FIRSTMERIT CORP /OH/, PRE 14A, 1999-02-18

FIRSTMERIT CORP /OH/
PRE 14A, 1999-02-18
NATIONAL COMMERCIAL BANKS

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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>

FIRSTMERIT CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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

(2) Aggregate number of securities to which transaction applies:

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

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

(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:

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<PAGE> 2

FirstMerit LOGO

III Cascade Plaza
Akron, Ohio 44308

March 12, 1999

To Our Shareholders:

You are cordially invited to attend the Annual Meeting of Shareholders to
be held on Wednesday, April 21, 1999 at 10:00 A.M. at the John S. Knight
Convention Center, 77 E. Mill Street, Akron, Ohio 44308.

The election of directors will take place at the Annual Meeting. This year
we will elect five Class II Directors whose terms will expire at the Annual
Meeting in 2002. All of the nominees are currently serving as directors. You
will also be asked to consider and approve the 1999 Stock Plan as well as a
proposal to increase the number of authorized shares of FirstMerit Common Stock.
These proposals are described in detail in the Proxy Statement.

Enclosed with this letter is a Notice of Annual Meeting together with a
Proxy Statement which contains information with respect to the proposals and the
nominees for director, as well as the other directors who will continue in
office.

It is important that your shares be voted, and we hope that you will be
able to attend the Annual Meeting. We urge you to execute and return the
enclosed form of proxy as soon as possible, whether or not you expect to attend
the Annual Meeting in person.

Sincerely,

/s/ John R. Cochran

John R. Cochran
Chairman and Chief Executive Officer
<PAGE> 3

FIRSTMERIT CORPORATION
III CASCADE PLAZA
AKRON, OHIO 44308

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD WEDNESDAY, APRIL 21, 1999

The Annual Meeting of Shareholders of FirstMerit Corporation, an Ohio
corporation ("FirstMerit"), will be held at the John S. Knight Convention
Center, 77 E. Mill Street, Akron, Ohio, on Wednesday, April 21, 1999, at 10:00
A.M. (local time), for the following purposes:

1. To elect five Class II Directors;

2. To approve a proposal to amend FirstMerit's Amended and Restated
Articles of Incorporation to increase the authorized shares of Common
Stock from 160,000,000 to 300,000,000 shares;

3. To approve the 1999 Stock Plan; and

4. To transact such other business as may properly come before the meeting
or any adjournments thereof.

The Board of Directors has fixed the close of business on February 22,
1999, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting. All shareholders are cordially
invited to attend the meeting in person. Whether or not you expect to attend the
meeting in person, please fill in, date, sign and return the enclosed Proxy
Card.

By Order of the Board of Directors,

/s/ Terry E. Patton

Terry E. Patton
Secretary
Akron, Ohio
March 12, 1999

THE 1998 ANNUAL REPORT TO SHAREHOLDERS ACCOMPANIES THIS NOTICE
<PAGE> 4

FIRSTMERIT(R) CORPORATION
------------------------

PROXY STATEMENT
------------------------

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of FirstMerit Corporation, an Ohio corporation
("FirstMerit" or "Company"), of the accompanying proxy to be voted at the Annual
Meeting of Shareholders to be held on Wednesday, April 21, 1999, at 10:00 A.M.
(local time), and at any adjournment thereof. Shares represented by duly
executed proxies in the accompanying form received by the Board of Directors
prior to the meeting will be voted at the meeting. A shareholder who signs and
returns a proxy in the accompanying form may revoke it prior to or at the
meeting by giving notice to the Secretary. FirstMerit(R) is a registered
trademark of the Company.

The close of business on February 22, 1999, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting. On that date FirstMerit had outstanding approximately [89,610,408]
shares of common stock, no par value per share ("Common Stock"), each of which
is entitled to one vote. For information concerning principal shareholders, see
the section titled "Principal Shareholders" below.

The mailing address of the principal executive offices of FirstMerit is III
Cascade Plaza, Akron, Ohio 44308, telephone number (330) 996-6300. This Proxy
Statement, together with the related Proxy Card, FirstMerit's 1998 Annual Report
to Shareholders and FirstMerit's 1998 Supplemental Consolidated Financial
Statements, as of December 31, 1998 is being mailed to the shareholders of
FirstMerit on or about March 12, 1999.

For Proposal No. 1, under Ohio law, FirstMerit's Amended and Restated
Articles of Incorporation and its Code of Regulations ("Regulations"), if a
quorum is present at the meeting, the nominees for election as directors who
receive the greatest number of votes cast will be elected directors. A majority
of the outstanding shares of Common Stock constitutes a quorum. An abstention
from voting any share with respect to the election of any nominee for director
will have the practical effect of a vote against that nominee. A broker non-vote
with respect to any share will not affect the election of directors since the
share is not counted for voting purposes.

Proposal No. 2 regarding the increase in authorized shares of Common Stock
must be approved by the affirmative vote of the holders of two-thirds of the
shares of Common Stock, present in person or represented by proxy at the Annual
Meeting, assuming a quorum is present. Abstentions and broker non-votes will be
counted in determining votes present at the meeting. Consequently, an abstention
or a broker non-vote has the same effect as a vote against Proposal No. 2, as
each abstention or broker non-vote would be one less vote in favor of Proposal
No. 2.

Proposal No. 3 regarding the 1999 Stock Plan must be approved by the
affirmative vote of the holders of a majority of the shares of Common Stock,
present in person or represented by proxy at the Annual Meeting, assuming a
quorum is present. Abstentions and broker non-votes will be counted in
determining votes present at the meeting. Consequently, an abstention or a
broker non- vote has the same effect as a vote against Proposal No. 3, as each
abstention or broker non-vote would be one less vote in favor of Proposal No. 3.

1
<PAGE> 5

PROPOSAL NO. 1

ELECTION OF DIRECTORS

NOMINEES

Six Class II directors are being nominated and are to be elected at this
Annual Meeting of Shareholders. In December 1998 the shareholders fixed the
total number of directors at 21. There currently exist four vacancies on the
Board of Directors, one in each of Classes I and III and two in Class II. As a
matter of corporate policy, the Board believes it is important to maintain
vacancies on the Board. This would allow a majority of the Board, pursuant to
Article III, Section 3 of the Regulations, to appoint an individual to the
Board. Such a need could occur, as examples, as part of the terms of a future
acquisition, or in the event the Board finds a highly qualified candidate for
the Board and believes it is important to appoint such person prior to the next
Annual Shareholder meeting. Any such person appointed would serve the remaining
term of such position, which could exceed one year. The Board appointed Jerry M.
Wolf as a Class III Director and Charles F. Valentine as a Class I Director
effective June 18 and October 23, 1998, respectively, in connection with
CoBancorp Inc.'s and Security First Corp.'s respective mergers with and into
FirstMerit. Effective February 12, 1999, the Board appointed Gary G. Clark as a
Class II Director in connection with the merger of Signal Corp with and into
FirstMerit.

Set forth below for each nominee for election as a director and for each
director whose term will continue after the Annual Meeting of Shareholders is a
brief statement, including the age, principal occupation and business experience
during the past five years, and the number of shares of Common Stock
beneficially owned by such director. The Board of Directors has nominated the
persons listed below as nominees. If any nominee should become unavailable for
any reason, it is intended that votes will be cast for a substitute nominee
designated by the Board of Directors. The Board of Directors has no reason to
believe that the nominees named will be unable to serve if elected. The nominees
receiving the greatest number of votes cast by shareholders by proxy or in
person at the meeting, a quorum being present, will be elected. A majority of
the outstanding shares of Common Stock constitutes a quorum. Proxies cannot be
voted for a greater number of nominees than the number named in the Proxy
Statement.

NOMINEES FOR ELECTION AS CLASS II DIRECTORS
(TERM EXPIRING IN 2002)(a)

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR PAST FIVE YEARS SHARES BENEFICIALLY OWNED
NAME AGE AND OTHER INFORMATION NUMBER-PERCENT(b)(c)
---- --- ---------------------------------------- -------------------------
<S> <C> <C> <C>
Karen S. Belden 57 Realtor, The Prudential-DeHoff Realtors, Canton, 22,562(d)
Ohio; formerly Director of The CIVISTA 167,600(e)(g)
Corporation, a publicly held savings and loan 6,000(f)
holding company

R. Cary Blair 59 Chairman, President and Chief Executive Officer 5,145(e)
of Westfield Companies, Westfield Center, Ohio, 6,000(f)
a group of insurance companies; Director, The
Davey Tree Expert Company, Kent, Ohio, a publicly
held horticultural company
</TABLE>

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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR PAST FIVE YEARS SHARES BENEFICIALLY OWNED
NAME AGE AND OTHER INFORMATION NUMBER-PERCENT(b)(c)
---- --- ---------------------------------------- -------------------------
<S> <C> <C> <C>
Robert W. Briggs 57 President of the law firm of Buckingham 6,170(d)
Doolittle & Burroughs, LLP, Akron, Ohio 107,602(e)(g)
6,000(f)
Gary G. Clark 49 Formerly Chairman of the Board and Chief 206,297(d)
Executive Officer of Signal Corp (formerly First 825(e)
Federal Financial Services Corp.) and Signal 57,750(i)
Bank, N.A.

Clifford J. Isroff 62 Chairman and Secretary, I Corp., Akron, Ohio, a 9,200(d)
manufacturing holding company 10,800(f)

CLASS I DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRING IN 2001)(a)

John R. Cochran 56 Chairman and Chief Executive Officer of 234,295(d)
FirstMerit, Chairman and Chief Executive Officer 27,420(e)
of FirstMerit Bank, N.A.; member of the Board 580,000(f)
of Directors of the Federal Reserve Bank of
Cleveland; formerly President and Chief Executive
Officer of FirstMerit, and President and Chief
Executive Officer, Norwest Bank, Omaha, Nebraska

Richard Colella 63 Attorney, Colella & Kolczun, P.L.L., Elyria, Ohio 8,898(d)
2,400(f)
Philip A. Lloyd, II 52 Attorney, Brouse McDowell, a Legal Professional 40,089(d)
Association, Akron, Ohio 374,176(e)(g)
10,800(f)
Roger T. Read 57 Formerly Chairman, Chief Executive Officer and 122,024(e)
President, Harwick Chemical Corporation, Akron, 9,600(f)
Ohio, a manufacturer and wholesaler of chemicals
and allied products

Richard N. Seaman 53 President and Chief Executive Officer, Seaman 2,900(d)
Corporation, a manufacturer of vinyl coated 400(e)
industrial fabrics 2,400(f)

Charles F. Valentine 59 Executive Vice-President of FirstMerit; formerly 181,768(d)
Chairman and Chief Executive Officer of Security 53,130(e)
First Corp. and Security Federal Savings and Loan 79,140(f)(h)
Corporation
</TABLE>

3
<PAGE> 7

CLASS III DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRING IN 2000)(a)

Sid A. Bostic 56 President and Chief Operating Officer, FirstMerit 9,197
Corporation, President and Chief Operating 75,000(f)
Officer, FirstMerit Bank, N.A.; formerly Chairman,
President and Chief Executive Officer, Norwest
Bank Indiana, N.A., Fort Wayne, Indiana

Terry L. Haines 52 President, Chief Executive Officer and Director, 3,514(e)
A. Schulman Inc., Akron, Ohio, a publicly held 9,600(f)
manufacturer and wholesaler of plastic materials

Robert G. Merzweiler 45 President and Chief Executive Officer, Landmark 8,000(d)
Plastic Corporation, Akron, Ohio, a manufacturer 10,800(f)
of plastic products

Jerry M. Wolf 53 President and Chief Executive Officer of Acoust- 9,000(d)
A-Fiber, Inc.; formerly Chairman of the Board of 150(e)
Directors of Jefferson Savings Bank and a member
of the Board of Directors of PremierBank & Trust
</TABLE>

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

(a) The directors have served since the year following their name: Messrs.
Isroff and Rogers, 1981; Mr. Lloyd, 1988; Messrs. Blickle and Myers, 1990;
Messrs. Merzweiler and Haines, 1991; Mr. Read, 1992; Mr. Cochran, 1995; Mrs.
Belden and Messrs. Blair and Briggs, 1996; Messrs. Bostic, Colella, Seaman,
Valentine and Wolf, 1998. Mr. Clark was appointed to the Board on February
12, 1999.

(b) Number of shares beneficially owned is reported as of February 16, 1999.
None of the directors beneficially owns one percent (1%) or more of the
outstanding shares of FirstMerit Common Stock.

(c) All directors and executive officers as a group (28 persons) beneficially
owned [ ] shares of Common Stock as of February 16, 1999. This
represents approximately [ %] of the outstanding shares of Common Stock
as of that date.

(d) Sole voting and/or investment power.

(e) Shared voting and/or investment power.

(f) Shares with respect to which the nominee or director has the right to
acquire beneficial ownership by exercising options granted under
FirstMerit's 1992 Stock Option Program ("1992 Stock Plan"), the 1992
Directors Stock Option Program ("Director Stock Plan") or the 1997 Stock
Plan ("1997 Stock Plan").

(g) Includes reported beneficial ownership of the following numbers of shares
owned by family members or trusts, as to which the director disclaims any
beneficial ownership: Mrs. Belden, 167,600; Mr. Briggs, 107,602; and Mr.
Lloyd, 345,244.

(h) Includes 904 shares of FirstMerit 6 1/4% Convertible Subordinated
Debentures.

4
<PAGE> 8

(i) Shares subject to stock options granted by Signal Corp. and assumed by
FirstMerit on February 12, 1999.

There are (and during the past five years there have been) no legal
proceedings material to an evaluation of the ability of any director or
executive officer of FirstMerit to act in such capacity or concerning his
integrity.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors of FirstMerit has several committees and has
appointed members to such committees since the 1998 Annual Meeting of
Shareholders.

The Audit and Review Committee consisted of Robert G. Merzweiler, Chairman,
Karen S. Belden, Robert W. Briggs, Stephen E. Myers and Richard N. Seaman. It
met five times during 1998 to examine and review internal and external reports
of operations of FirstMerit and its operating subsidiaries (the "Subsidiaries")
for presentation to the full Board of Directors.

The Credit Committee consisted of Philip A. Lloyd, II, Chairman, Karen S.
Belden, John C. Blickle, Richard Colella, Elizabeth A. Dalton and Justin T.
Rogers, Jr. It met five times during 1998 to monitor the lending activities of
the Subsidiaries and to help assure such activities were conducted in a manner
consistent with FirstMerit's loan policy.

The Compensation Committee was appointed to establish policies for and
levels of reasonable compensation for directors, officers and employees of
FirstMerit and the Subsidiaries, and to administer (among other plans)
FirstMerit's stock option plans, the FirstMerit Corporation Executive Incentive
Plan (the "Compensation Program") and the Executive Life Insurance Program
("Insurance Plan"). In addition, the Committee is involved in administering the
Employee Stock Purchase Plan ("ESPP"), the Pension Plan for Employees of
FirstMerit Corporation and the Subsidiaries ("Pension Plan"), the Executive
Supplemental Retirement Plan ("SERP") and the FirstMerit Corporation and
Subsidiaries Employees' Salary Savings Retirement Plan ("401(k) Plan"). The
committee met eight times during 1998. Its members consisted of Roger T. Read,
Chairman, R. Cary Blair, Terry L. Haines, Clifford J. Isroff, Philip A. Lloyd,
II and Justin T. Rogers, Jr., although Mr. Lloyd did not participate in
determinations relating to FirstMerit's option plans or any other compensation
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").

The Executive Committee evaluates and responds to management's
recommendations concerning planning, management, acquisitions, nominations for
directors and committee membership. The Executive Committee is authorized to act
for the Board of Directors when the Board is not in session, except in certain
limited circumstances. The members of the Executive Committee consisted of
Clifford J. Isroff, Chairman, R. Cary Blair, John C. Blickle, Sid A. Bostic,
John R. Cochran, Philip A. Lloyd, II, Roger T. Read and Justin T. Rogers, Jr. It
met fourteen times during 1998.

There were fourteen regularly scheduled and special meetings of the Board
of Directors in 1998. All of the incumbent directors attended more than 75%
percent of the aggregate of the total number of meetings of the Board of
Directors and the total number of meetings of committees on which each served.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires FirstMerit's directors, officers
and persons who own more than ten percent of its Common Stock ("Section 16
Filers") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission, and to furnish FirstMerit with copies of all
such forms they file.

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<PAGE> 9

FirstMerit understands from the information provided to it by Section 16 Filers
that for 1998 all reports were duly and timely filed by the Section 16 Filers,
except as set forth in the following paragraph:

Elizabeth A. Dalton failed to file a Form 4 to report the open market sale
of 1,500 shares of Common Stock. The transaction was reported on a Form 5 filed
in February, 1999. The July acquisitions of 539 shares of Common Stock by Jerry
M. Wolf, and 150 shares of Common Stock by Mr. Wolf's wife were reported on a
Form 4 that was filed eleven days late, on August 21, 1998.

6
<PAGE> 10

EXECUTIVE COMPENSATION AND OTHER INFORMATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table provides certain summary information concerning the
compensation paid or accrued by FirstMerit and its Subsidiaries, to or on behalf
of its executive officers. The table shows the compensation of the individuals
serving in the capacity of Chief Executive Officer, as well as each of the four
other most highly compensated executive officers of FirstMerit, determined as of
the end of the last fiscal year, December 31, 1998 (collectively the "Named
Executive Officers"), and for the fiscal years ended December 31, 1997 and 1996:

SUMMARY COMPENSATION

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS(1)
--------------------------------------------- ----------------------------------------------
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(3) BONUS(4) COMPENSATION(5) AWARDS(6) OPTIONS/SARS(7) COMPENSATION(8)
------------------ ---- --------- -------- --------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
John R. Cochran(2) 1998 $540,000 $350,880 $ -0- $ -0-(9) 120,000 $39,042
Chairman and Chief 1997 492,500 264,000 52,436 511,888 110,000 29,655
Executive Officer 1996 430,000 -0- 32,652 -0- 200,000 36,292

Sid A. Bostic(10) 1998 320,833 8,238 -0- 255,375(11) 75,000 33,744
President and Chief
Operating Officer

Robert P. Brecht 1998 194,500 105,925 -0- -0- -0- 24,461
Executive Vice 1997 188,000 72,800 27,716 -0- -0- 20,460
President 1996 180,250 34,000 -0- -0- 60,000 24,086

Jack R. Gravo 1998 245,000 160,475 -0- -0- 21,375 20,308
Executive Vice 1997 236,792 100,000 -0- -0- 9,000 19,240
President 1996 195,920 46,384 -0- -0- 75,000 19,015

John R. Macso 1998 285,417 132,550 -0- -0- 16,904 26,169
Executive Vice 1997 272,505 130,000 -0- -0- 15,914 16,345
President(12) 1996 263,013 44,975 42,123 -0- 105,000 25,794
</TABLE>

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

(1)Share information for 1996 has been restated to give effect to the 2-for-1
stock split effective in September 1997.

(2)Mr. Cochran was promoted to Chairman and Chief Executive Officer from
President and Chief Executive Officer on February 1, 1998.

(3)Includes the deferred portion of salary under the 401(k) Plan.

(4)For 1998, 1997 and 1996, the Bonus includes the amounts paid or accrued
pursuant to the Compensation Program. The amounts included represent the
incentive bonus earned for the prior year, but which cannot be determined
and paid until the first quarter of the following year. For 1998, the bonus
amounts reported include amounts which were deferred to subsequent periods
pursuant to FirstMerit's Executive Deferred Compensation Plan. The amounts
deferred to a subsequent period for each individual were as follows: Mr.
Cochran, $263,160, Mr. Bostic, -0-, Mr. Brecht, -0-, Mr. Gravo, -0-, and Mr.
Macso, $33,138.

(5)Perquisites provided to each of the Named Executive Officers in 1998 did not
exceed the disclosure thresholds established under Securities and Exchange
Commission regulations and are not included in these totals.

(6)Other than Messrs. Cochran and Bostic, none of the Named Executive Officers
hold restricted stock. No long-term incentive plan payouts were made in
1998.

(7)The terms of the Stock Options granted in 1998 to four of the Named
Executive Officers, due to new employment, promotion, and the granting of
reload options are described in detail in the table "Options/SAR Grants in
Last Fiscal Year" in this Proxy Statement.

7
<PAGE> 11

(8)"All Other Compensation" for 1998 includes the following: (i) contributions
to FirstMerit's 401(k) Plan to match the 1998 pre-tax elective deferral
contributions made by each to the 401(k) Plan: Mr. Cochran, $7,500, Mr.
Bostic, $2,625, Mr. Brecht, $7,500, Mr. Gravo, $7,400, and Mr. Macso,
$7,500, and (ii) amounts paid or accrued by FirstMerit for life and
accidental death insurance under FirstMerit's Insurance Program (together
with amounts paid as a tax "gross-up" on such amounts): Mr. Cochran,
$31,542, Mr. Bostic, $31,119, Mr. Brecht, $16,961, Mr. Gravo, $12,908 and
Mr. Macso, $18,669. None of the named Executive Officers received fees as a
director or committee member.

(9)On March 1, 1995, Mr. Cochran received 25,000 shares of restricted Common
Stock pursuant to the FirstMerit Corporation Restricted Stock Plan-1995 and
on April 9, 1997, he received 25,200 shares of restricted Common Stock
pursuant to the 1997 Stock Plan. As of December 31, 1998, the fair market
value of such shares equaled $1,349,125, based upon a closing market price
of $ 26.875 per share. The restrictions on the 1995 shares lapse equally
over a three-year period beginning in March, 2001, and restrictions on the
1997 shares lapse equally over a three-year period beginning in April, 2005,
but all may vest at an earlier time due to death, disability, a Change of
Control, Termination Without Cause or Termination for Good Reason. The
dividends on such shares are currently paid to Mr. Cochran.

(10)Mr. Bostic joined the Company on February 1, 1998.

(11)The restrictions on the 9,000 shares of Common Stock awarded to Mr. Bostic
on February 1, 1998 will lapse on February 1, 2001 with respect to 7,000 of
such shares, on February 1, 2002 with respect to 1,000 of such shares and on
February 1, 2003 with respect to the remaining 1,000 shares, but all may
vest at an earlier time due to death, disability, a Change of Control,
Termination Without Cause or Termination for Good Reason. As of December 31,
1998, the fair market value of such shares equaled $241,875, based upon a
closing market price of $26.875 per share. The dividends on such shares are
currently paid to Mr. Bostic.

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<PAGE> 12

STOCK OPTIONS

The following table contains information concerning the grant of stock
options and/or dividend units during fiscal 1998 under FirstMerit's 1997 Stock
Plan to the Named Executive Officers:

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN EXERCISE OR EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR BASE PRICE DATE 5% 10%
---- ------------ ---------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Cochran 80,000(3) 18.09% $34.00 3/19/08 $782,136 $2,856,546
40,000(4) 9.04% 34.00 3/19/08 391,068 1,428,273
-------
120,000 27.13%

Sid A. Bostic 50,000(5) 11.3% 28.50 2/02/08 763,835 2,060,341
25,000(6) 5.65% 28.50 2/02/08 381,918 1,030,171
-------
75,000 16.96%

Robert P. Brecht -0- 0% N/A N/A N/A N/A

Jack R. Gravo 4,274 0.97% 23.00 7/18/06 71,404 147,919
17,101 3.87% 23.00 2/15/06 285,701 591,848
-------
21,375(7) 4.83%

John R. Macso 10,904(7) 2.47% 31.56 2/15/06 88,832 284,038
4,000(8) 0.90% 24.375 8/20/08 77,587 181,307
2,000(9) 0.45% 24.375 8/20/08 38,793 90,654
-------
16,904 3.82%
Total All Employees 442,346
</TABLE>

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

(1)The 1992 and 1997 Stock Plans generally provide for granting of incentive
stock options ("ISOs"), non-qualified stock options ("NQSOs") (collectively
"Stock Options") and shares of restricted stock. The option price per share
of ISOs must be equal to the fair market value of a share of Common Stock on
the date granted; the option price of NQSOs may be set by the Compensation
Committee. The purchase price of any Stock Option must be paid upon exercise
in (i) immediately available funds, (ii) shares of Common Stock, or (iii) a
combination of (i) and (ii). If granted by the Committee, a one-time reload
option of NQSOs may be granted equal to the number of whole shares used by
the participant to exercise an option. Shares of stock acquired upon the
exercise of the reload option are restricted from sale for two years. If
granted by the Committee, an option may be transferred to an option holder's
immediate family. In the event of a "Change of Control," unless the
Committee otherwise determines, any unvested Stock Options will immediately
vest. "Change of Control" is basically defined as a change in 30% or more of
the beneficial ownership of FirstMerit or a change of a majority of the
Board of Directors within a two-year period.

The 1992 and 1997 Stock Plans also provide that a "Dividend Unit" may be
awarded to participants with respect to each share of Common Stock for which
a Stock Option is granted, for a period of up to five years. The 1992 and
1997 Stock Plans provide that in the event of a Change of Control,
FirstMerit will promptly

9
<PAGE> 13

thereafter pay to each participant an amount equal to the aggregate amount
accrued on the Dividend Units held by the participant on the date of the
Change of Control.

(2)This computation does not include the value of Dividend Units. In 1998, the
following amounts were accrued as Dividend Units by the named Executive
Officers: Mr. Cochran, $231,000, Mr. Bostic, $49,500, Mr. Brecht, $46,913,
Mr. Gravo, $53,286 and Mr. Macso, $49,726.

(3)These NQSO's vest on March 20, 1999.

(4)These NQSO's become exercisable in January, 2001 if FirstMerit reaches its
three-year earnings per share target. Otherwise these options vest in
September, 2007.

(5)Half of the shares subject to these NQSO's became exercisable on August
15,1998 and half become exercisable on February 15, 1999.

(6)These NQSO's became exercisable in January, 1999 because the Company reached
its earnings per share target.

(7)Reload Option granted on the exercise of a prior option.

(8)These NQSO's became exercisable in January, 1999 because the Company reached
its earnings per share target.

(9)These NQSO's became exercisable in January, 1999 because the Company reached
its earnings per share target.

The following table contains information concerning the exercise of Stock
Options and/or Dividend Units under FirstMerit's, 1992 Stock Plan, and the 1997
Stock Plan, and information on unexercised Stock Options held as of the end of
the 1998 fiscal year, by the Named Executive Officers:

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR-END AT YEAR-END
-------------------- ---------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
---- --------------- -------- -------------------- ---------------------
<S> <C> <C> <C> <C>
John R. Cochran -0- $ -0- 340,000 /240,000 $5,363,400/1,455,000
Sid A. Bostic -0- -0- 0 /75,000 0/120,000
Robert P. Brecht 6,110 116,586 41,396 /33,333 543,603/404,162
Jack R. Gravo 33,332 274,989 30,276 /47,667 180,903/525,823
John R. Macso 39,248 509,680 10,904/64,334 0/722,269
</TABLE>

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

(1) Share information relating to options granted prior to September, 1997 has
been restated to give effect to the 2-for-1 stock split effective in that
month.

(2) Based upon the closing price reported in the Nasdaq National Market System
("Nasdaq") for the Common Stock of FirstMerit on December 31, 1998. This
computation does not include the value of any Dividend Units which might be
paid or accrued during such time.

10
<PAGE> 14

BENEFICIAL OWNERSHIP AND STOCK OWNERSHIP GUIDELINES

The following table sets forth certain information regarding the Named
Executive Officers' beneficial ownership of the Common Stock of the Company as
of February 16, 1999.

<TABLE>
<CAPTION>
TITLE OF CLASS NAME OF OFFICER NUMBER OF SHARES(1) PERCENT OF CLASS(2)
- -------------- ------------------ ------------------- -------------------
<S> <C> <C> <C>
Common Stock John R. Cochran 721,715 --
Common Stock Sid A. Bostic 84,197 --
Common Stock Robert P. Brecht 88,687 --
Common Stock Jack R. Gravo 207,547 --
Common Stock John R. Macso 112,160 --
</TABLE>

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

(1) The amounts shown represent the total shares owned outright by such
individuals together with shares which are issuable upon the exercise of
currently exercisable stock options. These individuals have the right to
acquire the shares indicated after their names, upon the exercise of such
stock options: Mr. Cochran, 460,000; Mr. Bostic, 75,000; Mr. Brecht, 74,730;
Mr. Gravo, 71,610; and Mr. Macso, 71,238.

(2) None of the listed officers owns more than one percent of the applicable
class.

In February 1996, the Board adopted stock ownership guidelines for its
officers. The guidelines state that within five years after adoption, officers
of FirstMerit should own Common Stock having a market value equal to at least
the following levels of their base salary: Chief Executive Officer and
President, five times; Executive Vice President, three times; and Senior Vice
President, two times.

PENSION PLANS

Under the Pension Plan for Employees of FirstMerit Corporation and the
Subsidiaries (the "Pension Plan"), a tax-qualified defined benefit pension plan,
pension benefits may be paid to executive officers in the future. Executive
officers participate in the Pension Plan on the same basis as other employees.

Pension benefits at normal retirement age 65 are based on the average base
salary (exclusive of bonuses and overtime, if either exists, and not exceeding
$160,000 in 1998) of each participant for the highest four consecutive years
during the last ten years of employment. The benefits payable equal the sum of
1.35 percent of such average base salary multiplied by the number of years of
credited service, up to 40 years, plus .55 percent of such average base salary
in excess of "covered compensation," multiplied by the number of years of
credited service not exceeding 35 years. "Covered compensation" for this purpose
means the average (without indexing) of the Social Security taxable wage base in
effect for each calendar year during the 35-year period ending with the last day
of the calendar year in which the participant attains (or will attain) Social
Security retirement age.

Contributions to the Pension Plan are actuarially determined and cannot be
appropriately allocated to individual participants. As of December 31, 1998, the
Named Executives had the following numbers of years of service credited to them:
Mr. Cochran had four years, Mr. Bostic, zero years, Mr. Brecht, 13 years, Mr.
Gravo, 23 years and Mr. Macso, 33 years.

11
<PAGE> 15

The following table sets forth estimated annual retirement benefits
(assuming the payments are made on a straight-life annuity basis) at age 65
payable to persons in the specified remuneration and years of service
classification under the FirstMerit Pension Plan.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT ON
AVERAGE BASE DECEMBER 31, 1998 WITH YEARS OF SERVICE INDICATED
SALARY USED FOR ---------------------------------------------------------------
PLAN BENEFITS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000 $ 40,182 $ 53,576 $ 66,970 $ 80,364 $ 93,758 $103,883
200,000 54,432 72,576 90,720 108,864 127,008 140,508
250,000 68,682 91,576 114,470 137,364 160,258 177,133
300,000 82,932 110,576 138,220 165,864 193,508 213,758
350,000 97,182 129,576 161,970 194,364 226,758 250,383
400,000 111,432 148,576 185,720 222,864 260,008 287,008
450,000 125,682 167,576 209,470 251,364 293,258 323,633
500,000 139,932 186,576 233,220 279,864 326,508 360,258
550,000 154,182 205,576 256,970 308,364 359,758 396,883
600,000 168,432 224,576 280,720 336,864 393,008 433,508
650,000 182,682 243,576 304,470 365,364 426,258 470,133
700,000 196,932 262,576 328,220 393,864 459,508 506,758
750,000 211,182 281,576 352,970 422,364 492,758 543,383
800,000 225,432 300,576 375,720 450,864 526,008 580,008
850,000 239,682 319,576 399,470 479,364 559,258 616,633
</TABLE>

The foregoing figures are provided without regard to limitations on annual
pension benefits that may be paid from a tax-qualified pension plan and trust
under the Internal Revenue Code ("Code").

FirstMerit has adopted the SERP for its employees, including executive
officers. Under the SERP, persons entitled to receive benefits under the Pension
Plan are eligible to receive the excess amounts they would have been entitled to
under the Pension Plan but for limitations on maximum benefits imposed by the
Code on tax-qualified pension plans. The SERP provides total executive
retirement income based upon a formula of 50% of the final two-year average of
the executive's earnings plus 1.5% of the final two-year average earnings for
each year of service up to ten years. This retirement income "target" is then
reduced by the benefits provided by other retirement and supplemental plans,
social security, and the benefits from previous employers' retirement plans to
produce a net benefit under the SERP. In addition, benefits are further reduced
by three percent for each year where the retirement age is less than 65 years.
The SERP benefit is payable for 15 years.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee members consisted of Roger T. Read, Chairman, R.
Cary Blair, Terry L. Haines, Clifford J. Isroff, Philip A. Lloyd, II and Justin
T. Rogers, Jr. In serving on the Compensation

12
<PAGE> 16

Committee, Mr. Lloyd has recused himself from determinations relating to First
Merit's option plans or any other compensation subject to Section 16 of the
Exchange Act.

Mr. Lloyd also served on the Executive and Credit Committees. He is also a
shareholder of the law firm of Brouse McDowell, A Legal Professional Association
("Brouse McDowell") which performs legal services for FirstMerit and its
Subsidiaries. During 1998, Brouse McDowell was paid $820,993 for legal services
rendered to FirstMerit and $618,506 for legal services rendered to the
Subsidiaries. The amount of Mr. Lloyd's interest in such fees cannot be
practically determined.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS

This section discusses the employment contracts and termination agreements
for the Chief Executive Officer and the other Named Executive Officers.

FirstMerit entered into a new employment agreement with John R. Cochran
effective December 1, 1998. The agreement provides that Mr. Cochran will serve
as the Chairman and Chief Executive Officer, established his annual base salary
at $550,000 (subject to annual review), as well as providing for the terms of
payment of salary and benefits in the event of his death or disability,
termination or a Change of Control. Pursuant to the agreement, Mr. Cochran will
receive bonuses in accordance with the Company's Compensation Program. His
target award under such plan was set at 60% of his base salary.

Mr. Cochran was also provided the right to participate in various
retirement plans, as well as certain additional benefits provided executive
officers (including those provided to all employees generally), as detailed in
the "Summary Compensation" and "Option/SAR Grants in Last Fiscal Year" tables
above. The agreement contains a covenant not to compete for the two year period
immediately following termination or expiration of the agreement that is
conditioned upon FirstMerit's payment of certain obligations. These obligations
consist essentially of the payment of Mr. Cochran's base salary, bonus and other
benefits until the earlier of the second anniversary of the termination date or
the last day of the month of Mr. Cochran's sixty-fifth birthday. In the event
that Mr. Cochran's employment is terminated at his election or for Cause, the
covenant not to compete remains in force, notwithstanding that FirstMerit may
elect not to make the payments described in the preceding sentence.

The Board of Directors also agreed to nominate Mr. Cochran to the Board of
Directors. Additionally, if Mr. Cochran's employment is terminated by FirstMerit
without cause or by Mr. Cochran with Good Reason during the term of the
agreement, his base salary and benefits continue for one year. The agreement
terminates November 30, 2003, unless terminated at an earlier time pursuant to
its terms.

The employment agreement also provides that if there is a Change of Control
of FirstMerit, and within three years Mr. Cochran is terminated without Cause or
resigns with Good Reason, or within one year resigns without Good Reason, he
will be entitled to an amount payable in one lump sum. This amount will be equal
to (i) the lesser of (a) Mr. Cochran's annual base salary in effect at the time
of termination or immediately prior to the Change of Control (whichever is
higher) or (b) one twelfth of such annual base salary, multiplied by the number
of months between the termination and Mr. Cochran's sixty-fifth birthday
(including both the months of termination and of Mr. Cochran's birthday), plus
(ii) an amount equal to the highest annual incentive compensation paid to Mr.
Cochran over the three year period preceding the Change of Control. Such amount
will not be paid, however, if the termination is (i) due to death, retirement or
disability or (ii) by FirstMerit (or its successor) for Cause.

In addition, Mr. Cochran is to receive a lump sum payment after termination
equal to (i) the lesser of (a) the annual cost of all accident, disability, and
life insurance in effect at the time of termination or immediately prior

13
<PAGE> 17

to the Change of Control (whichever is higher) or (b) one twelfth of such
amount, multiplied by the number of months between the termination and Mr.
Cochran's sixty-fifth birthday (including both the months of termination and of
Mr. Cochran's birthday). Mr. Cochran also will be entitled to immediate vesting
of all stock options and similar rights in which he participates. He will also
receive continued health care coverage and continued payment by the Company of
premiums on the Executive Life Insurance Policy (plus 40% of such premiums as a
tax "gross-up").

FirstMerit must also pay for one year (up to $35,000) of reasonable
outplacement expenses incurred by Mr. Cochran in seeking comparable employment
through a placement firm. Based upon the closing price of FirstMerit common
stock effective for February 15, 1999 of $25.00 and Mr. Cochran's stock option
and restricted stock holdings as of the same date, the Company believes that had
a Change of Control occurred on such date, Mr. Cochran would have been entitled
to a payment equal to $ . In addition, Mr. Cochran will be indemnified by
FirstMerit to the extent of $ due to the foregoing payments being subject
to the tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended, or any similar tax that may be hereafter imposed.

To promote stability among the other executive officers, the Board of
Directors of FirstMerit authorized FirstMerit to enter into agreements with
other key officers regarding their termination due to a Change of Control. All
of the other Named Executive Officers have agreements which have Change of
Control provisions. These agreements each provide that if there is a Change of
Control of FirstMerit, and the Named Executive Officer is subsequently
terminated during the term of the his agreement, he will be entitled to an
amount payable in one lump sum. This amount will be equal to the greater of the
Named Executive Officer's base salary at the time of termination or immediately
prior to the Change of Control, plus an amount equal to the average annual
incentive compensation paid to such officer over the two years preceding the
Change of Control, multiplied by two. Such amount will not be paid, however, if
the termination is (i) due to death, retirement or disability, (ii) by
FirstMerit for Cause, or (iii) by the Named Executive Officer other than for
Good Reason. In addition, each Named Executive Officer is to receive benefits
during the two-year period after termination which must include medical,
disability and life insurance benefits identical to those in effect just before
the Change of Control.

Each Named Executive Officer also will be entitled to immediate vesting of
all stock options and similar rights in which he participates. FirstMerit must
also pay for one year (up to $25,000) of reasonable outplacement expenses
incurred by the officer in seeking comparable employment through a placement
firm. Based upon the closing price of FirstMerit common stock effective for
February 15, 1999 of $25.00, the Company believes that, had a Change of Control
occurred on such date, the Named Executive Officers would have been entitled to
the following payments: Mr. Bostic, $ Mr. Brecht, $ ; Mr. Gravo,
$ ; and Mr. Macso, $ . Notwithstanding any of the foregoing, the
termination compensation and benefits payable to any Named Executive Officer
will not exceed that which is permitted under the Code without being considered
"parachute payments."

FIRSTMERIT COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

PHILOSOPHY AND COMPOSITION OF COMMITTEE

FirstMerit's executive compensation program is designed to enable
FirstMerit to attract, motivate and retain top quality executive officers by
providing a fully competitive and comprehensive compensation package. It
provides for competitive base salaries that reflect individual performance as
well as annual variable incentive awards payable in cash for the achievement of
financial performance goals established by the Compensation Committee and
approved by the non-employee members of the Board of Directors ("non-employee
directors").

14
<PAGE> 18

In addition, long-term, stock-based incentive awards are granted to strengthen
the mutuality of interest between the executive officers and FirstMerit's
shareholders and to motivate and reward the achievement of important long-term
performance objectives of FirstMerit.

FirstMerit's executive compensation program is administered by the
Compensation Committee of the Board of Directors, composed entirely of the
following directors: Roger T. Read, Chairman, R. Cary Blair, Terry L. Haines,
Clifford J. Isroff, Philip A. Lloyd, II and Justin T. Rogers, Jr. Mr. Lloyd,
however, has recused himself from any determination of compensation subject to
Section 16 of the Exchange Act. None of these directors is an employee of
FirstMerit.

ESTABLISHMENT OF EXECUTIVE COMPENSATION PROGRAM AND PROCEDURES

The Compensation Committee has utilized the services of Sibson & Company
("Sibson"), a nationally recognized independent compensation consulting company,
to review and to make recommendations regarding the effectiveness of
FirstMerit's executive compensation program. As part of that review and for
purposes of recommending a program to FirstMerit, Sibson was requested to review
the executive compensation program being utilized and compare it with similar
programs of public corporations that shared one or more common traits with
FirstMerit (such as market capitalization, asset size and geographic location),
which the Committee and Sibson felt might be FirstMerit's most direct
competitors for executive talent, and also to assist FirstMerit in establishing
and weighting specific assessment areas for the Chief Executive Officer. The
recommendations of Sibson have been utilized by the Committee and Board of
Directors.

The Compensation Committee is responsible for the establishment of the base
salary, as well as the award level for the annual incentive compensation
program, both subject to approval by the non-employee directors. The Committee
is also responsible for the award level and administration of the stock option
programs for executive officers, as well as recommendations regarding other
executive benefits and plans, also subject to approval by the non-employee
directors. In reviewing the individual performance of the Named Executive
Officers whose compensation is detailed in this Proxy Statement, the Committee
takes into account the views of the Chief Executive Officer of FirstMerit. In
reviewing the Chief Executive Officer's performance, the Committee reports on
that evaluation directly to the non-employee members of the Executive Committee
and then to the directors.

As an overall evaluation tool in determining levels of compensation for the
FirstMerit executive officers, as well as for the Chief Executive Officer, the
Committee reviews the compensation policies of other public companies, as well
as published financial industry salary surveys. Although the Committee has not
defined or established a specific comparison group of bank holding companies for
determination of compensation, those listed in the salary surveys which share
one or more common traits with FirstMerit, such as market capitalization, asset
size, geographic location, similar lines of business and financial returns on
assets and equity, are given more weight. The companies listed in the various
salary surveys may or may not be included in the Nasdaq Banks Index (an index
included in FirstMerit's "Performance Graph" below), and as such, the Committee
is unable to make any comparisons between the two.

COMPONENTS OF THE NAMED EXECUTIVE OFFICER COMPENSATION

For 1998, the executive compensation program for the Named Executive
Officers consisted of four primary components: (i) a base salary; (ii) incentive
compensation; (iii) executive benefits, such as insurance and retirement
benefits; and (iv) benefits which are generally available to all employees.
These components are discussed in detail below.

15
<PAGE> 19

BASE SALARY. The Named Executive Officers' base salaries and performance
are reviewed annually. They are primarily determined by evaluating the
individual officers' level of responsibilities for their position, comparing
their position to similar positions within FirstMerit and by comparing salaries
detailed in the salary surveys for executives with similar experience and
responsibilities outside of FirstMerit.

Significant weight is also given to the views of the Chief Executive
Officer of FirstMerit regarding how the Named Executive Officer has succeeded in
his or her annual performance goals. These goals are established by the Chief
Executive Officer for each Executive Officer, including personal and bank goals.
The nature of these goals differs depending upon each Officer's job
responsibilities. Goals are both qualitative in nature, such as the development
and retention of key personnel, quality of products and services and management
effectiveness; and quantitative in nature, such as sales and revenue goals and
cost containment.

The Named Executive Officer's base salary is then established by the
Committee based upon the items listed above, as well as upon the Company's
overall performance during the preceding year. The Committee does not place a
specific weight value on any of the above-listed factors. The base salary as
established is subject to approval by the non-employee directors.

INCENTIVE COMPENSATION. Incentive compensation includes two programs: the
award of cash bonuses through the Compensation Program and the award of stock
options and restricted stock under the 1997 Stock Plan. The participants and
awards under FirstMerit's incentive plans are determined by the Committee,
subject to approval by the non-employee directors.

Cash Incentive Compensation. FirstMerit's policy for cash incentive
compensation is to reward the achievement of financial objectives
established in advance by the Compensation Committee. Prior to the
beginning of each year performance targets are established by the
Committee. The performance targets focus upon the net operating income
("NOI") of FirstMerit, and depending upon the duties of a Named Executive
Officer, the NOI of one or more Subsidiaries. Also included as targets are
individual performance goals. The Committee has the right, however, to also
take into consideration other factors related to the individual performance
of the Named Executive Officer in making an award to him or her under the
Compensation Program. An incentive bonus award for a Named Executive
Officer depends upon two basic factors: (i) the position held by the Named
Executive Officer which establishes a maximum bonus available based upon a
percentage of the officer's base salary (60-100% of the base salary for the
Chief Executive Officer; 40-70% of the base salary for the other Named
Executive Officers) and (ii) the extent to which the performance targets,
including the NOI target, have been met or exceeded.

All incentive bonus awards are currently paid in cash. The bonuses
paid or accrued in 1998 were based upon FirstMerit's 1997 performance.

Stock Options. FirstMerit's philosophy for granting stock options is
based on the principles of encouraging key employees to remain with the
Company by providing them with a long-term interest in the Company's
overall performance and an incentive to manage with a view toward
maximizing long-term shareholder value. Stock option grants provide an
incentive for the creation of shareholder value since the full benefit of
the grant to each Named Executive Officer can only be realized with an
appreciation in the price of FirstMerit's Common Stock.

Option grants provide the right to purchase shares of FirstMerit's
Common Stock at the fair market value on the date of the grant. Stock
options are granted pursuant to the 1997 Stock Plan using guidelines which
include corporate performance, individual responsibilities and performance.

16
<PAGE> 20

In 1996, the Committee determined and awarded to certain key
individuals "performance" stock options, which vest in January, 1999, but
only if a target cumulative EPS is achieved, otherwise the options vest in
January, 2006, as well as "multi-year" stock options representing grants
equal to approximately three times each Named Executive Officer's normal
annual grant, as determined by the Committee, which vest in 33 1/3%
increments on the anniversary of the option grant in 1997, 1998 and 1999.
Because of the grants made in 1996, the Committee only granted options
(performance or multi-year) in 1998 to newly hired personnel (including Mr.
Bostic) or personnel who had received a promotion (including Mr. Cochran
and Mr. Macso). In 1999, the Committee may award similar performance and
multi-year grants to individuals if it determines such awards are
warranted.

The total number of option grants made in 1998 for all participants in
the 1997 Stock Plan was for 442,346 shares of FirstMerit Common Stock, of
which 233,279 shares, or 52.7%, were awarded to the Named Executive
Officers (including 32,279 reload options granted upon the exercise of
prior options).

Stock Ownership Guidelines. In February 1996, the Board adopted stock
ownership guidelines for its officers. The guidelines state that within
five years after adoption, officers of FirstMerit should own Common Stock
having a market value equal to at least the following levels of their base
salary: Chief Executive Officer and President, five times; Executive Vice
President, three times; and Senior Vice President, two times. The Board
annually reviews the level of ownership to monitor the progress towards
attaining these guidelines.

DETERMINATION OF THE CHIEF EXECUTIVE OFFICER'S COMPENSATION

On February 1, 1998, FirstMerit named John R. Cochran as its Chairman and
Chief Executive Officer. Prior to this Mr. Cochran was the President and Chief
Executive Officer of FirstMerit, a position to which he was appointed to on
March 1, 1995. FirstMerit entered into a new employment agreement with John R.
Cochran effective December 1, 1998. The compensation package entered into with
Mr. Cochran is detailed in this Proxy under the tables and descriptive
paragraphs of this section entitled "Executive Compensation and Other
Information."

Mr. Cochran's base salary for 1998 was determined by the Committee through
an assessment of several areas, including the annual financial results of
FirstMerit and his overall performance as a leader of the Company. In
determining compensation and the annual financial results (which focused on net
operating income) were given a 75% weight by the Committee, whereas overall
performance as a leader was given a 25% weight by the Committee. Overall
performance was further broken down into seven sub-areas, three of which were
each given a 20% weight, while the other four were each given a 10% weight. In
addition to these factors, the Committee also reviewed information from Sibson
to determine if there were any overall trends in the financial services industry
regarding compensation of chief executive officers that would suggest any
adjustments to the amounts to be paid to Mr. Cochran.

Based on these factors, the Committee established Mr. Cochran's annual base
salary for 1998 at $550,000, which was approximately a 7.8% increase from his
1997 base salary. Mr. Cochran was also granted options to purchase 120,000
shares of FirstMerit Common Stock at a per share price equal to 100% of the fair
market value on the date of grant. All of the options granted were NQSOs. Of
these options, 80,000 will vest within one year of the grant. The grant was made
in accordance with the guidelines of the Committee referenced above and equated
to 27.13% of all options granted in 1998 to participants in the 1997 Stock
Plans.

17
<PAGE> 21

DEDUCTIBILITY OF EXECUTIVE COMPENSATION

The Committee has reviewed the qualifying compensation regulations issued
by the Internal Revenue Service under Code Section 162(m) which provide that no
deduction is allowed for applicable employee remuneration paid by a publicly
held corporation to a covered employee to the extent that the remuneration paid
to the employee exceeds $1.0 million for the applicable taxable year, unless
certain conditions are met. Currently, remuneration is not expected to exceed
the $1.0 million base for any employee and therefore, compensation should not be
affected by the qualifying compensation regulations. Under the FirstMerit
Corporation Executive Deferred Compensation Plan ("Executive Deferred Plan"),
which was approved by the shareholders in April, 1996, amounts deferred by
executives will not be subject to Code Section 162(m). The Executive Deferred
Plan permits executive officers of FirstMerit to elect to defer their base
salary and incentive compensation in "stock units" (which are not actual shares
of FirstMerit Common Stock but are tied to the performance thereof.)

The foregoing report has been respectfully furnished by the members of the
Compensation Committee, being:

<TABLE>
<S> <C>
Roger T. Read, Chairman R. Cary Blair
Terry L. Haines Clifford J. Isroff
Philip A. Lloyd, II Justin T. Rogers, Jr.
</TABLE>

18
<PAGE> 22

PERFORMANCE GRAPH

Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on FirstMerit's Common Stock against the
cumulative return of the Nasdaq Banks Index, the Nasdaq Index and the S&P 500
Index for the period of five fiscal years commencing January 1, 1993 and ended
December 31, 1998.(1)

<TABLE>
<CAPTION>
FMER NASDAQ NASDAQ BANKS(2) S&P 500
---- ------ --------------- -------
<S> <C> <C> <C> <C>
1993 $ 100.00 $ 100.00 $ 100.00 $ 100.00
1994 99.09 97.70 99.63 101.32
1995 124.97 126.32 132.37 139.35
1996 153.20 149.92 164.48 171.32
1997 251.43 177.66 230.72 228.48
1998 244.20 228.92 228.51 293.74
</TABLE>

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

(1) Assumes that the value of the investment in FirstMerit Common Stock and each
index was $100 on December 31, 1992 and that all dividends were reinvested.

(2) This is a CRSP Index and includes all companies on Nasdaq within the SI
Codes of 602 and 671. To the extent Nasdaq makes available the identity of
the companies which comprise this index, the Company, in a prompt manner,
will make such information available to any person requesting such.

DIRECTOR COMPENSATION

The following table describes the standard arrangements pursuant to which
non-employee directors of FirstMerit were compensated for their services
effective in April 1998:

<TABLE>
<CAPTION>
ANNUAL FEE PER FEE PER COMMITTEE
BASE RETAINER FEE BOARD MEETING MEETING
- ----------------- ------------- -----------------
<S> <C> <C>
$12,000 $800(1) $800(1)
</TABLE>

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

(1) Directors are paid $400 for telephonic Board and Committee meetings.

19
<PAGE> 23

The non-employee directors may also receive an additional cash payment of
$6,000 if certain performance based criteria are met by FirstMerit. In 1998 the
criteria were met and the directors received the additional payment.

The non-employee directors who serve as the chairmen of the various Board
committees receive additional cash compensation as follows: Audit, Compensation
and Credit Committees, $625; and the Executive Committee, $775. FirstMerit may
pay fees to directors who are former officers of FirstMerit or the Subsidiaries
but not to directors who are incumbent officers of FirstMerit or the
Subsidiaries.

The FirstMerit Director Deferred Compensation Plan ("Director Deferred
Plan"), which was approved by the shareholders in April, 1996, permits directors
of FirstMerit who are not employees to elect to defer their fees in either
"stock units" (which are not actual shares of FirstMerit Common Stock but are
tied to the performance thereof), or have them credited by FirstMerit to a
deferred benefit account which is credited with interest at a rate of Moody's
plus two. Nine of FirstMerit's directors participated in the Director Deferred
Plan during 1998.

On April 9, 1997, the shareholders approved the 1997 Stock Plan. This Plan
generally provides for granting of NQSOs to directors who are not full-time
employees of FirstMerit. Under the Plan, up to 200,000 shares of FirstMerit
Common Stock may be issued, subject to adjustment in the event of certain
corporate transactions as described below. Each participant in the Plan is
awarded annually, on the day after the Annual Meeting of Shareholders, NQSOs to
purchase 2,400 shares of Common Stock. The option price per share is 100 percent
of the fair market value of a share of Common Stock on the date the option is
granted. The Plan also provides that a Dividend Unit will be awarded to
participants with respect to each share of Common Stock for which a NQSO is
granted. The amount payable with respect to each Dividend Unit is equal to the
aggregate dividends actually paid on one share of Common Stock, to the extent
the participant held the Dividend Unit on the record date for payment of each
such dividend. Dividend Units will be awarded for terms of ten years, but they
will accrue dividends for only the five years following their award. The Plan
provides that in the event of a Change of Control, FirstMerit will promptly pay
to each participant an amount equal to the aggregate amount accrued on the
Dividend Units held by the participant on the date of the Change of Control.

In February 1996, the Board adopted stock ownership guidelines for its
directors. The guidelines state that within five years after adoption, directors
of FirstMerit should own Common Stock having a market value equal to at least
five times their base retainer.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 1998, certain directors and executive officers of FirstMerit, and
their associates, were customers of and had banking transactions with the
Subsidiaries of FirstMerit in the ordinary course of business. FirstMerit
expects that these relationships and transactions will continue in the future.

All loans and commitments to loans included in such transactions, including
equipment leasing transactions, were made and will be made in the future on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons not
employed by or affiliated with FirstMerit. The existing transactions do not
involve more than the normal risk of collectability or present other unfavorable
features.

The law firm of Brouse McDowell performed legal services for FirstMerit and
the Subsidiaries in 1998. Philip A. Lloyd, II, a Class I Director of FirstMerit,
is a shareholder of the law firm. The amounts of such fees for legal services
are indicated under "Compensation Committee Interlocks and Insider
Participation," above. The amount of Mr. Lloyd's interest in such fees cannot
practicably be determined.

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<PAGE> 24

The law firm of Buckingham, Doolittle & Burroughs received fees for the
performance of legal services for FirstMerit and a Subsidiary in 1998. Robert W.
Briggs, a nominee to serve as a Class II Director of FirstMerit, is a
shareholder of the law firm. The amount of Mr. Briggs' interest in such fees
cannot practicably be determined.

The law firm of Colella & Kolczun, P.L.L. received fees for the performance
of legal services for a Subsidiary of FirstMerit in 1998. Richard Colella, a
Class I Director of FirstMerit, is a shareholder of the law firm. The amount of
Mr. Colella's interest in such fees cannot practicably be determined.

FirstMerit and the Subsidiaries also employ other law firms to perform
legal services.

PROPOSAL NO. 2

INCREASE OF AMOUNT OF AUTHORIZED COMMON STOCK

The Board of Directors has approved and determined to submit to the
FirstMerit stockholders a proposal to amend FirstMerit's Articles to increase
the number of shares of authorized Common Stock from 160,000,000 to 300,000,000
shares. As of February 15, 1999, there were issued and outstanding [89,610,408]
shares of Common Stock (excluding the 1,052,355 shares of Common Stock held as
treasury shares by FirstMerit).

The Board of Directors of FirstMerit is of the opinion that the present
balance of shares of Common Stock available for issuance is insufficient to
enable FirstMerit to provide for its employee stock option and purchase plans
and to allow it to take advantage of business opportunities, such as
acquisitions, that may arise. On April 8, 1998, at the Annual Meeting of
Shareholders, the stockholders approved an increase in authorized shares of
Common Stock from 80,000,000 to 160,000,000. Since that time, FirstMerit has
completed mergers through exchanges of common stock with CoBancorp Inc.,
resulting in the issuance of 3,896,785 resulting in the issuance of 7,020,092
shares; and Signal Corp resulting in the issuance of [15,500,000] shares. These
mergers have reduced the number of shares of FirstMerit Common Stock available
for future transactions and stock splits. The increase in authorized shares
would give FirstMerit the flexibility to take advantage of various business
opportunities, including acquisitions, financings, stock splits and stock
dividends, the sale of shares of Common Stock in the open market or otherwise,
for other corporate purposes, as well as providing for future employee stock
option and purchase plans.

Authorized but unissued shares may be issued at some later date upon
authorization by the FirstMerit Board of Directors, except as may be limited by
the FirstMerit Articles, law, or by the rules of Nasdaq. The holders of shares
of FirstMerit Common Stock and 6 1/2% Cumulative Preferred Stock, are not
entitled to preemptive rights to purchase or have offered to them any shares of
Common or Preferred Stock whether now or hereafter authorized. Although the
proposed amendments would increase the number of shares of FirstMerit Common
Stock available for issuance, the directors currently have the authority
described above and the amendment would not increase the authority of the Board
to take such actions. The Board has no present plans to issue shares of
FirstMerit Common and/or Preferred Stock for such purposes.

The Board of Directors believes that an increase in the number of
authorized shares of FirstMerit Common Stock would not significantly impact any
attempt to gain control of FirstMerit. It is possible, however, that the
availability of authorized but unissued shares of FirstMerit Common Stock could
discourage third parties from attempting to gain such control since the Board
could authorize the issuance of shares of Common Stock in a private placement or
otherwise to one or more persons. Such an issuance of shares of Common Stock
could dilute the voting power of a person attempting to acquire control of
FirstMerit, increase the cost of acquiring such control, affect the accounting
treatment thereof or otherwise hinder such efforts.

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<PAGE> 25

It is proposed that the first paragraph of Article Fourth of the FirstMerit
Articles be amended to read as follows:

FOURTH: The maximum number of shares which the Corporation is authorized to
issue and to have outstanding at any time shall be Three Hundred Seven Million,
which shall be classified as follows:

(a) Three Hundred Million (300,000,000) of said shares shall be Common
Stock, without par value; and

(b) Seven Million (7,000,000) of said shares shall be Series Preferred
Stock, without par value ("no par value Preferred Stock");

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NUMBER 2

PROPOSAL NO. 3

APPROVAL OF THE COMPANY'S 1999 STOCK PLAN

The Board of Directors has adopted, subject to shareholder approval, the
FirstMerit Corporation 1999 Stock Plan (the "1999 Stock Plan" or the "Plan").
The Board of Directors believes that approval of the 1999 Stock Plan will
advance the interests of the Company by providing eligible participants the
opportunity to receive a broad variety of equity-based awards.

As of February 19, 1999, 1,500,000 shares remain available for grant under
the 1997 Stock Plan. These shares will continue to be available for grant even
after shareholder approval of the 1999 Stock Plan.

A total of 4,000,000 shares of Common Stock have been reserved for issuance
under the 1999 Stock Plan. The Company estimates that such amount will meet its
stock based compensation needs for the next five years.

The following types of awards can be made under the 1999 Stock Plan:
discretionary employee stock options, automatic Director stock options, dividend
units and restricted stock. The maximum number of shares reserved is [3,800,000]
for employee stock options and for restricted stock, and 200,000 for Director
stock options. The maximum number of shares of this amount which can be used for
restricted stock grants is 500,000. Restricted stock grants can only be made to
employees. The maximum annual grant which can be made to any one individual is
one and one-half percent of the total outstanding shares of Common Stock of
FirstMerit at the time of grant. No Award may be granted under the 1999 Stock
Plan after ten years from the date of the Plan, but Awards previously granted
may extend beyond such date.

As of January 1, 1999, 220 employees were eligible to participate in the
1997 Stock Plan and [all] of the non-employee directors were participants in the
1997 Stock Plan. Such individuals will also be eligible to participate in the
1999 Stock Plan if it is approved. It is not currently possible to determine the
benefits or amounts which may be received by the future participants of the 1999
Stock Plan, other than the non-employee Directors who will receive options to
purchase 2,400 shares of Common Stock annually.

SUMMARY OF THE 1999 STOCK PLAN

The following summary description of the 1999 Stock Plan is qualified in
its entirety by reference to the full text of the 1999 Stock Plan. Copies of the
1999 Stock Plan may be obtained by a shareholder upon written request to the
Secretary of FirstMerit.

EMPLOYEE STOCK PROGRAM. Awards to participants under the employee stock
portion of the 1999 Stock Plan may be either incentive stock options ("ISOs") or
non-qualified stock options ("NQSOs"). The option price

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<PAGE> 26

per share for ISOs must be at least equal to the fair market value of a share of
Common Stock on the date the option is granted; the option price per share for
NQSOs, however, maybe set by the Compensation Committee of the Board of
Directors ("Compensation Committee" or "Committee").

The exercise period for ISOs cannot be more than ten years from the date of
grant, while the exercise period for NQSOs may be set by the Committee. Stock
options are not transferable, except by will or the laws of descent and
distribution, and they may not be subjected to any lien or liability. A one-time
reload option may also be granted at the time of award of NQSOs equal to the
number of shares issued upon exercise by the participant of the original option.
FirstMerit may also require a participant to pay or otherwise satisfy applicable
withholding for income and employment taxes. The Compensation Committee may
prescribe additional rules governing the exercise of Stock Options and may
accelerate their exercisability, subject to certain restrictions imposed under
the Code.

In the event a participant's employment is terminated due to death,
disability or retirement, ISOs awarded to the participant will remain
exercisable for the maximum period allowable under the Code, and NQSOs will
remain exercisable for the remainder of the option term or five years, whichever
is less. If a participant's employment is terminated for any reason other than
death, disability or retirement, all stock options granted under the 1999 Stock
Plan will be canceled immediately; provided, however, that if FirstMerit
terminates a participant for reasons other than misconduct or misfeasance, the
participant may be granted 30 days to exercise any Stock Options; and provided
further, that if termination is attributable to a "Change of Control" (as
defined in the 1999 Stock Plan), any Stock Options previously granted will
continue for their term, and will immediately vest, unless otherwise determined
at the time of the grant by the Committee. An Award may be rescinded following a
participant's termination of employment upon a finding that the participant has
directly or indirectly competed with FirstMerit or has engaged in any activity
otherwise adverse to or not in the best interest of FirstMerit.

DIRECTORS STOCK PROGRAM. Each non-employee director will be awarded
annually, on the day after the Annual Meeting of Shareholders, NQSOs to purchase
2,400 shares of Common Stock. The option price per share is equal to 100 percent
of the fair market value of a share of Common Stock on the date the option is
granted. NQSOs may not be exercised until six months after the date of grant,
then will remain exercisable until ten years from the date of grant. NQSOs are
not transferable, except by will or the laws of descent or distribution, and
they may not be subjected to any lien or liability. If a director is removed for
cause, all NQSOs previously granted will be canceled immediately. If a director
is removed for any reason other than for cause, NQSOs previously granted will
remain exercisable for the remainder of their term or five years, whichever is
less.

DIVIDEND UNITS. The 1999 Stock Plan provides that a Dividend Unit may be
awarded for a term of ten years to participants with respect to each share of
Common Stock for which a Stock Option is granted. Dividend Units accrue
dividends for periods up to five years. The amount accrued with respect to a
Dividend Unit is equal to the aggregate dividends actually paid on one share of
Common Stock, to the extent the participant held the dividend unit on the record
date for payment. Dividend units are not transferable, except by will or the
laws of descent and distribution, and they may not be subjected to any lien or
liability.

Accrued Dividend Units are payable only upon issuance of the shares of
Common Stock to which such Dividend Units relate at the time of exercise of the
underlying option. The 1999 Stock Plan provides that in the event of a Change of
Control, FirstMerit may promptly pay to each participant an amount equal to the
aggregate amount accrued on the Dividend Units held by the participant; or as
long as a participant holds a Dividend Unit during its term and dividends are
accrued thereon, FirstMerit (or its successor) will continue to make accruals
with respect to the Dividend Units.

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<PAGE> 27

RESTRICTED STOCK PROGRAM. Shares may be awarded under the Restricted Stock
Program for such consideration, if any, as may be deemed appropriate, including
(i) cash or cash equivalents, (ii) promissory notes payable to FirstMerit's
order (which may be subject to cancellation in whole or in part at the
discretion of the Committee) or (iii) services rendered to FirstMerit or its
Subsidiaries. Shares issued under the Restricted Stock Program may be fully
vested upon issuance or may vest over a period of time. The vesting schedule
applicable to each issuance, including (i) the service period to be completed by
the participant or the performance objectives to be achieved by FirstMerit, (ii)
the number of installments in which the shares are to vest, (iii) the interval
to lapse between each installment, and (iv) the effect death, disability or any
other event designated by the Committee is to have on the vesting schedule.

A participant in the Restricted Stock Program will have full shareholder
rights with respect to the issued shares, including the right to vote such
shares and receive all cash dividends paid on such shares, whether or not such
shares are vested. Any new, additional or different securities, however, to
which the participant may become entitled with respect to the issued shares by
reason of (i) any stock dividend, stock split, reclassification,
recapitalization or other similar transaction affecting such shares, or (ii) a
Corporate Transaction (as such term is defined in the section entitled
"Corporate Transaction/Change in Control" below) will be subject to the same
vesting schedule and escrow requirements applicable to those issued shares.
Unvested shares held under the Restricted Stock Program may not be sold,
transferred or assigned, except for certain permitted transfers to the
participant's spouse or issue or transfers effected upon the participant's
death.

ADMINISTRATION OF THE 1999 STOCK PLAN

DISCRETIONARY PROGRAMS. The Employee Stock Program and the Restricted Stock
Program portions of the 1999 Stock Plan (collectively, the "Discretionary
Programs") will be administered by the Compensation Committee of the Board of
Directors. The Compensation Committee is comprised solely of persons who qualify
both as "outside directors" (within the meaning of Code Section 162(m)) and
"non-employee directors" (within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934), except that a person who otherwise may not so
qualify may be appointed where a recusal procedure is utilized by the Committee
for Awards under the Plan.

Subject to the terms of the 1999 Stock Plan and approval by the
non-employee Directors of the Board, the Committee has authority to interpret
the 1999 Stock Plan; determine eligibility for the grant of Awards; determine,
modify or waive the terms and conditions of any Award; and otherwise do all
things necessary to carry out the purposes of the 1999 Stock Plan. All awards
are subject to the approval of the non-employee Directors of the Board.

DIRECTORS STOCK PROGRAM. The Directors Stock Program is a self-executing
option program and is administered by the Secretary of the Company.

ELIGIBILITY AND PARTICIPATION

DISCRETIONARY PROGRAMS. In general, the Committee will recommend, and then
non-employee directors of the Board will select, the participants for the
Discretionary Programs. Participants will be among the key employees of the
Company who are in a position to make a significant contribution to the success
of FirstMerit.

DIRECTORS STOCK PROGRAM. On the day after the Annual Meeting of
Shareholders, each director is automatically awarded a NQSO to purchase 1,200
shares of Common Stock, at the then fair market value.

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<PAGE> 28

PAYMENT AND TAX WITHHOLDING

The full purchase price of any stock option must be paid upon exercise
either in (i) immediately available funds, (ii) shares of Common Stock having an
aggregate fair market value equal to the full purchase price, (iii) a
combination of (i) and (ii), or (iv) by use of a cashless exercise procedure.

CHANGES IN CAPITALIZATION; CHANGE IN CONTROL

In the event the outstanding shares of FirstMerit's Common Stock are
increased or decreased as a result of stock dividends, stock splits,
recapitalizations, reorganizations or other changes in corporate structure
effected without the receipt of consideration, or in the event FirstMerit's
Common Stock is converted into other shares or securities of FirstMerit or any
other corporation in connection with a "Corporate Transaction," then appropriate
adjustments will be made to the class and/or number of shares available for
subsequent issuance under the 1999 Stock Plan and, at the Compensation
Committee's discretion, the number shares of Common Stock subject to outstanding
stock options and the option price per share applicable to such stock options.

In the event of a Corporate Transaction or Change of Control, all stock
options or shares which have been outstanding under the 1999 Stock Plan will
immediately vest in full, except (and to the extent) there are limitations at
the time the shares are issued under the 1999 Stock Plan which preclude such
accelerated vesting in whole or in part. The acceleration of the vesting of
restricted shares and stock options could have the effect of discouraging a
Corporate Transaction or Change of Control of FirstMerit and in management even
though such Corporate Transaction or Change of Control could be favored by a
majority of shareholders. "Change of Control" is basically defined as a change
in 30% or more of the beneficial ownership of FirstMerit or a change of a
majority of the Board of Directors within a two-year period.

VALUATION

For purposes of valuation under the 1999 Stock Plan, the fair market value
of a share of Common Stock, on any relevant date, is the reported closing
selling price per share on the Nasdaq National Market System.

AMENDMENT AND TERMINATION

The Board of Directors may at any time amend, suspend or terminate the 1999
Stock Plan, in whole or part, provided such action does not adversely affect the
rights of participants with respect to outstanding options or shares. No
modification to the 1999 Stock Plan may, without shareholder approval, increase
the number of shares issuable under the 1999 Stock Plan.

Unless sooner terminated by Board action, the 1999 Stock Plan will
terminate upon the earlier of (i) ten years after adoption, or (ii) the first
date when all the shares of FirstMerit's Common stock available for issuance
thereunder, or options therefor, have been issued.

PRICE OF COMMON STOCK

The closing price of the Common Stock on the Nasdaq National Market System
on February 16, 1999 was $[ ].

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<PAGE> 29

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion summarizes certain federal income tax consequences
of the issuance and exercise of stock options and restricted stock awarded under
the 1999 Stock Plan. The summary does not address all federal tax consequences,
nor does it cover state or local tax consequences.

OPTIONS. In general, a participant realizes no taxable income on either the
grant or the vesting of a stock option. The exercise of a NQSO results in
ordinary income (generally subject to withholding, if the participant is an
employee) equal to the difference (the "Option Spread") between the value of the
Common Stock purchased and the option exercise price. A corresponding deduction
is available to the Company. In general, the ordinary income associated with the
exercise is measured and taken into account at the time of exercise. Any
subsequent sale of Common Stock purchased under a NQSO may result in a capital
gain or loss.

The exercise of an ISO does not produce ordinary taxable income. However,
because the Option Spread constitutes "alternative minimum taxable income"
(measured and taken into account, in general, at the time of exercise), exercise
of an ISO may result in an alternative minimum tax liability. In addition,
shares purchased under an ISO ("ISO Shares") are subject to special tax holding
rules. If a participant holds ISO Shares for at least two years from the date of
the ISO grant and at least one year after exercise, any gain or loss recognized
for tax purposes upon a subsequent sale of the shares will be a long-term
capital gain or loss. A disposition of ISO Shares, however, by the participant
within either of these special holding periods (a so-called "disqualifying
disposition") results in ordinary compensation income in the year of the
disposition equal, in general, to the Option Spread at the time the option was
exercised. The ordinary income realized upon a disqualifying disposition of ISO
Shares is deductible by the Company but is not subject to withholding. Any
additional gain recognized for tax purposes in a disqualifying disposition will
be taxed as short-term or long-term capital gain.

An ISO that is exercised by the participant more than three months
following termination of employment (one year, if termination occurred by reason
of total and permanent disability) is treated for tax purposes as a NQSO. ISOs
granted to a participant under the 1999 Stock Plan (together with ISOs granted
to the participant after 1986 under any other plans of the Company) are also
treated as NQSOs to the extent that, in the aggregate, they first become
exercisable in any calendar year for shares of Common Stock having a fair market
value (determined at time of grant) in excess of $100,000.

Under the so-called "golden parachute" provisions of the Code, certain
awards vested or paid in connection with a Change of Control of the Company may
also be non-deductible to the Company and may be subject to an additional 20%
federal excise tax. Non-deductible "parachute payments" will in general reduce
the $1.0 million limit on deductible compensation under Code Section 162(m), to
the extent such limit is applicable to remuneration paid under the 1999 Stock
Plan or otherwise.

DIVIDEND UNITS. The grant of a dividend unit generally will not result in
taxable income to the participant or a deduction for FirstMerit, but the payment
of cash with respect thereto generally will result in ordinary taxable income to
the participant and a deduction for FirstMerit. Income taxes will be withheld
from payments on dividend units.

RESTRICTED STOCK. To the extent the participant is issued vested shares,
the participant must report as ordinary income in the year of issuance an amount
equal to the excess of (i) the fair market value of those vested shares on the
date of issue over (ii) the aggregate purchase price paid for such shares. To
the extent the issued shares are unvested, the participant will not recognize
any taxable income at the time of issuance but will have to report as ordinary
income, for the taxable year in which the participant's interest in the issued
shares becomes vested, an amount equal to the excess of (i) the fair market
value of the shares on the date they become vested

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<PAGE> 30

over (ii) the aggregate purchase price paid for such shares. Such participant,
however, may elect under Code Section 83(b) to include as ordinary income in the
taxable year of issuance an amount equal to the excess of (i) the fair market
value of the unvested shares on the date of issue over (ii) the aggregate
purchase price paid for such shares. If the Code Section 83(b) election is made,
the participant will not recognize any additional income as and when such
participant's interest in the shares subsequently vests.

FirstMerit will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the participant in connection with the
acquisition of the shares and any note forgiveness. The deduction will be
allowed for the taxable year of FirstMerit in which the ordinary income is
recognized by the participant.

DEDUCTIBILITY OF PERFORMANCE AWARDS. If the 1999 Stock Plan is approved by
the shareholders, certain payments to executive officers under the 1999 Stock
Plan will be eligible for treatment as "performance based" compensation under
Code Section 162(m) of the Internal Revenue Code.

FirstMerit anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of ISOs or exercises of NQSOs granted
with an exercise price equal to the fair market value of the option shares at
the time of grant will qualify as performance-based compensation for purposes of
Code section 162(m) and will not have to be taken into account for purposes of
the $1.0 million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers of FirstMerit. Accordingly, all
compensation deemed paid with respect to those options will remain deductible by
FirstMerit without limitation under code section 162(m).

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR PROPOSAL NUMBER 3

PRINCIPAL SHAREHOLDERS

The following table describes the beneficial ownership of Common Stock of
each entity who was known by FirstMerit to be the beneficial owner of more than
five percent of the total shares issued and outstanding on or about February 16,
1999. Under rules and regulations promulgated by the Commission, a person is
deemed to be the "beneficial owner" of all the shares with respect to which he
has or shares voting power or investment power, regardless of whether he is
entitled to receive any economic benefit from his interest in the shares. As
used herein, the term "voting power" means the power to vote or to direct the
voting of shares and "investment power" means the power to dispose of or to
direct the disposition of shares.

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<PAGE> 31

These parties have certified to the Commission that the shares were
acquired in the ordinary course of business and were not acquired for the
purpose of and do not have the effect of changing or influencing the control of
FirstMerit.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP % OF CLASS
------------------- -------------------- ----------
<S> <C> <C>
Cincinnati Financial Corporation 6,581,292 [ ]%
P.O. Box 145496
Cincinnati, OH 45250
FirstMerit Bank, N.A. 5,338,873 [ ]%
Trust Division
121 S. Main Street
Akron, OH 44308
</TABLE>

AUDITORS

FirstMerit has selected PricewaterhouseCoopers LLP as its auditors for
1999. PricewaterhouseCoopers LLP, or its predecessor Coopers & Lybrand, has
served as auditors for FirstMerit since 1992. A representative of the auditors
will be present at the meeting and will be available to answer questions. The
representative will have the opportunity to make a statement at the meeting.

SHAREHOLDER PROPOSALS AND BOARD NOMINATIONS

Any proposals to be considered for inclusion in the proxy material to be
provided to shareholders of FirstMerit for its next Annual Meeting of
Shareholders to be held in 2000 may be made only by a qualified shareholder and
must be received by FirstMerit no later than October 23, 1999.

The Executive Committee will consider nominees for directors of FirstMerit
recommended by shareholders who submit the person's name and qualifications, in
writing, to the Executive Committee. Under Article II, Section 2, of
FirstMerit's Regulations, shareholders entitled to vote for the election of
directors who intend to nominate a director for election must deliver written
notice to the Secretary of FirstMerit no later than (i) with respect to the
election to be held at an annual meeting of shareholders, 90 days in advance of
such meeting, and (ii) with respect to the election to be held at a special
meeting of shareholders, the close of business on the seventh day following the
date on which notice of such meeting is first given to shareholders. The notice
from the shareholder must set forth certain information concerning the
shareholder and each nominee, including names and addresses, a representation
that the shareholder is entitled to vote and intends to appear in person or by
proxy at the meeting, a description of arrangements or understandings between
the shareholder and each nominee, such other information required to be included
in a proxy statement, and the consent of each nominee to serve as a director of
FirstMerit if so elected.

GENERAL

The accompanying proxy is solicited by and on behalf of the Board of
Directors of FirstMerit, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by FirstMerit.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by directors, officers and employees of
FirstMerit. Arrangements will be made with brokerage houses and other

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<PAGE> 32

custodians, nominees and fiduciaries for the forwarding of solicitation material
to the beneficial owners of stock held of record by such persons, and FirstMerit
will reimburse them for reasonable out-of-pocket expenses incurred by them in
connection therewith. FirstMerit has engaged Georgeson & Company Inc. to aid in
the solicitation of proxies in order to assure a sufficient return of votes on
the proposals to be presented at the meeting. It is expected that Georgeson will
primarily solicit institutional investors and owners not of record who are
non-objecting beneficial owners of FirstMerit Common Stock. The costs of such
services are estimated at $15,000, plus reasonable distribution and mailing
costs.

Management of FirstMerit has no information that other matters will be
brought before the meeting. If, however, other matters are properly presented,
the accompanying proxy will be voted in accordance with the best judgment of the
proxy holders with respect to such matters.

/s/ Terry E. Patton
Terry E. Patton
Secretary

Akron, Ohio
March 12, 1999

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<PAGE> 33
Appendix A

FIRSTMERIT CORPORATION

1999 STOCK PLAN

<PAGE> 34

FIRSTMERIT CORPORATION
1999 STOCK PLAN
AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 1, 1999

TABLE OF CONTENTS

<TABLE>
<S> <C>
I. INTRODUCTION ........................................................................................... 1

A. Purpose of the Plan ........................................................................... 1
B. Definitions ................................................................................... 1

II. EMPLOYEES STOCK OPTION PROGRAM.......................................................................... 5

A. Administration ................................................................................ 5
B. Participation ................................................................................. 5
C. Maximum Number of Shares Available ............................................................ 5
D. Adjustments ................................................................................... 5
E. Registration Conditions ....................................................................... 6
F. Committee Action .............................................................................. 6
G. Stock Options...................................................................................6
H. Dividend Units..................................................................................9
I. Amendment and Termination......................................................................10

III. DIRECTORS STOCK OPTION PROGRAM ........................................................................ 10

A. Administration ............................................................................... 10
B. Participation ................................................................................ 10
C. Maximum Number of Shares Available ........................................................... 11
D. Adjustments .................................................................................. 11
E. Registration Conditions ...................................................................... 11
F. Stock Options..................................................................................11
G. Dividend Units.................................................................................12
H. Amendment and Termination......................................................................13

IV. RESTRICTED STOCK PROGRAM .............................................................................. 14

A. Administration ............................................................................... 14
B. Participation ................................................................................ 14
C. Maximum Number of Shares Available ........................................................... 15
D. Awards ....................................................................................... 15
E. Restrictions ................................................................................. 16
F. Enforcement of Restrictions....................................................................16
G. Privileges of Employee-Participant.............................................................16
H. Non-Transferability............................................................................17
I. Withholding Taxes..............................................................................17
</TABLE>

<PAGE> 35

<TABLE>
<S> <C>
J. Lien on Shares.................................................................................17
K. Share Issuance and Transfer Restrictions.......................................................17
L. Acceleration on Change of Control..............................................................18
M. Effective Date and Duration....................................................................19
N. Exclusivity....................................................................................19
O. Amendment and Termination......................................................................19

V. GENERAL PROVISIONS .................................................................................... 19

A. Government and Other Regulations ............................................................. 19
B. Other Compensation Plans and Programs ........................................................ 19
C. Miscellaneous Provisions ..................................................................... 20
D. Effective Date ............................................................................... 22
</TABLE>

<PAGE> 36

FIRSTMERIT CORPORATION
1999 STOCK PLAN

FIRSTMERIT CORPORATION (the "Company") adopted the 1999 Stock Plan
("Plan"), effective as of January 1, 1999, which Plan received shareholder
approval at the 1999 Annual Shareholders Meeting. The number of shares of Common
Stock approved and reserved under the Plan, subject to the actual shares
available for grant under the Plan, is 3,800,000 for the Employees Stock Option
Program and the Restricted Stock Program, and 200,000 for the Directors Stock
Option Program. The maximum number of shares of Common Stock which can be
granted as part of the 2,000,000 shares under the Restricted Stock Program is
500,000.

I. INTRODUCTION

A. PURPOSE OF THE PLAN

FirstMerit Corporation has established the Plan to further its
long-term financial success by creating the opportunity to key employees and
non-employee Directors of the Company and its Subsidiaries to receive stock and
stock-based compensation whereby they can share in achieving and sustaining such
success. The Plan also provides a means to attract and retain the executive
talent needed to achieve the Company's long-term growth and profitability
objectives.

B. DEFINITIONS

When used in the Plan, the following terms shall have the meanings set
forth below:

"Award(s)" shall mean Incentive Stock Options, Non-Qualified Stock
Options, Reload Stock Options, Restricted Stock Awards or Dividend Units granted
under the Plan.

"Award Agreement" shall mean an agreement which shall evidence the
particular terms, conditions, rights and duties of the Company and the
Participant with respect to an Award.

"Board" shall mean the Board of Directors of the Company.

"Change of Control" means a change in control of a nature that would be
required to be reported by persons or entities subject to the reporting
requirements of Section 14(a) of the Securities Exchange Act of 1934 in response
to item 5(f) of Schedule 14A of Regulation 14(A) as in effect on the date
hereof, or successor provisions thereto, provided that, without limitation, such
a change in control shall be deemed to have occurred if (A) any unaffiliated
"person," "entity," or "group" (as defined in Rule 13(d)-3 issued under the
Securities Exchange Act of 1934) directly or indirectly becomes the owner of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities or (B) at any time during any
period of two (2)

<PAGE> 37
consecutive calendar years, individuals, who at the beginning of such period
constitute the Board of Directors of the Company, cease for any reason to
constitute at least the majority of such Board unless the election, or the
nomination for election, by the Company's shareholders of each new director was
approved by a vote of at least two-thirds of the directors still in office who
were directors of the Company at the beginning of such two-year period.

For purposes of determining a Change of Control under the Plan, the
following definitions shall be applicable:

1. The term "Person" shall mean any individual, corporation or other
entity.

2. Any Person shall be deemed to be the beneficial owner of any
shares of capital stock of the Company:

a. which that Person owns directly, whether or not of
record,

b. which that Person has the right to acquire pursuant
to any agreement or understanding or upon exercise of
conversion rights, warrants or options, or otherwise,

c. which are beneficially owned, directly or indirectly
(including shares deemed owned through application of
Paragraph 2.b. above), by an "affiliate" or
"associate" (as defined in the rules of the
Securities and Exchange Commission) of that Person,
or

d. which are beneficially owned, directly or indirectly
(including shares deemed owned through application of
Paragraph 2.b. above), by any other Person with which
that Person or his "affiliate" or "associate" has any
agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
capital stock of the Company.

3. For purposes of determining whether a Person has acquired beneficial
ownership of 30 percent or more of the Company, the outstanding shares of
capital stock of the Company shall include shares deemed owned by such Person
through application of Paragraphs 2.b., 2.c. and 2.d. above, but shall not
include any other shares which may be issuable pursuant to any agreement or upon
exercise of conversion rights, warrants or options, or otherwise, but which are
not actually outstanding.

"Committee" shall mean the Compensation Committee of the Board, or such
other Committee of the Board which shall be designated by the Board to
administer the Plan. If the Board does not designate the Compensation Committee
as the Committee, the Committee will be

<PAGE> 38
composed of two (2) or more persons who are from time to time appointed to serve
by the Board. Each member of the Committee will be a "non-employee director"
within the meaning of Rule 16b-3 of the Securities Exchange Act or any successor
rule, as any such rule may be amended from time to time and will qualify as an
"outside director" within the meaning of Code Section 162(m) ("Qualified
Director"). A person may be appointed to the Committee who does not qualify as a
"non-employee director" if the Committee adopts and follows a recusal procedure
which qualifies under the Section 16 Rules.

"Company" shall mean FirstMerit Corporation and any successor in a
reorganization or similar transaction.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Common Stock" shall mean the common stock of the Company, no par value
per share, and may be either stock previously authorized but unissued, or stock
reacquired by the Company.

"Director" shall mean a duly elected member of the Board.

"Directors Stock Option Program" shall mean the stock option program
delineated in Article III of this Plan.

"Director-Participant" shall mean a Director who is not also a
full-time employee of the Company or any of its Subsidiaries.

"Disability" shall mean the inability of an Employee-Participant to
perform the services normally rendered due to any physical or mental impairment
that can be expected to be of either permanent or indefinite duration, as
determined by the Committee on the basis of appropriate medical evidence, and
that results in the Employee-Participant's Termination of Employment; provided,
however, that with respect to any Employee-Participant who has entered into an
employment agreement with the Company or any of its Subsidiaries, the term of
which has not expired at the time a determination concerning Disability is to be
made, Disability shall have the meaning attributed to "permanent disability" in
such employment agreement.

"Employees Stock Option Program" shall mean the stock option program,
as delineated in Article II of this Plan.

["EMPLOYEE-PARTICIPANT" SHALL MEAN A FULL-TIME SALARIED EMPLOYEE
(INCLUDING A DIRECTOR WHO IS ALSO A FULL-TIME EMPLOYEE) OF THE COMPANY OR ANY OF
ITS SUBSIDIARIES.]

"Fair Market Value" shall mean with respect to a given day, the closing
sales price of a share of Common Stock, as reported by such responsible
reporting service as the Committee may select, or if there were no transactions
in the Common Stock on such day, then the last preceding day on which
transactions took place. The foregoing notwithstanding, the Committee may
determine the

<PAGE> 39
Fair Market Value in such other manner as it may deem more
appropriate for Plan purposes or as is required by applicable laws or
regulations.

"Incentive Stock Option" or "ISO" shall mean a right to purchase the
Company's Common Stock which is intended to comply with the terms and conditions
for an incentive stock option as set forth in Section 422 of the Code, or such
other sections of the Code as may be in effect from time to time.

"Non-Qualified Stock Option" or "NQSO" shall mean a right to purchase
the Company's Common Stock which is not intended to comply with the terms and
conditions for a tax-qualified stock option, as set forth in Section 422 of the
Code, or such other sections of the Code as may be in effect from time to time.

"Participant" shall mean an Employee-Participant or a
Director-Participant.

"Plan" shall mean the Company's 1999 Stock Plan, as set forth herein.

"Reload Stock Option" shall mean an option granted to an
Employee-Participant who has paid for shares subject to option through the
delivery of shares of Common Stock having an aggregate Fair Market Value as
determined on the date of exercise equal to the option price.

"Restricted Shares" shall mean those shares of Common Stock reserved
for issuance as Awards under the Restricted Stock Program, as further provided
in Article IV(D).

"Restricted Stock Program" shall mean the restricted stock program, as
delineated in Article IV of this Plan.

"Retirement" shall mean an Employee-Participant's Termination of
Employment by reason of retirement at his normal retirement date, pursuant to
and in accordance with a pension, retirement or similar plan or other regular
retirement practice of the Company or any of its Subsidiaries, or in accordance
with the early retirement provision(s) thereof.

"Securities Act" shall mean the Securities Act of 1933, as amended.

"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

"Subsidiaries" shall mean the majority-owned subsidiaries of the
Company.

"Termination of Employment" shall mean a cessation of the
employee-employer relationship between an Employee-Participant and the Company
or its Subsidiaries for any reason.

"Termination of Service" shall mean a cessation of the Director's
relationship with the Company for any reason.

<PAGE> 40

II. EMPLOYEES STOCK OPTION PROGRAM

A. ADMINISTRATION

The Employees Stock Option Program shall be administered by the
Committee, which, subject to the express provisions of the Employees Stock
Option Program, shall have full and exclusive authority to interpret the
Employees Stock Option Program, to prescribe, amend and rescind rules and
regulations relating to the Employees Stock Option Program and to make all other
determinations deemed necessary or advisable in the implementation and
administration of the Employees Stock Option Program; provided, however, that
subject to the express provisions hereof or unless required by applicable law or
regulation, no action of the Committee shall adversely affect the terms and
conditions of any Award made to, or any rights hereunder or under any Award
Agreement of, any Employee-Participant, without such Employee-Participant's
consent. The Committee's interpretation and construction of the Employees Stock
Option Program shall be conclusive and binding on all persons, including the
Company and all Employee-Participants.

B. PARTICIPATION

The Committee shall, from time to time, make recommendations to the
Board with respect to the selection of Employee-Participants and the Award or
Awards to be granted to each Employee- Participant, and thereafter grant such
Award or Awards upon the approval of a majority of the members of the Board
present and voting upon such approval, who are Qualified Directors. In making
its recommendations, the Committee may take into account the nature of the
services rendered or expected to be rendered by the respective
Employee-Participants, their present and potential contributions to the
Company's success, and such other factors as the Committee in its discretion
shall deem relevant.

C. MAXIMUM NUMBER OF SHARES AVAILABLE

The maximum number of shares which may be granted under the Employees
Stock Option Program is one million (1,000,000) shares, less shares granted
under the Restricted Stock Program.

No Incentive Stock Options shall be granted after January 1, 2007, or
such other period required under the Code.

D. ADJUSTMENTS

In the event of stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations, exchanges of shares, spin-offs,
liquidations, reclassifications or other similar changes in the capitalization
of the Company, the number of shares of Common Stock available for grant under
this Employees Stock Option Program shall be adjusted proportionately or
otherwise by the Board and, where deemed appropriate, the number of shares
covered by outstanding stock options and the option price of outstanding stock
options shall be similarly adjusted. Also, in instances

<PAGE> 41
where another corporation or other business entity is acquired by the Company,
and the Company has assumed outstanding employee option grants under a prior
existing plan of the acquired entity, similar adjustments are permitted at the
discretion of the Committee. In the event of any other change affecting the
Common Stock reserved under the Employees Stock Option Program, such adjustment,
if any, as may be deemed equitable by the Board, shall be made to give proper
effect to such event.

E. REGISTRATION CONDITIONS

Unless issued pursuant to a registration statement under the Securities
Act, no shares shall be issued to an Employee-Participant under the Employees
Stock Option Program unless the Employee-Participant represents to and agrees
with the Company that such shares are being acquired for investment and not with
a view to the resale or distribution thereof, or such other documentation as may
be required by the Company unless, in the opinion of counsel to the Company,
such representation, agreement or documentation is not necessary to comply with
the Securities Act.

Any restriction on the resale of shares shall be evidenced by an
appropriate legend on the stock certificate.

The Company shall not be obligated to deliver any Common Stock until it
has been listed on each securities exchange on which the Common Stock may then
be listed or until there has been qualification under or compliance with such
federal or state laws, rules or regulations as the Company may deem applicable.
The Company shall use reasonable efforts to obtain such listing, qualification
and compliance.

F. COMMITTEE ACTION

The Committee may, through Award Agreements, limit its discretion under
this Employees Stock Option Program. To the extent such discretion is not
specifically waived in an Award Agreement, the Committee shall retain such
discretion.

G. STOCK OPTIONS

All stock options granted to Employee-Participants under the Employees
Stock Option Program shall be evidenced by Award Agreements which shall be
subject to applicable provisions of the Employees Stock Option Program, and such
other provisions as the Committee may adopt, including the following provisions:

1. PRICE. The option price per share of Non-Qualified Stock
Options ("NQSOs") shall be set by the Committee at the time of
grant. The option price per share of Incentive Stock Options
("ISOs") shall not be less than 100 percent of the Fair Market
Value of a share of Common Stock on the date of grant. If a
NQSO is to meet the requirements of Section 162(m) of the
Code, it shall be issued at Fair Market Value.

<PAGE> 42

2. PERIOD. An ISO shall not be exercisable for a term longer than
ten (10) years from date of grant. NQSOs shall have a term as
established by the Committee.

3. TIME OF EXERCISE. The Committee may prescribe the timing of
the exercise of the stock option and any minimums and
installment provisions and may accelerate the time at which a
stock option becomes exercisable, provided that with respect
to ISOs, no such acceleration shall result in a violation of
Section 6 of this Paragraph G.

4. EXERCISE PROCEDURES. A stock option, or portion thereof, shall
be exercised by delivery of a written notice of exercise to
the Company and payment of the full price of the shares being
purchased.

5. PAYMENT. The price of an exercised stock option, or portion
thereof, may be paid pursuant to Paragraph V.C.11.

6. SPECIAL RULE FOR INCENTIVE STOCK OPTIONS. If the aggregate
Fair Market Value of Common Stock with respect to which ISOs
are exercisable for the first time by an Employee-Participant
during any calendar year (under this Employees Stock Option
Program and all other plans of the Company and its
Subsidiaries) exceeds One Hundred Thousand Dollars ($100,000),
such ISOs shall be treated as NQSOs to the extent of the
excess. In applying the foregoing limitation, ISOs shall be
taken into account in the order in which they were granted,
and the Fair Market Value of Common Stock subject to such ISOs
shall be determined as of the date of grant. If such limit is
exceeded in any calendar year, the Company shall have the
right to designate which shares of Common Stock purchased
pursuant to such ISOs shall be treated as having been acquired
by the Employee-Participant pursuant to an ISO.

7. RELOAD STOCK OPTIONS. A Reload Stock Option may be granted by
the Committee in an Award Agreement. If a reload option is
granted and a stock option is exercised while the
Employee-Participant is employed by the Company and the
Employee- Participant pays for the shares subject to option
through the delivery of Common Stock having an aggregate Fair
Market Value as determined on the date of exercise equal to
the option price, the Employee-Participant will be granted a
Reload Stock Option on the date of such exercise. The Award
shall equal the number of whole shares of Common Stock used to
pay the purchase price, and the exercise price of the Reload
Stock Option shall equal the Fair Market Value of the Common
Stock on the date of grant. If the Company withholds shares of
Common Stock to cover applicable income and employment taxes
related to the exercise of an option, then the Award shall
equal the number of whole shares of Common Stock used to pay
the purchase price less the number of shares withheld.

Subject to the provisions of the Employees Stock Option
Program, the Reload Stock Option may be exercised between its
date of grant and the date of expiration of an option. Shares
of stock acquired upon the exercise of a Reload Stock Option
are restricted from sale for two years. A Reload Stock Option
shall be evidenced by an

<PAGE> 43

Award Agreement containing such other terms and conditions as
the Committee approves. No Reload Stock Option shall be
granted with respect to a stock option exercised after the
Employee-Participant's Retirement, Disability, death or other
Termination of Employment. No Dividend Units shall be granted
in connection with a Reload Stock Option.

8. EFFECT OF LEAVES OF ABSENCE. It shall not be considered a
Termination of Employment when an Employee-Participant is
placed by the Company or any of its Subsidiaries on military
leave, sick leave or other bona fide leave of absence. In case
of such leave of absence, the employment relationship for
Employees Stock Option Program purposes shall be continued
until the later of the date when such leave of absence equals
ninety (90) days or when the Employee-Participant's right to
reemployment with the Company or any of its Subsidiaries shall
no longer be guaranteed either by statute or contract.

9. TERMINATION OF EMPLOYMENT. In the event of Termination of
Employment, the following provisions shall apply with respect
to ISOs and NQSOs unless waived by the Committee, or as
otherwise specifically provided in the Award Agreement.

a. TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT.
NQSOs and ISOs shall be exercisable for a period
equal to the lesser of five (5) years or the
remaining option term; provided, however, that if the
Employee-Participant elects to exercise his ISOs (i)
later than three (3) months after the date of his
Termination of Employment due to Retirement or (ii)
twelve (12) months after the date of his Termination
of Employment due to Disability, such ISOs shall be
treated as NQSOs under the Code for purposes of
calculating the federal income tax applicable as a
result of the exercise of such ISOs and the
subsequent disposition of the acquired shares.

b. OTHER TERMINATION. If an Employee-Participant's
employment with the Company or any of its
Subsidiaries is terminated for any reason other than
death, Disability or Retirement, all Awards under
this Employees Stock Option Program shall be
immediately canceled, except that if the termination
is by the Company or any of its Subsidiaries or for
any reason other than misconduct or misfeasance, the
Employee-Participant shall have thirty (30) days
thereafter within which to exercise his options to
the extent that the options are otherwise exercisable
immediately prior to such termination; and further,
if such termination is attributable to a Change of
Control, such Award shall not be canceled but shall
continue as though the Employee-Participant remained
in the employ of the Company or any of its
Subsidiaries during the remaining option term of the
Award and shall vest immediately.

c. LIMITATIONS ON EXERCISE. Notwithstanding the
foregoing, the Committee may rescind the right to
exercise stock options following Termination of

<PAGE> 44

Employment if the Employee-Participant has been found
to be directly or indirectly engaged in any activity
which is in competition with the Company or any of
its Subsidiaries or is otherwise adverse to, or not
in the best interest of, the Company or any of its
Subsidiaries. Further, no option agreement for ISOs
may extend their exercise period beyond the time
allowed by the Code.

H. DIVIDEND UNITS

1. AWARDS OF DIVIDEND UNITS

a. The Committee may, at its discretion, award to an
Employee-Participant one (1) Dividend Unit with
respect to each share of Common Stock for which an
option has been granted under the Employees Stock
Option Program. No Dividend Units shall be awarded in
connection with a Reload Stock Option.

b. An Award of a Dividend Unit by the Committee may be
made only in conjunction with a stock option for
Common Stock granted to the Employee- Participant
under the Employees Stock Option Program.

2. VALUATION

a. The amount payable to an Employee-Participant in
respect of each Dividend Unit awarded to such
Employee-Participant shall be equal to the aggregate
dividends actually paid on one (1) share of Common
Stock to the extent that such Employee-Participant
held such Dividend Unit on the record date
established by the Board for payment of each such
dividend. An Employee- Participant shall be deemed to
have held a Dividend Unit from the date on which the
Award of such Dividend Unit was made (or such later
date as may be specified in the related Award
Agreement) to and including the date on which the
term of the Dividend Unit expires.

b. The Committee shall, at the time it awards a Dividend
Unit to an Employee- Participant, specify the term of
the Dividend Unit (which term shall not be longer
than the term of the stock option to which it is
attached) and the period of time during the term over
which the Dividend Unit will accrue dividends.

3. PAYMENT

a. The amount payable to an Employee-Participant in
respect of a Dividend Unit shall be paid out by the
Company to such Employee-Participant only at the date
of exercise of the stock option to which the Dividend
Unit is attached. The Dividend Unit shall expire upon
the expiration of any stock option which has not been
exercised.

<PAGE> 45

b. Upon payment to an Employee-Participant in respect of
a Dividend Unit, such Dividend Unit shall be of no
further force or effect.

4. TERMINATION OF EMPLOYMENT. In the event of Termination of
Employment, any Dividend Unit shall remain outstanding for the
duration of the stock option to which it is attached until
paid upon exercise or until termination or expiration of such
stock option.

5. ACCELERATION OF PAYMENTS. Unless the Committee determines
otherwise, in the event of a Change of Control, the Company
shall, promptly after such Change of Control, make payment to
each Employee-Participant in an amount equal to the aggregate
amount accrued on the Dividend Units held by such
Employee-Participant on the date of such Change of Control.
Notwithstanding anything to the contrary or any Award
Agreement, after such Change of Control and for so long as an
Employee-Participant holds any Dividend Unit and dividends are
accrued thereon, the Company shall make payment to the
Employee-Participant in respect of any such Dividend Unit at
the same time as payment of dividends on Common Stock is made.

I. AMENDMENT AND TERMINATION

The Board may, at any time and from time to time, suspend or terminate
the Employees Stock Option Program in whole or amend it from time to time in
such respects as the Board may deem appropriate, subject, however, to the
regulatory requirements of Section 16(b) of the Securities Exchange Act and the
requirements of the Code.

III. DIRECTORS STOCK OPTION PROGRAM

A. ADMINISTRATION

The Directors Stock Option Program is a self-executing grant program
which shall be administered by the Secretary of the Company. Subject to the
express provisions of the Directors Stock Option Program, the Secretary shall
have full and exclusive authority to interpret the Directors Stock Option
Program, and to make such determinations deemed necessary or advisable in the
implementation and administration of the Directors Stock Option Program;
provided, however, that subject to the express provisions hereof or unless
required by applicable law or regulation, no action of the Secretary shall
adversely affect the terms and conditions of any Award made to, or any rights
hereunder or under any Award Agreement of, any Director-Participant without such
Director-Participant's consent.

<PAGE> 46

B. PARTICIPATION

All Directors who are not also full-time employees of the Company or a
Subsidiary shall be Director-Participants in the Directors Stock Option Program
and shall be awarded options to purchase one thousand two hundred (1,200) shares
each year on the date following the annual shareholders meeting.

C. MAXIMUM NUMBER OF SHARES AVAILABLE

The maximum number of shares which may be granted under this Directors
Stock Option Program is one hundred thousand (100,000) shares.

D. ADJUSTMENTS

E. REGISTRATION CONDITIONS

Unless issued pursuant to a registration statement under the Securities
Act, no shares shall be issued to a Director-Participant under the Directors
Stock Option Program unless the Director- Participant represents to and agrees
with the Company that such shares are being acquired for investment and not with
a view to the resale or distribution thereof, or such other documentation as may
be required by the Company unless, in the opinion of counsel to the Company,
such representation, agreement or documentation is not necessary to comply with
the Securities Act.

Any restriction on the resale of shares shall be evidenced by an
appropriate legend on the stock certificate.

F. STOCK OPTIONS

All stock options granted to Director-Participants under the Directors
Stock Option Program shall be evidenced by Award Agreements which shall be
subject to applicable provisions of the Directors Stock Option Program,
including the following provisions:

<PAGE> 47

1. PRICE. The option price per share shall be 100 percent of the
Fair Market Value of a share of Common Stock on the date of
grant.

2. PERIOD. Any option granted under the Directors Stock Option
Program shall be exercisable for a term of ten (10) years from
the date of grant.

3. TIME OF EXERCISE. Will be established by the Committee.

4. EXERCISE PROCEDURES. A stock option, or portion thereof, shall
be exercised by delivery of a written notice of exercise to
the Company and payment of the full price of the shares being
purchased.

5. PAYMENT. The price of an exercised stock option, or portion
thereof, may be paid pursuant to Paragraph V.C.11.

6. TERMINATION OF SERVICE. In the event of Termination of
Service, the following provisions shall apply:

a. DISCHARGE FOR CAUSE. All outstanding options shall be
canceled at termination.

b. TERMINATION OTHER THAN FOR CAUSE. Options shall be
exercisable for a period equal to the lesser of five
(5) years or the remaining option term.

G. DIVIDEND UNITS

1. AWARDS OF DIVIDEND UNITS

a. One (1) Dividend Unit shall be awarded to a
Director-Participant with respect to each share of
Common Stock for which an option has been granted
under the Directors Stock Option Program. When a
Director-Participant receives an Award of Dividend
Units, the Secretary shall cause to be issued to such
Director-Participant an Award Agreement specifying
the number of Dividend Units granted and the
applicable terms and conditions of the Award.

b. An Award of a Dividend Unit shall be made only in
conjunction with a stock option for Common Stock
granted to the Director-Participant under this
Directors Stock Option Program.

2. VALUATION

a. The amount payable to a Director-Participant in
respect of each Dividend Unit awarded to such
Director-Participant shall be equal to the aggregate
dividends actually paid on one share of Common Stock
to the extent that such

<PAGE> 48

Director-Participant held such Dividend Unit on the
record date established by the Board for payment of
each such dividend. A Director-Participant shall be
deemed to have held a Dividend Unit from the date on
which the Award of such Dividend Unit was made (or
such later date as may be specified in the related
grant letter) to and including the date on which the
term of the Dividend Unit expires.

b. The term of a Dividend Unit shall be the term of the
stock option to which it is attached. However,
Dividend Units will accrue dividends only for the
first five (5) years following grant.

3. PAYMENT

a. The amount payable to a Director-Participant in
respect of a Dividend Unit shall be paid out by the
Company to such Director-Participant only upon the
exercise of the option to which it is attached.

b. Upon payment to a Director-Participant in respect of
a Dividend Unit, such Dividend Unit shall be of no
further force or effect.

4. TERMINATION OF SERVICE. In the event of Termination of
Service, any Dividend Unit shall remain outstanding for the
duration of the stock option to which it is attached until
paid upon exercise, but it shall terminate upon termination,
cancellation or expiration of such stock option.

5. ACCELERATION OF PAYMENTS. In the event of a Change of Control,
the Company shall, promptly after such Change of Control, make
payment to each Director-Participant in an amount equal to the
aggregate amount accrued on the Dividend Units held by such
Director-Participant on the date of such Change of Control.
Notwithstanding anything to the contrary or any Award
Agreement, after such Change of Control and for so long as a
Director-Participant holds any Dividend Unit and dividends are
accrued thereon, the Company shall make payment to the
Director-Participant in respect of any such Dividend Unit at
the same time as payment of dividends on Common Stock is made.

H. AMENDMENT AND TERMINATION

The Board may, at any time and from time to time, amend, suspend or
terminate the Directors Stock Option Program, subject to the applicable
requirements and restrictions of the Code and securities laws. The Directors
Stock Option Program may not be materially amended without shareholder approval.

<PAGE> 49

IV. RESTRICTED STOCK PROGRAM

A. ADMINISTRATION

The Restricted Stock Program shall be administered by the Committee. A
majority of members of the Committee shall constitute a quorum, and all
determinations of the Committee shall be made by a majority of its members. Any
determination of the Committee under the Restricted Stock Program may be made
without notice or meeting, by a writing signed by a majority of the Committee
members.

In accordance with and subject to the provisions of the Restricted
Stock Program, the Committee shall, from time to time, recommend to the Board:

1. the Employee-Participants from those employees meeting the
eligibility criteria described in Paragraph B,

2. the number of shares to be subject to each Award,

3. the time at which Awards are made,

4. the duration and nature of Award restrictions,

5. fix such other provisions of the Awards as may be deemed
necessary or desirable, consistent with the terms of the
Restricted Stock Program, and

6. the form or forms of the Award Agreements with
Employee-Participants.

The Committee shall have the authority, subject to the provisions of
the Restricted Stock Program, to establish, adopt and revise such rules and
regulations relating to the Restricted Stock Program as it may deem necessary or
desirable for the administration of the Restricted Stock Program. Each
determination, interpretation or other action made or taken by the Committee
pursuant to the provisions of the Restricted Stock Program shall be conclusive
and binding for all purposes and on all persons, including without limitation
the Company, the stockholders of the Company, the Committee and each of the
members thereof, the Board, officers and employees of the Company and the
Employee-Participants and their respective successors in interest.

B. PARTICIPATION

Employee-Participants shall be such key employees (including officers)
of the Company and any present or future Subsidiary as the Committee, in its
sole discretion, determines to be mainly responsible for the success and future
growth and profitability of the Company and value to its stockholders and whom
the Committee may designate from time to time to receive Awards under the
Restricted Stock Program. Awards may be granted under this Restricted Stock
Program to

<PAGE> 50

persons who have previously received Awards or other benefits under
this or other plans of the Company.

The Committee shall, from time to time, make recommendations to the
Board with respect to the selection of Employee-Participants and the Award or
Awards to be granted to each Employee-Participant, and thereafter grant such
Award or Awards upon the approval of a majority of the members of the Board
present and voting upon such approval, who are Qualified Directors. In making
its recommendations, the Committee may take into account the nature of the
services rendered or expected to be rendered by the respective
Employee-Participants, their present and potential contributions to the
Company's success, and such other factors as the Committee in its discretion
shall deem relevant.

C. MAXIMUM NUMBER OF SHARES AVAILABLE

The maximum number of shares which may be granted under the Restricted
Stock Program is two hundred fifty thousand (250,000) shares, which may be
authorized but unissued or treasury shares.

Any shares subject to Awards may thereafter be subject to new Awards
under this Restricted Stock Option Program if shares of Common Stock are issued
under such Awards and are thereafter reacquired by the Company pursuant to
rights reserved by the Company upon issuance thereof, including, without
limitation, the forfeiture of shares subject to an Award prior to the lapse of
restrictions.

If the Company shall at any time change the number of issued shares of
Common Stock without new considerations to the Company (by stock dividends,
stock splits or similar transactions), the total number of shares reserved for
issuance under the Restricted Stock Option Program shall be adjusted
proportionately. Awards may also contain provisions for their continuation or
for other equitable adjustments after changes in the Common Stock resulting from
reorganization, sale, merger, consolidation or similar circumstances.

D. AWARDS

Awards may consist of grants of Restricted Shares to
Employee-Participants as a bonus for service rendered to the Company without
other payment therefor or for payment at less than Fair Market Value. In
addition to the restrictions described in Paragraph E, any Award under the
Restricted Stock Option Program may be subject to such other provisions (whether
or not applicable to an Award to any other Employee-Participant) as the
Committee deems appropriate, including, without limitation, provisions for the
forfeiture of and restrictions on the sale, resale or other disposition of
shares acquired under any Award, provisions giving the Company the right to
repurchase shares acquired under any Award, provisions to comply with federal
and state securities laws, or understandings or conditions as to the
Employee-Participant's employment in addition to those specifically provided for
under the Restricted Stock Option Program.

<PAGE> 51

E. RESTRICTIONS

An Employee-Participant shall not have a right to retain any Restricted
Shares granted under an Award unless and until such restrictions have by their
terms lapsed. The lapsing of such restrictions is referred to herein as vesting,
and the shares after Vesting has occurred are referred to herein as vested
shares. The restrictions which the Committee may place on the Awards include,
without limitation, the Employee-Participant's continued employment with the
Company for certain periods of time as determined by the Committee and the
attainment of various performance goals by the Employee-Participant and/or the
Company as specified by the Committee with respect to such Award. The Committee
may, in its sole discretion, require different periods of employment or
different performance goals with respect to different Employee-Participants,
with respect to different Awards or with respect to separate, designated
portions of an Award. The Committee may, in its sole discretion, terminate
restrictions on shares issued pursuant to an Award prior to the time such
restrictions otherwise would have lapsed. Any Restricted Shares granted under an
Award which have not become Vested Shares on or before the termination date, if
any, set forth in the Award Agreement shall permanently be forfeited, and shall
thereafter become available for reissuance under the Plan.

F. ENFORCEMENT OF RESTRICTIONS

The Committee, in its sole discretion, may employ one or more methods
of enforcing the restrictions referred to in Paragraphs E, G, H and J including,
without limitation, the following:

1. placing a legend on the stock certificates referring to the
restrictions,

2. requiring the Employee-Participant to keep stock certificates,
duly endorsed, in the custody of the Company or its designated
agent while the restrictions remain in effect,

3. not issuing certificates for Restricted Shares until the
shares become Vested Shares, or

4. retaining a possessory lien in the Award Shares as provided in
Paragraph J below.

G. PRIVILEGES OF EMPLOYEE-PARTICIPANT

Restricted Shares shall constitute issued and outstanding shares of the
Company for all corporate purposes, and the Employee-Participant shall have all
voting and (subject to any Award restrictions) all dividend, liquidation and
other rights with respect to Restricted Shares while the corresponding Award
remains in effect, as if such Employee-Participant were a holder of record of
unrestricted shares of Common Stock. Notwithstanding the foregoing, prior to the
time at which a Restricted Share becomes a Vested Share, the
Employee-Participant's right to assign or transfer such

<PAGE> 52

Restricted Share shall be subject to the limitations of Paragraph H.
Certificates representing Restricted Shares shall bear a restrictive legend
disclosing the restrictions, the existence of the Restricted Stock Option
Program and the existence of the applicable Award.

H. NON-TRANSFERABILITY

No right or interest of any Employee-Participant in any Award made
pursuant to the Restricted Stock Option Program shall, prior to the satisfaction
of all restrictions applicable thereto, be assignable or transferable, in whole
or in part, during the lifetime of the Employee-Participant, either voluntarily
or involuntarily, or be made subject to any lien (except as provided in
Paragraphs F and J), directly or indirectly, by operation of law or otherwise,
including execution, levy, garnishment, attachment, pledge or bankruptcy. In the
event of an Employee-Participant's death, his right and interest in any Award
shall, to the extent provided in the Award, be transferable by testamentary will
or the laws of descent and distribution, and the issuance of any shares subject
to an Award shall be made to the Employee-Participant's legal representatives,
heirs or legatees upon furnishing the Committee with evidence satisfactory to
the Committee of such status.

I. WITHHOLDING TAXES

The Company is entitled to withhold and deduct or take such other
action as delineated in Section V.C.4.

J. LIEN ON SHARES

The Company may, in its sole discretion, require that an
Employee-Participant, as a condition to the receipt of an Award, grant to the
Company a possessory lien on the Restricted Shares in order to secure retransfer
of the shares into the name of the Company, and ensure adequate provision for
any tax withholding obligations arising with respect to such Award, and to that
end, may require that certificates evidencing Restricted Shares be deposited by
the Employee-Participant with the Company, together with stock powers or other
instruments of assignment, each endorsed in blank, which will permit the
transfer to the Company of all or any portion of the Restricted Shares which are
forfeited or required to be retained to satisfy the Employee-Participant's
withholding obligations to the Company.

K. SHARE ISSUANCE AND TRANSFER RESTRICTIONS

1. SHARE ISSUANCE. Notwithstanding any other provision of the
Restricted Stock Program or any Award Agreement entered into
pursuant hereto, the Company shall not be required to issue or
deliver any certificate for shares under this Restricted Stock
Program unless and until both of the following are satisfied:

a. either:

<PAGE> 53
i. there shall be in effect with respect to
such shares a registration statement under
the Securities Act and any applicable state
securities laws, if the Committee, in its
sole discretion, shall have determined to
file, cause to become effective and maintain
the effectiveness of such registration
statement, or

ii. if the Committee has determined not to so
register the shares, exemptions from
registration under the Securities Act and
applicable state securities laws shall be
available for such issuance as determined by
counsel for the Company, and there shall
have been received from the
Employee-Participant (or in the event of
death or Disability, the
Employee-Participant's heir(s) or legal
representative(s)) any representations or
agreements requested by the Company in order
to permit such issuance to be made pursuant
to such exemptions, and

b. there shall have been obtained any other consent,
approval or permit from any state or federal
government agency which the Committee shall, in its
sole discretion and upon the advice of counsel, deem
necessary or advisable.

2. TRANSFERS OF VESTED SHARES. Vested Shares may not be sold,
assigned, transferred, pledged, encumbered or otherwise
disposed of (whether voluntarily or involuntarily) except
pursuant to registration under the Securities Act and
applicable state securities laws or pursuant to exemptions
from such registrations. The Company may condition the sale,
assignment, transfer, pledge, encumbrance or other disposition
of such shares not issued pursuant to an effective and current
registration statement under the Securities Act and all
applicable state securities laws, on the receipt from the
party to whom the shares are to be so transferred of any
representations or agreements requested by the Company in
order to permit such transfer to be made.

3. LEGENDS. Unless a registration under the Securities Act is in
effect with respect to the issuance or transfer of Vested
Shares, each certificate representing such shares will be
endorsed with a legend in the form determined necessary by the
Committee or its counsel.

L. ACCELERATION ON CHANGE OF CONTROL

The Committee may provide, in its sole discretion, in one or more
Awards, that notwithstanding the provisions of each Award which would result in
a forfeiture as a result of the Employee-Participant's termination of employment
with the Company prior to the Vesting of Restricted Shares, the Restricted
Shares subject to such Award shall immediately become Vested Shares as a result
of a Change of Control. Notwithstanding anything to the contrary in the
Restricted Stock Option Program, unless expressly provided to the contrary in
the Award Agreement, if Restricted Shares experience an acceleration in Vesting
on a Change of Control as permitted by the preceding sentence, the portion of
the Restricted Shares which experience such acceleration will be limited to that
number which will not cause or contribute to an "excess parachute payment" with

<PAGE> 54

respect to the Employee-Participant, as reasonably determined by the Committee
in accordance with Section 280G of the Code.

M. EFFECTIVE DATE AND DURATION

The Restricted Stock Option Program shall continue in effect until it
is terminated by action of the Board, but such termination shall not affect the
then outstanding terms of any Award. No Award shall be granted more than ten
(10) years after the date of adoption of the Restricted Stock Option Program;
provided, however, that the terms and conditions applicable to any Award granted
within such period may thereafter be amended or modified by mutual agreement
between the Company and the Employee-Participant or such other persons as may
then have an interest therein. Also, by mutual agreement between the Company and
an Employee-Participant, or under any future plan of the Company, Awards may be
granted to such Employee-Participant in substitution and exchange for, and in
cancellation of, any Awards previously granted such Employee-Participant under
this Restricted Stock Option Program, or any benefit previously or thereafter
granted to him under any future plan of the Company.

N. EXCLUSIVITY

Nothing contained in this Restricted Stock Option Program is intended
to amend, modify or rescind any previously approved compensation plans or
programs adopted by the Company. The Restricted Stock Option Program will be
construed to be in addition to any and all such other plans or programs.

O. AMENDMENT AND TERMINATION

The Board may amend the Restricted Stock Option Program from time to
time or terminate the Restricted Stock Option Program at any time. In addition,
the Company may amend the terms of any Award previously granted under this
Restricted Stock Option Program, prospectively or retroactively, however, no
action authorized by this Paragraph O shall impair the rights of any
Employee-Participant without his consent.

V. GENERAL PROVISIONS

A. GOVERNMENT AND OTHER REGULATIONS

The obligation of the Company to issue Awards under the Plan shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any government agencies as may be required.

B. OTHER COMPENSATION PLANS AND PROGRAMS

<PAGE> 55

The Plan shall not be deemed to preclude the implementation by the
Company and its Subsidiaries of other compensation plans or programs which may
be in effect from time to time.

C. MISCELLANEOUS PROVISIONS

1. NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in any Award
or Award Agreement confers upon any Employee-Participant the right to continue
in the employ of the Company or its Subsidiaries or interferes with or restricts
in any way the rights of the Company or its Subsidiaries to discharge any
Employee-Participant at any time for any reason whatsoever, with or without
cause.

2. NON-TRANSFERABILITY. No right or interest of any Participant in any
Award under the Plan shall be (a) assignable or transferable, except by will or
the laws of descent and distribution, a valid beneficiary designation made in
accordance with procedures established by the Committee, or as expressly stated
herein, or (b) liable for, or subject to, any lien, obligation or liability. An
ISO may be exercised only by the Participant during his lifetime, by his estate
or by the person who acquires the right to exercise such option by bequest or
inheritance.

The Board may, in its discretion, authorize all or a portion of the
options to be granted to a Participant, and may also amend outstanding options
to provide, that they be on terms which permit transfer by such Participant to
(i) the spouse, children or grandchildren of the Participant (the "Immediate
Family Members"), (ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members, (iii) a partnership in which such Immediate Family
Members are the only partners, (iv) a limited liability company in which such
Immediate Family Members are the only members; provided that (x) there may be no
consideration for any such transfer, (y) the stock option agreement pursuant to
which such options are granted must be approved by the Board, and must expressly
provide for transferability in a manner consistent with this Section, and (z)
subsequent transfers of transferred options shall be prohibited except those in
accordance with the section(s) herein dealing with transfers by will or the laws
of descent and distribution, or pursuant to qualified domestic relations order.
Following transfer, any such options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer, provided
that for all purposes hereof, the term "Participant" shall be deemed to refer to
the "Transferee." The events of termination of any option will continue to be
applied with respect to the original Participant, following which the options
shall be exercisable by the transferee only to the extent (if at all), and for
the periods specified in the Program or option agreement. The Participant in all
such cases will remain subject to and liable for the withholding taxes due or
payable upon exercise by the Transferee.

The Board may also, in its discretion, pursuant to the requirements and
restrictions listed above except as listed in this paragraph, authorize all or a
portion of the options to be granted to a Participant, to permit a
non-conforming transfer, such as a sale to a family member or family corporation
for estate planning purposes. Nothing herein or in any action by the Board shall
be

<PAGE> 56

construed as an amendment to any option other than those expressly indicated by
the action of the Board.

The Company shall not have any obligation to provide notice to the
Transferee of the termination or acceleration of an option for any reason.

3. DESIGNATION OF BENEFICIARY. A Participant, in accordance with
procedures established by the Committee, may designate a person or persons to
receive, in the event of the Participant's death, (a) any payments with respect
to which the Participant would then be entitled, and (b) the right to continue
to participate in the Plan to the extent of such Participant's outstanding
Awards. Such designation shall be made upon forms supplied by and delivered to
the Company and may be revoked in writing.

4. WITHHOLDING TAXES.

The Company's obligation to deliver shares of Common Stock or cash upon
the exercise of stock options granted will be subject to the satisfaction of all
applicable federal, state and local income tax and employment tax withholding
requirements. The Committee (or plan administrator) may, in its discretion and
in accordance with any applicable tax or securities laws (including the
applicable safe-harbor provisions of Securities and Exchange Commission Rule
16b-3), provide any or all holders of a NQSOs (other than the automatic grants
made pursuant to Directors Stock Option Program) or unvested shares under the
Plan, with the right to use shares of the Company's Common Stock in satisfaction
of all or part of the federal, state and local income tax and employment tax
liabilities incurred by such holders in connection with the exercise of their
options or the vesting of their shares (the "Taxes"). Such right may be provided
to any such option holder in either or both of the following formats:

(a) Stock Withholding: The holder of the NQSO or unvested
shares may be provided with the election to have the Company withhold,
from the shares of Common Stock otherwise issuable upon the exercise of
such NQSO or the vesting of such shares, a portion of those shares with
an aggregate fair market value not to exceed one hundred percent (100%)
of the applicable Taxes.

(b) Stock Delivery: Provide the holder of the NQSO or the
unvested shares with the election to deliver to the Company, at the
time the NQSO is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such individual (other than in
connection with the option exercise or share vesting triggering the
Taxes) with an aggregate fair market value equal to the designated
percentage (up to 100% as specified by the option holder) of the Taxes
incurred in connection with such option exercise or share vesting.

5. PLAN EXPENSES. Any expenses of administering the Plan shall be borne
by the Company.

<PAGE> 57

6. CONSTRUCTION OF PLAN. The interpretation of the Plan and the
application of any rules implemented hereunder shall be determined solely in
accordance with the laws of the State of Ohio.

7. UNFUNDED PLAN. The Plan shall be unfunded, and the Company shall not
be required to segregate any assets which may at any time be represented by
Awards. Any liability of the Company to any person with respect to an Award
under this Plan shall be based solely upon any obligations which may be created
by this Plan; no such obligation of the Company shall be deemed to be secured by
any pledge or other encumbrance on any property of the Company.

8. BENEFIT PLAN COMPUTATIONS. Any benefits received or amounts paid to
a Participant with respect to any Award granted under the Plan shall not have
any effect on the level of benefits provided to or received by any Participant,
or the Participant's estate or beneficiary, as part of any employee benefit plan
(other than the Plan) of the Company.

9. PRONOUNS, SINGULAR AND PLURAL. The masculine may be read as
feminine, the singular as plural and the plural as singular as necessary to give
effect to the Plan.

10. MAXIMUM ANNUAL GRANT. In no event shall any one individual
participating in the 1999 Stock Plan, be granted stock options and/or restricted
shares for more than one and one-half percent (1.5%) of the total outstanding
shares of Common Stock of the Company, in the aggregate, per calendar year.

11. PAYMENT. The exercise price will be payable in one of the
alternative forms specified below:

(a) full payment in cash or check made payable to the
Company's order; or

(b) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Company's reported
earnings and valued at fair market value on the Exercise Date (as such
term is defined below); or

(c) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Company's reported earnings and valued at fair market value on the
Exercise Date and cash or check payable to the Company's order; or

(d) full payment through a sale and remittance procedure
pursuant to which the Participant will provide irrevocable written
directives to a designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate exercise price payable for the purchased shares and shall
concurrently provide written instructions to the Company to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale transaction.

<PAGE> 58

For purposes of this subparagraph, the "exercise date" will be the date
on which written notice of the option exercise is delivered to the Company, and
the fair market value per share of Common Stock on any relevant date shall be
determined in accordance with the provisions of the Plan. Except to the extent
the sale and remittance procedure specified above is utilized for the exercise
of the option, payment of the option price for the purchased shares must
accompany the exercise notice.

D. EFFECTIVE DATE

The Plan became effective on approval by shareholders of the Company.
The Plan and all outstanding Awards shall remain in effect until all outstanding
Awards have been exercised, expired or canceled.

23
<PAGE> 59

<TABLE>
<CAPTION>
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<S> <C> <C> <C> <C>
- ----------------------- 1. For the election of five Class II For All With- For All
FIRSTMERIT CORPORATION Directors. Nominees hold Except
- -----------------------
Karen S. Belden Gary G. Clark [ ] [ ] [ ]
R. Cary Blair Clifford J. Isroff
Robert W. Briggs

RECORD DATE SHARES: NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the name(s)
of the nominee(s). Your shares will be voted for the remaining
nominee(s).

2. To approve the increase of Common For Against Abstain
Stock from 160,000,000 to 300,000,000 shares.
[ ] [ ] [ ]

3. To approve the 1999 Stock Plan [ ] [ ] [ ]

4. Such other business as properly may come before said meeting and
any adjournments thereof.

Please be sure to sign and date this Proxy Date Mark box at right if an address change or comment has been noted [ ]
- --------------------------------------------------- on the reverse side of this card.

- -Shareholder sign here----Co-owner sign here-------

DETACH CARD DETACH CARD

</TABLE>

FIRSTMERIT CORPORATION
III CASCADE PLAZA
AKRON, OHIO 44308
MARCH 12, 1999

Dear Shareholder:

Please take note of the important information enclosed with this Proxy Card.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.

Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.

Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.

Your vote must be received prior to the Annual Meeting of Shareholders,
Wednesday, April 21, 1999.

Thank you in advance for your prompt consideration of these matters.

Sincerely,

FirstMerit Corporation