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

[ ]  Confidential,  for Use of the  Commission  Only  [as  permitted  by Rule
     14a-6(e)(2)]

[X]  Definitive Proxy Statement

[ ]  Definitive Additional Materials

[ ]  Soliciting Material Pursuant toss. 240.14a-11(c) orss. 240.14a-12


                           FIRST MERCHANTS CORPORATION
                (Name of Registrant as Specified In Its Charter)


 ________________________________, AS AGENT FOR FIRST MERCHANTS CORPORATION
    (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)(1) and 0-11.

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

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

     2)   Aggregate number of securities to which transaction applies:

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


<PAGE>


     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):

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

     4)   Proposed maximum aggregate value of transaction:

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

     5)   Total fee paid:

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

[ ]  Fee paid previously with preliminary materials.




[ ]  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.

     1)   Amount Previously Paid:

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

     2)   Form, Schedule or Registration Statement No.:

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

     3)   Filing Party:

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

     4)   Date Filed:

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








<PAGE>


                           FIRST MERCHANTS CORPORATION
                             200 EAST JACKSON STREET
                              MUNCIE, INDIANA 47305


                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD APRIL 12, 2000


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 Wednesday,  April 12, 2000, at 3:30 p.m. for
the following purposes:

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

(2)  To ratify the  appointment of the firm of Olive LLP as  independent  public
     accountants for 2000.

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

Only those  shareholders of record at the close of business on February 16, 2000
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
February 23, 2000




                   IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY

             IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE
               MEETING, YOU ARE URGED TO SIGN, DATE AND RETURN THE
             ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NO POSTAGE IS
                    REQUIRED IF MAILED IN THE UNITED STATES.



<PAGE>


                                                               February 23, 2000

                           FIRST MERCHANTS CORPORATION

                                 PROXY STATEMENT
                                       FOR
                         ANNUAL MEETING OF SHAREHOLDERS

                            TO BE HELD APRIL 12, 2000


This Proxy  Statement is furnished in connection  with the  solicitation  of the
enclosed  proxy by and on behalf of the Board of  Directors  of First  Merchants
Corporation (the "Corporation") for use at the annual meeting of shareholders of
the  Corporation  to be held April 12,  2000.  The  distribution  of these proxy
materials is expected to commence on February 23, 2000.

Any shareholder  giving a proxy has the right to revoke it any time before it is
exercised by written notice to the Secretary received prior to the meeting or 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 in favor of Items 1 and 2.

VOTING SECURITIES

Only  shareholders  of record at the close of business on February 16, 2000 will
be entitled to notice of and to vote at the annual meeting. The number of shares
of common  stock  outstanding  and  entitled  to vote as of February 1, 2000 was
10,943,688.

Each  share of the  Corporation's  common  stock is  entitled  to one vote.  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 being  submitted to
the shareholders for their consideration. The Secretary will count the votes and
announce  at the meeting  the number  voting for and  against  each item and the
number  abstaining.  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.

The Corporation's subsidiaries held 1,220,686 shares of the Corporation's common
stock as of  February  1, 2000 in  various  fiduciary  capacities,  in  regular,
nominee  or street  name  accounts,  consisting  of 11.15% 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 said 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

Three directors will be elected at the annual meeting.

The  persons  named  below  have been  nominated  for  election  to the Board of
Directors  (the  "Board"),  with terms expiring as of the 2003 annual meeting of
shareholders. All of the nominees are currently members of the Board.

Those persons nominated as directors include:



<PAGE>


<TABLE>
<CAPTION>
Name and Age                            Present Occupation                                           Director Since
------------                            ------------------                                           --------------
<S>                                     <C>                                                               <C>
Class III (Terms expire 2003):
James F. Ault;(1)                       Chairman of the Board, The Madison Community                      1999
age 64                                  Bank ("Madison"), a wholly-owned subsidiary of the
                                        Corporation, and Retired executive of General Motors
                                        Corporation

Frank A. Bracken;                       Of Counsel, Bingham Summers Welsh & Spilman,                      1994
age 65                                  Attorneys

Barry J. Hudson;(1)                     Chairman of the Board and Chief Executive Officer,                1999
age 59                                  First National Bank of Portland ("First National"), a
                                        wholly-owned subsidiary of the Corporation

Those persons named below continue to serve as directors:

Class I (Terms expire 2001):

Michael L. Cox;                         President and Chief Executive Officer of the                      1984
age 55                                  Corporation and First Merchants Bank, National
                                        Association ("First Merchants"), a wholly-owned
                                        subsidiary of the Corporation

Norman M. Johnson;                      Retired Executive Vice President, Stein Roe &                     1996
age 65                                  Farnham, Investment Counsel

George A. Sissel;                       Chairman of the Board and Chief Executive Officer,                1995
age 63                                  Ball Corporation (Ball Corporation manufactures metal
                                        and plastic packaging products and technology
                                        products and services.)

Robert M. Smitson;                      Chairman of the Board, Maxon Corporation (Maxon                   1982
age 63                                  Corporation designs and manufactures specialty
                                        industrial combustion systems and valves.)
Class II (Terms expire 2002):

Stefan S. Anderson                      Chairman of the Board of the Corporation and First                1982
age 65                                  Merchants

Thomas B. Clark;                        President and Chief Executive Officer,  Alltrista                 1989
age 54                                  Corporation (Alltrista Corporation manufactures metal
                                        and plastic products.)

David A. Galliher;                      President, Wm. A. Didier & Sons, Inc. (Wm. A. Didier              1982
age 67                                  & Sons, Inc. manufactures credit cards.)

John E. Worthen;                        President, Ball State University                                  1987
age 66
</TABLE>

(1)  Under Agreements of  Reorganization  and Merger between the Corporation and
     Jay Financial  Corporation,  and among the Corporation,  Pendleton  Banking
     Company ("Pendleton"),  and Anderson Community Bank ("Anderson"), the Board
     appointed  Messrs.  Hudson and Ault as members of the Board on May 11, 1999
     and agreed to nominate  them for election to full 3-year terms as directors
     at the 2000 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


                                      -2-
<PAGE>


CEO from 1982 to 1999, and he was President of First Merchants from 1979 to 1996
and CEO from 1979 to 1999.  Mr.  Ault  became  Chairman of the Board of Anderson
when it was formed in 1995,  and he became  Chairman  of the Board of Madison in
1999 when  Anderson  was merged  into  Pendleton  to form  Madison.  Mr. Cox was
Executive Vice  President of the  Corporation  and First  Merchants from 1994 to
1996.  He  became  President  of  First  Merchants  in  1996,  President  of the
Corporation  in 1998, and CEO of both in 1999. Mr. Hudson has served as Chairman
of the Board and CEO of First  National since 1982, and he was also President of
First National from 1982 to 1998. Mr. Smitson was President of Maxon Corporation
from 1979 to 1997, Chief Executive  Officer from 1985 to 1998, and Vice Chairman
of the Board from 1989 to 1998.

Messrs. Bracken and Sissel are also directors of Ball Corporation.  Mr. Clark is
also a director of Alltrista Corporation,  and Dr. Worthen is also a director of
Indiana Energy, Inc.


CERTAIN COMMITTEES OF THE BOARD

The Corporation's  Executive Committee functions as a nominating  committee.  It
recommends to the Board:  (a) candidates to fill any vacancies on the Board, and
(b) a slate of  directors  to be  elected  each year at the  annual  meeting  of
shareholders.  The Committee will consider nominees recommended by shareholders.
Any such  recommendation  should be in writing and  addressed to the  Secretary,
First Merchants Corporation, 200 East Jackson Street, Muncie, Indiana 47305. The
members of the Executive  Committee are Messrs.  Smitson  (Chairman),  Anderson,
Bracken,  Clark, Cox, and Sissel. John W. Hartmeyer,  who is a director of First
Merchants,  serves  as a  non-voting  member  of the  Committee.  The  Executive
Committee met 2 times during 1999.

The  Corporation  has an Audit  Committee whose functions are: (a) to assist the
Board in fulfilling its  responsibilities  related to  accounting,  auditing and
financial reporting functions; (b) to review or cause to be reviewed all reports
of  examination  made by  banking  authorities;  (c) to meet  with the  internal
auditors and to make or cause to be made internal examinations and audits of the
affairs of the Corporation and its  subsidiaries;  (d) to meet with the external
auditors  and to review the scope and  results of  external  audits;  and (e) to
consult with management on the selection of the independent  public  accountants
to serve as external  auditors  for the ensuing  year.  The members of the Audit
Committee are Messrs. Galliher (Chairman),  Anderson, Clark, Worthen and Michael
D.  Wickersham,  who is retiring as a director of the Corporation as of the 2000
annual meeting. Suzanne L. Gresham and Nelson W. Heinrichs, who are directors of
First Merchants, George R. Likens, who is a director of Madison, Gerald S. Paul,
who is a director of the Corporation's wholly-owned subsidiary, The Union County
National  Bank of  Liberty  ("Union  County"),  and  Daniel  Eichhorn,  who is a
director of the Corporation's wholly-owned subsidiary, First United Bank ("First
United"),  serve as non-voting members of the Committee. The Audit Committee met
4 times during 1999.

The Corporation has a Compensation  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  Compensation  Committee to the chief
executive  officers of the  subsidiaries.  The Committee is responsible  for the
administration of the Corporation's  incentive compensation and stock plans. The
members of the Compensation Committee are Messrs. Smitson (Chairman),  Anderson,
Bracken,  Clark and Johnson.  Mr. Hartmeyer serves as a non-voting member of the
Committee. The Compensation Committee met 4 times during 1999.


MEETINGS OF THE BOARD

The Board of Directors  held 4 meetings  during 1999.  The only  director of the
Corporation  who attended  fewer than 75% of the total number of meetings of the
Board and the committees on which he served was Mr. Clark, who attended 10 of 14
meetings (71.4%).


                                      -3-
<PAGE>


COMPENSATION OF DIRECTORS

The directors of the Corporation who were employees of the Corporation or one of
its  subsidiaries  received  no  separate  compensation  for their  services  as
directors in 1999, except as follows: Mr. Hudson's  compensation included $5,292
for his services as a director of First  National,  of which $4,356 was deferred
compensation under an insurance-funded  deferred compensation plan maintained by
First  National,  and he was paid  $20,755  for his  services as Chairman of the
Board of Directors of First National. Following his April 16, 1999 retirement as
Chief Executive Officer of the Corporation and First Merchants, Mr. Anderson was
paid a retainer based on an annual amount of $12,000  ($8,500 for the balance of
1999) for his  continuing  services as Chairman of the Board of Directors of the
Corporation  and a retainer  based on an annual amount of $8,000 ($5,667 for the
balance of 1999) for  continuing  to serve as Chairman of the Board of Directors
of  First  Merchants.  The  other  directors  of the  Corporation  who  were not
employees  were paid an annual  retainer of $5,000 in 1999. The directors of the
Corporation who were not employees received $400 for each Board meeting and $250
for each committee  meeting they  attended,  except that the Board and committee
chairmen  were paid 150% of the regular  meeting  fee. Mr.  Smitson  serves as a
director of First Merchants, for which he was paid a retainer of $3,400 and $400
for each Board meeting he attended.  Messrs. Anderson, Smitson and Worthen serve
on committees of First  Merchants and were paid $250 for each committee  meeting
they attended,  except that Mr. Smitson received 150% of the regular meeting fee
for his services as Chairman of the First Merchants Executive Committee. For his
services as a director and  Chairman of the Board of  Directors of Madison,  Mr.
Ault was paid $250 for each Board  meeting  and $50 for each  committee  meeting
that he attended.  For his services as a director and Chairman of the  Executive
Committee of Union  County,  Mr.  Johnson was paid a retainer of $4,200 and $350
for each Board and Executive  Committee  meeting he attended.  Union County also
paid him a bonus of $900 and provided him life insurance  coverage in the amount
of $50,000 for these services.

On July 1, 1999,  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  1,000 shares of the  Corporation's  common stock at an option price of
$23.8125 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  1999,  one (1) of the  Corporation's
directors participated in the plan, deferring fees totaling $10,000.


COMPENSATION OF EXECUTIVE OFFICERS

The tables in this section of the Proxy Statement contain information concerning
the compensation of the  Corporation's  Chief Executive  Officers and its 4 most
highly compensated executive officers other than the Chief Executive Officers as
of the  Corporation's  most recent  fiscal year-end,  December  31,  1999.
Mr. Anderson  served  as  the  Corporation's   Chief  Executive  Officer until
his retirement on April 16, 1999, when Mr. Cox became the Chief Executive
Officer; therefore,  compensation  information  is provided with respect to both
of them.  The  information in these tables  concerning  stock options has been
adjusted to give retroactive effect to the 3-for-2 common stock split which was
effective at the close of  business on October  23,  1998 for  shareholders  of
record at the close of business on October 16, 1998.

Summary Compensation Table

The following table contains information concerning the compensation paid by the
Corporation  and its  subsidiaries  for the  years  1997,  1998  and 1999 to the
Corporation's  Chief  Executive  Officers  and  its 4  most  highly  compensated
executive officers other than the Chief Executive Officers.


                                      -4-
<PAGE>


                                                SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                   Annual Compensation        Long Term Compensation
                                                   -------------------        ----------------------
                                                                                       Awards
                                                                              ----------------------
   Name and                                                                          Securities
   Principal                                                                         Underlying              All Other
   Position                               Year        Salary          Bonus            Options            Compensation(1)
                                                        ($)            ($)                (#)                    ($)
-------------------------------------     ----       --------        ------   ----------------------      ----------------

<S>                                       <C>        <C>             <C>                   <C>                    <C>
   Stefan S. Anderson,                    1999        86,333         19,941                1,000                  1,073
     Chairman of the Board and Chief      1998       215,562         54,600                4,500                  2,000
     Executive Officer (CEO  until        1997       197,721         53,323                5,250                  2,000
     April 16, 1999), Corporation and
     First Merchants

   Michael L. Cox                         1999       194,105         56,772               10,000                  2,375
     President and Chief Executive        1998       165,691         43,432                4,950                  2,000
     Officer (CEO since April 16,         1997       153,461         44,985                5,250                  1,875
     1999), Corporation and First
     Merchants

   Ted J. Montgomery                      1999       126,095         17,753                2,000                  1,534
     Senior Vice President,               1998       143,674         27,440                3,600                  1,733
     Corporation; (also, President,       1997       143,674         26,684                3,900                  3,077
     Union County, until September 3,
     1999)

   Charles R. Phillips                    1999       129,868         24,346                5,000                    427
     Senior Vice President,               1998        34,463          5,381                5,250                      0
     Corporation and First Merchants(2)

   Larry R. Helms                         1999       106,654         19,898                5,000                  1,298
     Senior Vice President,               1998       102,958         17,220                3,000                  1,250
     Corporation and First Merchants;     1997        99,793         18,653                3,450                  1,211
     General Counsel and Secretary,
     Corporation

   James L. Thrash,                        1999      100,421         18,787                5,000                    980
     Senior Vice President, Corporation    1998       96,974         16,307                3,000                    947
     and First Merchants; Chief Finan-     1997       93,402         17,556                3,450                    912
     cial Officer, Corporation
</TABLE>

(1)  Represents  employer  matching  contributions  for  fiscal  year  to  First
     Merchants Corporation  Retirement Savings Plan (a Section 401(k) plan); for
     Mr.  Montgomery,  this amount also includes employer ESOP  contributions to
     Union County  National Bank  Employees'  Stock Ownership Plan. The Plan was
     terminated as of June 30, 1997.

(2)  Mr.  Phillips was employed by First Merchants as a Senior Vice President on
     September  21,  1998,  and  he  became  a  Senior  Vice  President  of  the
     Corporation on April 14, 1999.


                                      -5-
<PAGE>


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 1999 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.

<TABLE>
<CAPTION>
                                       OPTION GRANTS IN LAST FISCAL YEAR(1)

                                        Individual Grants                                     Potential Realizable
------------------------------------------------------------------------------------------    Value at Assumed an
                                                                                              nual Rates of Stock Price
                                                                                              Appreciation for Option
                                                                                              Term
                             Number of Se   Percent  of                                       -------------------------
                            curities Under  Total  Options
                             lying Options  Granted to
                                Granted     Employees in      Exercise
                                  (#)       Fiscal Year        Price
Name                                                           ($/Sh)      Expiration Date      5%($)            10%($)
----------------------      --------------  --------------    --------     ---------------    -------           -------

<S>                             <C>               <C>         <C>            <C>              <C>               <C>
Stefan S. Anderson (2)               0

Michael L. Cox                  10,000            8.96        22.7500        July 29, 2009    143,325           361,725

Ted J. Montgomery                2,000            1.79        22.7500        July 29, 2009     28,665            72,345

Charles R. Phillips              5,000            4.48        22.7500        July 29, 2009     71,663           180,863

Larry R. Helms                   5,000            4.48        22.7500        July 29, 2009     71,663           180,863

James L. Thrash                  5,000            4.48        22.7500        July 29, 2009     71,663           180,863
</TABLE>

(1)  The options  listed in the table were  granted on July 29,  1999.  They are
     exercisable as follows:  Mr. Cox's option is exercisable  for 325 shares on
     or after January 29, 2000,  4,395 shares on or after January 1, 2001, 4,395
     shares on or after  January 1, 2002,  and 885 shares on or after January 1,
     2003; Mr.  Montgomery's  option is exercisable for 2,000 shares on or after
     January 29, 2000; Mr.  Phillips'  option is exercisable for 3,094 shares on
     or after January 29, 2000 and 1,906 shares on or after January 1, 2001; and
     Messrs.  Helms' and Thrash's options are exercisable for 4,395 shares on or
     after January 29, 2000 and 605 shares on or after January 1, 2001.  None of
     the options is exercisable after July 29, 2009.

(2)  Mr.  Anderson was not awarded any options  during 1999 while serving as the
     Corporation's  Chief Executive Officer prior to his retirement on April 16,
     1999.  However,  as a non-employee  director of the  Corporation on July 1,
     1999,  he was  automatically  awarded  an option  under the 1999  Long-term
     Equity Incentive Plan, exercisable after January 1, 2000 but not after July
     1, 2009, to purchase 1,000 shares of the  Corporation's  common stock at an
     option  price of $23.8125  per share,  the market  price on the date of the
     grant.

Aggregated Option Exercises and Fiscal Year-End Option Value Table

The following table contains  information  concerning (1) each exercise of stock
options  during 1999 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, 1999 of each of the named executive  officer's  unexercised options
on an aggregated basis.



                                      -6-
<PAGE>


<TABLE>
<CAPTION>
                                       AGGREGATED OPTION EXERCISES IN LAST FISCAL
                                         YEAR AND FISCAL YEAR-END OPTION VALUES

                                Shares                            Number of Securities          Value of Unexercised
                               Acquired                          Underlying Unexercised         In-the-Money Options
                                  on              Value         Options at Fiscal Year-End        at Fiscal Year-End
                               Exercise         Realized                  (#)                           ($)
Name                              (#)             ($)          Exercisable/Unexercisable     Exercisable/Unexercisable
-------------------            --------         --------       ---------------------------   -------------------------
<S>                              <C>             <C>                <C>         <C>              <C>          <C>
Stefan S. Anderson               14,849          209,272            26,700  /   1,000            213,700  /   2,438

Michael L. Cox                        0                0            39,712  /  13,225            417,192  /  35,000

Ted J. Montgomery                     0                0            11,250  /   2,000             58,612  /   7,000

Charles R. Phillips                   0                0             4,050  /   6,200              6,412  /  19,400

Larry R. Helms                        0                0            20,924  /   5,000            186,332  /  17,500

James L. Thrash                       0                0             3,000  /   5,000                  0  /  17,500
</TABLE>


Pension Plans

The  Corporation  has a  qualified  defined  benefit  pension  plan - the  First
Merchants  Corporation  Retirement  Pension  Plan - covering,  in  general,  all
full-time  employees of the  Corporation and its  subsidiaries.  The Corporation
also has a  nonqualified  plan - the First  Merchants  Corporation  Supplemental
Executive  Retirement  Plan - which 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, 1998, $160,000 is the maximum amount
of  compensation  that can be  considered  for purposes of  calculating  pension
benefits accruing under the qualified plan.

The following table shows the estimated  annual benefits payable upon retirement
at age 65 to  persons  born in 1942  (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         $     35,644        $     47,525         $     59,406        $     59,406         $     59,406
     150,000               43,519              58,025               72,531              72,531               72,531
     175,000               51,394              68,525               85,656              85,656               85,656
     200,000               59,269              79,025               98,781              98,781               98,781
     225,000               67,144              89,525              111,906             111,906              111,906
     250,000               75,019             100,025              125,031             125,031              125,031
     300,000               90,769             121,025              151,281             151,281              151,281
     350,000              106,519             142,025              177,531             177,531              177,531
</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,  including  Messrs.  Anderson and Helms, are entitled to a pension benefit
calculated  under  the  formula  that was in  effect  prior to 1990 if that will
produce a greater  benefit.  The  following  table  shows the  estimated  annual
benefits  payable upon retirement at age 65 under the formula that was in effect
prior to 1990


                                      -7-
<PAGE>


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 (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
     175,000               52,500              70,000               87,500              87,500               87,500
     200,000               60,000              80,000              100,000             100,000              100,000
     225,000               67,500              90,000              112,500             112,500              112,500
     250,000               75,000             100,000              125,000             125,000              125,000
     300,000               90,000             120,000              150,500             150,500              150,500
     350,000              105,000             140,000              175,000             175,000              175,000
</TABLE>

Benefits under the plans are determined  primarily by average final compensation
and years of service  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 above.  Compensation for purposes of the  nonqualified  plan
also  includes  the bonus  amounts  reported in the Summary  Compensation  Table
above.  All of the executive  officers named in the Summary  Compensation  Table
above are  participating in the qualified plan, and Messrs.  Anderson,  Cox, and
Montgomery  are  also  participating  in the  nonqualified  plan.  However,  Mr.
Anderson's  benefits  under the  nonqualified  plan are payable at age 70 rather
than age 65. The 1999  compensation  used for  purposes of  calculating  pension
benefits  under the plans,  and the  credited  years of service as of January 1,
2000, of the executive officers named in the Summary Compensation Table are: Mr.
Anderson,  $105,806 (24.5 years), Mr. Cox, $246,797 (5.7 years), Mr. Montgomery,
$140,591 (3.0 years), Mr. Phillips,  $127,000 (1.3 years),  Mr. Helms,  $103,940
(28.3 years), and Mr. Thrash, $98,110 (22.0 years).

Termination of Employment and Change-in-Control Arrangements

The  Corporation  and  First  Merchants  have  entered  into   change-in-control
agreements on a year-to-year basis with Messrs. Cox, Phillips,  Helms and Thrash
which provide severance benefits in the event of both a change in control of the
Corporation or First Merchants and a termination or constructive  termination of
the  employment of the  executive  within 24 months after the change in 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 in  control"  means an  acquisition  by any
person of 25% or more of the  Corporation's or First Merchants' voting shares, a
change in the  makeup of a majority  of the  Corporation's  or First  Merchants'
Board of Directors over a 24-month  period, a merger of the Corporation or First
Merchants  in which the  shareholders  before  the merger own 50% or less of the
Corporation's or First Merchants' voting shares after the merger, or approval by
the  Corporation's  shareholders  of a  plan  of  complete  liquidation  of  the
Corporation  or  First   Merchants  or  an  agreement  to  sell  or  dispose  of
substantially   all  of  the   Corporation's  or  First  Merchants'   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 to Mr.  Cox,  in  addition  to base  salary and  incentive  compensation
accrued  through the date of  termination  would be: a lump sum payment equal to
299% of the sum of (1) his annual base  salary and (2) his  largest  bonus under
the  Corporation's  Management  Incentive  Plan  during  the 2  years  preceding
termination. The benefits payable to Messrs. Phillips, Helms and Thrash would be
determined in a similar manner, except that the percentage would be 150% instead
of 299%.  The  executives  would also be paid an amount  equal to any excise tax
imposed under Section 4999 of the Internal Revenue Code on any "excess parachute
payment,"and they would be entitled to 2 years of life, disability, accident and
health insurance  benefits,  the bargain element value of then outstanding stock
options, outplacement services, and reasonable legal fees and expenses incurred


                                      -8-
<PAGE>


as a result of the termination. The agreements were not entered into in response
to any effort to acquire control of the Corporation or First Merchants,  and the
Board of Directors is not aware of any such effort.

Compensation Committee Interlocks and Insider Participation

The following  non-employee directors comprise the Compensation Committee of the
Corporation: Robert M. Smitson (Chairman), Stefan S. Anderson, Frank A. Bracken,
Thomas B. Clark, and Norman M. Johnson. John W. Hartmeyer,  who is a director of
First Merchants,  serves as a non-voting  member of the Compensation  Committee.
Mr. Smitson is the Chairman of the Board of Maxon Corporation. Mr. Anderson, the
Chairman  of the  Board of the  Corporation  and First  Merchants  and the Chief
Executive Officer of the Corporation and First Merchants until his retirement on
April 16, 1999,  serves as a director of Maxon  Corporation.  Mr.  Bracken is of
counsel with the firm of Bingham  Summers Welsh & Spilman,  which provides legal
services to the Corporation and its subsidiaries on a transactional basis.

Compensation Committee Report on Executive Compensation

The Compensation Committee administers the Corporation's  executive compensation
program. It is responsible for establishing the compensation and benefits of the
Corporation's chief executive officer and chief operating officer. The Committee
also approves the  compensation  and benefits of the other  executive  officers,
after  receiving   recommendations   from  the  chief  executive  officer.   The
Corporation's  incentive  compensation and stock plans are also  administered by
the Committee.

General  Policy  on  Executive  Compensation.  The  Board  of  Directors  of the
Corporation has established an executive  compensation program which is designed
to provide  incentives to executive officers to achieve short-term and long-term
corporate strategic management goals, with the ultimate objective of obtaining a
superior return on the shareholders'  investment.  To this end, the compensation
program for  executive  officers  consists of cash and  equity-based  components
which   consider:   the  executive   officer's   individual   performance;   the
Corporation's performance as measured against  previously-established annual and
long-term goals; the Corporation's  performance  compared to industry peers; and
the compensation paid by competitors to individuals  holding similar  management
positions.

The   Compensation   Committee   believes  that  the   Corporation's   executive
compensation program is a significant contributor to the Corporation's excellent
short-term and long-term  performance,  compared to industry peers. In 1999, the
Corporation  and its subsidiary  banks again received  national  recognition for
their financial  strength.  The earnings of the  Corporation's  lead bank, First
Merchants,  grew  for the  24th  consecutive  year in  1999.  The  Corporation's
earnings have increased every year since it was formed in 1982.

The salaries  paid to the  executive  officers  (other than the chief  executive
officers)  named in the  Summary  Compensation  Table  above for 1999,  averaged
approximately  4% more than their 1998 salaries.  In addition,  these  executive
officers' bonuses for 1999 under the Corporation's  incentive compensation plans
averaged approximately 15% more than their bonuses for the previous year, due to
the  Corporation's  and First Merchants'  improved  performance  measured by the
criteria set forth in the Management Incentive Plans described below.

Salaries.  The  salaries  paid  to the  Corporation's  executive  officers  were
subjectively   determined  after   consideration  of  the  executive   officer's
individual responsibilities,  performance, and experience, the evaluation by the
chief executive officer of the executive officers other than the chief executive
officer,  the  Corporation's  financial  results  compared with industry  peers,
various   industry  salary   surveys,   and  other  factors  such  as  budgetary
considerations and inflation rates.

The Compensation  Committee tries to set the executive  officers' salaries at or
above the  average of the  salaries  paid to  executive  officers  with  similar
responsibilities  at Indiana and Midwestern banks and bank holding  companies of
similar  size.  The  salaries  and  percentage  salary  increases  for 1999 paid
executive  officers  at  peer  financial  organizations  were  determined  after
consulting  several salary surveys  including:  the Indiana Bankers  Association
survey of Indiana banks;  the Crowe Chizek  Mid-West Bank  Compensation  Survey;
national  surveys  of all  types  of  companies,  and of  those  in the  banking
industry,  prepared by the American  Compensation  Association,  The  Conference
Board,  and  several  benefits  consultants;  and  a  survey  of  the  Financial
Associates  banks (10 Indiana  banks and one Michigan  bank with assets  between
$200,000,000 and $1,500,000,000).


                                      -9-
<PAGE>


Incentive    Compensation.    The   Compensation    Committee    believes   that
performance-based  pay  should  be a  significant  component  of  the  executive
officers' total compensation package.  Therefore, each of the executive officers
is  covered by an  incentive  plan.  The  objectives  of the plans are:  to link
compensation to organization  and individual goal  achievement,  to motivate and
retain key personnel,  and to attract qualified talent to the organization.  The
executive  officers  qualified for bonuses under the plans if the Corporation or
subsidiary   bank  met  or  exceeded   pre-established   minimum   ("threshold")
performance  levels in 1999.  Each plan  contains a schedule  setting  forth the
percentage  of  salary,  if any,  payable to the  executive  officer as a bonus,
depending on the Corporation's or subsidiary bank's performance relative to each
of the  criteria.  In order to avoid wide swings in payouts and to better  focus
the plans on long-term  results,  the plans were amended in 1997 to provide that
60% of any bonus paid to the executive  officers  would be based on current year
performance  and 40%  would  be  based  on the  average  of the 2  prior  years'
performance. The plans are administered by the Compensation Committee.

The bonuses paid to Messrs.  Anderson and Cox for 1999  (reported in the "bonus"
column  of  the  Summary   Compensation   Table)  were   determined   under  the
Corporation's  Management Incentive Plan for Chief Executive Officer.  This plan
provides  for a bonus of up to 45% of annual  base  salary,  if the  Corporation
meets specific  targets for return on assets ("ROA"),  return on equity ("ROE"),
income growth  ("IG"),  and  efficiency  ratio ("ER").  These are commonly- used
criteria for measuring institutional  performance in the banking industry. ER is
defined in the plan as  operating  expense  divided by  operating  revenue.  The
threshold performance levels which would qualify them for a bonus under the plan
were  exceeded for all  criteria:  the  Corporation's  ROA, ROE, IG, and ER; the
maximum levels were not exceeded for any of the criteria.

The bonuses paid to Messrs. Helms, Phillips and Thrash for 1999 (reported in the
"bonus"  column of the Summary  Compensation  Table) were  determined  under the
Corporation's  Management Incentive Plan for Administrative  Officers. This plan
provides for a bonus of up to 25% of annual base salary,  if the Corporation and
First  Merchants  meet  specific  targets  for ROA,  IG, and ER.  The  threshold
performance  levels  which  would  qualify  them for a bonus under the plan were
exceeded for all criteria:  the  Corporation's and First Merchants' ROA, IG, and
ER; the maximum levels were not exceeded for any of the criteria.

Mr.  Montgomery's  bonus for 1999 (reported in the "bonus" column of the Summary
Compensation Table) was determined under the Corporation's  Management Incentive
Plan for Chief  Executive  Officer,  The Union County  National Bank.  This plan
provides for a bonus of up to 25% of annual base  salary,  if Union County meets
specific  targets for ROA,  IG, ER, and  achievement  of annual plan  objectives
("AAPO").  The threshold  performance levels which would qualify him for a bonus
under the plan were exceeded for all criteria:  Union  County's ROA, IG, ER, and
AAPO;  the maximum level was equaled or exceeded for Union County's ER and AAPO,
but not for either of the other criteria.

Stock  Plans.  Equity-based  compensation,   including  compensation  under  the
Corporation's  Long-term Equity Incentive Plan and Employee Stock Purchase Plan,
is intended to encourage  ownership  and retention of the  Corporation's  common
stock  by  key  employees,  thereby  giving  them  a  meaningful  stake  in  the
Corporation's continued success and aligning their interests with those of other
shareholders.

The Long-term Equity Incentive Plan is briefly  described in the paragraph above
the Option Grants Table. During 1999 the Compensation  Committee awarded options
under the plan to the executive officers named in the Summary Compensation Table
as follows: for 1,000 shares to Mr. Anderson,  for 10,000 shares to Mr. Cox, for
2,000  shares to Mr.  Montgomery,  and for 5,000  shares each to Messrs.  Helms,
Phillips and Thrash.

The 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,  1999,  Messrs.
Anderson,  Cox, Montgomery,  Phillips,  Helms and Thrash, the executive officers
named in the Summary  Compensation Table,  purchased 0, 458, 966, 0, 131 and 393
shares,  respectively,  under the 1994 Employee  Stock  Purchase  Plan. The 1994
Employee  Stock  Purchase Plan covered 5 offering  periods  expiring on June 30,
1999. The shareholders approved


                                      -10-
<PAGE>


the 1999  Employee  Stock  Purchase  Plan,  containing  similar  provisions  and
covering  5 offering  periods  expiring  on June 30,  2004,  at the 1999  annual
shareholders' meeting.

Other  Compensation.  The  executive  officers  are also  covered by medical and
retirement  plans which are generally  applicable to full-time  employees of the
Corporation and its subsidiaries,  except that Mr. Anderson is no longer covered
by the medical plan since his retirement on April 16, 1999. The retirement plans
covering  each of the  executive  officers are the First  Merchants  Corporation
Retirement  Pension  Plan,  a defined  benefit  pension plan  (described  in the
"Pension Plans" section), and the First Merchants Corporation Retirement Savings
Plan, an Internal  Revenue Code Section  401(k) plan (referred to in note (1) to
the Summary Compensation Table). Messrs.  Anderson, Cox, and Montgomery are also
covered by the First Merchants  Corporation  Supplemental  Executive  Retirement
Plan, a nonqualified SERP plan (described in the "Pension Plans" section).

Chief Executive Officer's Compensation.  The chief executive officer's salary is
determined in the manner described in the "Salaries"  section of this report. In
recognition of his succession of Mr. Anderson as chief executive  officer of the
Corporation  and First Merchants on April 16, 1999, the  Compensation  Committee
increased  Mr. Cox's salary in 1999 by  approximately  17% over his 1998 salary.
Mr. Cox's salary is below the average of the  salaries  paid to chief  executive
officers with similar responsibilities at other Indiana and Midwestern banks and
bank  holding  companies  of  similar  size  and  corporate  structure,  but the
Committee  expects to increase his salary  relative to these  individuals in the
future.  Mr. Cox's total  compensation  for 1999,  including his bonus under the
Management  Incentive Plan described above,  increased by approximately 20% over
his  total  1998   compensation.   The  relationship   between  Mr.   Anderson's
compensation  and  corporate  performance  is  similar  to  that  of  all of the
Corporation's  other  executive  officers,  as  described  above in this report,
except that his compensation is based primarily on the Corporation's performance
whereas  the  other  executive  officers'  compensation  is based in part on the
performance of a subsidiary bank.


                                    FIRST MERCHANTS CORPORATION COMPENSATION
                                    COMMITTEE

                                    Robert M. Smitson, Chairman
                                    Stefan S. Anderson
                                    Frank A. Bracken
                                    Thomas B. Clark
                                    John W. Hartmeyer
                                    Norman M. Johnson









                                      -11-
<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, 1995 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




[GRAPH]




<TABLE>
<S>                      <C>             <C>               <C>              <C>               <C>              <C>
FMC                      100..............122.69............130.53...........189.69............205.46...........215.65
Russell  2000            100..............128.44............149.63...........183.08............178.42...........216.35
Russell  2000 Finl Serv  100..............138.86............178.89...........243.34............225.84...........212.58
</TABLE>


                                      -12-
<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  is a
summary of the amount and percent of the Corporation's common stock beneficially
owned on  February  1,  2000 by each  director  and  director  nominee,  by each
executive  officer  named in the Summary  Compensation  Table above,  and by all
directors  and  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(1)                      of Class
         ----------------                   --------------------------                      --------

         <S>                                             <C>                                     <C>
         Stefan S. Anderson (13)                          97,792 (2)                             *
         James F. Ault                                    21,938 (3)                             *
         Frank A. Bracken (13)                            80,640 (4)                             *
         Thomas B. Clark                                   6,817                                 *
         Michael L. Cox                                   51,271 (5)                             *
         David A. Galliher                                22,715 (6)                             *
         Barry J. Hudson                                 518,266 (7)                             4.73%
         Norman M. Johnson                               367,884 (8)                             3.36%
         Ted J. Montgomery                                39,504 (9)                             *
         George A. Sissel                                  4,937 (10)                            *
         Robert M. Smitson (13)                           14,812 (11)                            *
         Michael D. Wickersham                             3,832                                 *
         John E. Worthen                                   7,225                                 *
         Larry R. Helms                                   40,309 (12)                            *
         Charles R. Phillips                               8,344                                 *
         James L. Thrash                                  21,094                                 *

         Directors and Executive
         Officers as a Group (16 persons)(13)          1,307,380                                 11.77%
</TABLE>

          (1)  The   information   contained   in  this  column  is  based  upon
               information  furnished  to the  Corporation  by the  persons  and
               entities named above and shareholder  records of the Corporation.
               The  shares  shown  include  the  following  shares  which may be
               acquired during the next 60 days under a stock option plan by the
               executive officers named above: Mr. Anderson,  27,700 shares; Mr.
               Cox, 43,262 shares; Mr. Montgomery,  13,250 shares; Mr. Phillips,
               8,344 shares;  Mr. Helms,  25,319 shares;  and Mr. Thrash,  7,395
               shares; and the following shares which may be acquired during the
               next 60 days under a stock  option  plan by the  directors  named
               above: Messrs. Clark,  Galliher,  and Worthen, 5,500 shares each;
               Messrs.  Bracken,  Sissel and Smitson, 4,600 shares each; Messrs.
               Johnson and  Wickersham,  2,800 shares each;  Mr.  Hudson,  3,000
               shares;  and  Mr.  Ault,  1,000  shares.  The  shares  shown  for
               directors  and  executive  officers  as a group  include  165,170
               shares  which may be  acquired  during  the next 60 days  under a
               stock option plan.

          (2)  Includes 1,875 shares held by his spouse, Joan Anderson, in which
               he disclaims any beneficial interest.

          (3)  Includes 12,420 shares held by his spouse, Marilyn Ault, in which
               he disclaims any beneficial interest.

          (4)  Includes 4,170 shares held by his spouse,  Judy Bracken, in which
               he  disclaims  any  beneficial  interest;  and 966 shares held in
               trust for family  members for which Mr.  Bracken,  as co-trustee,
               has sole voting and shared investment power.

          (5)  Includes 3,626 shares held jointly with his spouse, Sharon Cox.


                                      -13-
<PAGE>


          (6)  Includes 907 shares held by his spouse, Nancy Galliher,  in which
               he disclaims any beneficial interest.

          (7)  Includes 283,130 shares owned by Mutual Security,  Inc.;  180,109
               shares held jointly with his spouse,  Elizabeth Hudson; and 6,992
               shares held by his spouse as custodian for his children, in which
               he disclaims any beneficial interest.

          (8)  Includes  24,493  shares held by his spouse,  Julia  Johnson,  in
               which he disclaims  any  beneficial  interest;  and 74,220 shares
               held in trust  for  family  members  for which  Mr,  Johnson,  as
               co-trustee, has shared voting and investment power.

          (9)  Includes 23,575 shares held in trust for family members for which
               Mr. Montgomery, as trustee, has sole voting and investment power.

          (10) Includes 337 shares held jointly with his spouse, Mary R. Sissel.

          (11) Includes 5,062 shares held by his spouse,  Marilyn S. Smitson, in
               which he disclaims any beneficial interest.

          (12) Includes  14,990  shares held  jointly  with his  spouse,  Sandra
               Helms.

          (13) Messrs.  Anderson,  Bracken and Smitson serve as directors of the
               George and Frances Ball Foundation,  Muncie,  Indiana, which owns
               251,100 shares (2.29%) 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.

          *    Percentage  beneficially owned is less than 1% of the outstanding
               shares.


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.

Frank A. Bracken, a director of the Corporation,  is of counsel with the firm of
Bingham  Summers Welsh & Spilman,  Indianapolis,  Indiana,  which provides legal
services to the Corporation and its subsidiaries on a transactional basis.


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 1999 its
directors  and  executive  officers  complied  with  all  Section  16(a)  filing
requirements.


                                      -14-
<PAGE>


SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board, subject to the approval of the shareholders,  has selected Olive LLP,
Certified Public  Accountants,  as its independent  public accountants for 2000.
Representatives   of  the  firm  are  expected  to  be  present  at  the  annual
shareholder's  meeting.  They will have an opportunity  to make a statement,  if
they  desire,  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 Olive LLP as independent public accountants for 2000.


SHAREHOLDER PROPOSALS

Proposals of shareholders intended to be presented at the 2001 annual meeting of
the  shareholders  must be received by the Secretary of the  Corporation  at the
Corporation's  principal  office by  October  26,  2000,  for  inclusion  in the
Corporation's 2001 proxy statement and form of proxy relating to that meeting.

Shareholder  proposals,  if any,  intended  to be  presented  at the 2000 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 10, 2000.


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
telegraph,  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 and
the  ratification  of the  appointment of the  independent  public  accountants.
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 10, 2000.

                                              By Order of the Board of Directors


                                              Larry R. Helms
                                              Secretary

Muncie, Indiana
February 23, 2000


                                      -15-
<PAGE>


                                  PROXY SOLICITED ON BEHALF OF THE
                                  BOARD OF DIRECTORS OF FIRST MERCHANTS
                                  CORPORATION
                                  MUNCIE, INDIANA


                                  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 on April  12,
                                  2000, 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  are unable to serve for
                                  any reason,  the persons listed above have the
                                  authority   to  vote  as   directed   for  any
                                  substitute nominee.


Proxy Vote Instruction:  FIRST MERCHANTS CORPORATION

Annual meeting to be held on April 12, 2000 at the Horizon  Convention Center at
3:30 PM EST

THE BOARD OF DIRECTORS AND MANAGEMENT OF FIRST MERCHANTS CORPORATION RECOMMEND A
VOTE "FOR" THE PROPOSALS LISTED.

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

1.   Election of Directors:     |_|  FOR all nominees listed to the left (except
     James F. Ault                   as specified in the space below)
     Frank A. Bracken           |_|  WITHHOLD VOTE (do not vote for any
     Barry J. Hudson                 of the nominees listed to the left)

     (Instruction:  To withhold authority to vote for
      any individual nominee, write that nominee's
      name in the space provided to the right.) ________________________________

2.   Ratification  of the  appointment  of the firm of Olive LLP as  independent
     public accountants for 2000.

              FOR     |_|        AGAINST      |_|            ABSTAIN      |_|

3.   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 10, 2000.

                                  This proxy will be voted as  directed,  but if
                                  not  otherwise  directed  this  proxy  will be
                                  voted "FOR" approval of the matters  described
                                  in Items 1 and 2 above.


                                                              Dated
                                  ----------------------------     -------------
                                  (Signature of Shareholder)
John Q. Public
PO BOX 00000                                                 Dated
Anytown, USA 00000-0000           ----------------------------     -------------
                                  (Signature of Shareholder)

                                  (Joint  owners  should  each sign  personally.
                                  Trustees    and    others    signing    in   a
                                  representative  capacity  should  indicate the
                                  capacity in which they sign.)


     |_| Please check this box if you plan to attend the Annual Meeting.  Number
         attending:________