), a wholly owned subsidiary of the
                                      Corporation

Robert T. Jeffares(2)                 Retired Executive Vice President and Chief Financial         2002
age 68                                Officer, Great Lakes Chemical Corporation
</TABLE>


(1)      Under an Agreement of Reorganization and Merger between the Corporation
         and CNBC Bancorp, the Board appointed Mr. McAuliffe  as a member of the
         Board on April 15, 2003  and  agreed to  nominate him for election to a
         full  3-year  term  as  a  director  at  the  2004  annual  meeting  of
         shareholders.

 (2)     Under an Agreement of Reorganization and Merger between the Corporation
         and Lafayette Bancorporation, the Board appointed Messrs.  Boehning and
         Jeffares as members of the Board on May 14, 2002 and agreed to nominate
         them for election to full 3-year terms as directors at  the 2003 annual
         meeting of shareholders.

The  occupations  set forth  above have been the  principal  occupations  of the
director-nominees  and  continuing  directors  during the past 5 years except as
follows:

Mr.  Anderson was also  President of the  Corporation  from 1982 to 1998 and CEO
from 1982 to 1999, and he was President of First Merchants from 1979 to 1996 and
CEO from 1979 to 1999.  Mr. Arwood was Executive Vice President and Chief Credit
Officer of Boatmen's  Bank from 1988 until 1997,  when he became  Executive Vice
President, Credit Risk Management, of NationsBank/Bank of America. He joined the
Corporation  and First  Merchants in 2000 and served as Executive Vice President
of the  Corporation  and President and CEO of First Merchants from 2000 to 2002.
He became  Executive Vice President and COO of the Corporation in 2002. Mr. Ault
became  Chairman of the Board of Anderson  Community  Bank when it was formed in
1995,  and he became  Chairman  of the Board of Madison in 1999,  when  Anderson
Community Bank was merged into Pendleton  Banking  Company to form Madison.  Mr.
Bracken  was Of Counsel  with the Bingham  Summers  Welsh & Spilman LLP law firm
from 1994 to 2001.  The firm changed its name to Bingham McHale LLP in 2002. Dr.
Brownell was  Executive  Director of the Center for  International  Programs and
Services at the University of Memphis from 1998 to 2000, and he was President of
Ball State University from 2000 to 2004. He became CEO of U21pedagogica, Ltd. in

                                       3
<PAGE>

2004. Mr. Clark served as President and CEO of Alltrista  Corporation  from 1995
to 2001, and as Chairman of the Board from 2000 to 2001.  Alltrista  Corporation
changed its name to Jarden  Corporation  in 2002. Mr. Cox was President of First
Merchants  from  1996 to 2000  and CEO  from  1999 to  2000.  He has  served  as
President of the  Corporation  since 1998 and as its CEO since 1999.  Mr. Hudson
has served as Chairman  of the Board of First  National  since 1982,  and he was
also President of First National from 1982 to 1998 and CEO from 1982 until 2000.
Mr. Johnson became Chairman of the Board of Union County in 2002.

Mr. Bracken is also a director of Ball Corporation.

MEETINGS OF THE BOARD

The Board of Directors of the  Corporation  held 7 meetings  during 2003. All of
the directors attended at least 75% of the total number of meetings of the Board
and the committees on which they served.

COMPENSATION OF DIRECTORS

The directors of the  Corporation who are employees of the Corporation or one of
its  subsidiaries  received  no  separate  compensation  for their  services  as
directors in 2003,  except that,  for his services as a director and Chairman of
the Board of First National, Mr. Hudson was paid $6,426 in 2003, of which $4,356
was deferred  compensation under an insurance-funded  deferred compensation plan
maintained  by First  National.  The  directors of the  Corporation  who are not
employees  were paid an annual  retainer  of  $7,600  in 2003,  except  that Mr.
Anderson was paid an annual  retainer of $15,000 for his services as Chairman of
the Board of Directors of the  Corporation.  The directors who are not employees
also received $600 for each Board  meeting and $400 for each  committee  meeting
they attended,  except that the Board and committee  chairmen  received $800 and
$600, respectively, for each meeting they attended. Messrs. Anderson and Smitson
also serve as directors of First  Merchants,  for which Mr. Smitson  received an
annual  retainer  of $5,000 in 2003 and Mr.  Anderson,  as Chairman of the First
Merchants Board, received an annual retainer of $10,000. They also received $500
for each First Merchants Board meeting they attended,  except that Mr. Anderson,
as Board  Chairman,  received  $800.  Messrs.  Anderson  and  Smitson  served on
committees of First Merchants and were paid $300 for each committee meeting they
attended,  except that Mr. Smitson, as Chairman of the First Merchants Executive
Committee,  received  $400 per  meeting.  For his  services  as a  director  and
Chairman of the Board of Directors of Madison,  Mr. J. F. Ault was paid $375 for
each Board  meeting  and $50 for each  committee  meeting he  attended  in 2003.
Messrs.  Boehning  and Jeffares  also serve as  directors of Lafayette  Bank and
Trust Company, National Association ("Lafayette"),  a wholly owned subsidiary of
the  Corporation,  for which  they  received  a  retainer  of  $19,800  in 2003.
Lafayette also provided them life insurance coverage in the amount of $6,000 for
these  services.  For his  services as a director  and  Chairman of the Board of
Directors  of Union  County,  Mr.  Johnson  was paid a retainer of $3,800 and an
additional $5,025 for attending Board and committee  meetings during 2003. Union
County also paid him a bonus of $1,324 and provided him life insurance  coverage
in the amount of $30,000 for these services.

On July 1, 2003,  options were granted under the provisions of the Corporation's
1999 Long-term Equity  Incentive Plan to each of the  non-employee  directors to
purchase shares of the  Corporation's  common stock.  Taking into account the 5%
common stock dividend that was distributed on September 12, 2003 to shareholders
of record at the close of business on August 29, 2003,  each option is for 1,157
shares at an option  price of $23.46 per share,  the market price on the date of
the grants.

The Corporation  maintains an unfunded  deferred  compensation  plan which gives
each director an annual  election to defer the receipt of director's  fees.  Any
amounts  reflected in a  director's  account  under the plan are  credited  with
interest at a rate equal to First Merchants'  18-month variable rate IRA account
rate.  Payments  commence  when the  participant  is no longer a director of the
Corporation or First Merchants.  During 2003, one of the Corporation's directors
participated in the plan, deferring fees totaling $13,400.

                                       4
<PAGE>

BOARD INDEPENDENCE

The  Board has  determined  that each of the  director-nominees  and  continuing
directors  is  an  "independent   director,"  as  defined  in  Marketplace  Rule
4200(a)(15) of the Nasdaq Stock Market, Inc. ("Nasdaq"), except for Mr. Cox, the
President  and Chief  Executive  Officer of the  Corporation,  Mr.  Arwood,  the
Executive Vice President and Chief  Operating  Officer of the  Corporation,  Mr.
Hudson,  the Chairman of the Board of First  National,  and Mr.  McAuliffe,  the
President  and Chief  Executive  Officer of Commerce.  All of the members of the
Nominating  and  Governance  Committee,  the  Compensation  and Human  Resources
Committee,  and the Audit Committee are  "independent  directors," as defined in
Nasdaq Marketplace Rule 4200(a)(15).

COMMITTEES OF THE BOARD

Nominating and Governance Committee
-----------------------------------

The  Corporation  has a Nominating and Governance  Committee whose purpose is to
seek to ensure  continuation of the  effectiveness and independence of the Board
of Directors.  The Committee is  responsible  for reviewing the  credentials  of
persons  suggested  as  prospective  directors,  nominating  persons to serve as
directors  and as officers  of the Board of  Directors,  including  the slate of
directors to be elected each year at the annual meeting of shareholders,  making
recommendations  concerning the size and  composition of the Board of Directors,
as well as criteria for Board membership,  making recommendations concerning the
Board's committee  structure and makeup,  providing for continuing  education of
the directors and self-assessment of the Board's  effectiveness,  and overseeing
the  Corporate-wide  Code of Conduct and the Code of Ethics for senior financial
officers of the Corporation.  The Nominating and Governance  Committee's Charter
is  available  in  the  "Corporate   Governance   Disclosure"   section  of  the
Corporation's web site at www.firstmerchants.com.  The members of the Nominating
and  Governance  Committee  are Messrs.  Clark  (Chairman),  Ault,  Boehning and
Smitson.  Mr.  Anderson  serves ex officio on the  Committee  as Chairman of the
Board of the  Corporation.  The Nominating and Governance  Committee met 2 times
during 2003.

Identifying and Evaluating Nominees for Directors

The Nominating and Governance Committee is presently developing written criteria
for  membership  on the  Board  of  Directors  but has not yet  finalized  these
criteria.  The Committee's process for identifying and evaluating nominees is as
follows:  (a) for incumbent  directors whose terms are expiring,  it reviews the
quality of their  prior  service to the  Corporation,  including  the nature and
extent  of  their  participation  in  the  Corporation's  governance  and  their
contributions of management and financial  expertise and experience to the Board
and the Corporation;  and (b) for new director candidates,  in addition to their
expertise, experience, reputation and stature, it considers whether their skills
are complementary to those of existing Board members,  whether they will fulfill
the Board's needs for management,  financial,  technological or other expertise,
and whether they are likely to have sufficient  time to responsibly  perform all
of their duties as directors.  The Nominating and Governance Committee considers
candidates coming to its attention through current Board members,  search firms,
shareholders and other persons.  Suggestions for nominees from  shareholders are
evaluated in the same manner as other nominees. Any shareholder nominations must
be submitted in writing and should include the nominee's name and qualifications
and be addressed to the Secretary, First Merchants Corporation, 200 East Jackson
Street,  Muncie,  Indiana  47305.  There are no  nominees  for  election  to the
Corporation's Board of Directors at the 2004 annual shareholders'  meeting other
than directors standing for re-election.

                                       5
<PAGE>

Compensation and Human Resources Committee
------------------------------------------

The Corporation has a Compensation and Human Resources Committee whose functions
are: (a) to review and approve the  compensation  and benefits to be paid to the
executive  officers and senior  management  employees of the Corporation and the
chief executive officers of its subsidiaries,  and (b) to review and approve the
compensation  and  benefits  to be paid to the  executive  officers  and  senior
management employees and the compensation ranges and benefits for other officers
and employees of the Corporation's  subsidiaries.  The authority to periodically
adjust the compensation and benefits of employees, other than executive officers
and senior management of the Corporation and the chief executive officers of its
subsidiaries,  has  been  delegated  by the  Committee  to the  chief  executive
officers of the subsidiaries.  The Compensation and Human Resources Committee is
responsible for the administration of the Corporation's  incentive  compensation
and stock plans.  The members of the Committee are Messrs.  Smitson  (Chairman),
Anderson, Bracken, Clark and Johnson. The Committee met 3 times during 2003.

Compensation and Human Resources Committee Interlocks and Insider Participation

No member of the  Compensation  and Human Resources  Committee was an officer or
employee of the  Corporation  during 2003. Mr.  Anderson was the Chief Executive
Officer of the Corporation and First Merchants until his retirement on April 16,
1999.

Compensation and Human Resources Committee Report on Executive Compensation

General  Compensation  Policy.  The Compensation  and Human Resources  Committee
administers the Corporation's  executive compensation program, which is intended
to provide  incentives  to  executive  officers  to  achieve  both  current  and
long-term  strategic  management  goals of the  Corporation,  with the  ultimate
objective of achieving a superior  return on the  shareholders'  investment.  To
this end,  the program is comprised of cash and  equity-based  components  which
recognize performance as measured against the Corporation's annual and long-term
goals  as well  as  performance  evaluated  in  comparison  to  industry  peers.
Equity-based  compensation,  including the Employee  Stock  Purchase  Plan,  the
Long-term  Equity  Incentive  Plan,  and  Deferred  Stock Units under the Senior
Management Incentive Compensation Program, encourages ownership and retention of
the  Corporation's  common  stock by key  employees,  assuring  that they have a
meaningful stake in the Corporation's continued success and thereby aligning the
interests of these employees and shareholders.

The  executive  compensation  program is designed to assist the  Corporation  in
achieving its business  objectives  by:  maintaining a competitive  compensation
program to attract and retain qualified executives;  providing performance-based
incentive  compensation that is directly related to the Corporation's  financial
performance  and  individual  contributions  to that  performance;  and  linking
compensation to factors which affect short-term and long-term stock performance.
The manner in which the Committee  establishes the  compensation  and incentives
for Mr. Cox, the Corporation's chief executive officer,  and the other executive
officers listed in the Summary Compensation Table on page 10 is described below.

Cash  Compensation.  The  annual  cash  compensation  paid to the  Corporation's
executive  officers for 2003,  consisting of salary and incentive  compensation,
was determined by the Compensation and Human Resources  Committee.  The salaries
paid to the executive officers named in the Summary  Compensation Table for 2003
are shown in the "Salary" column of that Table. These salaries were subjectively
determined   after   consideration   of  the  executive   officer's   individual
responsibilities,   performance,   experience,  the  chief  executive  officer's
evaluation of the other executive officers,  a review of several measurements of
the  Corporation's  short-term  and long-term  financial  results  compared with
industry  peers,  various  industry  salary  surveys,  and other factors such as
budgetary considerations and inflation rates.

                                       6
<PAGE>

The incentive compensation paid to the Corporation's executive officers for 2003
was determined under the Senior Management Incentive  Compensation Program. This
Program  incorporates  modern incentive plan techniques and executive  retention
features for the purpose of closely  aligning the interests of  executives  with
those of  shareholders.  Under the  Program,  at or near the  beginning  of each
calendar year, the Committee  assigns each of the Program  participants a target
bonus for the year that is a percentage of salary.  The participant's  incentive
compensation  for the year is based on  accomplishment  of specific  performance
levels  set  forth in the  Program.  The  chief  executive  officer's  and chief
operating  officer's  bonuses  depend on  meeting  targets  with  respect to the
Corporation's  operating return on equity and improvements in the  Corporation's
operating earnings per share and diluted GAAP earnings per share compared to the
previous year. The other executive  officers'  bonuses depend on meeting targets
with respect to improvement in the  Corporation's  operating  earnings per share
compared  to the  previous  year  and  accomplishing  individual  benchmarks  as
determined  by the chief  executive  officer.  In order to avoid wide  swings in
payouts and to better focus the Program  participants on long-term results,  the
Program provides that 60% of any bonus paid to the participants will be based on
current year performance and 40% will be based on the previous year's payout. To
further the purpose of executive  retention,  2/3 of each participant's bonus is
payable to the  participant  in cash following the end of the calendar year, and
the other 1/3 is payable in  Deferred  Stock  Units two years after the bonus is
earned (unless the portion  payable in Deferred Stock Units is less than $1,000,
in which case the entire bonus is payable in cash).  When payable,  the Deferred
Stock  Units  are  valued  at an amount  equal to the fair  market  value of the
Corporation's  common stock on the  December 31 preceding  the payment date plus
accumulated dividends.  Payment is made to the participant in cash. The Deferred
Stock Units are forfeited if the  participant's  employment  is  terminated  for
cause or is  voluntarily  terminated  by the  participant  (except on account of
retirement,  death or disability) prior to the date of payment.  The participant
may elect to defer  payment  of all or part of the cash  portion of the bonus by
filing an election to do so in the manner  described  in the  Program.  Deferred
amounts will be credited with  interest  quarterly  based on the current  5-year
U.S. Treasury Bond rate.

The cash portion of the bonuses for 2003 for the executive officers named in the
Summary Compensation Table is set forth in the "Bonus" column of that Table, and
the Deferred  Stock Unit portion of these  bonuses is set forth in the Long-Term
Incentive  Plan Awards Table on page 12. Cash  amounts  paid to these  executive
officers  for  Deferred  Stock  Units  earned in 2001 are set forth in the "LTIP
Payouts" column of the Summary  Compensation  Table.  For 2003, Mr. Cox's target
bonus was 45% and Mr. Arwood's was 40% of salary.  The target bonuses of Messrs.
Connors,  Hardwick  and Helms  were each 30% of  salary.  None of the  executive
officers  earned  bonuses  for 2003  based on the  return on  equity,  operating
earnings  per share,  and diluted  GAAP  earnings  per share  components  of the
Program.  Messrs.  Connors,  Hardwick and Helms earned bonuses for 2003 based on
accomplishing  individual  benchmarks  as  determined  by  the  chief  executive
officer. The actual 2003 bonus payouts to Messrs. Cox, Arwood, Connors, Hardwick
and Helms,  based 60% on 2003  performance and 40% on 2002 payouts,  were 7.20%,
5.82%, 4.68%, 7.48% and 9.55% of salary, respectively.

Equity-based   Compensation.   The   equity-based   compensation   paid  to  the
Corporation's  executive  officers for 2003,  in addition to the Deferred  Stock
Units  under the Senior  Management  Incentive  Compensation  Program  described
above, included compensation under the Corporation's  Long-term Equity Incentive
Plan and 1999 Employee Stock Purchase Plan.

The Long-term  Equity  Incentive  Plan is briefly  described in the paragraph on
page 10 immediately  preceding the Option Grants in Last Fiscal Year Table.  The
number  of  shares  for which the  Compensation  and Human  Resources  Committee
awarded  options under the Plan to the executive  officers  named in the Summary
Compensation  Table  during  2003 is set  forth  in the  "Number  of  Securities
Underlying  Options  Granted"  column of the Option  Grants in Last  Fiscal Year
Table.

                                       7
<PAGE>

The  1999  Employee  Stock  Purchase  Plan  generally  provides  that  full-time
employees of the  Corporation  or a  participating  subsidiary  with more than 6
months of service may elect,  prior to the offering  period (July 1 to June 30),
to  purchase  common  shares of the  Corporation  at a price equal to 85% of the
lesser of the market  price of the stock at the  beginning of the period and the
market price at the end of the period.  For the offering  period ending June 30,
2003, Messrs. Cox, Arwood, Connors,  Hardwick and Helms purchased 761, 0, 0, 222
and 126 shares,  respectively,  under the 1999 Employee Stock Purchase Plan. The
1999 Employee Stock Purchase Plan covers 5 offering periods expiring on June 30,
2004.

Other  Compensation.  The  executive  officers  are also  covered by medical and
retirement  plans that are generally  applicable  to full-time  employees of the
Corporation  and its  subsidiaries.  The  retirement  plans covering each of the
executive officers are the First Merchants Corporation  Retirement Pension Plan,
a qualified  defined  benefit  pension plan (described on page 12 in the section
entitled  "Compensation of Executive Officers -- Pension Plans"),  and the First
Merchants Corporation Retirement Savings Plan, a qualified Internal Revenue Code
ss.401(k)  defined  contribution  pension  plan  (referred to in note (2) to the
Summary  Compensation  Table).  Mr. Cox and Mr.  Arwood are also  covered by the
First  Merchants   Corporation   Supplemental   Executive   Retirement  Plan,  a
nonqualified  SERP plan  (described  in the section  entitled  "Compensation  of
Executive Officers -- Pension Plans").

The above report is submitted by:

FIRST MERCHANTS CORPORATION COMPENSATION
AND HUMAN RESOURCES COMMITTEE
Robert M. Smitson, Chairman
Stefan S. Anderson
Frank A. Bracken
Thomas B. Clark
Norman M. Johnson

Audit Committee
---------------

The  Corporation  has an Audit  Committee  which  assists  the  Board (1) in its
oversight of the Corporation's accounting and financial reporting principles and
policies and internal accounting and disclosure controls and procedures,  (2) in
its oversight and supervision of the Corporation's  internal audit function, (3)
in its oversight of the certification of the Corporation's  quarterly and annual
financial  statements  and  disclosures  and  assessment of internal  disclosure
controls  by  the  Corporation's  CEO  and  CFO,  (4) in  its  oversight  of the
Corporation's  consolidated  financial  statements and the independent  external
audit thereof,  and (5) in evaluating the independence of the external auditors.
The Audit  Committee  recommends  the selection of the  independent  auditor for
approval by the Board and ratification by the shareholders,  and it approves the
independent auditor's  compensation.  In 2003 the Board of Directors amended the
written  charter  for the Audit  Committee.  A copy of the  amended  charter  is
attached  as Appendix A. The  members of the Audit  Committee  are Messrs.  Ault
(Chairman),  Anderson,  Brownell,  Clark, Jeffares and Smitson. John E. Worthen,
who is retiring as a director of the  Corporation as of the 2004 annual meeting,
was also a member of the Audit Committee during 2003. In accordance with Section
407 of the  Sarbanes-Oxley  Act, the  Corporation has identified Mr. Jeffares as
the "Audit Committee  financial  expert." The Audit Committee met 5 times during
2003.

                                       8
<PAGE>

Audit Committee Report

The Audit Committee reports as follows:

(1)      The Committee has reviewed and discussed the audited  financial
         statements of the Corporation for 2003 with the Corporation's
         management.

(2)      The Committee has discussed with BKD, LLP, the Corporation's
         independent auditors for 2003, the matters required to be discussed by
         SAS 61 (Codification of Statements on Auditing Standards, AU ss.380),
         as modified or supplemented.

(3)      The Committee has received the written disclosures and the letter from
         BKD, LLP required by Independence Standards Board Standard No. 1
         (Independent Discussions with Audit Committees), as modified or
         supplemented, and has discussed with BKD, LLP its independence from the
         Corporation.

(4)      Based on the review and discussions referred to in paragraphs (1)
         through (3) above, the Audit Committee recommended to the Board, and
         the Board has approved, that the audited financial statements of the
         Corporation be included in the Corporation's Annual Report on Form 10-K
         for the 2003 fiscal year for filing with the Securities and Exchange
         Commission.

The above report is submitted by:

FIRST MERCHANTS CORPORATION AUDIT COMMITTEE
James F. Ault, Chairman
Stefan S. Anderson
Blaine A. Brownell
Thomas B. Clark
Robert T. Jeffares
Robert M. Smitson
John E. Worthen

COMPENSATION OF EXECUTIVE OFFICERS

The tables in this section of the Proxy Statement contain information concerning
the  compensation of the  Corporation's  Chief Executive  Officer and its 4 most
highly compensated  executive officers other than the Chief Executive Officer as
of the  Corporation's  most recent  fiscal  year-end,  December  31,  2003.  The
information in these tables  concerning  stock options has been adjusted to give
retroactive  effect to the 5% common stock  dividends  that were  distributed on
September 24, 2001,  September 13, 2002, and September 12, 2003 to  shareholders
of record at the close of business on  September 3, 2001,  August 30, 2002,  and
August 29, 2003, respectively.

Summary Compensation Table
--------------------------

The following table contains information concerning the compensation paid by the
Corporation  and its  subsidiaries  for the  years  2001,  2002  and 2003 to the
Corporation's  Chief  Executive  Officer  and  its  4  most  highly  compensated
executive officers other than the Chief Executive Officer.

                                       9
<PAGE>
<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------

                                           Annual Compensation     Long Term Compensation
                                          -------------------------------------------------
                                                                      Awards     Payouts
                                                                  -------------------------
-----------------------------------------------------------------------------------------------------------
                                                                    Securities
            Name and                                                Underlying     LTIP      All Other
       Principal Position          Year      Salary     Bonus(1)     Options    Payouts(1)Compensation(2)
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
<S>                                <C>      <C>          <C>          <C>        <C>           <C>
   Michael L. Cox                  2003     $326,715     $15,360      13,125     $38,988       $2,500
     President and Chief           2002      285,941     33,600       13,781      41,880       3,231
     Executive Officer             2001      255,359     63,450       11,576                   3,125

   Roger M. Arwood                 2003      234,699      8,930       10,500      21,630         0
     Executive Vice President      2002      209,218     19,899       11,025      8,142          0
     and                           2001      188,834     35,201       9,261                      0
     Chief Operating Officer(3)

   Robert R. Connors               2003      166,231      5,085       5,250         0          2,002
     Senior Vice President,        2002      51,361       3,391       3,308         0           641
     Operations and Technology(4)

   Mark K. Hardwick                2003      132,722      6,732       5,250       4,553        1,901
     Senior Vice President and     2002      103,294      6,787       4,410       1,703        1,383
     Chief Financial Officer(5)    2001      77,885       7,410       1,736                     954

   Larry R. Helms                  2003      135,817      8,426       5,250       10,256       1,918
     Senior Vice President,        2002      125,619     12,134       5,513       6,114        1,470
     Administrative Services,      2001      115,422     16,690       5,325                    1,404
     General Counsel and
     Corporate Secretary

-----------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Under the Corporation's Senior Management Incentive Compensation Program ,
     the bonuses earned by each executive officer are paid 2/3 in cash following
     the end of the fiscal year and 1/3 in Deferred Stock Units that are payable
     in cash two years later, unless the Units are forfeited due to termination
     of the executive officer's employment for cause or because the executive
     officer voluntarily terminated employment (except on account of retirement,
     death or disability) prior to payment. The portion of each year's bonus
     paid in Deferred Stock Units is not reportable in the Summary Compensation
     Table, but is disclosed in the Long-term Incentive Plan Awards Table below.
     The LTIP Payouts column in the Summary Compensation Table sets forth the
     cash amounts paid in the year indicated for Deferred Stock Units earned by
     the executive officer two years earlier under the Senior Management
     Incentive Compensation Program. The first year for which LTIP Payouts were
     made under the Program was 2002.

(2)  Represents employer matching contributions for fiscal year to First
     Merchants Corporation Retirement Savings Plan (a ss.401(k) plan).

(3)  Mr. Arwood was employed as Executive Vice President of the Corporation and
     First Merchants on March 1, 2000. He was President and CEO of First
     Merchants from September 19, 2000 until he was appointed Executive Vice
     President and COO of the Corporation on August 13, 2002.

(4)  Mr. Connors was employed as Senior Vice President, Operations and
     Technology of the Corporation on August 26, 2002.

(5)  Mr. Hardwick was promoted from Vice President to Senior Vice President of
     the Corporation on August 13, 2002. He became CFO on April 11, 2002. He
     served as Corporate Controller prior to that date.

Option Grants Table
-------------------

The 1999 Long-term  Equity  Incentive Plan, which became effective as of July 1,
1999,  authorizes  the  Compensation  Committee to grant  stock-based  incentive
awards, including stock options, to eligible employees of the Corporation or any
subsidiary.  The following  table  contains  information  concerning  individual
grants of stock options under the plan made during 2003 to each of the executive
officers  named in the  Summary  Compensation  Table  above.  Each option was to
purchase  the  Corporation's  common  stock at a price not less than the  market
price of the stock on the date of grant.

                                       10
<PAGE>
<TABLE>
<CAPTION>

                        OPTION GRANTS IN LAST FISCAL YEAR
-----------------------------------------------------------------------------------------------------------

                                                                               Potential Realizable Value
                                                                               at Assumed Annual Rates of
                                                                                Stock Price Appreciation
                               Individual Grants                                     for Option Term
-----------------------------------------------------------------------------------------------------------
                     Number of
                    Securities      Percent of
                    Underlying    Total Options
                      Options       Granted to     Exercise
       Name           Granted      Employees in      Price     Expiration Date        5%           10%
                                   Fiscal Year    (per share)
-----------------------------------------------------------------------------------------------------------
<S>                   <C>              <C>          <C>          <C>               <C>          <C>
  Michael L. Cox      13,125           8.61         $23.46       July 1, 2013      $193,985     $489,581

  Roger M. Arwood     10,500           6.88          23.46       July 1, 2013       155,188      391,665

  Robert R. Connors    5,250           3.44          23.46       July 1, 2013       77,594       195,832

  Mark K. Hardwick     5,250           3.44          23.46       July 1, 2013       77,594       195,832

  Larry R. Helms       5,250           3.44          23.46       July 1, 2013       77,594       195,832

-----------------------------------------------------------------------------------------------------------
</TABLE>
Aggregated Option Exercises and Fiscal Year-End Option Value Table
------------------------------------------------------------------

The following table contains  information  concerning (1) each exercise of stock
options  during 2003 under the 1989 Stock  Option  Plan,  the 1994 Stock  Option
Plan,  or the 1999  Long-term  Equity  Incentive  Plan by each of the  executive
officers named in the Summary  Compensation Table above, and (2) the value as of
December 31, 2003 of each of the named executive  officer's  unexercised options
on an aggregated basis.
<TABLE>
<CAPTION>
                                AGGREGATED OPTION EXERCISES IN LAST FISCAL
                                  YEAR AND FISCAL YEAR-END OPTION VALUES
-----------------------------------------------------------------------------------------------------------

                                                     Number of Securities       Value of Unexercised
                                                    Underlying Unexercised      In-the-Money Options
                    Shares Acquired      Value        Options at Fiscal          at Fiscal Year-End
        Name          On Exercise      Realized            Year-End           Exercisable/Unexercisable
                                                   Exercisable/Unexercisable
-----------------------------------------------------------------------------------------------------------
<S>                       <C>             <C>          <C>                       <C>
  Michael L. Cox           0              $0           84,426 / 26,913           $764,303 / $26,906

  Roger M. Arwood          0               0           18,519 / 21,528            102,815 / 21,542

  Robert R. Connors        0               0              0 / 8,558                  0 / 11,358

  Mark K. Hardwick         0               0            3,008 / 9,662              18,280 / 10,776

  Larry R. Helms         4,949          71,354         31,938 / 11,022            228,471 / 12,260

-----------------------------------------------------------------------------------------------------------
</TABLE>
Long-term Incentive Plan Awards Table
-------------------------------------

Under the restructured Senior Management Incentive  Compensation Program,  which
became effective in 2000, the annual bonuses earned by  participating  employees
are  payable  2/3 in  cash  following  the  end of the  fiscal  year  and 1/3 in
"deferred  stock units" two years after the bonus is earned.  When payable,  the
units  are  valued  at  an  amount  equal  to  the  fair  market  value  of  the
Corporation's common stock on the date of payment,  plus accumulated  dividends.
Payments  for the  units  are  made in cash,  not  stock.  If the  participant's
employment  is  terminated  for  cause  or  is  voluntarily  terminated  by  the
participant (except on account of retirement,  death or disability) prior to the
date  of  payment,  the  units  are  forfeited.  The  following  table  contains
information  concerning  deferred  stock  unit  awards for 2003 under the Senior
Management  Incentive  Compensation  Program to each of the  executive  officers
named in the  Summary  Compensation  Table  above.  The  section  of this  Proxy

                                       11
<PAGE>
Statement  entitled  "Compensation  and  Human  Resources  Committee  Report  on
Executive  Compensation  --  Cash  Compensation,"  on  pages  6 and 7,  contains
additional  information  about  the  Senior  Management  Incentive  Compensation
Program.
<TABLE>
<CAPTION>
             LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
-------------------------------------------------------------------------------------------------------------

                                          Number of Shares,         Performance or Other Period Until
                 Name                   Units or Other Rights              Maturation or Payout
-------------------------------------------------------------------------------------------------------------
<S>                                              <C>                        <C>
  Michael L. Cox                                 301                        1/01/04 - 1/01/06

  Roger M. Arwood                                175                        1/01/04 - 1/01/06

  Robert R. Connors                              100                        1/01/04 - 1/01/06

  Mark K. Hardwick                               132                        1/01/04 - 1/01/06

  Larry R. Helms                                 165                        1/01/04 - 1/01/06

-------------------------------------------------------------------------------------------------------------
</TABLE>
Pension Plans
-------------

The  Corporation's  qualified  defined benefit pension plan, the First Merchants
Corporation  Retirement  Pension  Plan,  covers the  full-time  employees of the
Corporation and most of its  subsidiaries.  Its  nonqualified  "excess  benefit"
plan, the First Merchants  Corporation  Supplemental  Executive Retirement Plan,
provides benefits to designated executives that would otherwise be payable under
the qualified plan if incentive  compensation  were included in compensation and
Internal   Revenue  Code  Section   401(a)(17)  did  not  limit  the  amount  of
compensation that can be considered for purposes of calculating pension benefits
accruing under the qualified  plan. For plan years beginning on or after January
1, 2002,  $200,000 is the maximum amount of compensation  that can be considered
for purposes of calculating  pension benefits accruing under the qualified plan.
This amount  will  increase to  $205,000  for plan years  beginning  on or after
January 1, 2004.

The following table shows the estimated  annual benefits payable upon retirement
at age 65 to  persons  born in 1951  (the  average  of the  birth  years  of the
executive  officers named in the Summary  Compensation Table above) in specified
compensation and years of service  classifications  under the plans. The benefit
amounts shown in the table include  amounts payable under both the qualified and
the nonqualified plans, for those executives who participate in both.
<TABLE>
<CAPTION>
                                            PENSION PLAN TABLE
-----------------------------------------------------------------------------------------------------------

   Compensation                                       Years of Service
-----------------------------------------------------------------------------------------------------------

                          15              20             25                30                  35
-----------------------------------------------------------------------------------------------------------
<S>                   <C>              <C>            <C>              <C>                 <C>

    $125,000          $ 34,132         $ 45,509       $ 56,886         $ 56,886            $ 56,886
     150,000            42,007           56,009         70,011           70,011              70,011
     200,000            57,757           77,009         96,261           96,261              96,261
     250,000            73,507           98,009        122,510          122,510             122,510
     300,000            89,257          119,009        148,761          148,761             148,761
     350,000           105,007          140,009        175,011          175,011             175,011
     400,000           120,757          161,009        201,261          201,261             201,261
     450,000           136,507          182,009        227,511          227,511             227,511
-----------------------------------------------------------------------------------------------------------
</TABLE>
Participants in the qualified plan who had at least 15 credited years of service
and whose combined age and years of service totaled at least 65 as of January 1,
1991 are entitled to a pension benefit  calculated under the formula that was in
effect  prior to 1990 if that will produce a greater  benefit.  Mr. Helms is the
only executive officer named in the Summary Compensation Table who qualifies for
a benefit under the pre-1990  formula.  The following  table shows the estimated
annual benefits  payable upon retirement at age 65 under the formula that was in
effect   prior  to  1990  in  specified   compensation   and  years  of  service
classifications  under the plans. The benefit amounts shown in the table include

                                       12
<PAGE>
amounts payable under both the qualified and the  nonqualified  plans, for those
executives who participate in both.
<TABLE>
<CAPTION>
                                  PENSION PLAN TABLE (Pre-1990 Formula)
-----------------------------------------------------------------------------------------------------------
    Compensation                                       Years of Service
-----------------------------------------------------------------------------------------------------------

                         15              20               25              30                  35
-----------------------------------------------------------------------------------------------------------
<S>                    <C>             <C>              <C>             <C>                 <C>
      $125,000         $ 37,500        $ 50,000         $ 62,500        $ 62,500            $ 62,500
       150,000           45,000          60,000           75,000          75,000              75,000
       200,000           60,000          80,000          100,000         100,000             100,000
       250,000           75,000         100,000          125,000         125,000             125,000
       300,000           90,000         120,000          150,000         150,000             150,000
       350,000          105,000         140,000          175,000         175,000             175,000
       400,000          120,000         160,000          200,000         200,000             200,000
       450,000          135,000         180,000          225,000         225,000             225,000
-----------------------------------------------------------------------------------------------------------
</TABLE>

Benefits under the plans are determined  primarily by average final compensation
and years of service (to a maximum of 25 years) and are computed on the basis of
straight-life  annuity amounts. They are not subject to any deduction for Social
Security or other offset amounts.

Compensation  for purposes of the qualified plan consists of the base salary and
service  award  components  of  the  salary  amounts  reported  in  the  Summary
Compensation  Table on page 10.  Compensation  for purposes of the  nonqualified
plan also includes the bonus amounts reported in the Summary Compensation Table.
All of the  executive  officers  named in the  Summary  Compensation  Table  are
participants  in the qualified  plan. Mr. Connors became eligible to participate
on  January  1,  2004.  Mr.  Cox and Mr.  Arwood  are also  participants  in the
nonqualified  plan.  The 2003  compensation  used for  purposes  of  calculating
pension  benefits  under the  plans,  and the  credited  years of  service as of
January 1, 2004, of the  executive  officers  named in the Summary  Compensation
Table are: Mr. Cox, $343,085 (9.7 years), Mr. Arwood,  $243,395 (3.8 years), Mr.
Connors, $163,000 (0 years), Mr. Hardwick,  $130,030 (6.1 years), and Mr. Helms,
$132,480 (32.3 years).

Termination of Employment and Change of Control Arrangements
------------------------------------------------------------

The  Corporation  has change of control  agreements  with Messrs.  Cox,  Arwood,
Connors,  Hardwick and Helms which  provide  severance  benefits in the event of
both a change of control of the  Corporation  and a termination or  constructive
termination of the employment of the executive within 24 months after the change
of control,  unless such  termination was for cause,  because of the executive's
death or disability,  or by the executive  other than on account of constructive
termination.  In general,  a "change of  control"  means an  acquisition  by any
person of 25% or more of the Corporation's voting shares, a change in the makeup
of a majority of the Corporation's  Board of Directors over a 24-month period, a
merger of the Corporation in which the shareholders before the merger own 50% or
less of the  Corporation's  voting  shares after the merger,  or approval by the
Corporation's  shareholders of a plan of complete liquidation of the Corporation
or an agreement  to sell or dispose of  substantially  all of the  Corporation's
assets. A "constructive  termination" means,  generally, a significant reduction
in duties,  compensation or benefits or a relocation of the  executive's  office
outside of Muncie,  Indiana  unless  agreed to by the  executive.  The severance
benefits payable under the agreements,  in addition to base salary and incentive
compensation  accrued  through the date of  termination,  would be a lump sum to
Messrs.  Cox and Arwood,  equal to 299%,  and to Messrs.  Connors,  Hardwick and
Helms,  equal to 200%,  of the sum of (1) their annual base salary and (2) their
largest bonus under the Corporation's Senior Management  Incentive  Compensation
Program during the 2 years preceding termination. The Corporation would also pay
any excise tax  imposed on the  executive  under  Section  4999 of the  Internal
Revenue Code on an "excess parachute  payment," and would provide 2 years' life,
disability, accident and health insurance coverage, the bargain element value of
outstanding stock options,  outplacement services, and reasonable legal fees and
expenses  incurred  as a result  of the  termination.  The  agreements  were not
entered  into in response to any effort to acquire  control of the  Corporation,
and the Board of Directors is not aware of any such effort.

                                       13
<PAGE>
PERFORMANCE GRAPH

The following graph compares the yearly change in the  Corporation's  cumulative
total  shareholder  return on its common  stock during the last 5 years with (1)
the  cumulative  total return of the Russell 2000 Index,  and (2) the cumulative
total return of the Russell 2000  Financial  Services  Sector  Index.  The graph
assumes $100 was invested on January 1, 1999 in the Corporation's  common stock,
and in each of the two indexes shown, and all dividends were reinvested.



                 COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
                 AMONG FIRST MERCHANTS CORPORATION, RUSSELL 2000
                   AND RUSSELL 2000 FINANCIAL SERVICES SECTOR



                              [LINE CHART OMITTED]






<TABLE>
<CAPTION>

================== ============== =============== ============== =============== ============== =============
                   12/31/98       12/31/99        12/31/00       12/31/01        12/31/02       12/31/03
------------------ -------------- --------------- -------------- --------------- -------------- -------------
<S>                <C>            <C>             <C>            <C>             <C>            <C>
FMC                $100.00        $104.96         $  94.32       $109.05         $112.71        $137.42
------------------ -------------- --------------- -------------- --------------- -------------- -------------
Russell 2000       $100.00        $121.26         $117.59        $120.52         $  95.83       $141.11
------------------ -------------- --------------- -------------- --------------- -------------- -------------
Russell 2000       $100.00        $  94.13        $113.94        $131.76         $134.55        $187.66
Finl Serv
================== ============== =============== ============== =============== ============== =============
</TABLE>

                                       14
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  Corporation is not aware of any person who is the beneficial  owner of more
than 5% of the Corporation's outstanding common stock. The following table lists
the amount and percent of the Corporation's  common stock  beneficially owned on
February 13, 2004 by directors  (including  directors who are retiring as of the
2004  annual  meeting of  shareholders),  director  nominees  and the  executive
officers  named in the Summary  Compensation  Table on page 10, and such persons
and other executive officers as a group.  Unless otherwise noted, the beneficial
owner has sole voting and investment power.
<TABLE>
<CAPTION>
                                                 Amount and Nature                          Percent
         Beneficial Owner                   of Beneficial Ownership                         of Class
----------------------------------------------------------------------------------------------------
<S>                                                     <C>                                     <C>

         Stefan S. Anderson (20)                        113,016 (1)..............................*
         Roger M. Arwood                                 18,634 (2)..............................*
         James F. Ault                                   25,478 (3)..............................*
         Dennis A. Bieberich                             90,508 (4)..............................*
         Richard A. Boehning                             15,766 (5)..............................*
         Frank A. Bracken (20)                           97,191 (6)..............................*
         Blaine A. Brownell                               3,473 (7)..............................*
         Thomas B. Clark                                 12,521 (8)..............................*
         Michael L. Cox                                  98,175 (9)..............................*
         Barry J. Hudson                               497,883 (10)..............................2.68%
         Robert T. Jeffares                             12,092 (11)..............................*
         Norman M. Johnson                             388,499 (12)..............................2.10%
         Thomas D. McAuliffe                            73,912 (13)..............................*
         George A. Sissel                               10,345 (14)..............................*
         Robert M. Smitson (20)                         21,461 (15)..............................*
         John E. Worthen                                10,813 (16)..............................*
         Robert R. Connors                                 210...................................*
         Mark K. Hardwick                                3,885 (17)..............................*
         Larry R. Helms                                 54,727 (18)..............................*

         Directors and Executive
         Officers as a Group (19 persons) (20)       1,548,589 (19) .............................8.24%
</TABLE>
         * Percentage beneficially owned is less than 1% of the outstanding
shares.

          (1)     Includes  2,071 shares held by his spouse,  Joan Anderson,  in
                  which he disclaims  beneficial  ownership,  and 36,698  shares
                  that he may  acquire during the next 60 days upon the exercise
                  of stock options.

          (2)     Includes 18,519 shares that  he may acquire during the next 60
                  days upon the exercise of stock options.

          (3)     Includes 13,318 shares held by his spouse, Marilyn Ault, in
                  which he disclaims beneficial ownership, and 3,473 shares that
                  he may acquire during the next 60 days upon the exercise of
                  stock options.
                                       15
<PAGE>
          (4)     Includes 33,650 shares held by his spouse, Melanie Bieberich,
                  in which he disclaims beneficial ownership, and 4,052 shares
                  that he may acquire during the next 60 days upon the exercise
                  of stock options.

          (5)     Includes 4,315 shares held jointly with his spouse, Phyllis
                  Boehning, 5,586 shares held in trust for family members for
                  which Mr. Boehning, as trustee, has voting and investment
                  power, and 2,315 shares that he may acquire during the next 60
                  days upon the exercise of stock options.

          (6)     Includes 4,825 shares held by his spouse, Judy Bracken, in
                  which he disclaims beneficial ownership, and 9,957 shares that
                  he may acquire during the next 60 days upon the exercise of
                  stock options.

          (7)     Includes 956 shares held by his spouse, Mardi Brownell, in
                  which he disclaims beneficial ownership, and 2,517 shares that
                  he may acquire during the next 60 days upon the exercise of
                  stock options.

          (8)     Includes 9,958 shares that he may acquire during the next 60
                  days upon the exercise of stock options.

          (9)     Includes 5,828 shares held jointly with his spouse, Sharon
                  Cox, and 84,426 shares that he may acquire during the next 60
                  days upon the exercise of stock options.

         (10)     Includes 327,756 shares owned by Mutual Security, Inc., 97,319
                  shares held jointly with his spouse, Elizabeth Hudson, 12,026
                  shares held by his spouse as custodian for his children, in
                  which he disclaims beneficial ownership, and 10,650 shares
                  that he may acquire during the next 60 days upon the exercise
                  of stock options.

         (11)     Includes 3,595 shares held by his spouse, Olga Jeffares, in
                  which he disclaims beneficial ownership, 4,475 shares held
                  jointly with his spouse, Olga Jeffares, 1,709 shares held in
                  trust for family members for which Mr. Jeffares, as trustee,
                  has voting and investment power, and 2,315 shares that he may
                  acquire during the next 60 days upon the exercise of stock
                  options.

         (12)     Includes 28,352 shares held by his spouse, Julia Johnson, in
                  which he disclaims beneficial ownership, and 7,873 shares that
                  he may acquire during the next 60 days upon the exercise of
                  stock options.

         (13)     Includes 43,833 shares held jointly with his spouse, Andrea
                  McAuliffe, and 8,398 shares that he and his spouse hold as
                  joint custodians for his children.

         (14)     Includes 388 shares held jointly with his spouse, Mary Sissel,
                  and 9,957 shares that he may acquire during the next 60 days
                  upon the exercise of stock options.

         (15)     Includes 5,859 shares held by his spouse, Marilyn Smitson, in
                  which he disclaims beneficial ownership, and 9,957 shares that
                  he may acquire during the next 60 days upon the exercise of
                  stock options.

         (16)     Includes 7,873 shares that he may acquire during the next 60
                  days upon the exercise of stock options.

         (17)     Includes 3,008 shares that he may acquire during the next 60
                  days upon the exercise of stock options.

                                       16
<PAGE>
         (18)     Includes 22,789 shares held jointly with his spouse, Sandra
                  Helms, and 31,938 shares that he may acquire during the next
                  60 days upon the exercise of stock options.

         (19)     Includes 255,486 shares that may be acquired during the next
                  60 days upon the exercise of stock options.

         (20)     Messrs. Anderson, Bracken and Smitson serve as directors of
                  the George and Frances Ball Foundation, Muncie, Indiana, which
                  owns 182,267 shares (0.98%) of the Corporation's outstanding
                  common stock. The Foundation's Board of Directors, which has 6
                  members, has the voting and investment power over the shares
                  held by the Foundation. The Foundation's shares are not
                  included in the totals of the shares beneficially owned by
                  Messrs. Anderson, Bracken and Smitson or by directors and
                  executive officers as a group.

INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

Certain directors and executive officers of the Corporation and its subsidiaries
and their  associates  are customers  of, and have had  transactions  with,  the
Corporation's  subsidiary  banks  from  time to time in the  ordinary  course of
business.  Additional transactions may be expected to take place in the ordinary
course of  business in the future.  All loans and  commitments  included in such
transactions were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.

Richard A. Boehning, a director of the Corporation and Lafayette,  is Of Counsel
with the law firm of Bennett, Boehning & Clary, Lafayette, Indiana, which serves
as legal  counsel to Lafayette.  Bennett,  Boehning & Clary was paid $119,209 in
fees and expenses for legal services in 2003 to Lafayette.

COMMUNICATIONS WITH THE BOARD

Shareholders  may  communicate  with the  Corporation's  Board of  Directors  by
submitting  an e-mail to the Board at  bod@firstmerchants.com.  All such e-mails
will be automatically forwarded to the Chairman of the Nominating and Governance
Committee,  Mr. Clark, who will arrange for such communications to be relayed to
the other directors.

DIRECTORS' ATTENDANCE AT ANNUAL SHAREHOLDERS MEETING

The  Corporation's  directors  are  encouraged  to attend the annual  meeting of
shareholders.  At the 2003 annual meeting,  all but one of the 15 directors were
in attendance.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities  Exchange Act of 1934, as amended,  requires the
Corporation's  directors and executive officers to file reports of ownership and
changes in ownership of the Corporation's stock with the Securities and Exchange
Commission.  Based  on  its  records  and  the  written  representations  of its
directors  and executive  officers,  the  Corporation  believes that during 2003
these persons complied with all Section 16(a) filing  requirements,  except that
one late Form 4 report was filed on November 10, 2003 by John E. Worthen, who is
retiring as a director as of the 2004  annual  meeting,  to report a sale of 364
shares on November 4, 2003.
                                       17
<PAGE>

PROPOSAL TO APPROVE THE FIRST MERCHANTS CORPORATION 2004 EMPLOYEE STOCK PURCHASE
PLAN

On  December  9,  2003,  the Board of  Directors  approved  the First  Merchants
Corporation  2004 Employee Stock Purchase Plan (the "2004 Stock Purchase Plan"),
subject  to  approval  by  the  holders  of  a  majority  of  the  Corporation's
outstanding  shares of common stock,  which approval is now being sought. A copy
of the 2004 Stock Purchase Plan is attached as Appendix B.

The 2004 Stock Purchase Plan is intended to replace the  Corporation's  previous
employee stock purchase  plans - the 1989,  1994 and 1999 Stock Purchase  Plans.
The Board of Directors believes that the 1989 and 1994 Stock Purchase Plans, and
the 1999 Stock  Purchase  Plan,  under which no more offerings can be made after
the offering  period ending June 30, 2004, have provided  eligible  employees of
the Corporation and its participating  subsidiaries a convenient way to purchase
shares of the common stock of the Corporation  through payroll  deductions.  The
opportunity  to  purchase  the  Corporation's   common  shares  has  provided  a
significant  incentive to these  employees  who  contribute  and are expected to
contribute materially to the continued success of the Corporation. A substantial
majority of these  employees have become  shareholders  and/or  increased  their
shareholdings  through the Stock Purchase  Plans,  thus aligning their interests
closely  with  those of other  shareholders.  Therefore,  the  Board  recommends
approval of the 2004 Stock Purchase Plan,  which contains  essentially  the same
provisions as were in the 1989, 1994 and 1999 Plans.

The principal features of the 2004 Stock Purchase Plan are set forth below.

Offerings.   The  2004  Stock   Purchase  Plan  provides  for  purchase  of  the
Corporation's  common  stock  by  eligible  employees  through  a  maximum  of 5
offerings,  each of 12  months'  duration.  A total  of  400,000  shares  of the
Corporation's common stock are to be reserved for issuance pursuant to the Plan.
The fair market value of 400,000 shares as of December 31, 2003 was $10,204,000.

Eligibility. The employees eligible to participate in the Plan are all employees
of the Corporation or a participating  subsidiary who customarily work more than
20 hours  per week and who have  been  employed  for at least 6 months as of the
first day of the offering.  At the present time, there are  approximately  1,016
employees who would be eligible to participate in the Plan.

Purchase of Shares.  Prior to each offering period (July 1 to June 30), eligible
employees  will be  entitled  to elect to have up to 20% of their base salary or
wages,  excluding bonuses,  overtime,  incentive or other similar  extraordinary
remuneration,  deducted from their pay and  accumulated  with interest until the
end of that  offering  period,  but not to exceed  $25,000 per offering  period.
Participants may increase, decrease or suspend their payroll deductions one time
each  offering  period and may withdraw the balance of their  payroll  deduction
account at any time during each  offering  period.  At the end of each  offering
period,  the balance of each  participant's  payroll  deduction  account will be
applied  towards  the  purchase  of the  largest  number  of full  shares of the
Corporation's  common  stock  possible,  and each  participant  will  receive  a
certificate evidencing such shares.

The  benefits  or  amounts  that  will  be  received  by  or  allocated  to  the
participants  under  the 2004  Stock  Purchase  Plan,  including  the  executive
officers named in the Summary Compensation Table above, are not determinable. If
the 2004  Stock  Purchase  Plan had been in effect  for 2003,  the  benefits  or
amounts that would have been received by or allocated to the participants  under
the Plan,  including the executive  officers  named in the Summary  Compensation
Table above, are also not determinable.

Price.  The price at which the shares will be deemed to have been purchased (the
"option  price") will be  determined  by the  Compensation  and Human  Resources
Committee  of the Board,  and will be equal to the lesser of (i) 85% of the fair
market  value of the common  stock at the time the option is granted (the "grant
date"), or (ii) 85% of the fair market value of the common stock on the last day

                                       18
<PAGE>
of the offering period (the "exercise  date").  In general,  for purposes of the
2004 Stock  Purchase Plan "fair market value" means the last reported sale price
of a share of stock for the  particular  date,  as reported on Nasdaq;  or if no
sale took place,  the last  reported  sale price of a share of stock on the most
recent  day on which a sale of a share of  stock  took  place,  as  reported  on
Nasdaq.

Administration.  The Compensation and Human Resources  Committee will administer
the 2004 Stock Purchase Plan. The Compensation and Human Resources Committee has
the authority, subject to the terms of the Plan, to (i) adopt, alter, and repeal
administrative  rules and practices governing the Plan; (ii) interpret the terms
and provisions of the Plan; and (iii) otherwise  supervise the administration of
the Plan.

Federal  Income Tax  Consequences.  The 2004 Stock  Purchase Plan is intended to
qualify as an employee  stock  purchase  plan under  Section 423 of the Internal
Revenue  Code of 1986,  as amended.  Consequently,  the  Compensation  and Human
Resources  Committee's  purchase of stock on behalf of a participant pursuant to
the Plan will not cause any federal income tax  consequences  to the participant
or the Corporation.  If the participant  holds the shares purchased  pursuant to
the Plan for more than 1 year  after  the  exercise  date and 2 years  after the
grant date (the  "holding  period"),  upon selling the shares the  participant's
gain will be  subject to  capital  gains  treatment.  The  Corporation  will not
receive an income tax  deduction  in the event the  participant  disposes of the
shares after completion of the holding period. However, if the participant sells
the shares before the expiration of the holding  period,  the  participant  will
have made a "disqualifying  disposition" and will realize ordinary income on the
date of sale  equal to the  difference  between  the  option  price and the fair
market value of the shares on the exercise date. Upon the subsequent sale of any
such shares,  any  appreciation or depreciation in the value of the shares after
the date the option was  exercised  is  treated as a capital  gain or loss.  The
Corporation  will receive an income tax  deduction in the same amount and at the
same time as the participant  realizes ordinary income, but not as to any amount
which is subject to capital gains treatment.

Shareholder Vote Required to Approve the 2004 Stock Purchase Plan. The favorable
vote of a majority of the shares  present and voting is required for approval of
the 2004 Stock Purchase Plan.  Abstentions  and broker  non-votes are considered
neither a vote "for" nor "against."

The Board of  Directors  unanimously  recommends  a vote "FOR" the  Proposal  to
Approve the First Merchants Corporation 2004 Employee Stock Purchase Plan.

EQUITY COMPENSATION PLAN INFORMATION

The following table presents information as of December 31, 2003 with respect to
compensation  plans  under  which  equity  securities  of  the  Corporation  are
authorized  for  issuance.  It does not include  information  concerning  equity
securities  that may be  authorized  for  issuance  under  the  First  Merchants
Corporation  2004  Employee  Stock  Purchase  Plan  described on pages 18 and 19
above.
<TABLE>
<CAPTION>
------------------------------------- ----------------------- ------------------- -------------------------
                                                                                    Number of securities
                                                                                  remaining available for
                                       Number of securities    Weighted-average    future issuance under
                                        to be issued upon     exercise price of     equity compensation
                                           exercise of           outstanding          plans (excluding
           Plan Category               outstanding options,   options, warrants   securities reflected in
                                       warrants and rights        and rights           first column)
------------------------------------- ----------------------- ------------------- -------------------------
<S>                                          <C>                    <C>                  <C>
Equity compensation plans approved
by shareholders                              908,476                $20.66               163,244(1)

Equity compensation plans not
approved by shareholders(2)                   40,520                21.81                    0
------------------------------------- ----------------------- ------------------- -------------------------
Total                                        948,996                20.71                 163,244
------------------------------------- ----------------------- ------------------- -------------------------
</TABLE>
                                       19
<PAGE>
(1)      This number does not include shares remaining available for future
         issuance under the 1999 Long-term Equity Incentive Plan, which was
         approved by the Corporation's shareholders at the 1999 annual meeting.
         The aggregate number of shares that are available for grants under that
         Plan in any calendar year is equal to the sum of: (a) 1% of the number
         of common shares of the Corporation outstanding as of the last day of
         the preceding calendar year; plus (b) the number of shares that were
         available for grants, but not granted, under the Plan in any previous
         year; but in no event will the number of shares available for grants in
         any calendar year exceed 1 1/2 % of the number of common shares of the
         Corporation outstanding as of the last day of the preceding calendar
         year. The 1999 Long-term Equity Incentive Plan will expire in 2009.

(2)      The only plan not approved by the Corporation's shareholders involves
         non-qualified options to purchase the Corporation's common stock at a
         price not less than the market price of the stock on the date of the
         grant, awarded between 1997 and 2002 to directors of First Merchants
         who, on the dates of the grants: (a) were serving as directors of First
         Merchants; (b) were not employees of the Corporation, First Merchants,
         or any of the Corporation's other subsidiaries; and (c) were not
         serving as directors of the Corporation. The options are exercisable
         during a period of ten years after the dates of the grants.

INDEPENDENT PUBLIC ACCOUNTANTS

Selection of Independent Public Accountants
-------------------------------------------

The Board, subject to the approval of the shareholders, has selected BKD, LLP as
the Corporation's  independent public  accountants for 2004.  Representatives of
the firm are expected to be present at the annual  shareholders'  meeting.  They
will have an opportunity  to make a statement,  if they desire to do so, and are
expected to be available to respond to appropriate questions.

The Board of Directors  unanimously  recommends a vote "FOR" ratification of the
appointment of the firm of BKD, LLP as independent public accountants for 2004.

Fees for Professional Services Rendered by BKD, LLP
---------------------------------------------------

The following  table shows the  aggregate  fees billed by BKD, LLP for audit and
other services rendered to the Corporation for 2002 and 2003.

                                       2002                     2003
                                       ----                     ----
         Audit Fees                  $316,083                 $250,626
         Audit-Related Fees            33,280                   39,826
         Tax Fees                      58,700                   44,454
         All Other Fees                  0                        0
                                   --------------           --------------
         Total Fees                  $408,063                 $334,906
                                   ==============           ==============

The audit  fees were for  professional  services  rendered  for the audit of the
Corporation's  annual  financial  statements and review of financial  statements
included in the Corporation's  Form 10-Q and services that are normally provided
by BKD, LLP to the  Corporation  in connection  with  statutory  and  regulatory
filings or engagements.

The audit-related fees were for professional  services rendered for the audit of
the Corporation's stock and employee benefit plans.

                                       20
<PAGE>
The tax fees were for  professional  services  rendered for  preparation  of tax
returns and consultations with the Corporation on various tax matters.

The Audit  Committee  has  considered  whether the  provision by BKD, LLP of the
services  covered  by the fees  other  than the audit  fees is  compatible  with
maintaining BKD, LLP's independence and believes that it is compatible.

Pre-approval Policies and Procedures
------------------------------------

The Audit Committee  pre-approves all audit and non-audit  services performed by
the Corporation's  independent auditors in order to assure that the provision of
such  services does not impair the auditor's  independence.  These  services may
include audit services, audit-related services, tax services and other services.
The Audit  Committee  has  adopted a policy  for the  pre-approval  of  services
provided  by the  independent  auditors.  Under  this  policy,  pre-approval  is
provided  for 12  months  from the date of  pre-approval  unless  the  Committee
specifically  provides for a different period.  The policy is detailed as to the
particular   services  or   category  of  services   and  fee  levels  that  are
pre-approved.  Unless  a  service  or  type of  service  to be  provided  by the
independent auditors has received general pre-approval, it will require specific
pre-approval  by the  Audit  Committee.  The  Committee  must also  approve  any
proposed  services  exceeding  the  pre-approved  fee  levels.  The  independent
auditors are required to provide detailed back-up  documentation with respect to
each proposed pre-approved service at the time of approval.  The Audit Committee
may delegate pre-approval authority to one or more of its members. The member or
members to whom such authority has been  delegated must report any  pre-approval
decisions  to the  Audit  Committee  at its next  scheduled  meeting.  The Audit
Committee  does  not  delegate  its  responsibilities  to  pre-approve  services
performed by the independent auditors to management.

SHAREHOLDER PROPOSALS

Proposals of shareholders intended to be presented at the 2005 annual meeting of
the  shareholders  must be received by the Secretary of the  Corporation  at the
Corporation's  principal  office by  November  8,  2004,  for  inclusion  in the
Corporation's 2005 proxy statement and form of proxy relating to that meeting.

Shareholder  proposals,  if any,  intended  to be  presented  at the 2004 annual
meeting that were not submitted for  inclusion in this proxy  statement  will be
considered   untimely  unless  they  were  received  by  the  Secretary  of  the
Corporation at the Corporation's principal office by January 21, 2004.

OTHER MATTERS

The cost of soliciting proxies will be borne by the Corporation.  In addition to
solicitations  by mail,  proxies may be solicited  personally or by telephone or
other electronic  means, but no solicitation  will be made by specially  engaged
employees or paid solicitors.

The Board and  management  are not aware of any matters to be  presented  at the
annual  meeting of the  shareholders  other than the election of the  directors.
However,  if  any  other  matters  properly  come  before  such  meeting  or any
adjournment  thereof,  the holders of the proxies are authorized to vote thereon
at their  discretion,  provided the  Corporation did not have notice of any such
matter on or before January 21, 2004.

                                              By Order of the Board of Directors

Muncie, Indiana                               Larry R. Helms
March 5, 2004                                 Secretary

                                       21
<PAGE>
                                   APPENDIX A

               FIRST MERCHANTS CORPORATION AUDIT COMMITTEE CHARTER

ROLE
----

The Audit  Committee  (the  "Committee")  is appointed by the Board of Directors
(the "Board") of First Merchants  Corporation (the  "Corporation") to assist the
Board:
          1.  In its oversight of the Corporation's  accounting and financial
              reporting  principles and policies and internal accounting and
              disclosure controls and procedures;
          2.  In its oversight and supervision of the Corporation's internal
              audit function;
          3.  In its oversight of the certification of the Corporation's
              quarterly and annual financial statements and disclosures and
              assessment of internal disclosure controls by the Corporation's
              Chief Executive Officer ("CEO") and Chief Financial Officer
              ("CFO");
          4.  In its oversight of the Corporation's consolidated financial
              statements and the independent external audit thereof, including
              the appointing, compensating, overseeing (including resolving any
              disagreements between management and the independent external
              auditor regarding financial reporting); and
          5.  In evaluating the independence of the external auditors.

MEMBERSHIP
----------

The  members  of the  Committee  shall  meet  the  independence  and  experience
requirements  of Nasdaq and any other  applicable  laws and  regulations.  These
requirements  specifically  include  the rules of the  Securities  and  Exchange
Commission ("SEC") regarding audit committee financial experts, as defined.
          1.  The number and names of person determined to be audit committee
              financial experts will be disclosed in the Corporation's annual
              report.
          2.  The Corporation will disclose in the annual report whether the
              audit committee financial experts are independent of management,
              and if not, why.
          3.  If it is determined that the Corporation does not have a financial
              expert on the Committee, it must disclose that fact and explain
              why it does not.
Members of the Committee shall be appointed annually by majority vote of the
Board and will serve until the next annual meeting of the Board.

MEETINGS
--------

The Committee shall meet four times annually or more frequently as circumstances
require:
          1.  To discuss with the Senior Staff Auditor and/or the outsourced
              internal auditor the status of completion of the annual audit plan
              and audit reports arising therefrom.
          2.  To discuss with management the annual audited financial statements
              and quarterly financial results and the required certifications of
              the CEO and CFO.
          3.  At least annually, the Committee will meet separately with the
              internal auditor and the
              independent external auditor, without any members of management
              being present, to discuss matters that the Committee or any of
              these persons or firms believes should be discussed privately.
          4.  The Committee may request any officer or employee of the
              Corporation, or independent counsel, or independent external
              auditors to attend a meeting.

RESPONSIBILITIES
----------------

Overseeing Financial Reporting and Disclosures
The Committee shall:
          1.  Read and approve, prior to filing, the Corporation's annual
              audited financial statements filed with the SEC and consider
              whether they accurately and appropriately reflect their knowledge
              of the financial condition of the Corporation and its results of
              operations. Specific consideration will be given to the accuracy

                                      A-1
<PAGE>
              of the financial statements, off-balance-sheet transactions,
              disclosure of pro forma financial information, and real time
              issuer disclosure matters.
          2.  Determine that management has put in place procedures to report to
              the SEC, changes in Corporation stockholdings by directors,
              executive officers, and more than 10% stockholders of the
              Corporation.
          3.  Ensure that the Corporation has established adequate procedures to
              ensure that quarterly and annual financial statements and
              disclosures are accurate and complete. This will include reviewing
              and approving the quarterly and annual CEO and CFO certifications.
          4.  Determine that the Corporation has complied with requirements of
              the SEC to disclose in periodic reports whether or not the
              Corporation has established a Code of Ethics.
          5.  Determine that the Corporation has complied with requirements of
              the SEC to disclose the approval by the Committee of all non-audit
              services to be performed by the Corporation's independent external
              auditor.

Internal Audit Supervision
The Committee shall:
          1.  Review the appointment of the Senior Staff Auditor and/or
              outsourced internal auditor; and
          2.  Evaluate the effectiveness of the internal audit function.

Independent External Auditor
The Committee shall:
          1.  Recommend the appointment and/or discharge of the independent
              external auditor;
          2.  Pre-approve the external auditor's fees;
          3.  Evaluate the external auditor's independence; and
          4.  Pre-approve all permissible non-audit services to be provided by
              the external auditors.

Internal and External Audit Plans and Results
The Committee shall:
          1.  Review and approve the annual audit plans of the internal audit
              function and the independent external auditor;
          2.  Approve any changes to the annual audit plans;
          3.  Meet with the Senior Staff Auditor and/or outsourced internal
              auditor to discuss the status of completion of the annual internal
              audit plans and the periodic internal audit reports;
          4.  Review with management the results of the independent external
              auditor's quarterly financial statements reviews;
          5.  Review with management and the independent external auditor the
              results of the annual financial statements audit;
          6.  Review with management and the independent external auditor their
              assessment of the quality of the Corporation's accounting
              principles, the adequacy of internal accounting and disclosure
              controls and resolution of identified significant deficiencies or
              material weaknesses and reportable conditions in internal
              accounting and disclosure controls;
          7.  Review compliance with laws and regulations and other audit
              reports deemed significant by the Committee:
          8.  Receive certain communications from the independent external
              auditors on an annual basis which include required communications
              under generally accepted auditing standards; and
          9.  Based on these reviews, the Committee shall make its
              recommendation to the Board as to the inclusion of the audited
              consolidated financial statements in the Corporation's annual
              report on Form 10-K.

Annual Proxy Statement Disclosure
The Committee should report activities to the Board and issue an annual report
to be included in the Corporation's proxy statement. In addition, the Committee
shall re-approve the Committee Charter annually, with a copy of the charter
filed with the SEC every three (3) years, and after any amendments.

                                      A-2
<PAGE>
Fraud Reporting and Handling of Complaints
The Committee shall have the responsibility for establishing procedures for:
          1.  Receipt, retention, and treatment of complaints received by the
              Corporation regarding accounting, internal controls, or auditing
              matters; and
          2.  The confidential, anonymous submission by employees of the
              Corporation of concerns regarding questionable accounting or
              auditing matters.

Regulatory Responsibilities
The Committee shall advise the Board with respect to any significant change in
the BOPEC ratings of the Corporation and/or the CAMELS rating of any subsidiary
bank.

RESOURCES AND AUTHORITY
-----------------------

The Committee shall:
          1.  Meet with the Corporation's general in-house legal counsel, when
              appropriate;
          2.  Retain legal counsel at its discretion; and
          3.  Engage independent legal counsel, auditors, or other advisors as
              it determines necessary to carry out its duties.

FUNDING
-------

The  Corporation  shall  provide the  Committee  with  appropriate  funding,  as
determined by the Committee, for payment of compensation:
          1.  To the registered  independent  external  auditor employed by the
              Corporation for the purpose of rendering or issuing an audit
              report, and
          2.  To any advisors employed by the Committee.

                                      A-3
<PAGE>
                                   APPENDIX B

          FIRST MERCHANTS CORPORATION 2004 EMPLOYEE STOCK PURCHASE PLAN

INTRODUCTION
------------

The First Merchants  Corporation  2004 Employee Stock Purchase Plan (the "Plan")
was  adopted  by the  Board  of  Directors  (the  "Board")  of  First  Merchants
Corporation  (the  "Company")  on December  9, 2003,  subject to approval of the
Company's  shareholders at their annual meeting on April 22, 2004. The effective
date of the Plan shall be July 1, 2004,  if it is approved by the  shareholders.
The purpose of the Plan is to provide eligible  employees of the Company and its
subsidiaries a convenient  opportunity to purchase shares of common stock of the
Company through annual offerings financed by payroll deductions. As used in this
Plan,  "subsidiary" means a corporation or other form of business association of
which  shares (or other  ownership  interests)  having 50% or more of the voting
power are, or in the future become, owned or controlled, directly or indirectly,
by the Company.

The Plan may continue until all the stock  allocated to it has been purchased or
until after the fifth offering is completed, whichever is earlier. The Board may
terminate  the Plan at any time,  or make such  amendment  of the Plan as it may
deem  advisable,  but no  amendment  may be made  without  the  approval  of the
Company's  shareholders  if it  would  materially:  (i)  increase  the  benefits
accruing to  participants  under the Plan;  (ii) modify the  requirements  as to
eligibility for  participation  in the Plan; (iii) increase the number of shares
which may be issued  under the Plan,  (iv)  increase the cost of the Plan to the
Company;  or (v) alter  the  allocation  of Plan  benefits  among  participating
employees.

The Plan is not qualified  under Section 401(a) of the Internal  Revenue Code of
1986  (the  "Code")  and  is  not  subject  to any  provisions  of the  Employee
Retirement Income Security Act of 1974 (ERISA). It is the Company's intention to
have the Plan qualify as an "employee  stock purchase plan" under Section 423 of
the Code,  and the provisions of the Plan shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that Section
of the Code.

ADMINISTRATION
--------------

The Plan is administered by the Compensation and Human Resources  Committee (the
"Committee"),  which consists of two or more members of the Board,  none of whom
are  eligible  to  participate  in the Plan  and all of whom  are  "non-employee
directors,"  as such term is defined in Rule  16b-3(b)(3)  of the Securities and
Exchange Commission,  under the Securities Exchange Act of 1934, as amended (the
"1934  Act").  The  Committee  shall  prescribe  rules and  regulations  for the
administration  of the Plan and  interpret  its  provisions.  The  Committee may
correct any defect,  reconcile any inconsistency or resolve any ambiguity in the
Plan. The actions and determinations of the Committee on matters relating to the
Plan are  conclusive.  The Committee and its members may be addressed in care of
the Company at its principal  office.  The members of the Committee do not serve
for fixed periods but may be appointed or removed at any time by the Board.

STOCK SUBJECT TO THE PLAN
-------------------------

An  aggregate  of 400,000  shares of common  stock,  without  par value,  of the
Company (the "Common Stock") is available for purchase under the Plan. Shares of
Common  Stock  which are to be  delivered  under the Plan may be obtained by the
Company by authorized  purchases on the open market or from private sources,  or
by issuing  authorized but unissued  shares of Common Stock. In the event of any
change in the Common  Stock  through  recapitalization,  merger,  consolidation,
stock dividend or split,  combination  or exchanges of shares or otherwise,  the
Committee  may  make  such  equitable  adjustments  in the  Plan  and  the  then
outstanding  offering as it deems necessary and appropriate  including,  but not
limited to,  changing  the number of shares of Common Stock  reserved  under the
Plan and the price of the  current  offering.  If the number of shares of Common
Stock that  participating  employees become entitled to purchase is greater than
the number of shares of Common Stock  available,  the available  shares shall be
allocated by the Committee among such participating  employees in such manner as

                                      B-1
<PAGE>
it deems fair and  equitable.  No  fractional  shares of Common  Stock  shall be
issued or sold under the Plan.

ELIGIBILITY
-----------

All employees of the Company and such of its subsidiaries as shall be designated
by the Committee  will be eligible to participate in the Plan. No employee shall
be eligible to  participate  in the Plan if his or her  customary  employment is
less than 20 hours per week. No employee  shall be eligible to participate in an
offering  unless he or she has been  continuously  employed  by the  Company  or
subsidiary  for at least six  months as of the  first day of such  offering.  No
employee shall be eligible to participate in the Plan if,  immediately  after an
option is granted under the Plan,  the employee owns more than five percent (5%)
of the total  combined  voting  power or value of all  classes  of shares of the
Company or of any parent or subsidiary of the Company.

OFFERINGS, PARTICIPATING, DEDUCTIONS
------------------------------------

The  Company  may  make up to five  offerings  of 12  months'  duration  each to
eligible employees to purchase Common Stock under the Plan. An eligible employee
may  participate  in such offering by authorizing at any time prior to the first
day of such  offering  a payroll  deduction  for such  purpose  in whole  dollar
amounts,  up to a maximum of twenty  percent (20%) of his or her basic salary or
wages, excluding any bonus,  overtime,  incentive or other similar extraordinary
remuneration received by such employee. The Committee may at any time suspend an
offering if required by law or if  determined by the Committee to be in the best
interests of the Company.

The Company will maintain or cause to be maintained  payroll deduction  accounts
for all  participating  employees.  All funds received or held by the Company or
its subsidiaries  under the Plan may be, but need not be,  segregated from other
corporate funds.  Payroll  deduction  accounts will be credited with interest at
such rates and intervals as the Committee shall determine from time to time. Any
balance  remaining in any employee's  payroll deduction account at the end of an
offering period will be refunded to the employee.

Each  participating  employee  will  receive a  statement  of his or her payroll
deduction  account and the number of shares of Common Stock purchased  therewith
following the end of each offering period.

Subject to rules, procedures and forms adopted by the Committee, a participating
employee  may at any time  during the  offering  period  increase,  decrease  or
suspend his or her payroll deduction,  or may withdraw the entire balance of his
or her payroll deduction  account and thereby withdraw from  participation in an
offering.  Under  the  initial  rules  established  by  the  Committee,  payroll
deductions  may not be  altered  more  than  once in each  offering  period  and
withdrawal  requests may be received on or before the last day of such offering.
In the event of a participating  employee's retirement,  death or termination of
employment, his or her participation in any offering under the Plan shall cease,
no further  amounts shall be deducted  pursuant to the Plan,  and the balance in
the  employee's  account shall be paid to the employee,  or, in the event of the
employee's death, to the employee's beneficiary designated on a form approved by
the Committee (or, if the employee has not  designated a beneficiary,  to his or
her estate).

PURCHASE, LIMITATIONS, PRICE
----------------------------

Each employee  participating  in any offering  under the Plan will be granted an
option,  upon the effective  date of such  offering,  for as many full shares of
Common Stock as the amount of his or her payroll deduction account at the end of
any offering period can purchase. No employee may be granted an option under the
Plan which  permits his or her rights to purchase  Common  Stock under the Plan,
and any other stock  purchase  plan of the Company or a parent or  subsidiary of
the Company  qualified  under Section 423 of the Code, to accrue at a rate which
exceeds  $25,000 of Fair Market  Value of such Common Stock  (determined  at the
time the  option is  granted)  for each  calendar  year in which  the  option is
outstanding at any time. As of the last day of the offering period,  the payroll
deduction  account of each  participating  employee  shall be  totaled.  If such
account contains  sufficient funds to purchase one or more full shares of Common
Stock as of that date,  the employee shall be deemed to have exercised an option

                                      B-2
<PAGE>
to purchase  the largest  number of full shares of Common  Stock at the offering
price.  Such  employee's  account will be charged for the amount of the purchase
and the employee's  book entry stock account will be credited with the number of
shares of Common Stock purchased.

The Committee  shall  determine the purchase price of the shares of Common Stock
which are to be sold under each offering, which price shall be the lesser of (i)
an amount  equal to 85 percent of the Fair Market  Value of the Common  Stock at
the time such  option is granted,  or (ii) an amount  equal to 85 percent of the
Fair  Market  Value of the Common  Stock at the time such  option is  exercised.
"Fair Market Value" of a share of Common Stock on a given date is defined as the
last reported sale price of a share on such date, or if no sale took place,  the
last  reported  sale price of a share of stock on the most recent day on which a
sale of a share of stock took place as  recorded on the Nasdaq  Stock  Market or
national  securities exchange on which the Common Stock of the Company is listed
on such date.  If the Common  Stock of the Company  isn't listed on such date on
the Nasdaq Stock Market or a national securities  exchange,  "Fair Market Value"
is defined as the fair  market  value of a share on such date as  determined  in
good faith by the Committee.

STOCK ACCOUNTS, TRANSFER OF INTERESTS
-------------------------------------

Shares of Common Stock purchased under the Plan may be registered in the name of
a  nominee  or held in such  other  manner  as the  Committee  determines  to be
appropriate.   A  book  entry  stock  account  will  be   established   in  each
participating   employee's  name.  Each  participating   employee  will  be  the
beneficial  owner of the Common Stock  purchased  under the Plan and credited to
his or her  stock  account,  and he or she will have all  rights  of  beneficial
ownership in such Common Stock.  The Company or its nominee will retain  custody
of the Common Stock  purchased  under the Plan until  specifically  requested in
writing by the participating  employee to be sold,  transferred or delivered.  A
participating employee may request that a stock certificate, representing all or
part of the shares of Common  Stock  credited  to his or her stock  account,  be
issued and delivered to the participating employee at any time.

No option, right or benefit under the Plan may be transferred by a participating
employee  other than by will or the laws of descent  and  distribution,  and all
options,  rights  and  benefits  under  the Plan  may be  exercised  during  the
participating  employee's  lifetime  only by  such  employee  or the  employee's
guardian or legal representative.  There are no restrictions imposed by or under
the Plan upon the resale of shares of Common Stock issued under the Plan.

Certain officers of the Company are subject to restrictions  under Section 16(b)
of the 1934 Act. With respect to such officers,  transactions under the Plan are
intended  to  comply  with  all  applicable  conditions  of  Rule  16b-3  or its
successors under the 1934 Act. To the extent any provision of the Plan or action
by the  Committee  fails  to so  comply,  it shall  be  deemed  null and void if
permitted by law and deemed advisable by the Committee.

Beneficial  ownership of the shares of Common Stock purchased under the Plan may
be held only in the name of the participating  employee, or, if such employee so
indicates on his or her  authorization  form,  in his or her name jointly with a
member  of his or her  family,  with  right  of  survivorship.  A  participating
employee who is a resident of a  jurisdiction  which does not  recognize  such a
joint tenancy may hold shares in the employee's  name as tenant in common with a
member of his or her family, without right of survivorship.

                                      B-3

<PAGE>

                       ANNUAL MEETING OF SHAREHOLDERS OF

                          FIRST MERCHANTS CORPORATION

                                 April 22, 2004

                           Please date, sign and mail
                             your proxy card in the
                           envelope provided as soon
                                  as possible.

   v Please detach along perforated line and mail in the envelope provided. v
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
      THE BOARD OF DIRECTORS AND MANAGEMENT OF FIRST MERCHANTS CORPORATION
                  RECOMMEND A VOTE "FOR" THE PROPOSALS LISTED.
        PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
          PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
--------------------------------------------------------------------------------

1.    Election of Directors:

                                  NOMINEES:
|_| FOR ALL NOMINEES              ( ) Michael L. Cox
                                  ( ) Norman M. Johnson
|_| WITHHOLD AUTHORITY            ( ) Thomas D. McAuliffe
    FOR ALL NOMINEES              ( ) Robert M. Smitson

|_| FOR ALL EXCEPT
    (See Instructions below)

INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark
              "FOR ALL EXCEPT" and fill in the circle next to each nominee you
              wish to withhold, as shown here: (X)
--------------------------------------------------------------------------------



--------------------------------------------------------------------------------
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please             |_|
note that changes to the registered name(s) on the account may not
be submitted via this method.
--------------------------------------------------------------------------------
                                                       FOR    AGAINST    ABSTAIN
2.    Proposal to approve the First Merchants          |_|      |_|        |_|
      Corporation 2004 Employee Stock Purchase Plan.

                                                       FOR    AGAINST    ABSTAIN
3.    Proposal to ratify the appointment of the        |_|      |_|        |_|
      firm of BKD, LLP as the independent public
      accountants for 2004.

4.    In their discretion, the proxies are authorized to vote on such other
      matters as may properly come before the meeting, provided the Corporation
      did not have notice of any such matter on or before January 21, 2004.

This proxy will be voted as directed, but if not otherwise directed this proxy
will be voted "FOR" Items 1, 2 and 3.

TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' AND MANAGEMENT'S
RECOMMENDATIONS, JUST SIGN BELOW; NO BOXES NEED TO BE CHECKED.

      MARK "X" HERE IF YOU PLAN TO ATTEND THE MEETING. |_|

                         _________________________________        ______________

Signature of Shareholder _________________________________  Date: ______________

                         _________________________________        ______________

Signature of Shareholder _________________________________  Date: ______________

Note: Please sign exactly as your name or names appear on this Proxy. When
      shares are held jointly, each holder should sign. When signing as
      executor, administrator, attorney, trustee or guardian, please give full
      title as such. If the signer is a corporation, please sign full corporate
      name by duly authorized officer, giving full title as such. If signer is a
      partnership, please sign in partnership name by authorized person.

<PAGE>

                                     PROXY

                          FIRST MERCHANTS CORPORATION

                          PROXY SOLICITED ON BEHALF OF
             THE BOARD OF DIRECTORS OF FIRST MERCHANTS CORPORATION
                         ANNUAL MEETING OF SHAREHOLDERS

                                 APRIL 22, 2004

      The undersigned hereby appoints Clell W. Douglass and Hamer D. Shafer, and
each of them, as proxies with power of substitution, to represent and to vote
all shares of common stock of First Merchants Corporation which the undersigned
would be entitled to vote at the Annual Meeting of Shareholders of First
Merchants Corporation to be held at the Horizon Convention Center, 401 South
High Street, Muncie, Indiana 47305, at 3:30 PM EST on April 22, 2004, and at any
adjournment thereof, with all of the powers the undersigned would possess if
personally present. If any of the nominees for election as Directors is unable
or declines to serve for any reason, the persons listed above have the authority
to vote for any substitute nominee named by the Board of Directors of First
Merchants Corporation.

      (Continued, and to be marked, dated and signed on the reverse side)

<PAGE>

                       ANNUAL MEETING OF SHAREHOLDERS OF

                          FIRST MERCHANTS CORPORATION

                                 April 22, 2004

                           -------------------------
                           PROXY VOTING INSTRUCTIONS
                           -------------------------

MAIL - Date, sign and mail your proxy card in the
envelope provided as soon as possible.

                     - OR -
                                                    ----------------------------
TELEPHONE - Call toll-free 1-800-PROXIES from any   COMPANY NUMBER
touch-tone telephone and follow the instructions.   ----------------------------
Have your proxy card available when you call.       ACCOUNT NUMBER
                                                    ----------------------------

                     - OR -                         ----------------------------

INTERNET - Access "www.voteproxy.com" and follow
the on-screen instructions. Have your proxy card
available when you access the web page.

    Please detach along perforated line and mail in the envelope provided IF
  v            you are not voting via telephone or the Internet.             v
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
      THE BOARD OF DIRECTORS AND MANAGEMENT OF FIRST MERCHANTS CORPORATION
                  RECOMMEND A VOTE "FOR" THE PROPOSALS LISTED.
        PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
          PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
--------------------------------------------------------------------------------

1.    Election of Directors:

                                  NOMINEES:
|_| FOR ALL NOMINEES              ( ) Michael L. Cox
                                  ( ) Norman M. Johnson
|_| WITHHOLD AUTHORITY            ( ) Thomas D. McAuliffe
    FOR ALL NOMINEES              ( ) Robert M. Smitson

|_| FOR ALL EXCEPT
    (See Instructions below)

INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark
              "FOR ALL EXCEPT" and fill in the circle next to each nominee you
              wish to withhold, as shown here: (X)
--------------------------------------------------------------------------------



--------------------------------------------------------------------------------
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please             |_|
note that changes to the registered name(s) on the account may not
be submitted via this method.
--------------------------------------------------------------------------------
                                                       FOR    AGAINST    ABSTAIN
2.    Proposal to approve the First Merchants          |_|      |_|        |_|
      Corporation 2004 Employee Stock Purchase Plan.

                                                       FOR    AGAINST    ABSTAIN
3.    Proposal to ratify the appointment of the        |_|      |_|        |_|
      firm of BKD, LLP as the independent public
      accountants for 2004.

4.    In their discretion, the proxies are authorized to vote on such other
      matters as may properly come before the meeting, provided the Corporation
      did not have notice of any such matter on or before January 21, 2004.

This proxy will be voted as directed, but if not otherwise directed this proxy
will be voted "FOR" Items 1, 2 and 3.

TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' AND MANAGEMENT'S
RECOMMENDATIONS, JUST SIGN BELOW; NO BOXES NEED TO BE CHECKED.

      MARK "X" HERE IF YOU PLAN TO ATTEND THE MEETING. |_|

                         _________________________________        ______________

Signature of Shareholder _________________________________  Date: ______________

                         _________________________________        ______________

Signature of Shareholder _________________________________  Date: ______________

Note: Please sign exactly as your name or names appear on this Proxy. When
      shares are held jointly, each holder should sign. When signing as
      executor, administrator, attorney, trustee or guardian, please give full
      title as such. If the signer is a corporation, please sign full corporate
      name by duly authorized officer, giving full title as such. If signer is a
      partnership, please sign in partnership name by authorized person.

<PAGE>

                                     PROXY

                          FIRST MERCHANTS CORPORATION

                          PROXY SOLICITED ON BEHALF OF
             THE BOARD OF DIRECTORS OF FIRST MERCHANTS CORPORATION
                         ANNUAL MEETING OF SHAREHOLDERS

                                 APRIL 22, 2004

      The undersigned hereby appoints Clell W. Douglass and Hamer D. Shafer, and
each of them, as proxies with power of substitution, to represent and to vote
all shares of common stock of First Merchants Corporation which the undersigned
would be entitled to vote at the Annual Meeting of Shareholders of First
Merchants Corporation to be held at the Horizon Convention Center, 401 South
High Street, Muncie, Indiana 47305, at 3:30 PM EST on April 22, 2004, and at any
adjournment thereof, with all of the powers the undersigned would possess if
personally present. If any of the nominees for election as Directors is unable
or declines to serve for any reason, the persons listed above have the authority
to vote for any substitute nominee named by the Board of Directors of First
Merchants Corporation.

      (Continued, and to be marked, dated and signed on the reverse side)