<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
First Merchants Corporation
- -------------------------------------------------------------------------------
Name of Registrant as Specified in Charter
Merrill Corporation
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a 6(i)(3)
/ / 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:*
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4) Proposed maximum aggregate value of transaction:
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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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.:
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4) Date Filed:
<PAGE>
FIRST MERCHANTS CORPORATION
200 EAST JACKSON STREET
MUNCIE, INDIANA 47305
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 31, 1994
The annual meeting of the shareholders of First Merchants Corporation will
be held at the Horizon Convention Center, 401 South High Street, Muncie, Indiana
47305, on Thursday, March 31, 1994, at 3:30 p.m. for the following purposes:
(1) To elect three directors to hold office for a term of
three years and until their successors are duly elected
and qualified.
(2) To act on a proposal to approve the First Merchants
Corporation 1994 Stock Option Plan.
(3) To act on a proposal to approve the First Merchants
Corporation Employee Stock Purchase Plan (1994).
(4) To ratify the appointment of the firm of Geo. S. Olive &
Co. as independent public accountants for 1994.
(5) To transact such other business as may properly come
before the meeting.
Only those shareholders of record at the close of business on February 17,
1994 shall be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
----------------------------------------
Rodney A. Medler
Secretary
Muncie, Indiana
February 22, 1994
IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE
MEETING, YOU ARE URGED TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
February 22, 1994
FIRST MERCHANTS CORPORATION
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 31, 1994
This Proxy Statement is furnished in connection with the solicitation
of the enclosed proxy by and on behalf of the Board of Directors of First
Merchants Corporation (the "Corporation") for use at the annual meeting of
shareholders of the Corporation to be held March 31, 1994. The distribution of
these proxy materials is expected to commence on February 22, 1994.
Any shareholder giving a proxy has the right to revoke it any time
before it is exercised by written notice to the Secretary received prior to the
meeting or in person at the meeting. The shares represented by proxies will be
voted in accordance with the instructions on the proxies. In the absence of
specific instructions to the contrary, proxies will be voted in favor of Items
1, 2, 3 and 4.
VOTING SECURITIES
Only shareholders of record at the close of business on February 17,
1994 will be entitled to notice of and to vote at the annual meeting. As of
February 17, 1994, the number of shares of common stock outstanding and entitled
to vote was 3,390,130. Each share is entitled to one vote. The affirmative
vote of a majority of the Corporation's common shares present and voting at the
meeting in person or by proxy is required for approval of all items being sub-
mitted to the shareholders for their consideration, except that the affirmative
vote of at least a majority of the Corporation's outstanding common shares is
required to adopt the proposals to approve the First Merchants Corporation 1994
Stock Option Plan and the First Merchants Corporation Employee Stock Purchase
Plan (1994). The Secretary will count the votes and announce at the meeting the
number voting for and against each item and the number abstaining. Abstentions
will be counted for the purpose of determining whether a quorum is present but
for no other purpose. Broker non-votes will not be counted.
ELECTION OF DIRECTORS
Three directors will be elected at the annual meeting.
The persons named below have been nominated for election to the Board
of Directors (the "Board"), with terms expiring as of the 1997 annual meeting of
shareholders. All of the nominees are currently members of the Board.
Those persons nominated as directors include:
<PAGE>
<TABLE>
<CAPTION>
Name and Age Present Occupation Director Since(1)
- ------------ ------------------ -----------------
<S> <C> <C>
Class III (Terms expire 1997):
- ------------------------------
Nelson W. Heinrichs; age 54 President, Jordan Paper 1987 (1987)
Products, Inc. (Jordan
Paper Products, Inc. is a
wholesaler and distributor
of diversified paper products.)
Joseph E. Wilson; age 52 President, Muncie Power 1988 (1988)
Products, Inc. (Muncie Power
Products, Inc. manufactures
and distributes power trans-
mission components to the
truck equipment industry.)
Robert F. Wisehart; age 67 Attorney; Chairman of the 1991 (1955)
Board, First United Bank
Those persons named below continue to serve as directors:
Class I (Terms expire 1995):
- ----------------------------
Michael L. Cox, age 49 Group President, Ontario 1984 (1984)
Corporation (Ontario Corporation
manufactures and services
aerospace components and
engages in metallurgical and
environmental testing and in
computer software development.)
John W. Hartmeyer; age 55 President, Al Pete Meats, Inc. 1982 (1971)
(Al Pete Meats, Inc. is a
producer of frozen breaded
retail and institutional meat
and vegetable products.)
Jon H. Moll; age 51 Partner, DeFur, Voran, Hanley, 1985 (1985)
Radcliff & Reed, Attorneys
Robert M. Smitson; age 57 President, Maxon Corporation 1982 (1979)
(Maxon Corporation designs and
manufactures specialty industrial
combustion systems and valves.)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Name and Age Present Occupation Director Since(1)
- ------------ ------------------ -----------------
<S> <C> <C>
Class II (Terms expire 1996):
- -----------------------------
Stefan S. Anderson; age 59 Chairman of the Board and 1982 (1975)
President, First Merchants
Corporation and First
Merchants Bank, N.A.
Thomas B. Clark; age 48 Senior Vice President and 1989 (1989)
Chief Financial Officer,
Alltrista Corporation
(Alltrista Corporation
manufactures metal, plastics
and consumer products and
industrial equipment.)
David A. Galliher, age 61 President and Treasurer, 1982 (1969)
Wm. A. Didier & Sons, Inc.
(Wm. A. Didier & Sons, Inc.
manufactures credit cards.)
Thomas K. Gardiner; age 46 Physician, Medical 1989 (1989)
Consultants, P.C.
Hurley C. Goodall; age 66 Retired City of Muncie 1992 (1992)
Firefighter and former
Indiana State Represent-
ative, District 34
John E. Worthen; age 60 President, Ball State 1987 (1987)
University
<FN>
(1) Except as stated below, years in parenthesis relate to
service as a director of the Corporation's wholly-owned
subsidiary, First Merchants Bank, N.A. ("First
Merchants"). Prior to December 16, 1991, First
Merchants' name was The Merchants National Bank of
Muncie. In the case of Mr. Wisehart, the year in paren-
thesis relates to service as a director of the
Corporation's wholly-owned subsidiary, First United Bank
("First United"). All of the Corporation's directors
except Mr. Wisehart are also directors of First
Merchants. Mr. Wisehart is the only director of the
Corporation who is also a director of First United.
</TABLE>
3
<PAGE>
The occupations set forth above have been the principal occupations of
the director-nominees and continuing directors during the past 5 years except as
follows: Mr. Clark was Vice President, Communications, Planning and Development
of Ball Corporation from 1989 until he joined Alltrista Corporation as Senior
Vice President and Chief Financial Officer in 1992 (Alltrista Corporation was a
wholly-owned subsidiary of Ball Corporation until it was spun off as an inde-
pendent public corporation on April 2, 1993). Mr. Galliher was President of A.
E. Boyce Company, Inc. until he retired from that position in 1991 (A. E. Boyce
Company, Inc. designs and manufactures business forms and systems); he has been
President and Treasurer of Wm. A. Didier & Sons, Inc. since 1978. Mr. Goodall
retired from the Indiana House of Representatives in 1992.
CERTAIN COMMITTEES OF THE BOARD
The Corporation's Executive Committee functions as a nominating
committee. It recommends to the Board: (a) candidates to fill any vacancies on
the Board, and (b) a slate of directors to be elected each year at the annual
meeting of shareholders. The Committee will consider nominees recommended by
shareholders. Any such recommendation should be in writing and addressed to the
Secretary, First Merchants Corporation, 200 East Jackson Street, Muncie, Indiana
47305. The members of the Executive Committee are Messrs. Anderson, Clark, Cox,
Galliher, Hartmeyer, Moll, and Smitson. The Executive Committee met 4 times
during 1993.
The Corporation has an Audit Committee whose functions are: (a) to
assist the Board in fulfilling its responsibilities relating to accounting,
auditing and financial reporting functions; (b) to review or cause to be
reviewed all reports of examination made by banking authorities; (c) to meet
with the internal auditors and to make or cause to be made internal examinations
and audits of the affairs of the Corporation and its subsidiaries; (d) to meet
with the external auditors and to review the scope and results of external
audits; and (e) to consult with management on the selection of the independent
public accountants to serve as external auditors for the ensuing year. The
members of the Audit Committee are Messrs. Clark, Cox, Galliher, Gardiner,
Goodall, Heinrichs, Wilson, Wisehart, Worthen, and George Likens, who is a
director of Pendleton but not of the Corporation. Clell W. Douglass, who is
retiring as a director as of the 1994 annual meeting, also served on the Audit
Committee during 1993. The Audit Committee met 3 times during 1993.
The Corporation has a Compensation Committee whose functions are: (a)
to review and approve the compensation and benefits to be paid to the executive
officers and senior management employees of the Corporation and the chief execu-
tive officers of its subsidiaries, and (b) to review and approve the compensa-
tion and benefits to be paid to the executive officers and senior management
employees and the compensation ranges and benefits for other officers and
employees of the Corporation's subsidiaries. The authority to periodically
adjust the compensation and benefits of employees, other than executive officers
and senior management of the Corporation and the chief executive officers of its
subsidiaries, has been delegated by the Compensation Committee to the chief
executive officers of the subsidiaries. The Compensation Committee is responsi-
ble for the administration of the Corporation's incentive compensation and stock
plans. The members of the Compensation Committee are Messrs. Clark, Hartmeyer
4
<PAGE>
and Smitson. Clell W. Douglass, who is retiring as a director as of the 1994
annual meeting, also served on the Compensation Committee during 1993. The Com-
pensation Committee met 4 times during 1993.
MEETINGS OF THE BOARD
The Board of Directors held 5 meetings during 1993. Mr. Clark was the
only director of the Corporation who attended fewer than 75% of the total number
of meetings of the Board and the committees on which he served.
COMPENSATION OF DIRECTORS
Directors of the Corporation who were employees of the Corporation or
one of its subsidiaries received no separate compensation for their services as
directors in 1993. Other than Mr. Wisehart, directors of the Corporation who
were not employees received no compensation for attending meetings of the
Corporation's Board; however, they were paid an annual retainer of $2,200 and
$200 for each meeting of First Merchants' Board of Directors that they attended
in 1993. In addition, they were paid $200 per meeting for attending meetings of
the Executive Committee and the other committees of the Corporation's or First
Merchants' Board of Directors. The chairman of the Executive Committee was paid
an additional $200 and the chairmen of the other committees were paid an
additional $100 for each meeting over which they presided. Mr. Wisehart was
paid $300 for each meeting of the Corporation's Board of Directors and $200 for
each meeting of the Audit Committee he attended. He received $4,500 for serving
as the Chairman of First United's Board of Directors, and First United paid him
$150 per month for serving on its Board of Directors, $300 per month for serving
on its Executive Committee and $400 per month for serving on its Loan Workout
Committee. Mr. Wisehart was also covered by First United's health insurance
plan.
First Merchants maintains an unfunded deferred compensation plan which
gives each director an annual election to defer the receipt of director's fees.
Any amounts reflected in a director's account under the plan are credited with
interest at a rate equal to First Merchants' 18-month variable rate IRA account
rate. Payments are made or begun when the individual ceases to be a director,
or upon retirement or death. During 1993, 3 directors participated in the plan,
deferring fees of $26,900 as a group.
COMPENSATION OF EXECUTIVE OFFICERS
The tables in this section of the Proxy Statement contain information
concerning the compensation of certain named executive officers as of the
Corporation's most recent fiscal year-end, December 31, 1993. The information
in these tables concerning stock options reflects the 3-for-2 common stock split
which was effective at the close of business on January 25, 1993 for sharehold-
ers of record at the close of business on January 18, 1993.
5
<PAGE>
SUMMARY COMPENSATION TABLE
The following table contains information concerning the compensation
paid by the Corporation and its subsidiaries for the years 1991, 1992 and 1993
to the Corporation's Chief Executive Officer and its 4 most highly compensated
executive officers other than the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------
Awards
-------------------
Name and Securities
Principal Underlying All Other
Position Year Salary Bonus Options Compensation(1)
($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stefan S. Anderson, 1993 161,519 41,801 1,950 1,969
Chairman of the Board 1992 153,870 59,190 1,950 1,875
and President, Corporation 1991 135,825 49,262 2,700 1,665
and First Merchants
Roger W. Gilcrest, 1993 119,764 19,017 1,350 1,458
Executive Vice President, 1992 113,300 27,252 1,350 1,383
First Merchants 1991 108,204 24,510 1,650 1,327
Paul R. Hoover, 1993 98,042 15,592 1,350 1,195
Senior Vice President- 1992 92,941 22,324 1,350 1,133
Operations, First 1991 88,305 20,030 1,650 1,083
Merchants
Larry R. Helms, 1993 86,095 13,668 1,350 1,048
Senior Vice President 1992 82,829 19,860 1,350 1,008
and General Counsel, 1991 79,664 17,988 1,650 976
Corporation, and
Senior Vice President,
First Merchants
Lowell E. Williams, 1993 85,479 13,423 1,350 1,029
Senior Vice President, 1992 81,397 19,293 1,350 979
First Merchants 1991 77,831 17,477 1,650 953
<FN>
- --------------------------
(1) Employer contributions for fiscal year to retirement savings plan (Internal Revenue Code
Section 401(k) plan).
</TABLE>
OPTION GRANTS TABLE
The 1989 Stock Option Plan, which became effective as of June 30, 1989,
provides for the issuance of options to key employees of the Corporation or any
subsidiary to purchase the Corporation's common stock at prices not less than
the market price of the stock on the dates of grant. The following table con-
tains information concerning individual grants of stock options under the plan
made during 1993 to each of the executive officers named in the Summary
Compensation Table above.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable
Value at Assumed
Number of Percent Annual Rates
Securities of Total of Stock Price
Underlying Options Appreciation for
Options Granted to Exercise Option Term
Granted Employees in Price Expiration
Name (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stefan S. Anderson 1,950 9.70 27.50 July 30, 2003 33,784 85,264
Roger W. Gilcrest 1,350 6.72 27.50 July 30, 2003 23,389 59,029
Paul R. Hoover 1,350 6.72 27.50 July 30, 2003 23,389 59,029
Larry R. Helms 1,350 6.72 27.50 July 30, 2003 23,389 59,029
Lowell E. Williams 1,350 6.72 27.50 July 30, 2003 23,389 59,029
- -------------------
<FN>
(1) Options were granted on July 30, 1993 and are exercisable on or after January 30, 1994,
but not after July 30, 2003.
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table contains information concerning (1) each exercise
of stock options under the 1989 Stock Option Plan during 1993 by each of the
executive officers named in the Summary Compensation Table above, and (2) the
value as of December 31, 1993 of each of the named executive officer's unexer-
cised options on an aggregated basis.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options at Fiscal In-the-Money Options
on Value Year-End at Fiscal Year-End
Exercise Realized (#) ($)
---------------------------------------------------
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stefan S. Anderson 0 0 11,400 / 1,950 138,401 / 3,900
Roger W. Gilcrest 0 0 6,900 / 1,350 82,076 / 2,700
Paul R. Hoover 0 0 6,900 / 1,350 82,076 / 2,700
Larry R. Helms 0 0 6,900 / 1,350 82,076 / 2,700
Lowell E. Williams 0 0 5,100 / 1,350 53,576 / 2,700
</TABLE>
7
<PAGE>
PENSION PLAN TABLES
The Corporation has a defined benefit pension plan covering, in
general, all full-time employees of the Corporation and its subsidiaries. The
following table shows the estimated annual benefits payable upon retirement at
age 65 to persons born in 1936 (the average of the birth years of the executive
officers named in the Summary Compensation Table above) in specified compensa-
tion and years of service classifications under the plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------
Remuneration 15 20 25 30 35
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
125,000 $ 36,765 $ 49,020 $ 61,275 $ 61,275 $ 61,275
150,000 44,640 59,520 74,400 74,400 74,400
175,000 52,515 70,020 87,525 87,525 87,525
200,000 60,390 80,520 100,650 100,650 100,650
</TABLE>
Benefits under the plan are determined primarily by average final com-
pensation and years of service and are computed on the basis of straight-life
annuity amounts. They are not subject to any deduction for Social Security or
other offset amounts.
Remuneration for purposes of the Pension Plan Table above consists of
the base salary and service award components of the salary amounts reported in
the Summary Compensation Table above. As of January 1, 1994, Messrs. Anderson,
Gilcrest, Hoover, Helms and Williams, the executive officers named in the Sum-
mary Compensation Table, have 19.2, 5.5, 6.8, 22.3 and 39.5 credited years of
service, respectively, and their 1993 remuneration for purposes of calculating
their pension benefits under the plan was $157,595, $116,625, $95,630, $83,910
and $82,495, respectively.
Participants in the plan who had at least 15 credited years of service
and whose combined age and years of service totaled at least 65 as of January 1,
1991, including Messrs. Anderson, Helms and Williams, are entitled to a pension
benefit calculated under the formula that was in effect prior to 1990 if that
will produce a greater benefit. The following table shows the estimated annual
benefits payable upon retirement at age 65 in specified compensation and years
of service classifications under the formula that was in effect prior to 1990.
PENSION PLAN TABLE (PRE-1990 FORMULA)
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
125,000 $ 37,500 $ 50,000 $ 62,500 $ 62,500 $ 62,500
150,000 45,000 60,000 75,000 75,000 75,000
175,000 52,500 70,000 87,500 87,500 87,500
200,000 60,000 80,000 100,000 100,000 100,000
</TABLE>
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Corporation is comprised of the fol-
lowing non-employee directors: Thomas B. Clark, John W. Hartmeyer and Robert M.
Smitson (Chairman). Clell W. Douglass, who is retiring as a director as of the
1994 annual meeting, also served on the Compensation Committee during 1993.
Mr. Smitson is the President of Maxon Corporation. Stefan S. Anderson, the
Chairman of the Board and President of the Corporation and First Merchants,
serves as a director of Maxon Corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing the salary of the Corporation's chief executive officer and approv-
ing the salaries of the other executive officers after receiving recommendations
from the chief executive officer. The Committee is also responsible for admini-
stering the Corporation's incentive compensation and stock plans.
GENERAL POLICY ON EXECUTIVE COMPENSATION. The Board of Directors of
the Corporation has established an executive compensation program which is
designed to provide incentives to executive officers to achieve short-term and
long-term corporate strategic management goals, with the ultimate objective of
obtaining a superior return on the shareholders' investment. To this end, the
compensation program for executive officers is comprised of cash and equity-
based components which consider: the executive officer's individual
performance; the Corporation's performance as measured against previously-
established annual and long-term goals; the Corporation's performance compared
to industry peers; and the compensation paid by competitors to individuals hold-
ing similar management positions.
SALARIES. The salaries paid to the executive officers, including the
executive officers named in the Summary Compensation Table, were subjectively
determined after consideration of the executive officer's individual
performance, the evaluation of the chief executive officer for executive offi-
cers other than the chief executive officer, the Corporation's financial results
compared with industry peers, various industry salary surveys, and other factors
such as budgetary considerations and inflation rates.
The Compensation Committee believes that the executive officers' sala-
ries should be at or above the average of the salaries paid to executive offi-
cers with similar responsibilities at Indiana and Midwestern banks and bank
holding companies of similar size. The salaries paid executive officers at peer
financial institutions were determined by consulting several surveys, most
importantly: the Indiana Bankers Association survey of Indiana banks; the Crowe
Chizek Mid-West Bank survey of 94 banks; salary survey data prepared by
Sheshunoff; and an informal survey of the Financial Associates banks (9 Indiana
banks with assets between $200,000,000 and $1,400,000,000).
INCENTIVE COMPENSATION. The bonuses paid to the executive officers,
other than the chief executive officer, were determined under the Corporation's
Management Incentive Plan for Administrative Officers. The plan provides for
bonuses of up to 25% of annual base salary for the executive officers if First
Merchants meets specific targets established in advance of the fiscal year for
return on assets, return on equity, and net income growth. 30% of the bonus is
tied to the return on assets target, 25% is tied to the return on equity target,
9
<PAGE>
and 45% is tied to the net income growth target for the fiscal year. The execu-
tive officers, other than the chief executive officer, received bonuses of
16.31% of base salary for 1993. The minimum ("threshold") performance levels
which would qualify the executive officers for bonuses under the plan were
exceeded for all criteria -- First Merchants' return on assets, return on
equity, and net income growth. Maximum levels were not exceeded for any of the
criteria.
The bonus paid to the chief executive officer was determined under the
Corporation's Management Incentive Plan for Chief Executive Officer. The plan
provides for a bonus of up to 40% of annual base salary for the chief executive
officer, if the same targets are met as are established for the other executive
officers. However, the chief executive officer's bonus depends on the perform-
ance for the fiscal year of both the Corporation and First Merchants. 30% of
the bonus is tied to the Corporation's and First Merchants' performance (15%
each) relative to the return on assets target, 30% is tied to the Corporation's
and First Merchants' performance (15% each) relative to the return on equity
target, and 40% is tied to the Corporation's and First Merchants' performance
(20% each) relative to the net income growth target for the fiscal year. The
chief executive officer received a bonus of 26.54% of base salary for 1993. The
minimum ("threshold") performance levels which would qualify the chief executive
officer for a bonus under the plan were exceeded for all criteria __ the
Corporation's and First Merchants' return on assets, return on equity, and net
income growth. Maximum levels were not exceeded for any of the criteria.
STOCK PLANS. Equity-based compensation, including compensation under
the Corporation's Stock Option Plan and Employee Stock Purchase Plan, is
intended to encourage ownership and retention of the Corporation's common stock
by key employees, thereby giving them a meaningful stake in the Corporation's
continued success and aligning their interests with those of other shareholders.
The Stock Option Plan is briefly described in the paragraph above the
Option Grants Table. During 1993 the Compensation Committee awarded options for
1,950 shares to the chief executive officer and 1,350 shares to each of the
other executive officers under the plan. Options have been awarded over the
past 5 years for substantially all of the shares reserved under the plan when it
was established in 1989. Therefore, the Board of Directors has proposed that a
new plan be adopted and that 210,000 shares of the Corporation's common stock be
reserved for issuance to key employees and non-employee directors over the next
5 years. See "Proposal to Approve First Merchants Corporation 1994 Stock Option
Plan."
The Employee Stock Purchase Plan generally provides that full-time
employees of the Corporation or a participating subsidiary with more than 6
months of service may elect, prior to the offering period (July 1 to June 30),
to purchase common shares of the Corporation at a price equal to 85% of the
lesser of the market price of the stock at the beginning of the period and the
market price at the end of the period. For the offering period ending June 30,
1993, Messrs. Anderson, Gilcrest, Hoover, Helms and Williams, the executive
officers named in the Summary Compensation Table, purchased 926, 406, 657, 116,
and 773 shares, respectively, under the plan. The plan covers 5 offering
periods, expiring on June 30, 1994. The Board of Directors has proposed that a
new plan be adopted and that 112,500 shares of the Corporation's common stock be
reserved for issuance to plan participants over 5 offering periods, expiring on
June 30, 1999. See "Proposal to Approve First Merchants Corporation Employee
Stock Purchase Plan (1994)."
10
<PAGE>
OTHER COMPENSATION. The executive officers are also covered by medical
and retirement plans which are generally applicable to full-time employees of
the Corporation and its subsidiaries. The retirement plans covering each of the
executive officers are the defined benefit pension plan described in the
"Pension Plan Tables" section and the retirement savings plan (Internal Revenue
Code Section 401(k) plan) referred to in the Summary Compensation Table.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. The chief executive officer's
salary and bonus are determined in the manner described above in this section.
Mr. Anderson's total compensation for 1993, including salary and bonus, was near
the average for comparable financial institutions but below average if the
comparison is limited to chief executive officers who also serve as chairman of
the financial institution's board of directors. His 1993 compensation was 4.57%
less than his 1992 compensation because his bonus under the Management Incentive
Plan was smaller in 1993. In 1993 the Corporation and its subsidiary banks
again received national recognition for their financial strength, and the
Corporation's and First Merchants' earnings grew for the 18th consecutive year
under Mr. Anderson's leadership.
FIRST MERCHANTS CORPORATION COMPENSATION
COMMITTEE
Robert M. Smitson, Chairman
Thomas B. Clark
Clell W. Douglass
John W. Hartmeyer
PERFORMANCE GRAPH
The following graph compares the yearly change in the Corporation's
cumulative total shareholder return on its common stock during the last 5 years
with (1) the cumulative total return of the CRSP Index for NASDAQ Stock Market
(U.S. Companies), and (2) the cumulative total return of the CRSP Index for NAS-
DAQ Bank Stocks. The graph assumes $100 was invested on June 20, 1989 (the
first day the Corporation's common stock was traded in the NASDAQ market) in the
Corporation's common stock, and in each of the two indexes shown, and all divi-
dends were reinvested.
11
<PAGE>
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG FIRST
MERCHANTS CORPORATION, NASDAQ STOCK MARKET (U.S. COMPANIES)
AND NASDAQ BANK STOCKS
<CAPTION>
12/31/88 06/20/89 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
FMC -- 100.0 106.4 99.8 141.1 218.9 218.5
NASDAQ Stock Market 84.5 100.0 102.5 87.1 139.7 162.4 185.3
NASDAQ Bank Stocks 87.0 100.0 96.7 70.8 116.2 168.9 192.5
</TABLE>
The graph in the proxy statement for the 1993 annual shareholder meet-
ing compared the Corporation's performance to that of the Russell 2000 Index and
the Value Line Midwest Bank Industry Index. However, the Corporation considers
the NASDAQ Stock Market and Bank Stocks Indexes to be more appropriate for com-
parison of performance since the Corporation's common stock is traded in the
NASDAQ market. The NASDAQ Stock Market and Bank Stocks Indexes were not publish-
ed early enough in 1993 to use them in last year's proxy statement. These
indexes were available early enough to use in this year's proxy statement and
are expected to be so in future years.
12
<PAGE>
The following graph compares the yearly change in the Corporation's
cumulative total shareholder return on its common stock during the last 5 years
with the cumulative total returns of the indexes used in the 1993 proxy state-
ment -- the Russell 2000 and Value Line Midwest Bank Industry Indexes. The
graph assumes $100 was invested on January 1, 1989 in the Corporation's common
stock, and in each of the two indexes shown, and all dividends were
reinvested.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG FIRST
MERCHANTS CORPORATION, RUSSELL 2000 INDEX AND VALUE LINE
MIDWEST BANK INDUSTRY INDEX
<CAPTION>
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FMC 100.0 119.1 111.8 158.1 245.2 244.7
Russell 2000 100.0 116.2 93.8 136.7 161.8 192.4
Midwest Bank Industry 100.0 128.6 115.7 203.0 258.5 265.6
</TABLE>
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following is a summary of the amount and percent of the Corpora-
tion's common stock beneficially owned on January 15, 1994 by each beneficial
owner of more than 5% of the Corporation's common stock, by each continuing
director and director nominee, by each executive officer named in the Summary
Compensation Table above, and by all directors and executive officers as a
group. Unless otherwise noted, the beneficial owner has sole voting and invest-
ment power.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
---------------- -------------------------- ----------------
<S> <C> <C>
George and Frances Ball 206,413 6.09
Foundation
P.O.Box 1408
Muncie, Indiana 47308
Stefan S. Anderson 55,393 (2) 1.61
Thomas B. Clark 150 *
Michael L. Cox 1,758 *
David A. Galliher 1,200 *
Thomas K. Gardiner 750 *
Hurley C. Goodall 45
John W. Hartmeyer 25,710 (3) *
Nelson W. Heinrichs 1,441 *
Jon H. Moll 2,969 (4) *
Robert M. Smitson 4,050 (5) *
Joseph E. Wilson 801 *
Robert F. Wisehart 27,426 (6) *
John E. Worthen 300 (7) *
Roger W. Gilcrest 21,870 (8) *
Paul R. Hoover 13,127 (9) *
Larry R. Helms 10,099 (10) *
Lowell E. Williams 18,034 (11) *
Directors and Executive
Officers as a Group (19) 196,898 (12) 5.72
<FN>
(1) The information contained in this column is based upon informa-
tion furnished to the Corporation by the persons and entities
named above and shareholder records of the Corporation. The
amounts have been adjusted to reflect the 3-for-2 common stock
split which was effective at the close of business on January
25, 1993 for shareholders of record at the close of business on
January 18, 1993.
(2) Includes 2,250 shares held by his spouse, Joan Anderson, in
which he disclaims any beneficial interest. Also includes
13,350 shares which Mr. Anderson has the right to acquire during
the next 60 days under a stock option plan.
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
<FN>
(3) Includes 17,250 shares and 2,700 shares owned by Al Pete Meats, Inc.
and Al Pete Enterprises, Inc., respectively; 1,200 shares owned by
Hartmeyer, Inc.; 1,500 shares held by his spouse, Carol A. Hartmeyer,
in which he disclaims any beneficial interest; and 1,800 shares held
by Mr. Hartmeyer as custodian for other relatives, in which he dis-
claims any beneficial interest.
(4) Includes 640 shares held by his spouse, Barbara E. Moll, in which he
disclaims any beneficial interest.
(5) Includes 2,250 shares held by his spouse, Marilyn S. Smitson, in
which he disclaims any beneficial interest.
(6) Includes 468 shares owned by Wisehart Farms, Inc.; 12,804 shares held
by Mr. Wisehart as trustee for his son, Frank A. Wisehart, in which
he disclaims any beneficial interest; and 12,804 shares held by his
spouse, Jean F. Wisehart, as trustee for his daughter, Mary K.
Wisehart, in which he disclaims any beneficial interest.
(7) Held jointly with his spouse, Sandra D. Worthen.
(8) Includes 1,125 shares held by his spouse, Linda Gilcrest, and 1,650
shares held by Mr. Gilcrest as trustee for his mother, Dorothy
Gilcrest. Also includes 8,250 shares which Mr. Gilcrest has the
right to acquire during the next 60 days under a stock option plan.
(9) Includes 4,012 shares held jointly with his spouse, Judy Hoover.
Also includes 78 shares held by his spouse, Judy Hoover, in which he
disclaims any beneficial interest. Also includes 8,250 shares which
Mr. Hoover has the right to acquire during the next 60 days under a
stock option plan.
(10) Includes 1,849 shares held jointly with his spouse, Sandra Helms.
Also includes 8,250 shares which Mr. Helms has the right to acquire
during the next 60 days under a stock option plan.
(11) Includes 8,700 shares held jointly with his spouse, Marilyn Williams.
Also includes 1,806 shares held by his spouse, Marilyn Williams, in
which he disclaims any beneficial interest. Also includes 6,450
shares which Mr. Williams has the right to acquire during the next 60
days under a stock option plan.
(12) Includes 53,250 shares which executive officers have the right to
acquire during the next 60 days under a stock option plan.
* Percentage beneficially owned is less than 1% of the outstanding
shares.
</TABLE>
15
<PAGE>
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Certain directors and executive officers of the Corporation and its
subsidiaries and their associates are customers of, and have had transactions
with, First Merchants, Pendleton and First United from time to time in the ordi-
nary course of business. Additional transactions may be expected to take place
in the ordinary course of business in the future. All loans and commitments
included in such transactions were made on substantially the same terms, includ-
ing interest rates and collateral, as those prevailing at the time for compara-
ble transactions with other persons and did not involve more than the normal
risk of collectibility or present other unfavorable features.
Jon H. Moll, a director of the Corporation and First Merchants, is a
partner in the firm of DeFur, Voran, Hanley, Radcliff & Reed, Muncie, Indiana,
which serves as legal counsel to the Corporation and First Merchants and
provides legal services to the Corporation's other subsidiaries on a transac-
tional basis.
Robert F. Wisehart, a director of the Corporation and Chairman of the
Board of Directors of First United, owns the firm of Wisehart & Wisehart,
Middletown, Indiana, which serves as legal counsel to First United.
Mr. Wisehart's firm was paid $23,905 in fees and expenses for legal services in
1993 to First United. A portion of the legal fees represent loan fees which are
passed through to customers in financing transactions.
PROPOSAL TO APPROVE THE FIRST MERCHANTS CORPORATION 1994 STOCK OPTION PLAN
On December 14, 1993 the Board of Directors adopted the First Merchants
Corporation 1994 Stock Option Plan (the "1994 Stock Option Plan"). The Board's
adoption of the 1994 Stock Option Plan was subject to approval by the holders of
a majority of the Corporation's outstanding common stock, which approval is now
being sought. The Board recommends approval of the 1994 Stock Option Plan, the
principal features of which are set forth below.
Under the 1994 Stock Option Plan certain executives and other key
employees of the Corporation and its subsidiaries, as designated by the Compen-
sation Committee of the Board (the "Committee"), will be eligible to receive
options to purchase the Corporation's common stock. The Committee will admini-
ster the 1994 Stock Option Plan and determine the number of options to be
issued, the allocation of the options among the participants, and the price at
which the stock underlying the options may be purchased (the "option price");
provided, however, the option price will not be less than 100% of the fair mar-
ket value of the common stock on the date the option is granted. In general,
for purposes of the Plan "fair market value" means the average of the highest
"bid" and lowest "offered" quotations of the stock as reported by NASDAQ for the
particular date. Options may not be exercised until at least 6 months after the
option is granted, except by a recipient who becomes disabled. Unless a shorter
period is fixed by the Committee or a provision of the Plan, options are
exercisable for 10 years following the option grant date. Further, all options
outstanding will be exercisable upon a change in control of the Corporation.
16
<PAGE>
At the present time, there are approximately 32 executives and other
key employees of the Corporation and its subsidiaries who would be eligible to
receive options under the 1994 Stock Option Plan.
The 1994 Stock Option Plan also provides that options to purchase 400
shares of the Corporation's common stock will automatically be granted to all
non-employee directors of the Corporation annually, the initial grant to be on
July 1, 1994 and subsequent grants to be on each July 1 thereafter through
July 1, 1998. The option price with respect to options granted to the non-
employee directors will be equal to 100% of the fair market value of the stock.
There are presently 12 non-employee directors who would be eligible to receive
options under the 1994 Stock Option Plan. As a group, these directors would
receive 4,800 options annually under the Plan.
17
<PAGE>
The Committee will not have any power to alter the amount, price or
timing of the options granted to the non-employee directors under the Plan. A
total of 210,000 shares of the Corporation's common stock are to be reserved for
issuance pursuant to the Plan. The fair market value of 210,000 shares as of
January 15, 1994 was $6,247,500.
The dollar value of the benefits that will be received by or allocated
under the 1994 Stock Option Plan to the non-employee directors, executive
officers (including the executive officers named in the Summary Compensation
Table) and other key employees of the Corporation and its subsidiaries is not
determinable at this time. If the 1994 Stock Option Plan had been in effect for
1993, no benefits would have been received by or allocated under the Plan to the
executive officers (including the executive officers named in the Summary Com-
pensation Table) and other key employees of the Corporation and its subsidiaries
because sufficient shares remained authorized for issuance under the Corpora-
tion's 1989 Stock Option Plan for all options granted during 1993. If the 1994
Stock Option Plan had been in effect for 1993, the dollar value of benefits
allocated to non-employee directors of the Corporation as a group would have
been as follows:
NEW PLAN BENEFITS(1)
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION 1994 STOCK OPTION PLAN
-----------------------------------------------------------------
Dollar Value Number of
Name and Position ($) Units
-----------------------------------------------------------------
<S> <C> <C>
Non-Executive Director Group $9,600 4,800
Shares of
Common Stock
<FN>
- -------------------
(1) Aggregate value of unexercised in-the-money options at fiscal year end, if 1994
Stock Option Plan had been in effect for 1993.
</TABLE>
The 1994 Stock Option Plan provides that the Committee may determine
whether the options to be issued are to be incentive stock options under Section
422 of the Internal Revenue Code of 1986, as amended, or nonqualified stock
options; provided, however, the options granted to non-employee directors must
be nonqualified stock options. Under the Plan, a recipient of a nonqualified
stock option who separates from service due to retirement or disability may
exercise the option at any time within 5 years after the date of separation,
whereas a recipient of an incentive stock option who separates from service due
to retirement or disability must exercise the option within 3 months after the
date of separation (but in both cases not later than the date on which the
option expires).
Assuming the options are not traded on an established market at the
time they are granted, the issuance of an option under the 1994 Stock Option
Plan will not cause any federal income tax consequences to the recipient or the
Corporation.
18
<PAGE>
The recipient of a nonqualified stock option will realize ordinary
income upon exercising the option, equal to the difference between the option
price and the fair market value on the exercise date of the shares purchased.
The Corporation will receive an income tax deduction in the same amount and at
the same time as the recipient realizes ordinary income.
There are no federal income tax consequences to the recipient or the
Corporation upon the exercise of an incentive stock option. If the recipient
holds the shares purchased through the exercise of an incentive stock option for
more than 1 year after the exercise date and 2 years after the option was
granted (the "holding period"), the recipient will be eligible upon selling the
shares for long-term capital gain treatment on any excess in the amount of the
sale price over the option price. The Corporation will not receive an income
tax deduction in the event the recipient disposes of the shares after completion
of the holding period. However, if the recipient sells the shares before the
expiration of the holding period, the recipient will have made a "disqualifying
disposition" and will realize ordinary income on the date of sale equal to the
difference between the option price and the fair market value of the shares on
the exercise date. The balance of the recipient's gain, if any, on the sale of
the shares is subject to capital gains treatment. The Corporation will receive
an income tax deduction in the same amount and at the same time as the recipient
realizes ordinary income.
The Board of Directors believes that the grant of stock options will be
a significant incentive to the non-employee directors of the Corporation and the
executive officers and other key employees of the Corporation and its subsidiar-
ies who contribute and are expected to contribute materially to the continued
success of the Corporation. The Board therefore unanimously recommends a vote
"FOR" approval of the 1994 Stock Option Plan by the shareholders.
The affirmative vote of at least a majority of the Corporation's out-
standing common shares is required for approval of the 1994 Stock Option Plan.
PROPOSAL TO APPROVE THE FIRST MERCHANTS CORPORATION EMPLOYEE STOCK
PURCHASE PLAN (1994)
On December 14, 1993, the Board of Directors adopted the First Mer-
chants Corporation Employee Stock Purchase Plan (1994) (the "1994 Stock Purchase
Plan"). The Board's adoption date of the 1994 Stock Purchase Plan was subject
to approval by the holders of a majority of the Corporation's outstanding common
stock, which approval is now being sought. The Board recommends approval of the
1994 Stock Purchase Plan, the principal features of which are set forth below.
The 1994 Stock Purchase Plan provides for purchase of the Corporation's
common stock by eligible employees through a maximum of 5 offerings, each of 12
months' duration. The employees eligible to participate in the Plan are all
employees of the Corporation or a participating subsidiary who customarily work
more than 20 hours per week and who have been employed for at least 6 months as
of the first day of the offering. At the present time, there are approximately
360 employees who would be eligible to participate in the Plan.
Prior to each offering period (July 1 to June 30), eligible employees
will be entitled to elect to have up to 20% of their basic salary or wages,
excluding bonuses, overtime, incentive or other similar extraordinary
19
<PAGE>
remuneration, deducted from their pay and accumulated with interest until the
end of that offering period, but not to exceed $25,000 per offering period.
Participants may increase, decrease or suspend their payroll deductions one time
each offering period and may withdraw the balance of their payroll deduction
account at any time during each offering period. At the end of each offering
period, the balance of each participant's payroll deduction account will be
applied towards the purchase of the largest number of full shares of the
Corporation's common stock possible, and each participant will receive a certif-
icate evidencing such shares. The price at which the shares will be deemed to
have been purchased (the "option price") will be determined by the Compensation
Committee of the Board (the "Committee"), and will be equal to the lesser of (1)
85% of the fair market value of the common stock at the time the option is
granted ( the "grant date"), or (2) 85% of the fair market value of the common
stock on the last day of the offering period (the "exercise date"). In general,
for purposes of the 1994 Stock Purchase Plan "fair market value" means the aver-
age of the highest "bid" and lowest "offered" quotations of the stock as
reported by NASDAQ for the particular date.
The Committee will administer the 1994 Stock Purchase Plan. A total of
112,500 shares of the Corporation's common stock are to be reserved for issuance
pursuant to the Plan. The fair market value of 112,500 shares as of January 15,
1994 was $3,346,875.
The benefits or amounts that will be received by or allocated to par-
ticipants under the 1994 Stock Purchase Plan are not determinable at this time.
If the 1994 Stock Purchase Plan had been in effect for 1993, no benefits or
amounts would have been received by or allocated to participants under the Plan
because sufficient shares remained authorized for issuance under the Corpora-
tion's 1989 Stock Purchase Plan for all shares purchased by eligible employees
during 1993.
The 1994 Stock Purchase Plan is intended to qualify as an employee
stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as
amended. Consequently, the Committee's purchase of stock on behalf of a partic-
ipant pursuant to the Plan will not cause any federal income tax consequences to
the participant or the Corporation. If the participant holds the shares pur-
chased pursuant to the Plan for more than 1 year after the exercise date and 2
years after the grant date (the "holding period"), upon selling the shares the
participant's gain will be subject to capital gains treatment. The Corporation
will not receive an income tax deduction in the event the participant disposes
of the shares after completion of the holding period. However, if the partici-
pant sells the shares before the expiration of the holding period, the partici-
pant will have made a "disqualifying disposition" and will realize ordinary
income on the date of sale equal to the difference between the option price and
the fair market value of the shares on the exercise date. Any appreciation in
the stock after the date the option was exercised is treated as a capital gain.
The Corporation will receive an income tax deduction in the same amount and at
the same time as the participant realizes ordinary income, but not as to any
amount which is subject to capital gains treatment.
20
<PAGE>
The Board of Directors believes that providing eligible employees of
the Corporation and its participating subsidiaries a convenient opportunity to
purchase shares of the common stock of the Corporation at a favorable price
through payroll deductions will be a significant incentive to these employees
who contribute and are expected to contribute materially to the continued suc-
cess of the Corporation. The Board therefore unanimously recommends a vote
"FOR" approval of the 1994 Stock Purchase Plan by the shareholders.
The affirmative vote of at least a majority of the Corporation's out-
standing common shares is required for approval of the 1994 Stock Purchase Plan.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board, subject to the approval of the shareholders, has selected
Geo. S. Olive & Company, Certified Public Accountants, as its independent public
accountants for 1994. Representatives of the firm are expected to be present at
the annual shareholder's meeting. They will have an opportunity to make a
statement, if they desire, and are expected to be available to respond to appro-
priate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1995 annual
meeting of the shareholders must be received by the Secretary of the Corporation
at the Corporation's principal office by October 25, 1994, for inclusion in the
Corporation's 1995 proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The cost of soliciting proxies will be borne by the Corporation. In
addition to solicitations by mail, proxies may be solicited personally or by
telephone or telegraph, but no solicitation will be made by specially engaged
employees or paid solicitors.
The Board and management are not aware of any other matters to be pre-
sented at the annual meeting other than the election of the directors and the
proposals to approve the 1994 Stock Option Plan and the Employee Stock Purchase
Plan (1994). However, if any other matters properly come before such meeting or
any adjournment thereof, the holders of the proxies are authorized to vote
thereon at their discretion.
By Order of the Board of Directors
__________________________________________
Rodney A. Medler
Secretary
Muncie, Indiana
February 22, 1994
21
<PAGE>
FIRST MERCHANTS CORPORATION
1994 STOCK OPTION PLAN
I. PURPOSE
The purposes of the First Merchants Corporation 1994 Stock Option Plan
(the "Plan") are to promote the long-term success of First Merchants Corporation
(the "Company") and its subsidiaries, and to attract, retain, and motivate key
employees and directors while creating a long-term mutuality of interest with
shareholders.
II. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"Committee"), consisting of three or more non-employee members of the Board of
Directors of the Company (the "Board"), all of whom shall be "disinterested
persons" as such term is defined in the rules of the Securities and Exchange
Commission, as amended from time to time. The Committee shall have full author-
ity to establish regulations for the administration of the Plan and to make any
other determination it deems necessary to administer the Plan, except as
expressly provided in the Plan.
III. ELIGIBILITY FOR AWARD
Non-employee directors of the Company who are serving as directors on
the date of grant shall automatically receive options under the Plan, as pro-
vided in Section IV. In addition, the Committee shall designate key employees
(not non-employee directors) of the Company or any subsidiary of the Company to
receive options under the Plan.
IV. ALLOTMENT OF SHARES
Shares of common stock of the Company to be issued under the Plan shall
be made available, at the discretion of the Board, either from authorized but
unissued shares or from issued shares reacquired by the Company. The aggregate
number of shares of common stock that may be issued under the Plan shall not
exceed 210,000 shares. Where options are for any reason canceled, or expire or
terminate unexercised, the shares covered by such options shall again be availa-
ble for grant of options within the limits provided by the preceding sentence.
Options may be allotted to eligible employees (not non-employee directors) at
such times and in such amounts as the Committee, in its sole discretion, may
determine, provided, however, that in the case of options which are intended to
be incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the "Code"):
(i) the option holder, at the time the option is granted, shall not
own common stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, and
A-1
<PAGE>
(ii) the aggregate Fair Market Value (determined at the time the option
is granted) of the stock with respect to which the options are
exercisable for the first time by an individual during any calen-
dar year (under all such plans of the Company and any parent or
subsidiary corporations) shall not exceed $100,000.
Options to purchase 400 shares of common stock, which shall be options
that do not qualify as Incentive Stock Options ("Non-Qualified Stock Options"),
shall automatically be granted to all non-employee directors of the Company each
July 1 during the term of the Plan. However, if at any time insufficient shares
remain available for allotment to non-employee directors in accordance with the
preceding sentence, the number of options allotted to each such director shall
be reduced proportionally.
V. GRANTING OF OPTIONS
All options granted under the Plan shall be in such form as the Commit-
tee may from time to time approve. The Committee shall determine in each case
whether the options are Incentive Stock Options or Non-Qualified Stock Options;
provided, however, options granted to non-employee directors must be Non-
Qualified Stock Options. All options granted under the Plan shall be subject to
the following terms and conditions:
(a) OPTION PRICE. The option price per share with respect to each
option granted to a non-employee director shall be equal to 100% of the Fair
Market Value of the common stock at the date the option is granted. The Commit-
tee shall determine the option price per share with respect to each option
granted to an eligible employee; provided, however, the option price shall not
be less than 100% of the Fair Market Value of the common stock at the date the
option is granted.
(b) PERIOD OF OPTION. Unless a shorter period is fixed by the Commit-
tee or another provision of this Plan, each option may be exercised during a
period of ten years from the date the option was granted.
(c) PAYMENT. The option price shall be payable in cash, by tender to
the Company of shares of Company stock owned by the option holder, or by any
combination thereof. No shares shall be issued until full payment has been
made. A holder of an option shall have none of the rights of a shareholder
until the shares are issued.
(d) EXERCISE OF OPTIONS. The shares covered by an option may be pur-
chased on such installments and on such exercise dates as the Committee may
determine, provided, however, that no option shall become exercisable until at
least six months after grant unless disability of the option holder occurs
before the expiration of the six-month period. Any shares not purchased on the
applicable exercise date may be purchased thereafter at any time prior to the
final expiration of the option. In no event shall any option be exercisable
after the expiration of ten years from the date upon which the option was
granted. Each option shall become exercisable according to terms set by the
Committee at the time of grant, except as specified in Section VI (Acceleration
of Exercisability on Change of Control). The Committee may direct that an
option become exercisable in installments, which need not be annual install-
ments, over a period which may be less than the term of the option. At such
time as an installment shall become exercisable, it may be exercised at any time
thereafter in whole or in part until the expiration or termination of the
option. The
A-2
<PAGE>
Committee may, in its sole discretion, prescribe shorter or longer
time periods and additional requirements with respect to exercise of an
option.
(e) NONTRANSFERABILITY OF OPTIONS. An option granted under the Plan
may not be transferred except by will or the laws of descent and distribution
and, during the lifetime of the employee or director to whom granted, may be
exercised only by such employee or director, or his or her guardian or legal
representative.
(f) TERMINATION OF EMPLOYMENT. Upon the termination of an option
holder's employment (for any reason other than retirement, disability, death or
termination for deliberate, willful or gross misconduct), option privileges
shall be limited to the shares which were immediately purchasable at the date of
such termination and such option privileges shall expire unless exercised before
the date of such termination. If an option holder's employment is terminated
for deliberate, willful or gross misconduct, as determined by the Board, all
rights under the option shall expire upon receipt of the notice of such termina-
tion.
(g) RETIREMENT OR DISABILITY OF AN OPTION HOLDER. In the event of an
option holder's disability (within the meaning of Section 22(e)(3) of the Code)
or retirement as an employee or director, option privileges shall apply to those
shares immediately purchasable at the date of separation from service. The
Committee, in its sole discretion, may provide that any options outstanding but
not yet exercisable upon the separation of the option holder may become
exercisable in accordance with a schedule determined by the Committee; provided,
however, that in the event of retirement no options shall become exercisable
until at least six months after grant. Option privileges under Incentive Stock
Options shall expire unless exercised within three months from the date of
separation, but no later than the date on which the option terminates. Option
privileges under Non-Qualified Stock Options shall expire unless exercised
within five years from the date of separation, but no later than the date on
which the option terminates.
(h) DEATH OF OPTION HOLDER. Upon the death of an option holder,
option privileges shall apply to those shares which were immediately purchasable
at the time of death. Option privileges shall expire unless exercised by legal
representatives or beneficiaries within one year after the date of the
employee's or director's death, but no later than the date on which the option
terminates.
VI. ACCELERATION OF EXERCISABILITY ON CHANGE OF CONTROL
Upon a Change of Control of the Company, all options theretofore
granted and not previously exercisable shall become fully exercisable to the
same extent and in the same manner as if they had become exercisable by passage
of time in accordance with the provisions of the Plan relating to periods of
exercisability and to termination of employment.
A "CHANGE OF CONTROL" shall be deemed to have occurred if:
(i) any individual, entity or firm becomes the beneficial owner of 40%
or more of the outstanding common stock of the Company, provided, however, that
such an event shall not constitute a Change of Control if such shareholder has
entered into an agreement with the Company, approved by the Board, which materi-
ally restricts the right of such shareholder to direct or influence the manage-
ment or policies of the Company; or
A-3
<PAGE>
(ii) in any solicitation of proxies from the security holders of the
Company, proxies are solicited by or on behalf of a person or entity other than
the Board and, upon the conclusion of such solicitation, nominees of such person
or entity are elected to one-half or more of the then available positions on the
entire Board.
The merger or consolidation of the Company with any other entity shall
not, as such, be regarded as a Change of Control for the purposes of this Plan.
The effect of such a merger or consolidation shall be determined by the provi-
sions of this Section.
VII. FAIR MARKET VALUE
"FAIR MARKET VALUE" shall mean the value of a share of common stock on
a particular date, determined as follows: (i) if the common stock is not listed
on such date on any national securities exchange, the average between the high-
est "bid" and lowest "offered" quotations of a share on such date (or, if none,
on the most recent date on which there were bid and offered quotations of a
share), as reported by the National Association of Securities Dealers Automated
Quotation System, or other similar service selected by the Committee; (ii) if
the common stock is neither listed on such date on a national securities
exchange nor traded in the over-the-counter market, the fair market value of a
share on such date as determined in good faith by the Committee; or (iii) if the
common stock is listed on such date on one or more national securities
exchanges, the last reported sale price of a share on such date as recorded on
the composite tape system, or, if such system does not cover the common stock,
the last reported sale price of a share on such date on the principal national
securities exchange on which the common stock is listed or, if no sale of common
stock took place on such date, the last reported sale price of a share on the
most recent day on which a sale of a share took place as recorded by such system
or on such exchange, as the case may be.
VIII. ADJUSTMENT IN THE EVENT OF RECAPITALIZATION
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, rights offering, or any
other change in the corporate structure of the Company, the Committee shall make
such adjustments, if any, as are appropriate in the number and kind of shares
authorized by the Plan, in the number and kind of shares covered by the options
granted and in the option price.
IX. AMENDMENTS AND DISCONTINUANCE
The Board may discontinue the Plan at any time and may from time to
time amend or revise the terms of the Plan as permitted by applicable statutes,
except that it may not revoke or alter, in a manner unfavorable to the holders,
any options then outstanding, or amend the Plan without shareholder approval so
as to materially: (i) increase the benefits accruing to participants under the
Plan; (ii) increase the number of securities which may be issued under the Plan;
(iii) modify the requirements as to eligibility for participation in the Plan;
or (iv) increase the cost of the Plan to the Company. In addition, Plan provi-
sions relating to non-employee directors may not be amended more than once every
six months, other than to comport with changes in the Code, the Employee Retire-
ment Income Security Act of 1974 (ERISA), or the rules thereunder.
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X. COMPLIANCE WITH RULE 16b-3
With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934 (the "1934 ACT"), transactions under the Plan are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provisions of the Plan or action by the Commit-
tee fails to so comply, it shall be deemed null and void, if permitted by law
and deemed advisable by the Committee.
XI. EFFECTIVE DATE AND TERM OF THE PLAN
The 1994 Stock Option Plan shall become effective on July 1, 1994, sub-
ject to prior approval of the shareholders. No option shall be granted pursuant
to this Plan after June 30, 1999. However, options theretofore granted may
extend beyond that date in accordance with their terms and the provisions of the
Plan.
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<PAGE>
FIRST MERCHANTS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN (1994)
INTRODUCTION
The First Merchants Corporation Employee Stock Purchase Plan (the "PLAN") was
adopted by the Board of Directors (the "BOARD") of First Merchants Corporation
(the "Company") on December 14, 1993, subject to approval of the Company's
shareholders at their annual meeting on March 31, 1994. The effective date of
the Plan shall be July 1, 1994, if it is approved by the shareholders. The pur-
pose of the Plan is to provide eligible employees of the Company and its subsid-
iaries a convenient opportunity to purchase shares of common stock of the
Company through annual offerings financed by payroll deductions. The Plan may
continue until all the stock allocated to it has been purchased or until after
the fifth offering is completed, whichever is earlier. The Board may terminate
the Plan at any time, or make such amendment of the Plan as it may deem
advisable, but no amendment may be made without the approval of the Company's
shareholders if it would materially: (i) increase the benefits accruing to par-
ticipants under the Plan; (ii) modify the requirements as to eligibility for
participation in the Plan; (iii) increase the number of shares which may be
issued under the Plan, (iv) increase the cost of the Plan to the Company; or
(v) alter the allocation of Plan benefits among participating employees.
The Plan is not qualified under Section 401(a) of the Internal Revenue Code of
1986 (the "CODE") and is not subject to any provisions of the Employee Retire-
ment Income Security Act of 1974 (ERISA). It is the Company's intention to have
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Code, and the provisions of the Plan shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that Section
of the Code.
ADMINISTRATION
The Plan is administered by the Compensation Committee (the "COMMITTEE"), which
consists of three or more members of the Board, none of whom are eligible to
participate in the Plan and all of whom shall be "disinterested persons," as
such term is defined in the rules of the Securities and Exchange Commission, as
amended from time to time. The Committee shall prescribe rules and regulations
for the administration of the Plan and interpret its provisions. The Committee
may correct any defect, reconcile any inconsistency or resolve any ambiguity in
the Plan. The actions and determinations of the Committee on matters relating
to the Plan are conclusive. The Committee and its members may be addressed in
care of the Company at its principal executive office. The members of the Com-
mittee do not serve for fixed periods but may be appointed or removed at any
time by the Board.
STOCK SUBJECT TO THE PLAN
An aggregate of 112,500 shares of common stock, without par value, of the Com-
pany (the "COMMON STOCK") is available for purchase under the Plan. Shares of
Common Stock which are to be delivered under the Plan may be obtained by the
Company by authorized
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<PAGE>
purchases on the open market or from private sources, or by issuing authorized
but unissued shares of Common Stock. In the event of any change in the Common
Stock through recapitalization, merger, consolidation, stock dividend or
split, combination or exchanges of shares or otherwise, the Committee may make
such equitable adjustments in the Plan and the then outstanding offering as
it deems necessary and appropriate including, but not limited to, changing
the number of shares of Common Stock reserved under the Plan and the price
of the current offering. If the number of shares of Common Stock that
participating employees become entitled to purchase is greater than the number
of shares of Common Stock available, the available shares shall be allocated by
the Committee among such participating employees in such manner as it deems fair
and equitable. No fractional shares of Common Stock shall be issued or sold
under the Plan.
ELIGIBILITY
All employees of the Company and such of its subsidiaries as shall be designated
by the Committee will be eligible to participate in the Plan. No employee shall
be eligible to participate in the Plan if his or her customary employment is
less than 20 hours per week. No employee shall be eligible to participate in an
offering unless he or she has been continuously employed by the Company or sub-
sidiary for at least six months as of the first day of such offering. No
employee shall be eligible to participate in the Plan if, immediately after an
option is granted under the Plan, the employee owns more than five percent (5%)
of the total combined voting power or value of all classes of shares of the Com-
pany or of any parent or subsidiary of the Company.
OFFERINGS, PARTICIPATING, DEDUCTIONS
The Company may make up to five offerings of 12 months' duration each to eligi-
ble employees to purchase Common Stock under the Plan. An eligible employee may
participate in such offering by authorizing at any time prior to the first day
of such offering a payroll deduction for such purpose in whole dollar amounts,
up to a maximum of twenty percent (20%) of his or her basic salary or wages,
excluding any bonus, overtime, incentive or other similar extraordinary remuner-
ation received by such employee. The Committee may at any time suspend an
offering if required by law or if determined by the Committee to be in the best
interests of the Company.
The Company will maintain or cause to be maintained payroll deduction accounts
for all participating employees. All funds received or held by the Company or
its subsidiaries under the Plan may be, but need not be, segregated from other
corporate funds. Payroll deduction accounts will be credited with interest at
such rates and intervals as the Committee shall determine from time to time.
Any balance remaining in any employee's payroll deduction account at the end of
an offering period will be refunded to the employee.
Each participating employee will receive a statement of his or her payroll
deduction account and the number of shares of Common Stock purchased therewith
following the end of each offering period.
Subject to rules, procedures and forms adopted by the Committee, a participating
employee may at any time during the offering period increase, decrease or sus-
pend his or her payroll deduction, or may withdraw the entire balance of his or
her payroll deduction
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<PAGE>
account and thereby withdraw from participation in an offering. Under the
initial rules established by the Committee, payroll deductions may not be
altered more than once in each offering period and withdrawal requests may
be received on or before the last day of such offering. In the event of
a participating employee's retirement, death or termination of employment,
his or her participation in any offering under the Plan shall cease,
no further amounts shall be deducted pursuant to the Plan, and the balance in
the employee's account shall be paid to the employee, or, in the event of the
employee's death, to the employee's beneficiary designated on a form approved by
the Committee (or, if the employee has not designated a beneficiary, to his or
her estate).
PURCHASE, LIMITATIONS, PRICE
Each employee participating in any offering under the Plan will be granted an
option, upon the effective date of such offering, for as many full shares of
Common Stock as the amount of his or her payroll deduction account at the end of
any offering period can purchase. No employee may be granted an option under
the Plan which permits his or her rights to purchase Common Stock under the
Plan, and any other stock purchase plan of the Company or a parent or subsidiary
of the Company qualified under Section 423 of the Code, to accrue at a rate
which exceeds $25,000 of the fair market value of such Common Stock (determined
at the effective date of the offering) for each calendar year in which the
option is outstanding at any time. As of the last day of the offering period,
the payroll deduction account of each participating employee shall be totaled.
If such account contains sufficient funds to purchase one or more full shares of
Common Stock as of that date, the employee shall be deemed to have exercised an
option to purchase the largest number of full shares of Common Stock at the
offering price. Such employee's account will be charged for the amount of the
purchase and a stock certificate representing such shares will be issued.
The Committee shall determine the purchase price of the shares of Common Stock
which are to be sold under each offering, which price shall be the lesser of
(i) an amount equal to 85 percent of the Fair Market Value of the Common Stock
at the time such option is granted, or (ii) an amount equal to 85 percent of the
Fair Market Value of the Common Stock at the time such option is exercised.
Fair Market Value of a share of Common Stock on a given date is defined as the
average price between the highest "bid" and lowest "offered" quotations of a
share on such date (or, if none, on the most recent date on which there were bid
and offered quotations of a share), as reported by the National Association of
Securities Dealers Automated Quotation System, or other similar service selected
by the Committee. However, if the Common Stock is listed on a national securi-
ties exchange, Fair Market Value is defined as the last reported sale price of a
share on such date, or if no sale took place, the last reported sale price of a
share of stock on the most recent day on which a sale of a share of stock took
place as recorded on such exchange. If the Common Stock is neither listed on
such date on a national securities exchange nor traded in the over-the-counter
market, Fair Market Value is defined as the fair market value of a share on such
date as determined in good faith by the Committee.
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<PAGE>
TRANSFER OF INTERESTS, STOCK CERTIFICATES
No option, right or benefit under the Plan may be transferred by a participating
employee other than by will or the laws of descent and distribution, and all
options, rights and benefits under the Plan may be exercised during the partici-
pating employee's lifetime only by such employee or the employee's guardian or
legal representative. There are no restrictions imposed by or under the Plan
upon the resale of shares of Common Stock issued under the Plan.
Certain officers of the Company are subject to restrictions under Section 16(b)
of the Securities Exchange Act of 1934 (the "1934 ACT"). With respect to such
officers, transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void if permitted by law and deemed advisable by the
Committee.
Certificates for Common Stock purchased under the Plan may be registered only in
the name of the participating employee, or, if such employee so indicates on his
or her authorization form, in his or her name jointly with a member of his or
her family, with right of survivorship. An employee who is a resident of a
jurisdiction which does not recognize such a joint tenancy may have certificates
registered in the employee's name as tenant in common with a member of the
employee's family, without right of survivorship.
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<PAGE>
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF FIRST MERCHANTS CORPORATION
MUNCIE, INDIANA
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement dated February 22, 1994, and appoints Clell W.
Douglass, Hamer D. Shafer and Reed D. Voran and each of them, proxies with power
of substitution, to represent and to vote all shares of common stock of First
Merchants Corporation which the undersigned would be entitled to vote at the
Annual Meeting of Shareholders of First Merchants Corporation to be held on
March 31, 1994, at 3:30 p.m. at the Horizon Convention Center, 401 South High
Street, Muncie, Indiana 47305, and at any adjournment thereof, with all of the
powers the undersigned would possess if personally present. If any of the
nominees for election as directors are unable to serve for any reason, the per-
sons listed above have the authority to vote as directed for any substitute
nominee.
Dated: ___________________, 1994.
(Please sign exactly as your name appears
hereon)
__________________________________________
(Signature of Shareholder)
__________________________________________
(Signature of Shareholder)
(Joint owners should each sign personally.
Trustees and others signing in a
representative capacity should indicate
the capacity in which they sign.)
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE.
(See reverse side for important information)
<PAGE>
(CONTINUED FROM OTHER SIDE)
___ ___
I do |__| do not |__| plan to attend the Annual Meeting. Number attending: ____
THE BOARD OF DIRECTORS AND MANAGEMENT OF FIRST MERCHANTS CORPORATION RECOMMEND A
VOTE "FOR" THE PROPOSALS LISTED.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' AND MANAGEMENT'S RECOMMENDA-
TIONS, JUST SIGN THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
___ ___
1. Election of Directors: |__|FOR all nominees listed |__|WITHHOLD VOTE
below (except as withheld (do not vote
space below) for any of the
nominees listed
below)
Nelson W. Heinrichs, Joseph E. Wilson, Robert F. Wisehart.
(Instruction: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
_______________________________________________________________
2. Proposal to approve the First Merchants Corporation 1994 Stock Option Plan
described in the Proxy Statement dated February 22, 1994.
___ ___ ___
FOR |__| AGAINST |__| ABSTAIN |__|
3. Proposal to approve the First Merchants Corporation Employee Stock Purchase
Plan (1994) described in the Proxy Statement Dated February 22, 1994.
___ ___ ___
FOR |__| AGAINST |__| ABSTAIN |__|
4. Ratification of the appointment of the firm of Geo. S. Olive & Co. as
independent public accountants for 1994.
___ ___ ___
FOR |__| AGAINST |__| ABSTAIN |__|
5. In their discretion, the proxies are authorized to vote on such other
matters as may properly come before the meeting.
This proxy will be voted as directed, but if not otherwise directed this Proxy
will be voted "FOR" approval of the matters described in Items 1, 2, 3, and 4
above.
