FIRST MERCHANTS CORPORATION
AND
FIRST MERCHANTS BANK, N.A.
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MANAGEMENT INCENTIVE PLAN
FOR
___________________________________
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Prepared by:
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Approved by:
Board of Directors Compensation Committee
April 21, 1988 (ORIGINAL APPROVAL)
February 19, 1997 (CURRENT APPROVAL)
PLAN SUMMARY
OBJECTIVE: First Merchants Corporation and First Merchants Bank, N.A.
believe that performance-based pay should be a significant
component of the total compensation package.
The purpose of this plan is to provide incentive compensation
which will:
1. Link compensation to organization and individual goal
achievement.
2. Motivate and retain key personnel.
3. Attract qualified talent to the organization.
ADMINISTRATION: The plan will be administered by the Compensation Committee
of the Board of Directors. The Committee will have the
authority to:
-- Modify the formal plan document
-- Make the final award determinations
-- Set conditions for eligibility and award
-- Define extraordinary accounting events in calculating
earnings
-- Establish future payout schedules
-- Determine circumstances/causes for which payouts can be
withheld
-- Abolish the plan
ELIGIBILITY: Eligibility will be determined annually by the Compensation
Committee of the Board of Directors.
In order to receive an award, an incumbent must be employed
at the time of the award except for conditions of death or
retirement.
AWARD LEVELS: Award levels will vary with organizational level:
For the _____________________________________ of First
Merchants Corporation and First Merchants Bank, the maximum
bonus will be ____% of base salary.
The actual bonus will be calculated according to the
attached schedules.
The _________________ will not be eligible to participate
in the bank-wide Employee Performance Bonus Plan of First
Merchants Bank.
ANNUAL Beginning in 1997, the current year (1997) will have a
WEIGHTING: weight of 60% and the average of the two previous years
will have a weight of 40%. For purposes of calculating
the current year bonus, the percentage of maximum payout
will be used in the weighting calculation.
FORM OF AWARD: Payout will be in cash; there will be no deferral or
vesting provisions.
AWARD TIMING: Awards will be made not later than the 15th day of the
month following the month in which the audited financial
statement is delivered.
PRO-RATA AWARD: Participants employed for a period less than the full
fiscal year will receive a payout prorated to their length
of employment, so long as they have service of at least 90
days during the performance year.
PERFORMANCE For the ____________________, performance criteria will
CRITERIA AND include the performance of First Merchants Corporation and
WEIGHTS: First Merchants Bank. The weighting of these criteria
shall be as follows:
PERFORMANCE CRITERIA WEIGHT
(SEE ATTACHED SCHEDULE A)
PAYOUT Award schedules, attached hereto, define the minimum
THRESHOLD performance levels for which Incentive Compensation Awards
CONDITIONS: will be made. Awards will be made if performance equals or
exceeds the minimum performance levels shown on any one of
the attached schedules. For the current year, minimum
("THRESHOLD") performance levels are:
(SEE ATTACHED SCHEDULE A)
The total incentive award is calculated by adding the
applicable awards derived from each of the schedules.
A schedule will be utilized for this purpose only if
the actual performance level is above the schedule's
minimum.
Approved by the Compensation Committee:
April 21, 1988 (ORIGINAL APPROVAL)
February 19, 1997 (CURRENT APPROVAL)
SCHEDULE A TO FIRST MERCHANTS CORPORATION MANAGEMENT INCENTIVE PLAN
The Corporation's Management Incentive Plan covering its executive
officers are all in the form of Exhibit 10.1 and are substantially identical,
except as noted below. Actual targets are not disclosed.
The maximum bonus under the Management Incentive Plan for Chief
Executive Officer is 40% of base salary. The performance criteria used
include the Corporation's return on assets, return on equity, efficiency
ratio and net income growth.
The maximum bonus under the Management Incentive Plan for Chief Operating
Officer is 40% of base salary. The performance criteria used include the
Corporation's return on equity and the Corporation's and First Merchants Bank,
N.A.'s return on assets, efficiency ratio and net income growth.
The maximum bonus under the Management Incentive Plan for Administrative
Officers (Chief Financial Officer and General Counsel) is 25% of base salary.
The performance criteria used include the Corporation's and First Merchants
Bank, N.A.'s return on assets, efficiency ratio and net income growth.
The maximum bonus under the Management Incentive Plan for Chief
Executive Officer of the Union County National Bank of Liberty is 25% of base
salary. The performance criteria used include the Union County National
Bank's return on assets, efficiency ratio, net income growth and percentage
of annual plan objectives achieved.