Certain confidential information has been omitted where indicated and filed
separately with the
Securities and Exchange Commission.


     EMPLOYMENT AGREEMENT




THIS AGREEMENT, made and entered into as of this 1st day of June, 1996,
between FIRST
MERCHANTS ACCEPTANCE CORPORATION, a Delaware corporation, referred to herein
as
"FMAC" and MITCHELL C. KAHN, an individual, referred to herein as "Kahn".
WHEREAS, Kahn and  FMAC have heretofore entered into an Employment Agreement
dated
May 23, 1991, as amended and renewed (the "Original Agreement") pursuant to
which Kahn has
served as President and Chief Executive Officer ("CEO") of FMAC; and
WHEREAS, the Original Agreement has expired by its terms as of May 31, 1996;
and 
WHEREAS, FMAC desires to retain the services of Kahn as President and CEO and
Kahn
desires to continue on in such position; and
WHEREAS, the parties desire to renew, amend and restate the Original Agreement
on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the respective agreement of the parties
contained
herein, it is agreed as follows:
1.   Employment.  FMAC hereby employs Kahn, and Kahn hereby accepts employment
upon
the terms and conditions hereinafter set forth.

2.   Term.  The term of this Agreement (the "Initial Term") shall begin on
June 1, 1996 (the
"Commencement Date") and, subject to the provisions for termination and
renewal as hereinafter
provided, shall terminate on December 31, 1998.  The Agreement shall have two
one year
renewal terms (the "Renewal Term(s)").  FMAC may extend the Agreement beyond
the Initial
Term if at least thirty (30) days preceding the expiration of the Initial Term
or the first Renewal
Term, FMAC notifies Kahn in writing that FMAC is renewing this Agreement. 
Kahn's salary,
bonus and stock option for each of the Renewal Terms, if any, shall be as
mutually agreed to by
Kahn and FMAC at the time of such extension; provided, however, the terms of
such extension
shall be no less favorable than those for the Initial Term with the exception
of any stock option
grants.
3.   Duties.  Under the direction of the Board of Directors of FMAC (the
"Board"), Kahn is
engaged as CEO and President of FMAC and shall be responsible for the
operation of FMAC
and any subsidiary or subsidiaries of FMAC.  If Kahn is re-elected a director
or other officer of
FMAC or re-elected or elected a director or officer of any subsidiary or
subsidiaries of FMAC,
Kahn shall serve in such capacities without further compensation, except for
reimbursement of
reasonable out-of-pocket expenses incurred as a result of such additional
position or positions. 
Kahn shall perform such services and duties prescribed for such positions by
FMAC's By-laws
and as are otherwise incident to such positions and such other services and
duties not inconsistent
with such positions as may be specified from time to time by the Board. 
Kahn's duties shall
include, but not be limited to, responsibility for the management of FMAC's
operations,
organization and strategic planning, marketing (including development of
ancillary products and
location of offices), credit policies, pricing and yields, and principal
communications with the
Board, all to be effected under the direction of the Board.  Kahn shall
provide the Board with (i)
business plans and reports in such scope and detail as determined by the Board
from time to time
and (ii) such other information pertaining to the operations of FMAC as the
Board may
reasonably request.
4.   Compensation.  For all services rendered by Kahn under this Agreement,
FMAC shall
pay Kahn:
(a)  an annual base salary ("Base Compensation"), following the Commencement
Date,
payable in equal semi-monthly installments (prorated for partial periods),
effective on June 1,
1996, in the following annual amounts:

7 months ending 12/31/96 $250,000
12 months ending 12/31/97     $275,000
12 months ending 12/31/98     $302,500

(b)  In addition to the Base Compensation, Kahn shall receive from FMAC, on or
before
April 1, 1997, 1998 and 1999, an incentive compensation bonus (the "Bonus") of
up to 100% of
his Base Compensation in effect on the preceding December 31.  The Bonus, if
any, shall be
determined based on the achievement by FMAC and Kahn of certain specific
strategic plans and
goals (the "Strategic Goals") during the preceding calendar year (the
"Measurement Period") as
shall be determined by the Board following its consideration of
recommendations by Kahn.  For
the Measurement Period ending December 31, 1996, the Strategic Goals are
attached to this
Agreement as Exhibit A.  For each subsequent Measurement Period the Strategic
Goals shall be
established as aforesaid no later than April 30th in each such Measurement
Period.  On or before
March 31st following each Measurement Period, the Compensation Committee of
the Board
shall review the Strategic Goals for the prior Measurement Period in light of
FMAC's actual
performance during such Measurement Period and submit its recommendation to
the full Board
as to the percentage of Base Compensation to be paid to Kahn as a cash bonus,
if any, for such
prior Measurement Period.  Payment of any bonus so determined by the Board
will be paid on or
before April 1st.
(c)  In addition to the Base Compensation and Bonus, FMAC shall grant Kahn an
option to
purchase 100,000 shares of the common stock of FMAC on each of June 3, 1996,
December 31,
1996 and December 31, 1997, provided Kahn is employed by FMAC on such dates,
at 100% of
the fair market value of FMAC common stock at the close of trading of the
common stock at
each grant date pursuant to the terms and conditions, including the schedule
of vesting and
termination, set forth in the Stock Option Agreement attached as Exhibit B
hereto.
5.   Expenses; Auto Allowance; Country Club Membership.  Upon Kahn's
presentation of an
itemized accounting and the submission of supporting vouchers, FMAC shall
promptly
reimburse Kahn for all reasonable and necessary expenses incurred by him in
connection with
the discharge of his duties, including the management of the business of FMAC
and any
subsidiaries.  During the term of this Agreement, FMAC shall provide Kahn with
an automobile
allowance of $800 per month.  In addition, upon being advised by Kahn that he
has joined a
country club and upon submission of supporting documentation, FMAC will
reimburse Kahn for
up to $55,000 of the initiation expenses of such membership.
6.   Benefits: Vacation.  Kahn shall be offered inclusion in all employee
benefit plans
provided to FMAC employees ("Benefits") with respect to which he qualifies. 
Notwithstanding
the foregoing, Kahn shall be entitled to four (4) weeks vacation each year,
with the right to carry
over two (2) weeks of unused vacation to the following year.     
7.   Non-Renewal.  In the event that on or before 30 days preceding expiration
of the Initial
Term FMAC does not offer to renew this Agreement for at least one Renewal Term
(except in
the case where Kahn's employment with FMAC has been terminated for any reason
on or prior to
such renewal), on terms no less favorable than those for the Initial Term,
excluding any stock
option grants, this Agreement will terminate on the last day of the Initial
Term and FMAC shall
pay Kahn a termination payment equal to the amount of his Base Compensation in
effect on the
last day of the Initial Term payable in twelve (12) equal monthly
installments.  In the event of
such failure to renew by FMAC, Kahn shall also be entitled to any Bonus earned
to the date of
termination which shall be due and payable in accordance with the terms of
paragraph 4(b)
hereof; which obligation shall survive the termination of this Agreement.  In
addition, FMAC
shall continue to provide the Benefits to Kahn until the earlier of (i) the
date which is twelve (12)
months after the expiration of the Initial Term, or (ii) the date Kahn becomes
re-employed.
8.   Extent of Service.  Kahn shall devote his best efforts, attention and
energies to the
business of FMAC and any subsidiary or subsidiaries, and shall not, without
the prior approval of
the Board pursuant to a duly adopted resolution, directly or indirectly engage
in any other
business activity which materially interferes with Kahn's performance of his
duties hereunder. 
This shall not be construed as preventing Kahn from investing his assets in
such form or manner
as will not require substantial time on the part of Kahn in the affairs of the
entities in which such
investments are made, will not detract from the operation of FMAC and are not
reasonably
expected to cause conflicts of interest to arise.
9.   Disclosure of Information.
(a)  Kahn recognizes and acknowledges that FMAC's customers, arrangements with
automobile dealers and other vendors, business methods, forms and proprietary
data, as they may
exist from time to time, are valuable, special and unique assets of FMAC's
business.  Kahn will
not, during or after the term of his employment, disclose said information or
any part thereof to
any person, firm, corporation, association or other entity unaffiliated with
FMAC for any reason
or purpose whatsoever except to the extent that (i) such disclosure or use is
directly related to and
required for the performance of Kahn's duties pursuant hereto, (ii) such
disclosure is required by
law or legal process, (iii) such information becomes generally known to the
public at large (other
than through Kahn's breach of this Agreement) or (iv) such disclosure is
directly necessary in
connection with any legal action or proceeding initiated by or against Kahn. 
In the event that
Kahn is subject to legal process as described in (ii) or (iv) above, Kahn
shall give FMAC notice
thereof and cooperate with FMAC in assuring confidential treatment of the
information.
(b)  In the event of a breach or threatened breach by Kahn of the provisions
of this paragraph,
FMAC shall be entitled to an injunction restraining Kahn from disclosing, in
whole or in part, the
proprietary information or from rendering any services to any unaffiliated
person, firm,
corporation, association or other entity to whom such proprietary information,
in whole or in
part, has been disclosed or is threatened to be disclosed.  Nothing herein
shall be construed as
prohibiting FMAC from pursuing any other remedies available to it for such
breach or threatened
breach, including, but not limited to, the termination of this Agreement for
Cause and the
recovery of damages.
10.  Termination.  Kahn's employment hereunder may be terminated under the
following
circumstances:
(a)  Disability.  If Kahn is unable to perform his duties hereunder by reason
of illness or
incapacity for a period of not more than 180 days in any twelve (12)
consecutive months, he shall
be entitled to his compensation (including Bonus and Benefits) during the
period of such illness
or incapacity.  In the event that such illness or incapacity exceeds 180 days
in any twelve (12)
consecutive months in duration, FMAC may terminate Kahn's employment under
this Agreement
and all obligations of FMAC hereunder, other than as provided in paragraph
11(d), shall cease
upon termination.  Kahn shall be considered to be disabled (a "Disability") if
in the reasonable
judgment of the Board, Kahn becomes unable to satisfactorily perform his
duties and
responsibilities hereunder during the term hereof because of mental or
physical disability for a
period that exceeds 180 days in any twelve (12) consecutive months; 
(b)  Death.  Kahn's employment shall terminate in the event of Kahn's death
and all
obligations of FMAC hereunder, other than as provided in paragraph 11(c),
shall cease upon
termination;
(c)  Cause.  FMAC shall have the right to terminate Kahn's employment for
"Cause", as
herein defined, and such termination shall not constitute a breach of this
Agreement by FMAC. 
As used herein, any one or more of the following acts by Kahn shall constitute
Cause: (i) willful
misconduct or gross negligence in connection with the discharge of his duties
hereunder; (ii)
conviction of a felony, or if Kahn is convicted of a crime involving moral
turpitude; (iii) willful
or intentional disregard in material respects of the lawful and reasonable
directions of the Board; 
and (iv) failure to render services in accordance with paragraph 8 hereof. 
Termination of Kahn's
employment because of death or Disability shall not be considered termination
for "Cause";
(d)  Good Reason.  Kahn may terminate his employment for "Good Reason."  As
used in this
paragraph 10(d), the term "FMAC" shall also refer to any successor entity of
FMAC.  For
purposes of this Agreement, Good Reason shall mean the occurrence of any of
the following
events or conditions:
(i)    Kahn is no longer serving as the chief or principal executive officer
of FMAC charged
with and having the ultimate responsibility for the direction and supervision
of all of FMAC's
business and operations (the position of "President" under FMAC's current
Bylaws), or the
assignment to Kahn of any duties or responsibilities which are inconsistent
with the foregoing
described position (which assignment is not rescinded after FMAC receives
written notice from
Kahn providing a reasonable description of such inconsistency);
(ii)   after a Change in Control (as hereinafter defined in paragraph 10(e)),
FMAC's requiring
Kahn to be based at any place outside a 20-mile radius from the principal
location from which
Kahn served as an employee of FMAC immediately prior to the Change in Control,
except for
reasonably required travel on  FMAC's business which is not materially greater
than such travel
requirements prior to the Change in Control;
(iii)  after a Change in Control, the inability of FMAC to provide Kahn with
compensation and
benefits substantially comparable, in the aggregate, to those provided for
under the employee
benefit plans, programs and practices in effect immediately prior to the
Change in Control;
(iv)   after a Change in Control, the insolvency or the filing of a petition
for bankruptcy of
FMAC which petition is consented to or acquiesced in by FMAC or shall remain
for 90 days
undismissed; or
(v)    any breach by FMAC of any material provision of this Agreement which
breach is not
cured within 30 days of FMAC's receipt of written notice thereof from Kahn.
(e)  Change in Control.  For purposes of this Agreement, a "Change in Control"
shall mean
the occurrence of the following events:
(i)    the acquisition or holding by any person, entity or "group" within the
meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "1934
Act") (other than
by FMAC or any of its subsidiaries or any employee benefit plan of FMAC or its
subsidiaries) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of
20% or more of either the then-outstanding common stock or the combined voting
power of
FMAC's then-outstanding voting securities entitled to vote generally in the
election of directors
("Voting Power"); except that no such person, entity or group shall be deemed
to own
beneficially (A) any securities held by FMAC or a subsidiary or any employee
benefit plan (or
any related trust) of FMAC or a subsidiary, (B) any securities acquired
pursuant to a benefit plan
of FMAC or a subsidiary, (C) any securities issuable pursuant to any option,
warrant or right
owned by such person, entity or group as of the close of business on the
business day
immediately preceding September 30, 1994 (the "IPO Date"), (D) any security
that would
otherwise be beneficially owned by such person, entity or group as of the
close of business on the
business day immediately preceding the IPO Date and (E) any securities issued
in connection
with a stock split, stock dividend or similar recapitalization or
reorganization with respect to
shares covered by the foregoing exceptions; provided, however, that no Change
of Control shall
be deemed to have occurred solely by reason of any such acquisition (x) by a
corporation with
respect to which, after such acquisition, more than 60% of both the
then-outstanding common
shares of such corporation and the Voting Power of such corporation are
then-beneficially
owned, directly or indirectly, by the persons who were the beneficial owners
of the common
stock and voting securities of FMAC immediately before such acquisition in
substantially the
same proportions as their respective ownership, immediately before such
acquisition, of the then-outstanding common stock or the Voting Power of FMAC,
as the case may be; or (y) solely in
connection with the exercise of limited stock appreciation rights pursuant to
Section 9(e) of
FMAC's 1994 Equity Incentive Plan, pursuant to a tender offer unless at least
a majority of the
outstanding securities subject to the tender offer are tendered by persons who
are not Section 16
Persons as defined in such Plan and not withdrawn from such tender offer; or
(ii)  approval by the stockholders of FMAC of (A) a merger, reorganization or
consolidation with
respect to which persons who were the respective beneficial owners of the
common stock and
Voting Power of FMAC immediately before such merger, reorganization or
consolidation do not,
immediately thereafter, beneficially own, directly or indirectly, more than
60% of, respectively,
the then-outstanding common shares and the Voting Power of the corporation
resulting from
such merger, reorganization or consolidation, (B) a liquidation or dissolution
of FMAC or (C)
the sale or other disposition of all or substantially all of the assets of
FMAC, provided, however,
that for purposes of this paragraph the votes of all Section 16 Persons (for
purposes of the 1934
Act) shall be disregarded in determining whether stockholder approval has been
obtained. 
Notwithstanding the foregoing, a Change of Control shall be deemed not to have
occurred with
respect to any Section 16 Person if such Section 16 Person is, by agreement
(written or
otherwise), a participant on such Section 16 Person's own behalf in a
transaction which causes
the Change of Control to occur.
     (f)  Notice of Termination.  Any purported termination of Kahn's
employment
hereunder  by FMAC for any reason (other than due to Kahn's death but
including by reason of
Kahn's Disability) or by Kahn for Good Reason shall be communicated by a
written Notice of
Termination to the other party specifying the Termination Date defined
hereafter.  For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which
indicates the specific
termination provision in this Agreement relied upon as a basis for
termination.  For purposes of
this Agreement, no such purported termination of employment shall be effective
without such
Notice of Termination.
(g)  Termination Date.  "Termination Date" shall mean, in the case of Kahn's
death, his date
of death, or in all other cases, the date specified in the Notice of
Termination; provided, however,
that if Kahn terminates his employment for Good Reason, the date specified in
the Notice of
Termination shall not be less than 30 days nor more than 60 days from the date
the Notice of
Termination is given to FMAC and if FMAC terminates Kahn's employment other
than for
Cause, the date specified in the Notice of Termination shall be not less than
30 days from the
date the Notice of Termination is given to Kahn.  
11.  Compensation Upon Termination.  Upon termination of Kahn's employment
during the
term of this Agreement, Kahn shall be entitled to the following benefits:
(a)  For Cause or Voluntary Termination.  If Kahn's employment is terminated
by FMAC for
Cause or by Kahn (other than for Good Reason or Kahn's death or Disability),
FMAC shall pay
to Kahn all amounts earned or accrued hereunder through the Termination Date
but not paid as of
the Termination Date, including (i) Base Compensation, (ii) reimbursement (in
accordance with
the terms of this Agreement) for any and all monies advanced or expenses
incurred in connection
with Kahn's employment for reasonable and necessary expenses incurred by Kahn
on behalf of
FMAC for the period ending on the Termination Date, (iii) accrued but unpaid
vacation pay, and
(iv) any previously awarded and vested, but unpaid, Bonus or other incentive
compensation
(collectively, "Accrued Compensation").  Kahn's entitlement to any other
Benefits shall be
determined in accordance with FMAC's employee benefit plans and other
applicable programs
and practices then in effect and all stock options previously granted but not
vested shall be
forfeited.    
(b)  Involuntary or for Good Reason.  If Kahn's employment is terminated (i)
by FMAC for
any reason other than for Cause prior to expiration of this Agreement pursuant
to its terms, (ii) by
death or Disability, or (iii) by Kahn for Good Reason, FMAC shall pay to Kahn
all Accrued
Compensation plus any Bonus or portion thereof which would have been earned as
a result of the
Strategic Goals relating thereto having been achieved as of the Termination
Date ("Earned
Bonus") and, to the extent not covered by the foregoing,  any Accrued Bonus
(as hereinafter
defined).  The term "Accrued Bonus" shall mean the amount of the Bonus which
would have
been payable to Kahn pursuant to paragraph 4(b) hereof in respect of a
Measurement Period in
which the Termination Date occurs and calculated as if Kahn were employed by
FMAC as of the
end of such Measurement Period (but, to the extent the Bonus is contingent on
the achievement
of Strategic Goals, based on whether such Strategic Goals were actually
achieved) multiplied by
a fraction, the numerator of which shall be the number of days in such year
which have elapsed
prior to the Termination Date and the denominator of which shall be the number
of days in such
year.  In addition, Kahn shall receive each month for a period of twelve (12)
months after the
Termination Date (i) one-twelfth of the then current amount of Kahn's Base
Compensation, and
(ii) the Benefits which Kahn was entitled to receive as of the Termination
Date, with Kahn's
entitlement to any of the Benefits to be determined in accordance with FMAC's
employee benefit
plans and other programs and practices then in effect.  Finally, Kahn shall be
deemed to be fully
vested as to all of FMAC's contributions on his behalf to FMAC's 401(k) Plan,
if then in effect
and to the previously granted options described in paragraph 4(c) hereof.
(c)  Death.  If Kahn's employment by FMAC is terminated by reason of Kahn's
death, Kahn's
estate shall receive all of the monies and Benefits provided in paragraph
11(b), plus any death
benefits provided under the Benefits specified in paragraph 6 hereof.
(d)  Disability.  If Kahn's employment by FMAC is terminated by FMAC by reason
of Kahn's
Disability, Kahn shall be entitled to receive or continue to receive, as the
case may be, all of the
monies and Benefits provided in paragraph 11(b), plus any disability benefits
provided under the
Benefits specified in paragraph 6 hereof.
(e)  Continuation of Benefits.  The continuation of any life insurance,
medical, dental,
hospitalization and similar Benefits pursuant to this paragraph 11 shall be in
satisfaction of the
Company's obligations under Section 4980B of the Internal Revenue Code of
1986, or any
similar state law requiring continuation of such insurance benefits, with
respect to the period of
time during which such insurance or benefits are continued hereunder.  In the
event that it is not
possible to continue such health and life insurance benefits, FMAC shall
reimburse Kahn, or his
estate, for the cost of obtaining such coverage in accordance with COBRA and
other similar legal
requirements.  
(f)  Outplacement.  In the event of termination other than for Cause,
voluntary termination
without Good Reason, death or Disability, FMAC shall provide outplacement
assistance for a
period of up to twelve months after the Date of Termination.  Notwithstanding
the foregoing,
Kahn shall not be required to mitigate the amount or any payment provided for
in this Agreement
by seeking other employment and no such payment shall be offset or reduced by
the amount of
any compensation or benefits provided to Kahn in any subsequent employment.
12.  Restrictive Covenant
(a)  For a period of two (2) years after the termination of this Agreement or
any renewal
thereof, Kahn shall not, within a 250 mile radius of any office of FMAC or its
affiliates, which
the parties hereby agree is the "market area" of the business of FMAC,
directly or indirectly own,
manage, operate, control, be employed by, participate in or be connected in
any manner with the
ownership, management, operation or control of any business similar with or in
competition to
the business conducted by or to be conducted by FMAC or any subsidiaries at
the time of the
termination of this Agreement without the prior approval of the Board pursuant
to a duly adopted
resolution, provided, however, the foregoing shall not prohibit Kahn from
owning not more than
5% of the outstanding common stock of any entity whose common stock is
publicly traded on a
national securities exchange or on the Nasdaq Stock Market.  This paragraph
shall be deemed
null and void and not binding upon Kahn in the event that any one of the
following conditions
occur: (i) FMAC does not offer to renew this Agreement for at least one
Renewal Term; (ii)
FMAC sells all or substantially all of it assets other than in the ordinary
course of business; or
(iii) FMAC makes an assignment for the benefit of creditors, is adjudicated a
bankrupt, has a
receiver appointed for its property or voluntarily ceases to conduct business,
which condition
remains in effect for at least 60 days.
(b)  If at any time Kahn ceases to be an employee of FMAC, Kahn agrees that he
will not, for
a two (2) year period, recruit, solicit, offer employment or hire any employee
of FMAC or its
affiliates in any business similar to the type of business conducted by FMAC
or any of its
affiliates without the prior approval of the Board pursuant to a duly adopted
resolution.  This
paragraph shall be deemed null and void and not binding upon Kahn in the event
that any one of
the conditions specified in paragraph 12(a)(ii) or (iii) occur.
(c)  The parties agree that damages for a breach of the foregoing covenants
would be difficult
to ascertain and perhaps speculative and accordingly agree that injunctive or
other equitable
remedies may be granted to enforce said covenants.
13.  Notices.  Any notice required or permitted to be given under this
Agreement shall be
sufficient if in writing, and personally delivered or if sent by certified
mail to his residence in the
case of Kahn, (with a copy to Law Offices of Burke, Warren & MacKay, 22nd
Floor, One IBM
Plaza, Chicago, Illinois 60611, Attention: Christopher R. Manning, Esq.) or to
its principal office
in the case of FMAC, Attention: General Counsel, or to such other address or
to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party.
14.  Waiver of Breach.  The waiver by either party of a breach of any
provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent
breach or a waiver of any other provision of this Agreement by the waiving
party.
15.  Assignment.  The rights and obligations of Kahn under this Agreement
shall inure to the
benefit of and shall be binding upon the successors and assigns of FMAC;
however, no
assignment of rights, powers or benefits by Kahn shall be binding upon FMAC
without the
consent of the Board.
16.  Subsidiary Entities.  Any business entity with respect to which FMAC owns
50% or more
of the voting stock shall be deemed to be a "subsidiary" for purposes of this
Agreement.
17.  Separability.  Whenever possible, each provision of this Agreement will
be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder
of such provision or the remaining provisions of this Agreement.
18.  Governing Law.  This Agreement shall be governed by and construed in
accordance with
the laws of the State of Illinois.
19.   Costs of this Agreement.  FMAC will bear the expenses, including
reasonable counsel
fees, incurred by Kahn in the preparation and negotiation of this Agreement in
an amount  not to
exceed $ 3,000.
20.  Authority. The execution and delivery of this Agreement has been duly
authorized by the
Board.  Further, FMAC represents and warrants to Kahn, upon which Kahn relies,
that the
Agreement has been executed as so authorized on behalf of FMAC and is fully
binding and
effective on FMAC.
21.  Legal Proceedings.  If, at any time during the term of this Agreement (or
thereafter),
either FMAC of Kahn institutes any action or proceeding or asserts any
counterclaim against the
other relating to the provisions of this Agreement or any default hereunder,
the unsuccessful
party in such action or proceeding agrees to reimburse the successful party
for the reasonable
expense of attorneys fees, costs, expenses and disbursements incurred by the
successful party
with respect to such action before, during and after trial and on appeal. 
Kahn waives his right to
a trial by jury in any action or proceeding relating to this Agreement. 
22.  Entire Agreement.  This Agreement contains the entire Agreement of the
parties.  It may
not be changed orally but only by an agreement in writing signed by the party
against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above
written.



(Corporate Seal)                   FIRST MERCHANTS ACCEPTANCE
ATTEST:                       CORPORATION


S/Richard R. Vogelman                    S/Richard Uhl
_____________________________      By:________________________________

     A Member of its Compensation Committee



S/Mitchell C. Kahn
___________________________________
MITCHELL C. KAHN
Individually





     EXHIBIT A

     STRATEGIC GOALS
     FOR
     MEASUREMENT PERIOD
     ENDING
     DECEMBER 31, 1996


A. FINANCIAL

  1. INCREASE NET REVENUES [CONFIDENTIAL PORTION OMITTED] OVER CY1995.
  2. INCREASE NET INCOME ($) [CONFIDENTIAL PORTION OMITTED] OVER CY 1995.
  3. EPS GROWTH OF [CONFIDENTIAL PORTION OMITTED] OVER CY 1995.
  4. ORIGINATIONS OF [CONFIDENTIAL PORTION OMITTED] MILLION.
  5. CHARGE OFFS LESS THAN [CONFIDENTIAL PORTION OMITTED].

B. OPERATIONS

  1.  Use our national sales force to expand FMAC's presents into smaller 
      metropolitan markets without establishing a local "bricks and mortar"
      presence.

  2.  Open National Service Center in Dallas (scheduled for 6/15/96) serve 
      needs of used car mega stores like Carmax and multi-state mega dealer
      groups. [CONFIDENTIAL PORTION OMITTED].

  3.  Consolidate the following offices:
          a. St. Petersburg (into Tampa).
          b. Newport News (into Virginia Beach).
          c. Roanoke (into Richmond).
          d. Dallas (into National Service Center).

   4.  Develop "A-/B+" financing program to expand our level of dealer service 
       and be positioned as a full service lender to franchise dealers. 
       Estimate our "fresh start" financing program. [CONFIDENTIAL PORTION
       OMITTED].


                         [CONFIDENTIAL PORTION OMITTED]

C. TECHNOLOGY

                          [CONFIDENTIAL PORTION OMITTED]


D. SALES/MARKETING

     1. Continue building national sales force.

                          [CONFIDENTIAL PORTION OMITTED]


E. ACCOUNT SERVICES

     1. Install predictive dialers in Nashville and Denver Account 
        Service Centers.

     2. Close Charlotte and Orlando Account Service Centers.
     
     3. [CONFIDENTIAL PORTION OMITTED]


1997 INITIATIVES

                           [CONFIDENTIAL PORTION OMITTED]





                                EXHIBIT B

                         STOCK OPTION AGREEMENT


THIS STOCK OPTION AGREEMENT (the "Agreement") is made and entered into as of
this 1st
day of June, 1996 (the "Effective Date") by and between First Merchants
Acceptance
Corporation, a Delaware corporation with its principal offices at 570 Lake
Cook Road, Suite 126,
Deerfield, Illinois 60015 (the "Corporation" or "FMAC"), and Mitchell C. Kahn,
residing at 153
Plum Tree Road, Deerfield, Illinois 60015 ("Employee").

Now, therefore, in consideration of the premises, it is hereby agreed by and
between the parties
as follows:

1.   Grant of Option.  Pursuant to the terms of that certain Employment
Agreement between
FMAC and Employee dated as of June 1, 1996 (the "Employment Agreement") the
Corporation
hereby grants to Employee the right, privilege, and option (the "Option") to
purchase shares of
the Company's voting common stock, $0.01 par value per share (the "Common
Stock"), pursuant
to the terms hereof in the manner and subject to the conditions hereinafter
provided (such shares
of Common Stock hereinafter referred to as the "Option Shares"), as follows:

Date of Grant                 Number of Shares

June 3, 1996                       100,000
December 31, 1996                  100,000
December 31, 1997                  100,000

It is a condition to each stock option grant that Employee be employed on the
applicable Date of
Grant.  Each of the above grants of 100,000 Option Shares is referred to
herein as an "Option
Grant".  The purchase price for each Option Share shall be the "Fair Market
Value" of the
Common Stock as of the close of trading of the Common Stock as of the date of
grant.
  
For purposes of this Agreement, the term "Fair Market Value" shall mean the
closing price of the
Common Stock as reported on NASDAQ, or such other exchange as the Common Stock
may be
traded on in lieu of NASDAQ, on the date of grant or, if the date of grant is
not a trading day, the
last day preceding such date of grant on which a closing price was quoted (the
"Purchase Price").

2.   Vesting.  The 100,000 Option Shares contained in each Option Grant shall
become vested
and exercisable (the "Vested Shares") in accordance with the following
schedule:  as to 20,000
Option Shares on the December 31 next following the date of grant, as to
30,000 Option Shares
on the second December 31 following the date of grant and as to the remaining
50,000 Option
Shares on the third December 31 following the date of grant.  Each such
December 31 is herein
referred to as a "Vesting Date".

3.   Time of Exercise.  Subject to Section 2, Employee shall be entitled to
exercise the Option
with respect to the Vested Shares during the period commencing on the
applicable Date of Grant
and ending ten (10) years after such applicable Date of Grant.

4.   Method and Conditions of Exercise of the Options.

(a)  The Options shall be exercised by delivery by the Employee to the
Corporation at its
principal office of written notice in the form annexed hereto as Schedule A
(the "Notice") of the
number of Vested Shares with respect to which an Option is then being
exercised accompanied
by payment in full of the aggregate Purchase Price of such Vested Shares. 
Payment for Vested
Shares so purchased shall be made by certified check payable to the order of
the Corporation in
the amount of such Purchase Price or in such other manner as to which the
Employee and the
Corporation agree.

(b)  If, prior to the exercise of an Option, the Option Shares subject to the
Option being
exercised have not been registered with the Securities and Exchange Commission
pursuant to the
Securities Act of 1933 (a "Registration"), then the Employee agrees to include
in the Notice
Employee's acknowledgment of the truth and accuracy of the following
representations and
acknowledgments:  (i) the Option Shares then being acquired are being acquired
for investment
and not with a view to the resale or distribution thereof, and (ii) the
Employee shall not sell,
transfer, pledge, hypothecate or otherwise dispose of such Option Shares in
the absence of an
effective registration statement therefor, or an opinion of the Corporation's
counsel that such
registration is not required.  

5.   Transfer and Investment Presentation.

(a)  The Option is not transferrable and shall not be subject to execution,
attachment or other
process.

(b)  Any certificate(s) for Option Shares issued upon the exercise of this
Option and subject to
Section 4(b) hereof shall bear substantially the following legend:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH
ACT."  

6.   Adjustment in the Event of Reclassification or Consolidation.  If, and to
the extent that,
the number of issued shares of Common Stock of the Corporation shall be
increased or reduced
by change in par value, split-up, reclassification, distribution of a dividend
payable in stock or
the like, the number of shares subject to the Options contemplated by this
Agreement and/or the
price per share of the Options shall be proportionately adjusted.

7.   Termination of Options.  In the event that Employee's employment with the
Corporation
is terminated for any reason other than Employee's death, Disability or Good
Reason (as those
terms are defined in the Employment Agreement, the Options herein granted
shall terminate with
respect to all Option Shares other than Vested Shares.  In the event of a
termination of
Employee's employment as a result of Employee's death, Disability or for Good
Reason, all
Option Shares granted prior to such termination which have not as yet vested,
shall immediately
vest and shall become Vested Shares.   

8.   Notice.  Any notice required or permitted pursuant to this Option shall
be in writing and
shall be personally delivered or sent by registered or certified mail to the
addresses set forth
above or to such addresses as may be given by notice to the other party
hereto.  Notices sent by
registered or certified mail in the manner aforesaid shall be deemed given
upon dispatch.

9.   Employment Rights.  Employee shall receive no right to continued
employment with the
Corporation or to continue any other relationship with the Corporation nor
shall the right of such
Corporation to terminate Employee's employment or such other relationship at
any time be
interfered with in any way by reason of the grant, execution, delivery or
acceptance of this
Option.

10.  Miscellaneous.  This Agreement cannot be changed or terminated orally and
shall be
governed by and construed in accordance with the laws of the State of
Illinois.  The paragraph
headings herein are intended for reference only and shall not affect the
interpretation hereof.

11.  Binding Effect.  This Agreement shall be binding and inure to the benefit
of the parties
hereto and their respective successors, assigns and legal representatives.

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first
above written.


FIRST MERCHANTS ACCEPTANCE CORPORATION

S/Mitchell C. Kahn                  S/Richard Uhl
___________________________   By:_________________________________________
Mitchell C. Kahn
Its:_________________________________________




     SCHEDULE A

     FORM OF NOTICE OF
     EXERCISE OF OPTION


First Merchants Acceptance Corporation
570 Lake Cook Road, Suite 126
Deerfield, IL 60015

Gentlemen:

Delivered herewith is a certified check in the amount of $________________,
payable to the
order of First Merchants Acceptance Corporation (the "Company"), representing
the Purchase
Price for                shares of Common Stock, par value $0.01, of the
Company, pursuant to a
certain Stock Option Agreement between the Company and the undersigned dated
June 1, 1996.

I represent that the Option Shares are being acquired by me for investment and
that I have no
present intention to transfer, sell or otherwise dispose of such shares,
except in compliance with
applicable securities law.

I also agree that I will not sell, transfer, pledge, hypothecate or otherwise
dispose of the Option
Shares in the absence of an effective Registration Statement therefor, or an
opinion of the
Company's counsel that such registration is not required.

My address of record is                                                        
                         and my Social
Security number is                   .

Very truly yours,



                            

Receipt, together with the 
 payment referred to is
 hereby acknowledged.

FIRST MERCHANTS ACCEPTANCE CORPORATION


By:                                   
Date: