SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1995       Commission file number 0-17071

                           FIRST MERCHANTS CORPORATION
             (Exact name of registrant as specified in its charter)

               Indiana                                    35-1544218
(State or other jurisdiction of                   (I.R.S. Employer
incorporation or organization)                    Identification No.)

           200 East Jackson
           Muncie, Indiana                             47305-2814
(Address of principal executive offices)               (Zip Code)

     Registrant's telephone number, including area code:  (317) 747-1500

     Securities registered pursuant to Section 12(b) of the Act:  None

          Securities registered pursuant to Section 12(g) of the Act:

               Common Stock, $.125 stated value per share
                                (Title of Class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    Yes [X]    No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     The aggregate market value (not necessarily a reliable indication of the
price at which more than a limited number of shares would trade) of the voting
stock held by non-affiliates of the registrant was $117,223,514 as of March 5,
1996.

     As of March 5, 1996 there were outstanding 5,057,632 common shares, without
par value, of the registrant.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                             Part of Form 10-K
          Documents                        Into Which Incorporated
          ---------                        -----------------------

1995 Annual Report to Stockholders           Part II (Items 5 through 8)
Definitive Proxy Statement for
  Annual Meeting of Shareholders
  to be held April 4, 1996                   Part III (Items 10 through 13)

EXHIBIT INDEX:  Page 26                                Total Pages 157

FORM 10-K TABLE OF CONTENTS
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                                                                     Page

Part I

     Item 1  - Business . . . . . . . . . . . . . . . . . . . . . . .   3

     Item 2  - Properties . . . . . . . . . . . . . . . . . . . . . .  18

     Item 3  - Legal Proceedings. . . . . . . . . . . . . . . . . . .  18

     Item 4  - Submission of Matters to a Vote of Security Holders. .  18

     Supplemental Information - Executive Officers of the Registrant.  19

Part II

     Item 5  - Market For the Registrant's Common Equity and
               Related Stockholder Matters. . . . . . . . . . . . . .  20

     Item 6  - Selected Financial Data. . . . . . . . . . . . . . . .  20

     Item 7  - Management's Discussion and Analysis of Financial
               Condition and Results of Operations. . . . . . . . . .  20

     Item 8  - Financial Statements and Supplementary Data. . . . . .  20

     Item 9  - Changes In and Disagreements With Accountants on
               Accounting and Financial Disclosures . . . . . . . . .  20

Part III

     Item 10  - Directors and Executive Officers of the Registrant. .  21

     Item 11  - Executive Compensation  . . . . . . . . . . . . . . .  21

     Item 12  - Security Ownership of Certain Beneficial
                Owners and Management . . . . . . . . . . . . . . . .  21

     Item 13  - Certain Relationships and Related Transactions  . . .  21

Part IV

     Item 14  - Exhibits, Financial Statement Schedules, and
                Reports on Form 8-K. . . . . . . . . . . . . . . . .   22

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   24

Index to Exhibits  . . . . . . . . . . . . . . . . . . . . . . . . .   26

                                                                          Page 2

                                     PART I

ITEM 1. BUSINESS.
- --------------------------------------------------------------------------------

GENERAL

First Merchants Corporation (the "Corporation") was incorporated under Indiana
law on September 20, 1982, as the bank holding company for First Merchants Bank,
National Association ("First Merchants"), a national banking association
incorporated on February 6, 1893.  Prior to December 16, 1991, First Merchants'
name was The Merchants National Bank of Muncie.  On November 30, 1988, the
Corporation acquired Pendleton Banking Company ("Pendleton"), a state chartered
commercial bank organized in 1872.  On July 31, 1991, the Corporation acquired
First United Bank ("First United"), a state chartered commercial bank organized
in 1882.

As of December 31, 1995, the Corporation had consolidated assets of $707.9
million, consolidated deposits of $588.2 million and stockholders' equity of
$80.5 million.

The Corporation is headquartered in Muncie, Indiana, and is presently engaged in
conducting commercial banking business through the 21 offices of its three
banking subsidiaries.  As of December 31, 1995, the Corporation and its
subsidiaries had 379 full-time equivalent employees.

Through its subsidiaries, the Corporation offers a broad range of financial
services, including: accepting time and transaction deposits; making consumer,
commercial, agri-business and real estate mortgage loans; issuing credit cards;
renting safe deposit facilities; providing personal and corporate trust
services; and providing other corporate services, letters of credit and
repurchase agreements.

ACQUISITION POLICY AND PENDING TRANSACTIONS

The Corporation anticipates that it will continue its policy of geographic
expansion through consideration of acquisitions of additional financial
institutions.  Management of the Corporation periodically engages in reviewing
and analyzing potential acquisitions.  The Corporation is a party to a
definitive agreement to merge with Union National Bancorp and thereby acquire
its wholly-owned subsidiary, The Union County National Bank of Liberty.  Union
National Bancorp's principal executive offices are located in Liberty, Indiana.
The Corporation is also a party to a definitive agreement to merge with Randolph
County Bancorp and thereby acquire its wholly-owned subsidiary, The Randolph
County Bank.  Randolph County Bancorp's principal executive offices are located
in Winchester, Indiana.

COMPETITION

The Corporation's banking subsidiaries are located in Delaware, Madison, and
Henry counties, Indiana.  In addition to the competition provided by the lending
and deposit gathering subsidiaries of national manufacturers, retailers,
insurance companies and investment brokers, the banking subsidiaries compete
vigorously with other banks, thrift institutions, credit unions and finance
companies located within their service areas.

SUPERVISION AND REGULATION

The Corporation is a bank holding company ("BHC") subject to regulation under
the Bank Holding Company Act of 1956, as amended (the "Act").  The Act generally
requires a BHC to obtain prior approval of the Federal Reserve Board (the "FRB")
to acquire or hold more than a 5% voting interest in any bank.  The Act
restricts the non-banking activities of BHCs to those which are closely related
to banking activities.  As a result of the provisions in the Financial
Institutional Reform, Recovery and Enforcement Act of 1989, BHCs may now own and
operate savings and loan

                                                                          Page 3

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SUPERVISION AND REGULATION (CONTINUED)

associations or savings banks which, in the past, was prohibited.  First
Merchants is a national bank and is supervised, regulated and examined by the
Comptroller of the Currency.  Pendleton and First United are state banks and are
supervised, regulated and examined by the Indiana Department of Financial
Institutions (the "DFI").  In addition, First Merchants, as a member of the
Federal Reserve System, is supervised and regulated by the Federal Reserve.  In
addition, Pendleton and First United, which are not members of the Federal
Reserve System, are supervised and regulated by the Federal Deposit Insurance
Corporation ("FDIC").  The deposits of First Merchants, Pendleton, and First
United (the "Banks") are insured by the FDIC.  Each regulator has the authority
to issue cease-and-desist orders if it determines their activities represent an
unsafe and unsound practice or violation of law.

Under the Act and under regulations of the FRB, the Corporation and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit and are subject to limitations as to
certain intercompany transactions.

Subject to certain limitations, an Indiana bank may establish branches de novo
and may establish branches by acquisition in any location or locations within
Indiana.  Indiana law permits intrastate bank holding company acquisitions,
subject to certain limitations.  Effective July 1, 1992, Indiana bank holding
companies were permitted to acquire banks, and banks and bank holding companies
in Indiana were permitted to be acquired by bank holding companies, located in
any state in the United States which permits reciprocal entry by Indiana bank
holding companies.  Prior to July 1, 1992, such interestate bank holding company
acquisitions were permitted only on a regional, as opposed to national, basis.
Neither the Corporation nor its subsidiaries presently contemplate engaging in
any non-banking related business activities.

During 1991, Congress passed the Federal Deposit Insurance Corporation
Improvement Act ("FDICIA").  In addition to addressing the insurance fund's
financial needs, FDICIA expanded the power of the federal banking regulators.
FDICIA introduced a new system of classifying financial institutions with
respect to their capitalization.  Effective in 1993, FDICIA also requires
certain financial institutions, such as First Merchants, to have annual audits
and requires management to issue supplemental reports attesting to an
institution's compliance with laws and regulations and to the adequacy of its
internal controls and procedures.

The Riegle Community Development and Regulatory Improvement Act of 1994 (Act)
was signed into law in 1994.  The Act contains seven titles pertaining to
community development and home ownership protection, small business capital
formation, paperwork reduction and regulatory improvement, money laundering and
flood insurance.  The Act grants the authority to several agencies to promulgate
regulations under the Act.  No regulations have yet been promulgated.  The
Corporation cannot predict with certainty the impact of the Act on the banking
industry.

In September, 1994, the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (Interstate Act) was enacted into law.  The Interstate Act
authorized interstate acquisitions, mergers and bank branching and agency
banking with affiliates in different states.  The Interstate Act amends the Bank
Holding Company Act to allow adequately capitalized and managed bank holding
companies to acquire a bank located in another state beginning in September,
1995.  The new act permits full interstate branching after June 1, 1997.  After
that date, BHCs may merge

                                                                          Page 4

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SUPERVISION AND REGULATION (CONTINUED)

existing bank subsidiaries into one bank, with banks also permitted to merge
unaffiliated banks across state lines.  States may permit interstate branching
earlier than June 1, 1997, where both states involved with a bank merger
expressly permit it by statute.  The Interstate Act permits states to enact a
law expressly prohibiting interstate mergers.  Such laws must apply equally to
all out-of-state banks and be passed before June 1, 1997.

The monetary policies of regulatory authorities, including the Federal Reserve
Board, have a significant effect on the operating results of banks and bank
holding companies.  The nature of future monetary policies and the effect of
such policies on the future business and earnings of the Corporation and its
subsidiary banks cannot be predicted.

The Corporation is under the jurisdiction of the Securities and Exchange
Commission and state securities commission for matters relating to the offering
and sale of its securities and is subject to the Securities and Exchange
Commission's rules and regulations relating to periodic reporting, reporting to
stockholders, proxy solicitation, and insider trading.

The Corporation's income is principally derived from dividends paid on the
common stock of its subsidiaries.  The payment of these dividends are subject to
certain regulatory restrictions.

CAPITAL REQUIREMENTS

The Corporation and its subsidiary banks must meet certain minimum capital
requirements mandated by the FRB, the FDIC and DFI.  These regulatory agencies
require BHCs and banks to maintain certain minimum ratios of primary capital to
total assets and total capital to total assets.  As of January 1, 1991, the FRB
required bank holding companies to maintain a minimum Tier 1 leverage ratio to 3
per cent capital to total assets; however, for all but the most highly rated
institutions which do not anticipate significant growth, the minimum Tier 1
ratio is 3 per cent plus an additional cushion of 100 to 200 basis points.  As
of December 31, 1995, the Corporation's leverage ratio of capital to total
assets was 11.13 per cent.

The FRB and FDIC each have approved the imposition of "risk-adjusted" capital
ratios on BHCs and financial institutions.  The Corporation and its subsidiaries
had capital to assets ratios and risk-adjusted capital ratios at December 31,
1995, in excess of the applicable regulatory minimum requirements.

The following table summarizes the Corporation's risk-adjusted capital ratios
under FRB guidelines at December 31, 1995:

                                                Corporation's   Regulatory
                                                Consolidated      Minimum
                                                    Ratio       Requirement
                                                    -----       -----------
                                                          
Tier 1 Capital to Risk-Weighted
  Assets Ratio . . . . . . . . . . . . . . . .      16.99%        4.00%

Total Capital to Risk-Weighted
  Assets Ratio . . . . . . . . . . . . . . . .      18.07%        8.00%

                                                                          Page 5

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STATISTICAL DATA
The following tables set forth statistical data relating the Corporation and its
subsidiaries.

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY;
  INTEREST RATES AND INTEREST DIFFERENTIAL

The daily average balance sheet amounts, the related interest income or expense,
and average rates earned or paid are presented in the following table.

                                                             1995                       1994                       1993
                                                 ---------------------------  -------------------------  --------------------------
                                                           Interest                   Interest                   Interest
                                                 Average    Income/  Average  Average  Income/  Average  Average  Income/  Average
                                                 Balance    Expense   Rate    Balance  Expense   Rate    Balance  Expense   Rate
                                                 -------    -------   ----    -------  -------   ----    -------  -------   ----
                                                              (Dollars in Thousands on Fully Taxable Equivalent Basis)
                                                                                                
Assets:
 Federal funds sold . . . . . . . . . . . . .     $ 16,426   $   907   5.5% $  4,808   $    217   4.5%  $ 15,653   $   454     2.9%
 Interest-bearing time deposits . . . . . . .           87         4   4.6        35          2   5.7        648        35     5.4
 Federal Reserve and
 Federal Home Loan Bank stock   . . . . . . .        1,888       149   7.9     1,879        103   5.5        522        29     5.6
 Securities:
  Taxable  . . . . . . . . . . . . . . . . . .     146,140     8,624   5.9   149,063      8,552   5.7    163,006    10,265     6.3
  Tax-exempt . . . . . . . . . . . . . . . . .      51,303     3,807   7.4    52,678      3,690   7.0     50,152     3,631     7.2
                                                   ------- ---------        --------   --------          -------   -------
   Total Securities . . . . . . . . . . . . .      197,443    12,431   6.3   201,741     12,242   6.1    213,158    13,896     6.5
 Mortgage loans held for sale  . . . . . . . .         281        22   7.8
 Loans:*
  Commercial . . . . . . . . . . . . . . . . .     169,608    16,339   9.6   156,465     12,861   8.2    148,657    10,919     7.3
  Bankers' acceptance and commercial paper
   purchased   . . . . . . . . . . . . . . . .       2,590       149   5.8       454         22   4.8        112         4     3.6
 Real estate mortgage. . . . . . . . . . . . .     150,933    13,062   8.7   143,568     11,711   8.2    132,932    11,364     8.5
 Installment . . . . . . . . . . . . . . . . .      89,692     8,179   9.1    86,824      7,128   8.2     73,226     6,418     8.8
 Tax-exempt loans. . . . . . . . . . . . . . .         836        86  10.3     1,328        127   9.6      2,101       185     8.8
                                                   ------- ---------        --------   --------          -------   -------
    Total loans . . . . . . . . . . . . . . .      413,659    37,815   9.1   388,639     31,849   8.2    357,028    28,890     8.1
                                                   ------- ---------        --------   --------          -------   -------
    Total earning assets. . . . . . . . . . .      629,784    51,328   8.2   597,102     44,413   7.4    587,009    43,304     7.4
                                                           ---------                   --------                    -------
 Net unrealized loss on securities
   available for sale  . . . . . . . . . . . .     ( 1,462)                   (1,387)
 Allowance for loan losses . . . . . . . . . .     ( 5,074)                   (4,936)                     (4,584)
 Cash and due from banks . . . . . . . . . . .      22,049                    23,316                      23,373
 Premises and equipment  . . . . . . . . . . .       9,957                     9,318                       8,634
 Other assets  . . . . . . . . . . . . . . . .      10,093                    11,455                      11,966
                                                  --------                  --------                    --------
    Total assets  . . . . . . . . . . . . . .     $665,347                  $634,868                    $626,398
                                                  --------                  --------                    --------
                                                  --------                  --------                    --------
Liabilities:
 Interest-bearing deposits:
   NOW accounts . . . . . . . . . . . . . . .     $ 85,532     1,931   2.3  $ 85,973      1,786   2.1   $ 79,106     1,811     2.3
   Money market deposit accounts. . . . . . .       94,710     3,675   3.9   105,083      3,101   3.0    111,136     3,112     2.8
   Savings deposits . . . . . . . . . . . . .       53,202     1,434   2.7    55,755      1,429   2.6     51,697     1,414     2.7
   Certificates and other time deposits . . .      230,659    12,525   5.4   195,475      7,978   4.1    206,833     9,094     4.4
                                                  --------   -------        --------    -------         --------    ------
    Total interest-bearing deposits . . . . .      464,103    19,565   4.2   442,286     14,294   3.2    448,772    15,431     3.4
 Short-term borrowings  . . . . . . . . . . .       44,799     2,490   5.6    45,639      1,837   4.0     35,317     1,067     3.0
 Federal Home Loan Bank advance . . . . . . .          515        28   5.4
                                                  --------   -------        --------    -------         --------    ------
    Total interest-bearing liabilities. . . .      509,417    22,083   4.3   487,925     16,131   3.3    484,089    16,498     3.4
 Noninterest-bearing deposits . . . . . . . .       74,436                    71,743                      69,054
 Other liabilities  . . . . . . . . . . . . .        5,493                     5,096                       6,368
                                                  --------                  --------                    --------
    Total liabilities . . . . . . . . . . . .      589,346                   564,764                     559,511
 Stockholders' equity . . . . . . . . . . . .       76,001                    70,104                      66,887
                                                  --------                  --------                    --------
    Total liabilities and stockholders' equity    $665,347    22,083   3.5**$634,868     16,131   2.7** $626,398    16,498     2.8**
                                                  --------    ------        --------    -------         --------    ------
                                                  --------                  --------                    --------
    Net interest income . . . . . . . . . . .               $ 29,245   4.6             $ 28,282   4.7              $26,806     4.6
                                                            --------                   --------                    -------
                                                            --------                   --------                    -------
   *Nonaccruing loans have been included in the average balances.
  **Total interest expense divided by total earning assets
Adjustment to convert tax exempt investment
securities to fully taxable equivalent basis,
using marginal rate of 35% for 1995 and 34%
for 1994 and 1993 ..................                        $  1,364                   $  1,299                    $ 1,298
                                                            --------                   --------                    -------
                                                            --------                   --------                    -------

                                                                          Page 6

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STATISTICAL DATA (Continued)

ANALYSIS OF CHANGES IN NET INTEREST INCOME

The following table presents net interest income components on a tax-equivalent
basis and reflects changes between periods attributable to movement in either
the average balance or average interest rate for both earning assets and
interest-bearing liabilities.  The volume differences were computed as the
difference in volume between the current and prior year times the interest rate
of the prior year, while the interest rate changes were computed as the
difference in rate between the current and prior year times the volume of the
prior year.  Volume/rate variances have been allocated on the basis of the
absolute relationship between volume variances and rate variances.

                                                       1995 Compared to 1994                         1994 Compared to 1993
                                                    Increase (Decrease) Due To                     Increase (Decrease) Due To
                                                 ---------------------------------                 --------------------------
                                                 Volume           Rate       Total             Volume          Rate           Total
                                                 ------           ----       -----             ------          ----           -----
                                                                   (Dollars in Thousands on Fully Taxable Equivalent Basis)
                                                                                                          
Interest income:
 Federal funds sold . . . . . . .                $  632        $    58        $   690         $ (411)        $  174         $ (237)
 Interest-bearing time
  deposits. . . . . . . . . . . .                     2                             2            (35)             2            (33)
 Federal Reserve and Federal
  Home Loan Bank stock. . . . . .                                   46             46             75             (1)           (74)
 Securities . . . . . . . . . . .                  (243)           432            189           (769)          (885)        (1,654)
 Mortgage loans held for sale . .                    22                            22
 Loans. . . . . . . . . . . . . .                 2,206          3,760          5,966          2,597            362          2,959
                                                 -------        -------        -------        -------        -------        -------
  Totals. . . . . . . . . . . . .                 2,619          4,296          6,915          1,457           (348)         1,109
                                                 -------        -------        -------        -------        -------        -------
Interest expense:
 NOW accounts . . . . . . . . . .                 (  10)           155            145            145           (170)           (25)
 Money market deposit
  accounts. . . . . . . . . . . .                 ( 326)           900            574           (197)           186            (11)
 Savings deposits . . . . . . . .                 (  58)            63              5             81            (66)            15
 Certificates and other
  time deposits . . . . . . . . .                 1,647          2,900          4,547           (498)          (618)        (1,116)
 Short-term borrowings. . . . . .                 (  36)           689            653            360            410            770
 Federal Home Loan Bank advance .                    28                            28
                                                 -------        -------        -------        -------        -------        -------
  Totals. . . . . . . . . . . . .                 1,245          4,707          5,952           (109)          (258)          (367)
                                                 -------        -------        -------        -------        -------        -------

Change in net interest
 income (fully taxable
 equivalent basis). . . . . . . .                $1,374         $ (411)           963         $1,566         $  (90)         1,476
                                                 -------        -------                       -------        -------
                                                 -------        -------                       -------        -------
Tax equivalent adjustment
 using marginal rate
 of 35% for 1995 and 34% for
 1994 and 1993. . . . . . . . . .                                                ( 65)                                          (1)
                                                                               -------                                      -------

Change in net interest
 income . . . . . . . . . . . . .                                              $  898                                       $1,475
                                                                               -------                                      -------
                                                                               -------                                      -------

                                                                        Page 7

STATISTICAL DATA (Continued)

INVESTMENT SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and 
approximate market value of the investment securities at the dates 
indicated were:

                                                         Gross        Gross
                                         Amortized    Unrealized    Unrealized     Fair
                                            Cost         Gains        Losses       Value
                                        -----------  ------------  ------------  ----------
                                          (Dollars in Thousands)
                                                                    
Available for sale at December 31, 1995:
 U.S. Treasury. . . . . . . . . . . .     $   4,531    $      26    $       3    $   4,554
 Federal agencies . . . . . . . . . .        67,518        1,299           72       68,745
 State and municipal. . . . . . . . .        18,769          398           37       19,130
 Mortgage and other
  asset-backed securities. . . . . . .       24,023          210          121       24,112
 Corporate obligations. . . . . . . .        26,120          264           55       26,329
 Marketable equity securities . . . .           250                                    250
                                        -----------  ------------  ------------  ----------
   Total available for sale . . . . . .     141,211        2,197          288      143,120

Held to maturity at December 31, 1995:
 U.S. Treasury. . . . . . . . . . . .         3,103            8            2        3,109
 Federal agencies . . . . . . . . . .        11,645           69           21       11,693
 State and municipal. . . . . . . . .        40,013          483           57       40,439
 Mortgage and other
  asset-backed securities. . . . . . .        2,953            8            1        2,961
 Corporate obligations. . . . . . . .           500                                    499
                                        -----------  ------------  ------------  ----------
  Total held to maturity . . . . . . .       58,214          568           81       58,701
                                        -----------  ------------  ------------  ----------
  Total investment securities. . . . .    $ 199,425     $  2,765    $     369    $ 201,821
                                        -----------  ------------  ------------  ----------
                                        -----------  ------------  ------------  ----------

Available for sale at December 31, 1994:
 U.S. Treasury. . . . . . . . . . . .     $  11,817                 $     550    $  11,267
 Federal agencies . . . . . . . . . .        35,565                     1,271       34,294
 State and municipal. . . . . . . . .         9,762     $     31          385        9,408
 Mortgage and other
  asset-backed securities. . . . . . .       22,171           29          836       21,364
 Corporate obligations. . . . . . . .        24,221            4        1,195       23,030
                                        -----------  ------------  ------------  ----------
   Total available for sale . . . . .       103,536           64        4,237       99,363

Held to maturity at December 31, 1994:
 U.S. Treasury. . . . . . . . . . . .        12,630           21          222       12,429
 Federal agencies . . . . . . . . . .        24,529           29          469       24,089
 State and municipal. . . . . . . . .        38,117          211          680       37,648
 Mortgage and other
  asset-backed securities. . . . . . .          370                                    370
 Corporate obligations. . . . . . . .         2,031                        45        1,986
                                        -----------  ------------  ------------  ----------
  Total held to maturity . . . . . . .       77,677          261        1,416       76,522
                                        -----------  ------------  ------------  ----------
  Total investment securities. . . . .    $ 181,213     $    325     $  5,653    $ 175,885
                                        -----------  ------------  ------------  ----------
                                        -----------  ------------  ------------  ----------

                                                                          Page 8

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STATISTICAL DATA (Continued)

                                                            Gross        Gross   
                                          Amortized      Unrealized    Unrealized      Fair
                                             Cost           Gains        Losses       Value
                                          ----------     -----------   ----------   ---------
                                                                        
Held to maturity at December 31, 1993:
  U.S. Treasury. . . . . . . . . . . .    $  45,397      $    654       $      1    $  46,050
  Federal agencies . . . . . . . . . .       53,452           691             62       54,081
  State and municipal. . . . . . . . .       44,866         1,211             55       46,022
  Mortgage and other
    asset-backed securities. . . . . .       23,690           219             93       23,816
  Corporate obligations. . . . . . . .       36,958           582             87       37,453
                                          ---------      --------      ---------    ---------
     Total investment securities. . .     $ 204,363      $  3,357      $     298    $ 207,422
                                          ---------      --------      ---------    ---------
                                          ---------      --------      ---------    ---------

                                                         Cost
                                       ----------------------------------------
                                           1995          1994           1993
                                       -----------    ----------   ------------
                                                          
Federal Reserve and Federal Home Loan  
Bank stock at December 31:
  Federal Reserve Bank stock . . . . . $     307      $     307      $     307
  Federal Home Loan Bank stock . . . .     1,585          1,572          1,572
                                       ---------      ---------      ---------

      Total. . . . . . . . . . . . . . $   1,892      $   1,879      $   1,879
                                       ---------      ---------      ---------
                                       ---------      ---------      ---------

The Fair Value of Federal Reserve and Federal Home Loan Bank stock 
approximates cost.

The maturity distribution (dollars in thousands) and average yields for the 
securities portfolio at December 31, 1995 were:

Securities available for sale December 31, 1995:

                                       Within 1 Year              1-5 Years               5 - 10 Years
                                   ---------------------    ---------------------     ------------------
                                     Amount       Yield*      Amount      Yield*       Amount     Yield*
                                   ---------     -------    ---------    --------     --------    ------
                                                                                
U.S. Treasury. . . . . . . . . .    $  1,519       5.37%     $ 3,035       5.69% 
Federal Agencies . . . . . . . .      17,194       6.26       50,452       6.37        $ 1,099     8.12%
State and Municipal. . . . . . .                              11,891       7.29          7,239     7.76
Corporate Obligations. . . . . .       5,923       5.12       18,826       5.89          1,580     6.93
Marketable Equity Security . . .         250
Mortgage and other 
 asset-backed  . . . . . . . . .
                                    --------                --------                   -------     
   Total . . . . . . . . . . . .    $ 24,886       5.87     $ 84,204       6.37        $ 9,918     7.67   
                                    --------                --------                   -------     
                                    --------                --------                   -------     

                                                                   Mortgage and other     
                                  Due After Ten Years               asset-backed             Total
                                  -------------------               ------------             -----
                                      Amount        Yield*     Amount        Yield*     Amount        Yield*
                                      ------        -----      ------        -----      ------        ------
U.S. Treasury. . . . . . . . . .                                                        $  4,554      5.59%
Federal Agencies . . . . . . . .                                                          68,745      6.37
State and Municipal. . . . . . .                                                          19,130      7.46
Corporate Obligations. . . . . .                                                          26,329      5.78
Marketable Equity Security . . .                                                             250
Mortgage and other
 asset-backed. . . . . . . . . .                              $ 24,112       6.12%        24,112      6.12
                                                              --------                  --------
                                                              --------                  --------
   Total . . . . . . . . . . . .                              $ 24,112       6.12       $143,120      6.34
                                                              --------                  --------
                                                              --------                  --------

                                                                          Page 9

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

STATISTICAL DATA (Continued)
                
Securities held to maturity at December 31, 1995:

                                       Within 1 Year              1-5 Years               5 - 10 Years
                                   ---------------------    ---------------------     ------------------
                                     Amount       Yield*      Amount      Yield*       Amount     Yield*
                                   ---------     -------    ---------    --------     --------    ------
                                                                                
U.S. Treasury. . . . . . .          $ 3,103        5.87%
Federal Agencies . . . . .            6,898        6.13      $ 4,747        6.00%
State and Municipal. . . .            8,692        7.44       27,835        7.02       $ 2,866     8.27%
Corporate Obligations. . .              500        4.45
Mortgage and other           
  asset-backed . . . . . .          -------                  -------
   Total . . . . . . . . .          $19,193        6.64      $32,582        6.87       $ 2,866     8.27
                                    -------                  -------                   -------
                                    -------                  -------                   -------

                                                                Mortgage and other
                                      Due After Ten Years         asset-backed               Total
                                      -------------------         ------------        ------------------
                                      Amount        Yield*     Amount        Yield*    Amount     Yield*
                                      ------        -----      ------        -----    --------    ------
                                                                                
U.S. Treasury. . . . . . .                                                             $ 3,103     5.87%
Federal Agencies . . . . .                                                              11,645     6.08
State and Municipal. . . .           $  620          8.95%                              40,013     7.23
Corporate Obligations. . .                                                                 500     4.45
Mortgage and other
 asset-backed . . . . . .                                     $ 2,953         6.85%      2,953     6.85
                                     -------                  -------                  -------
                                     -------                  -------                  -------
    Total  . . . . . . . .           $   620         8.95     $ 2,953         6.85     $58,214     6.88
                                     -------                  -------                  -------
                                     -------                  -------                  -------

   *Interest yields on state and municipal securities are presented on a fully
   taxable equivalent basis using a 35% rate.  

Federal Reserve and Federal Home Loan Bank stock at December 31, 1995:

                                                      Amount        Yield
                                                      ------        -----
                                                             
Federal Reserve Bank stock. . . . . . .             $   307         6.00%
Federal Home Loan Bank stock. . . . . .               1,585         8.00
                                                    -------
  Total . . . . . . . . . . . . . . . .             $ 1,892         7.68
                                                    -------
                                                    -------

                                                                         Page 10

STATISTICAL DATA (Continued)

LOAN PORTFOLIO

Types of Loans
- --------------

The loan portfolio at the dates indicated is presented below:

                                       1995         1994        1993        1992        1991
                                      ------       ------      ------      ------      ------
                                                    (Dollars in Thousands)

Loans at December 31:

  Commercial and 
    industrial loans.. . . . . . . . $ 85,690     $ 78,943    $ 76,760     $ 70,959    $ 76,245
  Bankers acceptances and loans
    to financial institutions. . . .    2,925                    3,000        9,496       2,092
  Agricultural production 
    financing and other loans
    to farmers.. . . . . . . . . . .    5,796        5,310       5,591        6,240       6,887
  Real estate loans:
    Construction.. . . . . . . . . .    9,913        8,126       8,127        2,619       3,191
    Commercial and farmland. . . . .   66,749       64,110      58,235       52,402      51,323
    Residential. . . . . . . . . . .  166,414      164,760     150,572      140,526     120,281
  Individuals' loans for
    household and other
    personal expenditures. . . . . .   79,993       78,041      70,347       60,625      58,000
  Tax-exempt loans . . . . . . . . .      863        1,204       1,474        2,402       2,309
  Other loans. . . . . . . . . . . .      651        1,111       2,766        5,039       3,054
                                     --------     --------    --------     --------    --------
     Total loans . . . . . . . . . . $418,994     $401,605    $376,872     $350,308    $323,382
                                     --------     --------    --------     --------    --------
                                     --------     --------    --------     --------    --------

At December 31, 1995, the Corporation had Residential Real Estate Loans Held
for Sale of $735,522.

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES

Presented in the table below are the maturities of loans (excluding commercial
real estate, farmland, residential real estate and individuals' loans)
outstanding as of December 31, 1995.  Also presented are the amounts due after
one year classified according to the sensitivity to changes in interest rates.

                                                           Maturing
                                          --------------------------------------------
                                          Within         1-5        Over 5
                                          1 Year        Years        Years      Total
                                          --------     -------      --------   -------
                                                     (Dollars in Thousands)

Commercial and industrial loans . . .     $ 45,440     $ 18,497     $ 21,753   $ 85,690
Agricultural production financing
  and other loans to farmers. . . . .        4,342          835          619      5,796
Real estate - Construction. . . . . .        8,075           13        1,825      9,913
Tax-exempt loans. . . . . . . . . . .          122          329          412        863
Other loans . . . . . . . . . . . . .          651                                  651
                                          --------     --------     --------   --------
     Total                                $ 58,630     $ 19,674     $ 24,609   $102,913
                                          --------     --------     --------   --------
                                          --------     --------     --------   --------

                                                                         Page 11

STATISTICAL DATA (Continued)

                                       Maturing
                                ----------------------
                                 1 - 5           Over
                                 Years          5 Years
                                -------       ---------
                                 (Dollars in Thousands)

Loans maturing after one 
year with:

 Fixed rates. . . . . . .       $  5,625      $ 10,190
 Variable rate. . . . . .         14,049        14,419
                                --------      --------
   Total. . . . . . . . .       $ 19,674      $ 24,609
                                --------      --------
                                --------      --------

RISK ELEMENTS
                                                           December 31
                                       ---------------------------------------------------

                                         1995       1994       1993      1992       1991
                                       --------   --------   --------  --------   --------
                                                     (Dollars in Thousands)
                                                                   
Nonaccruing loans . . . . . . . . . .   $ 133      $ 326       $ 527    $ 493      $1,434
Loans contractually past due 90 
 days or more other than
 nonaccruing. . . . . . . . . . . . .     863        703         616      949       1,356
Restructured loans. . . . . . . . . .     625        754         879      548         828

Nonaccruing loans are loans which are reclassified to a nonaccruing status when
in management's judgment the collateral value and financial condition of the
borrower do not justify accruing interest.  Interest previously recorded but not
deemed collectible is reversed and charged against current income.  Interest
income on these loans is then recognized when collected. 

Restructured loans are loans for which the contractual interest rate has been
reduced or other concessions are granted to the borrower because of a
deterioration in the financial condition of the borrower resulting in the
inability of the borrower to meet the original contractual terms of the loans. 

Interest income of $55,601 for the year ended December 31, 1995, was recognized
on the nonaccruing and restructured loans listed in the table above, whereas
interest income of $59,168 would have been recognized under their original loan
terms. 

Potential problem loans:

Management has identified certain other loans totaling $3,122,000 as of 
December 31, 1995, not included in the risk elements table, which are current as
to principal and interest, about which there are doubts as to the to the
borrowers' ability to comply with present repayment terms.

                                                                         Page 12

STATISTICAL DATA (Continued)

SUMMARY OF LOAN LOSS EXPERIENCE

The following table summarizes the loan loss experience for the years indicated.

                                           1995       1994      1993      1992      1991
                                        --------   --------  --------  --------   -------
                                                      (Dollars in Thousands)
                                                                   
Allowance for loan losses:

  Balance at January 1 . . . . . .     $ 4,998     $ 4,800   $ 4,351   $ 3,867    $ 3,254
  Addition resulting from
    acquisition. . . . . . . . . .                                                    252

  Chargeoffs:
    Commercial . . . . . . . . . .         586         526       391       588        806
    Real estate mortgage . . . . .                      41       129       100         41
    Installment. . . . . . . . . .         296         346       388       552        511
                                       -------      ------    ------   -------    -------
     Total chargeoffs. . . . . . .         882         913       908     1,240      1,358
                                       -------      ------    ------   -------    -------
  Recoveries:
    Commercial . . . . . . . . . .          89         216       240       215        227
    Real estate mortgage . . . . .           4          30         5        38          7
    Installment. . . . . . . . . .         108          83        98       114         84
                                       -------      ------    ------   -------    -------
     Total recoveries. . . . . . .         201         329       343       367        318
                                       -------      ------    ------   -------    -------
  Net chargeoffs . . . . . . . . .         681         584       565       873      1,040
                                       -------      ------    ------   -------    -------
  Provisions for loan losses . . .         640         782     1,014     1,357      1,401
                                       -------      ------    ------   -------    -------
  Balance at December 31 . . . . .     $ 4,957     $ 4,998   $ 4,800   $ 4,351    $ 3,867
                                       -------      ------    ------   -------    -------
                                       -------      ------    ------   -------    -------
Ratio of net chargeoffs during the
  period to average loans 
  outstanding during the period. .         .16%        .15%      .16%      .26%       .35%
Peer Group . . . . . . . . . . . .       N/A           .25%      .49%      .65%       .95%

                                                                         Page 13

STATISTICAL DATA (Continued)

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31:

Presented below is an analysis of the composition of the allowance for loan 
losses and per cent of loans in each category to total loans:

                                          1995                   1994
                                   ---------------------  ---------------------
                                     Amount    Per Cent    Amount    Per Cent
                                   ---------  ----------  --------  -----------
                                              (Dollars in Thousands)
                                                         
Balance at December 31:

  Commercial, financial and
    agricultural. . . . . . . . .   $ 2,212       22.7%    $ 2,261      21.3%
  Real estate - construction. . .                  2.4                   2.0
  Real estate - mortgage. . . . .       587       55.6         560      57.0
  Installment . . . . . . . . . .     1,200       19.1       1,263      19.4
  Tax-exempt loans. . . . . . . .                   .2                    .3
  Unallocated . . . . . . . . . .       958       N/A          914       N/A
                                    -------     ------     -------     -----
  Totals. . . . . . . . . . . . .   $ 4,957      100.0%    $ 4,998     100.0%
                                    -------     ------     -------     -----
                                    -------     ------     -------     -----

                                          1993                   1992
                                   ---------------------  ---------------------
                                     Amount    Per Cent    Amount    Per Cent
                                   ---------  ----------  --------  -----------
                                              (Dollars in Thousands)
                                                        
Balance at December 31:
  Commercial, financial and
    agricultural. . . . . . . .     $ 2,187      23.4%     $ 2,193      26.2%
  Real estate - construction. .                   2.2                     .7
  Real estate - mortgage. . . .         384      55.4          435      55.1
  Installment . . . . . . . . .       1,266      18.6        1,473      17.3
  Tax-exempt loans. . . . . . .                    .4                     .7
  Unallocated . . . . . . . . .         963      N/A           250       N/A
                                    -------     ------     -------     -----
  Totals                            $ 4,800     100.0%     $ 4,351     100.0%
                                    -------     -----      -------     -----
                                    -------     -----      -------     -----

                                           1991
                                  ------------------------
                                   Amount       Per Cent
                                  --------     -----------
                                    (Dollars in Thousands)
                                         
Balance at December 31:

  Commercial, financial and
    agricultural. . . . . . . .   $ 2,127         27.3%
  Real estate - construction. .                    1.0
  Real estate - mortgage. . . .       193         53.1
  Installment . . . . . . . . .     1,547         17.9
  Tax-exempt loans. . . . . . .                    0.7
  Unallocated . . . . . . . . .                    N/A
                                  -------        -----
  Totals                          $ 3,867        100.0%
                                  -------        -----
                                  -------        -----

                                                                         Page 14

STATISTICAL DATA (Continued)

LOAN LOSS CHARGEOFF PROCEDURES

The Banks have weekly meetings at which loan delinquencies, maturities and
problems are reviewed.  The Board of Directors receive and review reports on
loans monthly. 

The Executive Committee of First Merchants' Board meets bimonthly to approve or
disapprove all new loans in excess of $1,000,000 and the Board reviews all
commercial loans in excess of $50,000 which were made or renewed during the
preceding month.  Pendleton's and First United's loan committees, consisting of
all loan officers and the president, meet as required to approve or disapprove
any loan which is in excess of an individual loan officer's lending limit. 

All chargeoffs are approved by the senior loan officer and are reported to the
Banks' Boards.  The Banks charge off loans when a determination is made that all
or a portion of a loan is uncollectible or as a result of examinations by
regulators and the independent auditors. 

PROVISION FOR LOAN LOSSES

In banking, loan losses are one of the costs of doing business.  Although the
Banks' management emphasize the early detection and chargeoff of loan losses, it
is inevitable that at any time certain losses exist in the portfolio which have
not been specifically identified.  Accordingly, the provision for loan losses is
charged to earnings on an anticipatory basis, and recognized loan losses are
deducted from the allowance so established.  Over time, all net loan losses must
be charged to earnings.  During the year, an estimate of the loss experience for
the year serves as a starting point in determining the appropriate level for the
provision.  However, the amount actually provided in any period may be greater
or less than net loan losses, based on management's judgment as to the
appropriate level of the allowance for loan losses.  The determination of the
provision in any period is based on management's continuing review and
evaluation of the loan portfolio, and its judgment as to the impact of current
economic conditions on the portfolio.  The evaluation by management includes
consideration of past loan loss experience, changes in the composition of the
loan portfolio, and the current condition and amount of loans outstanding. 

Impaired loans are measured by the present value of expected future cash flows,
or the fair value of the collateral of the loans, if collateral dependent. 
Impaired loans totaled $3,122,000 at December 31, 1995.  An allowance for losses
at December 31, 1995, was not deemed necessary for impaired loans totaling
$1,900,000, but an allowance of $559,000 was recorded for the remaining balance
of impaired loans of $1,222,000.  The average balance of impaired loans for 1995
was $1,682,000.

                                                                         Page 15

STATISTICAL DATA (Continued)

DEPOSITS

The following table shows the average amount of deposits and average rate of
interest paid thereon for the years indicated. 

                                               1995                  1994                 1993
                                        -------------------    -------------------  --------------------
                                         Amount      Rate       Amount      Rate      Amount      Rate
                                        --------   --------    ---------   -------  ----------  --------
                                                             (Dollars in Thousands)
                                                                     
Balance at December 31:
  Noninterest bearing deposits. . . .   $ 74,436               $ 71,743              $ 69,054
  NOW accounts. . . . . . . . . . . .     85,532     2.3%        85,973      2.1%      79,106      2.3%
  Money market deposit accounts . . .     94,710     3.9        105,083      3.0      111,136      2.8
  Savings deposits. . . . . . . . . .     53,202     2.7         55,755      2.6       51,697      2.7
  Certificates of deposit and
   other time deposits. . . . . . . .    230,659     5.4        195,475      4.1      206,833      4.4
                                        --------               --------              --------
     Total deposits . . . . . . . . .   $538,539     3.6       $514,029      2.8     $517,826      3.0
                                        --------               --------              --------
                                        --------               --------              --------

As of December 31, 1995, certificates of deposit and other time deposits of 
$100,000 or more mature as follows:

                                                            Maturing
                                -------------------------------------------------------------
                                 3 Months       3-6          6-12        Over 
                                 or less       Months       Months     12 Months     Total
                                ----------   ---------    ----------  ------------  ---------
                                                    (Dollars in Thousands)
                                                                     
Certificates of deposit and
  other time deposits. . . . .    $18,517     $ 9,969       $ 5,513       $15,217     $49,216
Per cent . . . . . . . . . . .         38%         20%           11%           31%

RETURN ON EQUITY AND ASSETS

                                              1995        1994       1993
                                            ---------   ---------   --------
                                                           
Return on assets (net income divided by
 average total assets) . . . . . . . . . . .  1.48%       1.44%       1.39%
Return on equity (net income divided by
  average equity). . . . . . . . . . . . . .  2.97       13.06       13.01
Dividend payout ratio (dividends per
  share divided by net income per share) . . 39.49       39.44       37.06
Equity to assets ratio (average equity
  divided by average total assets) . . . . . 11.42       11.04       10.68

                                                                         Page 16

STATISTICAL DATA (Continued) 

SHORT-TERM BORROWINGS

                                                   1995        1994       1993
                                                 ---------   ---------   -------
                                                      (Dollars in Thousands)
                                                               
Balance at December 31:

  Federal funds purchased. . . . . . . . .      $    100    $ 12,198   $  5,300
  Securities sold under repurchase
    agreements . . . . . . . . . . . . . .        27,293      17,776     26,363
  U.S. Treasury demand notes . . . . . . .         6,582       9,215     15,227
                                                ---------   ---------   --------
      Total short-term borrowings. . . . .      $ 33,975    $ 39,189   $ 46,890
                                                ---------   ---------   --------
                                                ---------   ---------   --------

Securities sold under repurchase agreements are borrowings maturing within 
one year and are secured by U. S. Treasury and Federal agency obligations.

Pertinent information with respect to short-term borrowings is summarized below:

                                                     1995        1994       1993
                                                  ---------   ---------   --------
                                                       (Dollars in Thousands)
                                                                 
Weighted average interest rate on outstanding
  balance at December 31:

  Securities sold under repurchase
       agreements . . . . . . . . . . . . . . .     5.29%        4.86%      2.86%
  Total short-term borrowings . . . . . . . . .     5.27         5.42       2.88

Weighted average interest rate during the year:
  Securities sold under repurchase
       agreements . . . . . . . . . . . . . . .     5.57         3.91       2.94
  Total short-term borrowings . . . . . . . . .     5.56         4.03       3.02

Highest amount outstanding at any month end
      during the year:
  Securities sold under repurchase
       agreements . . . . . . . . . . . . . . . $ 54,670     $ 29,115   $ 33,949
  Total short-term borrowings . . . . . . . . .   64,443       68,609     51,130

Average amount outstanding during the year:
  Securities sold under repurchase
       agreements . . . . . . . . . . . . . . .   33,632       23,389     22,882
  Total short-term borrowings . . . . . . . . .   44,799       45,639     35,317

                                                                         Page 17

ITEM 2.  PROPERTIES.

The headquarters of the Corporation and First Merchants are located in a five-
story building at 200 East Jackson Street, Muncie, Indiana.  This building and
eight branch buildings are owned by First Merchants; five remaining branches of
First Merchants are located in leased premises.  Ten automated cash dispensers
are located in leased premises; one cash dispenser is located in premises that
are provided free of charge.  All of the Corporation's and First Merchants'
facilities are located in Delaware and Madison Counties of Indiana.  

The principal offices of Pendleton are located at 100 West State Street,
Pendleton, Indiana.  Pendleton also operates three branches.  All of Pendleton's
properties are owned by Pendleton and are located in Madison County, Indiana. 
One automated dispenser is located in leased premises.  

The principal offices of First United are located at 790 West Mill Street,
Middletown, Indiana.  First United also operates two branches.  All of First
United's properties are owned by First United and are located in Henry County,
Indiana.  

None of the properties owned by the banks are subject to any major 
encumbrances. The net investment of the Corporation and subsidiaries in real 
estate and equipment at December 31, 1995 was $10,475,935.

ITEM 3.  LEGAL PROCEEDINGS. 
   
There is no pending legal proceeding, other than ordinary routine litigation
incidental to the business of the Corporation or its subsidiaries, of a material
nature to which the Corporation or its subsidiaries is a party or of which any
of their properties are subject.  Further, there is no material legal proceeding
in which any director, officer, principal shareholder, or affiliate of the
Corporation, or any associate of any such director, officer or principal
shareholder, is a party, or has a material interest, adverse to the Corporation.

None of the routine legal proceedings, individually or in the aggregate, in
which the Corporation or its affiliates are involved are expected to have a
material adverse impact on the financial position or the results of operations
of the Corporation.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.  
   
No matters were submitted during the fourth quarter of 1995 to a vote of
security holders, through the solicitation of proxies or otherwise. 

                                                                         Page 18

SUPPLEMENTAL INFORMATION - EXECUTIVE OFFICERS OF THE REGISTRANT.
 
The names, ages, and positions with the Corporation and subsidiary banks of all
executive officers of the Corporation are listed below. 

   Name and Age           Offices with the Corporation       Principal Occupation
                              And Subsidiary Banks           During Past Five Years
- --------------------   --------------------------------    --------------------------
                                                     
Stefan S. Anderson     Chairman of the Board and            Chairman of the Board of
61                     President, Corporation and           the Corporation and First
                       First Merchants                      Merchants since 1987;
                                                            President of First
                                                            Merchants since 1979 and
                                                            of the Corporation since
                                                            1982

Thomas E. Buczek       First Vice President,                First Vice President,
49                     First Merchants                      First Merchants since May
                                                            1995; Vice President
                                                            prior to May 1995

Michael L. Cox         Executive Vice President,            Executive Vice President
51                     Chief Operating Officer and          and Chief Operating
                       Director, Corporation;               Officer, Corporation
                       Executive Vice President and         since May, 1994;
                       Director, First Merchants            Executive Vice President,
                                                            First Merchants, since
                                                            May, 1994; Director,
                                                            Corporation and First
                                                            Merchants since December,
                                                            1984; President, Information
                                                            Systems Group, Ontario Corporation
                                                            prior to May 1994.

Jack L. Demaree        Senior Vice President and            Senior Vice President,
47                     Senior Commercial Loan               First Merchants since
                       Officer, First Merchants             March 1992, Senior
                                                            Commercial Loan Officer,
                                                            First Merchants since
                                                            1987; Vice President,
                                                            First Merchants prior to
                                                            March 1992

Roger W. Gilcrest      Executive Vice President and         Executive Vice President
58                     Director, First Merchants            First Merchants since
                                                            July, 1988; Director of
                                                            First Merchants since
                                                            July 1992

Paul R. Hoover         Senior Vice President,               Senior Vice President,
54                     First Merchants                      First Merchants since
                                                            1987

Larry R. Helms         Senior Vice President and            Senior Vice President,
55                     General Counsel, Corporation;        Corporation since 1982 and
                       Senior Vice President,               Senior Vice President and
                       First Merchants;                     General Counsel First
                       Director of First United;            Merchants since 1979;
                       Director of Pendleton                Director of First United
                                                            and Pendleton since 1992

Rodney A. Medler       First Vice President,                First Vice President,
59                     First Merchants                      First Merchants since 
                                                            May 1995; Vice President
                                                            and Cashier, First
                                                            Merchants prior to 
                                                            May 1995

                                                                         Page 19

SUPPLEMENTAL INFORMATION - EXECUTIVE OFFICERS OF THE REGISTRANT.

   Name and Age           Offices with the Corporation       Principal Occupation
                              And Subsidiary Banks           During Past Five Years
- --------------------   --------------------------------    --------------------------
                                                     
Michael G. Richardson   First Vice President,               First Vice President
40                      First Merchants                     since May 1995; Vice
                                                            President prior to May
                                                            1995

James L. Thrash         Senior Vice President and           Senior Vice President and
46                      Chief Financial Officer,            Chief Financial Officer
                        Corporation; Senior Vice            of the Corporation since
                        President, First Merchants          1990; Chief Financial
                                                            Officer, Corporation
                                                            prior to May 1990; Senior
                                                            Vice President, First
                                                            Merchants since 1990

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
         MATTERS

The information required under this item is incorporated by reference to page 2
of the Corporation's 1995 Annual Report to Stockholders under the caption
"Stockholder Information," Exhibit 13. 

ITEM 6.  SELECTED FINANCIAL DATA. 

The information required under this item is incorporated by reference to page 1
of the Corporation's 1995 Annual Report to Stockholders under the caption "Five-
Year Summary of Selected Financial Data," Exhibit 13. 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS.

The information required under this item is incorporated by reference to page 2
through 7 of the Corporation's 1995 Annual Report to Stockholders under the
caption "Management's Discussion and Analysis," Exhibit 13. 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 

The financial statements and supplementary data required under this item are
incorporated herein by reference to inside cover and pages 8 through 24 of the
Corporation's 1995 Annual Report to Stockholders, Exhibit 13. 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND  
         FINANCIAL DISCLOSURE.

In connection with its audits for the two most recent fiscal years ended 
December 31, 1995, there have been no disagreements with the Corporation's
independent certified public accountants on any matter of accounting principles
or practices, financial statement disclosure or audit scope or procedure, nor
have there been any changes in accountants.        

                                                                         Page 20

                            PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required under this item relating to directors is 
incorporated by reference to the Corporation's 1996 Proxy Statement furnished 
to its stockholders in connection with an annual meeting to be held April 4, 
1996 (the "1996 Proxy Statement"), under the caption "Election of Directors," 
which Proxy Statement has been filed with the Commission.  The information 
required under this item relating to executive officers is set forth in Part 
I, "Supplemental Information - Executive Officers of the Registrant" of this 
annual report on Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION.

The information required under this item is incorporated by reference to the
Corporation's 1996 Proxy Statement, under the captions, "Compensation of
Directors" and "Compensation of Executive Officers," which Proxy Statement has
been filed with the Commission. 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required under this item is incorporated by reference to the
Corporation's 1996 Proxy Statement, under the caption, "Security Ownership of
Certain Beneficial Owners and Management," which Proxy Statement has been
filed with the Commission. 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required under this item is incorporated by reference to the
Corporation's 1996 Proxy Statement, under the caption "Interest of Management
in Certain Transactions," which Proxy Statement has been filed with the
Commission.

                                                                       Page 21

                             PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

                                                         Annual Report   Form 10-K
                                                              Page         Page
                                                             Number        Number
                                                         -------------   ----------
                                                                   
(a)1.  Financial Statements:

         Independent auditor's report  . . . . . . . .      Inside         130
                                                             Cover         
         Consolidated balance sheet at December 31, 
           1995 and 1994 . . . . . . . . . . . . . . .       8             138
         Consolidated statement of income, years
           ended December 31, 1995, 1994 and 1993  . .       9             139
         Consolidated statement of changes in 
           stockholders' equity, years ended
           December 31, 1995, 1994 and 1993  . . . . .       10            140
         Consolidated statement of cash flows, years 
           ended December 31, 1995, 1994 and 1993  . .       10-11         140-141
         Notes to consolidated financial statements  .       12-24         142-154

(a)2.  Financial statement schedules:
         All schedules are omitted because they are
           not applicable or not required, or because
           the required information is included in the
           consolidated financial statements or
           related notes.

(a)3.  Exhibits:

   Exhibit No:          Description of Exhibit:
   -----------          -----------------------
                                                                   
      3.1          Articles of Incorporation and the Articles
                     of Amendment thereto . . . . . . . . . . . .          (F)
      3.2          Bylaws and amendments thereto. . . . . . . . .         30-42
     10.1          First Merchants Bank, National Association
                     Management Incentive Plan. . . . . . . . . .          (A)
     10.2          Unfunded Deferred Compensation Plan,
                     as Amended . . . . . . . . . . . . . . . . .          (D)
     10.3          Employee Stock Purchase Plan, (1989) . . . . .          (B)
     10.4          1989 Stock Option Plan . . . . . . . . . . . .          (C)
     10.5          Employee Stock Purchase Plan (1994). . . . . .          (E)
     10.6          1994 Stock Option Plan . . . . . . . . . . . .          (E)
     10.7          Agreement of Reorganization and Merger by and
                     between First Merchants Corporation and
                     Randolph County Bancorp dated January 17,
                     1996 . . . . . . . . . . . . . . . . . . . .         43-72
     10.8          Agreement of Reorganization and Merger by and
                     between First Merchants Corporation and
                     Union National Bancorp dated January 24,
                     1996 . . . . . . . . . . . . . . . . . . . .       73-106

                                                                       Page 22

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
          (Continued)

                                                                         Form 10-K
                                                                           Page
   Exhibit No:          Description of Exhibit:                            Number
   -----------          -----------------------                          ----------
                                                                   
        13         1995 Annual Report to Stockholders (except
                     for the Pages and information thereof
                     expressly incorporated by reference in this
                     Form 10-K, the Annual Report to Stockholders
                     is provided solely for the information of
                     the Securities and Exchange Commission and
                     is not deemed "filed" as part of this Form
                     10-K). . . . . . . . . . . . . . . . . . . .         107-154
       21          Subsidiaries of Registrant   . . . . . . . . .            27
       23          Consent of Independent Auditors  . . . . . . .            28
       27          Financial Data Schedule  . . . . . . . . . . .           157
       99.1        Financial statements and independent
                     auditor's report for First Merchants
                     Corporation Employee Stock Purchase Plan . .            29

(A)  Incorporated by reference to Registrant's Registration Statement on Form
     S-4 (SEC File No. 33-110) ordered effective on September 30, 1988. 
(B)  Incorporated by reference to Registrant's Registration Statement on Form
     S-8 (SEC File No. 33-28900) effective on May 24, 1989. 
(C)  Incorporated by reference to Registrant's Registration Statement on Form
     S-8 (SEC File No. 33-28901) effective on May 24, 1989. 
(D)  Incorporated by reference to Registrant's Form 10-K for year ended 
     December 31, 1990.
(E)  Incorporated by reference to Registrant's Form 10-K for year ended 
     December 31, 1993.
(F)  Incorporated by reference to Registrant's Form 10-K for year ended
     December 31, 1994.

(b) Reports on Form 8-K:

     No reports on Form 8-K were filed for the three months ended December 31,
     1995.

                                                                       Page 23

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 12th day of
March, 1996. 

                                   FIRST MERCHANTS CORPORATION

                                   By /s/  Stefan S. Anderson
                                      ----------------------------------------
                                      Stefan S. Anderson, Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-K has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

        Signature                         Capacity                     Date
- -----------------------------   ------------------------------    --------------

/s/ Stefan S. Anderson
- -----------------------------   Director and Chairman,            March 12, 1996
    Stefan S. Anderson           Principal Executive Officer

/s/ Michael L. Cox              Director, Executive Vice          March 12, 1996
- -----------------------------    President and Chief Operating
    Michael L. Cox               Officer

/s/ James L. Thrash                                               March 12, 1996
- -----------------------------   Principal Financial and
    James L. Thrash              Principal Accounting Officer

/s/ Frank A. Bracken
- -----------------------------   Director                          March 12, 1996
    Frank A. Bracken

- -----------------------------   Director                          March 12, 1996
    Thomas B. Clark

/s/ David A. Galliher
- -----------------------------   Director                          March 12, 1996
    David A. Galliher

/s/ Thomas K. Gardiner
- -----------------------------   Director                          March 12, 1996
  Dr. Thomas K. Gardiner

/s/ Hurley C. Goodall
- -----------------------------   Director                          March 12, 1996
    Hurley C. Goodall

/s/ John W. Hartmeyer
- -----------------------------   Director                          March 12, 1996
    John W. Hartmeyer

/s/ Nelson W. Heinrichs
- -----------------------------   Director                          March 12, 1996
    Nelson W. Heinrichs

                                                                       Page 24

        Signature                         Capacity                     Date
- -----------------------------   ------------------------------    --------------

/s/ Jon H. Moll
- -----------------------------   Director                          March 12, 1996
    Jon H. Moll

/s/ George A. Sissel
- -----------------------------   Director                          March 12, 1996
    George A. Sissel

/s/ Robert M. Smitson
- -----------------------------   Director                          March 12, 1996
    Robert M. Smitson

/s/ Joseph E. Wilson
- -----------------------------   Director                          March 12, 1996
    Joseph E. Wilson

/s/
- -----------------------------   Director                          March 12, 1996
    Robert F. Wisehart 

/s/ John E. Worthen
- -----------------------------   Director                          March 12, 1996
    John E. Worthen

                                                                       Page 25

INDEX TO EXHIBITS

                                                                         Form 10-K
                                                                           Page
   Exhibit No:          Description of Exhibit:                            Number
   -----------          -----------------------                          ----------
                                                                   
       3.1         Articles of Incorporation and the Articles of
                     Amendment thereto . . . . . . . . . . . . . .           (F)
       3.2         Bylaws and amendments thereto . . . . . . . . .          30-42
      10.1         First Merchants Bank, National Association
                     Management Incentive Plan   . . . . . . . . .           (A)
      10.2         Unfunded Deferred Compensation Plan, 
                     as Amended  . . . . . . . . . . . . . . . . .           (D)
      10.3         Employee Stock Purchase Plan (1989) . . . . . .           (B)
      10.4         1989 Stock Option Plan  . . . . . . . . . . . .           (C)
      10.5         Employee Stock Purchase Plan (1994) . . . . . .           (E)
      10.6         1994 Stock Option Plan  . . . . . . . . . . . .           (E)
      10.7         Agreement of Reorganization and Merger by and
                     between First Merchants Corporation and
                     Randolph County Bancorp dated January 17,
                     1996  . . . . . . . . . . . . . . . . . . . .          43-72
      10.8         Agreement of Reorganization and Merger by and
                     between First Merchants Corporation and
                     Union National Bancorp dated January 24,
                     1996  . . . . . . . . . . . . . . . . . . . .          73-106
      13           1995 Annual Report to Stockholders (except
                     for the Pages and information thereof
                     expressly incorporated by reference in this
                     Form 10-K, the Annual Report to Stockholders
                     is provided solely for the information of
                     the Securities and Exchange Commission and
                     is not deemed "filed" as part of this Form
                     10-K) . . . . . . . . . . . . . . . . . . . .         107-154
      21           Subsidiaries of Registrant  . . . . . . . . . .            27
      23           Consent of Independent Auditors . . . . . . . .            28
      27           Financial Data Schedule . . . . . . . . . . . .           157
      99.1         Financial statements and independent
                     auditor's report for First Merchants
                     Corporation Employee Stock Purchase Plan. . .            29

(A)  Incorporated by reference to Registrant's Registration Statement on Form
     S-4 (SEC File No. 33-110) ordered effective on September 30, 1988. 
(B)  Incorporated by reference to Registrant's Registration Statement on Form
     S-8 (SEC File No. 33-28900) effective on May 24, 1989. 
(C)  Incorporated by reference to Registrant's Registration Statement on Form
     S-8 (SEC File No. 33-28901) effective on May 24, 1989. 
(D)  Incorporated by reference to Registrant's Form 10-K for year ended 
     December 31, 1990.
(E)  Incorporated by reference to Registrant's Form 10-K for year ended 
     December 31, 1993.
(F)  Incorporated by reference to Registrant's Form 10-K for year ended
     December 31, 1994.

                                                                       Page 26

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT

                                                               State of
               Name                                          Incorporation
               ----                                          -------------

First Merchants Bank, National Association. . . . . . . . .      U.S.

Pendleton Banking Company . . . . . . . . . . . . . . . . .     Indiana

First United Bank . . . . . . . . . . . . . . . . . . . . .     Indiana

                                                                       Page 27

EXHIBIT 23--CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent to the incorporation by reference to Registration 
Statements on Form S-8, File Numbers 33-28900 and 33-28901, of our report 
dated January 19, 1996, except for Note 2 as to which the date is January 24, 
1996 on the consolidated financial statements of First Merchants Corporation, 
which report is incorporated by reference in the Annual Report on Form 10-K 
of First Merchants Corporation.

/s/ Geo. S. Olive & Co. LLC

Indianapolis, Indiana
March 18, 1996

                                                                       Page 28

EXHIBIT 99.1--FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT FOR 
              FIRST MERCHANTS CORPORATION EMPLOYEE STOCK PURCHASE PLAN

The annual financial statements and independent auditor's report thereon for 
First Merchants Corporation Employee Stock Purchase Plan for the year ending 
June 30, 1996, will be filed as an amendment to the 1995 Annual Report on 
Form 10-K no later than October 28, 1996. 

                                                                       Page 29

                                       BY-LAWS
                                          OF
                             FIRST MERCHANTS CORPORATION

                                      ARTICLE I

    SECTION 1.     NAME.   The name of the corporation is First Merchants
Corporation ("Corporation").

    SECTION 2.     PRINCIPAL OFFICE OF THE RESIDENT AGENT.   The post office
address of the principal office of the Corporation is 200 East Jackson Street,
Muncie, Indiana, 47305, and the name of its Resident Agent in charge of such
office is Rodney A. Medler.

    SECTION 3.     SEAL.   The seal of the Corporation shall be circular in
form and mounted upon a metal die, suitable for impressing the same upon paper.
About the upper periphery of the seal shall appear the words "First Merchants
Corporation" and about the lower periphery thereof the words "Muncie, Indiana".
In the center of the seal shall appear the word "Seal".

                                      ARTICLE II

    The fiscal year of the Corporation shall begin each year on the first day
of January and end on the last day of December of the same year.

                                     ARTICLE III

                                    CAPITAL STOCK

    SECTION 1.     NUMBER OF SHARES AND CLASSES OF CAPITAL STOCK.
The total number of shares of capital stock which the Corporation shall have
authority to issue shall be as stated in the Articles of Incorporation.

    SECTION 2.     CONSIDERATION FOR NO PAR VALUE SHARES.   The shares of stock
of the Corporation without par value shall be issued or sold in such manner and
for such amount of consideration as may be fixed from time to time by the Board
of Directors.  Upon payment of the consideration fixed by the Board of
Directors, such shares of stock shall be fully paid and nonassessable.

    SECTION 3.     CONSIDERATION FOR TREASURY SHARES.   Treasury shares may be
disposed of by the Corporation for such consideration as may be determined from
time to time by the Board of Directors.

    SECTION 4.     PAYMENT FOR SHARES.   The consideration for the issuance of
shares of capital stock of the Corporation may be paid, in whole or in part, in
money, in other property, tangible or intangible, or in labor actually performed
for, or services actually rendered to the Corporation; provided, however, that
the part of the surplus of the Corporation which is transferred to stated
capital upon the issuance of shares as a share dividend shall be deemed to be
the consideration for the issuance of such shares.  When payment of the
consideration for which a share was authorized to be issued shall have been
received by the Corporation, or when surplus shall have been transferred to
stated capital upon the issuance of a share dividend, such share shall be
declared and taken to be fully paid and not liable to any further call or
assessment, and the holder thereof shall not be liable for any further payments
thereon. In the absence of actual fraud in the transaction, the judgment of the
Board of Directors as to the value of such property, labor or services received
as consideration, or the value placed by the Board of Directors upon the
corporate assets in the event of a share dividend, shall be conclusive.
Promissory notes, uncertified checks, or future services shall not be accepted
in payment or part payment of the capital stock of the Corporation, except as
permitted by the Indiana General Corporation Act.

    SECTION 5.     CERTIFICATE FOR SHARES.   Each holder of capital stock of
the Corporation shall be entitled to a stock certificate, signed by the
President or a Vice President and the Secretary or any Assistant Secretary of
the Corporation, with the seal of the Corporation thereto affixed, stating the
name of the registered holder, the number of shares represented by such
certificate, the par value of each share of stock or that such shares of stock
are without par value, and that such shares are fully paid and nonassessable.
If such shares are not fully paid, the certificate shall be legibly stamped to
indicate the per cent which has been paid, and as further payments are made, the
certificate shall be stamped accordingly.

    If the Corporation is authorized to issue shares of more than one class,
every certificate shall state the kind and class of shares represented thereby,
and the relative rights, interests, preferences and restrictions of such class,
or a summary thereof; provided, that such statement may be omitted from the
certificate if it shall be set forth upon the face or back of the certificate
that such statement, in full, will be furnished by the Corporation to any
shareholder upon written request and without charge.

    SECTION 6.     FACSIMILE SIGNATURES.   If a certificate is countersigned by
the written signature of a transfer agent other than the Corporation or its
employee, the signatures of the officers of the Corporation may be facsimiles.
If a certificate is countersigned by the written signature of a registrar other
than the Corporation or its employee, the signatures of the transfer agent and
the officers of the Corporation may be facsimiles.  In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of its issue.

    SECTION 7.     TRANSFER OF SHARES.   The shares of capital stock of the
Corporation shall be transferable only on the books of the Corporation upon
surrender of the certificate or certificates representing the same, properly
endorsed by the registered holder or by his duly authorized attorney or
accompanied by proper evidence of succession, assignment or authority to
transfer.

    SECTION 8.     CANCELLATION.   Every certificate surrendered to the
Corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 10 of this Article III.

    SECTION 9.     TRANSFER AGENT AND REGISTRAR.   The Board of Directors may
appoint a transfer agent and a registrar for each class of capital stock of the
Corporation and may require all certificates representing such shares to bear
the signature of such transfer agent and registrar.  Shareholders shall be
responsible for notifying the Corporation or transfer agent and registrar for
the class of stock held by such shareholder in writing of any changes in their
addresses from time to time, and failure so to do shall relieve the Corporation,
its shareholders, directors, officers, transfer agent and registrar of liability
for failure to direct notices, dividends, or other documents or property to an
address other than the one appearing upon the records of the transfer agent and
registrar of the Corporation.

    SECTION 10.    LOST, STOLEN OR DESTROYED CERTIFICATES.   The Corporation
may cause a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed.  When authorizing such issue of a new certificate or certificates,
the Corporation may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum and in such form as it may  direct to indemnify
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed or the issuance of
such new certificate.  The Corporation, in its discretion, may authorize the
issuance of such new certificates without any bond when in its judgment it is
proper to do so.

                                         -2-

    SECTION 11.    REGISTERED SHAREHOLDERS.   The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of such shares to receive dividends, to vote as such owner, to hold liable
for calls and assessments, and to treat as owner in all other respects, and
shall not be bound to recognize any equitable or other claims to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Indiana.

    SECTION 12.    OPTIONS TO OFFICERS AND EMPLOYEES.   The issuance, including
the consideration, of rights or options to directors, officers or employees of
the Corporation, and not to the shareholders generally, to purchase from the
Corporation shares of its capital stock shall be approved by the affirmative
vote of the holders of a majority of the shares entitled to vote thereon or
shall be authorized by and consistent with a plan approved by such a vote of the
shareholders.

                                      ARTICLE IV

                               MEETINGS OF SHAREHOLDERS

    SECTION 1.     PLACE OF MEETING.   Meetings of shareholders of the
Corporation shall be held at such place, within or without the State of Indiana,
as may from time to time be designated by the Board of Directors, or as may be
specified in the notices or waivers of notice of such meetings.

    SECTION 2.     ANNUAL MEETING.   The annual meeting of shareholders for the
election of Directors, and for the transaction of such other business as may
properly come before the meeting, shall be held on the third Tuesday in April of
each year, if such day is not a holiday, and if a holiday, then on the first
following day that is not a holiday, or in lieu of such day may be held on such
other day as the Board of Directors may set by resolution, but not later than
the end of the fifth month following the close of the fiscal year of the
Corporation. Failure to hold the annual meeting at the designated time shall not
work any forfeiture or a dissolution of the Corporation, and shall not affect
otherwise valid corporate acts.

    SECTION 3.     SPECIAL MEETINGS.   Special meeting of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be called by the Board of Directors or the
President and shall be called by the President or Secretary at the request in
writing of a majority of the Board of Directors, or at the request in writing of
shareholders holding of record not less than one-fourth of all the shares
outstanding and entitled by the Articles of Incorporation to vote on the
business for which the meeting is being called.

    SECTION 4.     NOTICE OF MEETINGS.   A written or printed notice, stating
the place, day and hour of the meeting, and in case of a special meeting, or
when required by any other provision of The Indiana General Corporation Act, or
of the Articles of Incorporation, as now or hereafter amended, or these By-Laws,
the purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary, or by the officers or persons calling the meeting, to
each shareholder of record entitled by the Articles of Incorporation, as now or
hereafter amended, and by The Indiana General Corporation Act to vote at such
meeting, at such address as appears upon the records of the Corporation, at
least ten (10) days before the date of the meeting.  Notice of any such meeting
may be waived in writing by any shareholder, if the waiver sets forth in
reasonable detail the purpose or purposes for which the meeting is called,
and the time and place thereof.  Attendance at any meeting in person, or by
proxy, shall constitute a waiver of notice of such meeting.  Each shareholder,
who has in the manner above provided waived notice of a shareholders' meeting,
or who personally attends a shareholders' meeting, or is represented thereat by
a proxy authorized to appear by an instrument of proxy, shall be conclusively
presumed to have been given due notice of such meeting.  Notice of any adjourned
meeting of shareholders shall not be required to be given if the time and place
thereof are announced at the meeting at which the adjournment is taken except as
may be expressly required by law.

                                         -3-

    SECTION 5.     ADDRESSES OF SHAREHOLDERS.  The address of any shareholder
appearing upon the records of the Corporation shall be deemed to be the latest
address of such shareholder appearing on the records maintained by the
Corporation or its Transfer Agent for the class of stock held by such
shareholder.

    SECTION 6.     VOTING AT MEETINGS.

    (a)  QUORUM.  The holders of record of a majority of the issued and
outstanding stock of the Corporation entitled to vote at such meeting, present
in person or by proxy, shall constitute a quorum at all meetings of shareholders
for the transaction of business, except where otherwise provided by law, the
Articles of Incorporation or these By-Laws.  In the absence of a quorum, any
officer entitled to preside at, or act as secretary of, such meeting shall have
the power to adjourn the meeting from time to time until a quorum shall be
constituted.  At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the original
meeting, but only those shareholders entitled to vote at the original meeting
at any adjournment or adjournments thereof unless a new record date is fixed by
the Board of Directors for the adjourned meeting.

    (b)  VOTING RIGHTS.  Except as otherwise provided by law or by the
provisions of the Articles of Incorporation, every shareholder shall have the
right at every shareholder's meeting to one vote for each share of stock having
voting power, registered in his name on the books of the Corporation on the date
for the determination of shareholders entitled to vote, on all matters coming
before the meeting including the election of directors.   At any meeting of
shareholders, every shareholder having the right to vote shall be entitled to
vote in person, or by proxy executed in writing by the shareholder or a duly
authorized attorney in fact and bearing a date not more than eleven months prior
to its execution, unless a longer time is expressly provided therein.

    (c)  REQUIRED VOTE.  When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of The Indiana
General Corporation Act or of the Articles of Incorporation or by these By-Laws,
a greater vote is required, in which case such express provision shall govern
and control the decision of such question.

    SECTION 7.     VOTING LIST.  The Corporation or its Transfer Agent shall
make, at least five days before each election of directors, a complete list of
the shareholders entitled by the Articles of Incorporation, as now or hereafter
amended, to vote at such election, arranged in alphabetical order, with the
address and number of shares so entitled to vote held by each, which list shall
be on file at the principal office of the Corporation and subject to inspection
by any shareholder.  Such list shall be produced and kept open at the time and
place of election and subject to the inspection of any shareholder during the
holding of such election.  The original stock register or transfer book, or a
duplicate thereof kept in the State of Indiana, shall be the only evidence as to
who are the shareholders entitled to examine such list or the stock ledger or
transfer book or to vote at any meeting of the shareholders.

    SECTION 8.      FIXING OF RECORD DATE TO DETERMINE SHAREHOLDERS ENTITLED TO
VOTE.  The Board of Directors may prescribe a period not exceeding 50 days prior
to meetings of the shareholders, during which no transfer of stock on the books
of the Corporation may be made; or, in lieu of prohibiting the transfer of stock
may fix a day and hour not more than 50 days prior to the holding of any meeting
of shareholders as the time as of which shareholders entitled to notice of, and
to vote at, such meeting shall be determined, and all persons who are holders of
record of voting stock at such time, and no others, shall be entitled to notice
of, and to vote at, such meeting.  In the absence of such a determination, such
date shall be 10 days prior to the date of such meeting.

                                         -4-

    SECTION 9.     NOMINATIONS FOR DIRECTOR.   Nominations for election to the
Board of Directors may be made by the Board of Directors or by any shareholder
of any outstanding class of capital stock of the Corporation entitled to vote
for the election of directors.  Nominations, other than those made by or on
behalf of the existing management of the Corporation, shall be made in writing
and shall be delivered or mailed to the president of the Corporation not less
than 10 days nor more than 50 days prior to any meeting of shareholders called
for the election of directors.  Such notification shall contain the following
information to the extent known to the notifying shareholder:  (a)  the name and
address of each proposed nominee; (b)  the principal occupation of each proposed
nominee; (c)  the total number of shares of capital stock of the Corporation
that will be voted for each proposed nominee; (d)  the name and residence
address of the notifying shareholder; and (e)  the number of shares of capital
stock of the Corporation owned by the notifying shareholder. Nominations not
made in accordance herewith may, in his discretion, be disregarded by the
chairman of the meeting, and upon his instructions, the vote tellers may
disregard all votes cast for each such nominee.

                                      ARTICLE V

                                  BOARD OF DIRECTORS

    SECTION 1.     ELECTION, NUMBER AND TERM OF OFFICE.   Directors shall be
elected at the annual meeting of shareholders, or, if not so elected, at a
special meeting of shareholders called for that purpose, by the holders of the
shares of stock entitled by the Articles of Incorporation to elect Directors.

    The number of Directors of the Corporation to be elected by the holders of
the shares of stock entitled by the Articles of Incorporation to elect Directors
shall be sixteen unless changed by amendment of this section.

    All Directors elected by the holders of such shares, except in the case of
earlier resignation, removal or death, shall hold office until their respective
successors are chosen and qualified.  Directors need not be shareholders of the
Corporation.

    Any vacancy on the Board of Directors caused by an increase in the number
of Directors shall be filled by a majority vote of the members of the Board of
Directors, until the next annual or special meeting of the shareholders or, at
the discretion of the Board of Directors, such vacancy may be filled by vote of
the shareholders at a special meeting called for that purpose.  No decrease in
the number of Directors shall have the effect of shortening the term of any
incumbent Director.

    SECTION 2.     VACANCIES.  Any vacancy occurring in the Board of Directors
caused by resignation, death or other incapacity shall be filled by a majority
vote of the remaining members of the Board of Directors, until the next annual
meeting of the shareholders.  If the vote of the remaining members of the Board
shall result in a tie, such vacancy, at the discretion of the Board of
Directors, may be filled by vote of the shareholders at a special meeting called
for that purpose.

    SECTION 3.     ANNUAL MEETING OF DIRECTORS.   The Board of Directors
shall meet each year immediately after the annual meeting of the shareholders,
at the place where such meeting of the shareholders has been held either within
or without the State of Indiana, for the purpose of organization, election of
officers, and consideration of any other business that may properly come before
the meeting.  No notice of any kind to either old or new members of the Board of
Directors for such annual meeting shall be necessary.

                                         -5-

    SECTION 4.     REGULAR MEETINGS.   Regular meetings of the Board of
Directors shall be held at such times and places, either within or without the
State of Indiana, as may be fixed by the Directors.  Such regular meetings of
the Board of Directors may be held without notice or upon such notice as may be
fixed by the Directors.

    SECTION 5.     SPECIAL MEETINGS.   Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, or by not
less than a majority of the members of the Board of Directors.  Notice of the
time and place, either within or without the State of Indiana, of a special
meeting shall be served upon or telephoned to each Director at least twenty-four
hours, or mailed, telegraphed or cabled to each Director at his usual place of
business or residence at least forty-eight hours, prior to the time of the
meeting.  Directors, in lieu of such notice, may sign a written waiver of notice
either before the time of the meeting, at the meeting or after the meeting.
Attendance by a director in person at any special meeting shall constitute a
waiver of notice.

    SECTION 6.     QUORUM.   A majority of the actual number of Directors
elected and qualified, from time to time, shall be necessary to constitute a
quorum for the transaction of any business except the filling of vacancies, and
the act of a majority of the Directors present at the meeting, at which a quorum
is present, shall be the act of the Board of Directors, unless the act of a
greater number is required by The Indiana General Corporation Act, by the
Articles of Incorporation, or by these By-Laws.  A Director, who is present at a
meeting of the Board of Directors, at which action on any corporate matter is
taken, shall be conclusively presumed to have assented to the action taken,
unless (a) his dissent shall be affirmatively stated by him at and before the
adjournment of such meeting (in which event the fact of such dissent shall be
entered by the secretary of the meeting in the minutes of the meeting), or (b)
he shall forward such dissent by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting.  The right of
dissent provided for by either clause (a) or clause (b) of the immediately
preceding sentence shall not be available, in respect of any matter acted upon
at any meeting, to a Director who voted at the meeting in favor of such matter
and did not change his vote prior to the time that the result of the vote on
such matter was announced by the chairman of such meeting.

    A member of the Board of Directors may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment by
which all directors participating in the meeting can communicate with each
other, and participation by these means constitutes presence in person at the
meeting.

    SECTION 7.     CONSENT ACTION BY DIRECTORS.   Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if prior to such action a
written consent to such action is signed by all members of the Board of
Directors or such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board of Directors or committee.

    SECTION 8.     REMOVAL OF DIRECTORS.   Any or all members of the Board
of Directors may be removed, with or without cause, at a meeting of shareholders
called expressly for that purpose by a vote of the holders of not less than a
majority of the outstanding shares of capital stock then entitled to vote at the
election of directors.

    SECTION 9.     DIVIDENDS.   The Board of Directors shall have power,
subject any restrictions contained in The Indiana General Corporation Act or in
the Articles of Incorporation and out of funds legally available therefor, to
declare and pay dividends upon the outstanding capital stock of the Corporation
as and when they deem expedient.  Before declaring any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time in their absolute discretion
deem proper for working capital, or as a reserve or reserves to meet
contingencies or for such other purposes as the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.

                                         -6-

     SECTION 10.    FIXING OF RECORD DATE TO DETERMINE SHAREHOLDERS
ENTITLED TO RECEIVE CORPORATE BENEFITS.  The Board of Directors may fix a day
and hour not exceeding 50 days preceding the date fixed for payment of any
dividend or for the delivery of evidence of rights, or for the distribution of
other corporate benefits, or for a determination of shareholders for any other
purpose, as a record time for the determination of the shareholders entitled to
receive any such dividend, rights or distribution, and in such case only
shareholders of record at the time so fixed shall be entitled to receive such
dividend, rights or distribution.  If no record date is fixed for the
determination of shareholders entitled to receive payment of a dividend, the end
of the day on which the resolution of the Board of Directors declaring such
dividend is adopted shall be the record date for such determination.

    SECTION 11.    INTEREST OF DIRECTORS IN CONTRACTS.   Any contract or
other transaction between the Corporation or any corporation in which this
Corporation owns a majority of the capital stock shall be valid and binding,
notwithstanding that the directors or officers of this Corporation are identical
or that some or all of the directors or officers, or both, are also directors or
officers of such other corporation.

    Any contract or other transaction between the Corporation and one or more
of its directors or members or employees, or between the Corporation and any
firm of which one or more of its directors are members or employees or in which
they are interested, or between the Corporation and any corporation or
association of which one or more of its directors are stockholders, members,
directors, officers, or employees or in which they are interested, shall be
valid for all purposes, notwithstanding the presence of such director or
directors at the meeting of the Board of Directors of the Corporation which acts
upon, or in reference to, such contract or transaction and notwithstanding his
or their participation in such action, if the fact of such interest shall be
disclosed or known to the Board of Directors and the Board of Directors shall
authorize, approve and ratify such contract or transaction by a vote of a
majority of the directors present, such interested director or directors to be
counted in determining whether a quorum is present, but not to be counted in
calculating the majority of such quorum necessary to carry such vote.  This
Section shall not be construed to invalidate any contract or other transaction
which would otherwise be valid under the common and statutory law applicable
thereto.

    SECTION 12.    COMMITTEES.   The Board of Directors may, by resolution
adopted by a majority of the actual number of Directors elected and qualified,
from time to time, designate from among its members an executive committee and
one or more other committees, each of which, to the extent provided in the
resolution, the Articles of Incorporation, or these By-Laws, may exercise all of
the authority of the Board of Directors of the Corporation, including, but not
limited to, the authority to issue and sell or approve any contract to issue and
sell, securities or shares of the Corporation or designate the terms of a series
of a class of securities or shares of the Corporation.  The terms which may be
affixed by each such committee include, but are not limited to, the price,
dividend rate, and provisions of redemption, a sinking fund, conversion, voting,
or preferential rights or other features of securities or class or series of a
class of shares.  Each such committee may have full power to adopt a final
resolution which sets forth those terms and to authorize a statement of such
terms to be filed with the Secretary of State.  However, no such committee has
the authority to declare dividends or distributions, amend the Articles of
Incorporation or the By-Laws, approve a plan of merger or consolidation even if
such plan does not require shareholder approval, reduce earned or capital
surplus, authorize or approve the reacquisition of shares unless pursuant to a
general formula or method specified by the Board of Directors, or recommend to
the shareholders a voluntary dissolution of the Corporation or a revocation
thereof.  No member of any such committee shall continue to be a member thereof
after he ceases to be a Director of the Corporation.  The calling and holding of
meetings of any such committee and its method of procedure shall be determined
by the Board of Directors.  A member of the Board of Directors shall not be
liable for any action taken by any such committee if he is not a member of that
committee and has acted in good faith and in a manner he reasonably believes is
in the best interest of the Corporation.  A member of a committee may
participate in a meeting of the committee by means of a conference telephone or
similar communications equipment by which all members participating in the
meeting can communicate with each other, and participation by these means
constitutes presence in person at the meeting.

                                         -7-

                                      ARTICLE VI

                                       OFFICERS

    SECTION 1.     PRINCIPAL OFFICERS.   The principal officers of the
Corporation shall be a Chairman of the Board, Vice Chairman of the Board, a
President, one or more Vice Presidents, a Treasurer and a Secretary.  The
Corporation may also have, at the discretion of the Board of Directors, such
other subordinate officers as may be appointed in accordance with the provisions
of these By-Laws.  Any two or more offices may be held by the same person except
the duties of the President and Secretary shall not be performed by the same
person.  No person shall be eligible for the office of Chairman of the Board,
Vice Chairman of the Board, or President who is not a director of the
Corporation.

    SECTION 2.     ELECTION AND TERM OF OFFICE.   The principal officers
of the Corporation shall be chosen annually by the Board of Directors at the
annual meeting thereof.  Each such officer shall hold office until his successor
shall have been duly chosen and qualified, or until his death, or until he shall
resign, or shall have been removed in the manner hereinafter provided.

    SECTION 3.     REMOVAL.   Any principal officer may be removed, either
with or without cause, at any time, by resolution adopted at any meeting of the
Board of Directors by a majority of the actual number of Directors elected and
qualified from time to time.

    SECTION 4.     SUBORDINATE OFFICERS.   In addition to the principal
officers enumerated in Section 1 of this Article VI, the Corporation may have
one or more Assistant Treasurers, one or more Assistant Secretaries and such
other officers, agents and employees as the Board of Directors may deem
necessary, each of whom shall hold office for such period, may be removed with
or without cause, have such authority, and perform such duties as the President,
or the Board of Directors may from time to time determine.  The Board of
Directors may delegate to any principal officer the power to appoint and to
remove any such subordinate officers, agents, and employees.

    SECTION 5.     RESIGNATIONS.   Any officer may resign at any time by
giving written notice to the Chairman of the Board or to the Board of Directors
or to the President or to the Secretary.  Any such resignation shall take effect
upon receipt of such notice or at any later time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.

    SECTION 6.     VACANCIES.   Any vacancy in any office for any cause
may be filled for the unexpired portion of the term in the manner prescribed in
these By-Laws for election or appointment to such office for such term.

    SECTION 7.     CHAIRMAN OF THE BOARD.   The Chairman of the Board,
who shall be chosen from among the Directors, shall preside at all meetings of
shareholders and at all meetings of the Board of Directors.  He shall perform
such other duties and have such other powers as, from time to time, may be
assigned to him by the Board of Directors.

    SECTION 8.     VICE CHAIRMAN OF THE BOARD.   The Vice Chairman
of the Board, who shall be chosen from among the directors, shall act in the
absence of the Chairman of the Board.  He shall perform such other duties and
have such other power as, from time to time, may be assigned to him by the Board
of Directors.

    SECTION 9.     PRESIDENT.   The President, who shall be chosen from
among the Directors, shall be the chief executive officer of the Corporation and
as such shall have general supervision of the affairs of the Corporation,
subject to the control of the Board of Directors.  He shall be an ex officio
member of all standing committees.  In the absence or disability of the Chairman
of the Board and Vice Chairman of the Board, the President shall preside all
meetings of shareholders and at all meetings of the Board of Directors.  Subject
to the control and direction of the Board of Directors, the President may enter
into any contract or execute and deliver any

                                         -8-

instrument in the name and on behalf of the Corporation.  In general, he shall
perform all duties and have all powers incident to the office of President, as
herein defined, and all such other duties and powers as, from time to time, may
be assigned to him by the Board of Directors.

    SECTION 10.    VICE PRESIDENTS.   The Vice Presidents in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the President and Executive Vice
President, perform the duties and exercise the powers of the President.  They
shall perform such other duties and have such other powers as the President or
the Board of Directors may from time to time assign.

    SECTION 11.    TREASURER.   The Treasurer shall have charge and
custody of, and be responsible for, all funds and securities of the Corporation
and shall deposit all such funds in the name of the Corporation in such banks or
other depositories as shall be selected by the Board of Directors.  He shall
upon request exhibit at all reasonable times his books of account and records to
any of the directors of the Corporation during business hours at the office of
the Corporation where such books and records shall be kept; shall render upon
request by the Board of Directors a statement of the condition of the finances
of the Corporation at any meeting of the Board of Directors or at the annual
meeting of the shareholders; shall receive, and give receipt for, moneys due and
payable to the Corporation from any source whatsoever; and in general, shall
perform all duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the President or the Board of
Directors.  The Treasurer shall give such bond, if any, for the faithful
discharge of his duties as the Board of Directors may require.

    SECTION 12.    SECRETARY.   The Secretary shall keep or cause to be
kept in the books provided for that purpose the minutes of the meetings of the
shareholders and of the Board of Directors; shall duly give and serve all
notices required to be given in accordance with the provisions of these By-Laws
and by The Indiana General Corporation Act; shall be custodian of the records
and of the seal of the Corporation and see that the seal is affixed to all
documents, the execution of which on behalf of the Corporation under its seal is
duly authorized in accordance with the provisions of these By-Laws; and, in
general, shall perform all duties incident to the office of Secretary and such
other duties as may, from time to time, be assigned to him by the President or
the Board of Directors.

    SECTION 13.    SALARIES.   The salaries of the principal officers shall
be fixed from time to time by the Board of Directors, and the salaries of any
subordinate officers may be fixed by the President.

    SECTION 14.    VOTING CORPORATION'S SECURITIES.   Unless
otherwise ordered by the Board of Directors, the Chairman of the Board, the
President and Secretary, and each of them, are appointed attorneys and agents of
the Corporation, and shall have full power and authority in the name and on
behalf of the Corporation, to attend, to act, and to vote all stock or other
securities entitled to be voted at any meetings of security holders of
corporations, or associations in which the Corporation may hold securities,
in person or by proxy, as a stockholder or otherwise, and at such meetings shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities, and which as the owner thereof the Corporation might have
possessed and exercised, if present, or to consent in writing to any action by
any such other corporation or association. The Board of Directors by resolution
from time to time may confer like powers upon any other person or persons.

                                         -9-

                                     ARTICLE VII

                                   INDEMNIFICATION

    SECTION 1.     INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS.   Every person who is or was a director, officer, employee
or agent of this Corporation or of any other corporation for which he is or was
serving in any capacity at the request of this Corporation shall be indemnified
by this Corporation against any and all liability and expense that may be
incurred by him in connection with or resulting from or arising out of any
claim, action, suit or proceeding, provided that such person is wholly
successful with respect thereto or acted in good faith in what he reasonably
believed to be in or not opposed to the best interests of this Corporation or
such other corporation, as the case may be, and, in addition, in any criminal
action or proceeding in which he had no reasonable cause to believe that his
conduct was unlawful.  As used herein, "claim, action, suit or proceeding" shall
include any claim, action, suit or proceeding (whether brought by or in the
right of this Corporation or such other corporation or otherwise), civil,
criminal, administrative or investigative, whether actual or threatened or in
connection with an appeal relating thereto, in which a director, officer,
employee or agent of this Corporation may become involved, as a party or
otherwise,

    (i)  by reason of his being or having been a director, officer, employee or
         agent of this Corporation or such other corporation or arising out of
         his status as such or

    (ii) by reason of any past or future action taken or not taken by him in
         any such capacity, whether or not he continues to be such at the time
         such liability or expense is incurred.

The terms "liability" and "expense" shall include, but shall not be limited to,
attorneys' fees and disbursements, amounts of judgments, fines or penalties, and
amounts paid in settlement by or on behalf of a director, officer, employee, or
agent, but shall not in any event include any liability or expenses on account
of profits realized by him in the purchase or sale of securities of the
Corporation in violation of the law.  The termination of any claim, action, suit
or proceeding, by judgment, settlement (whether with or without court approval)
or conviction or upon a plea of guilty or nolo contendere, or its equivalent,
shall not create a presumption that a director, officer, employee, or agent, did
not meet the standards of conduct set forth in this paragraph.

    Any such director, officer, employee, or agent, who has been wholly
successful with respect to any such claim, action, suit or proceeding shall be
entitled to indemnification as a matter of right.  Except as provided in the
preceding sentence, any indemnification hereunder shall be made only if

    (i)  the Board of Directors acting by a quorum consisting of Directors
         who are not parties to or who have been wholly successful with
         respect to such claim, action, suit or proceeding shall find that the
         director, officer, employee, or agent, has met the standards of
         conduct set forth in the preceding paragraph; or

    (ii) independent legal counsel shall deliver to the Corporation their
         written opinion that such director, officer, employee, or agent,
         has met such standards of conduct.

    If several claims, issues, or matters of action are involved, any such
person may be entitled to indemnification as to some matters even though he is
not entitled as to other matters.

    The Corporation may advance expenses to or, where appropriate, may at its
expense undertake the defense of any such director, officer, employee, or agent,
upon receipt of an undertaking by or on behalf of such person to repay such
expenses if it should ultimately be determined that he is not entitled to
indemnification hereunder.

                                         -10-

    The provisions of this Section shall be applicable to claims, actions,
suits or proceedings made or commenced after the adoption hereof, whether
arising from acts or omissions to act during, before or after adoption hereof.

    The rights of indemnification provided hereunder shall be in addition to
any rights to which any person concerned may otherwise be entitled by contract
or as a matter of law and shall inure to the benefit of the heirs, executors and
administrators of any such person.

    The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation
as a director, officer, employee, or agent of another corporation against any
liability asserted against him and incurred by him in any capacity or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify him against such liability under the provisions of this Section or
otherwise.

                                     ARTICLE VIII

                                      AMENDMENTS

    The power to make, alter, amend, or repeal these By-Laws is vested in the
Board of Directors, but the affirmative vote of a majority of the actual number
of directors elected and qualified, from time to time, shall be necessary to
effect any alteration, amendment or repeal of these By-Laws.

                                         -11-

                                  AMMENDMENTS TO THE
                        BY-LAWS OF FIRST MERCHANTS CORPORATION
                                      ARTICLE V

                                  BOARD OF DIRECTORS

    SECTION 1.     ELECTION, NUMBER AND TERM OF OFFICE.  The number of
Directors of the Corporation to be elected by the holders of the shares of stock
entitled by the Articles of Incorporation to elect Directors shall be sixteen
(16) unless changed by amendment of this Section by a two-thirds (2/3) vote of
the Directors.

    The Directors shall be divided into three (3) classes as nearly equal in
number as possible, all Directors to serve three (3) year terms, with one class
to be elected at each annual meeting of the shareholders, by the holders of the
shares of stock entitled by the Articles of Incorporation to elect Directors.
The classes to be originally elected for terms expiring at the annual meetings
of the shareholders to be held in 1986 and 1987 shall each have five (5)
Directors, and the class to be originally elected for a term expiring at the
annual meeting of the shareholders to be held in 1988 shall have six (6)
Directors.  No decrease in the number of Directors shall have the effect of
shortening the term of any incumbent Director.

    All Directors elected by the holders of such shares, except in the case of
earlier resignation, removal or death, shall hold office until their respective
successors are chosen and qualified.  Directors need not be shareholders of the
Corporation.

    The provisions of this Section of the By-Laws may not be changed or amended
except by a two-thirds (2/3) vote of the Board of Directors.

    SECTION 2.     VACANCIES.  Any vacancy occurring in the Board of Directors
caused by resignation, death or other incapacity, or an increase in the number
of Directors, shall be filled by a majority vote of the remaining members of the
Board of Directors, until the next annual meeting of the shareholders, or at the
discretion of the Board of Directors, such vacancy may be filled by a vote of
the shareholders at a special meeting called for that purpose.

    SECTION 8.     REMOVAL.  Any or all members of the Board of Directors may
be removed, with or without cause, at a meeting of the shareholders called
expressly for that purpose by the affirmative vote of the holders of not less
than two-thirds (2/3) of the outstanding shares of capital stock then entitled
to vote on the election of Directors, except that if the Board of Directors, by
an affirmative vote of at least two-thirds (2/3) of the entire Board of
Directors, recommends removal of a Director to the shareholders, such removal
may be effected by the affirmative vote of the holders of not less than a
majority of the outstanding  shares of capital stock then entitled to vote on
the election of Directors at a meeting of shareholders called expressly for that
purpose.

    The provisions in this Section of the By-Laws may not be changed or amended
except by a two-thirds (2/3) vote of the Board of Directors.

                                     ARTICLE VIII
                                      AMENDMENTS

Except as expressly provided herein or in the Articles of Incorporation, the
Board of Directors may make, alter, amend or repeal these By-Laws by an
affirmative vote of a majority of the actual number of Directors elected and
qualified.

Dated:  February 12, 1985

                                         -12-

                                   AMENDMENT TO THE
                        BY-LAWS OF FIRST MERCHANTS CORPORATION

    RESOLVED that Article V, Section 1, of the By-Laws of the Corporation is
    hereby amended to read as follows, effective immediately:

         SECTION 1.     ELECTION, NUMBER AND TERM OF OFFICE.
    The number of Directors of the Corporation to be elected by the holders of
    the shares of stock entitled by the Articles of Incorporation to elect
    Directors shall be fifteen (15) unless changed by amendment of this
    Section by a two-thirds (2/3) vote of the Board of Directors.

    The Directors shall be divided into three (3) classes, all Directors to
    serve three (3) year terms, with one class to be elected at each annual
    meeting of the shareholders, by the holders of the shares of stock entitled
    by the Articles of Incorporation to elect Directors.  Unless the number of
    Directors is changed by amendment of this Section, Class I shall have five
    (5) Directors, Class II shall have six (6) Directors, and Class III shall
    have four (4) Directors.  No decrease in the number of Directors shall
    have the effect of shortening the term of any incumbent Director.

    All Directors elected by the holders of such shares, except in the case
    of earlier resignation, removal or death, shall hold office until their
    respective successors are chosen and qualified.

    The provisions of this Section of the Bylaws may not be changed or
    amended except by a two-thirds (2/3) vote of the Board of Directors.

    FURTHER RESOLVED that George A. Sissel is hereby elected a Director
    of the Corporation, and that he shall fill the vacancy in Class I by the
    increase in the number of Directors.

    Date:   June 13, 1995

                                         -13-

                        AGREEMENT OF REORGANIZATION AND MERGER

                                       BETWEEN

                             FIRST MERCHANTS CORPORATION

                                         AND

                               RANDOLPH COUNTY BANCORP

    THIS AGREEMENT OF REORGANIZATION AND MERGER ("Agreement"), is entered this
17th day of January, 1996, by and between FIRST MERCHANTS CORPORATION ("First
Merchants") and RANDOLPH COUNTY BANCORP ("Randolph County").

                                 W I T N E S S E T H:

    WHEREAS, First Merchants is a corporation duly organized and existing under
the laws of the State of Indiana and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, with its principal place of
business in Muncie, Delaware County, Indiana.

    WHEREAS, Randolph County is a corporation duly organized and existing under
the laws of the State of Indiana and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, with its principal place of
business in Winchester, Randolph County, Indiana.

    WHEREAS, The Randolph County Bank (the "Bank") is a banking institution
duly organized and existing under the laws of the State of Indiana and a
wholly-owned subsidiary of Randolph County with its principal banking office in
Winchester, Randolph County, Indiana.

    WHEREAS, it is the desire of First Merchants and Randolph County to effect
a transaction whereby the Bank will become a wholly-owned subsidiary of First
Merchants through a statutory merger of Randolph County with and into First
Merchants.

    WHEREAS, a majority of the entire Board of Directors of First Merchants and
a majority of the entire Board of Directors of Randolph County have approved
this Agreement, designated it as a plan of reorganization within the provisions
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and authorized its execution.

    NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, First Merchants and Randolph County
hereby make this Agreement and prescribe the terms and conditions of the merger
of

Randolph County with and into First Merchants and the mode of carrying the
transaction into effect as follows:

                                      SECTION 1

                                      THE MERGER

    Subject to the terms and conditions of this Agreement, on the Effective
Date, as defined in Section 11 hereof, Randolph County shall be merged into and
under the Articles of Incorporation of First Merchants, which shall be the
"Continuing Company" and which shall continue its corporate existence under the
laws of the State of Indiana, pursuant to the provisions of and with the effect
provided in the Indiana Business Corporation Law and particularly Indiana Code
chapter 23-1-40 (the "Merger").

                                      SECTION 2

                                 EFFECT OF THE MERGER

    Upon the Merger becoming effective:

    2.01.  GENERAL DESCRIPTION.  The separate existence of Randolph County
shall cease and the Continuing Company shall possess all of the assets of
Randolph County including all of the issued and outstanding shares of capital
stock of the Bank and all of its rights, privileges, immunities, powers, and
franchises and shall be subject to and assume all of the duties and liabilities
of Randolph County.

    2.02.  NAME, OFFICES, AND MANAGEMENT.  The name of the Continuing Company
shall continue to be "First Merchants Corporation."  Its principal banking
office shall be located at 200 E. Jackson Street, Muncie, Indiana.  The Board of
Directors of the Continuing Company, until such time as their successors have
been elected and qualified, shall consist of the current Board of Directors of
First Merchants.  The officers of First Merchants immediately prior to the
Effective Date shall continue as the officers of the Continuing Company.

    2.03.  CAPITAL STRUCTURE.  The amount of capital stock of the Continuing
Company shall not be less than the capital stock of First Merchants immediately
prior to the Effective Date increased by the amount of capital stock issued in
accordance with Section 3 hereof.

    2.04.  ARTICLES OF INCORPORATION AND BYLAWS.  The Articles of Incorporation
and Bylaws of the Continuing Company shall be those

                                        Page 2

of First Merchants immediately prior to the Effective Date until the same shall
be further amended as provided by law.

    2.05.  ASSETS AND LIABILITIES.  The title to all assets, real estate and
other property owned by First Merchants and Randolph County shall vest in the
Continuing Company without reversion or impairment.  All liabilities of Randolph
County shall be assumed by the Continuing Company.

                                      SECTION 3

                                 CONSIDERATION TO BE
                    DISTRIBUTED TO SHAREHOLDERS OF RANDOLPH COUNTY

    3.01.  CONSIDERATION.  Upon and by reason of the Merger becoming effective,
shareholders of Randolph County of record on the Effective Date who have not
dissented to the Merger in accordance with Indiana Code Section 23-1-44, as
amended, shall be entitled to receive twenty and 53/100 (20.53) shares of First
Merchants common stock for each share of Randolph County common stock held.

    3.02.  NO FRACTIONAL FIRST MERCHANTS COMMON SHARES.  Certificates for
fractional shares of common stock of First Merchants shall not be issued in
respect of fractional interests arising from the exchange ratio.  Each Randolph
County shareholder who would otherwise have been entitled to a fraction of a
First Merchants share, upon surrender of all of his/her certificates
representing Randolph County common shares, shall be paid in cash in an amount
equal to the fraction of the average of the closing price of First Merchants
common stock as quoted by NASDAQ for the five business days preceding the
Effective Date.

    3.03.  RECAPITALIZATION.  If, between the date of this Agreement and the
Effective Date, First Merchants issues a stock dividend with respect to its
shares of common stock, combines, subdivides, or splits up its outstanding
shares or takes any similar recapitalization action, then the number of shares
of First Merchants common stock into which each outstanding Randolph County
share will be converted under Section 3.01 hereof shall be adjusted so that each
Randolph County shareholder shall receive such number of First Merchants shares
as represents the same percentage of outstanding shares of First Merchants
common stock at the Effective Date as would have been represented by the number
of shares such shareholder would have received if the recapitalization had not
occurred.

                                        Page 3

    3.04.  DISTRIBUTION OF FIRST MERCHANTS COMMON STOCK AND CASH.

         (a)  Following the Effective Date, distribution of stock certificates
    representing First Merchants common stock and cash payments for fractional
    shares shall be made by First Merchants to each former shareholder of
    Randolph County within ten (10) days of such shareholder's delivery of
    his/her certificates representing common stock of Randolph County to the
    conversion agent, First Merchants Bank (the "Conversion Agent").  Interest
    shall not accrue or be payable with respect to any cash payments.

         (b)  Following the Effective Date, stock certificates representing
    Randolph County common stock shall be deemed to evidence only the right to
    receive ownership of First Merchants common stock (for all corporate
    purposes other than the payment of dividends) and cash for fractional
    shares, as applicable.  No dividends or other distributions otherwise
    payable subsequent to the Effective Date on stock of First Merchants shall
    be paid to any shareholder entitled to receive the same until such
    shareholder has surrendered his/her certificates for Randolph County common
    stock to the Conversion Agent in exchange for certificates representing
    First Merchants common stock and cash.  Upon surrender, there shall be paid
    to the recordholder of the new certificate(s) evidencing shares of First
    Merchants common stock, the amount of all dividends and other
    distributions, without interest thereon, withheld with respect to such
    common stock.

         (c)  First Merchants shall be entitled to rely upon the stock transfer
    books of Randolph County to establish the persons entitled to receive cash
    and shares of common stock of First Merchants, which books, in the absence
    of actual knowledge by First Merchants of any adverse claim thereto, shall
    be conclusive with respect to the ownership of such stock.

         (d)  With respect to any certificate for shares of Randolph County
    common stock which has been lost, stolen, or destroyed, First Merchants
    shall be authorized to issue common stock to the registered owner of such
    certificate upon receipt of an affidavit of lost stock certificate, in form
    and substance satisfactory to First Merchants, and upon compliance by the
    Randolph County shareholder with all procedures historically required by
    Randolph County in connection with lost, stolen, or destroyed certificates.

                                        Page 4

                                      SECTION 4

                               DISSENTING SHAREHOLDERS

    Shareholders of Randolph County shall have the rights accorded to
dissenting shareholders under Indiana Code Section 23-1-44, as amended.

                                      SECTION 5

                                 REPRESENTATIONS AND
                            WARRANTIES OF RANDOLPH COUNTY

    Randolph County represents and warrants to First Merchants with respect to
itself and the Bank as follows:  (For the purposes of this Section, a
"Disclosure Letter" is defined as a letter referencing Section 5 of this
Agreement which shall be prepared and executed by an authorized executive
officer of Randolph County and delivered to and initialed by an authorized
executive officer of First Merchants contemporaneous with the execution of this
Agreement.)

    5.01.  ORGANIZATION AND AUTHORITY.  Randolph County is a corporation duly
organized and validly existing under the laws of the State of Indiana, and Bank
is a state banking association duly organized and validly existing under the
laws of the State of Indiana.  Randolph County and Bank have the power and
authority (corporate and other) to conduct their respective businesses in the
manner and by the means utilized as of the date hereof.  Randolph County's only
subsidiary is Bank, and Bank has no subsidiaries.  Bank is subject to primary
federal regulatory supervision and regulation by the Federal Deposit Insurance
Corporation.

    5.02.  AUTHORIZATION.

         (a)  Randolph County has the corporate power and authority to enter
    into this Agreement and to carry out its obligations hereunder.  This
    Agreement, when executed and delivered, will have been duly authorized and
    will constitute a valid and binding obligation of Randolph County,
    enforceable in accordance with its terms except to the extent limited by
    insolvency, reorganization, liquidation, readjustment of debt or other laws
    of general application relating to or affecting the enforcement of
    creditors' rights.

         (b)  Neither the execution of this Agreement, nor the consummation of
    the transactions contemplated hereby, does or will (i) conflict with,
    result in a breach of, or constitute

                                        Page 5

    a default under Randolph County's Articles of Incorporation or By-Laws or,
    to the best of its knowledge, any federal, foreign, state or local law,
    statute, ordinance, rule, regulation or court or administrative order or
    decree, or any note, bond, indenture, mortgage, security agreement,
    contract, arrangement or commitment, to which Randolph County or Bank is
    subject or bound, the result of which would materially affect the business
    or financial condition of Randolph County or the Bank; (ii) result in the
    creation of or give any person the right to create any lien, charge,
    encumbrance, security interest, or any other rights of others or other
    adverse interest upon any right, property or asset of Randolph County or
    Bank; (iii) terminate or give any person, corporation or entity, the right
    to terminate, amend, abandon, or refuse to perform any note, bond,
    indenture, mortgage, security agreement, contract, arrangement or
    commitment to which Randolph County or Bank is subject or bound; or (iv)
    accelerate or modify, or give any party thereto the right to accelerate or
    modify, the time within which, or the terms according to which, Randolph
    County is to perform any duties or obligations or receive any rights or
    benefits under any note, bond, indenture, mortgage, security agreement,
    contract, arrangement or commitment.

         (c)  Other than in connection or in compliance with the provisions of
    the Bank Holding Company Act of 1956, federal and state securities laws and
    applicable Indiana banking and corporate statutes, all as amended, and the
    rules and regulations promulgated thereunder, no notice to, filing with,
    authorization of, exemption by, or consent or approval of, any public body
    or authority is necessary for the consummation by Randolph County of the
    transactions contemplated by this Agreement.

    5.03.  CAPITALIZATION.

         (a) As of December 31, 1995, Randolph County had 60,000 shares of
    common stock authorized, no par value per share, 27,555 shares of which
    were issued and outstanding.  Such issued and outstanding shares of
    Randolph County common stock have been duly and validly authorized by all
    necessary corporate action of Randolph County, are validly issued, fully
    paid and nonassessable and have not been issued in violation of any
    preemptive rights of any shareholders.  Randolph County has no intention or
    obligation to authorize or issue additional shares of its common stock.
    Randolph County has not authorized the issuance of any other class of
    stock.  On a consolidated basis as of December 31, 1995, Randolph County
    had total capital of $8,902,996, which consisted of common

                                        Page 6

    stock of $2,755,500, additional capital of $709,036, retained earnings of
    $5,399,994, and unrealized gain of $38,466.

         (b) As of December 31, 1995, Bank had 1,000 shares of common stock
    authorized, $100.00 par value per share, all of which shares were issued
    and outstanding to Randolph County.  Such issued and outstanding shares of
    Bank common stock have been duly and validly authorized by all necessary
    corporate action of Bank, are validly issued, fully paid and nonassessable,
    and have not been issued in violation of any preemptive rights of any Bank
    shareholders.  All the issued and outstanding shares of Bank common stock
    are owned by Randolph County free and clear of all liens, pledges, charges,
    claims, encumbrances, restrictions, security interests, options and
    preemptive rights and of all other rights of any other person, corporation
    or entity with respect thereto.  As of December 31, 1995, Bank had total
    capital of $8,906,739, which consisted of common stock of $100,000, capital
    surplus of $2,500,000, undivided profits of $6,268,273, and unrealized gain
    of $38,466.

         (c)  There are no options, commitments, calls, agreements,
    understandings, arrangements or subscription rights regarding the issuance,
    purchase or acquisition of capital stock, or any securities convertible
    into or representing the right to purchase or otherwise receive the capital
    stock or any debt securities, of Randolph County or Bank by which Randolph
    County or Bank is or may become bound.  Neither Randolph County or Bank has
    any outstanding contractual or other obligation to repurchase, redeem or
    otherwise acquire any of its respective outstanding shares of capital
    stock.

         (d)  Except as set forth in the Disclosure Letter, no person or entity
    beneficially owns 5% or more of Randolph County's outstanding shares of
    common stock.

    5.04.  ORGANIZATIONAL DOCUMENTS.  The respective Articles of Incorporation
or Association and By-Laws of Randolph County and Bank have been delivered to
First Merchants and represent true, accurate and complete copies of such
corporate documents of Randolph County and Bank in effect as of the date of this
Agreement.

    5.05.  COMPLIANCE WITH LAW.  Neither Randolph County nor Bank has engaged
in any activity nor taken or omitted to take any action which has resulted or,
to the knowledge of Randolph County could result, in the violation of any local,
state, federal or foreign law, statute, rule, regulation or ordinance or of any
order, injunction, judgment or decree of any court or government agency or

                                        Page 7

body, the violation of which could materially affect the business, prospects,
condition (financial or otherwise) or results of operations of Randolph County
or Bank.  Randolph County and Bank possess all licenses, franchises, permits and
other authorizations necessary for the continued conduct of their respective
businesses without material interference or interruption and such licenses,
franchises, permits and authorizations shall be transferred to First Merchants
on the Effective Date without any restrictions or limitations thereon or the
need to obtain any consents of third parties.  All agreements and understandings
with, and all orders and directives of, all regulatory agencies or government
authorities with respect to the business or operations of Randolph County or
Bank, including all correspondence, communications and commitments related
thereto, are set forth in the Disclosure Letter.  Bank has received no inquiries
from any regulatory agency or government authority relating to its compliance
with the Bank Secrecy Act, the Truth-in-Lending Act or the Community
Reinvestment Act or any laws with respect to the protection  of the environment
or the rules and regulations promulgated thereunder.

    5.06.  ACCURACY OF STATEMENTS.  Neither this Agreement nor any report,
statement, list, certificate or other information furnished or to be furnished
by Randolph County or Bank to First Merchants in connection with this Agreement
or any of the transactions contemplated hereby (including, without limitation,
any information which has been or shall be supplied by Randolph County or Bank
with respect to their businesses, operations and financial condition for
inclusion in the proxy statement and registration statement relating to the
Merger) contains or shall contain (in the case of information relating to the
proxy statement at the time it is mailed and for the registration statement at
the time it becomes effective) any untrue statement of a material fact or omits
or shall omit to state a material fact necessary to make the statements
contained herein or therein not misleading.

    5.07.  LITIGATION AND PENDING PROCEEDINGS.  Except as set forth in the
Disclosure Letter, there are no material claims of any kind, nor any material
action, suits, proceedings, arbitrations or investigations pending or to the
knowledge of Randolph County or Bank threatened in any court or before any
government agency or body, arbitration panel or otherwise (nor does Randolph
County or Bank have any knowledge of a basis for any claim, action, suit,
proceeding, arbitration or investigation) against, by or materially adversely
affecting Randolph County or Bank or their respective officers and/or directors,
businesses, prospects, conditions (financial or otherwise), results of
operations or assets, or which would prevent the performance of this Agreement
or declare the same unlawful or cause the rescission hereof.  There are no
material uncured violations, or violations with respect to which material
refunds or restitutions may be required, cited in any compliance

                                        Page 8

report to Randolph County or Bank as a result of an examination by any
regulatory agency or body.

    5.08.  FINANCIAL STATEMENTS.

         (a)  Randolph County's consolidated balance sheets as of the end of
    the three fiscal years ended December 31, 1992, 1993 and 1994 and the nine
    months ended September 30, 1995 and the related consolidated statements of
    income, shareholders' equity and cash flows for the years or period then
    ended (hereinafter collectively referred to as the "Financial Information")
    present fairly the consolidated financial condition or position of Randolph
    County as of the respective dates thereof and the consolidated results of
    operations of Randolph County for the respective periods covered thereby
    and have been prepared in conformity with generally accepted accounting
    principles applied on a consistent basis.  All required regulatory reports
    have been filed by Randolph County and Bank with their respective primary
    federal regulators during 1995, 1994, 1993 and 1992, are true, accurate and
    complete and were prepared in conformity with generally accepted regulatory
    accounting principles applied on a consistent basis.

         (b)  All loans reflected in the Financial Information and which have
    been made, extended or acquired since September 30, 1995, (i) have been
    made for good, valuable and adequate consideration in the ordinary course
    of business; (ii) constitute the legal, valid and binding obligation of the
    obligor and any guarantor named therein; (iii) are evidenced by notes,
    instruments or other evidences of indebtedness which are true, genuine and
    what they purport to be; and (iv) to the extent that Bank has a security
    interest in collateral or a mortgage securing such loans, are secured by
    perfected security interests or mortgages naming Bank as the secured party
    or mortgagee.

    5.09.  ABSENCE OF CERTAIN CHANGES.  Except for events and conditions
relating to the business environment in general or as set forth in the
Disclosure Letter, since September 30, 1995, no events or conditions of any
character, whether actual, threatened or contemplated, have occurred, or, to the
knowledge of Randolph County, can reasonably be expected to occur, which
materially adversely affect Randolph County's or Bank's business, prospects,
conditions (financial or otherwise), assets or results of operations or which
have caused, or can reasonably be expected to cause, Randolph County's or Bank's
business to be conducted in a materially less profitable manner than prior to
September 30, 1995.

                                        Page 9

    5.10.  ABSENCE OF UNDISCLOSED LIABILITIES.  Neither Randolph County nor
Bank is a party to any agreement, contract, obligation, commitment, arrangement,
liability, lease or license which individually exceeds $10,000 per year or which
may not be terminated within one year from the date of this Agreement, except as
set forth in the Disclosure Letter and except for unfunded loan commitments made
in the ordinary course of Bank's business consistent with past practices, nor to
the knowledge of Randolph County, does there exist any circumstances resulting
from transactions effected or to be effected or events which have occurred or
may occur or from any action taken or omitted to be taken which could reasonably
be expected to result in any such agreement, contract, obligation, commitment,
arrangement, liability, lease or license.

    5.11.  TITLE TO ASSETS.  Except as set forth in the Disclosure Letter,
Randolph County and Bank have good and marketable title in fee simple absolute
to all real property (including, without limitation, all real property used as
bank holding company or bank premises and all other real estate owned) and
personal property reflected in the Financial Information as of September 30,
1995, good and marketable title to all other properties and assets which
Randolph County or Bank purport to own, good and marketable title to or right to
use by terms of lease or contract all other property used in Randolph County's
or Bank's business and good and marketable title to all property and assets
acquired since September 30, 1995, free and clear of all mortgages, liens,
pledges, restrictions, security interests, charges, claims or encumbrances of
any nature.  All real property owned by Randolph County or Bank is in compliance
with all applicable zoning laws and all laws, statutes, rules, regulations and
ordinances relating to the environment, pollution and the treatment, storage,
disposal, discharge or release of chemicals and hazardous or toxic substances or
wastes.

    5.12.  LOANS AND INVESTMENTS.

         (a)  Except as set forth in the Disclosure Letter, there is no loan of
    Bank in excess of $10,000 that has been classified by bank regulatory
    examiners as "Other Loans Specially Mentioned," "Substandard," "Doubtful"
    or "Loss," nor is there any loan of Bank in excess of $10,000 that has been
    identified by accountants or auditors (internal or external) as having a
    significant risk of uncollectibility.
    Bank's loan watch list and all loans in excess if $10,000 that Bank's
    management has determined to be ninety (90) days or more past due with
    respect to principal or interest or has placed on nonaccrual status are set
    forth in the Disclosure Letter.

                                       Page 10

         (b)  Each of the reserves and allowances for possible loan losses and
    the carrying value for real estate owned which are shown on the Financial
    Information is, in the opinion of Randolph County and Bank, adequate in all
    material respects under the requirements of generally accepted accounting
    principles applied on a consistent basis to provide for possible losses on
    loans outstanding and real estate owned as of the date of such Financial
    Information.

         (c)  Except as set forth in the Disclosure Letter, none of the
    investments reflected in the Financial Information and none of the
    investments made by Randolph County or Bank since September 30, 1995 is
    subject to any restrictions, whether contractual or statutory, which
    materially impairs the ability of Randolph County or Bank to dispose freely
    of such investment at any time.  Except as set forth in the Disclosure
    Letter, neither Randolph County nor Bank are a party to any repurchase
    agreements with respect to securities.

    5.13.  EMPLOYEE BENEFIT PLANS.

         (a)  The Disclosure Letter contains a list identifying each "employee
    benefit plan," as defined in Section 3(3) of the Employee Retirement Income
    Security Act of 1974, as amended ("ERISA"), which (i) is subject to any
    provision of ERISA, and (ii) is maintained, administered or contributed to
    by Randolph County or Bank and covers any employee or former employee of
    Randolph County or Bank under which Randolph County or Bank has any
    liability.  Copies of such plans (and, if applicable, related trust
    agreements or insurance contracts) and all amendments thereto and written
    interpretations thereof have been furnished to First Merchants together
    with the three most recent annual reports prepared in connection with any
    such plan and the current summary plan descriptions.  Such plans are
    hereinafter referred to individually as an "Employee Plan" and collectively
    as the "Employee Plans."  The Employee Plans which individually or
    collectively would constitute an "employee pension benefit plan" as defined
    in Section 3(2) of ERISA are identified in the list referred to above.

         (b)  The Employee Plans comply with and have been operated in
    accordance with all applicable laws, regulations, rulings and other
    requirements the breach or violation of which could materially affect
    Randolph County, Bank, or an Employee Plan.  Each Employee Plan has been
    administered in substantial conformance with such requirements and all
    reports and information required with respect to each Employee Plan has
    been timely given.

                                       Page 11

         (c)  No "prohibited transaction," as defined in Section 406 of ERISA
    or Section 4975 of the Code, for which no statutory or administrative
    exemption exists, and no "reportable event," as defined in Section 4043(b)
    of ERISA, has occurred with respect to any Employee Plan.  Neither Randolph
    County or Bank has any liability to the Pension Benefit Guaranty
    Corporation ("PBGC"), to the Internal Revenue Service ("IRS"), to the
    Department of Labor ("DOL") or to an employee or Employee Plan beneficiary
    under Section 502 of ERISA.

         (d)  No "fiduciary," as defined in Section (3)(21) of ERISA, of an
    Employee Plan has failed to comply with the requirements of Section 404 of
    ERISA.

         (e)  Each of the Employee Plans which is intended to be qualified
    under Code Section 401(a) has been amended to comply in all material
    respects with the applicable requirements of the Code, including the Tax
    Reform Act of 1986, the Revenue Act of 1987, the Technical and
    Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of
    1989, the Revenue Reconciliation Act of 1990, the Tax Extension Act of
    1991, the Unemployment Compensation Amendments of 1992, the Omnibus Budget
    Reconciliation Act of 1993, and the Retirement Protection Act of 1994 and
    any rules, regulations or other requirements promulgated thereunder (the
    "Acts").  In addition, each such Employee Plan has been and is being
    operated in substantial conformance with the applicable provisions of ERISA
    and the Code, as amended by the Acts.  Except as set forth in the
    Disclosure Letter, Randolph County and/or Bank, as applicable, sought and
    received favorable determination letters from the IRS within the applicable
    remedial amendment periods under Code Section 401(b), and has furnished to
    First Merchants copies of the most recent IRS determination letters with
    respect to any such Employee Plan.

         (f)  Except as set forth in the Disclosure Letter, no Employee Plan
    owns any security of Randolph County or Bank.

         (g)  No Employee Plan has incurred an "accumulated funding
    deficiency," as determined under Code Section 412 and ERISA Section 302.

         (h)  No Employee Plan has been terminated or incurred a partial
    termination (either voluntarily or involuntarily).

         (i)  No claims against an Employee Plan, Randolph County or Bank, with
    respect to an Employee Plan, (other than normal benefit claims) have been
    asserted or threatened.

                                       Page 12

         (j)  There is no contract, agreement, plan or arrangement covering any
    employee or former employee of Randolph County or Bank that, individually
    or collectively, could give rise to the payment of any amount that would
    not be deductible by reason of Section 280G or Section 162(a)(1) of the
    Code.

         (k)  No event has occurred that would cause the imposition of the tax
    described in Code Section 4980B.  All requirements of ERISA Section 601
    have been met.

         (l)  The Disclosure Letter contains a list of each employment,
    severance or other similar contract, arrangement or policy and each plan or
    arrangement (written or oral) providing for insurance coverage (including
    any self-insured arrangements), workers' compensation, disability benefits,
    supplemental unemployment benefits, vacation benefits, retirement benefits
    or deferred compensation, profit sharing, bonuses, stock options, stock
    appreciation or other forms of incentive compensation or post-retirement
    insurance, compensation or benefits which (i) is not an Employee Plan, (ii)
    was entered into, maintained or contributed to, as the case may be, by
    Randolph County or Bank and (iii) covers any employee or former employee of
    Randolph County or Bank.  Such contracts, plans and arrangements as are
    described above, copies or descriptions of all of which have been furnished
    previously to First Merchants, are hereinafter referred to collectively as
    the "Benefit Arrangements."  Each of the Benefit Arrangements has been
    maintained in substantial compliance with its terms and with the
    requirements prescribed by any and all statutes, orders, rules and
    regulations which are applicable to such Benefit Arrangements.

         (m)  Except as set forth in the Disclosure Letter, neither Randolph
    County nor Bank has any present or future liability in respect of
    post-retirement health and medical benefits for former employees of
    Randolph County or Bank.

         (n)  Except as set forth in the Disclosure Letter, there has been no
    amendment to, written interpretation or announcement (whether or not
    written) by Randolph County or Bank relating to, or change in employee
    participation or coverage under, any Employee Plan or Benefit Arrangement
    which would increase materially the expense of maintaining such Employee
    Plans or Benefit Arrangements above the level of the expense incurred in
    respect thereof for the fiscal year ended December 31, 1994.

         (o)  For purposes of this Section 5.13, references to Randolph County
    or Bank are deemed to include (i) all predecessors of Randolph County or
    Bank, (ii) any subsidiary

                                       Page 13

    of Randolph County or Bank, (iii) all members of any controlled group (as
    determined under Code Section 414(b) or (c)) that includes Randolph County
    or Bank, and (iv) all members of any affiliated service group (as
    determined under Code Section 414(m) or (n)) that includes Randolph County
    or Bank.

    5.14  OBLIGATIONS TO EMPLOYEES.  Except as set forth in the Disclosure
Letter, all accrued obligations and liabilities of Randolph County and Bank,
whether arising by operation of law, by contract or by past custom, for payments
to trust or other funds, to any government agency or body or to any individual
director, officer, employee or agent (or his heirs, legatees or legal
representative) with respect to unemployment compensation or social security
benefits and all pension, retirement, savings, stock purchase, stock bonus,
stock ownership, stock option, stock appreciation rights or profit sharing plan,
any employment, deferred compensation, consultant, bonus or collective
bargaining agreement or group insurance contract or other incentive, welfare or
employee benefit plan or agreement maintained by Randolph County or Bank for
their current or former directors, officers, employees and agents have been and
are being paid to the extent required by law or by the plan or contract, and
adequate actuarial accruals and/or reserves for such payments have been and are
being made by Randolph County or Bank in accordance with generally accepted
accounting and actuarial principles.  All obligations and liabilities of
Randolph County and Bank, whether arising by operation of law, by contract, or
by past custom, for all forms of compensation which are or may be payable to
their current or former directors, officers, employees or agents have been and
are being paid, and adequate accruals and/or reserves for payment therefor have
been and are being made in accordance with generally accepted accounting
principles.  All accruals and reserves referred to in this Section 5.14, are
correctly and accurately reflected and accounted for in the books, statements
and records of Randolph County and Bank.

    5.15.  TAXES, RETURNS AND REPORTS.  Randolph County and Bank have (a) duly
filed all federal, state, local and foreign tax returns of every type and kind
required to be filed as of the date hereof, and each return is true, complete
and accurate in all material respects; (b) paid in all materials respects all
taxes, assessments and other governmental charges due or claimed to be due upon
them or any of their income, properties or assets; and (c) not requested an
extension of time for any such payments (which extension is still in force).
Except for taxes not yet due and payable, the reserve for taxes on the Financial
Information is adequate to cover all of Randolph County's and Bank's tax
liabilities (including, without limitation, income taxes and franchise fees)
that may become payable in future years with

                                       Page 14

respect to any transactions consummated prior to December 31, 1994.  Neither
Randolph County nor Bank has or will have, any liability for taxes of any nature
for or with respect to the operation of their business, including the assets of
any subsidiary, from December 31, 1994 up to and including the Effective Date,
except to the extent reflected on their Financial Information or on financial
statements of Randolph County or Bank subsequent to such date and as set forth
in the Disclosure Letter.  Neither Randolph County nor Bank is currently under
audit by any state or federal taxing authority.  Except as set forth in the
Disclosure Letter, neither the federal, state, or local tax returns of Randolph
County or Bank have been audited by any taxing authority during the past five
(5) years.

    5.16.  DEPOSIT INSURANCE.  The deposits of Bank are insured by the Federal
Deposit Insurance Corporation ("FDIC") in accordance with the Federal Deposit
Insurance Act, and Bank has paid all premiums and assessments with respect to
such deposit insurance.

    5.17.  BROKER'S OR FINDER'S FEES.  Except as set forth in the Disclosure
Letter, no agent, broker or other person acting on behalf of Randolph County or
Bank or under any authority of Randolph County or Bank is or shall be entitled
to any commission, broker's or finder's fee or any other form of compensation or
payment from any of the parties hereto, other than attorneys' or accountants'
fees, in connection with any of the transactions contemplated by this Agreement.

    5.18.  BRING DOWN OF REPRESENTATIONS AND WARRANTIES.  All representations
and warranties of Randolph County and Bank contained in this Section 5 shall be
true, accurate and correct on and as of the Effective Date except as affected by
the transactions contemplated by and specified within the terms of this
Agreement.

    5.19.  NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.  The representations
and warranties contained in this Section 5 shall expire on the Effective Date,
and thereafter Randolph County and Bank and all directors, officers and
employees of Randolph County and Bank shall have no further liability with
respect thereto unless a court of competent jurisdiction should determine that
any misrepresentation or breach of a warranty was willfully or intentionally
caused either by action or inaction.

                                       Page 15

                                      SECTION 6

                                 REPRESENTATIONS AND
                            WARRANTIES OF FIRST MERCHANTS

    First Merchants hereby represents and warrants to Randolph County as
follows:

    6.01.  ORGANIZATION AND QUALIFICATION.  First Merchants is a corporation
organized and existing under the laws of the State of Indiana and has the
corporate power and authority to conduct its business in the manner and by the
means utilized as of the date hereof.

    6.02.  AUTHORIZATION.

         (a)  First Merchants has the corporate power and authority to enter
    into this Agreement and to carry out its obligations hereunder subject to
    certain required regulatory approvals.  The Agreement, when executed and
    delivered, will have been duly authorized and will constitute a valid and
    binding obligation of First Merchants, enforceable in accordance with its
    terms, except to the extent limited by insolvency, reorganization,
    liquidation, readjustment of debt, or other laws of general application
    relating to or affecting the enforcement of creditor's rights.

         (b)  Neither the execution of this Agreement, nor the consummation of
    the transactions contemplated hereby, does or will (i) conflict with,
    result in a breach of, or constitute a default under First Merchant's
    Articles of Incorporation or By-laws or, to the best of its knowledge, any
    federal, foreign, state, or local law, statute, ordinance, rule,
    regulation, or court or administrative order or decree, or any note, bond,
    indenture, mortgage, security agreement, contract, arrangement, or
    commitment, to which First Merchants is subject or bound, the result of
    which would materially affect the business or financial condition of First
    Merchants; (ii) result in the creation of or give any person the right to
    create any lien, charge, claim, encumbrance, security interest, or any
    other rights of others or other adverse interest upon any right, property
    or asset of First Merchants; (iii) terminate or give any person,
    corporation or entity the right to terminate, amend, abandon, or refuse to
    perform any note, bond, indenture, mortgage, security agreement, contract,
    arrangement, or commitment to which First Merchants is a party or by which
    First Merchant is subject or bound; or (iv) accelerate or modify, or give
    any party thereto the right to accelerate or modify, the time within which,
    or the terms according to which, First Merchants is to perform any duties

                                       Page 16

    or obligations or receive any rights or benefits under any note, bond,
    indenture, mortgage, security agreement, contract, arrangement, or
    commitment.

         (c)  Other than in connection or in compliance with the provisions of
    the Bank Holding Company Act of 1956, federal and state securities laws,
    and applicable Indiana banking and corporate statutes, all as amended, and
    the rules and regulations promulgated thereunder, no notice to, filing
    with, authorization of, exemption by, or consent or approval of, any public
    body or authority is necessary for the consummation by First Merchants of
    the transactions contemplated by this Agreement.

    6.03.  CAPITALIZATION.

         (a)  At December 31, 1995 First Merchants had 20,000,000 authorized,
    no par value, of which 5,053,901 shares were issued and outstanding.  The
    5,053,901 shares of common stock are validly issued, fully paid and
    nonassessable.

         (b)  First Merchants has 500,000 shares of Preferred Stock authorized,
    no par value, no shares of which have been issued and no commitments exist
    to issue any of such shares.

         (c)  Other than in connection with the proposed merger of Union
    National Bancorp with and into First Merchants and pursuant to First
    Merchant's Dividend Reinvestment and Stock Purchase Plan, Stock Option
    Plans and Employee Stock Purchase Plans, there are no options, commitments,
    calls or agreements outstanding regarding the issuance of capital stock or
    any securities representing the right to purchase or otherwise receive such
    stock, or any debt securities of First Merchants.  First Merchants does not
    have any outstanding contractual obligation to repurchase, redeem, or
    otherwise acquire any of its outstanding shares of capital stock.

         (d)  The shares of First Merchants' common stock to be issued pursuant
    to the Merger will be fully paid, validly issued and nonassessable.

    6.04.  ORGANIZATIONAL DOCUMENTS.  The Articles of Incorporation and By-laws
of First Merchants in force as of the date hereof, have been delivered to
Randolph County.  The documents delivered by it represent complete and accurate
copies of the corporate documents of First Merchants in effect as of the date of
this Agreement.

    6.05.  ACCURACY OF STATEMENTS.  Neither this Agreement nor any report,
statement, list, certificate or other information furnished

                                       Page 17

or to be furnished by First Merchants to Randolph County in connection with this
Agreement or any of the transactions contemplated hereby (including, without
limitation, any information which has been or shall be supplied by First
Merchants with respect to its business, operations and financial condition for
inclusion in the proxy statement and registration statement relating to the
Merger) contains or shall contain (in the case of information relating to the
proxy statement at the time it is mailed and to the registration statement at
the time it become effective) any untrue statement of a material fact or omits
or shall omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.

    6.06.  COMPLIANCE WITH LAW.  First Merchants has not engaged in any
activity nor taken or omitted to take any action which has resulted or, to the
knowledge of First Merchants, could result in the violation of any local, state,
federal or foreign law, statute, rule, regulation or ordinance or of any order,
injunction, judgment or decree of any court or government agency or body, the
violation of which could materially adversely affect the business, prospects,
condition (financial or otherwise) or results of operations of First Merchants.
First Merchants possesses all licenses, franchises, permits and other
authorizations necessary for the continued conduct of its business without
material interference or interruption.  There are no agreements or
understandings with, nor any orders of directives of, any regulatory agencies or
government authorities, which would have a material adverse effect on the
consolidated financial position of First Merchants.  First Merchants has
received no written inquiries from any regulatory agency or government authority
relating to its compliance with the Bank Secrecy Act, the Truth-in-Lending Act
or the Community Reinvestment Act.

    6.07.  FINANCIAL STATEMENTS.  First Merchants consolidated balance sheets
as of the end of the three (3) fiscal years ended December 31, 1992, 1993 and
1994 and the nine months ended September 30, 1995 and the related consolidated
statements of income, shareholders' equity and cash flows for the years or
period then ended present fairly the consolidated financial condition or
position of First Merchants as of the respective dates thereof and the
consolidated results of operations of First Merchants for the respective periods
covered thereby and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis.  All required regulatory
reports have been filed by First Merchants with its primary federal regulator
during 1995, 1994, 1993 and 1992, are true, accurate and complete and have been
prepared in conformity with generally accepted regulatory accounting principles
applied on a consistent basis.

                                       Page 18

     6.08.  ABSENCE OF CERTAIN CHANGES.  Except for events and conditions
relating to the business environment in general, since September 30, 1995, no
events or conditions of any character, whether actual, threatened or
contemplated, have occurred, or can reasonably be expected to occur, which
materially adversely affect First Merchants consolidated business, prospects,
conditions (financial or otherwise), assets or results of operations or which
have caused, or can reasonably be expected to cause, First Merchants business,
on a consolidated basis, to be conducted in a materially less profitable manner
than prior to September 30, 1995.

    6.09.  FIRST MERCHANTS SECURITIES AND EXCHANGE COMMISSION FILINGS.  First
Merchants has filed all reports and other documents required to be filed by it
under the Securities Exchange Act of 1934 and the Securities Act of 1933,
including First Merchants' Annual Report on Form 10-K for the year ended
December 31, 1994, and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, copies of which have previously been delivered to Randolph
County.

    6.10.  BRING DOWN OF REPRESENTATIONS AND WARRANTIES.  All representations
and warranties of First Merchants contained in this Section 6 shall be true,
accurate and correct on and as of the Effective Date except as affected by the
transactions contemplated by and specified within the terms of this Agreement.

    6.11.  NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.  The representations
and warranties contained in this Section 6 shall expire on the Effective Date,
and thereafter First Merchants and all directors, officers and employees of
First Merchants shall have no further liability with respect thereto unless a
court of competent jurisdiction should determine that any misrepresentation or
breach of a warranty was willfully or intentionally caused either by action or
inaction.

                                      SECTION 7

                             COVENANTS OF RANDOLPH COUNTY

    Randolph County covenants and agrees with First Merchants, and covenants
and agrees to cause Bank to act, as follows:

    7.01.  SHAREHOLDER APPROVAL.  Randolph County shall submit this Agreement
to its shareholders for approval at a meeting to be called and held in
accordance with applicable law and the Articles of Incorporation and By-Laws of
Randolph County at the earliest possible reasonable date, and the Board of
Directors of Randolph County shall subject to their fiduciary duties recommend
to the

                                       Page 19

shareholders of Randolph County that such shareholders approve this Agreement.

    7.02.  OTHER APPROVALS.  Randolph County and Bank shall proceed
expeditiously, cooperate fully and use their best efforts to procure upon
reasonable terms and conditions all consents, authorizations, approvals,
registrations and certificates, to complete all filings and applications and to
satisfy all other requirements prescribed by law which are necessary for
consummation of the Merger on the terms and conditions provided in this
Agreement at the earliest possible reasonable date.

    7.03.  CONDUCT OF BUSINESS.

         (a)  On and after the date of this Agreement and until the Effective
    Date or until this Agreement shall be terminated as herein provided,
    neither Randolph County nor Bank shall, without the prior written consent
    of First Merchants, (i) make any material changes in their capital
    structure; (ii) authorize a class of stock or issue, or authorize the
    issuance of, stock other than or in addition to the outstanding stock as
    set forth in Section 5.03 hereof; (iii) declare, distribute or pay any
    dividends on their shares of common stock, or authorize a stock split, or
    make any other distribution to their shareholders, except for (a) the
    payment by Randolph County prior to the Effective Date of quarterly cash
    dividends on its common stock in April, 1996 (for the first fiscal quarter)
    and July, 1996 (for the second fiscal quarter), which dividends shall not
    exceed One and 50/100 Dollars ($1.50) and One and 50/100 Dollars ($1.50)
    per share, respectively, provided that Randolph County shall not pay any
    such dividend with respect to any fiscal quarter in which the Merger shall
    become effective and in which Randolph County shareholders will become
    entitled to receive dividends on the shares of First Merchants into which
    the shares of Randolph County have been converted, and (b) the payment by
    the Bank to Randolph County of dividends to pay Randolph County's expenses
    of operations and its business and payment of fees and expenses incurred in
    connection with the transactions contemplated by this Agreement; (iv)
    merge, combine or consolidate with or sell their assets or any of their
    securities to any other person, corporation or entity, effect a share
    exchange or enter into any other transaction not in the ordinary course of
    business; (v) incur any liability or obligation, make any commitment,
    payment or disbursement, enter into any contract, agreement, understanding
    or arrangement or engage in any transaction, or acquire or dispose of any
    property or asset having a fair market value in excess of $10,000.00
    (except for personal or real property acquired or disposed of in connection
    with foreclosures on mortgages or enforcement of

                                       Page 20

    security interests and loans made or sold by Bank in the ordinary course of
    business); (vi) subject any of their properties or assets to a mortgage,
    lien, claim, charge, option, restriction, security interest or encumbrance;
    (vii) promote or increase or decrease the rate of compensation (except for
    promotions and non-material increases in the ordinary course of business
    and in accordance with past practices) or enter into any agreement to
    promote or increase or decrease the rate of compensation of any director,
    officer or employee of Randolph County or Bank; (viii) execute, create,
    institute, modify or amend any pension, retirement, savings, stock
    purchase, stock bonus, stock ownership, stock option, stock appreciation or
    depreciation right or profit sharing plans, any employment, deferred
    compensation, consultant, bonus or collective bargaining agreement, group
    insurance contract or other incentive, welfare or employee benefit plan or
    agreement for current or former directors, officers of employees of
    Randolph County or Bank, change the level of benefits or payments under any
    of the foregoing or increase or decrease any severance or termination of
    pay benefits or any other fringe or employee benefits other than as
    required by law or regulatory authorities; (ix) amend their Articles of
    Incorporation or By-Laws from those in effect on the date of this
    Agreement; (x) modify, amend or institute new employment policies or
    practices, or enter into, renew or extend any employment or severance
    agreements with respect to any present or former Randolph County or Bank
    directors, officers or employees; (xi) give, dispose, sell, convey, assign,
    hypothecate, pledge, encumber or otherwise transfer or grant a security
    interest in any common stock of Bank; and (xii) fail to make additions to
    Bank's reserve for loan, losses, or any other reserve account, in the
    ordinary course of business and in accordance with sound banking practices.

         (b)  Randolph County and Bank shall maintain, or cause to be
    maintained, in full force and effect insurance on its properties and
    operations and fidelity coverage on its directors, officers and employees
    in such amounts and with regard to such liabilities and hazards as
    customarily are maintained by other companies operating similar businesses.

         (c)  Randolph County and Bank shall continue to give to First
    Merchants and its employees, accountants, attorneys and other authorized
    representatives reasonable access during regular business hours and other
    reasonable times to all their premises, properties, statements, books and
    records.

    7.04.  PRESERVATION OF BUSINESS.  On and after the date of this Agreement
and until the Effective Date or until this Agreement is terminated as herein
provided.  Randolph County and Bank each

                                       Page 21

shall (a) carry on their business diligently, substantially in the same manner
as heretofore conducted, and in the ordinary course of business; (b) use their
best efforts to preserve their business organizations intact, to keep their
present officers and employees and to preserve their present relationship with
customers and others having business dealings with them; and (c) not do or fail
to do anything which will cause a material breach of, or material default in,
any contract, agreement, commitment, obligation, understanding, arrangement,
lease or license to which they are a party or by which they are or may be
subject or bound.

    7.05.  OTHER NEGOTIATIONS.  Except with the prior written approval of First
Merchants, on and after the date of this Agreement and until the Effective Date,
Randolph County and Bank shall not, and shall not permit or authorize their
respective directors, officers, employees, agents or representatives to,
directly or indirectly, initiate, solicit, encourage, or engage in discussions
or negotiations with, or provide information to, any corporation, association,
partnership, person or other entity or group concerning any merger,
consolidation, share exchange, combination, purchase or sale of substantial
assets, sale of shares of capital stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing the right to acquire, capital stock), tender offer, acquisition of
control of Randolph County or Bank or similar transaction involving Randolph
County or Bank (all such transactions hereinafter referred to as "Acquisition
Transactions").  Randolph County and Bank shall promptly communicate to First
Merchants the terms of any proposal, written or oral, which either may receive
with respect to an Acquisition Transaction and any request by or indication of
interest on the part of any third party with respect to initiation of any
Acquisition Transaction or discussion with respect thereto.

    7.06.  RESTRICTIONS REGARDING AFFILIATES.  Randolph County shall, within 30
days after the date of this Agreement and promptly thereafter until the
Effective Date to reflect any changes, provide First Merchants with a list
identifying each person who may be deemed to be an "affiliate" of Randolph
County for purposes of Rule 145 under the Securities Act of 1933, as amended
("1933 Act").  Each director, executive officer and other person who is an
"affiliate" of Randolph County for purposes of the 1933 Act shall deliver to
First Merchants on or prior to the Effective Date hereunder a written agreement,
in form and substance satisfactory to counsel to First Merchants, providing that
such person will not sell, pledge, transfer, dispose of or otherwise reduce his
market risk with respect to shares of First Merchants common stock to be
received by such person pursuant to this Agreement (a) during the period 30 days
prior to the Effective Date, (b) until such time as financial results covering
at least 30 days of combined operations of First Merchants and Randolph County
have been published within

                                       Page 22

the meaning of Section 201.01 of the Securities and Exchange Commission's
Codification of Financial Reporting Policies, and (c) unless such sales are
pursuant to an effective registration statement under the 1933 Act or pursuant
to Rule 145 of the Securities and Exchange Commission or another exemption from
the 1933 Act.

    7.07.  PRESS RELEASE.  Neither Randolph County or Bank shall issue any
press releases or make any other public announcements or disclosures relating to
the Merger without the prior approval of First Merchants.

    7.08.  DISCLOSURE LETTER UPDATE.  Randolph County shall promptly
supplement, amend and update monthly and as of the Effective Date the Disclosure
Letter with respect to any matters hereafter arising which, if in existence or
having occurred as of the date of this Agreement, would have been required to be
set forth or described in the Disclosure Letter.

                                      SECTION 8

                             COVENANTS OF FIRST MERCHANTS

    First Merchants covenants and agrees with Randolph County as follows:

    8.01.  APPROVALS.  First Merchants shall proceed expeditiously, cooperate
fully and use its best efforts to procure upon reasonable terms and conditions
all consents, authorizations, approvals, registrations and certificates, to
complete all filings and applications and to satisfy all other requirements
prescribed by law which are necessary for consummation of the Merger on the
terms and conditions provided in this Agreement.  First Merchants shall provide
Randolph County with copies of proposed regulatory filings in connection with
the Merger and afford Randolph County the opportunity to offer comment on the
filings before filing.  The approval of First Merchants shareholders of the
transactions contemplated by this Agreement is not required.

    8.02.  EMPLOYEE BENEFIT PLANS.  Within one (1) year following the Effective
Date, First Merchants will permit Bank employees to participate in any
tax-qualified retirement plan First Merchants maintains for its employees,
provided that such an employee meets the applicable participation requirements,
in lieu of the Bank's current tax-qualified retirement plan.  Until that time,
the Bank's current tax-qualified retirement plan will be maintained at the same
level, with respect to benefit accruals, provided for on the Effective Date.
Following the Effective Date, Bank employees will otherwise receive employee
benefits that in the aggregate are

                                       Page 23

substantially comparable to the employee benefits provided to those employees by
Randolph County or the Bank on the Effective Date.  For purposes of determining
a Randolph County or Bank employee's eligibility and vesting service under a
First Merchant's employee benefit plan that the employee is permitted to enter,
service with Randolph County or Bank will be treated as service with First
Merchants; provided, however, that service with Randolph County or Bank will not
be treated as service with First Merchants for purposes of benefit accrual.

    8.03.  FIRST MERCHANTS BOARD OF DIRECTORS.  In connection with the first
annual meeting of the shareholders of First Merchants following the Effective
Date, First Merchants shall cause all necessary action to be taken to cause the
current Chairman of the Board of the Bank, Michael Wickersham, to be nominated
for election as a member of the First Merchants' Board of Directors for a three
(3)-year term.

    8.04.  PRESS RELEASE.  Except as required by law, First Merchants shall not
issue any press release to any national wire service relating solely to the
Merger without the prior approval of Randolph County.

    8.05.  CONFIDENTIALITY.  First Merchants shall, and shall use its best
efforts to cause its officers, employees, and authorized representatives to,
hold in strict confidence all confidential data and information obtained by it
from Randolph County or Bank, unless such information (i) was already known to
First Merchants, (ii) becomes available to First Merchants from other sources,
(iii) is independently developed by First Merchants, (iv) is disclosed outside
of First Merchants with and in accordance with the terms of prior written
approval of Randolph County or Bank , or (v) is or becomes readily ascertainable
from public or published information or trade sources or public disclosure of
such information is required by law or requested by a court or other
governmental agency, commission, or regulatory body.  First Merchants further
agrees that in the event the Agreement is terminated, it will return to Randolph
County all information obtained by First Merchants regarding Randolph County or
Bank, including all copies made of such information by First Merchants.

    8.06.  COVENANTS REGARDING THE BANK.  Upon consummation of the Merger, the
Bank shall be a bank organized under the laws of the State of Indiana and the
officers and directors of the Bank in office immediately prior to the
consummation of the Merger shall be the officers and directors of the Bank at
the Effective Date subject to the provisions of the Bank's Articles of
Incorporation and By-Laws.  The Bank directors will be subject to First
Merchants' policy of mandatory retirement at age seventy (70); provided,
however, the policy of mandatory retirement will not

                                       Page 24

apply to any of the Bank's current directors until twelve (12) months after the
Effective Date.  First Merchants intends to continue to operate the Bank as an
operating subsidiary of First Merchants under the name "The Randolph County
Bank."

                                      SECTION 9

                          CONDITIONS PRECEDENT TO THE MERGER

    The obligation of each of the parties hereto to consummate the transaction
contemplated by this Agreement is subject to the satisfaction and fulfillment of
each of the following conditions on or prior to the Effective Date:

    9.01.  SHAREHOLDER APPROVAL.  The shareholders of Randolph County shall
have approved, ratified and confirmed this Agreement as required by applicable
law.

    9.02.  REGISTRATION STATEMENT EFFECTIVE.  First Merchants shall have
registered its shares of common stock to be issued to shareholders of Randolph
County in accordance with this Agreement with the Securities and Exchange
Commission pursuant to the 1933 Act, and all state securities and "blue sky"
approvals and authorizations required to offer and sell such shares shall have
been received by First Merchants.  The registration statement with respect
thereto shall have been declared effective by the Securities and Exchange
Commission and no stop order shall have been issued or threatened.

    9.03. TAX OPINION.  The parties shall have obtained an opinion of counsel
which shall be in form and content satisfactory to counsel for all parties
hereto, to the effect that the Merger effected pursuant to this Agreement shall
constitute a tax-free transaction (except to the extent cash is received) to
each party hereto and to the shareholders of each party.  Such opinion shall be
based upon factual representations received by such counsel from the parties,
which representations may take the form of written certifications.

    9.04.  AFFILIATE AGREEMENTS.  First Merchants shall have obtained (a) from
Randolph County, a list identifying each affiliate of Randolph County and (b)
from each affiliate of Randolph County, the agreements contemplated by Section
7.06 hereof.

    9.05.  REGULATORY APPROVALS.  The Board of Governors of the Federal Reserve
System and the Indiana Department of Financial Institutions shall have
authorized and approved the Merger and the transactions related thereto.  In
addition, all appropriate orders,

                                       Page 25

consents, approvals and clearances from all other regulatory agencies and
governmental authorities whose orders, consents, approvals or clearances are
required by law for consummation of the transactions contemplated by this
Agreement shall have been obtained.

    9.06.  OFFICER'S CERTIFICATE.  First Merchants and Randolph County shall
have delivered to each other a certificate signed by their Chairman or President
and their Secretary, dated the Effective Date, certifying that (a) all the
representations and warranties of their respective corporations are true,
accurate and correct on and as of the Effective Date; (b) all the covenants of
their respective corporations have been complied with from the date of the
Agreement through and as of the Effective Date; and (c) their respective
corporations have satisfied and fully complied with all conditions necessary to
make this Agreement effective as to them.

    9.07.  FAIRNESS OPINION.  Randolph County shall have obtained an opinion
from an investment banker of its choosing to the effect that the terms of the
Merger, is fair to the shareholders of Randolph County from a financial
viewpoint.  Such opinion shall be (a) in form and substance reasonably
satisfactory to Randolph County, (b) dated as of a date not later than the
mailing date of the Proxy Statement relating to the Merger and (c) included in
the Proxy Statement.

    9.08.  POOLING OF INTERESTS.  First Merchants shall have obtained from its
independent accountants, Geo. S. Olive & Co. LLC, a letter stating that, based
upon their review of such documents and information which they deemed relevant,
such firm is currently unaware of any reason why the Merger cannot be accounted
for as a "pooling of interests."

                                      SECTION 10

                                TERMINATION OF MERGER

    10.01.  MANNER OF TERMINATION.  This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Effective Date by
written notice delivered by First Merchants to Randolph County or by Randolph
County to First Merchants:

         (a)  By Randolph County or First Merchants, if there has been a
    material misrepresentation, a breach of warranty or a failure to comply
    with any covenant on the part of any party in the representation,
    warranties, and covenants set forth

                                       Page 26

    herein; provided the party in default shall have no right to terminate for
    its own default;

         (b)  By Randolph County or First Merchants, if it shall determine in
    its sole discretion that the transactions contemplated by this Agreement
    have become inadvisable or impracticable by reason of commencement or
    threat of material litigation or proceedings against any of the parties;

         (c)  By Randolph County or First Merchants, if the financial
    condition, business, assets, or results of operations of the other party
    shall have been materially and adversely changed from that in existence at
    September 30, 1995;

         (d)  By Randolph County or First Merchants, if the transaction
    contemplated herein has not been consummated by September 30, 1996;

         (e)  By First Merchants if any of the items, events or information set
    forth in any update to the Disclosure Letter has had or may have a material
    adverse effect on the financial condition, results of operations, business,
    or prospects of Randolph County or Bank;

         (f)  By First Merchants or Randolph County if the Merger will not
    constitute a tax-free reorganization under the Code; or

         (g)  By First Merchants if the Merger cannot be accounted for as a
    "pooling of interests."

    10.02.  EFFECT OF TERMINATION.  Upon termination by written notice, as
provided in this Section, this Agreement shall be void and of no further force
or effect and there shall be no obligation on the part of Randolph County or
First Merchants or their respective officers, directors, employees, agents, or
shareholders, except for payment of their respective expenses and First
Merchants obligations under Section 8.05.

                                      SECTION 11

                               EFFECTIVE DATE OF MERGER

    Subject to the terms and upon satisfaction of all requirements of law and
the conditions specified in this Agreement, the Merger shall become effective at
the close of business on the day specified in the Articles of Merger of Randolph
County with and into First Merchants as filed with the Secretary of State of

                                       Page 27

Indiana ("Effective Date").  The Effective Date shall occur no later than the
last business day of the month in which that thirty (30) day period following
the last approval of the Merger by a federal regulatory agency or governmental
authority expires.

                                      SECTION 12

                                       CLOSING

    12.01.  CLOSING DATE AND PLACE.  The closing of the Merger ("Closing")
shall take place at the main office of First Merchants on the Effective Date.

    12.02.  ARTICLES OF MERGER.  Subject to the provisions of this Agreement,
on the Effective Date, the Articles of Merger shall be duly filed with the
Secretary of State of the State of Indiana.

    12.03.  OPINIONS OF COUNSEL.  At the Closing, Randolph County shall deliver
an opinion of its counsel, Cook & Haviza, to First Merchants, and First
Merchants shall deliver an opinion of its counsel, Bingham Summers Welsh &
Spilman, to Randolph County, dated as of the date of the Closing and
substantially in the form set forth in Exhibit A and Exhibit B, respectively,
attached hereto.

                                      SECTION 13

                                    MISCELLANEOUS

    13.01.  EFFECTIVE AGREEMENT.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but none of the provisions thereof shall inure to the benefit
of any other person, firm, or corporation whomsoever.  Neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned or
transferred by either party hereto without the prior written consent of the
other party.

    13.02.  WAIVER; AMENDMENT.

         (a)  First Merchants and Randolph County may, by an instrument in
    writing executed in the same manner as this Agreement:  (i) extend the time
    for the performance of any of the covenants or agreements of the other
    party under this Agreement; (ii) waive any inaccuracies in the
    representations or warranties of the other party contained in this
    Agreement or in any document delivered pursuant hereto or thereto; (iii)
    waive the performance by the other party of any of the covenants or
    agreements to be performed by it or them under

                                       Page 28

    this Agreement; or (iv) waive the satisfaction or fulfillment of any
    condition the nonsatisfaction or nonfulfillment of which is a condition to
    the right of the party so waiving to terminate this Agreement.  The waiver
    by any party hereto of a breach of any provision of this Agreement shall
    not operate or be construed as a waiver of any other or subsequent breach
    hereunder.

         (b)  Notwithstanding approval by the shareholders of Randolph County,
    this Agreement may be amended, modified, or supplemented by the written
    agreement of Randolph County and First Merchants without further approval
    of such shareholders, except that no such amendment, modification, or
    supplement shall result in a decrease in the consideration specified in
    Section 3 hereof or shall materially adversely affect the rights of
    shareholders of Randolph County without the further approval of such
    shareholders.

    13.03.  NOTICES.  Any notice required or permitted by this Agreement shall
be deemed to have been duly given if delivered in person, receipted for or sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:

    If to First Merchants:                  With a copy to:

    200 E. Jackson Street                   Bingham Summers Welsh & Spilman
    Box 792                                 2700 Market Tower
    Muncie, IN  47305                       10 West Market Street
    Attn:  Stefan S. Anderson,              Indianapolis, Indiana  46204-2982
      President                             Attn:  David R. Prechtel, Esq.

    If to Randolph County:                  With a copy to:

    122 West Washington St.                 Cook & Haviza
    Winchester, IN 47394                    111 North Main Street
    Attn:  Max Gordon,                      Winchester, IN 47384
      Chairman                              Attn:  John T. Cook, Esq.

or such substituted address as any of them have given to the other in writing.

    13.04.  HEADINGS.  The headings in this Agreement have been inserted solely
for the ease of reference and should not be considered in the interpretation or
construction of this Agreement.

    13.05.  SEVERABILITY.  In case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other

                                       Page 29

provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision or provisions had never been
contained herein.

    13.06.  COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.

    13.07.  GOVERNING LAW.  This Agreement is executed in and shall be
construed in accordance with the laws of the State of Indiana.

    13.08.  ENTIRE AGREEMENT.  This Agreement supersedes any other agreement,
whether oral or written, between First Merchants and Randolph County relating to
the matters contemplated hereby, and constitutes the entire agreement between
the parties hereto.

    13.09.  EXPENSES.  First Merchants and Randolph County shall each pay their
own expenses incidental to the transactions contemplated hereby.  It is
understood that the cost of the fairness opinion referenced in Section 9.07
shall be borne by Randolph County whether or not the Merger is consummated.

    IN WITNESS WHEREOF, First Merchants and Randolph County have made and
entered into this Agreement as of the day and year first above written and have
caused this Agreement to be executed and attested by their duly authorized
officers.

                                            FIRST MERCHANTS CORPORATION

ATTEST:

    /S/ Rodney A. Medler                     By     /S/ Stefan S. Anderson
- -----------------------------                    -----------------------------
 Rodney A. Medler, Secretary                     Stefan S. Anderson, President

                                            RANDOLPH COUNTY BANCORP

ATTEST:

     /S/ William H. Ward                      By       /S/ Max Gordon
- -----------------------------                    -----------------------------
   William Ward, Secretary                            Max Gordon, Chairman

                                       Page 30

                        AGREEMENT OF REORGANIZATION AND MERGER

                                       BETWEEN
\
                             FIRST MERCHANTS CORPORATION

                                         AND

                                UNION NATIONAL BANCORP

    THIS AGREEMENT OF REORGANIZATION AND MERGER ("Agreement"), is entered this
24th day of January, 1996, by and between FIRST MERCHANTS CORPORATION ("First
Merchants") and UNION NATIONAL BANCORP ("Union National").

                                 W I T N E S S E T H:

    WHEREAS, First Merchants is a corporation duly organized and existing under
the laws of the State of Indiana and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, with its principal place of
business in Muncie, Delaware County, Indiana.

    WHEREAS, Union National is a corporation duly organized and existing under
the laws of the State of Indiana and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, with its principal place of
business in Liberty, Union County, Indiana.

    WHEREAS, The Union County National Bank of Liberty (the "Bank") is a
national bank duly organized and existing under the laws of the United States
and a wholly-owned subsidiary of Union National with its principal banking
office in Liberty, Union County, Indiana.

    WHEREAS, it is the desire of First Merchants and Union National to effect a
transaction whereby the Bank will become a wholly-owned subsidiary of First
Merchants through a statutory merger of Union National with and into First
Merchants.

    WHEREAS, a majority of the entire Board of Directors of First Merchants and
a majority of the entire Board of Directors of Union National have approved this
Agreement, designated it as a plan of reorganization within the provisions of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and authorized its execution.

    NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, First Merchants and Union National
hereby make this Agreement and prescribe the terms and conditions of the merger
of

Union National with and into First Merchants and the mode of carrying the
transaction into effect as follows:

                                      SECTION 1

                                      THE MERGER

    Subject to the terms and conditions of this Agreement, on the Effective
Date, as defined in Section 11 hereof, Union National shall be merged into and
under the Articles of Incorporation of First Merchants, which shall be the
"Continuing Company" and which shall continue its corporate existence under the
laws of the State of Indiana, pursuant to the provisions of and with the effect
provided in the Indiana Business Corporation Law and particularly Indiana Code
chapter 23-1-40 (the "Merger").

                                      SECTION 2

                                 EFFECT OF THE MERGER

    Upon the Merger becoming effective:

    2.01.  GENERAL DESCRIPTION.  The separate existence of Union National shall
cease and the Continuing Company shall possess all of the assets of Union
National including all of the issued and outstanding shares of capital stock of
the Bank and all of its rights, privileges, immunities, powers, and franchises
and shall be subject to and assume all of the duties and liabilities of Union
National.

    2.02.  NAME, OFFICES, AND MANAGEMENT.  The name of the Continuing Company
shall continue to be "First Merchants Corporation."  Its principal banking
office shall be located at 200 E. Jackson Street, Muncie, Indiana.  The Board of
Directors of the Continuing Company, until such time as their successors have
been elected and qualified, shall consist of the current Board of Directors of
First Merchants.  The officers of First Merchants immediately prior to the
Effective Date shall continue as the officers of the Continuing Company.

    2.03.  CAPITAL STRUCTURE.  The amount of capital stock of the Continuing
Company shall not be less than the capital stock of First Merchants immediately
prior to the Effective Date increased by the amount of capital stock issued in
accordance with Section 3 hereof.

                                        Page 2

    2.04.  ARTICLES OF INCORPORATION AND BYLAWS.  The Articles of Incorporation
and Bylaws of the Continuing Company shall be those of First Merchants
immediately prior to the Effective Date until the same shall be further amended
as provided by law.

    2.05.  ASSETS AND LIABILITIES.  The title to all assets, real estate and
other property owned by First Merchants and Union National shall vest in the
Continuing Company without reversion or impairment.  All liabilities of Union
National shall be assumed by the Continuing Company.

                                      SECTION 3

                                 CONSIDERATION TO BE
                    DISTRIBUTED TO SHAREHOLDERS OF UNION NATIONAL

    3.01.  CONSIDERATION.  Upon and by reason of the Merger becoming effective,
shareholders of Union National of record on the Effective Date who have not
dissented to the Merger in accordance with Indiana Code Chapter 23-1-44 shall be
entitled to receive four and 86/100 (4.86) shares of First Merchants common
stock for each share of Union National common stock held.

    3.02.  NO FRACTIONAL FIRST MERCHANTS COMMON SHARES.  Certificates for
fractional shares of common stock of First Merchants shall not be issued in
respect of fractional interests arising from the exchange ratio, aggregating all
shares of First Merchants common stock to be received by each shareholder of
Union National.  Each Union National shareholder who would otherwise have been
entitled to a fraction of a First Merchants share, upon surrender of all of
his/her certificates representing Union National common shares, shall be paid in
cash in an amount equal to the fraction of the average of the closing price of
First Merchants common stock as quoted by NASDAQ for the five trading days
preceding the Effective Date.

    3.03.  RECAPITALIZATION.  If, between the date of this Agreement and the
Effective Date, First Merchants issues a stock dividend with respect to its
shares of common stock, combines, subdivides, or splits up its outstanding
shares or takes any similar recapitalization action, then the number of shares
of First Merchants common stock into which each outstanding Union National share
will be converted under Section 3.01 hereof shall be adjusted so that each Union
National shareholder shall receive such number of First Merchants shares as
represents the same percentage of outstanding shares of First Merchants common
stock at the Effective Date as would have been represented by the number of
shares such shareholder would have received if the recapitalization had not
occurred.

                                        Page 3

    3.04.  DISTRIBUTION OF FIRST MERCHANTS COMMON STOCK AND CASH.

         (a)  Following the Effective Date, distribution of stock certificates
    representing First Merchants common stock and cash payments for fractional
    shares shall be made by First Merchants to each former shareholder of Union
    National within ten (10) days of such shareholder's delivery of his/her
    certificates representing common stock of Union National to the conversion
    agent, First Merchants Bank (the "Conversion Agent").  Interest shall not
    accrue or be payable with respect to any cash payments.

         (b)  Following the Effective Date, stock certificates representing
    Union National common stock shall be deemed to evidence only the right to
    receive ownership of First Merchants common stock (for all corporate
    purposes other than the payment of dividends) and cash for fractional
    shares, as applicable.  No dividends or other distributions otherwise
    payable subsequent to the Effective Date on stock of First Merchants shall
    be paid to any shareholder entitled to receive the same until such
    shareholder has surrendered his/her certificates for Union National common
    stock to the Conversion Agent in exchange for certificates representing
    First Merchants common stock and cash.  Upon surrender, there shall be paid
    to the recordholder of the new certificate(s) evidencing shares of First
    Merchants common stock, the amount of all dividends and other
    distributions, without interest thereon, withheld with respect to such
    common stock.

         (c)  First Merchants shall be entitled to rely upon the stock transfer
    books of Union National to establish the persons entitled to receive cash
    and shares of common stock of First Merchants, which books, in the absence
    of actual knowledge by First Merchants of any adverse claim thereto, shall
    be conclusive with respect to the ownership of such stock.

         (d)  With respect to any certificate for shares of Union National
    common stock which has been lost, stolen, or destroyed, First Merchants
    shall be authorized to issue common stock to the registered owner of such
    certificate upon receipt of an affidavit of lost stock certificate, in form
    and substance satisfactory to First Merchants, and upon compliance by the
    Union National shareholder with all procedures historically required by
    Union National in connection with lost, stolen, or destroyed certificates.

                                        Page 4

         (e)  Stock certificates that name Bank as issuer but represent Union
    National common stock shall be deemed stock certificates representing Union
    National common stock in connection with the Merger and for the purposes of
    rights and obligations under this Agreement.

                                      SECTION 4

                               DISSENTING SHAREHOLDERS

    Shareholders of Union National shall have the rights accorded to dissenting
shareholders under Indiana Code Chapter 23-1-44.

                                      SECTION 5

                                 REPRESENTATIONS AND
                             WARRANTIES OF UNION NATIONAL

    Union National represents and warrants to First Merchants with respect to
itself and the Bank as follows:  (For the purposes of this Section, a
"Disclosure Letter" is defined as a letter referencing Section 5 of this
Agreement which shall be prepared and executed by an authorized executive
officer of Union National and delivered to and initialed by an authorized
executive officer of First Merchants contemporaneous with the execution of this
Agreement.)

    5.01.  ORGANIZATION AND AUTHORITY.  Union National is a corporation duly
organized and validly existing under the laws of the State of Indiana, and Bank
is a national bank duly organized and validly existing under the laws of the
United States.  Union National and Bank have the power and authority (corporate
and other) to conduct their respective businesses in the manner and by the means
utilized as of the date hereof.  Union National's only subsidiary is Bank, and
Bank has no subsidiaries.  Bank is subject to primary federal regulatory
supervision and regulation by the Office of the Comptroller of the Currency.

    5.02.  AUTHORIZATION.

         (a)  Union National has the corporate power and authority to enter
    into this Agreement and to carry out its obligations hereunder.  This
    Agreement, when executed and delivered, will have been duly authorized and
    will constitute a valid and binding obligation of Union National,
    enforceable in accordance with its terms except to the extent limited by
    insolvency, reorganization, liquidation,

                                        Page 5

    readjustment of debt or other laws of general application relating to or 
    affecting the enforcement of creditors' rights.

         (b)  Neither the execution of this Agreement, nor the consummation of
    the transactions contemplated hereby, does or will (i) conflict with,
    result in a breach of, or constitute a default under Union National's
    Articles of Incorporation or By-Laws; (ii) to the best of its knowledge,
    conflict with, result in a breach of, or constitute a default under any
    federal, foreign, state or local law, statute, ordinance, rule, regulation
    or court or administrative order or decree, or any note, bond, indenture,
    mortgage, security agreement, contract, arrangement or commitment, to which
    Union National or Bank is subject or bound, which as a result of any of the
    foregoing in this subpart (ii) would materially adversely affect the
    business or financial condition of Union National or the Bank; (iii) result
    in the creation of or give any person, corporation or entity, the right to
    create any material lien, charge, encumbrance, security interest, or any
    other rights of others or other adverse interest upon any right, property
    or asset of Union National or Bank; (iv) terminate or give any person,
    corporation or entity, the right to terminate, amend, abandon, or refuse to
    perform any note, bond, indenture, mortgage, security agreement, contract,
    arrangement or commitment to which Union National or Bank is subject or
    bound and which in the aggregate are in excess of $50,000; or (v)
    accelerate or modify, or give any party thereto the right to accelerate or
    modify, the time within which, or the terms according to which, Union
    National or Bank is to perform any duties or obligations or receive any
    rights or benefits under any note, bond, indenture, mortgage, security
    agreement, contract, arrangement or commitment in the aggregate in excess
    of $50,000.

         (c)  Other than in connection or in compliance with the provisions of
    the Bank Holding Company Act of 1956, federal and state securities laws and
    applicable Indiana banking and corporate statutes, all as amended, and the
    rules and regulations promulgated thereunder, no notice to, filing with,
    authorization of, exemption by, or consent or approval of, any public body
    or authority is necessary for the consummation by Union National of the
    transactions contemplated by this Agreement.

                                        Page 6

     5.03.  CAPITALIZATION.

         (a) As of December 31, 1995, Union National had 200,000 shares of
    common stock authorized, no par value per share, 193,968 shares of which
    were issued and outstanding.  Such issued and outstanding shares of Union
    National common stock have been duly and validly authorized by all
    necessary corporate action of Union National, are validly issued, fully
    paid and nonassessable and have not been issued in violation of any
    preemptive rights of any shareholders.  Union National has no intention or
    obligation to authorize or issue additional shares of its common stock.
    Union National has not authorized the issuance of any other class of stock.
    On a consolidated basis as of December 31, 1995, Union National had total
    capital of $15,741,000, which consisted of common stock of $970,000,
    capital surplus of $1,957,000, and retained earnings of $12,814,000.

         (b) As of December 31, 1995, Bank had 100,000 shares of common stock
    authorized, $10 par value per share, all of which shares were issued and
    outstanding to Union National.  Such issued and outstanding shares of Bank
    common stock have been duly and validly authorized by all necessary
    corporate action of Bank, are validly issued, fully paid and nonassessable,
    and have not been issued in violation of any preemptive rights of any Bank
    shareholders.  All the issued and outstanding shares of Bank common stock
    are owned by Union National free and clear of all liens, pledges, charges,
    claims, encumbrances, restrictions, security interests, options and
    preemptive rights and of all other rights of any other person, corporation
    or entity with respect thereto.  As of December 31, 1995, Bank had total
    capital of $15,446,000, which consisted of common stock of $1,000,000,
    capital surplus of $2,000,000, and undivided profits of $12,446,000.

         (c)  There are no options, commitments, calls, agreements,
    understandings, arrangements or subscription rights regarding the issuance,
    purchase or acquisition of capital stock, or any securities convertible
    into or representing the right to purchase or otherwise receive the capital
    stock or any debt securities, of Union National or Bank by which Union
    National or Bank is or may become bound.  Neither Union National or Bank
    has any outstanding contractual or other obligation to repurchase, redeem
    or otherwise acquire any of its respective outstanding shares of capital
    stock.

                                        Page 7

         (d)  Except as set forth in the Disclosure Letter, no person or entity
    beneficially owns 5% or more of Union National's outstanding shares of
    common stock.

    5.04.  ORGANIZATIONAL DOCUMENTS.  The respective Articles of Incorporation
or Association and By-Laws of Union National and Bank have been delivered to
First Merchants and represent true, accurate and complete copies of such
corporate documents of Union National and Bank in effect as of the date of this
Agreement.

    5.05.  COMPLIANCE WITH LAW.  Neither Union National nor Bank has engaged in
any activity nor taken or omitted to take any action which has resulted or, to
the knowledge of Union National could result, in the violation of any local,
state, federal or foreign law, statute, rule, regulation or ordinance or of any
order, injunction, judgment or decree of any court or government agency or body,
the violation of which could materially adversely affect the business,
prospects, condition (financial or otherwise) or results of operations of Union
National or Bank.  Union National and Bank possess all licenses, franchises,
permits and other authorizations necessary for the continued conduct of their
respective businesses without material interference or interruption and such
licenses, franchises, permits and authorizations shall be transferred to First
Merchants on the Effective Date without any restrictions or limitations thereon
or the need to obtain any consents of third parties.  All agreements and
understandings with, and all orders and directives of, all regulatory agencies
or government authorities with respect to the business or operations of Union
National or Bank, including all correspondence, communications and commitments
related thereto, are set forth in the Disclosure Letter.  Bank has received no
inquiries from any regulatory agency or government authority relating to its
material noncompliance with the Bank Secrecy Act, the Truth-in-Lending Act or
the Community Reinvestment Act or any laws with respect to the protection  of
the environment or the rules and regulations promulgated thereunder.

    5.06.  ACCURACY OF STATEMENTS.  Neither this Agreement nor any report,
statement, list, certificate or other information furnished or to be furnished
by Union National or Bank to First Merchants in connection with this Agreement
or any of the transactions contemplated hereby (including, without limitation,
any information which has been or shall be supplied by Union National or Bank
with respect to their businesses, operations and financial condition for
inclusion in the proxy statement and registration statement relating to the
Merger) contains or shall contain (in the case of information relating to the
proxy statement at the time it is mailed and for the registration statement at
the time it becomes effective) any untrue statement of a material

                                        Page 8

act or omits or shall omit to state a material fact necessary to make the
statements contained herein or therein not misleading.

    5.07.  LITIGATION AND PENDING PROCEEDINGS.  Except as set forth in the
Disclosure Letter, there are no material claims of any kind, nor any material
action, suits, proceedings, arbitrations or investigations pending or, to the
knowledge of Union National or Bank, threatened in any court or before any
government agency or body, arbitration panel or otherwise (nor does Union
National or Bank have any knowledge of a basis for any material claim, action,
suit, proceeding, arbitration or investigation) against, by or materially
adversely affecting Union National or Bank or their respective businesses,
prospects, conditions (financial or otherwise), results of operations or assets,
or which would prevent the performance of this Agreement or declare the same
unlawful or cause the rescission hereof.  There are no material uncured
violations, or violations with respect to which material refunds or restitutions
may be required, cited in any compliance report to Union National or Bank as a
result of an examination by any regulatory agency or body.

    5.08.  FINANCIAL STATEMENTS.

         (a)  Union National's consolidated balance sheets as of the end of the
    three fiscal years ended December 31, 1992, 1993 and 1994 and the nine
    months ended September 30, 1995 and the related consolidated statements of
    income, shareholders' equity and cash flows for the years or period then
    ended (hereinafter collectively referred to as the "Financial Information")
    present fairly, in all material respects, the consolidated financial
    condition or position of Union National as of the respective dates thereof
    and the consolidated results of operations of Union National for the
    respective periods covered thereby and have been prepared in conformity
    with generally accepted accounting principles applied on a consistent
    basis.  All required regulatory reports have been filed by Union National
    and Bank with their respective primary federal regulators during 1995,
    1994, 1993 and 1992, are true, accurate and complete, in all material
    respects, and were prepared in conformity with generally accepted
    regulatory accounting principles applied on a consistent basis.

         (b)  Except to the extent that failure to comply with this subsection
    does not have a material adverse effect on Union National or the Bank, all
    loans reflected in the Financial Information and which have been made,
    extended or acquired since September 30, 1995, (i) have been made for good,
    valuable and adequate consideration in the ordinary

                                        Page 9

    course of business; (ii) constitute the legal, valid and binding obligation
    of the obligor and any guarantor named therein; (iii) are evidenced by
    notes, instruments or other evidences of indebtedness which are true,
    genuine and what they purport to be; and (iv) to the extent that Bank has a
    security interest in collateral or a mortgage securing such loans, are
    secured by perfected security interests or mortgages naming Bank as the
    secured party or mortgagee.

    5.09.  ABSENCE OF CERTAIN CHANGES.  Except for events and conditions
relating to the business environment in general or as set forth in the
Disclosure Letter, since September 30, 1995, there has not been any change or
event of any character, actual or to Union National's or Bank's knowledge
threatened, which in the aggregate materially adversely affects Union National's
or Bank's business, prospects, conditions (financial or otherwise), assets or
results of operations.

    5.10.  ABSENCE OF UNDISCLOSED LIABILITIES.  Neither Union National nor Bank
is a party to any agreement, contract, obligation, commitment, arrangement,
liability, lease or license which individually exceeds $10,000 per year or which
may not be terminated within one year from the date of this Agreement, except as
set forth in the Disclosure Letter or reflected in the Financial Information and
except for unfunded loan commitments made in the ordinary course of Bank's
business consistent with past practices, nor to the knowledge of Union National
does there exist any circumstances resulting from transactions effected or to be
effected or events which have occurred or may occur or from any action taken or
omitted to be taken which could reasonably be expected to result in any such
agreement, contract, obligation, commitment, arrangement, liability, lease or
license.

    5.11.  TITLE TO ASSETS.  Except as set forth in the Disclosure Letter or
except to the extent that failure to comply with this Section 5.11 does not have
a material adverse effect on Union National or the Bank, Union National and Bank
have good and marketable title in fee simple absolute to all real property
(including, without limitation, all real property used as bank holding company
or bank premises and all other real estate owned) and personal property
reflected in the Financial Information as of September 30, 1995, good and
marketable title to all other properties and assets which Union National or Bank
purport to own, good and marketable title to or right to use by terms of lease
or contract all other property used in Union National's or Bank's business and
good and marketable title to all property and assets acquired since
September 30, 1995, free and clear of all mortgages, liens, pledges,
restrictions, security interests, charges, claims or encumbrances of any nature.
All real property owned by Union National or Bank is in compliance with all

                                       Page 10

applicable laws, statutes, rules, regulations and ordinances relating to the
environment, pollution and the treatment, storage, disposal, discharge or
release of chemicals and hazardous or toxic substances or wastes and, in all
material respects, with all applicable zoning law.

    5.12.  LOANS AND INVESTMENTS.

         (a)  Except as set forth in the Disclosure Letter, there is no loan of
    Bank in excess of $10,000 that has been classified by bank regulatory
    examiners as "Other Loans Specially Mentioned," "Substandard," "Doubtful"
    or "Loss," nor is there any loan of Bank in excess of $10,000 that has been
    identified by accountants or auditors (internal or external) as having a
    significant risk of uncollectibility.
    Bank's loan watch list and all loans in excess of $10,000 that Bank's
    management has determined to be ninety (90) days or more past due with
    respect to principal or interest or has placed on nonaccrual status are set
    forth in the Disclosure Letter.

         (b)  Each of the reserves and allowances for possible loan losses and
    the carrying value for real estate owned which are shown on the Financial
    Information is, in the opinion of Union National and Bank, adequate in all
    material respects under the requirements of generally accepted accounting
    principles applied on a consistent basis to provide for possible losses on
    loans outstanding and real estate owned as of the date of such Financial
    Information.

         (c)  Except as set forth in the Disclosure Letter, none of the
    investments reflected in the Financial Information and none of the
    investments made by Union National or Bank since September 30, 1995 is
    subject to any restrictions, whether contractual or statutory, which
    materially impairs the ability of Union National or Bank to dispose freely
    of such investment at any time.  Except as set forth in the Disclosure
    Letter, neither Union National nor Bank are a party to any repurchase
    agreements with respect to securities.

    5.13.  EMPLOYEE BENEFIT PLANS.

         (a)  The Disclosure Letter contains a list identifying each "employee
    benefit plan," as defined in Section 3(3) of the Employee Retirement Income
    Security Act of 1974, as amended ("ERISA"), which (i) is subject to any
    provision of ERISA, and (ii) is maintained, administered or contributed to
    by Union National or Bank and covers any employee or former employee of
    Union National or Bank under which Union

                                       Page 11

    National or Bank has any liability.  Copies of such plans (and, if
    applicable, related trust agreements or insurance contracts) and all
    amendments thereto and written interpretations thereof have been furnished
    to First Merchants together with the three most recent annual reports
    prepared in connection with any such plan and the current summary plan
    descriptions.  Such plans are hereinafter referred to individually as an
    "Employee Plan" and collectively as the "Employee Plans."  The Employee
    Plans which individually or collectively would constitute an "employee
    pension benefit plan" as defined in Section 3(2) of ERISA are identified in
    the list referred to above.

         (b)  The Employee Plans comply with and have been operated in
    accordance with all applicable laws, regulations, rulings and other
    requirements the breach or violation of which could materially affect Union
    National, Bank, or an Employee Plan.  Each Employee Plan has been
    administered in substantial conformance with such requirements and all
    reports and information required with respect to each Employee Plan have
    been timely given.

         (c)  No "prohibited transaction," as defined in Section 406 of ERISA
    or Section 4975 of the Code, for which no statutory or administrative
    exemption exists, and no "reportable event," as defined in Section 4043(b)
    of ERISA, has occurred with respect to any Employee Plan.  Neither Union
    National or Bank has any liability to the Pension Benefit Guaranty
    Corporation ("PBGC"), to the Internal Revenue Service ("IRS"), to the
    Department of Labor ("DOL") or to an employee or Employee Plan beneficiary
    under Section 502 of ERISA.

         (d)  No "fiduciary," as defined in Section (3)(21) of ERISA, of an
    Employee Plan has failed to comply with the requirements of Section 404 of
    ERISA.

         (e)  Each of the Employee Plans which is intended to be qualified
    under Code Section 401(a) has been amended to comply in all material
    respects with the applicable requirements of the Code, including the Tax
    Reform Act of 1986, the Revenue Act of 1987, the Technical and
    Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of
    1989, the Revenue Reconciliation Act of 1990, the Tax Extension Act of
    1991, the Unemployment Compensation Amendments of 1992, the Omnibus Budget
    Reconciliation Act of 1993, and the Retirement Protection Act of 1994 and
    any rules, regulations or other requirements promulgated thereunder (the
    "Acts").  In addition, each such Employee Plan has been and is being
    operated in substantial

                                       Page 12

    conformance with the applicable provisions of ERISA and the Code, as
    amended by the Acts.  Except as set forth in the Disclosure Letter, Union
    National and/or Bank, as applicable, sought and received favorable
    determination letters from the IRS within the applicable remedial amendment
    periods under Code Section 401(b), and has furnished to First Merchants
    copies of the most recent IRS determination letters with respect to any
    such Employee Plan.

         (f)  Except as set forth in the Disclosure Letter, no Employee Plan
    owns any security of Union National or Bank.

         (g)  No Employee Plan has incurred an "accumulated funding
    deficiency," as determined under Code Section 412 and ERISA Section 302.

         (h)  Except as set forth in the Disclosure Letter, no Employee Plan
    has been terminated or incurred a partial termination (either voluntarily
    or involuntarily).

         (i)  No claims against an Employee Plan, Union National or Bank, with
    respect to an Employee Plan, (other than normal benefit claims) have been
    asserted or threatened.

         (j)  There is no contract, agreement, plan or arrangement covering any
    employee or former employee of Union National or Bank that, individually or
    collectively, could give rise to the payment of any amount that would not
    be deductible by reason of Section 280G or Section 162(a)(1) of the Code.

         (k)  No event has occurred that would cause the imposition of the tax
    described in Code Section 4980B.  All requirements of ERISA Section 601
    have been met.

         (l)  The Disclosure Letter contains a list of each employment,
    severance or other similar contract, arrangement or policy and each plan or
    arrangement (written or oral) providing for insurance coverage (including
    any self-insured arrangements), workers' compensation, disability benefits,
    supplemental unemployment benefits, vacation benefits, retirement benefits
    or deferred compensation, profit sharing, bonuses, stock options, stock
    appreciation or other forms of incentive compensation or post-retirement
    insurance, compensation or benefits which (i) is not an Employee Plan, (ii)
    was entered into, maintained or contributed to, as the case may be, by
    Union National or Bank and (iii) covers any employee or former employee of
    Union National or Bank.  Such contracts, plans and

                                       Page 13

    arrangements as are described above, copies or descriptions of all of which
    have been furnished previously to First Merchants, are hereinafter referred
    to collectively as the "Benefit Arrangements."  Each of the Benefit
    Arrangements has been maintained in substantial compliance with its terms
    and with the requirements prescribed by any and all statutes, orders, rules
    and regulations which are applicable to such Benefit Arrangements.

         (m)  Neither Union National nor Bank has any present or future
    liability in respect of post-retirement health and medical benefits for
    former employees of Union National or Bank.

         (n)  Except as set forth in the Disclosure Letter, there has been no
    amendment to, written interpretation or announcement (whether or not
    written) by Union National or Bank relating to, or change in employee
    participation or coverage under, any Employee Plan or Benefit Arrangement
    which would increase materially the expense of maintaining such Employee
    Plans or Benefit Arrangements above the level of the expense incurred in
    respect thereof for the fiscal year ended December 31, 1994.

         (o)  For purposes of this Section 5.13, references to Union National
    or Bank are deemed to include (i) all predecessors of Union National or
    Bank, (ii) any subsidiary of Union National or Bank, (iii) all members of
    any controlled group (as determined under Code Section 414(b) or (c)) that
    includes Union National or Bank, and (iv) all members of any affiliated
    service group (as determined under Code Section 414(m) or (n)) that
    includes Union National or Bank.

    5.14  OBLIGATIONS TO EMPLOYEES.  Except as set forth in the Disclosure
Letter, all accrued obligations and liabilities of Union National and Bank,
whether arising by operation of law, by contract or by past custom, for payments
to trust or other funds, to any government agency or body or to any individual
director, officer, employee or agent (or his heirs, legatees or legal
representative) with respect to unemployment compensation or social security
benefits and all pension, retirement, savings, stock purchase, stock bonus,
stock ownership, stock option, stock appreciation rights or profit sharing plan,
any employment, deferred compensation, consultant, bonus or collective
bargaining agreement or group insurance contract or other incentive, welfare or
employee benefit plan or agreement maintained by Union National or Bank for
their current or former directors, officers, employees and agents have been and
are being paid to the extent required by law or by the plan or contract.  All
obligations and

                                       Page 14

liabilities of Union National and Bank, whether arising by operation of law, by
contract, or by past custom, for all forms of compensation which are or may be
payable to their current or former directors, officers, employees or agents have
been and are being paid.  All accruals and reserves referred to in this Section
5.14 are correctly and accurately reflected and accounted for in the books,
statements and records of Union National and Bank.

    5.15.  TAXES, RETURNS AND REPORTS.  Union National and Bank have (a) duly
filed all federal, state, local and foreign tax returns of every type and kind
required to be filed as of the date hereof, and each return is true, complete
and accurate in all material respects; (b) paid in all materials respects all
taxes, assessments and other governmental charges due or claimed to be due upon
them or any of their income, properties or assets; and (c) not requested an
extension of time for any such payments (which extension is still in force).
Except for taxes not yet due and payable, the reserve for taxes reflected in the
Financial Information is adequate, in all material respects, to cover all of
Union National's and Bank's tax liabilities (including, without limitation,
income taxes and franchise fees) that may become payable in future years with
respect to any transactions consummated prior to December 31, 1994.  Neither
Union National nor Bank has or will have, any material liability for taxes of
any nature for or with respect to the operation of their business, including the
assets of any subsidiary, from December 31, 1994 up to and including the
Effective Date, except to the extent reflected on their Financial Information or
on financial statements of Union National or Bank subsequent to such date and as
set forth in the Disclosure Letter.  Neither Union National nor Bank is
currently under audit by any state or federal taxing authority.  Except as set
forth in the Disclosure Letter, neither the federal, state, or local tax returns
of Union National or Bank have been audited by any taxing authority during the
past five (5) years.

    5.16.  DEPOSIT INSURANCE.  The deposits of Bank are insured by the Federal
Deposit Insurance Corporation ("FDIC") in accordance with the Federal Deposit
Insurance Act, and Bank has paid all premiums and assessments with respect to
such deposit insurance.

    5.17.  BROKER'S OR FINDER'S FEES.  Except as set forth in the Disclosure
Letter, no agent, broker or other person acting on behalf of Union National or
Bank or under any authority of Union National or Bank is or shall be entitled to
any commission, broker's or finder's fee or any other form of compensation or
payment from any of the parties hereto, other than attorneys' or

                                       Page 15

accountants' fees, in connection with any of the transactions contemplated by
this Agreement.

    5.18.  BRING DOWN OF REPRESENTATIONS AND WARRANTIES.  All representations
and warranties of Union National and Bank contained in this Section 5 shall be
true, accurate and correct on and as of the Effective Date except as affected by
the transactions contemplated by and specified within the terms of this
Agreement.

    5.19.  NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.  The representations
and warranties contained in this Section 5 shall expire on the Effective Date,
and thereafter Union National and Bank shall have no further liability with
respect thereto unless a court of competent jurisdiction should determine that
any misrepresentation or breach of a warranty was willfully or intentionally
caused either by action or inaction.

                                      SECTION 6

                                 REPRESENTATIONS AND
                            WARRANTIES OF FIRST MERCHANTS
 
    First Merchants hereby represents and warrants to Union National as
follows:

    6.01.  ORGANIZATION AND QUALIFICATION.  First Merchants is a corporation
organized and existing under the laws of the State of Indiana and has the
corporate power and authority to conduct its business in the manner and by the
means utilized as of the date hereof.

    6.02.  AUTHORIZATION.

         (a)  First Merchants has the corporate power and authority to enter
    into this Agreement and to carry out its obligations hereunder subject to
    certain required regulatory approvals.  The Agreement, when executed and
    delivered, will have been duly authorized and will constitute a valid and
    binding obligation of First Merchants, enforceable in accordance with its
    terms, except to the extent limited by insolvency, reorganization,
    liquidation, readjustment of debt, or other laws of general application
    relating to or affecting the enforcement of creditor's rights.

         (b)  Neither the execution of this Agreement, nor the consummation of
    the transactions contemplated hereby, does or will (i) conflict with,
    result in a breach of, or constitute a default under First Merchant's
    Articles of

                                       Page 16

Incorporation or By-laws; (ii) to the best of its knowledge, conflict with,
result in a breach of, or constitute a default under any federal, foreign,
state, or local law, statute, ordinance, rule, regulation, or court or
administrative order or decree, or any note, bond, indenture, mortgage, security
agreement, contract, arrangement, or commitment, to which First Merchants is
subject or bound, which as a result of any of the foregoing in this subpart (ii)
would materially adversely affect the business or financial condition of First
Merchants; (iii) result in the creation of or give any person, corporation or
entity, the right to create any material lien, charge, claim, encumbrance,
security interest, or any other rights of others or other adverse interest upon
any right, property or asset of First Merchants; (iv) terminate or give any
person, corporation or entity, the right to terminate, amend, abandon, or refuse
to perform any note, bond, indenture, mortgage, security agreement, contract,
arrangement, or commitment to which First Merchants is a party or by which First
Merchant is subject or bound and which in the aggregate are in excess of
$50,000; or (v) accelerate or modify, or give any party thereto the right to
accelerate or modify, the time within which, or the terms according to which,
First Merchants is to perform any duties or obligations or receive any rights or
benefits under any note, bond, indenture, mortgage, security agreement,
contract, arrangement, or commitment in the aggregate in excess of $50,000.

         (c)  Other than in connection or in compliance with the provisions of
    the Bank Holding Company Act of 1956, federal and state securities laws,
    and applicable Indiana banking and corporate statutes, all as amended, and
    the rules and regulations promulgated thereunder, no notice to, filing
    with, authorization of, exemption by, or consent or approval of, any public
    body or authority is necessary for the consummation by First Merchants of
    the transactions contemplated by this Agreement.

    6.03.  CAPITALIZATION.

         (a)  At December 31, 1995 First Merchants had 20,000,000 authorized,
    no par value, of which 5,053,901  shares were issued and outstanding.  The
    5,053,901 shares of common stock are validly issued, fully paid and
    nonassessable.

         (b)  First Merchants has 500,000 shares of Preferred Stock authorized,
    no par value, no shares of which have been issued and no commitments exist
    to issue any of such shares.

                                       Page 17

         (c)  Other than in connection with the proposed merger of Randolph
    County Bancorp, Inc. with and into First Merchants and pursuant to First
    Merchants Dividend Reinvestment and Stock Purchase Plan, Stock Option Plans
    and Employee Stock Purchase Plans, there are no options, commitments, calls
    or agreements outstanding regarding the issuance of capital stock or any
    securities representing the right to purchase or otherwise receive such
    stock, or any debt securities of First Merchants.  First Merchants does not
    have any outstanding contractual obligation to repurchase, redeem, or
    otherwise acquire any of its outstanding shares of capital stock.

         (d)  The shares of First Merchants' common stock to be issued pursuant
    to the Merger will be fully paid, validly issued and nonassessable.

    6.04.  ORGANIZATIONAL DOCUMENTS.  The Articles of Incorporation and By-laws
of First Merchants in force as of the date hereof, have been delivered to Union
National.  The documents delivered by it represent complete and accurate copies
of the corporate documents of First Merchants in effect as of the date of this
Agreement.

    6.05.  ACCURACY OF STATEMENTS.  Neither this Agreement nor any report,
statement, list, certificate or other information furnished or to be furnished
by First Merchants to Union National in connection with this Agreement or any of
the transactions contemplated hereby (including, without limitation, any
information which has been or shall be supplied by First Merchants with respect
to its business, operations and financial condition for inclusion in the proxy
statement and registration statement relating to the Merger) contains or shall
contain (in the case of information relating to the proxy statement at the time
it is mailed and to the registration statement at the time it become effective)
any untrue statement of a material fact or omits or shall omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.

    6.06.  COMPLIANCE WITH LAW.  First Merchants has not engaged in any
activity nor taken or omitted to take any action which has resulted or, to the
knowledge of First Merchants, could result in the violation of any local, state,
federal or foreign law, statute, rule, regulation or ordinance or of any order,
injunction, judgment or decree of any court or government agency or body, the
violation of which could materially adversely affect the business, prospects,
condition (financial or otherwise) or results of operations of First Merchants.
First Merchants possesses all licenses, franchises, permits and other

                                       Page 18

authorizations necessary for the continued conduct of its business without
material interference or interruption.  There are no agreements or
understandings with, nor any orders of directives of, any regulatory agencies or
government authorities, which would have a material adverse effect on the
consolidated financial position of First Merchants.  First Merchants has
received no written inquiries from any regulatory agency or government authority
relating to its material noncompliance with the Bank Secrecy Act, the
Truth-in-Lending Act or the Community Reinvestment Act.

    6.07.  FINANCIAL STATEMENTS.  First Merchants consolidated balance sheets
as of the end of the three (3) fiscal years ended December 31, 1992, 1993 and
1994 and the nine months ended September 30, 1995 and the related consolidated
statements of income, shareholders' equity and cash flows for the years or
period then ended present fairly, in all material respects, the consolidated
financial condition or position of First Merchants as of the respective dates
thereof and the consolidated results of operations of First Merchants for the
respective periods covered thereby and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis.  All
required regulatory reports have been filed by First Merchants with its primary
federal regulator during 1995, 1994, 1993 and 1992, are true, accurate and
complete, in all material respects, and have been prepared in conformity with
generally accepted regulatory accounting principles applied on a consistent
basis.

    6.08.  ABSENCE OF CERTAIN CHANGES.  Except for events and conditions
relating to the business environment in general, since September 30, 1995, there
has not been any change or event of any character, actual or to First Merchants
knowledge threatened, which in the aggregate materially adversely affects First
Merchants consolidated business, prospects, conditions (financial or otherwise),
assets or results of operations.

    6.09.  FIRST MERCHANTS SECURITIES AND EXCHANGE COMMISSION FILINGS.  First
Merchants has filed all reports and other documents required to be filed by it
under the Securities Exchange Act of 1934 and the Securities Act of 1933,
including First Merchants' Annual Report on Form 10-K for the year ended
December 31, 1994, and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, copies of which have previously been delivered to Union
National (the "Securities Law Filings").  The Securities Law Filings do not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein not misleading.

                                       Page 19

    6.10.  BRING DOWN OF REPRESENTATIONS AND WARRANTIES.  All representations
and warranties of First Merchants contained in this Section 6 shall be true,
accurate and correct on and as of the Effective Date except as affected by the
transactions contemplated by and specified within the terms of this Agreement.

    6.11.  NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.  The representations
and warranties contained in this Section 6 shall expire on the Effective Date,
and thereafter First Merchants shall have no further liability with respect
thereto unless a court of competent jurisdiction should determine that any
misrepresentation or breach of a warranty was willfully or intentionally caused
either by action or inaction.

                                      SECTION 7

                             COVENANTS OF UNION NATIONAL

    Union National covenants and agrees with First Merchants, and covenants and
agrees to cause Bank to act, as follows:

    7.01.  SHAREHOLDER APPROVAL.  Union National shall submit this Agreement to
its shareholders for approval at a meeting to be called and held in accordance
with applicable law and the Articles of Incorporation and By-Laws of Union
National.

    7.02.  OTHER APPROVALS.  Union National and Bank shall proceed
expeditiously, cooperate fully and use reasonable efforts to procure upon
reasonable terms and conditions all consents, authorizations, approvals,
registrations and certificates, to complete all filings and applications and to
satisfy all other requirements prescribed by law which are necessary for
consummation of the Merger on the terms and conditions provided in this
Agreement at the earliest possible reasonable date.

    7.03.  CONDUCT OF BUSINESS.

         (a)  On and after the date of this Agreement and until the Effective
    Date or until this Agreement shall be terminated as herein provided,
    neither Union National nor Bank shall, without the prior written consent of
    First Merchants, (i) make any material changes in their capital structure;
    (ii) authorize a class of stock or issue, or authorize the issuance of,
    stock other than or in addition to the outstanding stock as set forth in
    Section 5.03 hereof; (iii) declare, distribute or pay any dividends on
    their shares of common stock, or authorize a stock split, or make any other
    distribution to their shareholders, except for (a) the payment by Union
    National prior to the Effective

                                       Page 20

Date of quarterly cash dividends on its common stock in March, June, September
and December, 1996, which dividends shall not exceed thirty-five cents ($.35),
thirty-five cents ($.35), forty cents ($.40), and forty cents ($.40) per share,
respectively, provided that Union National shall not pay any such dividend
during the fiscal quarter in which the Merger shall become effective and in
which Union National shareholders will become entitled to receive dividends on
the shares of First Merchants into which the shares of Union National have been
converted or in any subsequent fiscal quarter (First Merchants shall advise
Union National in writing at least 15 days prior to the Effective Date if it
anticipates a change from its historical practice in establishing the record
date for determining those shareholders entitled to receive a dividend for the
fiscal quarter in which the Merger is to be consummated.  Such written notice
shall describe the anticipated change in the record date.), and (b) the payment
by the Bank to Union National of dividends to pay Union National's expenses of
operations and its business and payment of fees and expenses incurred in
connection with the transactions contemplated by this Agreement; (iv) merge,
combine or consolidate with or, other than in the ordinary course of business,
sell their assets or any of their securities to any other person, corporation or
entity, effect a share exchange or enter into any other transaction not in the
ordinary course of business; (v) incur any liability or obligation, make any
commitment, payment or disbursement, enter into any contract, agreement,
understanding or arrangement or engage in any transaction, or acquire or dispose
of any property or asset having a fair market value in excess of $10,000.00
(except for personal or real property acquired or disposed of in connection with
foreclosures on mortgages or enforcement of security interests and loans made or
sold by Bank in the ordinary course of business); (vi) subject any of their
properties or assets to a mortgage, lien, claim, charge, option, restriction,
security interest or encumbrance; (vii) promote or increase or decrease the rate
of compensation (except for promotions and non-material increases in the
ordinary course of business and in accordance with past practices) or enter into
any agreement to promote or increase or decrease the rate of compensation of any
director, officer or employee of Union National or Bank; (viii) execute, create,
institute, modify or amend (except to allow a contribution to the Bank's defined
contribution plan in connection with the period commencing January 1, 1996 and
ending on the Effective Date in an amount based upon the participants'
compensation during such period and the Bank's historical contribution
percentage of participants' compensation as defined in the plan.), any

                                       Page 21

    pension, retirement, savings, stock purchase, stock bonus, stock ownership,
    stock option, stock appreciation or depreciation right or profit sharing
    plan, any employment, deferred compensation, consultant, bonus or
    collective bargaining agreement, group insurance contract or other
    incentive, welfare or employee benefit plan or agreement for current or
    former directors, officers of employees of Union National or Bank, change
    the level of benefits or payments under any of the foregoing or increase or
    decrease any severance or termination of pay benefits or any other fringe
    or employee benefits other than as required by law or regulatory
    authorities; (ix) amend their Articles of Incorporation or By-Laws from
    those in effect on the date of this Agreement; (x) modify, amend or
    institute new employment policies or practices, or enter into, renew or
    extend any employment or severance agreements with respect to any present
    or former Union National or Bank directors, officers or employees; (xi)
    give, dispose, sell, convey, assign, hypothecate, pledge, encumber or
    otherwise transfer or grant a security interest in any common stock of
    Bank; and (xii) fail to make additions to Bank's reserve for loan, losses,
    or any other reserve account, in the ordinary course of business and in
    accordance with sound banking practices.

         (b)  Union National and Bank shall maintain, or cause to be
    maintained, in full force and effect insurance on its properties and
    operations and fidelity coverage on its directors, officers and employees
    in such amounts and with regard to such liabilities and hazards as have
    previously been maintained by Union National and Bank.

         (c)  Union National and Bank shall continue to give to First Merchants
    and its employees, accountants, attorneys and other authorized
    representatives reasonable access during regular business hours and other
    reasonable times to all their premises, properties, statements, books and
    records.

    7.04.  PRESERVATION OF BUSINESS.  On and after the date of this Agreement
and until the Effective Date or until this Agreement is terminated as herein
provided.  Union National and Bank each shall (a) carry on their business
diligently, substantially in the same manner as heretofore conducted, and in the
ordinary course of business; (b) use their reasonable efforts to preserve their
business organizations intact, to keep their present officers and employees and
to preserve their present relationship with customers and others having business
dealings with them; and (c) not do or fail to do anything which will cause a
material breach of, or material default in, any contract, agreement, commitment,
obligation, understanding, arrangement,

                                       Page 22

lease or license to which they are a party or by which they are or may be
subject or bound.

    7.05.  OTHER NEGOTIATIONS.  Except with the prior written approval of First
Merchants, on and after the date of this Agreement and until the Effective Date,
Union National and Bank shall not, and shall not permit or authorize their
respective directors, officers, employees, agents or representatives to,
directly or indirectly, initiate, solicit, encourage, or engage in discussions
or negotiations with, or provide information to, any corporation, association,
partnership, person or other entity or group concerning any merger,
consolidation, share exchange, combination, purchase or sale of substantial
assets, sale of shares of capital stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing the right to acquire, capital stock), tender offer, acquisition of
control of Union National or Bank or similar transaction involving Union
National or Bank (all such transactions hereinafter referred to as "Acquisition
Transactions").  Union National and Bank shall promptly communicate to First
Merchants the terms of any proposal, written or oral, which either may receive
with respect to an Acquisition Transaction and any request by or indication of
interest on the part of any third party with respect to initiation of any
Acquisition Transaction or discussion with respect thereto.  The above
provisions of this Section 7.05 notwithstanding, nothing contained in this
Agreement shall prohibit (i) Union National from furnishing information to, or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited proposal of an Acquisition Transaction if and to the extent that
(a) the Board of Directors of Union National, after consultation with and based
upon the written advice of legal counsel, determines in good faith that such
action is required for the directors of Union National to fulfill their
fiduciary duties and obligations to the Union National shareholders and other
constituencies under Indiana law, and (b) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
Union National provides immediate written notice to First Merchants to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity, or (ii) the Board of Directors of
Union National from failing to make, withdrawing or modifying its recommendation
to shareholders regarding the Merger following receipt of a proposal for an
Acquisition Transaction if the Board of Directors of Union National, after
consultation with and based upon the written advice of legal counsel, determines
in good faith that such action is required for the directors of Union National
to fulfill their fiduciary duties and obligations to the Union National
shareholders and other constituencies under Indiana law.

                                       Page 23

    7.06.  RESTRICTIONS REGARDING AFFILIATES.  Union National shall, within 30
days after the date of this Agreement and promptly thereafter until the
Effective Date to reflect any changes, provide First Merchants with a list
identifying each person who may be deemed to be an "affiliate" of Union National
for purposes of Rule 145 under the Securities Act of 1933, as amended ("1933
Act").  Each director, executive officer and other person who is an "affiliate"
of Union National for purposes of the 1933 Act shall deliver to First Merchants
on or prior to the Effective Date hereunder a written agreement, in form and
substance reasonably satisfactory to counsel to First Merchants, providing that
such person will not sell, pledge, transfer, dispose of or otherwise reduce his
market risk with respect to shares of First Merchants common stock to be
received by such person pursuant to this Agreement (a) during the period 30 days
prior to the Effective Date, (b) until such time as financial results covering
at least 30 days of combined operations of First Merchants and Union National
have been published within the meaning of Section 201.01 of the Securities and
Exchange Commission's Codification of Financial Reporting Policies, except that
any such affiliate may pledge the shares of First Merchants common stock
received in connection with the Merger as collateral for other than non-recourse
loans without compliance with this Section 7.06(b) and (c) unless such sales,
pledges, transfers or dispositions are effected pursuant to an effective
registration statement under the 1933 Act or pursuant to Rule 145 of the
Securities and Exchange Commission or another exemption from the registration
requirements set forth in the 1933 Act, or are otherwise not subject to the
registration requirements set forth in the 1993 Act.

    7.07.  PRESS RELEASE.  Neither Union National or Bank shall issue any press
releases or make any other public announcements or disclosures relating to the
Merger without the prior approval of First Merchants.

    7.08.  DISCLOSURE LETTER UPDATE.  Union National shall promptly supplement,
amend and update monthly and as of the Effective Date the Disclosure Letter with
respect to any matters hereafter arising which, if in existence or having
occurred as of the date of this Agreement, would have been required to be set
forth or described in the Disclosure Letter.

    7.09.  COOPERATION.  Union National shall generally cooperate with First
Merchants and its officers, employees, attorneys, accountants and other agents,
and, generally, do such other acts and things in good faith as may be
reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby.  Prior to the Closing (as

                                       Page 24

defined in Section 12), Union National agrees to disclose to First Merchants any
fact or matter that comes to the attention of Union National that might indicate
that any of the representations or warranties of Union National may be untrue,
incorrect, or misleading in any material respect.

                                      SECTION 8

                             COVENANTS OF FIRST MERCHANTS

    First Merchants covenants and agrees with Union National as follows:

    8.01.  APPROVALS.  First Merchants shall proceed expeditiously, cooperate
fully and use reasonable efforts to procure upon reasonable terms and conditions
all consents, authorizations, approvals, registrations and certificates, to
complete all filings and applications and to satisfy all other requirements
prescribed by law which are necessary for consummation of the Merger on the
terms and conditions provided in this Agreement.  First Merchants shall provide
Union National with copies of proposed regulatory filings in connection with the
Merger and afford Union National the opportunity to offer comment on the filings
before filing.  The approval of First Merchants shareholders of the transactions
contemplated by this Agreement is not required.

    8.02.  EMPLOYEE BENEFIT PLANS.  Within one (1) year following the Effective
Date, First Merchants will permit Bank employees to participate in any
tax-qualified retirement plan First Merchants maintains for its employees,
provided that such an employee meets the applicable participation requirements,
in lieu of the Bank's current tax-qualified retirement plan.  Until that time,
the Bank's current tax-qualified retirement plan will be maintained at the same
level, with respect to benefit accruals, provided for on the Effective Date.
Following the Effective Date, Bank employees will otherwise receive employee
benefits that in the aggregate provide substantially equivalent economic value
in comparison to the employee benefits provided to those employees by Union
National or the Bank on the Effective Date.  For purposes of determining a Union
National or Bank employee's eligibility and vesting service under a First
Merchants employee benefit plan that the employee is permitted to enter, service
with Union National or Bank will be treated as service with First Merchants;
provided, however, that service with Union National and Bank will not be treated
as service with First Merchants for purposes of benefit accrual.

    8.03.  FIRST MERCHANTS BOARD OF DIRECTORS.  In connection with the first
annual meeting of the shareholders of First

                                       Page 25

Merchants following the Effective Date, First Merchants shall cause all
necessary action to be taken to cause two (2) of the current members of the
Board of Directors of Union National to be nominated for election as members of
the First Merchants' Board of Directors for three (3)-year terms.

    8.04.  PRESS RELEASE.  Except as required by law, First Merchants shall not
issue any press release to any national wire service relating solely to the
Merger without the prior approval of Union National.

    8.05.  CONFIDENTIALITY.  First Merchants shall, and shall use its best
efforts to cause its officers, employees, and authorized representatives to,
hold in strict confidence all confidential data and information obtained by it
from Union National or Bank, unless such information (i) was already known to
First Merchants, (ii) becomes available to First Merchants from other sources,
(iii) is independently developed by First Merchants, (iv) is disclosed outside
of First Merchants with and in accordance with the terms of prior written
approval of Union National or Bank , or (v) is or becomes readily ascertainable
from public or published information or trade sources or public disclosure of
such information is required by law or requested by a court or other
governmental agency, commission, or regulatory body.  First Merchants further
agrees that in the event the Agreement is terminated, it will return to Union
National all information obtained by First Merchants regarding Union National or
Bank, including all copies made of such information by First Merchants.

    8.06.  COVENANTS REGARDING THE BANK.  Upon consummation of the Merger, the
Bank shall be a bank organized under the laws of the State of Indiana and the
officers and directors of the Bank in office immediately prior to the
consummation of the Merger shall be the officers and directors of the Bank at
the Effective Date subject to the provisions of the Bank's Articles of
Incorporation and By-Laws.  Thereafter, the Bank directors who desire to
continue serve in that capacity shall do so for at least the remainder of the
one (1) year terms to which they have been elected.  The Bank directors will be
subject to First Merchants' policy of mandatory retirement at age seventy (70);
provided, however, the policy of mandatory retirement will not apply to any of
the Bank's current directors until twelve (12) months after the Effective Date.
First Merchants intends to continue to operate the Bank as an operating
subsidiary of First Merchants under the name "The Union County National Bank of
Liberty" with no changes in the number or locations of branches.

    8.07.  REGISTRATION STATEMENT; NASDAQ LISTING.  First Merchants shall use
reasonable efforts to prepare and file with

                                       Page 26

the Securities and Exchange Commission under the Securities Act of 1933, as
amended, a registration statement on Form S-4 or other appropriate registration
form to register the shares of common stock of First Merchants to be used in
connection with the Merger (the "Registration Statement") and to cause the
Registration Statement to be declared effective.  First Merchants shall take all
such action as is reasonably necessary to qualify the shares of common stock of
First Merchants to be issued in connection with the Merger for quotation in the
National Association of Securities Dealers Automated Quotation System - National
Market System ("NASDAQ-NMS").

    8.08  COOPERATION.  First Merchants shall generally cooperate with Union
National and its officers, employees, attorneys, accountants and other agents,
and, generally, do such other acts and things in good faith as may be
reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby.  Prior to the Closing (as defined in Section 12), First Merchants agrees
to disclose to Union National any fact or matter that comes to the attention of
First Merchants that might indicate that any of the representations or
warranties of First Merchants may be untrue, incorrect, or misleading in any
material respect.

                                      SECTION 9

                          CONDITIONS PRECEDENT TO THE MERGER

    The obligation of each of the parties hereto to consummate the transaction
contemplated by this Agreement is subject to the satisfaction and fulfillment of
each of the following conditions on or prior to the Effective Date:

    9.01.  SHAREHOLDER APPROVAL.  The shareholders of Union National shall have
approved, ratified and confirmed this Agreement as required by applicable law.

    9.02.  REGISTRATION STATEMENT EFFECTIVE.  First Merchants shall have
registered its shares of common stock to be issued to shareholders of Union
National in accordance with this Agreement with the Securities and Exchange
Commission pursuant to the 1933 Act, and all state securities and "blue sky"
approvals and authorizations required to offer and sell such shares shall have
been received by First Merchants.  The registration statement with respect
thereto shall have been declared effective by the Securities and Exchange
Commission and no stop order shall have been issued or threatened.  The shares
of common stock of First

                                       Page 27

Merchants to be issued in connection with the Merger shall be eligible for
quotation in NASDAQ-NMS upon notice of issuance.

    9.03. TAX OPINION.  The parties shall have obtained an opinion of counsel
which shall be in form and content reasonably  satisfactory to counsel for all
parties hereto, to the effect that the Merger effected pursuant to this
Agreement shall constitute a tax-free transaction (except to the extent cash is
received) to each party hereto and to the shareholders of each party.  Such
opinion shall be based upon factual representations received by such counsel
from the parties, which representations may take the form of written
certifications.

    9.04.  AFFILIATE AGREEMENTS.  First Merchants shall have obtained (a) from
Union National, a list identifying each affiliate of Union National and (b) from
each affiliate of Union National, the agreements contemplated by Section 7.06
hereof.

    9.05.  REGULATORY APPROVALS.  The Board of Governors of the Federal Reserve
System and the Indiana Department of Financial Institutions shall have
authorized and approved the Merger and the transactions related thereto.  In
addition, all appropriate orders, consents, approvals and clearances from all
other regulatory agencies and governmental authorities whose orders, consents,
approvals or clearances are required by law for consummation of the transactions
contemplated by this Agreement shall have been obtained.

    9.06.  OFFICER'S CERTIFICATE.  First Merchants and Union National shall
have delivered to each other a certificate signed by their Chairman or President
and their Secretary, dated the Effective Date, certifying that (a) all the
representations and warranties of their respective corporations are true,
accurate and correct on and as of the Effective Date; (b) all the covenants of
their respective corporations have been complied with from the date of the
Agreement through and as of the Effective Date; and (c) their respective
corporations have satisfied and fully complied with all conditions necessary to
make this Agreement effective as to them.

    9.07.  FAIRNESS OPINION.  Union National shall have obtained an opinion
from an investment banker of its choosing to the effect that the terms of the
Merger are fair to the shareholders of Union National from a financial
viewpoint.  Such opinion shall be (a) in form and substance reasonably
satisfactory to Union National, (b) dated as of a date not later than the
mailing date of the Proxy Statement relating to the Merger and (c) included in
the Proxy Statement.

                                       Page 28

    9.08.  POOLING OF INTERESTS.  First Merchants shall have obtained from its
independent accountants, Geo. S. Olive & Co. LLC, or from a nationally
recognized accounting firm, in First Merchants sole discretion, a letter to the
effect that based upon their review of such documents and information as they
deemed relevant, such firm is currently unaware of any reason why the Merger
cannot be accounted for as a "pooling of interests."

                                      SECTION 10

                                TERMINATION OF MERGER

    10.01.  MANNER OF TERMINATION.  This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Effective Date by
written notice delivered by First Merchants to Union National or by Union
National to First Merchants:

         (a)  By Union National or First Merchants, if there has been a
    material misrepresentation, breach of warranty or failure to comply with
    any covenant on the part of any party in the representations, warranties,
    and covenants set forth herein; provided the party in default shall have no
    right to terminate for its own default;

         (b)  By Union National or First Merchants, if it shall have reasonably
    determined that the transactions contemplated by this Agreement have become
    inadvisable or impracticable by reason of commencement or threat of
    material litigation or proceedings against any of the parties;

         (c)  By Union National or First Merchants if there have been any
    changes or events of any character, actual or threatened, since September
    30, 1995, which in the aggregate materially adversely affect First
    Merchant's (on the one hand) or Union National's or the Bank's (on the
    other hand) business, prospects, condition (financial or otherwise), assets
    or results of operations (excluding events and conditions relating to the
    business environment in general and those set forth in the Disclosure
    Letter);

         (d)  By Union National or First Merchants, if the transaction
    contemplated herein has not been consummated by December 31, 1996;

         (e)  By First Merchants if any of the items, events or information set
    forth in any update to the Disclosure Letter has had or, in the reasonable
    discretion of First Merchants,

                                       Page 29

    may have a material adverse effect on the financial condition, results of
    operations, business, or prospects of Union National or Bank;

         (f)  By First Merchants or Union National if, in the opinion of
    counsel to First Merchants or Union National, the Merger will not
    constitute a tax-free reorganization under the Code;

         (g)  By Union National if First Merchants or any of its subsidiary
    banks is acquired by a third party in a merger, consolidation, share
    exchange, stock transaction or asset transaction; if First Merchants enters
    into an agreement containing the terms and conditions of such a
    transaction; or if the terms and conditions of such a transaction are
    publicly disclosed;

         (h)  By Union National if between the date of this Agreement and the
    Effective Date, (i) First Merchants issues, grants, sells or redeems any of
    its capital stock, or issues, grants, sells or redeems any security,
    option, warrant or other right that provides for the purchase of capital
    stock of First Merchants or that is convertible or exercisable into shares
    of the capital stock of First Merchants, or makes or sets a record date for
    a distribution of any kind to holders of the capital stock of First
    Merchants other than regular quarterly cash dividends (excluding shares of
    First Merchants capital stock and options therefor issued in connection
    with the proposed merger of Randolph County Bancorp, Inc. with and into
    First Merchants or pursuant to First Merchants Dividend Reinvestment and
    Stock Purchase Plan, Stock Option Plans or Employee Stock Purchase Plans
    (collectively, an "Equity Transaction"), or enters into an agreement,
    contract or arrangement of any kind relating to an Equity Transaction, and
    (ii) such Equity Transaction, after giving effect to the Merger, would
    decrease the projected earnings per share or book value per share
    attributable to the shares to be received by the shareholders of Union
    National in connection with the Merger;

         (i)  By First Merchants if the Merger cannot be accounted for as a
    "pooling of interests;"

         (j)  By Union National, if the appropriate discharge of the fiduciary
    duties of the Board of Directors of Union National consistent with Section
    7.05 requires that Union National terminate this Agreement; or

                                       Page 30

         (k)  By First Merchants if it receives written notice under Section
    7.05 that Union National intends to furnish information to or enter into
    discussions or negotiations with a third party in connection with a
    proposed Acquisition Transaction, if Union National fails to give any such
    written notice as required in Section 7.05 or if Union National's Board of
    Directors fails to make, withdraws or modifies its recommendation to Union
    National shareholders to vote in favor of the Merger.

    10.02.  EFFECT OF TERMINATION.  Except as set forth in this Section 10.02,
upon termination by written notice, as provided in this Section, this Agreement
shall be void and of no further force or effect and there shall be no obligation
on the part of Union National or First Merchants or their respective officers,
directors, employees, agents, or shareholders, except for payment of their
respective expenses and First Merchants obligations under Section 8.05.
Notwithstanding the foregoing, in the event of termination by First Merchants in
accordance with Section 10.01(k) or by Union National in accordance with Section
10.01(j), Union National shall pay First Merchants the sum of Five Hundred
Thousand Dollars ($500,000.00) as liquidated damages.  Such payment shall be
made within ten (10) days of the date of notice of termination.  Union National
acknowledges the reasonableness of such amount in light of the considerable time
and expense invested and to be invested by First Merchants and its
representatives in furtherance of the Merger.  Such amount was agreed upon by
First Merchants and Union National as compensation to First Merchants for its
time and expense and not as a penalty to Union National, it being impossible to
ascertain the exact value of the time and expense to be invested.  First
Merchants shall also be entitled to recover from Union National its reasonable
attorney's fees incurred in the enforcement of this Section.

                                      SECTION 11

                               EFFECTIVE DATE OF MERGER

    Subject to the terms and upon satisfaction of all requirements of law and
the conditions specified in this Agreement, the Merger shall become effective at
the close of business on the day specified in the Articles of Merger of Union
National with and into First Merchants as filed with the Secretary of State of
Indiana ("Effective Date").  The Effective Date shall occur no later than the
last business day of the month in which that thirty (30) day period following
the last approval of the Merger by a federal regulatory agency or governmental
authority expires.

                                       Page 31

                                      SECTION 12

                                       CLOSING

    12.01.  CLOSING DATE AND PLACE.  The closing of the Merger ("Closing")
shall take place at the main office of First Merchants on the Effective Date.

    12.02.  ARTICLES OF MERGER.  Subject to the provisions of this Agreement,
on the Effective Date, the Articles of merger shall be duly filed with the
Secretary of State of the State of Indiana.

    12.03.  OPINIONS OF COUNSEL.  At the Closing, Union National shall deliver
an opinion of its counsel, Ice Miller Donadio & Ryan, to First Merchants, and
First Merchants shall deliver an opinion of its counsel, Bingham Summers Welsh &
Spilman, to Union National, dated as of the date of the Closing and in form
reasonably satisfactory to the other party and their counsel.

                                      SECTION 13

                                    MISCELLANEOUS

    13.01.  EFFECTIVE AGREEMENT.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but none of the provisions thereof shall inure to the benefit
of any other person, firm, or corporation whomsoever.  Neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned or
transferred by either party hereto without the prior written consent of the
other party.

    13.02.  WAIVER; AMENDMENT.

         (a)  First Merchants and Union National may, by an instrument in
    writing executed in the same manner as this Agreement:  (i) extend the time
    for the performance of any of the covenants or agreements of the other
    party under this Agreement; (ii) waive any inaccuracies in the
    representations or warranties of the other party contained in this
    Agreement or in any document delivered pursuant hereto or thereto; (iii)
    waive the performance by the other party of any of the covenants or
    agreements to be performed by it or them under this Agreement; or (iv)
    waive the satisfaction or fulfillment of any condition the non-satisfaction
    or nonfulfillment of which is a condition to the right of the party so
    waiving to terminate this

                                       Page 32

    Agreement.  The waiver by any party hereto of a breach of any provision of 
    this Agreement shall not operate or be construed as a waiver of any other or
    subsequent breach hereunder.

         (b)  Notwithstanding approval by the shareholders of Union National,
    this Agreement may be amended, modified, or supplemented by the written
    agreement of Union National and First Merchants without further approval of
    such shareholders, except that no such amendment, modification, or
    supplement shall result in a decrease in the consideration specified in
    Section 3 hereof or shall materially adversely affect the rights of
    shareholders of Union National without the further approval of such
    shareholders.

    13.03.  NOTICES.  Any notice required or permitted by this Agreement shall
be deemed to have been duly given if delivered in person, receipted for or sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:

    If to First Merchants:             With a copy to:

    200 E. Jackson Street              Bingham Summers Welsh & Spilman
    Box 792                            2700 Market Tower
    Muncie, IN  47305                  10 West Market Street
    Attn:  Stefan S. Anderson,         Indianapolis, Indiana  46204-2982
      President                        Attn:  David R. Prechtel, Esq.

    If to Union National:              With a copy to:

    107 West Union                     Ice Miller Donadio & Ryan
    P. O. Box 217                      One American Square, Box 82001
    Liberty, IN 47353                  Indianapolis, Indiana 46282-0002
    Attn:  Ted J. Montgomery,          Attn:  Thomas H. Ristine, Esq.
      President

or such substituted address as any of them have given to the other in writing.

    13.04.  HEADINGS.  The headings in this Agreement have been inserted solely
for the ease of reference and should not be considered in the interpretation or
construction of this Agreement.

    13.05.  SEVERABILITY.  In case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be

                                       Page 33

construed as if such invalid, illegal, or unenforceable provision or provisions
had never been contained herein.

    13.06.  COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.

    13.07.  GOVERNING LAW.  This Agreement is executed in and shall be
construed in accordance with the laws of the State of Indiana.

    13.08.  ENTIRE AGREEMENT.  This Agreement supersedes any other agreement,
whether oral or written, between First Merchants and Union National relating to
the matters contemplated hereby, and constitutes the entire agreement between
the parties hereto.

    13.09.  EXPENSES.  First Merchants and Union National shall each pay their
own expenses incidental to the transactions contemplated hereby.  It is
understood that the cost of the fairness opinion referenced in Section 9.07
shall be borne by Union National whether or not the Merger is consummated.

    IN WITNESS WHEREOF, First Merchants and Union National have made and
entered into this Agreement as of the day and year first above written and have
caused this Agreement to be executed and attested by their duly authorized
officers.

                                            FIRST MERCHANTS CORPORATION

ATTEST:
 
     /S/ Rodney A. Medler                     By    /S/ Stefan S. Anderson
- -----------------------------                    -----------------------------
 Rodney A. Medler, Secretary                    Stefan S. Anderson, President

                                            UNION NATIONAL BANCORP

ATTEST:

    /S/ Millard E. Hays                       By    /S/ Ted J. Montgomery
- -----------------------------                    -----------------------------
  Millard E. Hays, Secretary                    Ted J. Montgomery, President

                                       Page 34

STOCKHOLDER INFORMATION

[GRAPHIC:  MAP; FIRST MERCHANTS CORPORATION MARKET AREA]

First
Merchants
Corporation
Market Area

Corporate Office
200 East Jackson Street
Muncie, IN  47305
317-747-1500

     First Merchants Corporation currently provides services through 21 offices
located in Delaware, Madison, and Henry counties in Indiana.

     First Merchants Corporation of Muncie, Indiana, was organized in September
1982, as the bank holding company for The Merchants National Bank, now First
Merchants Bank, N.A., an institution which has served Muncie and the surrounding
communities since 1893.

     In November, 1988, First Merchants acquired Pendleton Banking Company of
Pendleton, Indiana, a commercial bank which was organized in 1872.

     In July, 1991, the Corporation acquired First United Bank of Middletown,
Indiana, which was established in 1882.

     First Merchants Corporation currently provides services through 21 offices
located in Delaware, Madison, and Henry counties, Indiana.

     Subsidiaries of First Merchants Corporation conduct a full range of banking
operations, including commercial, industrial, consumer and real estate lending,
deposit and investment services, and other banking services.  First Merchants
Bank, with more than $914,000,000 in fiduciary assets at market value, operates
one of the ten largest trust departments in Indiana.

     First Merchants Corporation is committed to the sound management of its
subsidiaries and to leading its east central Indiana marketplace in meeting
customer banking needs and expectations.

                                     -1-

STOCKHOLDER INFORMATION
STOCK PRICE AND DIVIDEND INFORMATION

                            PRICE PER SHARE
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

QUARTER                        HIGH                    LOW              DIVIDENDS DECLARED
                          1995      1994           1995      1994         1995       1994
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
                                                                   
First Quarter             $22.17    $20.33         $20.83    $19.00       $.19       $.17
Second Quarter             23.50     19.67          21.33     18.67        .19        .17
Third Quarter              26.50     22.50          22.67     19.00        .20        .19
Fourth Quarter             26.75     22.33          25.75     20.33        .20        .19
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The table above lists per share  prices and dividend payments during 1994 and
1995, as adjusted for the 3-for-2 stock split of October, 1995.

Prices are as reported by the National Association of Securities Dealers
Automated Quotation - National Market System.

Numbers rounded to the nearest cent when applicable.

STOCK INFORMATION

COMMON STOCK LISTING

First Merchants Corporation common stock is traded over-the-counter on the
NASDAQ National Market System.  Quotations are carried in many daily papers.
The NASDAQ symbol is FRME (Cusip #320817-10-9).  At the close of business on
December 31, 1995, the number of shares outstanding was 5,053,901.  There were
1,115 stockholders of record on that date.

STOCK TRANSFER AGENT AND REGISTRAR

     First Merchants Bank, N.A.
     Corporate Trust Department
     P.O. Box 792
     Muncie, Indiana  47308-0792

GENERAL STOCKHOLDER INQUIRIES

Stockholders and interested investors may obtain information about the
Corporation upon written request or by calling:

     Mr. Douglas B. Harris
     Assistant Vice President
     Investor Services
     First Merchants Corporation
     P.O. Box 792
     Muncie, Indiana  47308-0792
     317-747-1500
     1-800-262-4261

MARKET MAKERS

The following firms make a market in First Merchants Corporation stock:

     City Securities Corporation
     Herzog, Heine, Geduld, Inc.
     Howe, Barnes & Johnson, Inc.
     McDonald and Company
     NatCity Investments, Inc.
     David A. Noyes and Company

FORM 10-K AND FINANCIAL INFORMATION

First Merchants Corporation, upon request and without charge, will furnish
stockholders, security analysts, and investors a copy of Form 10-K filed with
the Securities and Exchange Commission.  Please contact:

     Mr. James Thrash
     Senior Vice President
     and Chief Financial Officer
     First Merchants Corporation
     P.O. Box 792
     Muncie, Indiana  47308-0792
     317-747-1390
     1-800-262-4261

ANNUAL MEETING

The Annual Meeting of Stockholders of First Merchants Corporation will be held
Thursday, April 4, 1996, 3:30 p.m., at the Horizon Convention Center, 401 South
High Street, Muncie, Indiana.

                                     -2-

INDEPENDENT AUDITOR'S REPORT

To the Stockholders & Board of Directors
First Merchants Corporation
Muncie, Indiana

We have audited the consolidated balance sheet of First Merchants Corporation
and subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1995 (pages 8-24).  These
consolidated financial statements are the responsibility of the Corporation's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements described above present
fairly, in all material respects, the consolidated financial position of First
Merchants Corporation and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.

As discussed in the notes to the Consolidated Financial Statements, the
Corporation changed its method of accounting for investments in securities in
1994 and for income taxes in 1993.

                                   /S/  GEO S. OLIVE & CO. LLC

                                   Indianapolis, Indiana
                                   January 19, 1996,
                                   except for Note 2 as to which
                                   the date is January 24, 1996

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TABLE OF CONTENTS

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA. . . . . . . . . . . .           1

MANAGEMENT'S DISCUSSION & ANALYSIS  . . . . . . . . . . . . . . . .           2

CONSOLIDATED FINANCIAL STATEMENTS   . . . . . . . . . . . . . . . .           8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   . . . . . . . . . . . .         12
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                                 (INSIDE COVER)

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, Except per Share Amounts)

                                                                        1995        1994         1993        1992       1991

OPERATIONS
                                                                                                       
Net Interest Income
    Fully Taxable Equivalent Basis. . . . . . . . . . . . . . . . .   $ 29,245    $ 28,282     $ 26,806    $ 26,400   $ 23,277
Less Tax Equivalent Adjustment . . . . . . . . . . . . . . . . . .       1,364       1,299        1,298       1,190      1,320
                                                                      --------     --------    --------     --------   --------

Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . .     27,881      26,983       25,508      25,210     21,957
Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . .        640         782        1,014       1,357      1,401
                                                                      --------     --------    --------     --------   --------
Net Interest Income
    After Provision for Loan Losses . . . . . . . . . . . . . . . .     27,241      26,201       24,494      23,853     20,556
Total Other Income  . . . . . . . . . . . . . . . . . . . . . . . .      6,907       6,298        6,588       5,576      5,229
Total Other Expenses. . . . . . . . . . . . . . . . . . . . . . . .     18,842      18,434       18,214      17,603     15,792
                                                                      --------     --------    --------     --------   --------

Income Before Income Tax Expense . . . . . . . . . . . . . . . . . .    15,306      14,065       12,868      11,826      9,993
Income Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . .     5,448       4,907        4,396       4,041      3,234
                                                                      --------     --------    --------     --------   --------

Income Before Change in Accounting Method . . . . . . . . . . . . .      9,858       9,158        8,472       7,785      6,759
Change in Accounting Method for Income Taxes . . . . . . . . . . . .                                227
                                                                      --------     --------    --------     --------   --------

Net Income  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $  9,858    $  9,158     $  8,699    $  7,785   $  6,759
                                                                      --------     --------    --------     --------   --------
                                                                      --------     --------    --------     --------   --------
PER SHARE DATA (1)

Income Before Change in Accounting Method . . . . . . . . . . . . .   $   1.95    $   1.80     $   1.65    $   1.53   $   1.39
Net Income  . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1.95        1.80         1.70        1.53       1.39
Cash Dividends Paid . . . . . . . . . . . . . . . . . . . . . . . .        .77         .71          .63         .57        .57
December 31 Book Value  . . . . . . . . . . . . . . . . . . . . . .      15.92       14.07        13.53       12.53      11.57
December 31 Market Value (Bid Price). . . . . . . . . . . . . . . .      25.75       20.83        19.33       19.00      12.45

AVERAGE BALANCES

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $665,347    $634,868     $626,398    $603,067   $560,412
Total Loans  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   413,940     388,639      357,028     329,750    300,276
Total Deposits  . . . . . . . . . . . . . . . . . . . . . . . . . .    538,539     514,029      517,826     501,526    441,302
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . .    76,001      70,104       66,887      61,246     54,473

YEAR-END BALANCES

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $707,859    $644,606     $626,113    $616,859   $596,573
Total Loans  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   419,730     401,605      376,872     350,308    323,382
Total Deposits  . . . . . . . . . . . . . . . . . . . . . . . . . . .  588,156     529,830      506,302     511,971    484,824
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . .    80,473      71,018       68,804      63,935     58,472

FINANCIAL RATIOS

Return on Average Assets . . . . . . . . . . . . . . . . . . . . . . .    1.48%       1.44%        1.39%       1.29%      1.21%
Return on Average Stockholders' Equity . . . . . . . . . . . . . . . .   12.97       13.06        13.01       12.71      12.41
Average Earning Assets to Total Assets. . . . . . . . . . . . . . . .    94.65       94.05        93.71       93.93      93.82
Allowance for Loan Losses as % of Total Loans. . . . . . . . . . . . .    1.18        1.24         1.27        1.24       1.20
Dividend Payout Ratio . . . . . . . . . . . . . . . . . . . . . . . . .  39.49       39.44        37.06       37.25      38.13
Average Stockholders' Equity to Average Assets. . . . . . . . . . . . .  11.42       11.04        10.68       10.16       9.72
Tax Equivalent Yield on Earning Assets. . . . . . . . . . . . . . . . .   8.15        7.44         7.38        8.31       9.48
Cost of Supporting Liabilities. . . . . . . . . . . . . . . . . . . . .   3.51        2.70         2.81        3.65       5.05
Net Interest Margin on Earning Assets . . . . . . . . . . . . . . . . .   4.64        4.74         4.57        4.66       4.43

(1) Restated for 3- for- 2 stock splits distributed January, 1993, and October,
1995.

The amounts include First United Bank, subsequent to its acquisition on July 31,
1991.

                                     -1-

MANAGEMENT'S DISCUSSION & ANALYSIS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Asset quality has been a major factor in the Corporation's ability to generate
consistent profit improvement.

[Graphic; bar chart; Return on Average Assets]

[Graphic; bar chart; Return on Average Equity]

RESULTS OF OPERATIONS

     Net income amounted to $9,858,000 or $1.95, an increase of 8.3 per cent
over 1994 at $1.80 per share.

     Return on assets increased to a record level of 1.48 per cent, up from 1.44
per cent in 1994, and 1.39 per cent in 1993.

     Return on equity was 12.97 per cent in 1995, 13.06 per cent in 1994, and
13.01 per cent in 1993.

     In 1995, First Merchants Corporation ("Corporation") recorded the
twentieth consecutive year of improvement in net income on both an aggregate
and per share basis.

CAPITAL

     The Corporation's capital strength continues to exceed regulatory minimums
and peer group averages.  Management believes that strong capital is a distinct
advantage in the competitive environment in which the Corporation operates and
will provide a solid foundation for continued growth.

     The Corporation's capital ratio was 11.37 per cent at year-end 1995 and
11.02 per cent at December 31, 1994.  At December 31, 1995, the Corporation had
a Tier I risk-based capital ratio of 16.99 per cent, total risk-based capital
ratio of 18.07 per cent, and a leverage ratio of 11.13 per cent.  Regulatory
capital guidelines require a Tier I risk-based capital ratio of 4.0 per cent and
a total risk-based capital ratio of 8.0 per cent.

     The Corporation has an employee stock purchase plan and an employee stock
option plan.  Activity under these plans is described in Note 14 to the
Consolidated Financial Statements.  The transactions under these plans have not
had a material effect on the Corporation's capital position.

ASSET QUALITY/PROVISION FOR LOAN LOSSES

     The Corporation's asset quality and loan loss experience has consistently
been superior to that of its peer group, as summarized on the following page.
Asset quality has been a major factor in the Corporation's ability to generate
consistent profit improvement.

     The allowance for loan losses is maintained through the provision for loan
losses, which is a charge against earnings.

     The amount provided for loan losses and the determination of the adequacy
of the allowance are based on a continuous review of the loan portfolio,
including an internally administered loan review program.  The evaluation takes
into consideration identified credit problems, as well as the possibility of
losses inherent in the loan portfolio that cannot be specifically identified.

     The following table summarizes the risk elements for the Corporation and
its peer group consisting of bank holding companies with average assets between
$500 million and $1 billion.  The peer group statistics were provided by the
Federal Reserve System.  The table indicates that the Corporation's loan quality
compares favorably with the peer group.

(continued)

                                     -2-

MANAGEMENT'S DISCUSSION & ANALYSIS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

ASSET QUALITY/PROVISION FOR LOAN LOSSES (continued)

[Graphic; bar chart; Net Loan Losses]

- --------------------------------------------------------------------------------
NON-PERFORMING LOANS (1) at DECEMBER 31 as a PER CENT of LOANS

                                                         FIRST MERCHANTS   PEER
                                                          CORPORATION      GROUP
                                                                     
1995 . . . . . . . . . . . . . . . . . . . . . . . . . .    .16%           N/A

1994 . . . . . . . . . . . . . . . . . . . . . . . . . .    .26            1.01%

1993 . . . . . . . . . . . . . . . . . . . . . . . . . .    .30            1.55

1992 . . . . . . . . . . . . . . . . . . . . . . . . . .    .41            1.85

1991 . . . . . . . . . . . . . . . . . . . . . . . . . .    .86            2.59

(1) Accruing loans past due 90 days or more, and non-accruing loans, but
excluding restructured loans.  December 31, 1995, peer group comparisons are not
yet available.
- --------------------------------------------------------------------------------
     At December 31, 1995, the allowance for loan losses was $4,957,000,
down slightly from year end 1994.  As a per cent of loans, the allowance was
1.18 per cent, down from 1.24  per cent at year end 1994.

     The table below presents loan loss experience for the years indicated and
compares the Corporation's loss experience to that of its peer group.  Again,
the Corporation compares favorably.

                                                                 1995          1994          1993          1992          1991
                                                              -----------------------------------------------------------------
                                                                                 (Dollars in Thousands)
                                                                                                       
Allowance for loan losses:
    Balance at January 1 . . . . . . . . . . . . . . . . .    $   4,998     $   4,800     $   4,351     $   3,867     $   3,254
        Addition resulting
          from acquisition . . . . . . . . . . . . . . . .                                                                  252

    Chargeoffs:
        Commercial. . . . . . . . . . . . . . . . . . . . .         586           526           391           588           806
        Real estate mortgage . . . . . . . . . . . . . . . .                       41           129           100            41
        Installment . . . . . . . . . . . . . . . . . . . .         296           346           388           552           511
                                                              ---------     ---------     ---------     ---------     ---------
             Total chargeoffs  . . . . . . . . . . . . . . .        882           913           908         1,240         1,358
                                                              ---------     ---------     ---------     ---------     ---------

    Recoveries:
        Commercial. . . . . . . . . . . . . . . . . . . . .          89           216           240           215           227
        Real estate mortgage . . . . . . . . . . . . . . . .          4            30             5            38             7
        Installment   . . . . . . . . . . . . . . . . . . .         108            83            98           114            84
                                                              ---------     ---------     ---------     ---------     ---------
             Total recoveries  . . . . . . . . . . . . . . .        201           329           343           367           318
                                                              ---------     ---------     ---------     ---------     ---------

    Net chargeoffs . . . . . . . . . . . . . . . . . . . . .        681           584           565           873         1,040
                                                              ---------     ---------     ---------     ---------     ---------
    Provision for loan losses. . . . . . . . . . . . . . . .        640           782         1,014         1,357         1,401
                                                              ---------     ---------     ---------     ---------     ---------
    Balance at December 31 . . . . . . . . . . . . . . . . .   $  4,957     $   4,998     $   4,800     $   4,351     $   3,867
                                                              ---------     ---------     ---------     ---------     ---------
                                                              ---------     ---------     ---------     ---------     ---------

Ratio of net chargeoffs during
    the period to average loans
    outstanding during the period. . . . . . . . . . . . . .       .16%          .15%          .16%          .26%          .35%
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . .        N/A          .25%          .49%          .65%          .95%

          As a result of Management's assessment of loan quality and the
adequacy of the allowance for loan losses, the 1995 provision for loan losses
was reduced $142,000.  Chargeoffs exceeded the amount provided by $41,000.
The Corporation adopted SFAS No. 114 and No. 118 ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN AND ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN  -
INCOME RECOGNITION AND DISCLOSURE on January 1, 1995.  Impaired loans totaled
$3,122,000 at December 31, 1995.   An allowance for losses at December 31, 1995,
was not deemed necessary for impaired loans totaling $1,900,000, but an
allowance of $559,000 was recorded for the remaining balance of impaired loans
of $1,222,000.  The average balance of impaired loans for 1995 was $1,682,000.

                                     -3-

MANAGEMENT'S DISCUSSION & ANALYSIS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

LIQUIDITY AND INTEREST SENSITIVITY

     Asset/Liability Management has been an important factor in the
Corporation's ability to record consistent earnings growth through periods of
interest rate volatility and product deregulation.  Management and the Board of
Directors monitor the Corporation's liquidity and interest sensitivity positions
at regular meetings to ensure that changes in interest rates will not adversely
affect earnings.  Decisions regarding investment and the pricing of loan and
deposit products are made after analysis of liquidity, rates sensitivity, the
Corporation's exposure to changes in net interest income given various rate
scenarios, and the economic and competitive environments.

     The Corporation's liquidity and interest sensitivity position at 
December 31, 1995, remained adequate to meet the Corporation's primary goal 
of achieving optimum interest margins while avoiding undue interest rate 
risk. The table below presents the Corporation's interest rate sensitivity 
analysis as of December 31, 1995.

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

INTEREST-RATE SENSITIVITY ANALYSIS
(Dollars in Thousands)

                                                           AT DECEMBER 31, 1995

                                                   1-180 DAYS     181 - 365 DAYS  1-5 YEARS  BEYOND 5 YEARS   TOTAL
- ---------------------------------------------------------------------------------------------------------------------
                                                                                             
Rate-Sensitive Assets:
  Federal funds sold and
    interest-bearing time deposits . . . . . .     $ 37,655                                                 $ 37,655
  Securities available for sale. . . . . . . .       20,878         $ 10,544       $ 97,717 $  13,981        143,120
  Securities held to maturity. . . . . . . . .       11,823            7,882         35,023     3,486         58,214
  Mortgage loans held for sale . . . . . . . .                                                    736            736
  Loans. . . . . . . . . . . . . . . . . . . .      216,417           46,588        105,521    50,468        418,994
  Federal Reserve and
    Federal Home Loan Bank stock . . . . . . .        1,585                                       307          1,892
                                                   --------         --------       --------   -------        -------
         Total rate-sensitive assets . . . . .      288,358           65,014        238,261    68,978        660,611
                                                   --------         --------       --------   -------        -------
Rate Sensitive Liabilities:
  Interest-bearing deposits. . . . . . . . . .      212,175           29,162        247,318        68        488,723
  Short-term borrowings. . . . . . . . . . . .       33,975                                                   33,975
  Federal Home Loan Bank advance . . . . . . .        1,000                                                    1,000
                                                   --------         --------       --------   -------        -------
         Total rate-sensitive liabilities. . .      247,150           29,162        247,318        68        523,698
                                                   --------         --------       --------   -------        -------

Interest rate sensitivity gap by period. . . .     $ 41,208         $ 35,852       $ (9,057) $ 68,910
Cumulative gap . . . . . . . . . . . . . . . .       41,208           77,060         68,003   136,913
Cumulative ratio at December 31, 1995. . . . .       116.67%          127.89%        112.99%   126.14%

EARNING ASSETS

     Earning assets increased $76.4 million during 1995 after declining $.8
million during 1994.

     The following table presents the earning asset mix for the years 1995, 1994
and 1993.
- -------------------------------------------------------------------------------

EARNING ASSETS

(Dollars in Millions)

                                                                                   DECEMBER 31

                                                                           1995        1994        1993
                                                                          ------      ------      ------
                                                                                         
Federal funds sold and interest-bearing time deposits. . . . . . . . .    $ 37.7      $  3.7      $  1.9
Securities available for sale. . . . . . . . . . . . . . . . . . . . .     143.1        99.3
Securities held to maturity. . . . . . . . . . . . . . . . . . . . . .      58.2        77.7       204.3
Mortgage loans held for sale . . . . . . . . . . . . . . . . . . . . .        .7
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     419.0       401.6       376.9
Federal Reserve and Federal Home Loan Bank stock . . . . . . . . . . .       1.9         1.9         1.9
                                                                          ------      ------      ------
    Total. . . . . . . . . . . . . . . . . . . . .                        $660.6      $584.2      $585.0
                                                                          ------      ------      ------
                                                                          ------      ------      ------

                                     -4-

 MANAGEMENT'S DISCUSSION & ANALYSIS
(Dollars in Thousands)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

DEPOSITS, SHORT-TERM BORROWINGS AND FEDERAL HOME LOAN BANK ADVANCE

The following tables present the level of deposits and borrowed funds (Federal
funds purchased, repurchase agreements with customers, U.S. Treasury demand
notes and Federal Home Loan Bank stock) based on both year-end levels and daily
average balances for the past three years:

                         AS OF DECEMBER 31

                                SHORT-TERM  FEDERAL HOME LOAN
                  DEPOSITS      BORROWINGS    BANK ADVANCE
                  --------      ----------  -----------------
                                    
1995           $   588,156     $   33,975    $    1,000
1994               529,830         39,189
1993               506,302         46,890

                      AVERAGE BALANCES

                                SHORT-TERM  FEDERAL HOME LOAN
                  DEPOSITS      BORROWINGS    BANK ADVANCE
                  --------      ----------  -----------------
                                      
1995            $  538,539      $  44,799      $    515
1994               514,029         45,639
1993               517,826         35,317

NET INTEREST INCOME

     Net interest income is the primary source of the Corporation's earnings.
It is a function of net interest margin and the level of average earning assets.

     The table below presents the Corporation's asset yields, interest expense,
and net interest income as a per cent of average earning assets for the five-
year period ending in 1995.

     Asset yields improved in 1995 ( .71 per cent), while interest expense
increased .81 per cent.

     The resulting "spread" decrease of .10 per cent (4.64% vs 4.74%) was offset
by a $32.7 million increase in earning assets enabling fully taxable equivalent
net interest income to grow by $963,000.

                  INTEREST INCOME      INTEREST EXPENSE    NET INTEREST INCOME                NET INTEREST INCOME
                 (FTE) as a Per Cent     as a Per Cent    (FTE) as a Per Cent     AVERAGE            on a
                     of Average           of Average          of Average          EARNING        Fully Taxable
                   Earning Assets       Earning Assets      Earning Assets        ASSETS       Equivalent Basis
                 -------------------   ----------------    -------------------    -------      ------------------
                                                                                
1995                    8.15%                3.51%                4.64%         $ 629,784         $ 29,245
1994                    7.44                 2.70                 4.74            597,102           28,282
1993                    7.38                 2.81                 4.57            587,009           26,806
1992                    8.31                 3.65                 4.66            566,467           26,400
1991                    9.48                 5.05                 4.43            525,799           23,277

OTHER INCOME

     The Corporation has placed emphasis on the growth of non-interest income in
recent years by offering a wide range of fee-based services. Fee schedules are
regularly reviewed by a pricing committee to ensure that the products and
services offered by the Corporation are priced to be competitive and profitable.

     Other income reached $6,907,000 in 1995, exceeding the prior year by
$609,000 or 9.7 per cent. Major factors included:

     1.   A $205,000 (8.0 per cent) increase in trust revenues.

     2.   A gain of $205,000 on the sale of approximately $8,000,000 of the
          Corporation's student loans. 

     Other income declined in 1994 by $290,000, (4.4 per cent). The decline 
is  attributable to two factors:

     1.   Loss on the sale of securities of $31,000 compared to gains of
          $395,000 in 1993, a change of $426,000.

     2.   A $126,000 (5.0 per cent) decline in deposit service charges.  

     The first factor is not relevant to the underlying fee income potential 
of the Corporation. Without that change, fee income would have increased from 
$6,194,000 to $6,239,000 (2.2 per cent).

OTHER EXPENSE

     Total "other expenses" represent non-interest operating expenses of the
Corporation. Those expenses amounted to $18,842,000 in 1995, an increase of 2.2
per cent from the prior year.

Salary and benefit expenses, which account for over one-half of the
Corporation's non-interest operating expenses, increased by $510,000 (5.1 per
cent). Increases in occupancy, equipment, printing, and office supplies and
advertising expenses totaling $449,000 were offset by a $530,000 reduction in
the cost of deposit insurance and by a refund of $238,000 from the State of
Indiana for intangibles taxes paid in 1988 and 1989.

     1994 expenses at $18,434,000 exceeded the prior year by $219,000 (1.2 per
cent). Salary and benefit expenses increased by $928,000 (10.2 per cent).
Approximately

                              (continued)

                                     -5-

MANAGEMENT'S DISCUSSION & ANALYSIS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

OTHER EXPENSE (continued)

one-fourth of that increase was attributable to the change in the corporation's
data processing function described below.  This change resulted in a direct
reduction of computer processing fees amounting to $1,046,000.

     In the fourth quarter of 1993, First Merchants assumed responsibility for
the data processing function for the Corporation and its subsidiaries. The
agreement with an outside party to provide data processing was terminated. The
cost of the conversion equipment and software was approximately $1,700,000.

     The equipment and software costs will be depreciated on a straight-line
method based on useful lives of the assets.  The Corporation estimates that data
processing costs declined under the new arrangement (net of additional salary,
benefit, equipment and software costs) by more than $400,000.

INCOME TAXES

     The increase in 1995 tax expense of $541,000 is attributable primarily to a
$1,241,000 increase in net pre-tax income.  Likewise, the $512,000 increase in
1994 resulted from a $1,198,000 increase in pre-tax net income.

- --------------------------------------------------------------------------------
FEDERAL and STATE INCOME TAXES
- --------------------------------------------------------------------------------
(Dollars in Thousands)
                     1995         1994           1993
- --------------------------------------------------------------------------------
Federal taxes    $   4,146    $   3,735    $   3,272

State taxes          1,302        1,172        1,124
                 ---------    ---------    ---------

      Total      $   5,448    $   4,907    $   4,396
                 ---------    ---------    ---------
                 ---------    ---------    ---------

ACCOUNTING MATTERS

Derivative Financial Instruments and Fair Value of Financial Statements

     SFAS No. 119 ("SFAS 119") requires disclosure about derivative financial
instruments-futures, forwards, swap and option contracts and other financial
instruments with similar characteristics (e.g., interest rate caps or floors and
loan commitments).  The definition of derivatives excludes all on-balance sheet
receivables and payables, including those that "derive" their values or cash
flows from the price of another security or index, such as mortgage-backed
securities and interest-only obligations.

     SFAS 119 requires disclosures about amounts, nature and terms of
derivatives that are not subject to SFAS No. 105 because they do not result in
off-balance sheet risk of accounting loss.  It requires that a distinction be
made between financial instruments held or issued for trading purposes and
financial instruments held or issued for purposes other than trading. The
required disclosures, either in the body of the financial statements or in the
footnotes, include: (i) the face or contract amount (or notional principal
amount) and ii) the nature and terms, including at a minimum, a discussion of:
(1)  the credit and  market risk of those instruments, (2) the cash requirements
of those instruments,  and (3) the related accounting policy.

     SFAS 119 amends SFAS No. 105 and No. 107 to require disaggregation of
information about financial instruments with off-balance sheet risk of
accounting loss and to require that fair value information be presented without
combining, aggregating or netting the fair values of derivatives with fair value
of nonderivatives and be presented together with the related carrying amounts in
the body of the financial statements, a single footnote or a summary table in a
form that makes it clear whether the amounts represent assets or liabilities.
SFAS 119 was effective for the Company's financial statements issued for the
year ended December 31, 1995.

     At December 31, the Corporation did not have any derivative financial
instruments as defined in SFAS 115.

Accounting for Mortgage Servicing Rights

     During 1995, the FASB issued SFAS No. 122 ("SFAS 122") ACCOUNTING FOR
MORTGAGE SERVICING RIGHTS.  SFAS 122 pertains to mortgage banking enterprises
and financial institutions that conduct operations that are substantially
similar to the primary operations of a mortgage banking enterprise.  SFAS 122
eliminates the accounting distinction between mortgage servicing rights that are
acquired through loan origination activities and those acquired through purchase
transactions.  Under SFAS 122, if a mortgage banking enterprise sells or
securitizes loans and retains the mortgage servicing rights, the enterprise must
allocate the total cost of the mortgage loans to the mortgage servicing rights
and the loans (without the rights) based on their relative fair values if

                              (continued)

                                     -6-

MANAGEMENT'S DISCUSSION & ANALYSIS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNTING MATTERS (continued)

it is practicable to estimate those fair values.  If it is not practicable,  the
entire cost should be allocated to the mortgage loans and no cost should be
allocated to the mortgage servicing rights.  As entity would measure impairment
of mortgage service rights and loans based on the excess of the carrying amount
of the mortgage servicing rights portfolio over the fair value of that
portfolio.

     SFAS 122 is to be applied prospectively in fiscal years beginning after
December 15, 1995, to transactions in which an entity acquires mortgage
servicing rights and to impairment evaluations of all capitalized mortgage
servicing rights.  The Company has not yet determined the impact of SFAS 122 on
its financial condition and results of operations.

Accounting for Stock-based Compensation

     The FASB issued SFAS 123, STOCK-BASED COMPENSATION.  In December, 1994, the
FASB decided to require expanded disclosures rather than recognition of
compensation cost for fixed, at the money, options rather than recognition of
compensation expense as was originally proposed in the ED.

     This statement establishes a fair value based method of accounting for
stock-based compensation plans.  The FASB encourages employers to recognize the
related compensation expense; however, employers are permitted to continue to
apply the provisions of APB Opinion No. 25.  Employers that choose to continue
to follow APB No. 25 are  required to disclose in notes to the financial
statements the pro forma  effects on their net income and earnings per share of
the new accounting  method.

     SFAS 123 is effective for the Corporation in 1996.  The Corporation has not
yet determined the impact of adopting SFAS 123 on net income or financial
position in the year of adoption.

INFLATION

     Changing prices of goods, services, and capital affect the  financial
position of every business enterprise.  The level of market interest rates and
the price of funds loaned or borrowed fluctuate due to changes in the rate of
inflation and various other factors, including government monetary policy.

     Fluctuating interest rates affect the Corporation's net interest income,
loan volume, and other operating expenses, such as employees' salaries and
benefits, reflecting the effects of escalating prices, as well as increased
levels of operations and  other factors.  As the inflation rate increases, the
purchasing power of the dollar decreases.  Those holding fixed-rate monetary
assets incur a loss, while those holding fixed rate monetary liabilities enjoy a
gain.  The nature of a bank holding company's operations is such that there will
be an excess of monetary assets over monetary liabilities, and, thus, a bank
holding company will tend to suffer from an increase in the rate of inflation
and benefit from a decrease.

                                     -7-

CONSOLIDATED BALANCE SHEET

                                                           DECEMBER 31
                                                           -----------
                                                       1995            1994
                                                       ----            ----
ASSETS
                                                            
  Cash and due from banks. . . . . . . . . . . . . $ 31,432,299   $ 42,684,174
  Federal funds sold . . . . . . . . . . . . . . .   37,500,000      3,675,000
                                                    ------------   ------------
    Cash and cash equivalents. . . . . . . . . . .   68,932,299     46,359,174
  Interest-bearing time deposits . . . . . . . . .      155,441         23,117
  Investment securities
    Available for sale . . . . . . . . . . . . . .  143,119,910     99,363,240
    Held to maturity . . . . . . . . . . . . . . .   58,213,962     77,676,818
                                                    ------------   ------------
       Total investment securities . . . . . . . .  201,333,872    177,040,058
  Mortgage loans held for sale . . . . . . . . . .      735,522
  Loans. . . . . . . . . . . . . . . . . . . . . .  418,994,250    401,604,848
    Less:  Allowance for loan losses . . . . . . .   (4,957,467)    (4,997,847)
                                                    ------------   ------------
      Net Loans. . . . . . . . . . . . . . . . . .  414,036,783    396,607,001
  Premises and equipment . . . . . . . . . . . . .   10,475,935      9,545,153
  Federal Reserve and Federal Home Loan Bank
    stock. . . . . . . . . . . . . . . . . . . . .    1,891,800      1,879,300
  Interest receivable. . . . . . . . . . . . . . .    6,187,277      5,627,391
  Core deposit intangibles and goodwill. . . . . .    1,845,417      1,976,594
  Other assets . . . . . . . . . . . . . . . . . .    2,264,833      5,548,184
                                                    ------------   ------------
       Total assets. . . . . . . . . . . . . . . . $707,859,179   $644,605,972
                                                    ------------   ------------
                                                    ------------   ------------
LIABILITIES

  Deposits:
    Noninterest bearing. . . . . . . . . . . . . . $ 99,432,455   $ 99,667,435
    Interest bearing . . . . . . . . . . . . . . .  488,723,230    430,162,771
                                                    ------------   ------------
      Total deposits . . . . . . . . . . . . . . .  588,155,685    529,830,206
  Short-term borrowings. . . . . . . . . . . . . .   33,975,269     39,188,990
  Federal Home Loan Bank advance . . . . . . . . .    1,000,000
  Interest payable . . . . . . . . . . . . . . . .    1,866,499      1,319,917
  Other liabilities. . . . . . . . . . . . . . . .    2,389,037      3,248,790
                                                    ------------   ------------
      Total liabilities. . . . . . . . . . . . . .  627,386,490    573,587,903

STOCKHOLDERS' EQUITY
  Preferred stock, no par value:
    Authorized and unissued--500,000 shares
  Common stock, $.125 stated value:
    Authorized--20,000,000 shares
    Issued and outstanding--5,053,901 and
    3,366,346 shares . . . . . . . . . . . . . . .      631,737        420,793
  Additional paid-in capital . . . . . . . . . . .   15,852,082     16,230,765
  Retained earnings. . . . . . . . . . . . . . . .   62,836,310     56,886,450
  Net unrealized gain (loss) on securities
    available for sale . . . . . . . . . . . . . .    1,152,560     (2,519,939)
                                                    ------------   ------------
   Total stockholders' equity. . . . . . . . . . .   80,472,689     71,018,069
                                                    ------------   ------------
      Total liabilities and stockholders'equity. . $707,859,179   $644,605,972
                                                    ------------   ------------
                                                    ------------   ------------

                 See Notes to Consolidated Financial Statements.

                                     -8-

 CONSOLIDATED STATEMENT OF INCOME

                                                              YEAR ENDED DECEMBER 31
                                                      -----------------------------------------
                                                          1995           1994          1993
                                                          ----           ----          ----
                                                                          
INTEREST INCOME
  Loans receivable:
    Taxable. . . . . . . . . . . . . . . . . . . . . .$ 37,750,745  $ 31,721,626   $28,704,848
    Tax exempt . . . . . . . . . . . . . . . . . . . .      55,295        83,412       122,422
  Investment securities:
    Taxable. . . . . . . . . . . . . . . . . . . . . .   8,623,701     8,552,888    10,264,922
    Tax exempt . . . . . . . . . . . . . . . . . . . .   2,474,920     2,434,992     2,396,031
  Federal funds sold . . . . . . . . . . . . . . . . .     906,564       217,035       453,805
  Deposits with financial institutions . . . . . . . .       3,728         1,743        35,295
  Federal Reserve and Federal Home Loan Bank stock         149,110       102,785        28,933
                                                      ------------   -----------    ----------
    Total interest income. . . . . . . . . . . . . . .  49,964,063    43,114,481    42,006,256
                                                      ------------   -----------    ----------
INTEREST EXPENSE
  Deposits . . . . . . . . . . . . . . . . . . . . . .  19,565,304    14,294,358    15,431,588
  Short-term borrowings. . . . . . . . . . . . . . . .   2,489,963     1,836,794     1,066,592
  Federal Home Loan Bank advance . . . . . . . . . . .      27,502
                                                      ------------   -----------    ----------
    Total interest expense . . . . . . . . . . . . . .  22,082,769    16,131,152    16,498,180
                                                      ------------   -----------    ----------
NET INTEREST INCOME. . . . . . . . . . . . . . . . . .  27,881,294    26,983,329    25,508,076
  Provision for loan losses. . . . . . . . . . . . . .     640,000       782,000     1,013,765
NET INTEREST INCOME AFTER
  PROVISION FOR LOAN LOSSES. . . . . . . . . . . . . .  27,241,294    26,201,329    24,494,311
                                                      ------------   -----------    ----------
OTHER INCOME
  Fiduciary activities . . . . . . . . . . . . . . . .   2,754,667     2,549,660     2,408,632
  Service charges on deposit accounts. . . . . . . . .   2,377,712     2,380,166     2,506,483
  Other customer fees. . . . . . . . . . . . . . . . .   1,159,421     1,061,332     1,049,751
  Net realized gains(losses) on
      sale of available-for-sale securities. . . . . .     (66,404)      (31,317)      394,551
  Other income . . . . . . . . . . . . . . . . . . . .     681,142       337,927       228,794
                                                      ------------   -----------    ----------
    Total other income . . . . . . . . . . . . . . . .   6,906,538     6,297,768     6,588,211
                                                      ------------   -----------    ----------
OTHER EXPENSES
  Salaries and employee benefits . . . . . . . . . . .  10,561,065    10,051,455     9,123,874
  Net occupancy expenses . . . . . . . . . . . . . . .   1,209,807     1,106,107     1,096,771
  Equipment expenses . . . . . . . . . . . . . . . . .   1,674,234     1,586,398     1,138,180
  Computer processing fees . . . . . . . . . . . . . .     138,463       130,882     1,176,957
  Deposit insurance expense. . . . . . . . . . . . . .     604,019     1,134,194     1,138,463
  Printing and office supplies . . . . . . . . . . . .     915,703       760,646       771,593
  Advertising expense. . . . . . . . . . . . . . . . .     586,738       484,657       525,685
  Other expenses . . . . . . . . . . . . . . . . . . .   3,151,836     3,179,536     3,243,368
                                                      ------------   -----------    ----------
    Total other expenses . . . . . . . . . . . . . . .  18,841,865    18,433,875    18,214,891
                                                      ------------   -----------    ----------
INCOME BEFORE INCOME TAX AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING METHOD. . . . . . . . . . . . . . . . . . .  15,305,967    14,065,222    12,867,631
  Income tax expense . . . . . . . . . . . . . . . . .   5,448,153     4,907,459     4,395,920
                                                      ------------   -----------    ----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING METHOD. . . . . . . . . . . . . .   9,857,814     9,157,763     8,471,711

CUMULATIVE EFFECT OF CHANGE IN METHOD
OF ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . .                                 227,329
                                                      ------------   -----------    ----------

NET INCOME . . . . . . . . . . . . . . . . . . . . . .$  9,857,814   $ 9,157,763   $ 8,699,040
                                                      ------------   -----------    ----------
                                                      ------------   -----------    ----------
PER SHARE. . . . . . . . . . . . . . . . . . . . . . .
  Income before cumulative effect of change
  in accounting method . . . . . . . . . . . . . . . .$       1.95   $      1.80   $      1.65
  Net Income . . . . . . . . . . . . . . . . . . . . .$       1.95   $      1.80   $      1.70
WEIGHTED AVERAGE SHARES OUTSTANDING. . . . . . . . . .   5,055,169     5,077,307     5,124,626

                 See Notes to Consolidated Financial Statements.

                                     -9-

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                                                                                             NET UNREALIZED
                                                                ADDITIONAL                   GAIN (LOSS) ON
                                         COMMON STOCK            PAID-IN        RETAINED       SECURITIES
                                     SHARES       AMOUNT         CAPITAL        EARNINGS    AVAILABLE FOR SALE      TOTAL
                                   ---------     ---------     -----------     -----------  ------------------   -----------
                                                                                               
BALANCES, JANUARY 1, 1993 . . . .  3,402,213     $ 425,277     $17,683,626     $45,825,656                       $63,934,559
 Net income for 1993  . . . . . .                                                8,699,040                         8,699,040
 Cash dividends ($.63 per share).                                               (3,212,727)                       (3,212,727)
 Stock issued under employee
  benefit plans . . . . . . . . .     11,817         1,477         246,286                                           247,763
 Stock issued under dividend
  reinvestment and stock
   purchase plan  . . . . . . . .      9,858         1,232         285,717                                           286,949
 Stock options exercised. . . . .      9,299         1,163         153,222                                           154,385
 Stock redeemed . . . . . . . . .   ( 43,500)     (  5,438)    ( 1,296,000)                                       (1,301,438)
 Cash paid in lieu of  issuing
  fractional shares . . . . . . .   (     96)     (     12)    (     4,248)                                       (    4,260)
                                   ---------     ---------     -----------     -----------  ------------------   -----------
BALANCES, DECEMBER 31, 1993 . . .  3,389,591       423,699      17,068,603      51,311,969                        68,804,271
 Net income for 1994. . . . . . .                                                9,157,763                         9,157,763
 Cash dividends ($.71 per share).                                               (3,583,282)                       (3,583,282)
 Cumulative effect of change in
  method of accounting for
   securities, net of taxes
    of $422,334 . . . . . . . . .                                                                    $ 643,896       643,896
 Net change in unrealized gain
  (loss) on securities available
   for sale, net of taxes
    of $2,075,170 . . . . . . . .                                                                   (3,163,835)   (3,163,835)
 Stock issued under employee
  benefit plans . . . . . . . . .     10,543         1,318         248,485                                           249,803
 Stock issued under dividend
  reinvestment and stock
   purchase plan. . . . . . . . .     11,670         1,459         355,745                                           357,204
 Stock options exercised. . . . .      4,875           609         107,275                                           107,884
 Stock redeemed . . . . . . . . .   ( 50,333)     (  6,292)    ( 1,549,343)                                       (1,555,635)
                                   ---------     ---------     -----------     -----------  ------------------   -----------
BALANCES, DECEMBER 31, 1994 . . .  3,366,346       420,793      16,230,765      56,886,450         ( 2,519,939)   71,018,069

 Net income for 1995                                                             9,857,814                         9,857,814
 Cash dividends ($.77 per share).                                              ( 3,907,954)                       (3,907,954)
 Net change in unrealized gain
  (loss) on securities
   available for sale,
    net of taxes of $2,408,806. .                                                               3,672,499          3,672,499
 Stock issued under employee
  benefit plans . . . . . . . . .     11,175         1,397         275,254                                           276,651
 Stock issued under dividend
  reinvestment and stock purchase
   plan . . . . . . . . . . . . .     13,928         1,741       1,454,498                                           456,239
 Stock options exercised. . . . .      9,267         1,158         191,251                                           192,409
 Stock redeemed . . . . . . . . .    (30,000)       (3,750)     (1,085,125)                                       (1,088,875)
 Three-for-two stock split. . . .  1,683,344       210,418      (  210,418)
 Cash paid in lieu of issuing
  fractional shares . . . . . . .       (159)          (20)     (    4,143)                                       (    4,163)
                                   ---------     ---------     -----------     -----------  ------------------   -----------
BALANCES, DECEMBER 31, 1995 . . .  5,053,901     $ 631,737     $15,852,082    $ 62,836,310         $ 1,152,560   $80,472,689
                                   ---------     ---------     -----------     -----------  ------------------   -----------
                                   ---------     ---------     -----------     -----------  ------------------   -----------

                 See Note to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                                              YEAR ENDED DECEMBER 31
                                                                        ------------------------------------------------------------
                                                                                1995                  1994                  1993
                                                                                ----                  ----                  ----
                                                                                                              
OPERATING ACTIVITIES:
  Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $ 9,857,814           $ 9,157,763          $ 8,699,040
  Adjustments to reconcile net income to
      net cash provided by operating activities:

    Provision for loan losses. . . . . . . . . . . . . . . . . . . . .          640,000               782,000            1,013,765
    Depreciation and amortization. . . . . . . . . . . . . . . . . . .        1,145,833             1,125,697              696,782
    Amortization of goodwill and intangibles . . . . . . . . . . . . .          131,177               131,177              131,181

                                   (continued)

                                     -10-

CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

                                                                                              YEAR ENDED DECEMBER 31
                                                                                ----------------------------------------------------
                                                                                1995                    1994                  1993
                                                                              --------               ----------            ---------

 Deferred income tax. . . . . . . . . . . . . . . . . . . . . . . . . .       $    340,302           $(  127,976)     $(   542,266)
 Securities amortization, net. . . . . . . . . . . . . . . . . . . . .             597,523             1,161,783           987,365
 Securities losses (gains), net. . . . . . . . . . . . . . . . . . . .              66,404                31,317       (   394,551)
 Mortgage loans originated for sale. . . . . . . . . . . . . . . . . .         ( 4,491,484)
 Proceeds from sales of mortgage loans . . . . . . . . . . . . . . . .           3,785,283
 Net change in:
  Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . .             497,818                28,505           191,612
  Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . .             546,582                93,750       (   279,409)
 Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .         (   300,938)              163,867           829,887
                                                                               -----------           -----------       -----------
  Net cash provided by operating activities. . . . . . . . . . . . . .          11,820,678            12,490,873        11,333,406
                                                                               -----------           -----------       -----------

INVESTING ACTIVITIES:
 Net change in interest-bearing deposits . . . . . . . . . . . . . . .         (   132,324)              230,737         1,250,620
 Purchases of:
  Securities available for sale. . . . . . . . . . . . . . . . . . . .         (71,857,503)         ( 24,216,114)
  Securities held to maturity. . . . . . . . . . . . . . . . . . . . .         (31,786,823)         ( 30,833,553)     (120,299,746)
 Proceeds from maturities of:
  Securities available for sale. . . . . . . . . . . . . . . . . . . .          26,537,062            12,424,651
  Securities held to maturity. . . . . . . . . . . . . . . . . . . . .          46,522,672            49,498,914       104,327,097
 Proceeds from sales of:
  Securities available for sale. . . . . . . . . . . . . . . . . . . .          11,695,656            15,083,461
  Securities held to maturity. . . . . . . . . . . . . . . . . . . . .                                                   5,430,571
 Net change in loans . . . . . . . . . . . . . . . . . . . . . . . . .         (18,560,933)         ( 25,767,003)     ( 27,530,846)
 Purchases of premises and equipment . . . . . . . . . . . . . . . . .         ( 2,076,615)         (  1,230,215)     (  2,642,213)
 Other investing activities. . . . . . . . . . . . . . . . . . . . . .             375,190               707,118           683,511
                                                                               -----------           -----------       -----------
    Net cash used by investing activities. . . . . . . . . . . . . . .         (39,283,618)         (  4,102,004)     ( 38,781,006)
                                                                               -----------           -----------       -----------

FINANCING ACTIVITIES:
 Net change in:
  Noninterest-bearing, interest-bearing
   and savings deposits. . . . . . . . . . . . . . . . . . . . . . . .           6,602,698            24,818,997        12,890,301
  Certificates of deposit and other time deposits. . . . . . . . . . .          51,722,781           ( 1,290,957)      (18,559,253)
  Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . .        (  5,213,721)          ( 7,701,137)        9,817,127
 Federal Home Loan Bank advance. . . . . . . . . . . . . . . . . . . .           1,000,000
 Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . .        (  3,907,954)          ( 3,583,282)      ( 3,212,727)
 Stock issued under employee benefit plans . . . . . . . . . . . . . .             276,651               249,803           247,763
 Stock issued under dividend reinvestment
  and stock purchase plan. . . . . . . . . . . . . . . . . . . . . . .             456,239               357,204           286,949
 Stock options exercised . . . . . . . . . . . . . . . . . . . . . . .             192,409               107,884           154,385
 Stock redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . .        (  1,088,875)          ( 1,555,635)      ( 1,301,438)
 Cash paid in lieu of issuing fractional shares. . . . . . . . . . . .        (      4,163)                            (     4,260)
                                                                               -----------           -----------       -----------
  Net cash provided by financing activities. . . . . . . . . . . . . .          50,036,065            11,402,877           318,847
                                                                               -----------           -----------       -----------
NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .          22,573,125            19,791,746       (27,128,753)

CASH AND CASH EQUIVALENTS,
 BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . .          46,359,174            26,567,428        53,696,181
                                                                               -----------           -----------       -----------
CASH AND CASH EQUIVALENTS,
 END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $ 68,932,299          $ 46,359,174      $ 26,567,428
                                                                               -----------           -----------       -----------
                                                                               -----------           -----------       -----------
ADDITIONAL CASH FLOWS INFORMATION:
 Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $ 21,536,187          $ 16,037,402      $ 16,777,589
 Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . .           5,065,558             4,997,385         5,004,469

                      See Notes to Consolidated Financial Statements.

                                     -11-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 1
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting and reporting policies of First Merchants Corporation
("Corporation"), and its wholly owned subsidiaries, First Merchants Bank, N.A.
("First Merchants"), Pendleton Banking Company ("Pendleton"), and First United
Bank ("First United"), (collectively "the Banks",) conform to generally accepted
accounting principles and reporting practices followed by the banking industry.
The more significant of the policies are described below.

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

     The Corporation is a bank holding company whose principal activity is the
ownership and management of the Banks.  First Merchants operates under a
national bank charter and provides full banking services, including trust
services.  As a national bank, First Merchants is subject to the regulation of
the Office of the Comptroller of the Currency and the Federal Deposit Insurance
Corporation.  Pendleton and First United operate under state bank charters and
provide full banking services, including trust services.  As state banks,
Pendleton and First United are subject to the regulation of the Department of
Financial Institutions, State of Indiana, and the Federal Deposit Insurance
Corporation.

     The Banks generate commercial, mortgage, and consumer loans and receive
deposits from customers located primarily in central Indiana.  The  Banks' loans
are generally secured by specific items of collateral, including real property,
consumer assets, and business assets.  Although the Banks have a diversified
loan portfolio, a substantial portion of their debtors' ability to honor their
contracts is dependent upon economic conditions in the automotive industry.

CONSOLIDATION - The consolidated financial statements include the accounts of
the Corporation and the Banks, after elimination of all material intercompany
transactions and accounts.

INVESTMENT SECURITIES -  The Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES, on January 1, 1994.

     Debt securities are classified as held to maturity when the Company has the
positive intent and ability to hold the securities to maturity.  Securities held
to maturity are carried at amortized cost.

     Debt securities not classified as held to maturity are classified as
available for sale.  Securities available for sale are carried at fair value
with unrealized gains and losses reported separately through stockholders'
equity, net of tax.

     Amortization of premiums and accretion of discounts are recorded as
interest income from securities.  Realized gains and losses are recorded as net
security gains (losses).  Gains and losses on sales of securities are determined
on the specific-identification method.

     At January 1, 1994, investment securities, with an approximate carrying
value of $107,569,000, were reclassified as available for sale.  This
reclassification resulted in an increase in total stockholders' equity, net of
taxes, of $644,000.

     Prior to the adoption of SFAS No. 115, investment securities were carried
at cost, adjusted for amortization of premiums and discounts, and securities
held for sale and marketable equity securities were carried at the lower of
aggregate cost or market.  Realized gains and losses on sales were included in
other income.  Unrealized losses on securities held for sale were included in
other income.  Unrealized losses on marketable equity securities were charged to
stockholders' equity.  Gains and losses on the sale of securities were
determined on the specific-identification method.

MORTGAGE LOANS HELD FOR SALE are carried at the lower of aggregate cost or
market.  Net unrealized losses are recognized through a valuation allowance by
charges to income.

LOANS are carried at the principal amount outstanding.  Interest income is
accrued on the principal balances of loans.  Loans are placed in a nonaccrual
status when the collection of interest becomes doubtful.  Interest income
previously accrued, but not deemed collectible, is reversed and charged against
current income.  Interest on nonaccrual loans is then recognized as income when
collected.  Loans are considered impaired when it becomes probable that the
Banks will be unable to collect all amounts due according to the contractual
terms of the loan agreement.  Interest income on these loans is recognized as
described above depending on the accrual status of the loan.  Certain loan fees
and direct costs are being deferred and amortized as an adjustment of yield on
the loans.

ALLOWANCE FOR LOAN LOSSES is maintained to absorb potential loan losses based on
management's continuing review and evaluation of the loan portfolio and its
judgment as to the impact of economic conditions on the portfolio.  The
evaluation by

                                                                 (continued)

                                     -12-

NOTE 1
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

management includes consideration of past loss experience, changes in the
composition of the loan portfolio, the current condition and amount of loans
outstanding, and the probability of collecting all amounts due.  Impaired loans
are measured by the present value of expected future cash flows, or the fair
value of the collateral of the loan, if collateral dependent.

     The determination of the adequacy of the allowance for loan losses
is based on estimates that are particularly susceptible to significant changes
in the economic environment and market conditions.  Management believes that,
as of December 31, 1995, the allowance for loan losses is adequate based on
information currently available.  A worsening or protracted economic decline in
the area within which the Corporation operates would increase the likelihood of
additional losses due to credit and market risks and could create the need for
additional loss reserves.

PREMISES AND EQUIPMENT are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method based on the estimated
useful lives of the assets.  Maintenance and repairs are expensed as incurred,
while major additions and improvements are capitalized.  Gains and losses on
dispositions are included in current operations.

FEDERAL RESERVE AND FEDERAL HOME LOAN BANK STOCK are required investments for
institutions that are members of the Federal Reserve Bank ("FRB") and Federal
Home Loan Bank ("FHLB") systems.  The required investment in the common stock is
based on a predetermined formula.

ADVERTISING COSTS are expensed as incurred.

INTANGIBLE ASSETS are being amortized on the straight-line basis over
periods ranging from 10 to 25 years.  Such assets are periodically evaluated
as to the recoverability of their carrying value.

INCOME TAX in the consolidated statement of income includes deferred income 
tax provisions or benefits for all significant temporary differences in 
recognizing income and expenses for financial reporting and income tax 
purposes. The Corporation  adopted the provisions of SFAS No. 109, ACCOUNTING 
FOR INCOME TAXES, during the year ended December 31, 1993.  The Corporation 
files consolidated income tax returns with its subsidiaries.

EARNINGS PER SHARE have been computed based upon the weighted average
common shares outstanding during each year and have been restated to give effect
to a three-for-two stock split distributed to stockholders on January 25, 1993
and on October 27, 1995.  Common stock equivalents, consisting of shares
issuable under employee benefit plans, were not included since their effect on
dilution was insignificant.

NOTE 2
ACQUISITIONS

     On January 18, 1996, the Corporation signed a definitive agreement to
acquire all of the outstanding shares of Randolph County Bancorp, Inc.,
Winchester, Indiana.  Under terms of the agreement, the Corporation will issue
approximately 566,000 shares of its common stock.  The transaction will be
accounted for under the pooling of interests method of accounting and is subject
to approval  by stockholders of Randolph County Bancorp, Inc., and appropriate
regulatory agencies.  Although the corporation anticipates that the merger will
be consummated during the second quarter of 1996, there can be no assurance that
the acquisition will be completed.   At December 31, 1995, Randolph County
Bancorp, Inc., had total assets and stockholders' equity of $73,333,000 and
$8,867,000, respectively.

     On January 24, 1996, the Corporation signed a definitive agreement to
acquire all of the outstanding shares of Union National Bancorp, Liberty,
Indiana.  Under terms of the agreement, the Corporation will issue approximately
943,000 shares of its common stock.  The transaction will be accounted for under
the pooling of interests method of accounting and is subject to approval by
stockholders of Union National Bancorp and appropriate regulatory agencies.
Although the Corporation anticipates that the merger will be consummated during
the second quarter of 1996, there can be no assurance that the acquisition will
be completed.  At December 31, 1995, Union National Bancorp had total assets and
stockholders' equity of $161,078,000 and $15,741,000, respectively.

                                     -13-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 3
RESTRICTION ON CASH AND DUE FROM BANKS

     The Banks are required to maintain reserve funds in cash 
and/or on deposit with the Federal Reserve Bank.  The reserve required 
at December 31, 1995, was $10,159,000.

NOTE 4
INVESTMENT SECURITIES

                                                           GROSS         GROSS
                                            AMORTIZED    UNREALIZED    UNREALIZED     FAIR
                                              COST         GAINS         LOSSES       VALUE
                                            ---------    ----------    ----------    --------
                                                                         
Available for sale at December 31, 1995:
  U.S. Treasury . . . . . . . . . . . . .    $  4,531      $   26        $   3       $  4,554
  Federal agencies. . . . . . . . . . . .      67,518       1,299           72         68,745
  State and municipal . . . . . . . . . .      18,769         398           37         19,130
  Mortgage and other
    asset-backed securities . . . . . . .      24,023         210          121         24,112
  Corporate obligations . . . . . . . . .      26,120         264           55         26,329
  Marketable equity security. . . . . . .         250                                     250
                                             --------      ------        -----       --------
       Total available for sale . . . . .     141,211       2,197          288        143,120

Held to maturity at December 31, 1995:
  U.S. Treasury . . . . . . . . . . . . .       3,103           8            2          3,109
  Federal agencies. . . . . . . . . . . .      11,645          69           21         11,693
  State and municipal . . . . . . . . . .      40,013         483           57         40,439
  Mortgage and other
    asset-backed securities . . . . . . .       2,953           8                       2,961
  Corporate obligations . . . . . . . . .         500                        1            499
                                             --------      ------        -----       --------
       Total held to maturity . . . . . .      58,214         568           81         58,701
                                             --------      ------        -----       --------
       Total investment securities. . . .    $199,425    $  2,765       $  369       $201,821
                                             --------      ------        -----       --------
                                             --------      ------        -----       --------

Available for sale at December 31, 1994:
    U.S. Treasury . . . . . . . . . . . .    $ 11,817                   $  550       $ 11,267
    Federal agencies. . . . . . . . . . .      35,565                    1,271         34,294
    State and municipal . . . . . . . . .       9,762        $ 31          385          9,408
    Mortgage and other asset-backed
     securities . . . . . . . . . . . . .      22,171          29          836         21,364
    Corporate obligations . . . . . . . .      24,221           4        1,195         23,030
                                             --------      ------        -----       --------
       Total available for sale . . . . .     103,536          64        4,237         99,363

Held to maturity at December 31, 1994:
    U.S. Treasury . . . . . . . . . . . .      12,630          21          222         12,429
    Federal agencies. . . . . . . . . . .      24,529          29          469         24,089
    State and municipal . . . . . . . . .      38,117         211          680         37,648
    Mortgage and other 
       asset-backed securities. . . . . .         370                                     370
    Corporate obligations . . . . . . . .       2,031                       45          1,986
                                             --------      ------        -----       --------
      Total held to maturity. . . . . . .      77,677         261        1,416         76,522
                                             --------      ------        -----       --------
      Total investment securities . . . .    $181,213      $  325       $5,653       $175,885
                                             --------      ------        -----       --------
                                             --------      ------        -----       --------

The amortized cost and estimated fair value of securities held to 
maturity and available for sale at December 31, 1995, by contractual 
maturity, are shown on the following page.  Expected maturities will 
differ from contractual maturities because issuers may have the right 
to call or prepay obligations with or without call or prepayment penalties.

                                             (continued)

                                     -14-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 4 
INVESTMENT SECURITIES (continued)

                                                    AVAILABLE FOR SALE              HELD TO MATURITY 
                                                 ------------------------      -----------------------
                                                  AMORTIZED        FAIR         AMORTIZED       FAIR
                                                    COST           VALUE          COST          VALUE
                                                 ---------       --------      ---------      --------
                                                                                  
Maturity distribution at December 31, 1995:
   Due in one year or less . . . . . . . . . .    $ 24,867       $ 24,886       $ 19,193      $ 19,251
   Due after one through five years. . . . . .      82,767         84,204         32,582        32,891
   Due after five through ten years. . . . . .       9,554          9,918          2,866         2,978
   Due after ten years . . . . . . . . . . . .                                       620           620
                                                  --------       --------       --------      --------
                                                   117,188        119,008         55,261        55,740

   Mortgage and other asset-backed
     securities                                     24,023         24,112          2,953         2,961
                                                  --------       --------       --------      --------
     Totals. . . . . . . . . . . . . . . . . .    $141,211       $143,120       $ 58,214      $ 58,701
                                                  --------       --------       --------      --------
                                                  --------       --------       --------      --------

     Securities with a carrying value of approximately $91,090,000 
and $83,411,000 were pledged at December 31, 1995 and 1994, to secure 
certain deposits and for other purposes as permitted or required by law.

     Proceeds from sales of securities available for sale during 1995 
and 1994 were $11,696,000 and $15,083,000.  Gross gains of $47,000 and 
$167,000 and gross losses of $113,000 and $198,000 were realized on 
those sales.

     Proceeds from sales of securities held to maturity during 1993 
were $5,431,000.  Gross gains of $395,000 and gross losses of $500 were 
realized on those sales.

     On December 28, 1995, the Corporation transferred certain 
securities from held to maturity to available for sale in accordance with a 
transition reclassification allowed by the Financial Accounting Standards 
Board.  Such securities had a carrying value of $4,421,000 and a fair value 
of $4,418,000.

NOTE 5
LOANS AND ALLOWANCE

                                                    1995         1994
                                                   -------      -------
                                                         
Loans at December 31:
  Commercial and industrial loans . . . . . . .  $  85,690     $  78,943
  Bankers' acceptances and loans to financial
    institutions. . . . . . . . . . . . . . . .      2,925
  Agricultural production financing and other
    loans to farmers. . . . . . . . . . . . . .      5,796         5,310
  Real estate loans:
    Construction. . . . . . . . . . . . . . . .      9,913         8,126
    Commercial and farmland . . . . . . . . . .     66,749        64,110
    Residential . . . . . . . . . . . . . . . .    166,414       164,760
  Individuals' loans for household 
    and other personal expenditures . . . . . .     79,993        78,041
  Tax-exempt loans. . . . . . . . . . . . . . .        863         1,204
  Other loans . . . . . . . . . . . . . . . . .        651         1,111
                                                 ---------     ---------
    Total loans . . . . . . . . . . . . . . . .  $ 418,994     $ 401,605
                                                 ---------     ---------
                                                 ---------     ---------

                                         1995       1994        1993
                                       --------   --------    --------
                                                     
Allowance for loan losses:
 Balance, January 1 . . . . . . . .     $ 4,998    $ 4,800     $ 4,351
 Provision for losses . . . . . . .         640        782       1,014
 Recoveries on loans. . . . . . . .         201        329         343
 Loans charged off. . . . . . . . .        (882)      (913)       (908)
                                       --------   --------    --------
 Balance, December 31 . . . . . . .     $ 4,957    $ 4,998     $ 4,800
                                       --------   --------    --------
                                       --------   --------    --------

                         (continued)

                                     -15-

NOTE 5 
LOANS AND ALLOWANCE (continued)

      The Corporation adopted SFAS No. 114 and No. 118 ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN and ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN -
INCOME RECOGNITION AND DISCLOSURES on January 1, 1995.  Impaired loans 
totaled $3,122,000 at December 31, 1995. An allowance for losses at December 
31, 1995, was not deemed necessary for impaired loans totaling $1,900,000, 
but an allowance of $559,000 was recorded for the remaining balance of 
impaired loans of $1,222,000.  The average balance of impaired loans for 1995 
was $1,682,000. Interest income and cash receipts of interest totaled $34,000 
and $5,000 during the period in 1995 that the loans were impaired.

     Nonaccruing and restructured loans totaled $1,080,000 and $1,406,000 at 
December 31, 1994 and 1993.  

     Additional interest income of $39,000 for 1994 and $39,000 for 1993 
would have been recorded had income on nonaccruing and restructured loans 
been considered collectible and accounted for on the accrual basis under the 
original terms of the loans.

     The Banks have entered into transactions with certain directors, 
executive officers, significant stockholders, and their affiliates or
associates ("related parties").  Such transactions were made in the ordinary 
course of business on substantially the same terms and conditions, including 
interest rates and collateral, as those prevailing at the same time for 
comparable transactions with other customers, and did not, in the opinion of 
management, involve more than normal credit risk or present other unfavorable 
features.

     The aggregate amount of loans, as defined, to such related parties were
as shown below:

Balances, December 31, 1994 . . . . . . . . . . .  $ 12,880
New loans, including renewals . . . . . . . . . .     5,727
Payments, etc., including renewals. . . . . . . .    (8,279)
                                                   --------
Balances, December 31, 1995 . . . . . . . . . . .  $ 10,328
                                                   --------
                                                   --------

NOTE 6
PREMISES AND EQUIPMENT

                                                      1995            1994
                                                    --------        --------
                                                              
Cost at December 31:
  Land . . . . . . . . . . . . . . . . . . . . .    $  1,850         $  1,324
  Buildings and leasehold improvements . . . . .       9,706            9,231
  Equipment. . . . . . . . . . . . . . . . . . .      10,328            9,310
                                                     -------         --------
    Total cost . . . . . . . . . . . . . . . . .      21,884           19,865
Accumulated depreciation . . . . . . . . . . . .     (11,408)         (10,320)
                                                     -------         --------
    Net. . . . . . . . . . . . . . . . . . . . .    $ 10,476         $  9,545
                                                     -------         --------
                                                     -------         --------

     The Corporation is committed under various noncancelable lease contracts 
for certain subsidiary office facilities.  Total lease expense for 1995, 1994 
and 1993 was $127,000, $113,000, and $110,000, respectively.  The future 
minimum rental commitments required under the operating leases in effect at 
December 31, 1995, expiring at various dates through the year 2016, follow on 
the right for the years ending December 31:

     1996 . . . . . . . . . . . . . . . . . . . . . . . $ 106
     1997 . . . . . . . . . . . . . . . . . . . . . . .   255
     1998 . . . . . . . . . . . . . . . . . . . . . . .    85
     1999 . . . . . . . . . . . . . . . . . . . . . . .    72
     2000 . . . . . . . . . . . . . . . . . . . . . . .    63
     After 2000 . . . . . . . . . . . . . . . . . . . .   318
                                                        -----
       Total future minimum obligations . . . . . . . . $ 899
                                                        -----
                                                        -----

                                     -16-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 7
DEPOSITS

                                                                 1995         1994
                                                                -------      -------
                                                                     
Deposits at December 31:
  Noninterest-bearing . . . . . . . . . . . . . . . . . . . .   $ 99,432     $ 99,667
  Interest-bearing demand . . . . . . . . . . . . . . . . . .    105,957       91,806
  Savings deposits  . . . . . . . . . . . . . . . . . . . . .    137,134      144,447
  Certificates and other time deposits of $100,000 or more  .     49,216       33,622
  Other certificates and time deposits  . . . . . . . . . . .    196,417      160,288
                                                               ---------     --------
    Total deposits. . . . . . . . . . . . . . . . . . . . . .  $ 588,156     $529,830
                                                               ---------     --------
                                                               ---------     --------

Certificates maturing in years ending December 31:

1996 . . . . . . . . . . . $ 155,357
1997 . . . . . . . . . . .    41,862
1998 . . . . . . . . . . .    27,939
1999 . . . . . . . . . . .    15,132
2000 . . . . . . . . . . .     5,273
After 2000 . . . . . . . .        70
                           ---------
                           $ 245,633
                           ---------
                           ---------

NOTE 8
SHORT-TERM BORROWINGS 

                                                      1995         1994
                                                     -------      -------
                                                            
Short-term borrowings at December 31:
  Federal funds purchased . . . . . . . . . . . .    $   100      $12,198
  Securities sold under repurchase agreements . .     27,293       17,776
  U.S. Treasury demand notes. . . . . . . . . . .      6,582        9,215
                                                     -------      -------
    Total short-term borrowings . . . . . . . . .    $33,975      $39,189
                                                     -------      -------
                                                     -------      -------

     Securities sold under agreements to repurchase consist of obligations of 
the Banks to other parties.  The obligations are secured by U.S. Treasury and 
Federal agency obligations and generally mature within one to 185 days from 
the transaction date.  The following table summarizes certain information on 
these repurchase agreements.

As of and for the Year Ended December 31:

                                                      1995         1994
                                                     -------      -------
                                                            
Book value . . . . . . . . . . . . . . . . . . . .   $ 27,293     $ 17,776
Collateral book value. . . . . . . . . . . . . . .     40,471       40,664
Collateral market value. . . . . . . . . . . . . .     40,748       40,539
Average balance of agreements during year. . . . .     33,632       23,389
Highest month-end balance during year. . . . . . .     54,670       29,115
Interest payable at end of year. . . . . . . . . .         87           41
Weighted average interest rate at end of year. . .       5.29%        4.86%

NOTE 9
FEDERAL HOME LOAN BANK ADVANCE 

     At December 31, 1995, the Corporation had a $1,000,000 Federal 
Home Bank advance maturing June 20, 1996, with an interest rate of 5.79 
per cent.

     The advance is secured by investment securities with a carrying value of 
$1,561,000.  The advance is subject to restrictions or penalties in the event 
of prepayment.

NOTE 10
LOAN SERVICING 

     Mortgage loans serviced for others are not included in the accompanying 
consolidated balance sheet.  The loans are serviced primarily for the Federal 
Home Loan Mortgage Corporation and the unpaid balances totaled $3,546,000 at 
December 31, 1995.

                                     -17-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 11
INCOME TAX

                                                          1995       1994       1993
                                                         -------    -------   --------
                                                                     
Income tax expense, for the year ended December 31:
  Currently payable:          
    Federal . . . . . . . . . . . . . . . . . . . . .   $  3,879   $  3,845  $   3,576
    State . . . . . . . . . . . . . . . . . . . . . .      1,229      1,190      1,135
  Deferred:
    Federal . . . . . . . . . . . . . . . . . . . . .        267       (110)      (304)
    State . . . . . . . . . . . . . . . . . . . . . .         73        (18)       (11)
                                                        --------   --------  ---------
      Total income tax expense. . . . . . . . . . . .   $  5,448   $  4,907  $   4,396
                                                        --------   --------  ---------
                                                        --------   --------  ---------
Reconciliation of federal statutory to
  actual tax expense (benefit):         
  Federal statutory income tax at 34% . . . . . . . .   $  5,204   $  4,782  $   4,375
  Tax exempt interest . . . . . . . . . . . . . . . .       (727)      (759)      (759)
  Effect of state income taxes  . . . . . . . . . . .        859        774        742
  Other . . . . . . . . . . . . . . . . . . . . . . .        112        110         38
                                                        --------   --------  ---------
    Actual tax expense. . . . . . . . . . . . . . . .   $  5,448   $  4,907  $   4,396
                                                        --------   --------  ---------
                                                        --------   --------  ---------

     Tax expense (benefit) applicable to security gains and losses 
for the years ended December 31, 1995, 1994, and 1993, was ($22,600), 
($12,000) and $156,000, respectively.

     The components of the deferred tax asset included in other 
assets are as shown in the table below.

     No valuation allowance at December 31, 1995, was considered 
necessary.

     During 1993, the Corporation adopted SFAS No. 109, ACCOUNTING 
FOR INCOME TAXES.  As a result, the beginning deferred tax asset was 
increased by $227,329, which is reported as the cumulative effect 
of a change in accounting method.

                                                         1995             1994
                                                       --------         --------
                                                                  
Deferred Tax Asset at December 31:
  Differences in depreciation methods. . . . . . . . . $  (701)          $ (595)
  Differences in accounting for loans and securities .     (58)             (44)
  Differences in accounting for loan fees. . . . . . .     368              532
  Differences in accounting for loan losses. . . . . .   2,107            2,124
  Deferred compensation. . . . . . . . . . . . . . . .     280              275
  Differences in accounting for pensions and
    other employee benefits. . . . . . . . . . . . . .      85              147
  Net unrealized (gain) loss on securities available 
    for sale . . . . . . . . . . . . . . . . . . . . .    (756)           1,653
  State income tax . . . . . . . . . . . . . . . . . .    (134)            (159)
  Other. . . . . . . . . . . . . . . . . . . . . . . .      (2)               5
                                                       -------          -------
    Total. . . . . . . . . . . . . . . . . . . . . . . $ 1,189          $ 3,938
                                                       -------          -------
                                                       -------          -------

Assets. . . . . . . . . . . . . . . . . . . . . . . .  $ 2,840          $ 4,736
Liabilities                                             (1,651)            (798)
                                                       -------          -------
  Total . . . . . . . . . . . . . . . . . . . . . . .  $ 1,189          $ 3,938
                                                       -------          -------
                                                       -------          -------

                                     -18-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 12
COMMITMENTS AND CONTINGENT LIABILITIES 

     In the normal course of business, there are outstanding commitments 
and contingent liabilities, such as commitments to extend credit and standby 
letters of credit, which are not included in the accompanying financial
statements.  The Banks' exposure to credit loss in the event of nonperformance
by the other party to the financial instruments for commitments to extend credit
and standby letters of credit is represented by the contractual or notional 
amount of those instruments.  The Banks use the same credit policies in making 
such commitments as they do for instruments that are included in the 
consolidated balance sheet.

     Financial instruments whose contract amount represents credit risk as 
of December 31, were as follows:

                                                                 1995            1994
                                                               --------        -------
                                                                         
Commitments to extend credit  . . . . . . . . . . . . . .      $120,649        $87,244
Standby letters of credit . . . . . . . . . . . . . . .           2,820          2,649

     Commitments to extend credit are agreements to lend to a customer, as
long as there is no violation of any condition established in the contract. 
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee.  Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.  The Banks evaluate each customer's credit 
worthiness on a case-by-case basis.  The amount of collateral obtained, if 
deemed necessary by the Banks upon extension of credit, is based on management's
credit evaluation. Collateral held varies, but may include accounts receivable, 
inventory, property and equipment, and income-producing commercial properties.

     Standby letters of credit are conditional commitments issued by the
Banks to guarantee the performance of a customer to a third party.

     The Corporation and Banks are also subject to claims and lawsuits which
arise primarily in the ordinary course of business.  It is the opinion of 
management that the disposition or ultimate resolution of such claims and 
lawsuits will not have a material adverse effect on the consolidated financial 
position of the Corporation.

NOTE 13
STOCKHOLDERS' EQUITY

     National and state banking laws restrict the maximum amount of dividends
that a bank may pay in any calendar year.  National banks are limited to the 
bank's retained net income (as defined by the Comptroller of the Currency) for 
that year and the two preceding years.  State banks are limited to retained 
earnings, as defined.  The amount at December 31, 1995, available for 1996 
dividends to the Corporation is $15,923,000.  As a practical matter, 
subsidiaries restrict dividends to a lesser amount because of the need to 
maintain an adequate capital structure.

     Total stockholders' equity for all subsidiaries at December 31, 1995,
was $78,940,000, of which $63,017,000 was restricted from dividend distribution
to the Corporation.

     The Corporation has a Dividend Reinvestment and Stock Purchase Plan,
enabling stockholders to elect to have their cash dividends on all shares held
automatically reinvested in additional shares of the Corporation's common stock.
In addition, stockholders may elect to make optional cash payments up to an 
aggregate of $2,500 per quarter for the purchase of additional shares of 
common stock.  The stock is credited to participant accounts at fair market 
value.  Dividends are reinvested on a quarterly basis.  At December 31, 1995, 
386,046 shares of common stock were reserved for purchase under the plan.

     On December 1, 1992, the Board of Directors of the Corporation declared
a three-for-two stock split on its common shares and approved an increase in 
the authorized common stock shares to 20,000,000 shares.  The new shares were 
distributed on January 25, 1993, to holders of record on January 18, 1993. On 
August 8, 1995, the Board of Directors of the Corporation declared a three-for-
two stock split on its common shares.  The new shares were distributed on 
October 27, 1995, to holders of record on October 20, 1995.

                                     -19-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 14
EMPLOYEE BENEFIT PLANS

     The Corporation's defined-benefit pension plan covers substantially all 
of the Banks' employees.  The benefits are based primarily on years of service
and employees' pay near retirement.  Contributions are intended to provide not
only for benefits attributed to service to date, but also for those expected
to be earned in the future.  Pension expense was $201,000 for 1995, $193,000 for
1994 and $56,000 for 1993.

     The following table sets forth the plan's funded status and amounts 
recognized in the consolidated balance sheet at December 31:

                                                                                 1995           1994
                                                                               --------       --------
                                                                                         
Actuarial present value of:
  Accumulated benefit obligation including vested
    benefits of $8,997 and $7,595 . . . . . . . . . . . . . . . . . . . .      $  9,181       $  7,720
                                                                               --------       --------
                                                                               --------       --------
  Projected benefit obligation for service rendered to date . . . . . . .      $(10,971)       $(9,189)
Plan assets at fair value, primarily interest-bearing deposits
  and corporate bonds and securities. . . . . . . . . . . . . . . . . . .        12,049          9,740
                                                                               --------       --------
Plan assets in excess of projected benefit obligation . . . . . . . . . .         1,078            551
Unrecognized net loss from experience different than 
  that assumed  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         ( 569)         ( 121)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . .         (  71)         (  52)
Unrecognized net asset at January 1, 1987, being
  recognized over 15 years. . . . . . . . . . . . . . . . . . . . . . . .         ( 650)         ( 755)
                                                                               --------       --------
Accrued pension cost included in the balance sheet. . . . . . . . . . . .       $ ( 212)        $( 377)
                                                                               --------       --------
                                                                               --------       --------

                                                                 1995            1994           1993
                                                               --------        --------       --------
                                                                                      
Pension expense includes the following components:
    Service cost benefits earned during the year . .  . . . .  $    405        $    483       $    389
    Interest cost on projected benefit obligation . . . . . .       740             678            619
    Actual return on plan assets. . . . . . . . . . . . . . .    (2,387)          ( 124)       ( 1,072)
    Net amortization and deferral . . . . . . . . . . . . . .     1,443           ( 844)           120
                                                               --------        --------       --------
                                                               $    201        $    193       $     56
                                                               --------        --------       --------
                                                               --------        --------       --------

                                                                 1995            1994           1993
                                                               --------        --------       --------
                                                                                      
Assumptions used in the accounting as of December 31 were:
  Discount rate . . . . . . . . . . . . . . . . . . . . . . .    7.50%           8.25%          6.85%
  Rate of increase in compensation. . . . . . . . . . . . . .    4.50%           4.50%          4.50%
  Expected long-term rate of return on assets . . . . . . . .    8.75%           8.75%          8.75%

                                                           (continued)

                                     -20-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 14
EMPLOYEE BENEFIT PLANS (continued)

     In 1989, stockholders approved the 1989 Stock Option Plan, 
reserving 112,500 shares of Corporation common stock for the 
granting of options to certain employees.  The exercise price of the 
shares may not be less than the fair market value of the shares 
upon grant of the option.  Options become 100 per cent vested when 
granted and are fully exercisable generally six months after the date 
of grant, for a period of ten years.  There were no shares available for 
grant at December 31, 1995.

     On March 31, 1994, stockholders approved the 1994 Stock Option 
Plan, reserving 315,000 shares of Corporation common stock for the granting 
of options to certain employees and non-employee directors.  The exercise 
price of the shares may not be less than the fair market value of the shares 
upon the grant of the option.  Options become 100 per cent vested when 
granted and are fully exercisable generally six months after the date of the 
grant, for a period of ten years.  There were 198,075 shares available for 
grant at December 31, 1995. 

                                                              1995       1994       1993
                                                            --------   --------   --------
                                                                         
Shares under option after restatement for stock splits:
  Outstanding at beginning of year . . . . . . . . . . . .   179,807    127,345    113,400
  Adjustment for fractional shares . . . . . . . . . . . .                              (6)
  Granted during the year. . . . . . . . . . . . . . . . .    57,150     59,775     30,150
  Expired during the year. . . . . . . . . . . . . . . . .                          (2,250)
  Exercised during the year. . . . . . . . . . . . . . . .   (13,898)    (7,313)   (13,949)
  Outstanding at end of year . . . . . . . . . . . . . . .   223,059    179,807    127,345
  Exercisable at end of year . . . . . . . . . . . . . . .   165,909    120,032     97,646
  Average option price at end of year. . . . . . . . . . .  $  18.07   $  15.81   $  13.72
  Price of options exercised
     Low . . . . . . . . . . . . . . . . . . . . . . . . .  $   9.11   $  10.78   $   9.11
     High. . . . . . . . . . . . . . . . . . . . . . . . .  $  19.42   $  18.33   $  17.22

     In 1989, the stockholders also approved the Employee 
Stock Purchase Plan, enabling eligible employees to purchase the 
Corporation's common stock.  The price of the stock to be paid 
by the employees is determined by the Corporation's compensation 
committee, but may not be less than 85 per cent of the lesser of the 
fair market value of the Corporation's common stock at the beginning 
or at the end of the offering period.  Common stock purchases are 
made annually and are paid through advance payroll deductions of 
up to 20 per cent of eligible compensation.

     Participants under the plan purchased 11,175 shares (prior 
to stock split) in 1995 at $24.7563 per share.  The fair market value per 
share on the purchase date was $34.125.  

     On March 31, 1994, the stockholders approved the 1994 
Employee Stock Purchase Plan.  A total of 168,750 shares of the 
Corporation's common stock are reserved for issuance pursuant to the 
plan.  The terms of the plan are similar to the 1989 Employee Stock 
Purchase Plan.

     At December 31, 1995, 136,173 shares of Corporation common 
stock were reserved for purchase under the plan, and $152,725 has been 
deducted from compensation, plus interest, toward the purchase of 
shares after June 30, 1996, the end of the annual offering period.

     The Banks have a retirement savings 401(k) plan in which 
substantially all employees may participate.  The Banks match employees' 
contributions at the rate of 25 per cent for the first 5 per cent of base
salary contributed by participants.  The Banks' expense for the plan was $68,000
for 1995, $61,000 for 1994 and $52,000 for 1993.

     SFAS No. 123, STOCK-BASED COMPENSATION, is effective for the 
Corporation in 1996.  This statement establishes a fair value based method of 
accounting for stock-based compensation plans.  The Corporation has not yet 
determined the impact of adopting SFAS No. 123 on net income or financial
position in the year of adoption.

                                     -21-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 15
FAIR VALUES OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to 
estimate the fair value of each class of financial instrument:

Cash and Cash Equivalents--The fair value of cash 
and cash equivalents approximates carrying value.

Interest-Bearing Time Deposits--The fair value of interest-bearing 
time deposits approximates carrying value.

Securities--Fair values are based on quoted market prices.

Mortgage Loans Held for Sale--The fair value of mortgages 
held for sale approximates carrying values.

Loans--For both short-term loans and variable-rate loans that reprice 
frequently and with no significant change in credit risk, fair values are 
based on carrying values.  The fair value for other loans, are estimated 
using discounted cash flow analyses, using interest rates currently being 
offered for loans with similar terms to borrowers of similar credit quality.

Interest Receivable/Payable--The fair values of interest 
receivable/payable approximate carrying values.

Federal Reserve and Federal Home Loan Bank Stock--The fair 
value of FRB and FHLB stock is based on the price at which it may be 
resold to the FRB and FHLB.

Deposits--The fair values of noninterest-bearing demand accounts and 
interest-bearing demand accounts are equal to the amount payable on demand 
at the balance sheet date.   The carrying amounts for variable rate, fixed-term
certificates of deposit approximate their fair values at the balance sheet 
date.  Fair values for fixed-rate certificates of deposit and other time 
deposits are estimated using a discounted cash flow calculation that applies 
interest rates currently being offered on certificates to a schedule of 
aggregated expected monthly maturities on such time deposits. 

Federal Funds Purchased, Securities Sold Under Repurchase Agreements and 
U.S. Treasury Demand Notes--These financial instruments are short-term 
borrowing arrangements.  The rates at December 31, 1995 and 1994, approximate 
market rates, thus the fair value approximates carrying value.

Federal Home Loan Bank Advance--The fair value of the Federal Home Loan 
Bank advance approximates carrying value.

Off-Balance Sheet Standby Letters of Credit--The fair value of standby 
letters of credit are based upon fees currently charged to enter into similar 
agreements, taking into account the remaining terms of the agreements and the 
counterparties' credit standing. 

     The estimated fair values of the Corporation's financial instruments are
as follows:

                                                          1995                 1994
                                                   -----------------    -----------------
                                                   CARRYING     FAIR    CARRYING    FAIR
                                                    AMOUNT     VALUE     AMOUNT    VALUE
                                                   --------  --------  ---------  -------
                                                                      
ASSETS AT DECEMBER 31:
  Cash and cash equivalents . . . . . . . . . . .  $ 68,932  $ 68,932  $ 46,359   $ 46,359
  Interest-bearing time deposits. . . . . . . . .       155       155        23         23
  Investment securities available for sale. . . .   143,120   143,120    99,363     99,363
  Investment securities held to maturity. . . . .    58,214    58,701    77,677     76,522
  Mortgage loans held for sale. . . . . . . . . .       736       736
  Loans . . . . . . . . . . . . . . . . . . . . .   418,994   420,424   401,605    400,174
  Federal Reserve and 
    Federal Home Loan Bank stock. . . . . . . . .     1,892     1,892     1,879      1,879
  Interest receivable . . . . . . . . . . . . . .     6,187     6,187     5,627      5,627

LIABILITIES AT DECEMBER 31:
  Deposits. . . . . . . . . . . . . . . . . . . .   588,156   590,015   529,830    529,191
  Short-term borrowings:
    Federal funds purchased . . . . . . . . . . .       100       100    12,198     12,198
    Securities sold under repurchase agreements .    27,293    27,293    17,776     17,776
    U.S. Treasury demand notes  . . . . . . . . .     6,582     6,582     9,215      9,215
  Federal Home Loan Bank advance. . . . . . . . .     1,000     1,000
  Interest payable  . . . . . . . . . . . . . . .     1,866     1,866     1,320      1,320
  Off-balance sheet standby letters of credit   .                  56                   53

                                     -22-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 16
CONDENSED FINANCIAL INFORMATION (Parent Company Only)

     Presented below is condensed financial information as to financial 
position, results of operations, and cash flows of the Corporation:

CONDENSED BALANCE SHEET

                                                                    DECEMBER 31
                                                              ----------------------
                                                                 1995         1994
                                                              ---------     --------
                                                                      
ASSETS
  Cash. . . . . . . . . . . . . . . . . . . . . . . . . . .   $     591    $     137
  Investment security available for sale  . . . . . . . . .         250
  Investment in subsidiaries. . . . . . . . . . . . . . . .      78,877       70,089
  Goodwill. . . . . . . . . . . . . . . . . . . . . . . . .         673          711
  Other assets. . . . . . . . . . . . . . . . . . . . . . .         287          233
                                                              ---------    ---------
    Total assets. . . . . . . . . . . . . . . . . . . . . .   $  80,678    $  71,170
                                                              ---------    ---------
                                                              ---------    ---------
LIABILITIES
  Other liabilities . . . . . . . . . . . . . . . . . . . .   $     205    $     152
                                                              ---------    ---------
    Total liabilities . . . . . . . . . . . . . . . . . . .         205          152

STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . .   $  80,473       71,018
                                                              ---------    ---------
    Total liabilities and stockholders' equity. . . . . . .   $  80,678    $  71,170
                                                              ---------    ---------
                                                              ---------    ---------

CONDENSED STATEMENT OF INCOME

                                                                    YEAR ENDED DECEMBER 31
                                                              -----------------------------------
                                                                 1995        1994         1993
                                                              ----------   ---------   ----------
                                                                              
INCOME
  Dividends from subsidiaries . . . . . . . . . . . . . . .   $    4,857   $   4,335   $    3,571
                                                              ----------   ---------   ----------
      Total income. . . . . . . . . . . . . . . . . . . . .        4,857       4,335        3,571
                                                              ----------   ---------   ----------
EXPENSES
  Amortization of core deposit intangibles, 
    goodwill and fair value adjustments . . . . . . . . . .           38          32           19
  Other expenses. . . . . . . . . . . . . . . . . . . . . .          153         170          100
                                                              ----------   ---------   ----------
      Total expenses. . . . . . . . . . . . . . . . . . . .          191         202          119
                                                              ----------   ---------   ----------
Income before income tax, equity in undistributed income 
  of subsidiaries and cumulative effect of change in 
  accounting method . . . . . . . . . . . . . . . . . . . .        4,666       4,133        3,452
      Income tax benefit. . . . . . . . . . . . . . . . . .          (76)     (   73)      (   40)
                                                              ----------   ---------   ----------
Income before equity in undistributed income of
  subsidiaries and cumulative effect of change in 
  accounting method . . . . . . . . . . . . . . . . . . . .        4,742       4,206        3,492
      Equity in undistributed income of subsidiaries. . . .        5,116       4,952        5,225
                                                              ----------   ---------   ----------
Income before cumulative effect of change in
  accounting method . . . . . . . . . . . . . . . . . . . .        9,858       9,158        8,717
Cumulative effect of change in method of accounting for
  income taxes. . . . . . . . . . . . . . . . . . . . . . .                                 (  18)
                                                              ----------   ---------   ----------
Net income. . . . . . . . . . . . . . . . . . . . . . . . .   $    9,858   $   9,158   $    8,699
                                                              ----------   ---------   ----------
                                                              ----------   ---------   ----------

                                                                    (continued)

                                     -23-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts In Thousands, Except Per Share Amounts)

NOTE 16
CONDENSED FINANCIAL INFORMATION (Parent Company Only, continued)

CONDENSED STATEMENT OF CASH FLOWS

                                                                    YEAR ENDED DECEMBER 31
                                                              -----------------------------------
                                                                 1995        1994         1993
                                                              ----------   ---------   ----------
                                                                              
OPERATING ACTIVITIES:
  Net income. . . . . . . . . . . . . . . . . . . . . . . .   $    9,858   $   9,158   $    8,699
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Amortization. . . . . . . . . . . . . . . . . . . . . .           38          32           19
    Equity in undistributed income of subsidiaries. . . . .       (5,116)    ( 4,952)     ( 5,225)
    Net change in:
      Other assets. . . . . . . . . . . . . . . . . . . . .       (   54)    (    48)     (    64)
      Other liabilities . . . . . . . . . . . . . . . . . .           53          29          123
                                                              ----------   ---------   ----------
        Net cash provided by operating activities . . . . .        4,779       4,219        3,552
                                                              ----------   ---------   ----------
INVESTING ACTIVITY:
  Purchase of security available for sale . . . . . .              ( 250)
                                                              ----------
        Net cash used by investing activities . . . . . . .        ( 250)
                                                              -----------

FINANCING ACTIVITIES:
  Cash dividends. . . . . . . . . . . . . . . . . . . . . .      ( 3,908)    ( 3,583)      (3,213)
  Stock issued under employee benefit plans . . . . . . . .          278         250          247
  Stock issued under dividend reinvestment
    and stock purchase plan . . . . . . . . . . . . . . . .          456         357          287
  Stock options exercised . . . . . . . . . . . . . . . . .          192         108          154
  Stock redeemed. . . . . . . . . . . . . . . . . . . . . .      ( 1,089)    ( 1,556)      (1,301)
  Cash paid in lieu of issuing fractional shares  . . . . .      (     4)                    (  4)
                                                              ----------   ---------   ----------
      Net cash used by financing activities . . . . . . . .      ( 4,075)    ( 4,424)      (3,830)
                                                              ----------   ---------   ----------
Net increase (decrease) in cash on deposit                           454     (   205)      (  278)
Cash on deposit, beginning of year. . . . . . . . . . . . .          137         342          620
                                                              ----------   ---------   ----------
Cash on deposit, end of year. . . . . . . . . . . . . . . .   $      591   $     137   $      342
                                                              ----------   ---------   ----------
                                                              ----------   ---------   ----------

NOTE 17
QUARTERLY RESULTS OF OPERATIONS (Unaudited)

     The following table sets forth certain quarterly results for the 
years ended December 31, 1995 and 1994:

                                              NET     PROVISION              AVERAGE
                     INTEREST   INTEREST   INTEREST   FOR LOAN      NET      SHARES      EARNINGS
   QUARTER ENDED      INCOME    EXPENSE     INCOME     LOSSES     INCOME   OUTSTANDING   PER SHARE
   -------------     --------   --------   --------   ---------   ------   -----------   ---------
                                                                    
March, 1995. . . .   $ 11,588   $  4,661   $  6,927     $  160    $ 2,391    5,051,232      $  .47
June, 1995 . . . .     12,435      5,435      7,000        160      2,529    5,055,723         .50
September, 1995. .     12,796      5,840      6,956        160      2,414    5,062,748         .48
December, 1995 . .     13,145      6,147      6,998        160      2,524    5,050,974         .50
                     --------   --------   --------   --------    -------                  -------
                     $ 49,964   $ 22,083   $ 27,881     $  640    $ 9,858    5,055,169      $ 1.95
                     --------   --------   --------   --------    -------                  -------
                     --------   --------   --------   --------    -------                  -------

March, 1994. . . .   $ 10,211   $  3,768   $  6,443     $  193    $ 2,246    5,082,999      $  .44
June, 1994 . . . .     10,679      3,929      6,750        199      2,360    5,072,202         .47
September, 1994. .     11,106      4,281      6,825        201      2,227    5,086,058         .44
December, 1994 . .     11,118      4,153      6,965        189      2,325    5,067,968         .45
                     --------   --------   --------   --------    -------                  -------
                     $ 43,114   $ 16,131   $ 26,983     $  782    $ 9,158    5,077,307      $ 1.80
                     --------   --------   --------   --------    -------                  -------
                     --------   --------   --------   --------    -------                  -------

                                     -24-

ANNUAL REPORT APPENDIX - GRAPHIC & IMAGE INFORMATION

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

MAP:  FIRST MERCHANTS CORPORATION MARKET AREA

This graphic is a map of Indiana showing the market area for First Merchants
Corporation ("Corporation").  The map illustrates the location of Delaware,
Madison and Henry counties, Indiana.  The map identifies the communities with
Corporation offices.  The following table summarizes the Corporation's office
locations:

     LOCATION                   COUNTY

     Muncie                    Delaware
     Albany                    Delaware
     Delaville                 Delaware
     Eaton                     Delaware

     Pendleton                 Madison
     Edgewood                  Madison
     Ingalls                   Madison
     Lapel                     Madison
     Markleville               Madison

     Middletown                Henry
     Bulphur Springs           Henry
     Mooreland                 Henry

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

ANNUAL REPORT APPENDIX - GRAPHIC & IMAGE INFORMATION  (Continued)
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bar chart:  RETURN ON AVERAGE ASSETS

A bar graph with the following plot points for the respective years.

                                              RETURN ON AVERAGE ASSETS
                                                    (per cent)

                                              1993       1994      1995
                                                          
Return on Average Assets                      1.39%      1.44%     1.48%

A narrative discussion of this data is provided in the Management's Discussion
& Analysis, under the caption "Results of Operations."

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bar chart:  RETURN ON AVERAGE EQUITY

A bar graph with the following plot points for the respective years.

                                              RETURN ON AVERAGE EQUITY
                                                    (per cent)

                                              1993       1994      1995
                                                          
Return on Average Equity                     13.01%     13.06%     12.97%

A narrative discussion of the data is provided in the Management's Discussion
& Analysis, under the caption "Results of Operations."

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bar chart:  NET LOAN LOSSES

A bar graph with the following plot points for the respective years.

                                                  NET LOAN LOSSES
                                          (as a per cent of average loans)

                                              1993       1994      1995
                                                          
First Merchants Corporation                   .16%       .15%      .16%
Peer Group                                    .49%       .25%       NA

A narrative discussion of this data is provided in the Management's Discussion
& Analysis, under the caption "Asset Quality/Provision for Loan Losses."

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                                                                             

  

 9

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-K FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REPORT.

 1,000
 U.S. DOLLARS

                   YEAR
                          DEC-31-1995
                             JAN-01-1995
                               DEC-31-1995
                                      1
                                          31,432
                             155
                                37,500
                                     0
                    143,120
                          58,214
                            58,701
                                        418,994
                                      4,957
                                 707,859
                                     588,156
                                    33,975
                              5,255
                                          0
                                0
                                          0
                                           632
                                      79,841
                 707,859
                                 37,806
                               11,099
                                 1,059
                                49,964
                              19,565
                              22,083
                           27,881
                                      640
                                (66)
                                 18,842
                                 15,306
                       9,858
                                      0
                                            0
                                     9,858
                                     1.95
                                     1.95
                                    4.64
                                        133
                                       863
                                   625
                                  3,122
                                 4,998
                                      882
                                       201
                                4,957
                             3,999
                                  0
                            958