UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549




                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

                         ______________________________

         DATE OF REPORT (Date of earliest event reported): July 2, 2007

                         ______________________________

                           FIRST MERCHANTS CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

                         _______________________________

         INDIANA                     0-17071                     35-1544218
(State or other jurisdiction   (Commission file number)        (IRS Employer
     of incorporation)                                       Identification No.)

                             200 East Jackson Street
                                  P.O. Box 792
                              Muncie, IN 47305-2814
          (Address of principal executive offices, including zip code)

                                 (765) 747-1500
              (Registrant's telephone number, including area code)

                                  Not Applicable
          (Former name or former address, if changed since last report)

Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
    230.425)

[ ] Soliciting material pursuant to  Rule 14a-12 under  the Exchange Act (17 CFR
    240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
    Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
    Act (17 CFR 240.13e-4(c))

<PAGE>

Item 1.01.        Entry into a Material Definitive Agreement.

            See Item 2.03 below.

Item 2.03.  Creation of a Direct Financial Obligation or an Obligation under an
            Off-Balance Sheet Arrangement of a Registrant.

     (a) On  July 2,  2007,  First  Merchants  Corporation  (the  "Corporation")
redeemed its subordinated debentures payable to First Merchants Capital Trust I.
The aggregate  redemption price was the principal amount of $54,832,475 plus any
accrued but unpaid  interest.  The redemption of the debentures was  immediately
followed by the redemption by First Merchants Capital Trust I of its outstanding
common and preferred securities at their $25 liquidation value, plus any accrued
but unpaid distributions.

     In order to  finance  the  redemption,  on July 2,  2007,  the  Corporation
completed the issuance and sale of $55,000,000 in aggregate  liquidation  amount
of Fixed/Floating  Rate Capital Securities (the "Capital  Securities") issued by
the Corporation's newly formed subsidiary,  First Merchants Capital Trust II,  a
Delaware  Statutory  Trust (the "Trust") in a trust preferred  transaction.  The
Trust  simultaneously  issued 1,702 shares of the Trust's common securities (the
"Common  Securities")  to the  Corporation  for the purchase price of $1,702,000
which  constitute  all of the issued and  outstanding  common  securities of the
Trust.  The Trust used the proceeds from the sale of the Capital  Securities and
the Common Securities to purchase  $56,702,000 in aggregate  principal amount of
Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures issued by
the Corporation (the "Debentures"). The net proceeds to the Corporation from the
sale of the Debentures will be used by the Corporation to finance the redemption
discussed above.

     The Capital  Securities  and the  Debentures  will mature on September  15,
2037. Distributions on the Capital Securities are cumulative and will be payable
quarterly  at a fixed  annual  rate of 6.495%  for the  period  from the date of
issuance through September 15, 2012, and, thereafter, at an annual floating rate
equal to three-month LIBOR plus 1.56%,  reset quarterly.  The Capital Securities
are redeemable at any time after September 15, 2012 at par and without  penalty,
and may be redeemed  earlier  following  the  occurrence  of  specified  Special
Events.  In each  case,  the  right of the  Corporation  to redeem  the  related
Debentures, and thereby to cause the redemption of the Capital Securities,  will
be  subject to the  Corporation's  receipt of prior  approval  from the  Federal
Reserve, if then required under applicable capital guidelines or policies of the
Federal Reserve.  The Corporation has the ability to defer interest  payments on
the Capital  Securities  for up to 20 consecutive  quarterly  periods (5 years),
provided that there is no event of default.  Interest on the Capital  Securities
will continue to accrue during the extension  period,  and all accrued principal
and interest must be paid at the end of each extension period. During a deferral
period,  the  Corporation  may not,  except in  certain  limited  circumstances,
(i) declare  or pay any  dividends  or  distributions  on, or redeem,  purchase,
acquire, or make a liquidation payment with respect to, any of the Corporation's
capital  stock or (ii) make any payment of  principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Corporation
that  rank  pari  passu  in all  respects  with or  junior  in  interest  to the
Debentures.

The Debentures  were issued  pursuant to an Indenture,  dated as of July 2, 2007
(the "Indenture") between the Corporation as issuer and Wilmington Trust Company
as trustee.  The terms of the Debentures are substantially the same as the terms
of  the  Capital  Securities.  The  interest  paid  by  the  Corporation  on the
Debentures will be used by the Trust to pay the quarterly  distributions  on the
Capital Securities.

The terms of the Capital  Securities  are  governed  by an Amended and  Restated
Declaration of Trust, dated as of July 2, 2007 (the "Trust Agreement") among the
Corporation as sponsor,  Wilmington Trust Company, as institutional  trustee and
Delaware trustee and the administrators named therein.

Under the terms of the Capital Securities,  an event of default generally occurs
upon  the  Corporation's  failure  to  make  required  payments  when  due,  its
declaration  of  bankruptcy,  or breach of certain  covenants made in connection
with the issuance of the Debentures, among other things.

In connection  with the  placement of the Capital  Securities,  the  Corporation
entered into a Guarantee  Agreement with  Wilmington  Trust Company as guarantee
trustee, dated as of July 2, 2007 (the "Guarantee  Agreement"),  for the purpose
of  guaranteeing  the payment,  after the expiration of any cure period,  of any
amounts to be paid by the Trust under the terms of the Capital  Securities.  The
obligations  of  the  Corporation  under  the  Guarantee  Agreement   constitute
unsecured  obligations of the Corporation and rank subordinate and junior to all
senior debt of the Corporation. The Guarantee Agreement shall terminate upon the
full payment of the redemption price for the Capital  Securities or full payment
of the Debenture upon liquidation of the Trust.

The placement of the Securities was conducted pursuant to a Placement Agreement,
dated June 29,  2007 (the "Placement  Agreement"),  among the  Corporation,  the
Trust and FTN Financial  Capital Markets and Keefe,  Bruyette & Woods,  Inc., as
placement agents.

The preceding description is qualified in its entirety by reference to the terms
of the Trust  Agreement,  the Indenture,  the Guarantee  Agreement,  the form of
Capital Securities Certificate and the Placement Agreement,  copies of which are
attached  hereto as Exhibits  4.1,  4.2,  4.3,  4.4 and 10.1,  respectively  and
incorporated herein by reference. Item 9.01. Financial Statements and Exhibits.

     (d)        (4.1) Amended and Restated Declaration of Trust, dated as of
                      July 2, 2007;
                (4.2) Indenture, dated as of July 2, 2007;
                (4.3) Guarantee Agreement, dated as of July 2, 2007;
                (4.4) Form of Capital Securities Certificate of First Merchants
                      Capital Trust II; and
                (10.1) Placement Agreement, dated June 29, 2007


<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

         DATE: July 3, 2007.

                                               FIRST MERCHANTS CORPORATION


                                               By: /s/ Mark K. Hardwick
                                                   Mark K. Hardwick,
                                                   Executive Vice President and
                                                   Chief Financial Officer


<PAGE>

                                  EXHIBIT INDEX


            4.1        Amended and Restated Declaration of Trust, dated as of
                       July 2, 2007;
            4.2        Indenture, dated as of July 2, 2007;
            4.3        Guarantee Agreement, dated as of July 2, 2007;
            4.4        Form of Capital Securities Certificate of First Merchants
                       Capital Trust II; and
           10.1        Placement Agreement, dated June 29, 2007

<PAGE>

                                   Exhibit 4.1

                   =========================================

                        AMENDED AND RESTATED DECLARATION
                                    OF TRUST

                                  by and among

                            WILMINGTON TRUST COMPANY,
                              as Delaware Trustee,

                            WILMINGTON TRUST COMPANY,
                            as Institutional Trustee,

                          FIRST MERCHANTS CORPORATION,
                                   as Sponsor,

                                       and

                     JAMI L. BRADSHAW and MARK K. HARDWICK,
                               as Administrators,

                            Dated as of July 2, 2007

                   =========================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----
<S>                                                                                          <C>
ARTICLE I INTERPRETATION AND DEFINITIONS .................................................    1
      Section 1.1. Definitions. ..........................................................    1

ARTICLE II ORGANIZATION ..................................................................    8
      Section 2.1.  Name .................................................................    8
      Section 2.2.  Office ...............................................................    8
      Section 2.3.  Purpose ..............................................................    8
      Section 2.4.  Authority ............................................................    9
      Section 2.5.  Title to Property of the Trust .......................................    9
      Section 2.6.  Powers and Duties of the Trustees and the Administrators .............    9
      Section 2.7.  Prohibition of Actions by the Trust and the Institutional Trustee ....   12
      Section 2.8.  Powers and Duties of the Institutional Trustee .......................   13
      Section 2.9.  Certain Duties and Responsibilities of the Trustees and Administrators   14
      Section 2.10. Certain Rights of Institutional Trustee ..............................   15
      Section 2.11. Delaware Trustee .....................................................   17
      Section 2.12. Execution of Documents ...............................................   18
      Section 2.13. Not Responsible for Recitals or Issuance of Securities ...............   18
      Section 2.14. Duration of Trust ....................................................   18
      Section 2.15. Mergers ..............................................................   18

ARTICLE III SPONSOR ......................................................................   19
      Section 3.1.  Sponsor's Purchase of Common Securities ..............................   19
      Section 3.2.  Responsibilities of the Sponsor ......................................   19
      Section 3.3.  Expenses .............................................................   20
      Section 3.4.  Right to Proceed .....................................................   20

ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS ......................................   20
      Section 4.1.  Number of Trustees ...................................................   20
      Section 4.2.  Delaware Trustee; Eligibility ........................................   21
      Section 4.3.  Institutional Trustee; Eligibility ...................................   21
      Section 4.4.  Administrators .......................................................   21
      Section 4.5.  Appointment, Removal and Resignation of Trustees and Administrators ..   22
      Section 4.6.  Vacancies Among Trustees .............................................   23
      Section 4.7.  Effect of Vacancies ..................................................   23
      Section 4.8.  Meetings of the Trustees and the Administrators ......................   23
      Section 4.9.  Delegation of Power ..................................................   24
      Section 4.10. Conversion, Consolidation or Succession to Business ..................   24

ARTICLE V DISTRIBUTIONS ..................................................................   24
      Section 5.1.  Distributions ........................................................   24

ARTICLE VI ISSUANCE OF SECURITIES ........................................................   24
      Section 6.1.  General Provisions Regarding Securities ..............................   24
      Section 6.2.  Paying Agent, Transfer Agent and Registrar ...........................   25
      Section 6.3.  Form and Dating ......................................................   26
      Section 6.4.  Book-Entry Capital Securities ........................................   26
      Section 6.5.  Mutilated, Destroyed, Lost or Stolen Certificates ....................   28
</TABLE>


                                       i

<PAGE>

<TABLE>
<S>                                                                                          <C>
      Section 6.6.  Temporary Securities .................................................   28
      Section 6.7.  Cancellation .........................................................   28
      Section 6.8.  CUSIP Numbers ........................................................   28
      Section 6.9.  Rights of Holders; Waivers of Past Defaults ..........................   29

ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST .........................................   30
      Section 7.1.  Dissolution and Termination of Trust .................................   30

ARTICLE VIII TRANSFER OF INTERESTS .......................................................   31
      Section 8.1.  General ..............................................................   31
      Section 8.2.  Transfer Procedures and Restrictions .................................   32
      Section 8.3.  Deemed Security Holders ..............................................   34

ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL
           TRUSTEE OR OTHERS .............................................................   34
      Section 9.1.  Liability ............................................................   34
      Section 9.2.  Exculpation ..........................................................   35
      Section 9.3.  Fiduciary Duty .......................................................   35
      Section 9.4.  Indemnification ......................................................   36
      Section 9.5.  Outside Businesses ...................................................   38
      Section 9.6.  Compensation; Fee ....................................................   38

ARTICLE X ACCOUNTING .....................................................................   38
      Section 10.1. Fiscal Year ..........................................................   38
      Section 10.2. Certain Accounting Matters ...........................................   38
      Section 10.3. Banking ..............................................................   39
      Section 10.4. Withholding ..........................................................   39

ARTICLE XI AMENDMENTS AND MEETINGS .......................................................   39
      Section 11.1. Amendments ...........................................................   39
      Section 11.2. Meetings of the Holders of Securities; Action by Written Consent .....   41

ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE ............   42
      Section 12.1. Representations and Warranties of Institutional Trustee ..............   42
      Section 12.2. Representations of the Delaware Trustee ..............................   42

ARTICLE XIII MISCELLANEOUS ...............................................................   43
      Section 13.1. Notices ..............................................................   43
      Section 13.2. Governing Law ........................................................   44
      Section 13.3. Intention of the Parties .............................................   44
      Section 13.4. Headings .............................................................   44
      Section 13.5. Successors and Assigns ...............................................   45
      Section 13.6. Partial Enforceability ...............................................   45
      Section 13.7. Counterparts .........................................................   45
</TABLE>

Annex I.........Terms of Securities
Exhibit A-1.....Form of Capital Security Certificate
Exhibit A-2.....Form of Common Security Certificate
Exhibit B.......Specimen of Initial Debenture
Exhibit C.......Placement Agreement


                                       ii
<PAGE>

                              AMENDED AND RESTATED

                              DECLARATION OF TRUST

                                       OF

                        FIRST MERCHANTS CAPITAL TRUST II

                                  July 2, 2007

      AMENDED  AND  RESTATED  DECLARATION  OF TRUST  ("Declaration")  dated  and
effective  as of  July  2,  2007,  by the  Trustees  (as  defined  herein),  the
Administrators  (as defined herein),  the Sponsor (as defined herein) and by the
holders,  from time to time, of undivided  beneficial interests in the Trust (as
defined herein) to be issued pursuant to this Declaration;

      WHEREAS,  the Trustees,  the  Administrators  and the Sponsor  established
First  Merchants  Capital Trust II (the  "Trust"),  a statutory  trust under the
Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated
as of June 29, 2007 (the  "Original  Declaration"),  and a Certificate  of Trust
filed with the Secretary of State of the State of Delaware on June 29, 2007, for
the  sole  purpose  of  issuing  and  selling  certain  securities  representing
undivided  beneficial  interests  in the assets of the Trust and  investing  the
proceeds  thereof in certain  debentures  of the  Debenture  Issuer (as  defined
herein);

      WHEREAS,  as of the date  hereof,  no  interests  in the  Trust  have been
issued; and

      WHEREAS,  the  Trustees,  the  Administrators  and  the  Sponsor,  by this
Declaration, amend and restate each and every term and provision of the Original
Declaration;

      NOW,  THEREFORE,  it being the intention of the parties hereto to continue
the  Trust as a  statutory  trust  under the  Statutory  Trust Act and that this
Declaration  constitutes the governing  instrument of such statutory  trust, the
Trustees declare that all assets  contributed to the Trust will be held in trust
for  the  benefit  of  the  holders,  from  time  to  time,  of  the  securities
representing  undivided  beneficial  interests in the assets of the Trust issued
hereunder,  subject to the  provisions of this  Declaration.  The parties hereto
hereby agree as follows:

                                   ARTICLE I

                         INTERPRETATION AND DEFINITIONS

      Section 1.1. Definitions.

      Unless the context otherwise requires:

      (a)  Capitalized  terms used in this  Declaration  but not  defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;

      (b) a term  defined  anywhere  in this  Declaration  has the same  meaning
throughout;

      (c) all references to "the Declaration" or "this  Declaration" are to this
Declaration as modified, supplemented or amended from time to time;

      (d) all  references  in this  Declaration  to Articles  and  Sections  and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified; and


                                       1
<PAGE>

      (e) a reference to the singular includes the plural and vice versa.

      "Acceleration  Event  of  Default"  has  the  meaning  set  forth  in  the
Indenture.

      "Additional Interest" has the meaning set forth in the Indenture.

      "Administrative  Action" has the meaning  set forth in  paragraph  4(a) of
Annex I.

      "Administrators"  means  each of Jami L.  Bradshaw  and Mark K.  Hardwick,
solely in such  Person's  capacity  as  Administrator  of the Trust  created and
continued  hereunder  and  not in such  Person's  individual  capacity,  or such
Administrator's  successor  in  interest  in  such  capacity,  or any  successor
appointed as herein provided.

      "Affiliate"  has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.

      "Applicable  Depositary Procedures" means, with respect to any transfer or
transaction involving a Book-Entry Capital Security, the rules and procedures of
the Depositary for such Book-Entry Capital Security,  in each case to the extent
applicable to such transaction and as in effect from time to time.

      "Authorized  Officer" of a Person means any Person that is  authorized  to
bind such Person.

      "Bankruptcy Event" means, with respect to any Person:

      (a) a court having  jurisdiction  in the premises  shall enter a decree or
order for  relief in  respect of such  Person in an  involuntary  case under any
applicable  bankruptcy,  insolvency  or other  similar law now or  hereafter  in
effect,  or appointing a receiver,  liquidator,  assignee,  custodian,  trustee,
sequestrator (or similar official) of such Person or for any substantial part of
its property,  or ordering the winding-up or liquidation of its affairs and such
decree  or  order  shall  remain  unstayed  and in  effect  for a  period  of 90
consecutive days; or

      (b) such  Person  shall  commence a  voluntary  case under any  applicable
bankruptcy,  insolvency or other  similar law now or hereafter in effect,  shall
consent  to the entry of an order for  relief in an  involuntary  case under any
such law,  or shall  consent to the  appointment  of or taking  possession  by a
receiver,  liquidator,  assignee,  trustee,  custodian,  sequestrator  (or other
similar  official) of such Person of any  substantial  part of its property,  or
shall make any general  assignment  for the benefit of creditors,  or shall fail
generally to pay its debts as they become due.

      "Book-Entry  Capital  Securities" means a Capital Security,  the ownership
and transfer of which shall be made through book entries by a Depositary.

      "Business Day" means any day other than Saturday,  Sunday or any other day
on which  banking  institutions  in New York City or  Wilmington,  Delaware  are
permitted or required by any applicable law or executive order to close.

      "Capital  Securities" has the meaning set forth in paragraph 1(a) of Annex
I.

      "Capital  Security  Certificate"  means a definitive  Certificate in fully
registered form  representing a Capital  Security  substantially  in the form of
Exhibit A-1.

      "Capital  Treatment  Event" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Certificate" means any certificate evidencing Securities.


                                       2
<PAGE>

      "Closing Date" has the meaning set forth in the Placement Agreement.

      "Code"  means the Internal  Revenue Code of 1986,  as amended from time to
time, or any successor legislation.

      "Common  Securities"  has the meaning set forth in paragraph 1(b) of Annex
I.

      "Common  Security  Certificate"  means a definitive  Certificate  in fully
registered  form  representing a Common  Security  substantially  in the form of
Exhibit A-2.

      "Company  Indemnified  Person"  means  (a)  any  Administrator;   (b)  any
Affiliate  of any  Administrator;  (c) any  officers,  directors,  shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.

      "Comparable Treasury Issue" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Comparable Treasury Price" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Corporate Trust Office" means the office of the Institutional  Trustee at
which the corporate  trust business of the  Institutional  Trustee shall, at any
particular  time,  be  principally  administered,  which  office  at the date of
execution of this  Declaration  is located at Rodney  Square  North,  1100 North
Market  Street,   Wilmington,   Delaware   19890-1600,   Attn:  Corporate  Trust
Administration.

      "Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I.

      "Covered  Person"  means:  (a)  any  Administrator,   officer,   director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities.

      "Creditor" has the meaning set forth in Section 3.3.

      "Debenture   Issuer"  means  First  Merchants   Corporation,   an  Indiana
corporation, in its capacity as issuer of the Debentures under the Indenture.

      "Debenture  Trustee" means Wilmington Trust Company,  as trustee under the
Indenture until a successor is appointed  thereunder,  and thereafter means such
successor trustee.

      "Debentures" means the Fixed/Floating Rate Junior Subordinated  Deferrable
Interest  Debentures  due 2037 to be issued by the  Debenture  Issuer  under the
Indenture.

      "Defaulted Interest" has the meaning set forth in the Indenture.

      "Definitive  Capital  Securities  Certificates"  means Capital  Securities
issued  in  certificated,  fully  registered  form that are not  Global  Capital
Securities.

      "Delaware Trustee" has the meaning set forth in Section 4.2.

      "Depositary"  means an organization  registered as a clearing agency under
the Exchange Act that is designated as Depositary by the  Administrators  or any
successor thereto. DTC will be the initial Depositary.


                                       3
<PAGE>

      "Depositary  Participant"  means a broker,  dealer,  bank, other financial
institution  or other Person for whom from time to time the  Depositary  effects
book-entry transfers and pledges of securities deposited with the Depositary.

      "Determination  Date" has the meaning set forth in paragraph 4(a) of Annex
I.

      "Direct Action" has the meaning set forth in Section 2.8(d).

      "Distribution"  means a  distribution  payable to Holders of Securities in
accordance with Section 5.1.

      "Distribution Payment Date" has the meaning set forth in paragraph 2(b) of
Annex I.

      "Distribution  Period" means (i) with respect to the Distribution  paid on
the first Distribution Payment Date, the period beginning on (and including) the
date of original issuance and ending on (but excluding) the Distribution Payment
Date in September 2007 and (ii) thereafter,  with respect to a Distribution paid
on each  successive  Distribution  Payment  Date,  the period  beginning on (and
including) the preceding Distribution Payment Date and ending on (but excluding)
such current Distribution Payment Date.

      "Distribution  Rate" means, for the Distribution  Period beginning on (and
including)  the date of  original  issuance  and ending on (but  excluding)  the
Distribution  Payment Date in September 2012, the rate per annum of 6.495%,  and
for each Distribution Period beginning on or after the Distribution Payment Date
in September 2012, the Coupon Rate for such Distribution Period.

      "DTC" means The Depository Trust Company or any successor thereto.

      "Event of Default"  means any one of the  following  events  (whatever the
reason for such event and whether it shall be  voluntary  or  involuntary  or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order,  rule or regulation of any  administrative  or  governmental
body):

      (a) the occurrence of an Indenture Event of Default; or

      (b) default by the Trust in the payment of any Redemption Price or Special
Redemption Price of any Security when it becomes due and payable; or

      (c) default in the performance, or breach, in any material respect, of any
covenant or warranty of the  Institutional  Trustee in this  Declaration  (other
than  those  specified  in clause (a) or (b)  above)  and  continuation  of such
default  or  breach  for a period of 60 days  after  there  has been  given,  by
registered or certified mail to the Institutional  Trustee and to the Sponsor by
the Holders of at least 25% in aggregate  liquidation  amount of the outstanding
Capital  Securities,  a written  notice  specifying  such  default or breach and
requiring  it to be  remedied  and  stating  that such  notice  is a "Notice  of
Default" hereunder; or

      (d) athe   occurrence   of  a  Bankruptcy   Event  with  respect  to  the
Institutional  Trustee  if  a  successor  Institutional  Trustee  has  not  been
appointed within 90 days thereof.

      "Exchange Act" means the Securities  Exchange Act of 1934, as amended from
time to time, or any successor legislation.

      "Extension Period" has the meaning set forth in paragraph 2(b) of Annex I.


                                       4
<PAGE>

      "Federal Reserve" has the meaning set forth in paragraph 3 of Annex I.

      "Fiduciary  Indemnified  Person"  shall  mean  each  of the  Institutional
Trustee (including in its individual capacity),  the Delaware Trustee (including
in its  individual  capacity),  any  Affiliate of the  Institutional  Trustee or
Delaware Trustee and any officers, directors,  shareholders,  members, partners,
employees, representatives,  custodians, nominees or agents of the Institutional
Trustee or Delaware Trustee.

      "Fiscal Year" has the meaning set forth in Section 10.1.

      "Fixed Rate Period  Remaining Life" has the meaning set forth in paragraph
4(a) of Annex I.

      "Global  Capital   Security"  means  a  Capital   Securities   Certificate
evidencing ownership of Book-Entry Capital Securities.

      "Guarantee"  means the  guarantee  agreement to be dated as of the Closing
Date, of the Sponsor in respect of the Capital Securities.

      "Holder"  means a  Person  in  whose  name a  Certificate  representing  a
Security is registered,  such Person being a beneficial owner within the meaning
of the Statutory Trust Act.

      "Indemnified  Person"  means a Company  Indemnified  Person or a Fiduciary
Indemnified Person.

      "Indenture" means the Indenture dated as of the Closing Date,  between the
Debenture  Issuer and the  Debenture  Trustee,  and any  indenture  supplemental
thereto pursuant to which the Debentures are to be issued, as such Indenture and
any supplemental  indenture may be amended,  supplemented or otherwise  modified
from time to time.

      "Indenture Event of Default" means an "Event of Default" as defined in the
Indenture.

      "Institutional   Trustee"  means  the  Trustee   meeting  the  eligibility
requirements set forth in Section 4.3.

      "Interest"  means  any  interest  due  on  the  Debentures  including  any
Additional Interest and Defaulted Interest.

      "Investment  Company"  means  an  investment  company  as  defined  in the
Investment Company Act.

      "Investment  Company  Act" means the  Investment  Company Act of 1940,  as
amended from time to time, or any successor legislation.

      "Investment  Company Event" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Liquidation" has the meaning set forth in paragraph 3 of Annex I.

      "Liquidation  Distribution"  has the meaning  set forth in  paragraph 3 of
Annex I.

      "Majority in  liquidation  amount of the  Securities"  means  Holder(s) of
outstanding  Securities voting together as a single class or, as the context may
require,  Holders of  outstanding  Capital  Securities or Holders of outstanding
Common  Securities  voting  separately as a class,  who are the record owners of
more than 50% of the aggregate  liquidation  amount (including the stated amount
that would be paid on


                                       5
<PAGE>

redemption,  liquidation or otherwise,  plus accrued and unpaid Distributions to
the date upon which the voting  percentages  are  determined) of all outstanding
Securities of the relevant class.

      "Maturity Date" has the meaning set forth in paragraph 4(a) of Annex I.

      "Officers'  Certificates" means, with respect to any Person, a certificate
signed by two  Authorized  Officers of such Person.  Any  Officers'  Certificate
delivered with respect to compliance with a condition or covenant  providing for
it in this Declaration shall include:

      (a) a statement  that each officer  signing the  Certificate  has read the
covenant or condition and the definitions relating thereto;

      (b) a brief  statement  of the  nature  and  scope of the  examination  or
investigation undertaken by each officer in rendering the Certificate;

      (c) a  statement  that each such  officer  has made  such  examination  or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed  opinion as to whether or not such  covenant or condition
has been complied with; and

      (d) a statement as to whether,  in the opinion of each such officer,  such
condition or covenant has been complied with.

      "OTS" has the meaning set forth in paragraph 3 of Annex I.

      "Owner"  means  each  Person  who is the  beneficial  owner of  Book-Entry
Capital  Securities  as  reflected  in the  records of the  Depositary  or, if a
Depositary Participant is not the beneficial owner, then the beneficial owner as
reflected in the records of the Depositary Participant.

      "Paying Agent" has the meaning specified in Section 6.2.

      "Person"  means a legal  person,  including any  individual,  corporation,
estate, partnership,  joint venture,  association,  joint stock company, limited
liability  company,  trust,  unincorporated  association,  or  government or any
agency or political subdivision thereof, or any other entity of whatever nature.

      "Placement  Agreement"  means  the  Placement  Agreement  relating  to the
offering and sale of Capital Securities in the form of Exhibit C.

      "Primary  Treasury  Dealer" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Property Account" has the meaning set forth in Section 2.8(c).

      "Pro Rata" has the meaning set forth in paragraph 8 of Annex I.

      "QIB"  means a  "qualified  institutional  buyer" as  defined in Rule 144A
under the Securities Act.

      "Quorum" means a majority of the  Administrators or, if there are only two
Administrators, both of them.

      "Quotation Agent" has the meaning set forth in paragraph 4(a) of Annex I.

      "Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I.

      "Redemption/Distribution  Notice" has the  meaning set forth in  paragraph
4(e) of Annex I.


                                       6
<PAGE>

      "Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I.

      "Reference Treasury Dealer" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Reference  Treasury  Dealer  Quotations"  has the  meaning  set  forth in
paragraph 4(a) of Annex I.

      "Registrar" has the meaning set forth in Section 6.2.

      "Relevant Trustee" has the meaning set forth in Section 4.5(a).

      "Responsible  Officer" means, with respect to the  Institutional  Trustee,
any officer  within the  Corporate  Trust Office of the  Institutional  Trustee,
including  any  vice-president,  any  assistant  vice-president,  any  assistant
secretary,  the treasurer,  any assistant treasurer,  any trust officer or other
officer of the Corporate Trust Office of the Institutional  Trustee  customarily
performing  functions  similar to those performed by any of the above designated
officers and also means,  with respect to a particular  corporate  trust matter,
any other  officer to whom such  matter is  referred  because of that  officer's
knowledge of and familiarity with the particular subject.

      "Restricted  Securities  Legend"  has the  meaning  set  forth in  Section
8.2(b).

      "Rule 3a-5" means Rule 3a-5 under the Investment Company Act.

      "Rule 3a-7" means Rule 3a-7 under the Investment Company Act.

      "Securities" means the Common Securities and the Capital Securities.

      "Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.

      "Special Event" has the meaning set forth in paragraph 4(a) of Annex I.

      "Special  Redemption  Date" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Special  Redemption Price" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Sponsor" means First Merchants  Corporation,  an Indiana corporation,  or
any successor entity in a merger, consolidation or amalgamation, in its capacity
as sponsor of the Trust.

      "Statutory  Trust Act" means Chapter 38 of Title 12 of the Delaware  Code,
12 Del. C. ss.ss. 3801, et seq. as may be amended from time to time.

      "Successor Entity" has the meaning set forth in Section 2.15(b).

      "Successor Delaware Trustee" has the meaning set forth in Section 4.5(e).

      "Successor  Institutional  Trustee"  has the  meaning set forth in Section
4.5(b).

      "Successor Securities" has the meaning set forth in Section 2.15(b).

      "Super Majority" has the meaning set forth in paragraph 5(b) of Annex I.

      "Tax Event" has the meaning set forth in paragraph 4(a) of Annex I.


                                       7
<PAGE>

      "10%  in  liquidation   amount  of  the  Securities"  means  Holder(s)  of
outstanding  Securities voting together as a single class or, as the context may
require,  Holders of  outstanding  Capital  Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate  liquidation  amount  (including the stated amount that
would be paid on redemption,  liquidation or otherwise,  plus accrued and unpaid
Distributions  to the date upon which the voting  percentages are determined) of
all outstanding Securities of the relevant class.

      "3-Month LIBOR" has the meaning set forth in paragraph 4(a) of Annex I.

      "Transfer Agent" has the meaning set forth in Section 6.2.

      "Treasury Rate" has the meaning set forth in paragraph 4(a) of Annex I.

      "Treasury  Regulations"  means  the  income  tax  regulations,   including
temporary  and proposed  regulations,  promulgated  under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

      "Trust Property" means (a) the Debentures,  (b) any cash on deposit in, or
owing to, the Property Account and (c) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being held or deemed to
be held by the Institutional Trustee pursuant to the trusts of this Declaration.

      "Trustee" or "Trustees"  means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the  terms  hereof,  and all  other  Persons  who may from  time to time be duly
appointed,  qualified and serving as Trustees in accordance  with the provisions
hereof,  and references  herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.

      "U.S.  Person"  means  a  United  States  Person  as  defined  in  Section
7701(a)(30) of the Code.

                                   ARTICLE II

                                  ORGANIZATION

      Section 2.1. Name. The Trust is named "First Merchants  Capital Trust II,"
as such name may be modified from time to time by the  Administrators  following
written notice to the Holders of the Securities.  The Trust's  activities may be
conducted under the name of the Trust or any other name deemed  advisable by the
Administrators.

      Section 2.2. Office.  The address of the principal  office of the Trust is
c/o  Wilmington  Trust Company,  Rodney Square North,  1100 North Market Street,
Wilmington,  Delaware 19890-1600. On at least 10 Business Days written notice to
the  Holders  of  the  Securities,  the  Administrators  may  designate  another
principal  office,  which  shall be in a state of the  United  States  or in the
District of Columbia.

      Section 2.3. Purpose.  The  exclusive  purposes and functions of the Trust
are (a) to issue  and  sell the  Securities  representing  undivided  beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale to acquire the  Debentures,  (c) to  facilitate  direct  investment  in the
assets of the Trust through  issuance of the Common  Securities  and the Capital
Securities and (d) except as otherwise  limited herein,  to engage in only those
other  activities  necessary or incidental  thereto.  The Trust shall not borrow
money,  issue debt or reinvest proceeds derived from investments,  pledge any of
its assets,  or otherwise  undertake (or permit to be  undertaken)  any activity
that would cause the Trust not to be classified for United States federal income
tax purposes as a grantor trust.

                                       8
<PAGE>

      Section  2.4.   Authority.   Except  as  specifically   provided  in  this
Declaration,  the  Institutional  Trustee  shall  have  exclusive  and  complete
authority to carry out the  purposes of the Trust.  An action taken by a Trustee
in accordance with its powers shall  constitute the act of and serve to bind the
Trust.  In dealing  with the Trustees  acting on behalf of the Trust,  no Person
shall be  required to inquire  into the  authority  of the  Trustees to bind the
Trust.  Persons dealing with the Trust are entitled to rely  conclusively on the
power  and  authority  of the  Trustees  as set forth in this  Declaration.  The
Administrators  shall have only those  ministerial  duties set forth herein with
respect to  accomplishing  the  purposes of the Trust and are not intended to be
trustees  or  fiduciaries  with  respect  to  the  Trust  or  the  Holders.  The
Institutional Trustee shall have the right, but shall not be obligated except as
provided in Section 2.6, to perform those duties assigned to the Administrators.

      Section 2.5. Title to Property of the Trust. Except as provided in Section
2.8 with  respect to the  Debentures  and the  Property  Account or as otherwise
provided  in this  Declaration,  legal title to all assets of the Trust shall be
vested in the Trust.  The Holders  shall not have legal title to any part of the
assets of the Trust,  but shall have an  undivided  beneficial  interest  in the
assets of the Trust.

      Section 2.6. Powers and Duties of the Trustees and the Administrators.

      (a) The Trustees and the  Administrators  shall conduct the affairs of the
Trust  in  accordance  with  the  terms  of  this  Declaration.  Subject  to the
limitations  set forth in paragraph (b) of this Section,  and in accordance with
the following provisions (i) and (ii), the Trustees and the Administrators shall
have the authority to enter into all transactions  and agreements  determined by
the Institutional Trustee to be appropriate in exercising the authority, express
or implied, otherwise granted to the Trustees or the Administrators, as the case
may be, under this Declaration,  and to perform all acts in furtherance thereof,
including without limitation, the following:

            (i) Each Administrator  shall have the power and authority to act on
      behalf of the Trust with respect to the following matters:

                  (A) the issuance and sale of the Securities;

                  (B) to cause  the  Trust to enter  into,  and to  execute  and
            deliver on behalf of the Trust,  such agreements as may be necessary
            or  desirable  in  connection  with the purposes and function of the
            Trust, including agreements with the Paying Agent;

                  (C) ensuring  compliance with the Securities  Act,  applicable
            state securities or blue sky laws;

                  (D) the sending of notices  (other than  notices of  default),
            and other information regarding the Securities and the Debentures to
            the Holders in accordance with this Declaration;

                  (E) the consent to the appointment of a Paying Agent, Transfer
            Agent and  Registrar  in  accordance  with this  Declaration,  which
            consent shall not be unreasonably withheld or delayed;

                  (F)  execution  and delivery of the  Securities  in accordance
            with this Declaration;

                  (G) execution and delivery of closing certificates pursuant to
            the  Placement   Agreement  and  the   application  for  a  taxpayer
            identification number;


                                       9
<PAGE>

                  (H) unless  otherwise  determined by the Holders of a Majority
            in liquidation  amount of the Securities or as otherwise required by
            the  Statutory  Trust Act, to execute on behalf of the Trust (either
            acting alone or together with any or all of the  Administrators) any
            documents that the Administrators have the power to execute pursuant
            to this Declaration;

                  (I) the taking of any action  incidental  to the  foregoing as
            the  Institutional  Trustee  may  from  time  to time  determine  is
            necessary  or  advisable  to  give  effect  to  the  terms  of  this
            Declaration for the benefit of the Holders (without consideration of
            the effect of any such action on any particular Holder);

                  (J) to  establish a record date with respect to all actions to
            be  taken  hereunder  that  require  a record  date be  established,
            including Distributions,  voting rights,  redemptions and exchanges,
            and to issue relevant  notices to the Holders of Capital  Securities
            and Holders of Common  Securities as to such actions and  applicable
            record dates; and

                  (K) to duly  prepare and file all  applicable  tax returns and
            tax  information  reports that are required to be filed with respect
            to the Trust on behalf of the Trust.

            (ii) As among the Trustees and the Administrators, the Institutional
      Trustee  shall have the power,  duty and authority to act on behalf of the
      Trust with respect to the following matters:

                  (A) the establishment of the Property Account;

                  (B) the receipt of the Debentures;

                  (C) the  collection  of  interest,  principal  and  any  other
            payments made in respect of the Debentures in the Property Account;

                  (D) the distribution  through the Paying Agent of amounts owed
            to the Holders in respect of the Securities;

                  (E) the exercise of all of the rights,  powers and  privileges
            of a holder of the Debentures;

                  (F) the  sending of notices of default  and other  information
            regarding  the  Securities  and the  Debentures  to the  Holders  in
            accordance with this Declaration;

                  (G) the  distribution of the Trust Property in accordance with
            the terms of this Declaration;

                  (H) to the extent provided in this Declaration, the winding up
            of the affairs of and liquidation of the Trust and the  preparation,
            execution and filing of the  certificate  of  cancellation  with the
            Secretary of State of the State of Delaware;

                  (I) after any Event of  Default  (provided  that such Event of
            Default is not by or with respect to the Institutional  Trustee) the
            taking  of  any  action   incidental   to  the   foregoing   as  the
            Institutional  Trustee may from time to time  determine is necessary
            or  advisable  to give effect to the terms of this  Declaration  and
            protect  and  conserve  the Trust  Property  for the  benefit of the
            Holders  (without  consideration of the effect of any such action on
            any particular Holder); and


                                       10
<PAGE>

                  (J)  to  take  all  action  that  may  be  necessary  for  the
            preservation  and the  continuation of the Trust's valid  existence,
            rights,  franchises  and  privileges as a statutory  trust under the
            laws of the State of Delaware.

            (iii) The  Institutional  Trustee shall have the power and authority
      to  act on  behalf  of  the  Trust  with  respect  to  any of the  duties,
      liabilities,  powers or the authority of the  Administrators  set forth in
      Section  2.6(a)(i)(D),  (E) and (F) herein but shall not have a duty to do
      any such act  unless  specifically  requested  to do so in  writing by the
      Sponsor,  and shall then be fully  protected  in acting  pursuant  to such
      written request;  and in the event of a conflict between the action of the
      Administrators and the action of the Institutional  Trustee, the action of
      the Institutional Trustee shall prevail.

      (b) So long as this  Declaration  remains  in  effect,  the  Trust (or the
Trustees or  Administrators  acting on behalf of the Trust) shall not  undertake
any business,  activities or transaction  except as expressly provided herein or
contemplated hereby. In particular,  neither the Trustees nor the Administrators
may cause the Trust to (i) acquire any  investments  or engage in any activities
not  authorized by this  Declaration,  (ii) sell,  assign,  transfer,  exchange,
mortgage,  pledge,  set-off or otherwise dispose of any of the Trust Property or
interests  therein,  including to Holders,  except as expressly provided herein,
(iii) take any action that would  reasonably  be expected (x) to cause the Trust
to fail or cease to  qualify as a "grantor  trust"  for  United  States  federal
income tax  purposes or (y) to require  the trust to  register as an  Investment
Company  under the  Investment  Company  Act,  (iv) incur any  indebtedness  for
borrowed money or issue any other debt or (v) take or consent to any action that
would  result  in the  placement  of a lien on any of the  Trust  Property.  The
Institutional  Trustee shall, at the sole cost and expense of the Trust,  defend
all claims and  demands of all Persons at any time  claiming  any lien on any of
the Trust Property  adverse to the interest of the Trust or the Holders in their
capacity as Holders.

      (c) In  connection  with the issuance and sale of the Capital  Securities,
the  Sponsor  shall have the right and  responsibility  to assist the Trust with
respect  to, or effect on behalf of the Trust,  the  following  (and any actions
taken by the Sponsor in furtherance  of the following  prior to the date of this
Declaration are hereby ratified and confirmed in all respects):

            (i) the taking of any action  necessary to obtain an exemption  from
      the Securities Act;

            (ii) the  determination  of the States in which to take  appropriate
      action  to  qualify  or  register  for  sale  all or part  of the  Capital
      Securities  and the  determination  of any and all such  acts,  other than
      actions  which must be taken by or on behalf of the Trust,  and the advice
      to the  Administrators  of actions  they must take on behalf of the Trust,
      and the  preparation  for  execution  and  filing of any  documents  to be
      executed and filed by the Trust or on behalf of the Trust,  as the Sponsor
      deems  necessary or advisable in order to comply with the applicable  laws
      of any such States in connection with the sale of the Capital Securities;

            (iii)  the  negotiation  of the  terms  of,  and the  execution  and
      delivery of, the Placement Agreement providing for the sale of the Capital
      Securities; and

            (iv) the taking of any other actions necessary or desirable to carry
      out any of the foregoing activities.

      (d)  Notwithstanding  anything herein to the contrary,  the Administrators
and the Holders of a Majority in liquidation amount of the Common Securities are
authorized  and  directed to conduct the affairs of the Trust and to operate the
Trust so that the  Trust  will not (i) be  deemed  to be an  Investment


                                       11
<PAGE>

Company  required to be registered  under the  Investment  Company Act, and (ii)
fail to be classified as a "grantor  trust" for United States federal income tax
purposes. The Administrators and the Holders of a Majority in liquidation amount
of the  Common  Securities  shall  not take  any  action  inconsistent  with the
treatment of the Debentures as indebtedness  of the Debenture  Issuer for United
States federal income tax purposes.  In this connection,  the Administrators and
the Holders of a Majority in  liquidation  amount of the Common  Securities  are
authorized  to take any action,  not  inconsistent  with  applicable  laws,  the
Certificate  of Trust or this  Declaration,  as amended from time to time,  that
each of the  Administrators  and the Holders of a Majority in liquidation amount
of the Common  Securities  determines  in their  discretion  to be  necessary or
desirable for such purposes.

      (e) All expenses  incurred by the  Administrators or the Trustees pursuant
to this Section 2.6 shall be reimbursed by the Sponsor, and the Trustees and the
Administrators  shall have no  obligations  with respect to such  expenses  (for
purposes of clarification,  this Section 2.6(e) does not contemplate the payment
by the Sponsor of acceptance or annual administration fees owing to the Trustees
under this  Declaration  or the fees and  expenses of the  Trustees'  counsel in
connection   with  the  closing  of  the   transactions   contemplated  by  this
Declaration).

      (f) The assets of the Trust shall consist of the Trust Property.

      (g) Legal title to all Trust  Property shall be vested at all times in the
Institutional  Trustee  (in  its  capacity  as  such)  and  shall  be  held  and
administered by the Institutional Trustee and the Administrators for the benefit
of the Trust in accordance with this Declaration.

      (h)  If the  Institutional  Trustee  or  any  Holder  has  instituted  any
proceeding  to  enforce  any right or remedy  under  this  Declaration  and such
proceeding  has been  discontinued  or  abandoned  for any  reason,  or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor,  the  Institutional  Trustee and the Holders shall,
subject to any  determination  in such  proceeding,  be restored  severally  and
respectively to their former positions hereunder,  and thereafter all rights and
remedies of the  Institutional  Trustee and the Holders shall continue as though
no such proceeding had been instituted.

      Section  2.7.  Prohibition  of Actions by the Trust and the  Institutional
Trustee.

      (a) The Trust shall not,  and the  Institutional  Trustee  shall cause the
Trust not to,  engage in any activity  other than as required or  authorized  by
this  Declaration.  In  particular,  the Trust  shall not and the  Institutional
Trustee shall cause the Trust not to:

            (i) invest any  proceeds  received  by the Trust  from  holding  the
      Debentures,  but shall  distribute  all such  proceeds  to  Holders of the
      Securities   pursuant  to  the  terms  of  this  Declaration  and  of  the
      Securities;

            (ii) acquire any assets other than as expressly provided herein;

            (iii) possess Trust Property for other than a Trust purpose;

            (iv) make any  loans or incur  any  indebtedness  other  than  loans
      represented by the Debentures;

            (v) possess any power or otherwise  act in such a way as to vary the
      Trust assets or the terms of the  Securities in any way  whatsoever  other
      than as expressly provided herein;


                                       12
<PAGE>

            (vi) issue any securities or other evidences of beneficial ownership
      of, or beneficial interest in, the Trust other than the Securities;

            (vii) carry on any "trade or business" as that phrase is used in the
      Code; or

            (viii) other than as provided in this  Declaration  (including Annex
      I), (A) direct the time, method and place of exercising any trust or power
      conferred upon the Debenture  Trustee with respect to the Debentures,  (B)
      waive any past default that is waivable under the Indenture,  (C) exercise
      any right to rescind or annul any  declaration  that the  principal of all
      the Debentures shall be due and payable,  or (D) consent to any amendment,
      modification or termination of the Indenture or the Debentures  where such
      consent  shall be required  unless the Trust shall have received a written
      opinion of counsel to the effect that such modification will not cause the
      Trust to cease to be  classified  as a "grantor  trust" for United  States
      federal income tax purposes.

      Section 2.8. Powers and Duties of the Institutional Trustee.

      (a) The legal title to the Debentures shall be owned by and held of record
in the name of the  Institutional  Trustee in trust for the benefit of the Trust
and the  Holders  of the  Securities.  The  right,  title  and  interest  of the
Institutional  Trustee to the Debentures shall vest automatically in each Person
who may  hereafter be  appointed as  Institutional  Trustee in  accordance  with
Section 4.5. Such vesting and  cessation of title shall be effective  whether or
not conveyancing  documents with regard to the Debentures have been executed and
delivered.

      (b) The  Institutional  Trustee  shall not transfer  its right,  title and
interest in the Debentures to the Administrators or to the Delaware Trustee.

      (c) The Institutional Trustee shall:

            (i) establish and maintain a segregated  non-interest  bearing trust
      account (the  "Property  Account") in the name of and under the  exclusive
      control of the Institutional  Trustee, and maintained in the Institutional
      Trustee's  trust  department,  on behalf of the Holders of the  Securities
      and,  upon the  receipt  of  payments  of  funds  made in  respect  of the
      Debentures held by the Institutional Trustee,  deposit such funds into the
      Property  Account  and make  payments,  or cause the Paying  Agent to make
      payments,  to the  Holders of the  Capital  Securities  and Holders of the
      Common  Securities  from the Property  Account in accordance  with Section
      5.1.  Funds  in the  Property  Account  shall  be  held  uninvested  until
      disbursed in accordance with this Declaration;

            (ii) engage in such ministerial  activities as shall be necessary or
      appropriate  to effect the  redemption of the Capital  Securities  and the
      Common Securities to the extent the Debentures are redeemed or mature; and

            (iii)   upon   written   notice  of   distribution   issued  by  the
      Administrators  in accordance with the terms of the Securities,  engage in
      such ministerial activities as shall be necessary or appropriate to effect
      the  distribution  of the  Debentures  to Holders of  Securities  upon the
      occurrence  of  certain  circumstances   pursuant  to  the  terms  of  the
      Securities.

      (d)  The  Institutional   Trustee  may  bring  or  defend,  pay,  collect,
compromise,  arbitrate,  resort to legal  action with  respect to, or  otherwise
adjust  claims or demands of or  against,  the Trust  which  arises out of or in
connection  with an  Event of  Default  of which a  Responsible  Officer  of the
Institutional  Trustee has actual  knowledge or arises out of the  Institutional
Trustee's duties and obligations under this Declaration; provided, however, that
if an Event  of  Default  has  occurred  and is  continuing  and  such  event is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the  Debentures on the


                                       13
<PAGE>

date  such  interest  or  principal  is  otherwise  payable  (or in the  case of
redemption, on the redemption date), then a Holder of the Capital Securities may
directly institute a proceeding for enforcement of payment to such Holder of the
principal of or interest on the  Debentures  having a principal  amount equal to
the  aggregate  liquidation  amount of the Capital  Securities of such Holder (a
"Direct  Action")  on  or  after  the  respective  due  date  specified  in  the
Debentures.  In connection with such Direct Action, the rights of the Holders of
the Common  Securities  will be  subrogated  to the rights of such Holder of the
Capital  Securities to the extent of any payment made by the Debenture Issuer to
such Holder of the Capital Securities in such Direct Action; provided,  however,
that no Holder of the Common  Securities  may exercise such right of subrogation
so long as an Event of  Default  with  respect  to the  Capital  Securities  has
occurred and is continuing.

      (e) The  Institutional  Trustee shall continue to serve as a Trustee until
either:

            (i) the Trust has been completely liquidated and the proceeds of the
      liquidation  distributed to the Holders of the Securities  pursuant to the
      terms of the Securities and this Declaration; or

            (ii) a Successor  Institutional  Trustee has been  appointed and has
      accepted that appointment in accordance with Section 4.5.

      (f) The  Institutional  Trustee shall have the legal power to exercise all
of the rights,  powers and  privileges of a Holder of the  Debentures  under the
Indenture  and,  if  an  Event  of  Default   occurs  and  is  continuing,   the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as holder of the  Debentures  subject  to the  rights of the  Holders
pursuant  to  this  Declaration  (including  Annex  I)  and  the  terms  of  the
Securities.

      The  Institutional  Trustee  must  exercise  the  powers set forth in this
Section 2.8 in a manner that is  consistent  with the purposes and  functions of
the Trust set out in Section 2.3, and the  Institutional  Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.

      Section  2.9.  Certain  Duties and  Responsibilities  of the  Trustees and
Administrators.

      (a) The  Institutional  Trustee,  before  the  occurrence  of any Event of
Default and after the curing or waiving of all such  Events of Default  that may
have occurred,  shall undertake to perform only such duties as are  specifically
set forth in this  Declaration and no implied  covenants shall be read into this
Declaration  against the Institutional  Trustee. In case an Event of Default has
occurred  (that has not been  cured or waived  pursuant  to  Section  6.8),  the
Institutional  Trustee shall exercise such of the rights and powers vested in it
by this  Declaration,  and use the  same  degree  of care  and  skill  in  their
exercise,  as a prudent person would exercise or use under the  circumstances in
the conduct of his or her own affairs.

      (b) The duties and responsibilities of the Trustees and the Administrators
shall be as provided by this  Declaration.  Notwithstanding  the  foregoing,  no
provision of this  Declaration  shall  require any Trustee or  Administrator  to
expend or risk their own funds or otherwise incur any financial liability in the
performance of any of their duties hereunder, or in the exercise of any of their
rights or powers if it shall have  reasonable  grounds to believe that repayment
of such funds or  adequate  protection  against  such risk of  liability  is not
reasonably  assured to it. Whether or not therein  expressly so provided,  every
provision of this Declaration relating to the conduct or affecting the liability
of or affording protection to the Trustees or Administrators shall be subject to
the provisions of this Article.  Nothing in this Declaration  shall be construed
to relieve an  Administrator  or a Trustee from  liability for its own negligent
act, its own  negligent  failure to act, or its own willful  misconduct.  To the
extent that, at law or in equity, a Trustee or an  Administrator  has duties and
liabilities  relating  to the  Trust or to the  Holders,  such  Trustee  or such
Administrator  shall  not be  liable  to the  Trust  or to any  Holder  for


                                       14
<PAGE>

such Trustee's or such  Administrator's good faith reliance on the provisions of
this Declaration.  The provisions of this  Declaration,  to the extent that they
restrict  the  duties  and  liabilities  of the  Administrators  or the  Trustee
otherwise  existing  at law or in  equity,  are  agreed by the  Sponsor  and the
Holders to replace such other duties and  liabilities of the  Administrators  or
the Trustees.

      (c) All payments  made by the  Institutional  Trustee or a Paying Agent in
respect of the Securities  shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds  from the Trust  Property to enable the  Institutional  Trustee or a
Paying Agent to make payments in accordance with the terms hereof.  Each Holder,
by its acceptance of a Security,  agrees that it will look solely to the revenue
and  proceeds  from the Trust  Property  to the  extent  legally  available  for
distribution   to  it  as  herein   provided  and  that  the  Trustees  and  the
Administrators  are not personally liable to it for any amount  distributable in
respect of any Security or for any other  liability in respect of any  Security.
This Section  2.9(c) does not limit the liability of the Trustees  expressly set
forth elsewhere in this Declaration.

      (d) The  Institutional  Trustee  shall not be  liable  for its own acts or
omissions  hereunder  except as a result of its own  negligent  action,  its own
negligent failure to act, or its own willful misconduct, except that:

            (i) the  Institutional  Trustee shall not be liable for any error of
      judgment made in good faith by an Authorized  Officer of the Institutional
      Trustee,  unless it shall be proved  that the  Institutional  Trustee  was
      negligent in ascertaining the pertinent facts;

            (ii) the  Institutional  Trustee shall not be liable with respect to
      any action taken or omitted to be taken by it in good faith in  accordance
      with  the  direction  of the  Holders  of not  less  than  a  Majority  in
      liquidation amount of the Capital Securities or the Common Securities,  as
      applicable,  relating  to the time,  method  and place of  conducting  any
      proceeding  for any remedy  available  to the  Institutional  Trustee,  or
      exercising  any trust or power  conferred upon the  Institutional  Trustee
      under this Declaration;

            (iii) the  Institutional  Trustee's  sole duty with  respect  to the
      custody,  safekeeping and physical  preservation of the Debentures and the
      Property  Account shall be to deal with such property in a similar  manner
      as the Institutional Trustee deals with similar property for its fiduciary
      accounts  generally,   subject  to  the  protections  and  limitations  on
      liability afforded to the Institutional Trustee under this Declaration;

            (iv) the Institutional  Trustee shall not be liable for any interest
      on any money  received by it except as it may  otherwise  agree in writing
      with the Sponsor; and money held by the Institutional  Trustee need not be
      segregated  from other funds held by it except in relation to the Property
      Account  maintained  by the  Institutional  Trustee  pursuant  to  Section
      2.8(c)(i) and except to the extent otherwise required by law; and

            (v)  the   Institutional   Trustee  shall  not  be  responsible  for
      monitoring the compliance by the  Administrators or the Sponsor with their
      respective  duties  under this  Declaration,  nor shall the  Institutional
      Trustee be liable for any default or misconduct of the  Administrators  or
      the Sponsor.

      Section 2.10.  Certain  Rights of  Institutional  Trustee.  Subject to the
provisions of Section 2.9:


                                       15
<PAGE>

      (a) the  Institutional  Trustee may  conclusively  rely and shall fully be
protected in acting or refraining from acting in good faith upon any resolution,
opinion  of  counsel,  certificate,   written  representation  of  a  Holder  or
transferee,  certificate  of  auditors  or  any  other  certificate,  statement,
instrument,   opinion,  report,  notice,  request,  direction,  consent,  order,
appraisal,  bond, debenture, note, other evidence of indebtedness or other paper
or  document  believed  by it to be  genuine  and to have been  signed,  sent or
presented by the proper party or parties;

      (b)  if  (i)  in  performing  its  duties  under  this  Declaration,   the
Institutional  Trustee is  required  to decide  between  alternative  courses of
action,  (ii) in  construing  any of the  provisions  of this  Declaration,  the
Institutional  Trustee finds the same ambiguous or  inconsistent  with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration,  then, except as to any matter
as to which the  Holders of Capital  Securities  are  entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's written instructions as to the course of action
to be taken and the  Institutional  Trustee  shall take such action,  or refrain
from taking such action,  as the  Institutional  Trustee  shall be instructed in
writing, in which event the Institutional Trustee shall have no liability except
for its own negligence or willful misconduct;

      (c) any direction or act of the Sponsor or the Administrators contemplated
by this Declaration shall be sufficiently evidenced by an Officers' Certificate;

      (d) whenever in the administration of this Declaration,  the Institutional
Trustee shall deem it desirable  that a matter be proved or  established  before
undertaking,  suffering  or omitting  any action  hereunder,  the  Institutional
Trustee  (unless other evidence is herein  specifically  prescribed) may request
and conclusively rely upon an Officers' Certificate as to factual matters which,
upon receipt of such request,  shall be promptly delivered by the Sponsor or the
Administrators;

      (e) the Institutional  Trustee shall have no duty to see to any recording,
filing  or   registration   of  any  instrument   (including  any  financing  or
continuation  statement  or any  filing  under  tax or  securities  laws) or any
rerecording, refiling or reregistration thereof;

      (f) the  Institutional  Trustee may consult with counsel of its  selection
(which counsel may be counsel to the Sponsor or any of its  Affiliates)  and the
advice of such counsel shall be full and complete  authorization  and protection
in respect of any action  taken,  suffered  or omitted by it  hereunder  in good
faith  and  in  reliance  thereon  and  in  accordance  with  such  advice;  the
Institutional  Trustee  shall  have the  right at any time to seek  instructions
concerning the  administration  of this  Declaration from any court of competent
jurisdiction;

      (g) the Institutional Trustee shall be under no obligation to exercise any
of the  rights or powers  vested in it by this  Declaration  at the  request  or
direction  of any of the  Holders  pursuant  to this  Declaration,  unless  such
Holders shall have offered to the  Institutional  Trustee  security or indemnity
reasonably  satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;  provided,
that nothing  contained in this  Section  2.10(g)  shall be taken to relieve the
Institutional  Trustee,  subject to Section  2.9(b),  upon the  occurrence of an
Event of Default (that has not been cured or waived pursuant to Section 6.9), to
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their  exercise,  as a prudent person would
exercise  or use  under  the  circumstances  in the  conduct  of his or her  own
affairs;

      (h) the Institutional Trustee shall not be bound to make any investigation
into the facts or  matters  stated in any  resolution,  certificate,  statement,
instrument,  opinion,  report, notice, request,  consent, order, approval, bond,
debenture,  note or other evidence of  indebtedness  or other paper or


                                       16
<PAGE>

document,  unless requested in writing to do so by one or more Holders,  but the
Institutional  Trustee may make such further inquiry or investigation  into such
facts or matters as it may see fit;

      (i) the  Institutional  Trustee  may  execute  any of the trusts or powers
hereunder or perform any duties  hereunder  either directly or by or through its
agents or attorneys and the  Institutional  Trustee shall not be responsible for
any misconduct or negligence on the part of or for the  supervision of, any such
agent or attorney appointed with due care by it hereunder;

      (j) whenever in the  administration  of this Declaration the Institutional
Trustee  shall  deem it  desirable  to  receive  instructions  with  respect  to
enforcing  any  remedy  or  right or  taking  any  other  action  hereunder  the
Institutional  Trustee  (i) may  request  instructions  from the  Holders of the
Capital  Securities  which  instructions may only be given by the Holders of the
same  proportion  in  liquidation  amount of the Capital  Securities as would be
entitled  to direct the  Institutional  Trustee  under the terms of the  Capital
Securities  in respect of such  remedy,  right or action,  (ii) may refrain from
enforcing  such  remedy  or  right  or  taking  such  other  action  until  such
instructions  are  received,  and (iii)  shall be fully  protected  in acting in
accordance with such instructions;

      (k)  except as  otherwise  expressly  provided  in this  Declaration,  the
Institutional  Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;

      (l) when the Institutional  Trustee incurs expenses or renders services in
connection  with a  Bankruptcy  Event,  such  expenses  (including  the fees and
expenses of its counsel) and the  compensation for such services are intended to
constitute  expenses of administration  under any bankruptcy law or law relating
to creditors rights generally;

      (m) the  Institutional  Trustee shall not be charged with  knowledge of an
Event of  Default  unless a  Responsible  Officer of the  Institutional  Trustee
obtains actual  knowledge of such event or the  Institutional  Trustee  receives
written  notice of such  event from any  Holder,  the  Sponsor or the  Debenture
Trustee;

      (n) any action taken by the Institutional  Trustee or its agents hereunder
shall bind the Trust and the Holders of the Securities, and the signature of the
Institutional  Trustee or its agents alone shall be sufficient  and effective to
perform  any such  action and no third  party shall be required to inquire as to
the  authority of the  Institutional  Trustee to so act or as to its  compliance
with any of the terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Institutional Trustee's or its agent's taking such
action; and

      (o) no provision of this Declaration shall be deemed to impose any duty or
obligation on the  Institutional  Trustee to perform any act or acts or exercise
any  right,  power,  duty or  obligation  conferred  or  imposed  on it,  in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be  unqualified  or  incompetent  in accordance  with  applicable  law, to
perform any such act or acts,  or to exercise  any such  right,  power,  duty or
obligation.  No  permissive  power or authority  available to the  Institutional
Trustee shall be construed to be a duty.

      Section 2.11.  Delaware  Trustee.  Notwithstanding  any other provision of
this  Declaration  other than Section 4.1,  the  Delaware  Trustee  shall not be
entitled to exercise any powers,  nor shall the Delaware Trustee have any of the
duties  and  responsibilities  of  any  of the  Trustees  or the  Administrators
described in this  Declaration  (except as may be required  under the  Statutory
Trust Act).  Except as set forth in Section 4.1, the Delaware Trustee shall be a
Trustee for the sole and limited  purpose of fulfilling the  requirements of ss.
3807 of the Statutory Trust Act.


                                       17
<PAGE>

      Section  2.12.  Execution of  Documents.  Unless  otherwise  determined in
writing by the Institutional  Trustee,  and except as otherwise  required by the
Statutory  Trust  Act,  the  Institutional  Trustee,  or any  one or more of the
Administrators,  as the case may be, is  authorized  to execute on behalf of the
Trust any documents that the Trustees or the Administrators, as the case may be,
have the power and authority to execute pursuant to Section 2.6.

      Section 2.13. Not Responsible for Recitals or Issuance of Securities.  The
recitals  contained in this Declaration and the Securities shall be taken as the
statements of the Sponsor, and the Trustees do not assume any responsibility for
their  correctness.  The  Trustees  make no  representations  as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations  as to the  validity or  sufficiency  of this  Declaration,  the
Debentures or the Securities.

      Section  2.14.  Duration of Trust.  The Trust,  unless  earlier  dissolved
pursuant to the  provisions of Article VII hereof,  shall be in existence for 35
years from the Closing Date.

      Section 2.15. Mergers.

      (a) The Trust may not consolidate,  amalgamate,  merge with or into, or be
replaced  by,  or  convey,   transfer  or  lease  its   properties   and  assets
substantially  as an  entirety  to any  corporation  or other  body,  except  as
described  in  Section  2.15(b)  and (c)  and  except  in  connection  with  the
liquidation  of the Trust and the  distribution  of the Debentures to Holders of
Securities  pursuant to Section  7.1(a)(iv) of the  Declaration  or Section 4 of
Annex I.

      (b) The Trust may,  with the  consent  of the  Institutional  Trustee  and
without  the  consent of the  Holders of the  Capital  Securities,  consolidate,
amalgamate,  merge with or into,  or be  replaced by a trust  organized  as such
under the laws of any state; provided that:

            (i) if the Trust is not the surviving entity,  such successor entity
      (the "Successor Entity") either:

                  (A)  expressly  assumes  all of the  obligations  of the Trust
            under the Securities; or

                  (B) substitutes  for the Securities  other  securities  having
            substantially  the same  terms  as the  Securities  (the  "Successor
            Securities")  so that the Successor  Securities rank the same as the
            Securities  rank with respect to  Distributions  and  payments  upon
            Liquidation, redemption and otherwise;

            (ii) the  Sponsor  expressly  appoints  a trustee  of the  Successor
      Entity  that  possesses  substantially  the same  powers and duties as the
      Institutional Trustee as the Holder of the Debentures;

            (iii) such merger,  consolidation,  amalgamation or replacement does
      not adversely affect the rights, preferences and privileges of the Holders
      of the  Securities  (including  any Successor  Securities) in any material
      respect;

            (iv) the  Institutional  Trustee receives written  confirmation from
      Moody's  Investor  Services,  Inc.  and any  other  nationally  recognized
      statistical  rating  organization  that  rates  securities  issued  by the
      initial  purchaser  of the Capital  Securities  that it will not reduce or
      withdraw  the  rating  of any  such  securities  because  of such  merger,
      conversion, consolidation, amalgamation or replacement;

            (v) such Successor Entity has a purpose  substantially  identical to
      that of the Trust;


                                       18
<PAGE>

            (vi)  prior  to  such   merger,   consolidation,   amalgamation   or
      replacement,  the Trust has received an opinion of a nationally recognized
      independent counsel to the Trust experienced in such matters to the effect
      that:

                  (A) such merger,  consolidation,  amalgamation  or replacement
            does not adversely affect the rights,  preferences and privileges of
            the Holders of the Securities  (including any Successor  Securities)
            in any material respect;

                  (B)  following  such merger,  consolidation,  amalgamation  or
            replacement,  neither  the Trust nor the  Successor  Entity  will be
            required to register as an Investment Company; and

                  (C)  following  such merger,  consolidation,  amalgamation  or
            replacement, the Trust (or the Successor Entity) will continue to be
            classified as a "grantor trust" for United States federal income tax
            purposes;

            (vii) the  Sponsor  guarantees  the  obligations  of such  Successor
      Entity under the Successor  Securities at least to the extent  provided by
      the Guarantee;

            (viii)  the  Sponsor  owns  100%  of the  common  securities  of any
      Successor Entity; and

            (ix)  prior  to  such   merger,   consolidation,   amalgamation   or
      replacement,  the  Institutional  Trustee shall have received an Officers'
      Certificate of the Administrators  and an opinion of counsel,  each to the
      effect that all conditions  precedent  under this Section  2.15(b) to such
      transaction have been satisfied.

      (c) Notwithstanding  Section 2.15(b), the Trust shall not, except with the
consent of Holders of 100% in aggregate  liquidation  amount of the  Securities,
consolidate,  amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to  consolidate,  amalgamate,  merge with or into, or
replace it if such  consolidation,  amalgamation,  merger or  replacement  would
cause the Trust or  Successor  Entity to be  classified  as other than a grantor
trust for United States federal income tax purposes.

                                   ARTICLE III

                                     SPONSOR

      Section 3.1. Sponsor's Purchase of Common Securities. On the Closing Date,
the Sponsor will purchase all of the Common Securities issued by the Trust in an
amount at least equal to 3% of the capital of the Trust, at the same time as the
Capital Securities are sold.

      Section 3.2. Responsibilities of the Sponsor. In connection with the issue
and sale of the Capital  Securities,  the Sponsor shall have the exclusive right
and  responsibility to engage in, or direct the Administrators to engage in, the
following activities:

      (a) to determine the States in which to take appropriate action to qualify
the  Trust  or to  qualify  or  register  for  sale  all or part of the  Capital
Securities  and to do any and all such acts,  other than  actions  which must be
taken by the Trust,  and advise the Trust of actions it must take,  and  prepare
for execution and filing any documents to be executed and filed by the Trust, as
the Sponsor deems  necessary or advisable in order to comply with the applicable
laws of any such States,  to protect the limited liability of the Holders of the
Capital  Securities  or to enable the Trust to effect the  purposes for which it
was created; and


                                       19
<PAGE>

      (b) to negotiate the terms of and/or  execute on behalf of the Trust,  the
Placement  Agreement and other related agreements  providing for the sale of the
Capital Securities.

      Section 3.3. Expenses. In connection with the offering,  sale and issuance
of the Debentures to the Trust and in connection with the sale of the Securities
by the Trust, the Sponsor, in its capacity as Debenture Issuer, shall:

      (a) pay all reasonable  costs and expenses owing to the Debenture  Trustee
pursuant to Section 6.6 of the Indenture;

      (b) be responsible for and shall pay all debts and obligations (other than
with respect to the  Securities)  and all costs and  expenses of the Trust,  the
offering,  sale and issuance of the Securities  (including fees to the placement
agents in connection  therewith),  the costs and expenses (including  reasonable
counsel fees and expenses) of the Institutional  Trustee and the Administrators,
the costs and  expenses  relating  to the  operation  of the  Trust,  including,
without limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping  services,  expenses  for printing and  engraving  and  computing or
accounting equipment,  Paying Agents, Registrars,  Transfer Agents, duplicating,
travel  and  telephone  and  other  telecommunications  expenses  and  costs and
expenses incurred in connection with the acquisition, financing, and disposition
of Trust assets and the enforcement by the  Institutional  Trustee of the rights
of the Holders (for  purposes of  clarification,  this  Section  3.3(b) does not
contemplate  the payment by the Sponsor of acceptance  or annual  administration
fees owing to the  Trustees  pursuant  to the  services  to be  provided  by the
Trustees  under  this  Declaration  or the fees and  expenses  of the  Trustees'
counsel in connection with the closing of the transactions  contemplated by this
Declaration); and

      (c) pay any and all taxes  (other than  United  States  withholding  taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.

      The Sponsor's  obligations under this Section 3.3 shall be for the benefit
of, and shall be  enforceable  by, any Person to whom such  debts,  obligations,
costs,  expenses and taxes are owed (a "Creditor")  whether or not such Creditor
has  received  notice  hereof.  Any such  Creditor  may  enforce  the  Sponsor's
obligations  under this Section 3.3 directly against the Sponsor and the Sponsor
irrevocably  waives any right or remedy to require that any such  Creditor  take
any action against the Trust or any other Person before  proceeding  against the
Sponsor.  The Sponsor  agrees to execute such  additional  agreements  as may be
necessary or desirable  in order to give full effect to the  provisions  of this
Section 3.3.

      Section  3.4.  Right to Proceed.  The Sponsor  acknowledges  the rights of
Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.

                                   ARTICLE IV

                    INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

      Section 4.1 .Number of Trustees. The number of Trustees shall initially be
two, and;

      (a) at any time before the issuance of any Securities, the Sponsor may, by
written instrument, increase or decrease the number of Trustees; and

      (b) after the  issuance of any  Securities,  the number of Trustees may be
increased or decreased by vote of the Holder of a Majority in liquidation amount
of the  Common  Securities  voting as a class at a meeting  of the Holder of the
Common Securities;  provided, however, that there shall be a Delaware Trustee if
required by Section  4.2; and there shall always be one Trustee who shall be the
Institutional Trustee, and such Trustee may also serve as Delaware Trustee if it
meets the  applicable



                                       20
<PAGE>

requirements,  in which case  Section  2.11 shall  have no  application  to such
entity in its capacity as Institutional Trustee.

      Section 4.2 .Delaware Trustee; Eligibility.

      (a) If required by the  Statutory  Trust Act, one Trustee  (the  "Delaware
Trustee") shall be:

            (i) a natural  person at least 21 years of age who is a resident  of
      the State of Delaware; or

            (ii) if not a natural person, an entity which is organized under the
      laws  of the  United  States  or any  state  thereof  or the  District  of
      Columbia,  has its  principal  place of business in the State of Delaware,
      and otherwise meets the requirements of applicable law, including ss. 3807
      of the Statutory Trust Act.

      (b) The initial Delaware Trustee shall be Wilmington Trust Company.

      Section 4.3 .Institutional Trustee; Eligibility.

      (a) There shall at all times be one Trustee which shall:

            (i) not be an Affiliate of the Sponsor;

            (ii) not offer or provide credit or credit enhancement to the Trust;
      and

            (iii) be a banking  corporation or trust company organized and doing
      business  under  the laws of the  United  States of  America  or any state
      thereof  or the  District  of  Columbia,  authorized  under  such  laws to
      exercise corporate trust powers,  having a combined capital and surplus of
      at  least  50  million  U.S.  dollars  ($50,000,000.00),  and  subject  to
      supervision  or  examination  by Federal,  state,  or District of Columbia
      authority.  If such  corporation  publishes  reports of condition at least
      annually,  pursuant to law or to the  requirements  of the  supervising or
      examining  authority  referred  to above,  then for the  purposes  of this
      Section 4.3(a)(iii),  the combined capital and surplus of such corporation
      shall be deemed to be its combined capital and surplus as set forth in its
      most recent report of condition so published.

      (b) If at any time the Institutional Trustee shall cease to be eligible to
so act under Section 4.3(a), the Institutional  Trustee shall immediately resign
in the manner and with the effect set forth in Section 4.5.

      (c) If the  Institutional  Trustee has or shall  acquire any  "conflicting
interest"  within the meaning of Section  310(b) of the Trust  Indenture  Act of
1939, as amended, the Institutional Trustee shall either eliminate such interest
or resign,  to the extent and in the  manner  provided  by, and  subject to this
Declaration.

      (d) The initial Institutional Trustee shall be Wilmington Trust Company.

      Section 4.4. Administrators. Each Administrator shall be a U.S. Person, 21
years  of age  or  older  and  authorized  to  bind  the  Sponsor.  The  initial
Administrators  shall be Jami L. Bradshaw and Mark K.  Hardwick.  There shall at
all times be at least one  Administrator.  Except where a requirement for action
by  a  specific  number  of  Administrators  is  expressly  set  forth  in  this
Declaration  and  except  with  respect to any action the taking of which is the
subject of a meeting of the Administrators,  any action required or permitted to
be  taken  by  the  Administrators  may  be  taken  by,  and  any  power  of the
Administrators  may be  exercised  by,  or with  the  consent  of,  any one such
Administrator.


                                       21
<PAGE>

      Section  4.5.  Appointment,   Removal  and  Resignation  of  Trustees  and
Administrators.

      (a) No resignation or removal of any Trustee (the "Relevant  Trustee") and
no  appointment  of a successor  Trustee  pursuant to this Article  shall become
effective  until the  acceptance  of  appointment  by the  successor  Trustee in
accordance with the applicable requirements of this Section 4.5.

      (b) Subject to Section 4.5(a),  a Relevant  Trustee may resign at any time
by giving  written  notice  thereof  to the  Holders  of the  Securities  and by
appointing  a  successor   Relevant   Trustee.   Upon  the  resignation  of  the
Institutional  Trustee,  the Institutional  Trustee shall appoint a successor by
requesting  from at least three  Persons  meeting the  eligibility  requirements
their expenses and charges to serve as the successor  Institutional Trustee on a
form provided by the Administrators,  and selecting the Person who agrees to the
lowest  expense and charges  (the  "Successor  Institutional  Trustee").  If the
instrument  of acceptance by the  successor  Relevant  Trustee  required by this
Section 4.5 shall not have been delivered to the Relevant Trustee within 60 days
after the giving of such notice of  resignation or delivery of the instrument of
removal,  the Relevant  Trustee may petition,  at the expense of the Trust,  any
federal,  state or District of Columbia court of competent  jurisdiction for the
appointment of a successor  Relevant  Trustee.  Such court may thereupon,  after
prescribing  such  notice,  if any,  as it may deem  proper,  appoint a Relevant
Trustee. The Institutional  Trustee shall have no liability for the selection of
such successor pursuant to this Section 4.5.

      (c) Unless an Event of Default shall have occurred and be continuing,  any
Trustee  may be  removed at any time by an act of the  Holders of a Majority  in
liquidation amount of the Common Securities. If any Trustee shall be so removed,
the  Holders of the Common  Securities,  by act of the  Holders of a Majority in
liquidation  amount of the Common Securities  delivered to the Relevant Trustee,
shall promptly appoint a successor Relevant Trustee,  and such successor Trustee
shall comply with the applicable  requirements  of this Section 4.5. If an Event
of Default shall have occurred and be continuing,  the Institutional  Trustee or
the Delaware Trustee,  or both of them, may be removed by the act of the Holders
of a Majority in liquidation amount of the Capital Securities,  delivered to the
Relevant Trustee (in its individual capacity and on behalf of the Trust). If any
Trustee shall be so removed,  the Holders of Capital  Securities,  by act of the
Holders of a Majority  in  liquidation  amount of the  Capital  Securities  then
outstanding  delivered  to  the  Relevant  Trustee,  shall  promptly  appoint  a
successor Relevant Trustee or Trustees,  and such successor Trustee shall comply
with the applicable  requirements of this Section 4.5. If no successor  Relevant
Trustee shall have been so appointed by the Holders of a Majority in liquidation
amount of the Capital Securities and accepted appointment in the manner required
by this Section 4.5 within 30 days after  delivery of an  instrument of removal,
the Relevant  Trustee or any Holder who has been a Holder of the  Securities for
at least six months may, on behalf of himself and all others similarly situated,
petition  any  federal,  state  or  District  of  Columbia  court  of  competent
jurisdiction for the appointment of a successor Relevant Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a successor Relevant Trustee or Trustees.

      (d) The  Institutional  Trustee shall give notice of each  resignation and
each  removal of a Trustee and each  appointment  of a successor  Trustee to all
Holders and to the Sponsor.  Each notice shall include the name of the successor
Relevant  Trustee and the  address of its  Corporate  Trust  Office if it is the
Institutional Trustee.

      (e)   Notwithstanding  the  foregoing  or  any  other  provision  of  this
Declaration,  in the event a Delaware Trustee who is a natural person dies or is
adjudged by a court to have become  incompetent  or  incapacitated,  the vacancy
created  by  such  death,  incompetence  or  incapacity  may  be  filled  by the
Institutional  Trustee  following  the  procedures in this Section 4.5 (with the
successor  being a  Person  who  satisfies  the  eligibility  requirement  for a
Delaware  Trustee  set  forth  in this  Declaration)  (the  "Successor  Delaware
Trustee").


                                       22
<PAGE>

      (f) In case of the appointment  hereunder of a successor Relevant Trustee,
the retiring  Relevant Trustee and each successor  Relevant Trustee with respect
to the  Securities  shall execute and deliver an amendment  hereto  wherein each
successor  Relevant  Trustee shall accept such  appointment  and which (a) shall
contain  such  provisions  as shall be  necessary  or  desirable to transfer and
confirm  to, and to vest in,  each  successor  Relevant  Trustee all the rights,
powers,  trusts and duties of the retiring  Relevant Trustee with respect to the
Securities and the Trust and (b) shall add to or change any of the provisions of
this  Declaration  as  shall be  necessary  to  provide  for or  facilitate  the
administration  of the  Trust  by more  than  one  Relevant  Trustee,  it  being
understood  that  nothing  herein or in such  amendment  shall  constitute  such
Relevant  Trustees  co-trustees  and upon the  execution  and  delivery  of such
amendment  the  resignation  or removal of the retiring  Relevant  Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee,  without any further act, deed or conveyance,  shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on  request  of the  Trust or any  successor  Relevant  Trustee,  such  retiring
Relevant  Trustee  shall duly  assign,  transfer  and deliver to such  successor
Relevant Trustee all Trust Property, all proceeds thereof and money held by such
retiring Relevant Trustee hereunder with respect to the Securities and the Trust
subject to the payment of all unpaid  fees,  expenses  and  indemnities  of such
retiring Relevant Trustee.

      (g) No  Institutional  Trustee or Delaware Trustee shall be liable for the
acts or omissions  to act of any  Successor  Institutional  Trustee or Successor
Delaware Trustee, as the case may be.

      (h) The  Holders of the Capital  Securities  will have no right to vote to
appoint,  remove or replace the  Administrators,  which voting rights are vested
exclusively in the Holders of the Common Securities.

      (i)  Any  successor  Delaware  Trustee  shall  file  an  amendment  to the
Certificate  of Trust  with the  Secretary  of  State of the  State of  Delaware
identifying the name and principal place of business of such Delaware Trustee in
the State of Delaware.

      Section 4.6. Vacancies Among Trustees.  If a Trustee ceases to hold office
for any reason and the number of  Trustees  is not  reduced  pursuant to Section
4.1, a vacancy  shall  occur.  A  resolution  certifying  the  existence of such
vacancy  by the  Trustees  or, if there are more than  two,  a  majority  of the
Trustees,  shall be conclusive  evidence of the  existence of such vacancy.  The
vacancy shall be filled with a Trustee appointed in accordance with Section 4.5.

      Section  4.7. Effect of  Vacancies.  The death,  resignation,  retirement,
removal,  bankruptcy,  dissolution,  liquidation,  incompetence or incapacity to
perform the duties of a Trustee  shall not  operate to  dissolve,  terminate  or
annul the Trust or terminate this Declaration.  Whenever a vacancy in the number
of Trustees  shall occur,  until such vacancy is filled by the  appointment of a
Trustee in accordance with Section 4.5, the Institutional Trustee shall have all
the powers  granted to the Trustees and shall  discharge all the duties  imposed
upon the Trustees by this Declaration.

      Section 4.8. Meetings of the Trustees and the Administrators.  Meetings of
the  Administrators  shall  be  held  from  time  to time  upon  the  call of an
Administrator.  Regular meetings of the  Administrators may be held in person in
the United States or by telephone,  at a place (if applicable) and time fixed by
resolution  of the  Administrators.  Notice  of any  in-person  meetings  of the
Trustees with the Administrators or meetings of the Administrators shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 48 hours before such meeting. Notice of
any telephonic  meetings of the Trustees with the  Administrators or meetings of
the Administrators or any committee thereof shall be hand delivered or otherwise
delivered  in writing  (including  by  facsimile,  with a hard copy by overnight
courier) not less than 24 hours before a meeting.  Notices shall contain a brief
statement  of the time,  place and  anticipated  purposes  of the  meeting.  The
presence  (whether in person or by telephone) of a Trustee or an  Administrator,
as the case may be, at a


                                       23
<PAGE>

meeting  shall  constitute a waiver of notice of such  meeting  except where the
Trustee  or an  Administrator,  as the case may be,  attends a  meeting  for the
express  purpose of objecting to the  transaction of any activity on the grounds
that the meeting  has not been  lawfully  called or  convened.  Unless  provided
otherwise in this Declaration, any action of the Trustees or the Administrators,
as the case  may be,  may be taken at a  meeting  by vote of a  majority  of the
Trustees or the  Administrators  present (whether in person or by telephone) and
eligible to vote with respect to such matter, provided that a Quorum is present,
or without a meeting by the  unanimous  written  consent of the  Trustees or the
Administrators.  Meetings of the Trustees and the Administrators  together shall
be held from time to time upon the call of any Trustee or an Administrator.

      Section 4.9. Delegation of Power.

      (a) Any Administrator may, by power of attorney consistent with applicable
law,  delegate  to any other  natural  person  over the age of 21 that is a U.S.
Person his or her power for the purpose of executing any documents  contemplated
in Section 2.6; and

      (b) the  Administrators  shall have power to delegate from time to time to
such of  their  number  the  doing  of such  things  and the  execution  of such
instruments  either in the name of the Trust or the names of the  Administrators
or  otherwise  as the  Administrators  may deem  expedient,  to the extent  such
delegation is not  prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.

      Section 4.10.  Conversion,  Consolidation  or Succession to Business.  Any
Person  into which the  Institutional  Trustee or the  Delaware  Trustee  may be
merged  or  converted  or  with  which  it may be  consolidated,  or any  Person
resulting   from  any  merger,   conversion  or   consolidation   to  which  the
Institutional  Trustee or the Delaware  Trustee shall be a party,  or any Person
succeeding  to all or  substantially  all the  corporate  trust  business of the
Institutional  Trustee or the  Delaware  Trustee  shall be the  successor of the
Institutional  Trustee or the Delaware Trustee  hereunder,  provided such Person
shall be  otherwise  qualified  and eligible  under this Article and,  provided,
further,  that such Person shall file an amendment to the  Certificate  of Trust
with the Secretary of State of the State of Delaware as  contemplated in Section
4.5(i).

                                    ARTICLE V

                                  DISTRIBUTIONS

      Section  5.1.  Distributions.   Holders  shall  receive  Distributions  in
accordance  with the  applicable  terms  of the  relevant  Holder's  Securities.
Distributions  shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their  respective  terms. If and
to the extent  that the  Debenture  Issuer  makes a payment of  Interest  or any
principal on the Debentures held by the Institutional Trustee, the Institutional
Trustee  shall and is  directed,  to the  extent  funds are  available  for that
purpose, to make a distribution (a "Distribution") of such amounts to Holders.

                                   ARTICLE VI

                             ISSUANCE OF SECURITIES

      Section 6.1. General Provisions Regarding Securities.

      (a) The Administrators  shall, on behalf of the Trust, issue one series of
capital  securities  substantially  in the  form  of  Exhibit  A-1  representing
undivided  beneficial  interests in the assets of the Trust having such terms as
are set  forth in  Annex I and one  series  of  common  securities  representing


                                       24
<PAGE>

undivided  beneficial  interests in the assets of the Trust having such terms as
are set forth in Annex I. The Trust shall issue no securities or other interests
in the assets of the Trust  other  than the  Capital  Securities  and the Common
Securities. The Capital Securities rank pari passu to, and payment thereon shall
be made Pro Rata with,  the Common  Securities  except  that,  where an Event of
Default  has  occurred  and is  continuing,  the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption  and  otherwise  are  subordinated  to the  rights to  payment of the
Holders of the Capital Securities as set forth in Annex I.

      (b) The Certificates shall be signed on behalf of the Trust by one or more
Administrators. Such signature shall be the facsimile or manual signature of any
Administrator.  In case any Administrator of the Trust who shall have signed any
of the Securities shall cease to be such  Administrator  before the Certificates
so signed shall be delivered by the Trust, such Certificates nevertheless may be
delivered as though the person who signed such Certificates had not ceased to be
such Administrator,  and any Certificate may be signed on behalf of the Trust by
such persons who, at the actual date of execution of such Security,  shall be an
Administrator  of the Trust,  although at the date of the execution and delivery
of the  Declaration  any such  person was not such an  Administrator.  A Capital
Security  shall not be valid  until  authenticated  by the  facsimile  or manual
signature of an Authorized Officer of the Institutional  Trustee. Such signature
shall be conclusive  evidence that the Capital  Security has been  authenticated
under  this  Declaration.  Upon  written  order  of  the  Trust  signed  by  one
Administrator,   the  Institutional   Trustee  shall  authenticate  the  Capital
Securities  for  original  issue.  The  Institutional  Trustee  may  appoint  an
authenticating  agent  that  is  a  U.S.  Person  acceptable  to  the  Trust  to
authenticate  the  Capital  Securities.   A  Common  Security  need  not  be  so
authenticated.

      (c) The Capital  Securities issued to QIBs shall be, except as provided in
Section 6.4,  Book-Entry  Capital  Securities  issued in the form of one or more
Global  Capital  Securities  registered  in the  name of the  Depositary  or its
nominee and deposited  with the Depositary or a custodian for the Depositary for
credit  by  the  Depositary  to  the  respective   accounts  of  the  Depositary
Participants  thereof (or such other  accounts as they may direct).  The Capital
Securities  issued to a Person other than a QIB shall be issued in the form of a
Definitive Capital Securities Certificate.

      (d) The  consideration  received  by the  Trust  for the  issuance  of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.

      (e) Upon issuance of the Securities as provided in this  Declaration,  the
Securities  so issued  shall be deemed to be  validly  issued,  fully  paid and,
except as provided  in Section  9.1(b)  with  respect to the Common  Securities,
non-assessable.

      (f) Every Person,  by virtue of having become a Holder in accordance  with
the terms of this  Declaration,  shall be deemed to have expressly  assented and
agreed  to the  terms  of,  and  shall be bound  by,  this  Declaration  and the
Guarantee.

      Section 6.2. Paying Agent,  Transfer Agent and Registrar.  The Trust shall
maintain  in  Wilmington,  Delaware,  an  office or  agency  where  the  Capital
Securities  may be  presented  for payment  ("Paying  Agent"),  and an office or
agency  where  Securities  may be  presented  for  registration  of  transfer or
exchange  (the  "Transfer  Agent").  The Trust shall keep or cause to be kept at
such  office or agency a register  for the  purpose of  registering  Securities,
transfers and exchanges of  Securities,  such register to be held by a registrar
(the  "Registrar").  The  Administrators  may  appoint  the  Paying  Agent,  the
Registrar and the Transfer Agent and may appoint one or more  additional  Paying
Agents or one or more  co-Registrars,  or one or more co-Transfer Agents in such
other  locations as it shall  determine.  The term "Paying  Agent"  includes any
additional paying agent, the term "Registrar"  includes any additional registrar
or co-Registrar and the term "Transfer  Agent" includes any additional  transfer
agent.  The  Administrators  may  change  any Paying  Agent,  Transfer  Agent or
Registrar at any time without  prior  notice to any Holder.


                                       25
<PAGE>

The  Administrators  shall  notify  the  Institutional  Trustee  of the name and
address of any Paying  Agent,  Transfer  Agent and Registrar not a party to this
Declaration.  The  Administrators  hereby  initially  appoint the  Institutional
Trustee to act as Paying  Agent,  Transfer  Agent and  Registrar for the Capital
Securities and the Common  Securities.  The Institutional  Trustee or any of its
Affiliates  in the United  States  may act as Paying  Agent,  Transfer  Agent or
Registrar.

      Section 6.3. Form and Dating. The Capital Securities and the Institutional
Trustee's  certificate of  authentication  thereon shall be substantially in the
form of Exhibit A-1, and the Common  Securities  shall be  substantially  in the
form of Exhibit A-2, each of which is hereby  incorporated in and expressly made
a part of this Declaration.  Certificates may be typed, printed, lithographed or
engraved or may be produced in any other manner as is  reasonably  acceptable to
the Administrators,  as conclusively  evidenced by their execution thereof.  The
Securities may have letters, numbers, notations or other marks of identification
or designation and such legends or endorsements  required by law, stock exchange
rule,  agreements to which the Trust is subject if any, or usage  (provided that
any  such  notation,  legend  or  endorsement  is in a  form  acceptable  to the
Sponsor).  The Trust at the  direction  of the  Sponsor  shall  furnish any such
legend not  contained  in Exhibit A-1 to the  Institutional  Trustee in writing.
Each   Capital   Security   shall  be  dated  on  or  before  the  date  of  its
authentication.  The terms and provisions of the Securities set forth in Annex I
and the forms of  Securities  set forth in Exhibits  A-1 and A-2 are part of the
terms  of this  Declaration  and to the  extent  applicable,  the  Institutional
Trustee,  the Delaware Trustee,  the  Administrators  and the Sponsor,  by their
execution and delivery of this  Declaration,  expressly  agree to such terms and
provisions and to be bound thereby.  Capital  Securities  will be issued only in
blocks having a stated  liquidation  amount of not less than $100,000.00 and any
multiple of $1,000.00 in excess thereof.

      The Capital Securities are being offered and sold by the Trust pursuant to
the Placement Agreement in definitive,  registered form without coupons and with
the Restricted Securities Legend.

      Section 6.4. Book-Entry Capital Securities.

      (a) A Global Capital  Security may be exchanged,  in whole or in part, for
Definitive  Capital  Securities  Certificates  registered in the names of Owners
only if such exchange complies with Article VIII and (i) the Depositary  advises
the Administrators and the Institutional  Trustee in writing that the Depositary
is no longer  willing or able to properly  discharge its  responsibilities  with
respect to the Global Capital Security,  and no qualified successor is appointed
by the  Administrators  within ninety (90) days of receipt of such notice,  (ii)
the Depositary  ceases to be a clearing agency registered under the Exchange Act
and the Administrators  fail to appoint a qualified successor within ninety (90)
days of obtaining  knowledge of such event,  (iii) the  Administrators  at their
option  advise the  Institutional  Trustee in writing  that the Trust  elects to
terminate the  book-entry  system through the  Depositary,  or (iv) an Indenture
Event of Default has  occurred and is  continuing.  Upon the  occurrence  of any
event  specified in clause (i), (ii),  (iii) or (iv) above,  the  Administrators
shall notify the  Depositary and instruct the Depositary to notify all Owners of
Book-Entry Capital Securities and the Institutional Trustee of the occurrence of
such event and of the availability of Definitive Capital Securities Certificates
to Owners of the Capital  Securities  requesting the same.  Upon the issuance of
Definitive   Capital  Securities   Certificates,   the  Administrators  and  the
Institutional  Trustee  shall  recognize the Holders of the  Definitive  Capital
Securities  Certificates as Holders.  Notwithstanding the foregoing, if an Owner
of a  beneficial  interest in a Global  Capital  Security  wishes at any time to
transfer an interest in such Global  Capital  Security to a Person  other than a
QIB,  such  transfer  shall be effected,  subject to the  Applicable  Depositary
Procedures,  in accordance  with the  provisions of this Section 6.4 and Article
VIII,  and  the  transferee  shall  receive  a  Definitive   Capital  Securities
Certificate in connection with such transfer.  A holder of a Definitive  Capital
Securities  Certificate  that is a QIB may upon request,  and in accordance with
the  provisions of this Section 6.4 and


                                       26
<PAGE>

Article VIII,  exchange such  Definitive  Capital  Securities  Certificate for a
beneficial interest in a Global Capital Security.

      (b) If any Global  Capital  Security  is to be  exchanged  for  Definitive
Capital  Securities  Certificates  or  canceled  in part,  or if any  Definitive
Capital  Securities  Certificate  is to be exchanged in whole or in part for any
Global Capital  Security,  then either (i) such Global Capital Security shall be
so surrendered  for exchange or cancellation as provided in this Section 6.4 and
Article VIII or (ii) the aggregate liquidation amount represented by such Global
Capital  Security  shall be reduced,  subject to Section 6.3, or increased by an
amount equal to the liquidation amount represented by that portion of the Global
Capital  Security to be so exchanged or  canceled,  or equal to the  liquidation
amount represented by such Definitive  Capital Securities  Certificates to be so
exchanged for any Global  Capital  Security,  as the case may be, by means of an
appropriate  adjustment  made on the  records of the  Registrar,  whereupon  the
Institutional  Trustee, in accordance with the Applicable Depositary Procedures,
shall  instruct  the  Depositary  or its  authorized  representative  to  make a
corresponding  adjustment  to  its  records.  Upon  any  such  surrender  to the
Administrators  or the Registrar of any Global Capital Security or Securities by
the Depositary, accompanied by registration instructions, the Administrators, or
any one of them, shall execute the Definitive Capital Securities Certificates in
accordance  with the  instructions  of the  Depositary.  None of the  Registrar,
Administrators,  or the  Institutional  Trustee shall be liable for any delay in
delivery of such  instructions and may conclusively  rely on, and shall be fully
protected in relying on, such instructions.

      (c) Every Definitive Capital Securities Certificate executed and delivered
upon  registration  or transfer  of, or in exchange  for or in lieu of, a Global
Capital  Security or any portion  thereof shall be executed and delivered in the
form of, and shall be, a Global Capital Security, unless such Definitive Capital
Securities  Certificate  is  registered  in the name of a Person  other than the
Depositary for such Global Capital Security or a nominee thereof.

      (d) The Depositary or its nominee, as registered owner of a Global Capital
Security,  shall be the Holder of such Global Capital  Security for all purposes
under this Declaration and the Global Capital Security,  and Owners with respect
to a  Global  Capital  Security  shall  hold  such  interests  pursuant  to  the
Applicable  Depositary  Procedures.  The Registrar,  the  Administrators and the
Institutional  Trustee  shall be  entitled to deal with the  Depositary  for all
purposes  of  this  Declaration   relating  to  the  Global  Capital  Securities
(including the payment of the  liquidation  amount of and  Distributions  on the
Book-Entry Capital Securities represented thereby and the giving of instructions
or directions by Owners of Book-Entry Capital Securities represented thereby and
the giving of notices) as the sole Holder of the Book-Entry  Capital  Securities
represented thereby and shall have no obligations to the Owners thereof. None of
the Administrators,  the Institutional  Trustee nor the Registrar shall have any
liability in respect of any transfers effected by the Depositary.

      (e) The rights of the Owners of the Book-Entry Capital Securities shall be
exercised only through the Depositary and shall be limited to those  established
by law, the Applicable  Depositary Procedures and agreements between such Owners
and the Depositary and/or the Depositary Participants; provided, however, solely
for the purpose of  determining  whether the Holders of the requisite  amount of
Capital Securities have voted on any matter provided for in this Declaration, to
the extent that Capital Securities are represented by a Global Capital Security,
the Administrators  and the Institutional  Trustee may conclusively rely on, and
shall be fully  protected  in relying on, any written  instrument  (including  a
proxy) delivered to the  Institutional  Trustee by the Depositary  setting forth
the  Owners'  votes or  assigning  the right to vote on any  matter to any other
Persons  either in whole or in part. To the extent that Capital  Securities  are
represented  by a Global  Capital  Security,  the initial  Depositary  will make
book-entry transfers among the Depositary  Participants and receive and transmit
payments on the Capital  Securities  that are  represented  by a Global  Capital
Security  to  such  Depositary  Participants,  and  none  of


                                       27
<PAGE>

the Sponsor,  the  Administrators  or the  Institutional  Trustee shall have any
responsibility or obligation with respect thereto.

      (f) To the extent that a notice or other  communication  to the Holders is
required  under  this  Declaration,  for  so  long  as  Capital  Securities  are
represented  by  a  Global  Capital   Security,   the   Administrator   and  the
Institutional  Trustee  shall give all such  notices and  communications  to the
Depositary, and shall have no obligations to the Owners.

      Section 6.5. Mutilated, Destroyed, Lost or Stolen Certificates.

      If:

      (a) any mutilated Certificates should be surrendered to the Registrar,  or
if the Registrar shall receive  evidence to its satisfaction of the destruction,
loss or theft of any Certificate; and

      (b) there shall be delivered to the Registrar,  the Administrators and the
Institutional  Trustee such  security or indemnity as may be required by them to
keep each of them harmless;

then, in the absence of notice that such Certificate shall have been acquired by
a protected  purchaser,  an  Administrator  on behalf of the Trust shall execute
(and in the case of a Capital Security  Certificate,  the Institutional  Trustee
shall  authenticate)  and  deliver,  in  exchange  for or in  lieu  of any  such
mutilated,  destroyed,  lost or stolen  Certificate,  a new  Certificate of like
denomination.  In connection with the issuance of any new Certificate under this
Section 6.4, the  Registrar or the  Administrators  may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection  therewith.  Any  duplicate  Certificate  issued  pursuant to this
Section shall  constitute  conclusive  evidence of an ownership  interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.

      Section 6.6. Temporary  Securities.  Until definitive Securities are ready
for  delivery,  the  Administrators  may prepare and, in the case of the Capital
Securities, the Institutional Trustee shall authenticate,  temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may  have  variations  that  the  Administrators  consider  appropriate  for
temporary  Securities.  Without  unreasonable  delay, the  Administrators  shall
prepare and, in the case of the Capital  Securities,  the Institutional  Trustee
shall authenticate, definitive Securities in exchange for temporary Securities.

      Section  6.7.  Cancellation.  The  Administrators  at any time may deliver
Securities to the Institutional  Trustee for  cancellation.  The Registrar shall
forward  to the  Institutional  Trustee  any  Securities  surrendered  to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly  cancel  all  Securities  surrendered  for  registration  of  transfer,
payment,  replacement  or  cancellation  and  shall  dispose  of  such  canceled
Securities as the  Administrators  direct.  The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.

      Section 6.8.  CUSIP  Numbers.  The Trust in issuing the Securities may use
"CUSIP"  numbers  (if then  generally  in use),  and,  if so, the  Institutional
Trustee shall use CUSIP  numbers in notice of  redemption  as a  convenience  to
Holders;   provided,   however,   that  any  such   notice  may  state  that  no
representation  is made as to the  correctness of such numbers either as printed
on the  Securities  or as  contained  in  any  notice  of  redemption  and  that
identification  numbers printed on the Securities and any such redemption  shall
not be affected by any defect in or  omission of such  numbers.  The Trust shall
promptly notify the Institutional  Trustee in writing of any change in the CUSIP
numbers.


                                       28
<PAGE>

      Section 6.9. Rights of Holders; Waivers of Past Defaults.

      (a) The legal  title to the Trust  Property is vested  exclusively  in the
Institutional  Trustee (in its capacity as such) in accordance with Section 2.5,
and the  Holders  shall  not have any  right or  title  therein  other  than the
undivided  beneficial  interest  in the assets of the Trust  conferred  by their
Securities and they shall have no right to call for any partition or division of
property,  profits  or rights  of the  Trust  except  as  described  below.  The
Securities  shall be personal  property giving only the rights  specifically set
forth therein and in this  Declaration.  The Securities shall have no preemptive
or similar rights.

      (b) For so long as any Capital Securities remain  outstanding,  if upon an
Acceleration Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding  Debentures fail to declare
the principal of all of the  Debentures to be immediately  due and payable,  the
Holders of a Majority  in  liquidation  amount of the  Capital  Securities  then
outstanding shall have the right to make such declaration by a notice in writing
to the Institutional Trustee, the Sponsor and the Debenture Trustee.

      At any time  after a  declaration  of  acceleration  with  respect  to the
Debentures  has been made and  before a judgment  or decree  for  payment of the
money  due has  been  obtained  by the  Debenture  Trustee  as  provided  in the
Indenture, if the Institutional Trustee, subject to the provisions hereof, fails
to annul any such declaration and waive such default,  the Holders of a Majority
in  liquidation  amount of the  Capital  Securities,  by  written  notice to the
Institutional  Trustee,  the Sponsor and the Debenture Trustee,  may rescind and
annul such declaration and its consequences if:

            (i) the  Debenture  Issuer has paid or deposited  with the Debenture
      Trustee a sum sufficient to pay

                  (A)  all  overdue  installments  of  interest  on  all  of the
            Debentures,

                  (B) any accrued Additional Interest on all of the Debentures,

                  (C) the principal of (and premium,  if any, on) any Debentures
            that  have  become  due  otherwise  than  by  such   declaration  of
            acceleration  and interest and  Additional  Interest  thereon at the
            rate borne by the Debentures, and

                  (D) all sums paid or advanced by the  Debenture  Trustee under
            the   Indenture   and   the   reasonable   compensation,   expenses,
            disbursements   and  advances  of  the  Debenture  Trustee  and  the
            Institutional Trustee, their agents and counsel; and

            (ii) all Events of Default  with  respect to the  Debentures,  other
      than the  non-payment of the principal of the  Debentures  that has become
      due solely by such acceleration,  have been cured or waived as provided in
      Section 5.7 of the Indenture.

      The  Holders of at least a Majority in  liquidation  amount of the Capital
Securities  may, on behalf of the Holders of all the Capital  Securities,  waive
any past default under the Indenture or any Indenture Event of Default, except a
default or Indenture Event of Default in the payment of principal or interest on
the Debentures (unless such default or Indenture Event of Default has been cured
and a sum sufficient to pay all matured  installments  of interest and principal
due  otherwise  than by  acceleration  has been  deposited  with  the  Debenture
Trustee) or a default  under the  Indenture or an Indenture  Event of Default in
respect of a covenant or provision  that under the Indenture  cannot be modified
or amended without the consent of the holder of each outstanding  Debenture.  No
such  rescission  shall  affect  any  subsequent  default  or  impair  any right
consequent thereon.


                                       29
<PAGE>

      Upon receipt by the Institutional Trustee of written notice declaring such
an acceleration,  or rescission and annulment thereof, by Holders of any part of
the Capital  Securities,  a record  date shall be  established  for  determining
Holders of outstanding Capital Securities entitled to join in such notice, which
record  date  shall be at the  close of  business  on the day the  Institutional
Trustee  receives  such notice.  The Holders on such record date,  or their duly
designated  proxies,  and only such  Persons,  shall be entitled to join in such
notice,  whether or not such  Holders  remain  Holders  after such record  date;
provided,  that unless such  declaration  of  acceleration,  or  rescission  and
annulment,  as the case may be,  shall have  become  effective  by virtue of the
requisite  percentage  having  joined in such notice prior to the day that is 90
days after such record date,  such notice of  declaration  of  acceleration,  or
rescission and annulment,  as the case may be, shall  automatically  and without
further  action by any Holder be canceled and of no further  effect.  Nothing in
this  paragraph  shall  prevent a Holder,  or a proxy of a Holder,  from giving,
after  expiration of such 90-day period,  a new written notice of declaration of
acceleration,  or rescission and annulment thereof,  as the case may be, that is
identical to a written notice that has been canceled  pursuant to the proviso to
the preceding  sentence,  in which event a new record date shall be  established
pursuant to the provisions of this Section 6.8.

            (c) Except as otherwise  provided in paragraphs  (a) and (b) of this
      Section 6.8, the Holders of at least a Majority in  liquidation  amount of
      the  Capital  Securities  may, on behalf of the Holders of all the Capital
      Securities,   waive  any  past   default  or  Event  of  Default  and  its
      consequences. Upon such waiver, any such default or Event of Default shall
      cease to exist,  and any  default  or Event of Default  arising  therefrom
      shall be deemed to have been cured, for every purpose of this Declaration,
      but no such waiver  shall  extend to any  subsequent  or other  default or
      Event of Default or impair any right consequent thereon.

                                  ARTICLE VII

                      DISSOLUTION AND TERMINATION OF TRUST

      Section 7.1 .Dissolution and Termination of Trust.

      (a) The Trust shall dissolve on the first to occur of:

            (i) unless earlier dissolved,  on September 15, 2042, the expiration
      of the term of the Trust;

            (ii) upon a Bankruptcy Event with respect to the Sponsor,  the Trust
      or the Debenture Issuer;

            (iii)  upon  the  filing  of a  certificate  of  dissolution  or its
      equivalent  with respect to the Sponsor  (other than in connection  with a
      merger,  consolidation  or  similar  transaction  not  prohibited  by  the
      Indenture,  this Declaration or the Guarantee, as the case may be) or upon
      the revocation of the charter of the Sponsor and the expiration of 90 days
      after the date of revocation without a reinstatement thereof;

            (iv) upon the  distribution  of the Debentures to the Holders of the
      Securities,  upon  exercise  of  the  right  of the  Holder  of all of the
      outstanding Common Securities to dissolve the Trust as provided in Annex I
      hereto;

            (v) upon the entry of a decree of judicial dissolution of the Holder
      of the Common Securities, the Sponsor, the Trust or the Debenture Issuer;


                                       30
<PAGE>
            (vi)  when  all  of  the  Securities  shall  have  been  called  for
      redemption  and the amounts  necessary for  redemption  thereof shall have
      been paid to the Holders in accordance  with the terms of the  Securities;
      or

            (vii) before the issuance of any Securities, with the consent of all
      of the Trustees and the Sponsor.

      (b) As soon as is practicable after the occurrence of an event referred to
in Section  7.1(a),  and after  satisfaction  of liabilities to creditors of the
Trust as required by applicable  law,  including of the Statutory Trust Act, and
subject  to the  terms  set forth in Annex I, the  Institutional  Trustee  shall
terminate the Trust by filing a certificate of  cancellation  with the Secretary
of State of the State of Delaware.

      (c) The  provisions  of  Section  2.9 and  Article  IX shall  survive  the
termination of the Trust.

                                  ARTICLE VIII

                              TRANSFER OF INTERESTS

      Section 8.1. General.

      (a) Subject to Section 8.1(c),  where Capital  Securities are presented to
the  Registrar  or a  co-registrar  with a request to  register a transfer or to
exchange them for an equal number of Capital Securities represented by different
certificates,  the Registrar shall register the transfer or make the exchange if
its  requirements  for such  transactions  are met. To permit  registrations  of
transfer  and  exchanges,  the Trust shall issue and the  Institutional  Trustee
shall authenticate Capital Securities at the Registrar's request.

      (b) Upon issuance of the Common Securities,  the Sponsor shall acquire and
retain  beneficial and record ownership of the Common Securities and for so long
as the Securities  remain  outstanding,  and to the fullest extent  permitted by
applicable  law,  the  Sponsor  shall  maintain  100%  ownership  of the  Common
Securities;  provided,  however, that any permitted successor of the Sponsor, in
its capacity as Debenture Issuer,  under the Indenture that is a U.S. Person may
succeed to the Sponsor's ownership of the Common Securities.

      (c) Capital  Securities may only be  transferred,  in whole or in part, in
accordance  with the terms and conditions set forth in this  Declaration  and in
the terms of the Securities.  To the fullest extent permitted by applicable law,
any transfer or purported  transfer of any Security not made in accordance  with
this  Declaration  shall be null and void and will be  deemed  to be of no legal
effect  whatsoever and any such transferee  shall be deemed not to be the holder
of such Capital  Securities  for any purpose,  including  but not limited to the
receipt of Distributions on such Capital  Securities,  and such transferee shall
be deemed to have no interest whatsoever in such Capital Securities.

      (d) The Registrar shall provide for the  registration of Securities and of
transfers of  Securities,  which will be effected  without  charge but only upon
payment (with such indemnity as the Registrar may require) in respect of any tax
or other  governmental  charges  that may be imposed  in  relation  to it.  Upon
surrender for  registration of transfer of any  Securities,  the Registrar shall
cause one or more new  Securities  of the same tenor to be issued in the name of
the  designated  transferee  or  transferees.  Every  Security  surrendered  for
registration  of  transfer  shall be  accompanied  by a  written  instrument  of
transfer in form  satisfactory  to the Registrar  duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each Security surrendered for
registration of transfer shall be canceled by the Institutional Trustee pursuant
to Section 6.7. A transferee  of a Security  shall be entitled to the rights and


                                       31
<PAGE>

subject  to the  obligations  of a Holder  hereunder  upon the  receipt  by such
transferee of a Security. By acceptance of a Security,  each transferee shall be
deemed to have agreed to be bound by this Declaration.

      (e) The Trust shall not be required  (i) to issue,  register  the transfer
of, or  exchange  any  Securities  during a period  beginning  at the opening of
business  fifteen  days  before  the  day of any  selection  of  Securities  for
redemption and ending at the close of business on the earliest date on which the
relevant notice of redemption is deemed to have been given to all Holders of the
Securities  to be redeemed,  or (ii) to register the transfer or exchange of any
Security so selected for  redemption in whole or in part,  except the unredeemed
portion of any Security being redeemed in part.

      Section 8.2. Transfer Procedures and Restrictions.

      (a) The Capital  Securities shall bear the Restricted  Securities  Legend,
which  shall  not be  removed  unless  there  is  delivered  to the  Trust  such
satisfactory  evidence,  which may include an opinion of counsel satisfactory to
the  Institutional  Trustee,  as may be reasonably  required by the Trust,  that
neither  the legend nor the  restrictions  on  transfer  set forth  therein  are
required to ensure that  transfers  thereof  comply with the  provisions  of the
Securities Act. Upon provision of such satisfactory  evidence, the Institutional
Trustee,  at the written direction of the Trust,  shall authenticate and deliver
Capital Securities that do not bear the legend.

      (b) Except as permitted by Section  8.2(a),  each Capital  Security  shall
bear  a  legend  (the  "Restricted  Securities  Legend")  in  substantially  the
following  form and a  Capital  Security  shall  not be  transferred  except  in
compliance with such legend,  unless otherwise  determined by the Sponsor,  upon
the advice of counsel expert in securities  law, in accordance  with  applicable
law:

            [If the Capital  Security  is to be Global  Capital  Security-  THIS
      CAPITAL   SECURITY  IS  A  GLOBAL  SECURITY  WITHIN  THE  MEANING  OF  THE
      DECLARATION  HEREINAFTER  REFERRED TO AND IS REGISTERED IN THE NAME OF THE
      DEPOSITORY  TRUST  COMPANY  ("DTC")  OR A  NOMINEE  OF DTC.  THIS  CAPITAL
      SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES  REGISTERED IN THE NAME OF
      A PERSON OTHER THAN DTC OR ITS NOMINEE  ONLY IN THE LIMITED  CIRCUMSTANCES
      DESCRIBED IN THE  DECLARATION,  AND NO TRANSFER OF THIS  CAPITAL  SECURITY
      (OTHER  THAN A TRANSFER  OF THIS  CAPITAL  SECURITY AS A WHOLE BY DTC TO A
      NOMINEE OF DTC OR BY A NOMINEE  OF DTC TO DTC OR  ANOTHER  NOMINEE OF DTC)
      MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

            UNLESS  THIS  CAPITAL   SECURITY  IS  PRESENTED  BY  AN   AUTHORIZED
      REPRESENTATIVE OF DTC TO FIRST MERCHANTS CAPITAL TRUST II OR ITS AGENT FOR
      REGISTRATION OF TRANSFER,  EXCHANGE OR PAYMENT,  AND ANY CAPITAL  SECURITY
      ISSUED IS  REGISTERED  IN THE NAME OF CEDE & CO. OR IN SUCH  OTHER NAME AS
      REQUESTED BY AN AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT HEREON
      IS MADE TO  CEDE & CO.  OR TO SUCH  OTHER  ENTITY  AS IS  REQUESTED  BY AN
      AUTHORIZED  REPRESENTATIVE  OF DTC),  ANY  TRANSFER,  PLEDGE  OR OTHER USE
      HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL  INASMUCH AS
      THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

            THIS SECURITY HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES ACT OF
      1933, AS AMENDED (THE "SECURITIES  ACT"), ANY


                                       32
<PAGE>

      STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS
      SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,  SOLD,
      ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
      ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
      NOT SUBJECT TO, THE  REGISTRATION  REQUIREMENTS  OF THE SECURITIES ACT AND
      ANY APPLICABLE  STATE  SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS
      ACCEPTANCE  HEREOF  AGREES  TO  OFFER,  SELL OR  OTHERWISE  TRANSFER  THIS
      SECURITY  ONLY  (A) TO  THE  SPONSOR  OR  THE  TRUST,  (B)  PURSUANT  TO A
      REGISTRATION   STATEMENT  THAT  HAS  BEEN  DECLARED  EFFECTIVE  UNDER  THE
      SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER  REASONABLY  BELIEVES IS A
      QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
      RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
      144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE
      TRANSACTION  IN ACCORDANCE  WITH RULE 903 OR RULE 904 (AS  APPLICABLE)  OF
      REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
      INVESTOR"  WITHIN THE  MEANING OF  SUBPARAGRAPH  (A) OF RULE 501 UNDER THE
      SECURITIES  ACT  THAT  IS  ACQUIRING  THIS  CAPITAL  SECURITY  FOR ITS OWN
      ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL  ACCREDITED INVESTOR,
      FOR  INVESTMENT  PURPOSES  AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
      CONNECTION  WITH, ANY  DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
      (F)  PURSUANT  TO ANY  OTHER  AVAILABLE  EXEMPTION  FROM THE  REGISTRATION
      REQUIREMENTS  OF THE  SECURITIES  ACT,  SUBJECT TO THE  SPONSOR'S  AND THE
      TRUST'S  RIGHT  PRIOR TO ANY SUCH  OFFER,  SALE OR TRANSFER TO REQUIRE THE
      DELIVERY OF AN OPINION OF COUNSEL,  CERTIFICATION AND/OR OTHER INFORMATION
      SATISFACTORY  TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST,
      A COPY OF WHICH MAY BE  OBTAINED  FROM THE  SPONSOR OR THE TRUST.  HEDGING
      TRANSACTIONS  INVOLVING  THIS  SECURITY  MAY NOT BE  CONDUCTED  UNLESS  IN
      COMPLIANCE WITH THE SECURITIES ACT.

            THE HOLDER OF THIS  SECURITY BY ITS  ACCEPTANCE  HEREOF ALSO AGREES,
      REPRESENTS  AND WARRANTS  THAT IT IS NOT AN EMPLOYEE  BENEFIT,  INDIVIDUAL
      RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT  SUBJECT TO TITLE I OF THE
      EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"),  OR
      SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")
      (EACH A  "PLAN"),  OR AN ENTITY  WHOSE  UNDERLYING  ASSETS  INCLUDE  "PLAN
      ASSETS" BY REASON OF ANY PLAN'S  INVESTMENT  IN THE ENTITY,  AND NO PERSON
      INVESTING  "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR
      ANY  INTEREST  THEREIN,  UNLESS SUCH  PURCHASER  OR HOLDER IS ELIGIBLE FOR
      EXEMPTIVE  RELIEF  AVAILABLE  UNDER U.S.  DEPARTMENT  OF LABOR  PROHIBITED
      TRANSACTION CLASS EXEMPTION 96-23,  95-60, 91-38, 90-1 OR 84-14 OR ANOTHER
      APPLICABLE  EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS  SECURITY IS NOT
      PROHIBITED  BY  SECTION  406 OF ERISA  OR  SECTION  4975 OF THE CODE  WITH
      RESPECT  TO SUCH  PURCHASE  OR  HOLDING.  ANY  PURCHASER  OR HOLDER OF THE
      SECURITIES OR ANY INTEREST  THEREIN WILL BE DEEMED


                                       33
<PAGE>

      TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT
      IS NOT AN EMPLOYEE  BENEFIT  PLAN  WITHIN THE  MEANING OF SECTION  3(3) OF
      ERISA,  OR A PLAN TO  WHICH  SECTION  4975 OF THE  CODE IS  APPLICABLE,  A
      TRUSTEE OR OTHER  PERSON  ACTING ON BEHALF OF AN EMPLOYEE  BENEFIT PLAN OR
      PLAN,  OR ANY  OTHER  PERSON OR ENTITY  USING THE  ASSETS OF ANY  EMPLOYEE
      BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE,  OR (ii) SUCH PURCHASE WILL
      NOT  RESULT IN A  PROHIBITED  TRANSACTION  UNDER  SECTION  406 OF ERISA OR
      SECTION  4975 OF THE CODE FOR WHICH THERE IS NO  APPLICABLE  STATUTORY  OR
      ADMINISTRATIVE EXEMPTION.

            THIS SECURITY WILL BE ISSUED AND MAY BE  TRANSFERRED  ONLY IN BLOCKS
      HAVING A LIQUIDATION  AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES)
      AND MULTIPLES OF $1,000.00 IN EXCESS  THEREOF.  ANY ATTEMPTED  TRANSFER OF
      SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00
      SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

            THE HOLDER OF THIS  SECURITY  AGREES  THAT IT WILL  COMPLY  WITH THE
      FOREGOING RESTRICTIONS.

      (c) To permit  registrations  of transfers and exchanges,  the Trust shall
execute and the Institutional  Trustee shall authenticate  Capital Securities at
the Registrar's request.

      (d)  Registrations  of  transfers or  exchanges  will be effected  without
charge,  but only upon  payment  (with such  indemnity  as the  Registrar or the
Sponsor may require) in respect of any tax or other governmental charge that may
be imposed in relation to it.

      (e) All Capital  Securities  issued upon any  registration  of transfer or
exchange  pursuant  to the terms of this  Declaration  shall  evidence  the same
security and shall be entitled to the same benefits  under this  Declaration  as
the  Capital  Securities  surrendered  upon such  registration  of  transfer  or
exchange.

      Section 8.3 .Deemed Security Holders.  The Trust, the Administrators,  the
Trustees,  the Paying Agent,  the Transfer  Agent or the Registrar may treat the
Person  in whose  name any  Certificate  shall be  registered  on the  books and
records  of  the  Trust  as the  sole  holder  of  such  Certificate  and of the
Securities   represented   by  such   Certificate   for  purposes  of  receiving
Distributions and for all other purposes whatsoever and, accordingly,  shall not
be bound to  recognize  any  equitable  or other  claim to or  interest  in such
Certificate or in the Securities  represented by such Certificate on the part of
any Person,  whether or not the Trust,  the  Administrators,  the Trustees,  the
Paying Agent,  the Transfer  Agent or the  Registrar  shall have actual or other
notice thereof.

                                   ARTICLE IX

                           LIMITATION OF LIABILITY OF
             HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS

      Section 9.1. Liability.

      (a) Except as expressly set forth in this  Declaration,  the Guarantee and
the terms of the Securities, the Sponsor shall not be:


                                       34
<PAGE>

            (i)  personally  liable for the return of any portion of the capital
      contributions  (or any return  thereon) of the  Holders of the  Securities
      which shall be made solely from assets of the Trust; or

            (ii) required to pay to the Trust or to any Holder of the Securities
      any deficit upon dissolution of the Trust or otherwise.

      (b) The  Holder of the  Common  Securities  shall be liable for all of the
debts and  obligations of the Trust (other than with respect to the  Securities)
to the extent not satisfied out of the Trust's assets.

      (c)  Pursuant  to the  Statutory  Trust Act,  the  Holders of the  Capital
Securities  shall be  entitled  to the same  limitation  of  personal  liability
extended to stockholders of private  corporations for profit organized under the
General Corporation Law of the State of Delaware.

      Section 9.2. Exculpation.

      (a) No Indemnified  Person shall be liable,  responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss,  damage or
claim  incurred  by reason of any act or omission  performed  or omitted by such
Indemnified  Person in good  faith on  behalf of the Trust and in a manner  such
Indemnified  Person reasonably  believed to be within the scope of the authority
conferred on such Indemnified  Person by this Declaration or by law, except that
an  Indemnified  Person  shall be  liable  for any such  loss,  damage  or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.

      (b) An  Indemnified  Person  shall be fully  protected  in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence  and, if selected by such  Indemnified  Person,  has been selected by
such  Indemnified  Person  with  reasonable  care by or on behalf of the  Trust,
including  information,  opinions,  reports  or  statements  as to the value and
amount of the assets, liabilities, profits, losses, or any other facts pertinent
to the  existence  and amount of assets from which  Distributions  to Holders of
Securities might properly be paid.

      Section 9.3. Fiduciary Duty.

      (a) To the extent that,  at law or in equity,  an  Indemnified  Person has
duties  (including  fiduciary  duties) and liabilities  relating  thereto to the
Trust or to any other Covered  Person,  an Indemnified  Person acting under this
Declaration  shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified  Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and  liabilities of the  Indemnified
Person.

      (b) Whenever in this  Declaration  an  Indemnified  Person is permitted or
required to make a decision:

            (i) in its "discretion" or under a grant of similar  authority,  the
      Indemnified  Person  shall be  entitled  to consider  such  interests  and
      factors as it desires, including its own interests, and shall have no duty
      or  obligation  to give any  consideration  to any  interest of or factors
      affecting the Trust or any other Person; or


                                       35
<PAGE>

            (ii) in its "good  faith" or under  another  express  standard,  the
      Indemnified  Person shall act under such express standard and shall not be
      subject to any other or different  standard imposed by this Declaration or
      by applicable law.

      Section 9.4. Indemnification.

      (a) The Sponsor shall indemnify,  to the full extent permitted by law, any
Indemnified  Person who was or is a party or is threatened to be made a party to
any threatened,  pending or completed action, suit or proceeding, whether civil,
criminal,  administrative  or  investigative  (other than an action by or in the
right of the Trust)  arising  out of or in  connection  with the  acceptance  or
administration  of this  Declaration  by reason of the fact that he is or was an
Indemnified Person against expenses  (including  reasonable  attorneys' fees and
expenses),  judgments,  fines  and  amounts  paid  in  settlement  actually  and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he  reasonably  believed  to be in or not
opposed to the best  interests of the Trust,  and,  with respect to any criminal
action or  proceeding,  had no  reasonable  cause to  believe  his  conduct  was
unlawful. The termination of any action, suit or proceeding by judgment,  order,
settlement,  conviction,  or upon a plea of nolo  contendere or its  equivalent,
shall not, of itself,  create a presumption that the Indemnified  Person did not
act in good faith and in a manner which he  reasonably  believed to be in or not
opposed to the best  interests of the Trust,  and,  with respect to any criminal
action or  proceeding,  had  reasonable  cause to believe  that his  conduct was
unlawful.

      (b) The Sponsor shall indemnify,  to the full extent permitted by law, any
Indemnified  Person who was or is a party or is threatened to be made a party to
any  threatened,  pending or completed  action or suit by or in the right of the
Trust to procure a judgment in its favor  arising out of or in  connection  with
the acceptance or  administration of this Declaration by reason of the fact that
he is or  was an  Indemnified  Person  against  expenses  (including  reasonable
attorneys'  fees  and  expenses)  actually  and  reasonably  incurred  by him in
connection  with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust;  provided,  however,  that no such  indemnification
shall be made in  respect  of any  claim,  issue  or  matter  as to  which  such
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the court in which such action or suit was brought shall
determine upon  application  that,  despite the adjudication of liability but in
view of all the  circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.

      (c) To the extent that an  Indemnified  Person shall be  successful on the
merits or otherwise  (including  dismissal of an action without prejudice or the
settlement  of an action  without  admission  of  liability)  in  defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this Section
9.4,  or in  defense  of any  claim,  issue  or  matter  therein,  he  shall  be
indemnified,  to the full extent permitted by law,  against expenses  (including
attorneys'  fees  and  expenses)  actually  and  reasonably  incurred  by him in
connection therewith.

      (d) Any  indemnification of an Administrator  under paragraphs (a) and (b)
of this  Section  9.4 (unless  ordered by a court)  shall be made by the Sponsor
only  as   authorized   in  the  specific   case  upon  a   determination   that
indemnification of the Indemnified Person is proper in the circumstances because
he has met the  applicable  standard of conduct set forth in paragraphs  (a) and
(b). Such  determination  shall be made (i) by the  Administrators by a majority
vote of a Quorum consisting of such  Administrators who were not parties to such
action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if
obtainable,  if  a  Quorum  of  disinterested   Administrators  so  directs,  by
independent legal counsel in a written opinion,  or (iii) by the Common Security
Holder of the Trust.

      (e) To the fullest extent permitted by law, expenses (including reasonable
attorneys' fees and expenses)  incurred by an Indemnified  Person in defending a
civil,  criminal,  administrative  or


                                       36
<PAGE>

investigative  action,  suit or proceeding referred to in paragraphs (a) and (b)
of this  Section  9.4  shall be paid by the  Sponsor  in  advance  of the  final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on  behalf  of such  Indemnified  Person  to repay  such  amount  if it shall
ultimately  be  determined  that he is not  entitled  to be  indemnified  by the
Sponsor as authorized in this Section 9.4.  Notwithstanding  the  foregoing,  no
advance  shall be made by the  Sponsor  if a  determination  is  reasonably  and
promptly  made (i) by the  Administrators  by a  majority  vote of a  Quorum  of
disinterested Administrators,  (ii) if such a Quorum is not obtainable, or, even
if  obtainable,  if a quorum of  disinterested  Administrators  so  directs,  by
independent  legal counsel in a written  opinion or (iii) by the Common Security
Holder of the Trust,  that,  based upon the facts  known to the  Administrators,
counsel or the Common  Security Holder at the time such  determination  is made,
such Indemnified  Person acted in bad faith or in a manner that such Indemnified
Person  did not  believe to be in the best  interests  of the  Trust,  or,  with
respect to any criminal proceeding, that such Indemnified Person believed or had
reasonable  cause to believe  his conduct  was  unlawful.  In no event shall any
advance be made in instances where the Administrators, independent legal counsel
or the Common Security Holder reasonably  determine that such Indemnified Person
deliberately  breached  his duty to the Trust or its Common or Capital  Security
Holders.

      (f) The Trustees, at the sole cost and expense of the Sponsor,  retain the
right to representation by counsel of their own choosing in any action,  suit or
any other proceeding for which they are indemnified under paragraphs (a) and (b)
of this Section 9.4, without affecting their right to indemnification  hereunder
or waiving any rights afforded to it under this Declaration or applicable law.

      (g) The  indemnification  and  advancement  of  expenses  provided  by, or
granted  pursuant  to, the other  paragraphs  of this  Section  9.4 shall not be
deemed exclusive of any other rights to which those seeking  indemnification and
advancement  of  expenses  may  be  entitled   under  any  agreement,   vote  of
stockholders  or  disinterested  directors  of the  Sponsor or Capital  Security
Holders of the Trust or  otherwise,  both as to action in his official  capacity
and as to action in another  capacity  while holding such office.  All rights to
indemnification  under  this  Section  9.4 shall be deemed to be  provided  by a
contract  between  the Sponsor  and each  Indemnified  Person who serves in such
capacity  at any time  while  this  Section  9.4 is in  effect.  Any  repeal  or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.

      (h) The Sponsor or the Trust may purchase and maintain insurance on behalf
of any Person who is or was an Indemnified Person against any liability asserted
against  him and  incurred  by him in any such  capacity,  or arising out of his
status as such, whether or not the Sponsor would have the power to indemnify him
against such liability under the provisions of this Section 9.4.

      (i) For  purposes of this  Section  9.4,  references  to "the Trust" shall
include,  in addition to the  resulting or  surviving  entity,  any  constituent
entity (including any constituent of a constituent)  absorbed in a consolidation
or  merger,  so that any Person who is or was a  director,  trustee,  officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity,  shall stand in the same position  under the  provisions of this Section
9.4 with  respect to the  resulting  or  surviving  entity as he would have with
respect to such constituent entity if its separate existence had continued.

      (j) The  indemnification  and  advancement  of  expenses  provided  by, or
granted  pursuant to, this Section 9.4 shall,  unless  otherwise  provided  when
authorized  or  ratified,  (i)  continue  as to a Person who has ceased to be an
Indemnified  Person and shall inure to the benefit of the heirs,  executors  and
administrators of such a Person;  and (ii) survive the termination or expiration
of this  Declaration  or the earlier  removal or  resignation  of an Indemnified
Person.


                                       37
<PAGE>

      Section 9.5. Outside  Businesses.  Any Covered  Person,  the Sponsor,  the
Delaware  Trustee  and the  Institutional  Trustee  may  engage in or possess an
interest in other business ventures of any nature or description,  independently
or with others,  similar or  dissimilar  to the  business of the Trust,  and the
Trust  and the  Holders  of  Securities  shall  have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom,  and the pursuit of any such venture,  even if  competitive  with the
business of the Trust,  shall not be deemed  wrongful or  improper.  None of any
Covered Person, the Sponsor,  the Delaware Trustee or the Institutional  Trustee
shall be obligated to present any particular  investment or other opportunity to
the Trust even if such  opportunity is of a character  that, if presented to the
Trust,  could be taken by the Trust,  and any Covered Person,  the Sponsor,  the
Delaware Trustee and the Institutional  Trustee shall have the right to take for
its own account  (individually  or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity.  Any Covered Person,
the Delaware Trustee and the  Institutional  Trustee may engage or be interested
in any financial or other  transaction  with the Sponsor or any Affiliate of the
Sponsor,  or may act as  depositary  for,  trustee or agent  for,  or act on any
committee or body of holders of,  securities or other obligations of the Sponsor
or its Affiliates.

      Section 9.6. Compensation; Fee. The Sponsor agrees:

      (a) to pay to the  Trustees  from time to time such  compensation  for all
services rendered by them hereunder as the parties shall agree from time to time
(which  compensation  shall not be limited by any  provision of law in regard to
the compensation of a trustee of an express trust); and

      (b) except as  otherwise  expressly  provided  herein,  to  reimburse  the
Trustees upon request for all reasonable  expenses,  disbursements  and advances
incurred  or made by the  Trustees  in  accordance  with any  provision  of this
Declaration  (including  the  reasonable   compensation  and  the  expenses  and
disbursements of their respective agents and counsel),  except any such expense,
disbursement or advance as may be  attributable to its negligence,  bad faith or
willful misconduct.

      For purposes of  clarification,  this Section 9.6 does not contemplate the
payment by the Sponsor of acceptance or annual  administration fees owing to the
Trustees  under  this  Declaration  or the fees and  expenses  of the  Trustees'
counsel in connection with the closing of the transactions  contemplated by this
Declaration.

      The  provisions of this Section 9.6 shall survive the  dissolution  of the
Trust and the termination of this  Declaration and the removal or resignation of
any Trustee.

      No Trustee may claim any lien or charge on any  property of the Trust as a
result of any amount due pursuant to this Section 9.6.

                                   ARTICLE X

                                   ACCOUNTING

      Section 10.1 Fiscal  Year.  The fiscal year  ("Fiscal  Year") of the Trust
shall be the calendar year, or such other year as is required by the Code.

      Section 10.2 Certain Accounting Matters.

      (a) At all times  during the  existence of the Trust,  the  Administrators
shall  keep,  or cause to be kept at the  principal  office  of the Trust in the
United  States,  as  defined  for  purposes  of  Treasury   Regulations  section
301.7701-7, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of account
shall be  maintained,  at the


                                       38
<PAGE>

Sponsor's expense, in accordance with generally accepted accounting  principles,
consistently applied. The books of account and the records of the Trust shall be
examined by and reported  upon (either  separately  or as part of the  Sponsor's
regularly prepared  consolidated  financial report) as of the end of each Fiscal
Year of the Trust by a firm of independent certified public accountants selected
by the Administrators.

      (b) The  Administrators  shall cause to be duly  prepared and delivered to
each of the Holders of  Securities  Form 1099 or such other annual United States
federal income tax information  statement required by the Code,  containing such
information  with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations.  Notwithstanding any right under the Code
to deliver any such statement at a later date, the Administrators shall endeavor
to deliver all such statements  within 30 days after the end of each Fiscal Year
of the Trust.

      (c) The Administrators,  at the Sponsor's expense,  shall cause to be duly
prepared at the principal office of the Sponsor in the United States, as `United
States' is defined in Section 7701(a)(9) of the Code (or at the principal office
of the Trust if the Sponsor has no such principal  office in the United States),
and filed an annual  United States  federal  income tax return on a Form 1041 or
such other form required by United States  federal income tax law, and any other
annual income tax returns required to be filed by the  Administrators  on behalf
of the Trust with any state or local taxing authority.

      Section 10.3.  Banking.  The Trust shall maintain in the United States, as
defined for purposes of Treasury  Regulations  section  301.7701-7,  one or more
bank  accounts  in the name and for the sole  benefit  of the  Trust;  provided,
however,  that all  payments of funds in respect of the  Debentures  held by the
Institutional  Trustee  shall be made  directly to the  Property  Account and no
other funds of the Trust shall be deposited in the  Property  Account.  The sole
signatories  for  such  accounts  (including  the  Property  Account)  shall  be
designated by the Institutional Trustee.

      Section 10.4.  Withholding.  The Institutional Trustee or any Paying Agent
and the  Administrators  shall comply with all  withholding  requirements  under
United States  federal,  state and local law. The  Institutional  Trustee or any
Paying Agent shall request,  and each Holder shall provide to the  Institutional
Trustee or any Paying  Agent,  such forms or  certificates  as are  necessary to
establish  an exemption  from  withholding  with respect to the Holder,  and any
representations  and forms as shall reasonably be requested by the Institutional
Trustee or any Paying  Agent to assist it in  determining  the extent of, and in
fulfilling, its withholding obligations.  The Administrators shall file required
forms with applicable jurisdictions and, unless an exemption from withholding is
properly  established by a Holder,  shall remit amounts withheld with respect to
the Holder to  applicable  jurisdictions.  To the extent that the  Institutional
Trustee or any Paying  Agent is required to withhold and pay over any amounts to
any authority with respect to  distributions  or allocations to any Holder,  the
amount  withheld  shall be  deemed  to be a  Distribution  in the  amount of the
withholding to the Holder. In the event of any claimed overwithholding,  Holders
shall be limited to an action against the applicable jurisdiction. If the amount
required to be withheld was not withheld  from actual  Distributions  made,  the
Institutional Trustee or any Paying Agent may reduce subsequent Distributions by
the amount of such withholding.

                                   ARTICLE XI

                             AMENDMENTS AND MEETINGS

      Section 11.1. Amendments.

      (a) Except as otherwise  provided in this Declaration or by any applicable
terms of the  Securities,  this  Declaration  may only be  amended  by a written
instrument  approved and executed (i) by


                                       39
<PAGE>

the Institutional  Trustee, or (ii) if the amendment affects the rights, powers,
duties,  obligations  or  immunities  of the Delaware  Trustee,  by the Delaware
Trustee.

      (b)  Notwithstanding  any other provision of this Article XI, an amendment
may be made, and any such purported  amendment shall be valid and effective only
if:

            (i) the Institutional Trustee shall have first received

                  (A) an  Officers'  Certificate  from each of the Trust and the
            Sponsor that such  amendment  is permitted  by, and conforms to, the
            terms of this  Declaration  (including the terms of the Securities);
            and

                  (B) an opinion of counsel  (who may be counsel to the  Sponsor
            or the Trust) that such  amendment is permitted by, and conforms to,
            the  terms  of  this   Declaration   (including  the  terms  of  the
            Securities); and

            (ii) the result of such amendment would not be to

                  (A) cause the Trust to cease to be classified  for purposes of
            United States federal income taxation as a grantor trust; or

                  (B) cause the Trust to be deemed to be an  Investment  Company
            required to be registered under the Investment Company Act.

      (c) Except as provided in Section 11.1(d),  (e) or (h), no amendment shall
be made, and any such purported amendment shall be void and ineffective,  unless
the Holders of a Majority in liquidation  amount of the Capital Securities shall
have consented to such amendment.

      (d) In  addition  to and  notwithstanding  any  other  provision  in  this
Declaration,  without the consent of each affected Holder,  this Declaration may
not be amended to (i)  change  the amount or timing of any  Distribution  on the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the  Securities  as of a  specified  date or change any
conversion  or exchange  provisions  or (ii)  restrict  the right of a Holder to
institute suit for the enforcement of any such payment on or after such date.

      (e) Sections  9.1(b) and 9.1(c) and this Section 11.1 shall not be amended
without the consent of all of the Holders of the Securities.

      (f) Article III shall not be amended without the consent of the Holders of
a Majority in liquidation amount of the Common Securities.

      (g) The rights of the Holders of the Capital  Securities  under Article IV
to appoint and remove  Trustees shall not be amended  without the consent of the
Holders of a Majority in liquidation amount of the Capital Securities.

      (h) This Declaration may be amended by the  Institutional  Trustee and the
Holders of a Majority in liquidation amount of the Common Securities without the
consent of the Holders of the Capital Securities to:

            (i) cure any ambiguity;

            (ii) correct or supplement  any provision in this  Declaration  that
      may be  defective  or  inconsistent  with  any  other  provision  of  this
      Declaration;


                                       40
<PAGE>

            (iii)  add to the  covenants,  restrictions  or  obligations  of the
      Sponsor; or

            (iv) modify,  eliminate or add to any provision of this  Declaration
      to such  extent  as may be  necessary  to ensure  that the  Trust  will be
      classified for United States federal income tax purposes at all times as a
      grantor  trust  and will not be  required  to  register  as an  Investment
      Company  (including  without  limitation  to conform to any change in Rule
      3a-5, Rule 3a-7 or any other applicable rule under the Investment  Company
      Act or written  change in  interpretation  or  application  thereof by any
      legislative body, court,  government agency or regulatory authority) which
      amendment  does  not  have  a  material  adverse  effect  on  the  rights,
      preferences or privileges of the Holders of Securities;

      provided,  however,  that no such  modification,  elimination  or addition
referred to in clauses (i), (ii),  (iii) or (iv) shall  adversely  affect in any
material respect the powers, preferences or special rights of Holders of Capital
Securities.

      Section  11.2.  Meetings of the Holders of  Securities;  Action by Written
Consent.

      (a)  Meetings of the Holders of any class of  Securities  may be called at
any time by the  Administrators  (or as provided in the terms of the Securities)
to consider and act on any matter on which  Holders of such class of  Securities
are  entitled  to act under the  terms of this  Declaration  or the terms of the
Securities. The Administrators shall call a meeting of the Holders of such class
if  directed to do so by the  Holders of at least 10% in  liquidation  amount of
such class of  Securities.  Such  direction  shall be given by delivering to the
Administrators  one or more calls in a writing  stating that the signing Holders
of the Securities  wish to call a meeting and indicating the general or specific
purpose  for which the meeting is to be called.  Any  Holders of the  Securities
calling a meeting shall specify in writing the Certificates  held by the Holders
of the  Securities  exercising  the  right  to call a  meeting  and  only  those
Securities  represented  by such  Certificates  shall be counted for purposes of
determining  whether the required percentage set forth in the second sentence of
this paragraph has been met.

      (b)  Except  to  the  extent  otherwise  provided  in  the  terms  of  the
Securities,  the following  provisions shall apply to meetings of Holders of the
Securities:

            (i) notice of any such meeting  shall be given to all the Holders of
      the Securities having a right to vote thereat at least 7 days and not more
      than 60 days before the date of such meeting.  Whenever a vote, consent or
      approval of the Holders of the  Securities is permitted or required  under
      this Declaration, such vote, consent or approval may be given at a meeting
      of the  Holders  of the  Securities.  Any  action  that  may be taken at a
      meeting of the Holders of the Securities may be taken without a meeting if
      a consent  in writing  setting  forth the action so taken is signed by the
      Holders  of the  Securities  owning  not less than the  minimum  amount of
      Securities in  liquidation  amount that would be necessary to authorize or
      take such  action at a meeting  at which  all  Holders  of the  Securities
      having a right to vote thereon were present and voting.  Prompt  notice of
      the taking of action  without a meeting  shall be given to the  Holders of
      the  Securities  entitled to vote who have not  consented in writing.  The
      Administrators  may  specify  that any  written  ballot  submitted  to the
      Holders of the  Securities  for the purpose of taking any action without a
      meeting  shall be returned to the Trust  within the time  specified by the
      Administrators;

            (ii) each Holder of a Security may  authorize  any Person to act for
      it by proxy on all matters in which a Holder of  Securities is entitled to
      participate,  including  waiving  notice  of any  meeting,  or  voting  or
      participating  at a meeting.  No proxy shall be valid after the expiration
      of 11 months from the date thereof unless otherwise provided in the proxy.
      Every  proxy  shall be  revocable  at the  pleasure  of the  Holder of the
      Securities  executing it. Except as otherwise


                                       41
<PAGE>

      provided herein, all matters relating to the giving, voting or validity of
      proxies shall be governed by the General  Corporation  Law of the State of
      Delaware relating to proxies, and judicial interpretations  thereunder, as
      if the Trust were a Delaware corporation and the Holders of the Securities
      were stockholders of a Delaware  corporation;  each meeting of the Holders
      of the  Securities  shall be  conducted by the  Administrators  or by such
      other Person that the Administrators may designate; and

            (iii) unless the Statutory Trust Act, this Declaration, or the terms
      of the Securities  otherwise provides,  the Administrators,  in their sole
      discretion,  shall establish all other provisions  relating to meetings of
      Holders of Securities,  including  notice of the time, place or purpose of
      any  meeting at which any  matter is to be voted on by any  Holders of the
      Securities,  waiver  of any such  notice,  action  by  consent  without  a
      meeting, the establishment of a record date, quorum  requirements,  voting
      in person or by proxy or any other  matter with respect to the exercise of
      any such right to vote;  provided,  however,  that each  meeting  shall be
      conducted  in the  United  States  (as that term is  defined  in  Treasury
      Regulations section 301.7701-7).

                                  ARTICLE XII

        REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE

      Section 12.1. Representations and Warranties of Institutional Trustee. The
initial  Institutional  Trustee  represents and warrants to the Trust and to the
Sponsor  at the  date of this  Declaration,  and  each  Successor  Institutional
Trustee  represents and warrants to the Trust and the Sponsor at the time of the
Successor Institutional Trustee's acceptance of its appointment as Institutional
Trustee, that:

      (a) the Institutional Trustee is a Delaware banking corporation with trust
powers,  duly  organized  and  validly  existing  under the laws of the State of
Delaware with trust power and authority to execute and deliver, and to carry out
and perform its obligations under the terms of, this Declaration;

      (b) the execution,  delivery and performance by the Institutional  Trustee
of this  Declaration has been duly authorized by all necessary  corporate action
on the  part of the  Institutional  Trustee.  This  Declaration  has  been  duly
executed and delivered by the Institutional Trustee, and it constitutes a legal,
valid and binding obligation of the Institutional  Trustee,  enforceable against
it  in   accordance   with  its  terms,   subject  to   applicable   bankruptcy,
reorganization,   moratorium,  insolvency,  and  other  similar  laws  affecting
creditors' rights generally and to general  principles of equity  (regardless of
whether considered in a proceeding in equity or at law);

      (c) the execution,  delivery and  performance  of this  Declaration by the
Institutional  Trustee  does not  conflict  with or  constitute  a breach of the
charter or by-laws of the Institutional Trustee; and

      (d) no consent,  approval or  authorization  of, or  registration  with or
notice to, any state or federal banking authority is required for the execution,
delivery or performance by the Institutional Trustee of this Declaration.

      Section 12.2.  Representations  of the Delaware Trustee.  The Trustee that
acts as initial Delaware Trustee represents and warrants to the Trust and to the
Sponsor at the date of this  Declaration,  and each Successor  Delaware  Trustee
represents  and  warrants  to the  Trust  and  the  Sponsor  at the  time of the
Successor Delaware  Trustee's  acceptance of its appointment as Delaware Trustee
that:

      (a) if it is not a natural person, the Delaware Trustee is duly organized,
validly existing and in good standing under the laws of the State of Delaware;


                                       42
<PAGE>

      (b) if it is not a natural person, the execution, delivery and performance
by the Delaware  Trustee of this  Declaration  has been duly  authorized  by all
necessary corporate action on the part of the Delaware Trustee. This Declaration
has been duly executed and delivered by the Delaware Trustee, and under Delaware
law  (excluding  any  securities  laws)  constitutes a legal,  valid and binding
obligation of the Delaware  Trustee,  enforceable  against it in accordance with
its  terms,  subject  to  applicable  bankruptcy,  reorganization,   moratorium,
insolvency and other similar laws affecting  creditors'  rights generally and to
general  principles  of equity and the  discretion of the court  (regardless  of
whether considered in a proceeding in equity or at law);

      (c) if it is not a natural person, the execution, delivery and performance
of this Declaration by the Delaware Trustee does not conflict with or constitute
a breach of the charter or by-laws of the Delaware Trustee;

      (d) it has trust power and authority to execute and deliver,  and to carry
out and perform its obligations under the terms of, this Declaration;

      (e) no consent,  approval or  authorization  of, or  registration  with or
notice to, any state or federal banking authority  governing the trust powers of
the Delaware  Trustee is required for the execution,  delivery or performance by
the Delaware Trustee of this Declaration; and

      (f) the  Delaware  Trustee is a natural  person  who is a resident  of the
State of Delaware  or, if not a natural  person,  it is an entity  which has its
principal  place of  business in the State of Delaware  and, in either  case,  a
Person that  satisfies  for the Trust the  requirements  of Section  3807 of the
Statutory Trust Act.

                                  ARTICLE XIII

                                  MISCELLANEOUS

      Section 13.1 Notices.  All notices provided for in this Declaration  shall
be in  writing,  duly  signed  by the party  giving  such  notice,  and shall be
delivered,  telecopied  (which telecopy shall be followed by notice delivered or
mailed by first class mail) or mailed by first class mail, as follows:

      (a) if given to the Trust,  in care of the  Administrators  at the Trust's
mailing  address  set forth  below (or such other  address as the Trust may give
notice of to the Holders of the Securities):

            First Merchants Capital Trust II
            c/o First Merchants Corporation
            200 East Jackson Street
            Muncie, Indiana  47305
            Attention:  Jami L. Bradshaw
            Telecopy:  765-747-1447

      (b) if given to the Delaware  Trustee,  at the Delaware  Trustee's mailing
address set forth below (or such other address as the Delaware  Trustee may give
notice of to the Holders of the Securities):

            Wilmington Trust Company
            Rodney Square North
            1100 North Market Street
            Wilmington, Delaware  19890-1600
            Attention:  Corporate Trust Administration
            Telecopy:  302-636-4140


                                       43
<PAGE>

      (c) if given to the Institutional Trustee, at the Institutional  Trustee's
mailing  address  set forth  below (or such other  address as the  Institutional
Trustee may give notice of to the Holders of the Securities):

            Wilmington Trust Company
            Rodney Square North
            1100 North Market Street
            Wilmington, Delaware  19890-1600
            Attention:  Corporate Trust Administration
            Telecopy:  302-636-4140

      (d) if  given to the  Holder  of the  Common  Securities,  at the  mailing
address of the Sponsor  set forth below (or such other  address as the Holder of
the Common Securities may give notice of to the Trust):

            First Merchants Corporation
            200 East Jackson Street
            Muncie, Indiana  47305
            Attention:  Jami L. Bradshaw
            Telecopy:  765-747-1447

      (e) if given to any other  Holder,  at the  address set forth on the books
and records of the Trust.

      All such  notices  shall be deemed to have been  given  when  received  in
person,  telecopied  with  receipt  confirmed,  or mailed by first  class  mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered  because of a changed  address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

      Section  13.2.  Governing  Law.  This  Declaration  and the  rights of the
parties  hereunder  shall be governed by and  interpreted in accordance with the
law of the State of Delaware  and all rights and  remedies  shall be governed by
such laws without  regard to the  principles of conflict of laws of the State of
Delaware or any other  jurisdiction  that would call for the  application of the
law of any  jurisdiction  other than the State of Delaware;  provided,  however,
that  there  shall  not be  applicable  to  the  Trust,  the  Trustees  or  this
Declaration  any  provision  of the laws  (statutory  or common) of the State of
Delaware  pertaining  to  trusts  that  relate  to  or  regulate,  in  a  manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative  requirements  to post  bonds  for  trustees,  officers,  agents  or
employees  of  a  trust,   (c)  the  necessity  for  obtaining  court  or  other
governmental approval concerning the acquisition, holding or disposition of real
or personal  property,  (d) fees or other sums  payable to  trustees,  officers,
agents or employees of a trust,  (e) the allocation of receipts and expenditures
to income or principal,  or (f)  restrictions  or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets.

      Section 13.3. Intention of the Parties. It is the intention of the parties
hereto  that the Trust be  classified  for  United  States  federal  income  tax
purposes  as a  grantor  trust.  The  provisions  of this  Declaration  shall be
interpreted to further this intention of the parties.

      Section  13.4.  Headings.  Headings  contained  in  this  Declaration  are
inserted for convenience of reference only and do not affect the  interpretation
of this Declaration or any provision hereof.


                                       44
<PAGE>

      Section 13.5. Successors and Assigns.  Whenever in this Declaration any of
the parties  hereto is named or referred to, the  successors and assigns of such
party shall be deemed to be included,  and all covenants and  agreements in this
Declaration  by the Sponsor and the Trustees shall bind and inure to the benefit
of their respective successors and assigns, whether or not so expressed.

      Section   13.6.   Partial   Enforceability.   If  any  provision  of  this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration,  or the application of
such provision to persons or circumstances  other than those to which it is held
invalid, shall not be affected thereby.

      Section 13.7.  Counterparts.  This  Declaration  may contain more than one
counterpart  of the signature page and this  Declaration  may be executed by the
affixing of the signature of each of the Trustees and  Administrators  to any of
such counterpart  signature pages. All of such counterpart signature pages shall
be read as though  one,  and they shall have the same force and effect as though
all of the signers had signed a single signature page.

                     Signatures appear on the following page


                                       45
<PAGE>

      IN WITNESS  WHEREOF,  the  undersigned  have caused  these  presents to be
executed as of the day and year first above written.

                         WILMINGTON TRUST COMPANY,
                         as Delaware Trustee


                         By  /s/ Christopher J. Slaybaugh
                           -----------------------------------------------
                             Name:  Christopher J. Slaybaugh
                             Title:  Senior Financial Services Officer


                         WILMINGTON TRUST COMPANY,
                         as Institutional Trustee


                         By  /s/ Christopher J. Slaybaugh
                           -----------------------------------------------
                               Name:  Christopher J. Slaybaugh
                               Title:  Senior Financial Services Officer

                         FIRST MERCHANTS CORPORATION, as Sponsor


                         By /s/  Mark Hardwick
                           -----------------------------------------------
                               Name:  Mark Hardwick
                               Title:  CFO & EVP


                         ADMINISTRATORS OF FIRST MERCHANTS CAPITAL TRUST II


                         By:/s/  Mark Hardwick
                           -----------------------------------------------
                               Administrator


                         By: /s/  Jami L. Bradshaw
                           -----------------------------------------------
                                 Administrator


                                       46
<PAGE>

                                     ANNEX I

                               TERMS OF SECURITIES

            Pursuant to Section 6.1 of the Amended and Restated  Declaration  of
Trust,   dated  as  of  July  2,  2007  (as  amended  from  time  to  time,  the
"Declaration"), the designation, rights, privileges,  restrictions,  preferences
and  other  terms  and  provisions  of the  Capital  Securities  and the  Common
Securities are set out below (each  capitalized term used but not defined herein
has the meaning set forth in the Declaration):

      1. Designation and Number.

            (a) 55,000 Fixed/Floating Rate Capital Securities of First Merchants
Capital Trust II (the "Trust"), with an aggregate stated liquidation amount with
respect   to  the   assets  of  the   Trust  of   fifty-five   million   dollars
($55,000,000.00)  and a stated  liquidation amount with respect to the assets of
the Trust of  $1,000.00  per Capital  Security,  are hereby  designated  for the
purposes  of  identification  only  as the  "Capital  Securities".  The  Capital
Security  Certificates  evidencing the Capital Securities shall be substantially
in the form of Exhibit A-1 to the  Declaration,  with such changes and additions
thereto or deletions  therefrom as may be required by ordinary usage,  custom or
practice.

            (b) 1,702  Fixed/Floating  Rate Common  Securities of the Trust (the
"Common   Securities")  will  be  evidenced  by  Common  Security   Certificates
substantially in the form of Exhibit A-2 to the  Declaration,  with such changes
and  additions  thereto or  deletions  therefrom  as may be required by ordinary
usage, custom or practice.

      2. Distributions.

            (a)  Distributions   will  be  payable  on  each  Security  for  the
Distribution  Period beginning on (and including) the date of original  issuance
and ending on (but excluding) the Distribution Payment Date in September 2012 at
a rate per  annum  of  6.495%  and  shall  bear  interest  for  each  successive
Distribution  Period beginning on (and including) the Distribution  Payment Date
in September 2012, and each succeeding  Distribution Payment Date, and ending on
(but  excluding)  the next  succeeding  Distribution  Payment Date at a rate per
annum equal to the 3-Month LIBOR, determined as described below, plus 1.56% (the
"Coupon Rate"),  applied to the stated  liquidation  amount  thereof,  such rate
being  the  rate  of  interest  payable  on the  Debentures  to be  held  by the
Institutional  Trustee.  Distributions  in arrears  will bear  interest  thereon
compounded  quarterly  at  the  applicable  Distribution  Rate  (to  the  extent
permitted by law). Distributions, as used herein, include cash distributions and
any such  compounded  distributions  unless  otherwise  noted. A Distribution is
payable only to the extent that  payments are made in respect of the  Debentures
held by the Institutional  Trustee and to the extent the  Institutional  Trustee
has funds available therefor. The amount of the Distribution payable (i) for any
Distribution  Period  commencing  on or after the date of original  issuance but
before the  Distribution  Payment Date in September 2012 will be computed on the
basis of a 360-day year of twelve 30-day months,  and (ii) for the  Distribution
Period  commencing on the  Distribution  Payment Date in September 2012 and each
succeeding  Distribution  Period will be calculated by applying the Distribution
Rate to the stated  liquidation  amount  outstanding at the  commencement of the
Distribution  Period  on  the  basis  of  the  actual  number  of  days  in  the
Distribution Period concerned divided by 360. All percentages resulting from any
calculations  on the Capital  Securities will be rounded,  if necessary,  to the
nearest one  hundred-thousandth  of a percentage point, with five one-millionths
of a percentage  point rounded  upward (e.g.,  9.876545%  (or  .09876545)  being
rounded to 9.87655% (or  .0987655),  and all dollar amounts used in or resulting
from such  calculation  will be rounded to the nearest cent (with  one-half cent
being rounded upward)).

                                      I-1
<PAGE>

            (b) Distributions on the Securities will be cumulative,  will accrue
from the date of original issuance, and will be payable, subject to extension of
distribution payment periods as described herein,  quarterly in arrears on March
15, June 15,  September 15 and December 15 of each year, or if such day is not a
Business  Day,  then the next  succeeding  Business  Day  (each a  "Distribution
Payment  Date")  (it  being  understood  that  interest  accrues  for  any  such
non-Business  Day during the  applicable  Distribution  Period,  beginning on or
after  September  15,  2012),  commencing  on the  Distribution  Payment Date in
September 2007 when, as and if available for payment.  The Debenture  Issuer has
the right under the Indenture to defer  payments of interest on the  Debentures,
so long as no Acceleration  Event of Default has occurred and is continuing,  by
deferring  the payment of interest on the  Debentures  for up to 20  consecutive
quarterly  periods  (each an  "Extension  Period")  at any time and from time to
time, subject to the conditions  described below,  during which Extension Period
no interest shall be due and payable. During any Extension Period, interest will
continue to accrue on the Debentures, and interest on such accrued interest will
accrue at an annual rate equal to the Distribution  Rate in effect for each such
Extension  Period,  compounded  quarterly from the date such interest would have
been payable were it not for the Extension  Period,  to the extent  permitted by
law (such interest  referred to herein as "Additional  Interest").  No Extension
Period may end on a date other than a  Distribution  Payment Date. At the end of
any such  Extension  Period,  the  Debenture  Issuer shall pay all interest then
accrued  and  unpaid  on  the  Debentures  (together  with  Additional  Interest
thereon);  provided,  however,  that no Extension  Period may extend  beyond the
Maturity  Date and provided  further,  however,  that during any such  Extension
Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any
dividends  or  distributions  on,  or  redeem,  purchase,  acquire,  or  make  a
liquidation  payment  with  respect  to, any of the  Debenture  Issuer's  or its
Affiliates'  capital stock (other than payments of dividends or distributions to
the  Debenture  Issuer)  or make any  guarantee  payments  with  respect  to the
foregoing,  or (ii) make any payment of principal of or interest or premium,  if
any, on or repay,  repurchase  or redeem any debt  securities  of the  Debenture
Issuer or any  Affiliate  that rank pari passu in all respects with or junior in
interest to the  Debentures  (other  than,  with respect to clauses (i) and (ii)
above, (a) repurchases,  redemptions or other  acquisitions of shares of capital
stock of the  Debenture  Issuer  in  connection  with any  employment  contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees,  officers,  directors or  consultants,  in connection with a dividend
reinvestment  or  stockholder  stock  purchase  plan or in  connection  with the
issuance of capital stock of the  Debenture  Issuer (or  securities  convertible
into or exercisable for such capital stock) as  consideration  in an acquisition
transaction  entered into prior to the  applicable  Extension  Period,  (b) as a
result of any  exchange or  conversion  of any class or series of the  Debenture
Issuer's  capital  stock (or any capital  stock of a subsidiary of the Debenture
Issuer) for any class or series of the  Debenture  Issuer's  capital stock or of
any class or  series of the  Debenture  Issuer's  indebtedness  for any class or
series of the Debenture  Issuer's  capital stock, (c) the purchase of fractional
interests in shares of the  Debenture  Issuer's  capital  stock  pursuant to the
conversion or exchange  provisions  of such capital stock or the security  being
converted or exchanged, (d) any declaration of a dividend in connection with any
stockholders'  rights plan, or the issuance of rights,  stock or other  property
under any  stockholders'  rights plan, or the redemption or repurchase of rights
pursuant thereto,  (e) any dividend in the form of stock,  warrants,  options or
other rights where the dividend  stock or the stock  issuable  upon  exercise of
such  warrants,  options or other  rights is the same stock as that on which the
dividend  is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional  shares issued in connection  therewith,  or
(f) payments under the Capital Securities  Guarantee).  Prior to the termination
of any Extension  Period,  the Debenture  Issuer may further extend such period,
provided  that  such  period   together  with  all  such  previous  and  further
consecutive  extensions  thereof  shall  not  exceed  20  consecutive  quarterly
periods,  or extend  beyond  the  Maturity  Date.  Upon the  termination  of any
Extension  Period and upon the payment of all accrued  and unpaid  interest  and
Additional  Interest,  the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements.  No interest or Additional Interest shall
be due and payable during an Extension  Period,  except at the end thereof,  but
each  installment  of interest  that would  otherwise  have been due and payable
during  such  Extension  Period  shall  bear  Additional  Interest.  During  any
Extension Period, Distributions


                                      I-2
<PAGE>

on the Securities shall be deferred for a period equal to the Extension  Period.
If Distributions  are deferred,  the Distributions due shall be paid on the date
that the related  Extension  Period  terminates to Holders of the  Securities as
they appear on the books and records of the Trust on the record date immediately
preceding such date.  Distributions  on the Securities must be paid on the dates
payable  (after giving  effect to any  Extension  Period) to the extent that the
Trust has funds available for the payment of such  distributions in the Property
Account of the Trust.  The  Trust's  funds  available  for  Distribution  to the
Holders  of the  Securities  will be  limited  to  payments  received  from  the
Debenture  Issuer.  The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

            (c)  Distributions  on the Securities will be payable to the Holders
thereof as they  appear on the books and  records  of the Trust on the  relevant
record  dates.  The  relevant  record  dates  shall be fifteen  days  before the
relevant Distribution Payment Date. Distributions payable on any Securities that
are not  punctually  paid on any  Distribution  Payment Date, as a result of the
Debenture  Issuer having failed to make a payment under the  Debentures,  as the
case may be, when due (taking into account any Extension Period),  will cease to
be payable to the Person in whose name such  Securities  are  registered  on the
relevant record date, and such defaulted Distribution will instead be payable to
the Person in whose name such  Securities  are  registered on the special record
date or other specified date determined in accordance with the Indenture.

            (d) In the event that there is any money or other  property  held by
or for the Trust that is not accounted  for  hereunder,  such property  shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.

      3.  Liquidation  Distribution  Upon  Dissolution.  In  the  event  of  the
voluntary or involuntary liquidation,  dissolution, winding-up or termination of
the Trust (each a  "Liquidation")  other than in connection with a redemption of
the Debentures, the Holders of the Securities will be entitled to receive out of
the assets of the Trust available for distribution to Holders of the Securities,
after  satisfaction  of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer),  distributions equal to the aggregate of the
stated  liquidation  amount of $1,000.00  per  Security  plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"), unless in connection with such Liquidation, the Debentures in an
aggregate  stated  principal  amount equal to the aggregate  stated  liquidation
amount of such Securities,  with an interest rate equal to the Distribution Rate
of, and bearing  accrued and unpaid  interest in an amount  equal to the accrued
and  unpaid  Distributions  on,  and  having  the  same  record  date  as,  such
Securities,  after paying or making  reasonable  provision to pay all claims and
obligations  of the Trust in accordance  with the Statutory  Trust Act, shall be
distributed on a Pro Rata basis to the Holders of the Securities in exchange for
such Securities.

      The Sponsor, as the Holder of all of the Common Securities,  has the right
at any time to  dissolve  the Trust  (including,  without  limitation,  upon the
occurrence of a Special Event),  subject to the receipt by the Debenture  Issuer
of prior approval from the Board of Governors of the Federal Reserve System,  or
its designated  district bank, as applicable,  and any successor  federal agency
that is primarily  responsible for regulating the activities of the Sponsor (the
"Federal Reserve"), if the Sponsor is a bank holding company, or from the Office
of  Thrift  Supervision  and any  successor  federal  agency  that is  primarily
responsible for regulating the activities of Sponsor, (the "OTS") if the Sponsor
is a savings and loan holding  company,  in either case if then  required  under
applicable  capital  guidelines  or policies  of the Federal  Reserve or OTS, as
applicable,  and, after  satisfaction  of liabilities to creditors of the Trust,
cause the Debentures to be distributed to the Holders of the Securities on a Pro
Rata basis in accordance with the aggregate stated liquidation amount thereof.


                                      I-3
<PAGE>

      If a  Liquidation  of the Trust occurs as  described in clause (i),  (ii),
(iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated
by the Institutional Trustee as expeditiously as it determines to be possible by
distributing,  after  satisfaction  of liabilities to creditors of the Trust, to
the Holders of the Securities,  the Debentures on a Pro Rata basis to the extent
not satisfied by the Debenture Issuer, unless such distribution is determined by
the Institutional Trustee not to be practical,  in which event such Holders will
be entitled to receive out of the assets of the Trust available for distribution
to the Holders,  after  satisfaction of liabilities of creditors of the Trust to
the  extent  not  satisfied  by the  Debenture  Issuer,  an amount  equal to the
Liquidation  Distribution.  An early Liquidation of the Trust pursuant to clause
(iv) of  Section  7.1(a) of the  Declaration  shall  occur if the  Institutional
Trustee  determines  that such  Liquidation is possible by  distributing,  after
satisfaction  of  liabilities  to creditors of the Trust,  to the Holders of the
Securities on a Pro Rata basis, the Debentures, and such distribution occurs.

      If, upon any such  Liquidation  the Liquidation  Distribution  can be paid
only in part because the Trust has insufficient  assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on such  Capital  Securities  shall be paid to the  Holders  of the  Trust
Securities on a Pro Rata basis,  except that if an Event of Default has occurred
and is  continuing,  the Capital  Securities  shall have a  preference  over the
Common Securities with regard to such distributions.

      After the date for any  distribution of the Debentures upon dissolution of
the  Trust  (i) the  Securities  of the  Trust  will be  deemed  to be no longer
outstanding,  (ii) upon  surrender of a Holder's  Securities  certificate,  such
Holder of the Securities will receive a certificate  representing the Debentures
to be delivered upon such distribution,  (iii) any certificates representing the
Securities still  outstanding will be deemed to represent  undivided  beneficial
interests in such of the Debentures as have an aggregate  principal amount equal
to the aggregate  stated  liquidation  amount with an interest rate identical to
the  Distribution  Rate of, and  bearing  accrued and unpaid  interest  equal to
accrued and unpaid  distributions on, the Securities until such certificates are
presented to the Debenture  Issuer or its agent for transfer or reissuance  (and
until such certificates are so surrendered, no payments of interest or principal
shall be made to  Holders of  Securities  in  respect  of any  payments  due and
payable under the Debentures;  provided,  however that such failure to pay shall
not be deemed to be an Event of Default  and shall not entitle the Holder to the
benefits of the Guarantee),  and (iv) all rights of Holders of Securities  under
the  Declaration  shall  cease,  except  the right of such  Holders  to  receive
Debentures upon surrender of certificates representing such Securities.

      4. Redemption and Distribution.

            (a) The Debentures will mature on September 15, 2037. The Debentures
may  be  redeemed  by  the  Debenture  Issuer,  in  whole  or in  part,  at  any
Distribution Payment Date on or after the Distribution Payment Date in September
2012, at the Redemption  Price.  In addition,  the Debentures may be redeemed by
the Debenture Issuer at the Special  Redemption Price, in whole but not in part,
at any  Distribution  Payment Date,  upon the occurrence and  continuation  of a
Special Event within 120 days  following the occurrence of such Special Event at
the  Special  Redemption  Price,  upon not less  than 30 nor more  than 60 days'
notice  to  holders  of  such  Debentures  so  long as  such  Special  Event  is
continuing.  In each  case,  the right of the  Debenture  Issuer  to redeem  the
Debentures is subject to the Debenture  Issuer having  received  prior  approval
from the Federal Reserve (if the Debenture  Issuer is a bank holding company) or
prior  approval  from the OTS (if the  Debenture  Issuer is a  savings  and loan
holding  company),  in each  case  if then  required  under  applicable  capital
guidelines  or policies of the  applicable  federal  agency.  The Sponsor  shall
appoint a  Quotation  Agent,  which  shall be a  designee  of the  Institutional
Trustee,  for the  purpose of  performing  the  services  contemplated  in or by
reference  in, the  definition  of Special  Redemption  Price.  Any error in the
calculation  of the  Special  Redemption  Price  by the  Quotation  Agent or the
Debenture  Trustee  may be  corrected  at any time by  notice  delivered  to the
Sponsor  and the holders of the Capital  Securities.  Subject to the  corrective
rights   set  forth   above,   all

                                      I-4
<PAGE>

certificates, communications, opinions, determinations, calculations, quotations
and  decisions  given,  expressed,  made or  obtained  for the  purposes  of the
provisions  relating to the payment and  calculation  of the Special  Redemption
Price on the Debentures or the Capital Securities by the Debenture Trustee,  the
Quotation Agent or the Institutional  Trustee, as the case may be, shall (in the
absence of willful  default,  bad faith or manifest error) be final,  conclusive
and binding on the holders of the  Debentures  and the Capital  Securities,  the
Trust and the Sponsor,  and no liability shall attach (except as provided above)
to the Debenture  Trustee,  the Quotation Agent or the Institutional  Trustee in
connection with the exercise or non-exercise by any of them of their  respective
powers, duties and discretion.

      "3-Month  LIBOR"  means the London  interbank  offered  interest  rate for
three-month,  U.S.  dollar deposits  determined by the Debenture  Trustee in the
following order of priority:

            (1) the rate  (expressed as a percentage per annum) for U.S.  dollar
      deposits  having a  three-month  maturity  that  appears on  Reuters  Page
      LIBOR01 as of 11:00 a.m. (London time) on the related  Determination  Date
      (as defined below). "Reuters Page LIBOR01" means the display designated as
      "LIBOR01"  on  Reuters  or such other  page as may  replace  Reuters  Page
      LIBOR01  on that  service  or such other  service  or  services  as may be
      nominated by the British  Bankers'  Association as the information  vendor
      for the purpose of  displaying  London  interbank  offered  rates for U.S.
      dollar deposits;

            (2) if such rate cannot be identified  on the related  Determination
      Date, the Debenture  Trustee will request the principal  London offices of
      four leading banks in the London  interbank  market to provide such banks'
      offered quotations  (expressed as percentages per annum) to prime banks in
      the London  interbank market for U.S. dollar deposits having a three-month
      maturity as of 11:00 a.m. (London time) on such Determination  Date. If at
      least two  quotations  are provided,  3-Month LIBOR will be the arithmetic
      mean of such quotations;

            (3) if fewer than two such  quotations  are provided as requested in
      clause (2) above,  the Debenture  Trustee will request four major New York
      City  banks to  provide  such  banks'  offered  quotations  (expressed  as
      percentages per annum) to leading European banks for loans in U.S. dollars
      as of 11:00 a.m. (London time) on such Determination Date. If at least two
      such quotations are provided, 3-Month LIBOR will be the arithmetic mean of
      such quotations; and

            (4) if fewer than two such  quotations  are provided as requested in
      clause (3) above,  3-Month LIBOR will be a 3-Month LIBOR  determined  with
      respect to the  Distribution  Period  immediately  preceding  such current
      Distribution Period.

      If the rate for U.S. dollar  deposits  having a three-month  maturity that
initially  appears on Reuters Page LIBOR01 as of 11:00 a.m. (London time) on the
related  Determination  Date is  superseded  on the  Reuters  Page  LIBOR01 by a
corrected rate by 12:00 noon (London time) on such Determination  Date, then the
corrected rate as so  substituted on the applicable  page will be the applicable
3-Month LIBOR for such Determination Date.

      The  Distribution  Rate  for any  Distribution  Period  will at no time be
higher than the maximum  rate then  permitted by New York law as the same may be
modified by United States law.

      "Capital  Treatment  Event" means the receipt by the Debenture  Issuer and
the Trust of an  opinion of counsel  experienced  in such  matters to the effect
that, as a result of the  occurrence  of any amendment to, or change  (including
any announced  prospective  change) in, the laws,  rules or  regulations  of the
United States or any political  subdivision thereof or therein, or as the result
of  any  official  or   administrative   pronouncement  or  action  or  decision
interpreting  or applying such laws,  rules or  regulations,  which amendment or
change is effective or which  pronouncement,  action or decision is


                                      I-5
<PAGE>

announced on or after the date of original issuance of the Debentures,  there is
more than an insubstantial risk that the Sponsor will not, within 90 days of the
date of such  opinion,  be  entitled to treat an amount  equal to the  aggregate
liquidation  amount of the Capital  Securities  as "Tier 1 Capital" (or its then
equivalent)  for  purposes of the  capital  adequacy  guidelines  of the Federal
Reserve,  as then in effect and  applicable to the Sponsor (or if the Sponsor is
not a bank holding company or otherwise is not subject to the Federal  Reserve's
risk-based capital adequacy  guidelines,  such guidelines applied to the Sponsor
as if the Sponsor were subject to such guidelines);  provided, however, that the
inability of the Sponsor to treat all or any portion of the  liquidation  amount
of the Capital Securities as Tier l Capital shall not constitute the basis for a
Capital  Treatment  Event,  if such  inability  results from the Sponsor  having
cumulative preferred stock, minority interests in consolidated subsidiaries,  or
any other class of security  or  interest  which the Federal  Reserve or OTS, as
applicable,  may now or hereafter  accord Tier 1 Capital  treatment in excess of
the amount  which may now or hereafter  qualify for  treatment as Tier 1 Capital
under applicable capital adequacy guidelines;  provided further,  however,  that
the  distribution  of Debentures in connection with the Liquidation of the Trust
shall not in and of itself  constitute  a Capital  Treatment  Event  unless such
Liquidation  shall have occurred in connection with a Tax Event or an Investment
Company Event.

      "Comparable  Treasury Issue" means with respect to any Special  Redemption
Date the United States  Treasury  security  selected by the  Quotation  Agent as
having a maturity  comparable to the Fixed Rate Period Remaining Life that would
be utilized, at the time of selection and in accordance with customary financial
practice,  in pricing new issues of  corporate  debt  securities  of  comparable
maturity to the Fixed Rate Period  Remaining  Life. If no United States Treasury
security  has a  maturity  which is  within a period  from 3 months  before to 3
months  after the  Distribution  Payment Date in  September  2012,  the two most
closely  corresponding  United  States  Treasury  securities  as selected by the
Quotation Agent shall be used as the Comparable Treasury Issue, and the Treasury
Rate shall be interpolated and extrapolated on a straight-line  basis,  rounding
to the nearest month using such securities.

      "Comparable  Treasury Price" means (a) the average of 5 Reference Treasury
Dealer Quotations for such Special  Redemption Date, after excluding the highest
and lowest such Reference  Treasury Dealer  Quotations,  or (b) if the Quotation
Agent  obtains  fewer than 5 such  Reference  Treasury  Dealer  Quotations,  the
average of all such Quotations.

      "Determination Date" means the date that is two London Banking Days (i.e.,
a business day in which  dealings in deposits in U.S.  dollars are transacted in
the London interbank  market) preceding the particular  Distribution  Period for
which a Coupon Rate is being determined.

      "Fixed Rate Period  Remaining Life" means,  with respect to any Debenture,
the  period  from  the  Special  Redemption  Date  for  such  Debenture  to  the
Distribution Payment Date in September 2012.

      "Investment  Company Event" means the receipt by the Debenture  Issuer and
the Trust of an  opinion of counsel  experienced  in such  matters to the effect
that, as a result of the  occurrence of a change in law or regulation or written
change  (including  any  announced  prospective  change)  in  interpretation  or
application of law or regulation by any legislative  body,  court,  governmental
agency or regulatory  authority,  there is more than an insubstantial  risk that
the Trust is or, within 90 days of the date of such opinion,  will be considered
an  Investment  Company that is required to be registered  under the  Investment
Company Act which change or prospective change becomes effective or would become
effective,  as the case  may be,  on or after  the date of the  issuance  of the
Debentures.

      "Maturity Date" means September 15, 2037.

      "Primary  Treasury  Dealer"  shall  mean  either a primary  United  States
Government  securities dealer or an entity of nationally  recognized standing in
matters  pertaining to the quotation of treasury  securities  that is reasonably
acceptable to the Sponsor and the Institutional Trustee.


                                      I-6
<PAGE>

      "Quotation Agent" means a designee of the Institutional  Trustee who shall
be a Primary Treasury Dealer.

      "Redemption  Date" shall mean the date fixed for the redemption of Capital
Securities,  which  shall  be any  Distribution  Payment  Date on or  after  the
Distribution Payment Date in September 2012.

      "Redemption  Price" means 100% of the principal  amount of the  Debentures
being  redeemed,  plus  accrued and unpaid  Interest on such  Debentures  to the
Redemption Date.

      "Reference  Treasury  Dealer" means (i) the  Quotation  Agent and (ii) any
other  Primary   Treasury  Dealer  selected  by  the  Debenture   Trustee  after
consultation with the Debenture Issuer.

      "Reference  Treasury  Dealer  Quotations"  means,  with  respect  to  each
Reference  Treasury  Dealer and any Special  Redemption  Date,  the average,  as
determined  by the  Quotation  Agent,  of the  bid  and  asked  prices  for  the
Comparable  Treasury  Issue  (expressed  in  each  case as a  percentage  of its
principal  amount) quoted in writing to the Debenture  Trustee by such Reference
Treasury  Dealer at 5:00 p.m.,  New York City time,  on the third  Business  Day
preceding such Redemption Date.

      "Special  Event"  means a Tax  Event,  an  Investment  Company  Event or a
Capital Treatment Event.

      "Special Redemption Date" means a date on which a Special Event redemption
occurs, which shall be a Distribution Payment Date.

      "Special Redemption Price" means (a) if the Special Redemption Date occurs
before the  Distribution  Payment  Date in  September  2012,  the greater of (i)
107.5% of the  principal  amount of the  Debentures,  plus  accrued  and  unpaid
Interest on the Debentures to the Special Redemption Date, or (ii) as determined
by the  Quotation  Agent,  (A) the sum of the  present  values of the  scheduled
payments  of  principal  and  Interest on the  Debentures  during the Fixed Rate
Period  Remaining  Life of the Debentures  (assuming the  Debentures  matured on
September  15, 2012)  discounted to the Special  Redemption  Date on a quarterly
basis  (assuming  a 360-day  year  consisting  of twelve  30-day  months) at the
Treasury  Rate,  plus (B) accrued and unpaid  Interest on the Debentures to such
Special  Redemption  Date,  or (b) if the Special  Redemption  Date occurs on or
after the  Distribution  Payment Date in September  2012,  100% of the principal
amount of the Debentures  being  redeemed,  plus accrued and unpaid  Interest on
such Debentures to the Special Redemption Date.

      "Tax Event" means the receipt by the Debenture  Issuer and the Trust of an
opinion of counsel  experienced  in such matters to the effect that, as a result
of any amendment to or change  (including any announced  prospective  change) in
the laws or any  regulations  thereunder  of the United  States or any political
subdivision  or  taxing  authority  thereof  or  therein,  or as a result of any
official  administrative  pronouncement  (including  any private  letter ruling,
technical advice memorandum,  field service advice, regulatory procedure, notice
or  announcement  including any notice or  announcement  of intent to adopt such
procedures or regulations)  (an  "Administrative  Action") or judicial  decision
interpreting  or applying such laws or  regulations,  regardless of whether such
Administrative  Action or judicial decision is issued to or in connection with a
proceeding  involving  the  Debenture  Issuer or the Trust  and  whether  or not
subject  to  review  or  appeal,   which   amendment,   clarification,   change,
Administrative Action or decision is enacted,  promulgated or announced, in each
case on or after the date of original issuance of the Debentures,  there is more
than an insubstantial  risk that: (i) the Trust is, or will be within 90 days of
the date of such  opinion,  subject  to United  States  federal  income tax with
respect to income received or accrued on the Debentures;  (ii) interest  payable
by the Debenture  Issuer on the Debentures is not, or within 90 days of the date
of such opinion, will not be, deductible by the Debenture Issuer, in whole or in
part, for United States  federal income tax purposes;  or (iii) the Trust is, or
will be within 90 days of the


                                      I-7
<PAGE>

date of such opinion,  subject to more than a de minimis  amount of other taxes,
duties or other governmental charges.

      "Treasury  Rate" means (i) the yield,  under the heading which  represents
the average for the week immediately prior to the date of calculation, appearing
in the most recently published  statistical release designated H.15 (519) or any
successor publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury  Constant  Maturities," for the
maturity  corresponding  to the Fixed Rate Period Remaining Life (if no maturity
is within three  months  before or after the Fixed Rate Period  Remaining  Life,
yields for the two published maturities most closely  corresponding to the Fixed
Rate Period  Remaining  Life shall be determined  and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis, rounding
to the nearest month) or (ii) if such release (or any successor  release) is not
published  during the week  preceding the  calculation  date or does not contain
such yields,  the rate per annum equal to the  semi-annual  equivalent  yield to
maturity of the  Comparable  Treasury  Issue,  calculated  using a price for the
Comparable  Treasury Issue  (expressed as a percentage of its principal  amount)
equal to the  Comparable  Treasury Price for such Special  Redemption  Date. The
Treasury Rate shall be calculated by the Quotation  Agent on the third  Business
Day preceding the Special Redemption Date.

            (b) Upon the repayment in full at maturity or redemption in whole or
in  part  of the  Debentures  (other  than  following  the  distribution  of the
Debentures to the Holders of the  Securities),  the proceeds from such repayment
or payment shall  concurrently  be applied to redeem Pro Rata at the  applicable
Redemption Price or Special  Redemption Price, as applicable,  Securities having
an aggregate  liquidation amount equal to the aggregate  principal amount of the
Debentures  so repaid or  redeemed;  provided,  however,  that  holders  of such
Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption (other than at the scheduled maturity of the Debentures).

            (c) If  fewer  than  all  the  outstanding  Securities  are to be so
redeemed,  the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital  Securities  to be redeemed  will be redeemed Pro Rata from
each Holder of Capital Securities.

            (d) The Trust may not redeem fewer than all the outstanding  Capital
Securities  unless all  accrued and unpaid  Distributions  have been paid on all
Capital  Securities  for all quarterly  Distribution  periods  terminating on or
before the date of redemption.

            (e) Redemption or Distribution Procedures.

                  (i) Notice of any redemption of, or notice of  distribution of
      the Debentures in exchange for, the Securities (a "Redemption/Distribution
      Notice")  will be given by the Trust by mail to each Holder of  Securities
      to be redeemed or exchanged not fewer than 30 nor more than 60 days before
      the date fixed for redemption or exchange  thereof which, in the case of a
      redemption,  will be the date fixed for redemption of the Debentures.  For
      purposes of the  calculation of the date of redemption or exchange and the
      dates on which notices are given  pursuant to this  paragraph  4(e)(i),  a
      Redemption/Distribution Notice shall be deemed to be given on the day such
      notice is first mailed by first-class mail, postage prepaid, to Holders of
      such Securities. Each Redemption/Distribution Notice shall be addressed to
      the  Holders  of  such  Securities  at the  address  of each  such  Holder
      appearing  on the  books  and  records  of the  Trust.  No  defect  in the
      Redemption/Distribution  Notice or in the mailing  thereof with respect to
      any Holder  shall  affect  the  validity  of the  redemption  or  exchange
      proceedings with respect to any other Holder.


                                      I-8
<PAGE>

                  (ii) If the  Securities are to be redeemed and the Trust gives
      a Redemption/  Distribution Notice, which notice may only be issued if the
      Debentures  are redeemed as set out in this paragraph 4 (which notice will
      be  irrevocable),  then,  provided  that the  Institutional  Trustee has a
      sufficient  amount of cash in  connection  with the related  redemption or
      maturity  of the  Debentures,  the  Institutional  Trustee  will  pay  the
      relevant  Redemption Price or Special Redemption Price, as applicable,  to
      the Holders of such Securities by check mailed to the address of each such
      Holder  appearing on the books and records of the Trust on the  Redemption
      Date. If a Redemption/Distribution  Notice shall have been given and funds
      deposited as required then  immediately  prior to the close of business on
      the  date of such  deposit  Distributions  will  cease  to  accrue  on the
      Securities  so called  for  redemption  and all  rights of Holders of such
      Securities so called for  redemption  will cease,  except the right of the
      Holders of such Securities to receive the applicable  Redemption  Price or
      Special Redemption Price specified in paragraph 4(a), but without interest
      on such Redemption  Price or Special  Redemption  Price. If payment of the
      Redemption Price or Special  Redemption Price in respect of any Securities
      is  improperly  withheld or refused and not paid either by the Trust or by
      the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions
      on such Securities will continue to accrue at the  Distribution  Rate from
      the original  Redemption Date to the actual date of payment, in which case
      the actual  payment date will be considered  the date fixed for redemption
      for purposes of  calculating  the Redemption  Price or Special  Redemption
      Price. In the event of any redemption of the Capital  Securities issued by
      the Trust in part, the Trust shall not be required to (i) issue,  register
      the transfer of or exchange any Security during a period  beginning at the
      opening of business  fifteen days before any selection  for  redemption of
      the Capital Securities and ending at the close of business on the earliest
      date on which the  relevant  notice of  redemption  is deemed to have been
      given to all Holders of the Capital  Securities  to be so redeemed or (ii)
      register the transfer of or exchange  any Capital  Securities  so selected
      for redemption,  in whole or in part, except for the unredeemed portion of
      any Capital Securities being redeemed in part.

                  (iii)  Redemption/Distribution  Notices  shall  be sent by the
      Administrators  on behalf of the Trust to (A) in  respect  of the  Capital
      Securities,  the  Holders  thereof  and  (B)  in  respect  of  the  Common
      Securities, the Holder thereof.

                  (iv) Subject to the foregoing and applicable  law  (including,
      without  limitation,  United States federal securities laws), and provided
      that the  acquiror  is not the  Holder  of the  Common  Securities  or the
      obligor under the Indenture, the Sponsor or any of its subsidiaries may at
      any time and from time to time purchase  outstanding Capital Securities by
      tender, in the open market or by private agreement.

      5. Voting Rights - Capital Securities.

            (a) Except as provided under  paragraphs 5(b) and 7 and as otherwise
required by law and the Declaration,  the Holders of the Capital Securities will
have no voting rights.  The Administrators are required to call a meeting of the
Holders of the  Capital  Securities  if directed to do so by Holders of at least
10% in liquidation amount of the Capital Securities.

            (b) Subject to the  requirements  of  obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph,  the Holders of a Majority in liquidation  amount of the Capital
Securities,  voting  separately  as a class,  have the right to direct the time,
method,  and place of conducting any proceeding for any remedy  available to the
Institutional  Trustee,  or  exercising  any trust or power  conferred  upon the
Institutional  Trustee under the Declaration,  including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies
available  under the Indenture as the holder of the  Debentures,  (ii) waive any
past default that is waivable under the


                                      I-9
<PAGE>

Indenture,  (iii) exercise any right to rescind or annul a declaration  that the
principal  of all the  Debentures  shall be due and  payable or (iv)  consent on
behalf  of  all  the  Holders  of  the  Capital  Securities  to  any  amendment,
modification  or  termination  of the  Indenture  or the  Debentures  where such
consent shall be required;  provided,  however,  that, where a consent or action
under the  Indenture  would require the consent or act of the holders of greater
than a simple  majority in aggregate  principal  amount of  Debentures (a "Super
Majority")  affected  thereby,  the  Institutional  Trustee  may only  give such
consent or take such action at the written  direction of the Holders of at least
the proportion in liquidation amount of the Capital Securities outstanding which
the relevant Super Majority  represents of the aggregate principal amount of the
Debentures outstanding. If the Institutional Trustee fails to enforce its rights
under the Debentures  after the Holders of a Majority in  liquidation  amount of
such Capital  Securities  have so directed  the  Institutional  Trustee,  to the
fullest  extent  permitted  by law,  a  Holder  of the  Capital  Securities  may
institute a legal  proceeding  directly  against the Debenture Issuer to enforce
the   Institutional   Trustee's  rights  under  the  Debentures   without  first
instituting any legal proceeding against the Institutional  Trustee or any other
person or entity.  Notwithstanding  the  foregoing,  if an Event of Default  has
occurred and is continuing and such event is  attributable to the failure of the
Debenture  Issuer to pay interest or principal on the Debentures on the date the
interest or principal is payable (or in the case of  redemption,  the Redemption
Date or the Special Redemption Date, as applicable),  then a Holder of record of
the Capital  Securities may directly  institute a proceeding for  enforcement of
payment,  on or after the respective due dates specified in the  Debentures,  to
such Holder directly of the principal of or interest on the Debentures having an
aggregate  principal  amount equal to the  aggregate  liquidation  amount of the
Capital  Securities of such Holder.  The Institutional  Trustee shall notify all
Holders  of  the  Capital  Securities  of  any  default  actually  known  to the
Institutional Trustee with respect to the Debentures unless (x) such default has
been cured prior to the giving of such notice or (y) the  Institutional  Trustee
determines in good faith that the  withholding of such notice is in the interest
of the Holders of such Capital  Securities,  except where the default relates to
the payment of  principal of or interest on any of the  Debentures.  Such notice
shall state that such  Indenture  Event of Default also  constitutes an Event of
Default  hereunder.  Except with respect to directing the time, method and place
of conducting a proceeding  for a remedy,  the  Institutional  Trustee shall not
take any of the actions described in clauses (i), (ii) or (iii) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such  action,  the Trust will not be  classified  as other than a
grantor trust for United States federal income tax purposes.

      In the event the consent of the  Institutional  Trustee,  as the holder of
the  Debentures,  is required under the Indenture with respect to any amendment,
modification or termination of the Indenture,  the  Institutional  Trustee shall
request the  direction  of the Holders of the  Securities  with  respect to such
amendment,  modification  or  termination  and shall  vote with  respect to such
amendment,  modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class;  provided,  however,
that  where a  consent  under the  Indenture  would  require  the  consent  of a
Super-Majority,  the  Institutional  Trustee  may only give such  consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities  outstanding  which the  relevant  Super-Majority  represents  of the
aggregate  principal  amount of the Debentures  outstanding.  The  Institutional
Trustee shall not take any such action in accordance  with the directions of the
Holders of the  Securities  unless the  Institutional  Trustee  has  obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified  as other than a grantor trust for United States  federal
income tax purposes.

      A waiver of an Indenture  Event of Default will constitute a waiver of the
corresponding Event of Default hereunder.  Any required approval or direction of
Holders of the Capital  Securities may be given at a separate meeting of Holders
of the Capital Securities  convened for such purpose, at a meeting of all of the
Holders of the  Securities  in the Trust or  pursuant  to written  consent.  The
Institutional Trustee will cause a notice of any meeting at which Holders of the
Capital  Securities  are entitled to vote, or of any matter upon which action by
written  consent of such Holders is to be taken,  to be mailed to each Holder of
record of the Capital  Securities.  Each such  notice  will  include a statement
setting forth the following


                                      I-10
<PAGE>

information  (i) the date of such meeting or the date by which such action is to
be taken,  (ii) a description  of any  resolution  proposed for adoption at such
meeting on which such  Holders are entitled to vote or of such matter upon which
written consent is sought and (iii)  instructions for the delivery of proxies or
consents.  No vote or consent of the Holders of the Capital  Securities  will be
required for the Trust to redeem and cancel Capital  Securities or to distribute
the  Debentures  in  accordance  with  the  Declaration  and  the  terms  of the
Securities.

      Notwithstanding  that  Holders of the Capital  Securities  are entitled to
vote or  consent  under any of the  circumstances  described  above,  any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not entitle the Holder thereof to vote or consent and shall,  for purposes
of such vote or  consent,  be treated  as if such  Capital  Securities  were not
outstanding.

      In no event will Holders of the Capital  Securities have the right to vote
to appoint, remove or replace the Administrators, which voting rights are vested
exclusively in the Sponsor as the Holder of all of the Common  Securities of the
Trust.  Under certain  circumstances as more fully described in the Declaration,
Holders  of  Capital  Securities  have the right to vote to  appoint,  remove or
replace the Institutional Trustee and the Delaware Trustee.

      6. Voting Rights - Common Securities.

            (a) Except as  provided  under  paragraphs  6(b),  6(c) and 7 and as
otherwise  required by law and the Declaration,  the Common Securities will have
no voting rights.

            (b) The Holders of the Common Securities are entitled, in accordance
with Article IV of the  Declaration,  to vote to appoint,  remove or replace any
Administrators.

            (c)  Subject to Section 6.8 of the  Declaration  and only after each
Event of Default (if any) with respect to the Capital Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common  Securities,  voting  separately as a class,  may direct the time,
method,  and place of conducting any proceeding for any remedy  available to the
Institutional  Trustee,  or  exercising  any trust or power  conferred  upon the
Institutional  Trustee under the Declaration,  including (i) directing the time,
method,  place of  conducting  any  proceeding  for any remedy  available to the
Debenture  Trustee,  or exercising any trust or power conferred on the Debenture
Trustee  with respect to the  Debentures,  (ii) waiving any past default and its
consequences that is waivable under the Indenture, or (iii) exercising any right
to rescind or annul a declaration that the principal of all the Debentures shall
be due and payable; provided, however, that, where a consent or action under the
Indenture would require a Super  Majority,  the  Institutional  Trustee may only
give such consent or take such action at the written direction of the Holders of
at least the proportion in liquidation amount of the Common Securities which the
relevant  Super  Majority  represents of the aggregate  principal  amount of the
Debentures  outstanding.  Notwithstanding this paragraph 6(c), the Institutional
Trustee shall not revoke any action previously  authorized or approved by a vote
or consent of the Holders of the Capital Securities.  Other than with respect to
directing the time, method and place of conducting any proceeding for any remedy
available to the  Institutional  Trustee or the  Debenture  Trustee as set forth
above,  the  Institutional  Trustee shall not take any action  described in (i),
(ii) or (iii) above, unless the Institutional Trustee has obtained an opinion of
tax counsel to the effect that for the purposes of United States  federal income
tax the Trust will not be classified as other than a grantor trust on account of
such action.  If the  Institutional  Trustee fails to enforce its rights, to the
fullest extent permitted by law, under the Declaration, any Holder of the Common
Securities  may  institute  a legal  proceeding  directly  against any Person to
enforce the Institutional Trustee's rights under the Declaration,  without first
instituting a legal proceeding  against the  Institutional  Trustee or any other
Person.


                                      I-11
<PAGE>

      Any approval or direction of Holders of the Common Securities may be given
at a separate  meeting of Holders  of the Common  Securities  convened  for such
purpose,  at a meeting of all of the Holders of the  Securities  in the Trust or
pursuant  to  written  consent.  The  Administrators  will cause a notice of any
meeting at which  Holders of the Common  Securities  are entitled to vote, or of
any matter upon which action by written  consent of such Holders is to be taken,
to be mailed to each  Holder of the Common  Securities.  Each such  notice  will
include a statement  setting  forth (i) the date of such  meeting or the date by
which such action is to be taken, (ii) a description of any resolution  proposed
for  adoption at such  meeting on which such  Holders are entitled to vote or of
such matter upon which written consent is sought and (iii)  instructions for the
delivery of proxies or consents.

      No vote  or  consent  of the  Holders  of the  Common  Securities  will be
required for the Trust to redeem and cancel  Common  Securities or to distribute
the  Debentures  in  accordance  with  the  Declaration  and  the  terms  of the
Securities.

      7. Amendments to Declaration and Indenture.

            (a) In  addition  to any  requirements  under  Section  11.1  of the
Declaration,  if any proposed amendment to the Declaration  provides for, or the
Trustees,  Sponsor or Administrators otherwise propose to effect, (i) any action
that would  adversely  affect the powers,  preferences  or special rights of the
Securities, whether by way of amendment to the Declaration or otherwise, or (ii)
the  Liquidation  of the Trust,  other than as  described  in Section 7.1 of the
Declaration,  then the Holders of outstanding  Securities,  voting together as a
single  class,  will be entitled to vote on such  amendment or proposal and such
amendment  or proposal  shall not be  effective  except with the approval of the
Holders of at least a Majority in liquidation amount of the Securities, affected
thereby;  provided,  however, if any amendment or proposal referred to in clause
(i) above would adversely affect only the Capital  Securities or only the Common
Securities,  then  only the  affected  class  will be  entitled  to vote on such
amendment  or proposal  and such  amendment  or proposal  shall not be effective
except with the  approval of a Majority in  liquidation  amount of such class of
Securities.

            (b) In the event the  consent  of the  Institutional  Trustee as the
holder of the  Debentures is required  under the  Indenture  with respect to any
amendment,  modification or termination of the Indenture or the Debentures,  the
Institutional  Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation  amount of the Securities  voting together as a single
class; provided, however, that where a consent under the Indenture would require
a Super Majority,  the  Institutional  Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities  which  the  relevant  Super  Majority  represents  of the  aggregate
principal amount of the Debentures outstanding.

            (c) Notwithstanding the foregoing,  no amendment or modification may
be made to the Declaration if such amendment or modification would (i) cause the
Trust to be classified for purposes of United States federal income  taxation as
other than a grantor trust, (ii) reduce or otherwise adversely affect the powers
of the Institutional Trustee or (iii) cause the Trust to be deemed an Investment
Company which is required to be registered under the Investment Company Act.

            (d) Notwithstanding  any provision of the Declaration,  the right of
any Holder of the Capital  Securities to receive  payment of  distributions  and
other payments upon  redemption or otherwise,  on or after their  respective due
dates,  or to  institute a suit for the  enforcement  of any such  payment on or
after such  respective  dates,  shall not be impaired  or  affected  without the
consent of such Holder.  For the  protection  and  enforcement  of the foregoing
provision,  each and every Holder of the Capital Securities shall be entitled to
such relief as can be given either at law or equity.


                                      I-12
<PAGE>

      8. Pro Rata. A reference in these terms of the  Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
of  the  Securities  according  to  the  aggregate  liquidation  amount  of  the
Securities held by the relevant Holder in relation to the aggregate  liquidation
amount of all Securities then outstanding  unless, in relation to a payment,  an
Event of  Default  has  occurred  and is  continuing,  in which  case any  funds
available to make such payment shall be paid first to each Holder of the Capital
Securities Pro Rata according to the aggregate liquidation amount of the Capital
Securities  held by the relevant  Holder  relative to the aggregate  liquidation
amount of all Capital Securities outstanding, and only after satisfaction of all
amounts  owed to the  Holders of the Capital  Securities,  to each Holder of the
Common Securities Pro Rata according to the aggregate  liquidation amount of the
Common  Securities  held  by the  relevant  Holder  relative  to  the  aggregate
liquidation amount of all Common Securities outstanding.

      9.  Ranking.  The  Capital  Securities  rank pari passu  with and  payment
thereon shall be made Pro Rata with the Common  Securities except that, where an
Event of Default has  occurred and is  continuing,  the rights of Holders of the
Common  Securities  to  receive  payment  of  Distributions  and  payments  upon
liquidation,  redemption  and  otherwise are  subordinated  to the rights of the
Holders  of the  Capital  Securities  with the  result  that no  payment  of any
Distribution  on, or  Redemption  Price (or  Special  Redemption  Price) of, any
Common Security,  and no other payment on account of redemption,  liquidation or
other acquisition of Common Securities,  shall be made unless payment in full in
cash of all accumulated  and unpaid  Distributions  on all  outstanding  Capital
Securities for all distribution  periods  terminating on or prior thereto, or in
the case of payment of the Redemption  Price (or Special  Redemption  Price) the
full  amount of such  Redemption  Price  (or  Special  Redemption  Price) on all
outstanding Capital Securities then called for redemption,  shall have been made
or  provided  for,  and all funds  immediately  available  to the  Institutional
Trustee  shall  first  be  applied  to  the  payment  in  full  in  cash  of all
Distributions on, or the Redemption Price (or Special  Redemption Price) of, the
Capital Securities then due and payable.

      10.  Acceptance  of Guarantee  and  Indenture.  Each Holder of the Capital
Securities  and the Common  Securities,  by the  acceptance of such  Securities,
agrees  to  the  provisions  of  the  Guarantee,   including  the  subordination
provisions therein and to the provisions of the Indenture.

      11. No  Preemptive  Rights.  The Holders of the  Securities  shall have no
preemptive or similar rights to subscribe for any additional securities.

      12. Miscellaneous.  These terms constitute a part of the Declaration.  The
Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture
to a Holder  without  charge on written  request to the Sponsor at its principal
place of business.


                                      I-13
<PAGE>

                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

      THIS  CAPITAL  SECURITY  IS A GLOBAL  SECURITY  WITHIN THE  MEANING OF THE
DECLARATION  HEREINAFTER  REFERRED  TO AND IS  REGISTERED  IN  THE  NAME  OF THE
DEPOSITORY  TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL  SECURITY IS
EXCHANGEABLE  FOR CAPITAL  SECURITIES  REGISTERED  IN THE NAME OF A PERSON OTHER
THAN DTC OR ITS  NOMINEE  ONLY IN THE  LIMITED  CIRCUMSTANCES  DESCRIBED  IN THE
DECLARATION,  AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF
THIS  CAPITAL  SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF
DTC TO DTC OR  ANOTHER  NOMINEE  OF DTC) MAY BE  REGISTERED  EXCEPT  IN  LIMITED
CIRCUMSTANCES.

      UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE
OF DTC TO FIRST  MERCHANTS  CAPITAL  TRUST II OR ITS AGENT FOR  REGISTRATION  OF
TRANSFER,  EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS  REQUESTED  BY AN  AUTHORIZED
REPRESENTATIVE  OF DTC (AND ANY PAYMENT  HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER  ENTITY AS IS  REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC),  ANY
TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

      THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED  (THE  "SECURITIES  ACT"),  ANY  STATE  SECURITIES  LAWS  OR  ANY  OTHER
APPLICABLE   SECURITIES   LAW.   NEITHER  THIS  SECURITY  NOR  ANY  INTEREST  OR
PARTICIPATION  HEREIN MAY BE REOFFERED,  SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED,
ENCUMBERED  OR  OTHERWISE  DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR
UNLESS SUCH  TRANSACTION  IS EXEMPT  FROM,  OR NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  AGREES  TO OFFER,  SELL OR
OTHERWISE  TRANSFER  THIS  SECURITY  ONLY (A) TO THE  SPONSOR OR THE TRUST,  (B)
PURSUANT TO A REGISTRATION  STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES  ACT,  (C) TO A  PERSON  WHOM THE  SELLER  REASONABLY  BELIEVES  IS A
QUALIFIED  INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS  SECURITY IS ELIGIBLE  FOR RESALE  PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S.  PERSON IN AN OFFSHORE  TRANSACTION
IN ACCORDANCE  WITH RULE 903 OR RULE 904 (AS  APPLICABLE)  OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN  INSTITUTIONAL  "ACCREDITED  INVESTOR"  WITHIN THE
MEANING  OF  SUBPARAGRAPH  (A) OF RULE  501  UNDER  THE  SECURITIES  ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT,  OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL  ACCREDITED  INVESTOR,  FOR INVESTMENT  PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION  WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION  REQUIREMENTS OF THE SECURITIES  ACT,  SUBJECT TO THE SPONSOR'S AND
THE  TRUST'S  RIGHT  PRIOR TO ANY SUCH  OFFER,  SALE OR  TRANSFER TO REQUIRE THE
DELIVERY  OF AN OPINION  OF  COUNSEL,  CERTIFICATION  AND/OR  OTHER  INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE


                                     A-1-1
<PAGE>

OBTAINED  FROM THE SPONSOR OR THE TRUST.  HEDGING  TRANSACTIONS  INVOLVING  THIS
SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

      THE  HOLDER  OF  THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  ALSO  AGREES,
REPRESENTS  AND  WARRANTS  THAT  IT  IS  NOT  AN  EMPLOYEE  BENEFIT,  INDIVIDUAL
RETIREMENT  ACCOUNT  OR  OTHER  PLAN OR  ARRANGEMENT  SUBJECT  TO TITLE I OF THE
EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  ("ERISA"),  OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"),  OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER  OR HOLDER IS  ELIGIBLE  FOR  EXEMPTIVE  RELIEF  AVAILABLE  UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED  TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER  APPLICABLE  EXEMPTION  OR ITS  PURCHASE AND HOLDING OF
THIS  SECURITY IS NOT  PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH  PURCHASE OR HOLDING.  ANY  PURCHASER OR HOLDER OF THE
SECURITIES  OR ANY INTEREST  THEREIN WILL BE DEEMED TO HAVE  REPRESENTED  BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE  BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA,  OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS  APPLICABLE,  A  TRUSTEE  OR OTHER  PERSON  ACTING  ON  BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY  EMPLOYEE  BENEFIT  PLAN OR PLAN TO  FINANCE  SUCH  PURCHASE,  OR (ii)  SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED  TRANSACTION UNDER SECTION 406 OF ERISA
OR  SECTION  4975 OF THE CODE FOR  WHICH  THERE IS NO  APPLICABLE  STATUTORY  OR
ADMINISTRATIVE EXEMPTION.

      THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED  ONLY IN BLOCKS HAVING
A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK
HAVING A LIQUIDATION  AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID
AND OF NO LEGAL EFFECT WHATSOEVER.

      THE HOLDER OF THIS SECURITY  AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

      IN CONNECTION WITH ANY TRANSFER,  THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY
THE  DECLARATION  TO  CONFIRM  THAT THE  TRANSFER  COMPLIES  WITH THE  FOREGOING
RESTRICTIONS.

      Certificate Number P-1                    55,000 Capital Securities
      [CUSIP NO. [_______]]

                                  July 2, 2007

              Certificate Evidencing Fixed/Floating Rate Capital Securities

                                       of

                        First Merchants Capital Trust II

               (liquidation amount $1,000.00 per Capital Security)


                                     A-1-2
<PAGE>

      First Merchants Capital Trust II, a statutory trust created under the laws
of the State of Delaware (the  "Trust"),  hereby  certifies that Cede & Co. (the
"Holder")  is  the  registered   owner  of  capital   securities  of  the  Trust
representing  undivided  beneficial  interests  in  the  assets  of  the  Trust,
(liquidation amount $1,000.00 per capital security) (the "Capital  Securities").
Subject to the  Declaration  (as  defined  below),  the Capital  Securities  are
transferable  on the  books  and  records  of the  Trust in  person or by a duly
authorized  attorney,  upon surrender of this  Certificate  duly endorsed and in
proper form for transfer.  The Capital Securities  represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions,  preferences
and other terms and provisions of the Capital  Securities  shall in all respects
be subject to, the  provisions of the Amended and Restated  Declaration of Trust
of the  Trust  dated as of July 2,  2007,  among  Jami L.  Bradshaw  and Mark K.
Hardwick,  as  Administrators,  Wilmington Trust Company,  as Delaware  Trustee,
Wilmington Trust Company, as Institutional Trustee, First Merchants Corporation,
as Sponsor,  and the holders from time to time of undivided beneficial interests
in the  assets  of the  Trust,  including  the  designation  of the terms of the
Capital  Securities  as set  forth  in  Annex I to  such  amended  and  restated
declaration  as the same may be amended  from time to time (the  "Declaration").
Capitalized  terms used herein but not defined shall have the meaning given them
in the  Declaration.  The Holder is entitled to the benefits of the Guarantee to
the extent provided therein. The Sponsor will provide a copy of the Declaration,
the  Guarantee,  and the  Indenture  to the Holder  without  charge upon written
request to the Sponsor at its principal place of business.

      Upon receipt of this Security,  the Holder is bound by the Declaration and
is entitled to the benefits thereunder.

      By acceptance  of this  Security,  the Holder agrees to treat,  for United
States  federal  income tax purposes,  the  Debentures as  indebtedness  and the
Capital Securities as evidence of beneficial ownership in the Debentures.

      This Capital  Security is governed by, and construed in  accordance  with,
the laws of the State of Delaware,  without  regard to principles of conflict of
laws.

                       Signatures appear on following page


                                     A-1-3
<PAGE>

      IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                    FIRST MERCHANTS CAPITAL TRUST II

                                    By:
                                       ---------------------------------------
                                       Name:
                                       Title:  Administrator

                          CERTIFICATE OF AUTHENTICATION

      This is one of the Capital Securities referred to in the  within-mentioned
Declaration.

                                    WILMINGTON TRUST COMPANY,
                                    as the Institutional Trustee

                                    By:
                                       ---------------------------------------
                                                  Authorized Officer


                                     A-1-4
<PAGE>

                      [FORM OF REVERSE OF CAPITAL SECURITY]

      Distributions  payable  on each  Capital  Security  will be  payable at an
annual rate equal to 6.495%  beginning on (and  including)  the date of original
issuance  and  ending  on  (but  excluding)  the  Distribution  Payment  Date in
September  2012 and at an annual rate for each  successive  period  beginning on
(and  including)  the  Distribution  Payment  Date in September  2012,  and each
succeeding  Distribution  Payment Date,  and ending on (but  excluding) the next
succeeding  Distribution Payment Date (each a "Distribution  Period"),  equal to
3-Month LIBOR,  determined as described  below,  plus 1.56% (the "Coupon Rate"),
applied to the stated liquidation amount of $1,000.00 per Capital Security, such
rate  being the rate of  interest  payable on the  Debentures  to be held by the
Institutional  Trustee.  Distributions  in arrears  will bear  interest  thereon
compounded  quarterly  at the  Distribution  Rate (to the  extent  permitted  by
applicable  law).  The  term   "Distributions"  as  used  herein  includes  cash
distributions  and any such compounded  distributions  unless otherwise noted. A
Distribution  is payable only to the extent that payments are made in respect of
the  Debentures  held  by  the  Institutional  Trustee  and to  the  extent  the
Institutional   Trustee  has  funds   available   therefor.   As  used   herein,
"Determination  Date" means the date that is two London  Banking  Days (i.e.,  a
business day in which dealings in deposits in U.S. dollars are transacted in the
London interbank market) preceding the commencement of the relevant Distribution
Period. The amount of the Distribution  payable (i) for any Distribution  Period
commencing on or after the date of original issuance but before the Distribution
Payment Date in  September  2012 will be computed on the basis of a 360-day year
of twelve 30-day months, and (ii) for the Distribution  Period commencing on the
Distribution  Payment Date in September  2012 and each  succeeding  Distribution
Period  will be  calculated  by  applying  the  Distribution  Rate to the stated
liquidation amount outstanding at the commencement of the Distribution Period on
the basis of the  actual  number of days in the  Distribution  Period  concerned
divided by 360.

      "3-Month  LIBOR"  as used  herein,  means  the  London  interbank  offered
interest rate for three-month  U.S. dollar deposits  determined by the Debenture
Trustee  in the  following  order  of  priority:  (i) the rate  (expressed  as a
percentage per annum) for U.S.  dollar  deposits  having a three-month  maturity
that  appears on Reuters  Page  LIBOR01  as of 11:00 a.m.  (London  time) on the
related  Determination Date ("Reuters Page LIBOR01" means the display designated
as "LIBOR01"  on Reuters or such other page as may replace  Reuters Page LIBOR01
on that  service or such other  service or services as may be  nominated  by the
British  Bankers'  Association  as the  information  vendor  for the  purpose of
displaying  London interbank  offered rates for U.S. dollar  deposits);  (ii) if
such rate cannot be identified on the related  Determination Date, the Debenture
Trustee will request the principal  London  offices of four leading banks in the
London interbank market to provide such banks' offered quotations  (expressed as
percentages  per annum) to prime banks in the London  interbank  market for U.S.
dollar deposits having a three-month  maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided,  3-Month LIBOR
will be the  arithmetic  mean of such  quotations;  (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will  request  four  major New York City banks to provide  such  banks'  offered
quotations  (expressed as percentages  per annum) to leading  European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at  least  two  such  quotations  are  provided,  3-Month  LIBOR  will be the
arithmetic mean of such  quotations;  and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution  Period immediately  preceding
such current  Distribution Period. If the rate for U.S. dollar deposits having a
three-month  maturity that initially appears on Reuters Page LIBOR01 as of 11:00
a.m.  (London  time) on the  related  Determination  Date is  superseded  on the
Reuters  Page LIBOR01 by a corrected  rate by 12:00 noon  (London  time) on such
Determination  Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.

      The  Distribution  Rate  for any  Distribution  Period  will at no time be
higher than the maximum  rate then  permitted by New York law as the same may be
modified by United States law.


                                     A-1-5
<PAGE>

      All percentages  resulting from any calculations on the Capital Securities
will be  rounded,  if  necessary,  to the nearest  one  hundred-thousandth  of a
percentage point, with five  one-millionths of a percentage point rounded upward
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all
dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).

      Except  as  otherwise  described  below,   Distributions  on  the  Capital
Securities  will be cumulative,  will accrue from the date of original  issuance
and will be payable  quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date") (it being
understood  that  interest  accrues  for any such  non-Business  Day  during the
applicable  Distribution  Period,  beginning on or after  September  15,  2012),
commencing on the  Distribution  Payment Date in September  2007.  The Debenture
Issuer has the right under the  Indenture  to defer  payments of interest on the
Debentures,  so long as no  Acceleration  Event of Default has  occurred  and is
continuing,  by extending the interest  payment  period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the  Debentures,  subject to the  conditions  described  below,  during which
Extension  Period no interest  shall be due and  payable.  During any  Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period,  compounded  quarterly from the date such
interest  would have been payable were it not for the Extension  Period,  to the
extent  permitted  by law (such  interest  referred  to  herein  as  "Additional
Interest").  No  Extension  Period may end on a date  other than a  Distribution
Payment  Date. At the end of any such  Extension  Period,  the Debenture  Issuer
shall pay all interest then accrued and unpaid on the Debentures  (together with
Additional Interest thereon);  provided,  however,  that no Extension Period may
extend  beyond the Maturity  Date.  Prior to the  termination  of any  Extension
Period, the Debenture Issuer may further extend such period,  provided that such
period  together  with all such  previous  and  further  consecutive  extensions
thereof shall not exceed 20 consecutive  quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing  requirements.  No
interest or  Additional  Interest  shall be due and payable  during an Extension
Period,  except at the end thereof,  but each installment of interest that would
otherwise  have been due and payable  during such  Extension  Period  shall bear
Additional Interest.  During any Extension Period,  Distributions on the Capital
Securities  shall be deferred for a period  equal to the  Extension  Period.  If
Distributions are deferred, the Distributions due shall be paid on the date that
the related  Extension Period  terminates,  to Holders of the Securities as they
appear on the books and  records  of the Trust on the  record  date  immediately
preceding such date.  Distributions  on the Securities must be paid on the dates
payable  (after giving  effect to any  Extension  Period) to the extent that the
Trust has funds available for the payment of such  distributions in the Property
Account of the Trust.  The  Trust's  funds  available  for  Distribution  to the
Holders  of the  Securities  will be  limited  to  payments  received  from  the
Debenture  Issuer.  The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

      The Capital Securities shall be redeemable as provided in the Declaration.

                                     A-1-6
<PAGE>

                                   ASSIGNMENT

      FOR VALUE  RECEIVED,  the  undersigned  assigns and transfers this Capital
Security Certificate to:

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

      (Insert assignee's social security or tax identification number)
                                                                       --------

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

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

      (Insert address and zip code of assignee) and irrevocably appoints

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

      agent to transfer this Capital  Security  Certificate  on the books of the
Trust. The agent may substitute another to act for him or her.

      Date:
           -------------------------

      Signature:
                --------------------

            (Sign exactly as your name appears on the other side of this Capital
Security Certificate)

      Signature Guarantee:(1)

-----------------
(1)   Signature must be guaranteed by an "eligible  guarantor  institution" that
      is a bank,  stockbroker,  savings  and loan  association  or credit  union
      meeting the  requirements of the Security  registrar,  which  requirements
      include  membership or  participation  in the Securities  Transfer  Agents
      Medallion Program ("STAMP") or such other "signature guarantee program" as
      may  be  determined  by the  Security  registrar  in  addition  to,  or in
      substitution  for, STAMP,  all in accordance with the Securities  Exchange
      Act of 1934, as amended.


                                     A-1-7
<PAGE>

                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

      THIS COMMON SECURITY HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

      THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 8.1
OF THE DECLARATION.

      Certificate Number C-1                            1,702 Common Securities

                                  July 2, 2007

          Certificate Evidencing Fixed/Floating Rate Common Securities

                                       of

                        First Merchants Capital Trust II

      First Merchants Capital Trust II, a statutory trust created under the laws
of the State of Delaware (the "Trust"),  hereby  certifies that First  Merchants
Corporation (the "Holder") is the registered  owner of common  securities of the
Trust  representing  undivided  beneficial  interests in the assets of the Trust
(the "Common Securities").  The Common Securities  represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions,  preferences
and other terms and provisions of the Common Securities shall in all respects be
subject to, the  provisions of the Amended and Restated  Declaration of Trust of
the Trust dated as of July 2, 2007, among Jami L. Bradshaw and Mark K. Hardwick,
as  Administrators,  Wilmington Trust Company,  as Delaware Trustee,  Wilmington
Trust  Company,  as  Institutional  Trustee,  First  Merchants  Corporation,  as
Sponsor,  and the holders from time to time of undivided  beneficial interest in
the assets of the Trust  including  the  designation  of the terms of the Common
Securities as set forth in Annex I to such amended and restated declaration,  as
the same may be amended from time to time (the "Declaration"). Capitalized terms
used  herein  but  not  defined  shall  have  the  meaning  given  them  in  the
Declaration.  The Holder is entitled to the  benefits  of the  Guarantee  to the
extent provided therein. The Sponsor will provide a copy of the Declaration, the
Guarantee and the Indenture to the Holder without charge upon written request to
the Sponsor at its principal place of business.

      As set forth in the Declaration, when an Event of Default has occurred and
is continuing,  the rights of Holders of Common Securities to payment in respect
of  Distributions  and payments  upon  Liquidation,  redemption or otherwise are
subordinated to the rights of payment of Holders of the Capital Securities.

      Upon receipt of this  Certificate,  the Holder is bound by the Declaration
and is entitled to the benefits thereunder.

      By acceptance of this Certificate,  the Holder agrees to treat, for United
States  federal  income tax purposes,  the  Debentures as  indebtedness  and the
Common  Securities  as  evidence  of  undivided   beneficial  ownership  in  the
Debentures.

      This Common Security is governed by, and construed in accordance with, the
laws of the State of Delaware, without regard to principles of conflict of laws.


                                     A-2-1
<PAGE>

      IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                    FIRST MERCHANTS CAPITAL TRUST II

                                    By:
                                       ---------------------------------------
                                       Name:
                                       Title: Administrator


                                     A-2-2
<PAGE>

                      [FORM OF REVERSE OF COMMON SECURITY]

      Distributions payable on each Common Security will be payable at an annual
rate equal to 6.495% beginning on (and including) the date of original  issuance
and ending on (but  excluding) the  Distribution  Payment Date in September 2012
and at an annual rate for each  successive  period  beginning on (and including)
the   Distribution   Payment  Date  in  September   2012,  and  each  succeeding
Distribution  Payment Date, and ending on (but  excluding)  the next  succeeding
Distribution  Payment  Date  (each a  "Distribution  Period"),  equal to 3-Month
LIBOR, determined as described below, plus 1.56% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Common Security,  such rate being
the rate of interest  payable on the Debentures to be held by the  Institutional
Trustee.   Distributions  in  arrears  will  bear  interest  thereon  compounded
quarterly at the Distribution  Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded  distributions unless otherwise noted. A Distribution is payable only
to the extent that  payments are made in respect of the  Debentures  held by the
Institutional  Trustee  and to the extent the  Institutional  Trustee  has funds
available therefor. As used herein,  "Determination Date" means the date that is
two London  Banking Days (i.e.,  a business day in which dealings in deposits in
U.S.  dollars are  transacted  in the London  interbank  market)  preceding  the
commencement of the relevant Distribution Period. The amount of the Distribution
payable  (i) for any  Distribution  Period  commencing  on or after  the date of
original  issuance but before the  Distribution  Payment Date in September  2012
will be computed on the basis of a 360-day  year of twelve  30-day  months,  and
(ii) for the Distribution Period commencing on the Distribution  Payment Date in
September  2012 and each  succeeding  Distribution  Period will be calculated by
applying the Distribution Rate to the stated  liquidation  amount outstanding at
the commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.

      "3-Month  LIBOR"  as used  herein,  means  the  London  interbank  offered
interest rate for three-month  U.S. dollar deposits  determined by the Debenture
Trustee  in the  following  order  of  priority:  (i) the rate  (expressed  as a
percentage per annum) for U.S.  dollar  deposits  having a three-month  maturity
that  appears on Reuters  Page  LIBOR01  as of 11:00 a.m.  (London  time) on the
related  Determination Date ("Reuters Page LIBOR01" means the display designated
as "LIBOR01"  on Reuters or such other page as may replace  Reuters Page LIBOR01
on that  service or such other  service or services as may be  nominated  by the
British  Bankers'  Association  as the  information  vendor  for the  purpose of
displaying  London interbank  offered rates for U.S. dollar  deposits);  (ii) if
such rate cannot be identified on the related  Determination Date, the Debenture
Trustee will request the principal  London  offices of four leading banks in the
London interbank market to provide such banks' offered quotations  (expressed as
percentages  per annum) to prime banks in the London  interbank  market for U.S.
dollar deposits having a three-month  maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided,  3-Month LIBOR
will be the  arithmetic  mean of such  quotations;  (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will  request  four  major New York City banks to provide  such  banks'  offered
quotations  (expressed as percentages  per annum) to leading  European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at  least  two  such  quotations  are  provided,  3-Month  LIBOR  will be the
arithmetic mean of such  quotations;  and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution  Period immediately  preceding
such current  Distribution Period. If the rate for U.S. dollar deposits having a
three-month  maturity that initially appears on Reuters Page LIBOR01 as of 11:00
a.m.  (London  time) on the  related  Determination  Date is  superseded  on the
Reuters  Page LIBOR01 by a corrected  rate by 12:00 noon  (London  time) on such
Determination  Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.

      The  Distribution  Rate  for any  Distribution  Period  will at no time be
higher than the maximum  rate then  permitted by New York law as the same may be
modified by United States law.


                                     A-2-3
<PAGE>

      All percentages  resulting from any calculations on the Common  Securities
will be  rounded,  if  necessary,  to the nearest  one  hundred-thousandth  of a
percentage point, with five  one-millionths of a percentage point rounded upward
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all
dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).

      Except  as  otherwise   described  below,   Distributions  on  the  Common
Securities  will be cumulative,  will accrue from the date of original  issuance
and will be payable  quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date") (it being
understood  that  interest  accrues  for any such  non-Business  Day  during the
applicable  Distribution  Period,  beginning on or after  September  15,  2012),
commencing on the  Distribution  Payment Date in September  2007.  The Debenture
Issuer has the right under the  Indenture  to defer  payments of interest on the
Debentures,  so long as no  Acceleration  Event of Default has  occurred  and is
continuing,  by extending the interest  payment  period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the  Debentures,  subject to the  conditions  described  below,  during which
Extension  Period no interest  shall be due and  payable.  During any  Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period,  compounded  quarterly from the date such
interest  would have been payable were it not for the Extension  Period,  to the
extent  permitted  by law (such  interest  referred  to  herein  as  "Additional
Interest").  No  Extension  Period may end on a date  other than a  Distribution
Payment  Date. At the end of any such  Extension  Period,  the Debenture  Issuer
shall pay all interest then accrued and unpaid on the Debentures  (together with
Additional Interest thereon);  provided,  however,  that no Extension Period may
extend  beyond the Maturity  Date.  Prior to the  termination  of any  Extension
Period, the Debenture Issuer may further extend such period,  provided that such
period  together  with all such  previous  and  further  consecutive  extensions
thereof shall not exceed 20 consecutive  quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing  requirements.  No
interest or  Additional  Interest  shall be due and payable  during an Extension
Period,  except at the end thereof,  but each installment of interest that would
otherwise  have been due and payable  during such  Extension  Period  shall bear
Additional  Interest.  During any Extension Period,  Distributions on the Common
Securities  shall be deferred for a period  equal to the  Extension  Period.  If
Distributions are deferred, the Distributions due shall be paid on the date that
the related  Extension Period  terminates,  to Holders of the Securities as they
appear on the books and  records  of the Trust on the  record  date  immediately
preceding such date.  Distributions  on the Securities must be paid on the dates
payable  (after giving  effect to any  Extension  Period) to the extent that the
Trust has funds available for the payment of such  distributions in the Property
Account of the Trust.  The  Trust's  funds  available  for  Distribution  to the
Holders  of the  Securities  will be  limited  to  payments  received  from  the
Debenture Issuer.

      The Common Securities shall be redeemable as provided in the Declaration.


                                     A-2-4
<PAGE>

                                   ASSIGNMENT

      FOR VALUE  RECEIVED,  the  undersigned  assigns and transfers  this Common
Security Certificate to:

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

      (Insert assignee's social security or tax identification number)
                                                                      ----------

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

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

      (Insert address and zip code of assignee) and irrevocably appoints

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

                                                                         agent
                  ------------------------------------------------------
                  to transfer  this Common  Security  Certificate  on the books
                  of the Trust. The agent may substitute another to act for him
                  or her.

                  Date:
                       -------------------------------

                  Signature:
                            --------------------------

                  (Sign  exactly as your name  appears  on the other  side of
                  this  Common Security Certificate)

                  Signature:
                            --------------------------

                  (Sign  exactly as your name  appears  on the other  side of
                  this  Common Security Certificate)

      Signature Guarantee(2)

-----------------
(2)   Signature must be guaranteed by an "eligible  guarantor  institution" that
      is a bank,  stockbroker,  savings and loan  association  or credit  union,
      meeting the  requirements of the Security  registrar,  which  requirements
      include  membership or  participation  in the Securities  Transfer  Agents
      Medallion Program ("STAMP") or such other "signature guarantee program" as
      may  be  determined  by the  Security  registrar  in  addition  to,  or in
      substitution  for, STAMP,  all in accordance with the Securities  Exchange
      Act of 1934, as amended.


                                     A-2-5
<PAGE>

                                    EXHIBIT B

                          SPECIMEN OF INITIAL DEBENTURE

                              (See Document No. 17)


                                      B-1
<PAGE>

                                    EXHIBIT C

                               PLACEMENT AGREEMENT

                              (See Document No. 1)


                                       C-1


<PAGE>

                                   Exhibit 4.2

                   =========================================

                          FIRST MERCHANTS CORPORATION,
                                    as Issuer

                                    INDENTURE

                            Dated as of July 2, 2007

                            WILMINGTON TRUST COMPANY,
                                   as Trustee

     FIXED/FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

                                    DUE 2037

                   =========================================
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I. DEFINITIONS ....................................................    1

    Section 1.1. Definitions ..............................................    1

ARTICLE II. DEBENTURES ....................................................    8

    Section 2.1. Authentication and Dating ................................    8
    Section 2.2. Form of Trustee's Certificate of Authentication ..........    9
    Section 2.3. Form and Denomination of Debentures ......................    9
    Section 2.4. Execution of Debentures ..................................   10
    Section 2.5. Exchange and Registration of Transfer of Debentures ......   10
    Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures ..........   12
    Section 2.7. Temporary Debentures .....................................   13
    Section 2.8. Payment of Interest and Additional Interest ..............   13
    Section 2.9. Cancellation of Debentures Paid, etc .....................   14
    Section 2.10. Computation of Interest .................................   14
    Section 2.11. Extension of Interest Payment Period ....................   16
    Section 2.12. CUSIP Numbers ...........................................   17
    Section 2.13. Global Debentures .......................................   17

ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY ..........................   19

    Section 3.1. Payment of Principal, Premium and Interest; Agreed
                 Treatment of the Debentures ..............................   19
    Section 3.2. Offices for Notices and Payments, etc ....................   19
    Section 3.3. Appointments to Fill Vacancies in Trustee's Office .......   20
    Section 3.4. Provision as to Paying Agent .............................   20
    Section 3.5. Certificate to Trustee ...................................   21
    Section 3.6. Additional Sums ..........................................   21
    Section 3.7. Compliance with Consolidation Provisions .................   21
    Section 3.8. Limitation on Dividends ..................................   21
    Section 3.9. Covenants as to the Trust ................................   22
    Section 3.10. Additional Junior Indebtedness ..........................   22
    Section 3.11. Subsidiary; Insured Depository Institution ..............   22

ARTICLE IV. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND
            THE TRUSTEE ...................................................   23

    Section 4.1. Securityholders' Lists ...................................   23
    Section 4.2. Preservation and Disclosure of Lists .....................   23
    Section 4.3. Reports by the Company ...................................   24

ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN
           EVENT OF DEFAULT ...............................................   24

    Section 5.1. Events of Default ........................................   24
    Section 5.2. Payment of Debentures on Default; Suit Therefor ..........   26
    Section 5.3. Application of Moneys Collected by Trustee ...............   27
    Section 5.4. Proceedings by Securityholders ...........................   28


                                       i
<PAGE>

    Section 5.5.  Proceedings by Trustee ..................................   28
    Section 5.6.  Remedies Cumulative and Continuing; Delay or
                  Omission Not a Waiver ...................................   28
    Section 5.7.  Direction of Proceedings and Waiver of Defaults by
                  Majority of Securityholders .............................   28
    Section 5.8.  Notice of Defaults ......................................   29
    Section 5.9.  Undertaking to Pay Costs ................................   29

ARTICLE VI. CONCERNING THE TRUSTEE ........................................   30

    Section 6.1.  Duties and Responsibilities of Trustee ..................   30
    Section 6.2.  Reliance on Documents, Opinions, etc ....................   30
    Section 6.3.  No Responsibility for Recitals, etc .....................   31
    Section 6.4.  Trustee, Authenticating Agent, Paying Agents,
                  Transfer Agents or Registrar May Own Debentures .........   32
    Section 6.5.  Moneys to be Held in Trust ..............................   32
    Section 6.6.  Compensation and Expenses of Trustee ....................   32
    Section 6.7.  Officers' Certificate as Evidence .......................   33
    Section 6.8.  Eligibility of Trustee ..................................   33
    Section 6.9.  Resignation or Removal of Trustee .......................   33
    Section 6.10. Acceptance by Successor Trustee .........................   34
    Section 6.11. Succession by Merger, etc ...............................   35
    Section 6.12. Authenticating Agents ...................................   35

ARTICLE VII. CONCERNING THE SECURITYHOLDERS ...............................   36

    Section 7.1.  Action by Securityholders ...............................   36
    Section 7.2.  Proof of Execution by Securityholders ...................   37
    Section 7.3.  Who Are Deemed Absolute Owners ..........................   37
    Section 7.4.  Debentures Owned by Company Deemed Not Outstanding ......   37
    Section 7.5.  Revocation of Consents; Future Holders Bound ............   37

ARTICLE VIII. SECURITYHOLDERS' MEETINGS ...................................   38

    Section 8.1.  Purposes of Meetings ....................................   38
    Section 8.2.  Call of Meetings by Trustee .............................   38
    Section 8.3.  Call of Meetings by Company or Securityholders ..........   38
    Section 8.4.  Qualifications for Voting ...............................   38
    Section 8.5.  Regulations .............................................   38
    Section 8.6.  Voting ..................................................   39
    Section 8.7.  Quorum; Actions .........................................   39

ARTICLE IX. SUPPLEMENTAL INDENTURES .......................................   40

    Section 9.1.  Supplemental Indentures without Consent of
                  Securityholders .........................................   40
    Section 9.2.  Supplemental Indentures with Consent of
                  Securityholders .........................................   41
    Section 9.3.  Effect of Supplemental Indentures .......................   42
    Section 9.4.  Notation on Debentures ..................................   42
    Section 9.5.  Evidence of Compliance of Supplemental Indenture to
                  be Furnished to Trustee .................................   42

ARTICLE X. REDEMPTION OF SECURITIES .......................................   42

    Section 10.1. Optional Redemption .....................................   42
    Section 10.2. Special Event Redemption ................................   43


                                       ii

<PAGE>

    Section 10.3.  Notice of Redemption;  Selection of Debentures .........   43
    Section 10.4.  Payment of Debentures Called for Redemption ............   44

ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE .............   44

    Section 11.1.  Company May Consolidate, etc., on Certain Terms ........   44
    Section 11.2.  Successor Entity to be Substituted .....................   44
    Section 11.3.  Opinion of Counsel to be Given to Trustee ..............   45

ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE ......................   45

    Section 12.1.  Discharge of Indenture .................................   45
    Section 12.2.  Deposited Moneys to be Held in Trust by Trustee ........   46
    Section 12.3.  Paying Agent to Repay Moneys Held ......................   46
    Section 12.4.  Return of Unclaimed Moneys .............................   46

ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
              DIRECTORS ...................................................   46

    Section 13.1.  Indenture and Debentures Solely Corporate
                   Obligations ............................................   46

ARTICLE XIV. MISCELLANEOUS PROVISIONS .....................................   46

    Section 14.1.  Successors .............................................   46
    Section 14.2.  Official Acts by Successor Entity ......................   46
    Section 14.3.  Surrender of Company Powers ............................   46
    Section 14.4.  Addresses for Notices, etc .............................   47
    Section 14.5.  Governing Law ..........................................   47
    Section 14.6.  Evidence of Compliance with Conditions Precedent .......   47
    Section 14.7.  Table of Contents, Headings, etc .......................   47
    Section 14.8.  Execution in Counterparts ..............................   47
    Section 14.9.  Separability ...........................................   47
    Section 14.1.  Assignment .............................................   48
    Section 14.1.  Acknowledgment of Rights ...............................   48

ARTICLE XV. SUBORDINATION OF DEBENTURES ...................................   48

    Section 15.1.  Agreement to Subordinate ...............................   48
    Section 15.2.  Default on Senior Indebtedness .........................   48
    Section 15.3.  Liquidation, Dissolution, Bankruptcy ...................   49
    Section 15.4.  Subrogation ............................................   50
    Section 15.5.  Trustee to Effectuate Subordination ....................   50
    Section 15.6.  Notice by the Company ..................................   51
    Section 15.7.  Rights of the Trustee; Holders of Senior
                   Indebtedness ...........................................   51
    Section 15.8.  Subordination May Not Be Impaired ......................   52

Exhibit A   Form of Fixed/Floating Rate Junior Subordinated
            Deferrable Interest Debenture
Exhibit B   Form of Certificate to Trustee
Exhibit C   Form of Quarterly Report


                                      iii
<PAGE>


      THIS  INDENTURE,  dated  as of  July  2,  2007,  between  First  Merchants
Corporation,  an Indiana  corporation  (the  "Company"),  and  Wilmington  Trust
Company, a Delaware banking corporation, as debenture trustee (the "Trustee").

                                       WITNESSETH:

      WHEREAS,  for  its  lawful  corporate  purposes,   the  Company  has  duly
authorized  the  issuance  of  its  Fixed/Floating   Rate  Junior   Subordinated
Deferrable  Interest Debentures due 2037 (the "Debentures") under this Indenture
to provide,  among other things, for the execution and authentication,  delivery
and administration thereof, and the Company has duly authorized the execution of
this Indenture; and

      WHEREAS,  all acts and things  necessary  to make this  Indenture  a valid
agreement according to its terms, have been done and performed;

      NOW, THEREFORE, This Indenture Witnesseth:

      In  consideration  of the premises,  and the purchase of the Debentures by
the holders thereof,  the Company  covenants and agrees with the Trustee for the
equal and proportionate  benefit of the respective  holders from time to time of
the Debentures as follows:

                                   ARTICLE I.
                                   DEFINITIONS

      Section 1.1. Definitions. The terms defined in this Section 1.1 (except as
herein otherwise  expressly  provided or unless the context otherwise  requires)
for all purposes of this  Indenture  and of any  indenture  supplemental  hereto
shall have the respective meanings specified in this Section 1.1. All accounting
terms used herein and not expressly  defined shall have the meanings assigned to
such terms in accordance with generally accepted  accounting  principles and the
term "generally accepted accounting principles" means such accounting principles
as are generally  accepted in the United States at the time of any  computation.
The words  "herein,"  "hereof" and "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.

      "Acceleration  Event of Default"  means an Event of Default  under Section
5.1(a),  (d),  (e) or (f),  whatever the reason for such  Acceleration  Event of
Default  and  whether it shall be  voluntary  or  involuntary  or be effected by
operation  of law or pursuant to any  judgment,  decree or order of any court or
any order, rule or regulation of any administrative or governmental body.

      "Additional Interest" has the meaning set forth in Section 2.11.

      "Additional Junior Indebtedness" means, without duplication and other than
the Debentures, any indebtedness,  liabilities or obligations of the Company, or
any Subsidiary of the Company,  under debt  securities (or guarantees in respect
of debt  securities)  initially  issued after the date of this  Indenture to any
trust, or a trustee of a trust,  partnership or other entity affiliated with the
Company that is, directly or indirectly,  a finance  subsidiary (as such term is
defined  in Rule  3a-5  under  the  Investment  Company  Act of  1940)  or other
financing  vehicle of the Company or any Subsidiary of the Company in connection
with the issuance by that entity of  preferred  securities  or other  securities
that  are  eligible  to  qualify  for  Tier 1  capital  treatment  (or its  then
equivalent)  for  purposes of the  capital  adequacy  guidelines  of the Federal
Reserve,  as then in effect and applicable to the Company (or, if the Company is
not a bank holding  company,  such  guidelines  applied to the Company as if the
Company were subject to such guidelines);  provided, however, that the inability
of the Company to treat all or any portion of the Additional Junior Indebtedness
as Tier 1 capital shall not disqualify it as Additional  Junior  Indebtedness if
such  inability  results from the Company  having  cumulative  preferred  stock,
minority interests in consolidated


                                       1
<PAGE>

subsidiaries,  or any other  class of  security  or  interest  which the Federal
Reserve now or may  hereafter  accord Tier 1 capital  treatment  (including  the
Debentures)  in excess of the amount  which may qualify for  treatment as Tier 1
capital under applicable capital adequacy guidelines.

      "Additional Sums" has the meaning set forth in Section 3.6.

      "Affiliate"  has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.

      "Applicable  Depositary Procedures" means, with respect to any transfer or
transaction  involving a Global Debenture or beneficial  interest  therein,  the
rules and procedures of the Depositary for such  Debenture,  in each case to the
extent applicable to such transaction and as in effect from time to time.

      "Authenticating  Agent" means any agent or agents of the Trustee  which at
the time shall be appointed and acting pursuant to Section 6.12.

      "Bankruptcy  Law" means Title 11,  U.S.  Code,  or any similar  federal or
state law for the relief of debtors.

      "Board  of  Directors"  means  the  board of  directors  or the  executive
committee or any other duly authorized designated officers of the Company.

      "Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant  Secretary of the Company to have been duly adopted by the Board
of  Directors  and  to be  in  full  force  and  effect  on  the  date  of  such
certification and delivered to the Trustee.

      "Business  Day" means any day other than a  Saturday,  Sunday or any other
day on which banking  institutions in New York City or Wilmington,  Delaware are
permitted or required by any applicable law or executive order to close.

      "Capital Securities" means undivided beneficial interests in the assets of
the Trust  which  rank pari passu with  Common  Securities  issued by the Trust;
provided,  however,  that upon the  occurrence  and  continuance  of an Event of
Default  (as defined in the  Declaration),  the rights of holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption  and  otherwise  are  subordinated  to the  rights of holders of such
Capital Securities.

      "Capital  Securities  Guarantee"  means the guarantee  agreement  that the
Company enters into with  Wilmington  Trust Company,  as guarantee  trustee,  or
other Persons that operates directly or indirectly for the benefit of holders of
Capital Securities of the Trust.

      "Capital  Treatment  Event" means the receipt by the Company and the Trust
of an opinion of counsel  experienced  in such matters to the effect that,  as a
result of the occurrence of any amendment to, or change (including any announced
prospective  change) in, the laws,  rules or regulations of the United States or
any political  subdivision  thereof or therein, or as the result of any official
or administrative  pronouncement or action or decision  interpreting or applying
such laws, rules or regulations, which amendment or change is effective or which
pronouncement,  action or decision is announced on or after the date of original
issuance of the Debentures,  there is more than an  insubstantial  risk that the
Company  will not,  within 90 days of the date of such  opinion,  be entitled to
treat an  amount  equal  to the  aggregate  liquidation  amount  of the  Capital
Securities  as "Tier 1 Capital"  (or its then  equivalent)  for  purposes of the
capital  adequacy  guidelines  of the  Federal  Reserve,  as then in effect  and
applicable to the Company (or if the Company is not a bank holding company or is
otherwise  not  subject to the Federal  Reserve's  risk-based  capital  adequacy
guidelines,  such  guidelines  applied  to the  Company as if the  Company  were


                                       2
<PAGE>

subject  to such  guidelines);  provided,  however,  that the  inability  of the
Company to treat all or any  portion of the  liquidation  amount of the  Capital
Securities  as Tier l  Capital  shall  not  constitute  the  basis for a Capital
Treatment  Event, if such inability  results from the Company having  cumulative
preferred stock, minority interests in consolidated  subsidiaries,  or any other
class of security or interest  which the Federal  Reserve or OTS, as applicable,
may now or  hereafter  accord Tier 1 Capital  treatment  in excess of the amount
which  may now or  hereafter  qualify  for  treatment  as Tier 1  Capital  under
applicable  capital adequacy  guidelines;  provided further,  however,  that the
distribution of Debentures in connection with the liquidation of the Trust shall
not  in  and  of  itself  constitute  a  Capital  Treatment  Event  unless  such
liquidation  shall have occurred in connection with a Tax Event or an Investment
Company Event.

      "Certificate"  means a  certificate  signed  by any  one of the  principal
executive officer,  the principal financial officer or the principal  accounting
officer of the Company.

      "Common Securities" means undivided  beneficial interests in the assets of
the Trust  which rank pari passu with  Capital  Securities  issued by the Trust;
provided,  however,  that upon the  occurrence  and  continuance  of an Event of
Default  (as defined in the  Declaration),  the rights of holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption  and  otherwise  are  subordinated  to the  rights of holders of such
Capital Securities.

      "Company" means First Merchants Corporation, an Indiana corporation,  and,
subject to the  provisions  of Article  XI,  shall  include its  successors  and
assigns.

      "Comparable  Treasury Issue" means with respect to any Special  Redemption
Date the United States  Treasury  security  selected by the  Quotation  Agent as
having a maturity  comparable to the Fixed Rate Period Remaining Life that would
be utilized, at the time of selection and in accordance with customary financial
practice,  in pricing new issues of  corporate  debt  securities  of  comparable
maturity to the Fixed Rate Period  Remaining  Life. If no United States Treasury
security  has a maturity  which is within a period from three  months  before to
three  months after the Interest  Payment Date in September  2012,  the two most
closely corresponding fixed,  non-callable United States Treasury securities, as
selected by the Quotation Agent, shall be used as the Comparable Treasury Issue,
and the Treasury Rate shall be  interpolated  or extrapolated on a straight-line
basis, rounding to the nearest month using such securities.

      "Comparable  Treasury  Price"  means  (a) the  average  of five  Reference
Treasury Dealer Quotations for such Special Redemption Date, after excluding the
highest and lowest such  Reference  Treasury  Dealer  Quotations,  or (b) if the
Quotation  Agent  obtains  fewer  than  five  such  Reference   Treasury  Dealer
Quotations, the average of all such Quotations.

      "Coupon Rate" has the meaning set forth in Section 2.8.

      "Debenture" or "Debentures" has the meaning stated in the first recital of
this Indenture.

      "Debenture Register" has the meaning specified in Section 2.5.

      "Declaration"  means the Amended and Restated  Declaration of Trust of the
Trust, as amended or supplemented from time to time.

      "Default"  means any event,  act or condition that with notice or lapse of
time, or both, would constitute an Event of Default.

      "Defaulted Interest" has the meaning set forth in Section 2.8.


                                       3
<PAGE>

      "Depositary"  means an organization  registered as a clearing agency under
the  Exchange  Act  that is  designated  as  Depositary  by the  Company  or any
successor thereto. The initial Depositary will be DTC.

      "Depositary  Participant"  means a broker,  dealer,  bank, other financial
institution  or other  Person  for whom from time to time a  Depositary  effects
book-entry transfers and pledges of securities deposited with the Depositary.

      "Determination Date" has the meaning set forth in Section 2.10.

      "Distribution Period" means (i) with respect to interest paid on the first
Interest  Payment  Date,  the period  beginning on (and  including)  the date of
original  issuance and ending on (but  excluding)  the Interest  Payment Date in
September  2007 and (ii)  thereafter,  with  respect  to  interest  paid on each
successive  Interest  Payment Date, the period  beginning on (and including) the
preceding  Interest  Payment  Date and ending on (but  excluding)  such  current
Interest Payment Date.

      "DTC" means the Depository Trust Company, a New York corporation.

      "Event of Default" means any event specified in Section 5.1, continued for
the period of time, if any, and after the giving of the notice,  if any, therein
designated.

      "Exchange Act" means the Securities  Exchange Act of 1934, as amended from
time to time, or any successor legislation.

      "Extension Period" has the meaning set forth in Section 2.11.

      "Federal  Reserve"  means the Board of  Governors  of the Federal  Reserve
System,  or its  designated  district  bank,  as  applicable,  and any successor
federal  agency that is primarily  responsible  for regulating the activities of
bank holding companies.

      "Fixed Rate Period  Remaining Life" means,  with respect to any Debenture,
the period from the Special  Redemption  Date for such Debenture to the Interest
Payment Date in September 2012.

      "Global  Debenture"  means a security  that  evidences  all or part of the
Debentures,  the  ownership  and  transfers  of which shall be made through book
entries by a Depositary.

      "Indenture" means this instrument as originally executed or, if amended or
supplemented as herein provided, as so amended or supplemented, or both.

      "Institutional Trustee" has the meaning set forth in the Declaration.

      "Interest Payment Date" means March 15, June 15, September 15 and December
15 of each  year  during  the  term of this  Indenture,  or if such day is not a
Business Day, then the next  succeeding  Business Day (it being  understood that
interest   accrues  for  any  such   non-Business   Day  during  the  applicable
Distribution  Period,  beginning on or after September 15, 2012),  commencing in
September 2007.

      "Interest  Rate"  means  for the  Distribution  Period  beginning  on (and
including)  the date of  original  issuance  and ending on (but  excluding)  the
Interest  Payment Date in September  2012 the rate per annum of 6.495%,  and for
each  Distribution  Period  beginning on or after the  Interest  Payment Date in
September 2012, the Coupon Rate for such Distribution Period.

      "Investment  Company Event" means the receipt by the Company and the Trust
of an opinion of counsel  experienced  in such matters to the effect that,  as a
result of the  occurrence  of a change in law or

                                       4
<PAGE>

regulation or written  change  (including any announced  prospective  change) in
interpretation  or  application  of law or regulation by any  legislative  body,
court,  governmental  agency  or  regulatory  authority,  there is more  than an
insubstantial  risk  that the  Trust is or,  within  90 days of the date of such
opinion  will be  considered  an  "investment  company"  that is  required to be
registered under the Investment  Company Act of 1940, as amended which change or
prospective change becomes effective or would become effective,  as the case may
be, on or after the date of the issuance of the Debentures.

      "Liquidation  Amount"  means  the  stated  amount of  $1,000.00  per Trust
Security.

      "Maturity Date" means September 15, 2037.

      "Officers'  Certificate" means a certificate signed by the Chairman of the
Board,  the Chief  Executive  Officer,  the Vice Chairman,  the  President,  any
Managing  Director or any Vice  President,  and by the  Treasurer,  an Assistant
Treasurer,  the  Comptroller,  an  Assistant  Comptroller,  the  Secretary or an
Assistant  Secretary of the  Company,  and  delivered to the Trustee.  Each such
certificate shall include the statements  provided for in Section 14.6 if and to
the extent required by the provisions of such Section.

      "Opinion of Counsel"  means an opinion in writing signed by legal counsel,
who may be an employee  of or counsel to the  Company,  or may be other  counsel
reasonably  satisfactory  to the Trustee.  Each such opinion  shall  include the
statements  provided  for in Section  14.6 if and to the extent  required by the
provisions of such Section.

      "OTS" means the Office of Thrift  Supervision  and any  successor  federal
agency that is primarily  responsible  for  regulating the activities of savings
and loan holding companies.

      The term  "outstanding,"  when used with reference to  Debentures,  means,
subject to the  provisions  of  Section  7.4,  as of any  particular  time,  all
Debentures  authenticated  and  delivered  by the Trustee or the  Authenticating
Agent under this Indenture, except:

      (a) Debentures  theretofore  canceled by the Trustee or the Authenticating
Agent or delivered to the Trustee for cancellation;

      (b)  Debentures,  or portions  thereof,  for the payment or  redemption of
which moneys in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or shall have been set
aside and  segregated  in trust by the Company (if the Company  shall act as its
own paying agent);  provided,  however,  that, if such  Debentures,  or portions
thereof, are to be redeemed prior to maturity thereof, notice of such redemption
shall have been given as provided in Section 10.3 or provision  satisfactory  to
the Trustee shall have been made for giving such notice; and

      (c)  Debentures  paid  pursuant  to  Section  2.6  or  in  lieu  of  or in
substitution  for which  other  Debentures  shall  have been  authenticated  and
delivered  pursuant to the terms of Section 2.6 unless proof satisfactory to the
Company and the Trustee is presented  that any such  Debentures are held by bona
fide holders in due course.

      "Person" means any individual,  corporation,  limited  liability  company,
partnership,   joint   venture,   association,   joint-stock   company,   trust,
unincorporated organization or government or any agency or political subdivision
thereof.

      "Predecessor  Security" of any particular  Debenture  means every previous
Debenture evidencing all or a portion of the same debt as that evidenced by such
particular  Debenture;  and,  for  purposes of this  definition,  any  Debenture
authenticated  and delivered  under Section 2.6 in lieu of a lost,  destroyed or
stolen  Debenture  shall  be  deemed  to  evidence  the same  debt as the  lost,
destroyed or stolen Debenture.


                                       5
<PAGE>

      "Primary  Treasury  Dealer" means either a nationally  recognized  primary
United States Government  securities dealer or an entity of recognized  standing
in matters pertaining to the quotation of treasury securities that is reasonably
acceptable to the Company and the Trustee.

      "Principal Office of the Trustee," or other similar term, means the office
of the Trustee,  at which at any  particular  time its corporate  trust business
shall be  principally  administered,  which at the time of the execution of this
Indenture  shall be Rodney Square North,  1100 North Market Street,  Wilmington,
Delaware 19890-1600, Attention: Corporate Trust Administration.

      "Quotation Agent" means a designee of the Institutional  Trustee who shall
be a Primary Treasury Dealer.

      "Redemption Date" has the meaning set forth in Section 10.1.

      "Redemption  Price" means 100% of the principal  amount of the  Debentures
being  redeemed,  plus accrued and unpaid  interest  (including  any  Additional
Interest) on such Debentures to the Redemption Date.

      "Reference  Treasury  Dealer" means (i) the  Quotation  Agent and (ii) any
other Primary  Treasury Dealer selected by the Trustee after  consultation  with
the Company.

      "Reference  Treasury  Dealer  Quotations"  means,  with  respect  to  each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Quotation  Agent,  of the bid and asked prices for the  Comparable  Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Quotation  Agent by such Reference  Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such Redemption Date.

      "Responsible  Officer"  means,  with respect to the  Trustee,  any officer
within the Principal Office of the Trustee,  including any  vice-president,  any
assistant vice-president, any secretary, any assistant secretary, the treasurer,
any  assistant  treasurer,  any trust  officer or other officer of the Principal
Trust Office of the Trustee  customarily  performing  functions similar to those
performed by any of the above designated  officers and also means,  with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred  because  of that  officer's  knowledge  of and  familiarity  with  the
particular subject.

      "Reuters Page LIBOR01" has the meaning set forth in Section 2.10.

      "Securities Act" means the Securities Act of 1933, as amended from time to
time or any successor legislation.

      "Securityholder,"  "holder of Debentures,"  or other similar terms,  means
any Person in whose name at the time a particular Debenture is registered on the
register kept by the Company or the Trustee for that purpose in accordance  with
the terms hereof.

      "Senior  Indebtedness"  means,  with  respect  to  the  Company,  (i)  the
principal,  premium,  if any, and interest in respect of (A) indebtedness of the
Company for all borrowed and purchased money and (B)  indebtedness  evidenced by
securities,  debentures, notes, bonds or other similar instruments issued by the
Company;  (ii)  all  capital  lease  obligations  of  the  Company;   (iii)  all
obligations of the Company  issued or assumed as the deferred  purchase price of
property, all conditional sale obligations of the Company and all obligations of
the Company under any title  retention  agreement;  (iv) all  obligations of the
Company for the reimbursement of any letter of credit, any banker's  acceptance,
any security purchase facility, any repurchase agreement or similar arrangement,
any interest rate swap,  any other hedging


                                       6
<PAGE>

arrangement,  any  obligation  under  options  or any  similar  credit  or other
transaction;  (v) all  obligations  of the Company  associated  with  derivative
products  such as  interest  and  foreign  exchange  rate  contracts,  commodity
contracts,  and similar arrangements;  (vi) all obligations of the type referred
to in clauses (i)  through  (v) above of other  Persons for the payment of which
the  Company  is  responsible  or  liable as  obligor,  guarantor  or  otherwise
including,  without  limitation,  similar  obligations  arising from off-balance
sheet guarantees and direct credit substitutes; and (vii) all obligations of the
type referred to in clauses (i) through (vi) above of other  Persons  secured by
any lien on any property or asset of the Company (whether or not such obligation
is assumed by the  Company),  whether  incurred  on or prior to the date of this
Indenture  or  thereafter  incurred.   Notwithstanding  the  foregoing,  "Senior
Indebtedness"  shall not include (1) any  Additional  Junior  Indebtedness,  (2)
Debentures  issued  pursuant to this Indenture and guarantees in respect of such
Debentures,  (3) trade accounts  payable of the Company  arising in the ordinary
course of business  (such trade  accounts  payable  being pari passu in right of
payment to the Debentures),  or (4) obligations with respect to which (a) in the
instrument  creating  or  evidencing  the same or  pursuant to which the same is
outstanding,  it is provided  that such  obligations  are pari passu,  junior or
otherwise  not  superior  in  right of  payment  to the  Debentures  and (b) the
Company,  prior to the issuance  thereof,  has notified  (and,  if then required
under the applicable  guidelines of the regulating entity, has received approval
from) the Federal Reserve (if the Company is a bank holding  company) or the OTS
(if the  Company is a savings and loan  holding  company).  Senior  Indebtedness
shall continue to be Senior  Indebtedness  and be entitled to the  subordination
provisions irrespective of any amendment,  modification or waiver of any term of
such Senior Indebtedness.

      "Special  Event" means any of a Capital  Treatment  Event,  an  Investment
Company Event or a Tax Event.

      "Special Redemption Date" has the meaning set forth in Section 10.2.

      "Special Redemption Price" means (a) if the Special Redemption Date occurs
before the Interest Payment Date in September 2012, the greater of (i) 107.5% of
the  principal  amount of the  Debentures,  plus  accrued  and  unpaid  interest
(including  Additional  Interest) on the  Debentures  to the Special  Redemption
Date, or (ii) as determined by the Quotation  Agent,  (A) the sum of the present
values of the  scheduled  payments of principal  and interest on the  Debentures
during the Fixed Rate Period  Remaining  Life of the  Debentures  (assuming  the
Debentures matured on the Interest Payment Date in September 2012) discounted to
the Special  Redemption  Date on a  quarterly  basis  (assuming  a 360-day  year
consisting of twelve 30-day months) at the Treasury  Rate,  plus (B) accrued and
unpaid  interest  (including  Additional  Interest)  on the  Debentures  to such
Special  Redemption  Date,  or (b) if the Special  Redemption  Date occurs on or
after the Interest  Payment Date in September 2012, 100% of the principal amount
of the Debentures  being redeemed,  plus accrued and unpaid interest  (including
any Additional Interest) on such Debentures to the Special Redemption Date.

      "Subsidiary"  means with  respect to any Person,  (i) any  corporation  at
least a majority of the outstanding voting stock of which is owned,  directly or
indirectly,  by such  Person or by one or more of its  Subsidiaries,  or by such
Person and one or more of its Subsidiaries,  (ii) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar  interests of which shall at the time be owned by such Person, or by one
or  more  of  its  Subsidiaries,  or by  such  Person  and  one or  more  of its
Subsidiaries  and (iii) any limited  partnership  of which such Person or any of
its  Subsidiaries  is a general  partner.  For the purposes of this  definition,
"voting stock" means shares,  interests,  participations or other equivalents in
the equity interest  (however  designated) in such Person having ordinary voting
power for the election of a majority of the  directors  (or the  equivalent)  of
such Person, other than shares,  interests,  participations or other equivalents
having such power only by reason of the occurrence of a contingency.


                                       7
<PAGE>

      "Tax  Event"  means the receipt by the Company and the Trust of an opinion
of counsel  experienced  in such matters to the effect that,  as a result of any
amendment to or change (including any announced  prospective change) in the laws
or any regulations  thereunder of the United States or any political subdivision
or  taxing  authority  thereof  or  therein,  or as a  result  of  any  official
administrative  pronouncement  (including any private  letter ruling,  technical
advice  memorandum,  field  service  advice,  regulatory  procedure,  notice  or
announcement,  including  any  notice or  announcement  of intent to adopt  such
procedures or regulations)  (an  "Administrative  Action") or judicial  decision
interpreting  or applying such laws or  regulations,  regardless of whether such
Administrative  Action or judicial decision is issued to or in connection with a
proceeding  involving  the  Company or the Trust and  whether or not  subject to
review or appeal, which amendment, clarification,  change, Administrative Action
or decision is enacted,  promulgated or announced,  in each case on or after the
date of original issuance of the Debentures, there is more than an insubstantial
risk  that:  (i) the  Trust  is,  or will be  within 90 days of the date of such
opinion,  subject to United  States  federal  income tax with  respect to income
received or accrued on the Debentures;  (ii) interest  payable by the Company on
the  Debentures is not, or within 90 days of the date of such opinion,  will not
be,  deductible by the Company,  in whole or in part,  for United States federal
income  tax  purposes;  or (iii)  the Trust is, or will be within 90 days of the
date of such opinion,  subject to more than a de minimis  amount of other taxes,
duties or other governmental charges.

      "3-Month LIBOR" has the meaning set forth in Section 2.10.

      "Treasury  Rate" means (i) the yield,  under the heading which  represents
the average for the week immediately prior to the date of calculation, appearing
in the most recently published  statistical release designated H.15 (519) or any
successor publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury  Constant  Maturities," for the
maturity  corresponding  to the Fixed Rate Period Remaining Life (if no maturity
is within three  months  before or after the Fixed Rate Period  Remaining  Life,
yields for the two published maturities most closely  corresponding to the Fixed
Rate Period  Remaining  Life shall be determined  and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis, rounding
to the nearest month) or (ii) if such release (or any successor  release) is not
published  during the week  preceding the  calculation  date or does not contain
such yields,  the rate per annum equal to the  semi-annual  equivalent  yield to
maturity of the  Comparable  Treasury  Issue,  calculated  using a price for the
Comparable  Treasury Issue  (expressed as a percentage of its principal  amount)
equal to the  Comparable  Treasury Price for such Special  Redemption  Date. The
Treasury Rate shall be calculated by the Quotation  Agent on the third  Business
Day preceding the Special Redemption Date.

      "Trust" shall mean First Merchants Capital Trust II, a Delaware  statutory
trust,  or any other similar  trust  created for the purpose of issuing  Capital
Securities in connection  with the issuance of Debentures  under this Indenture,
of which the Company is the sponsor.

      "Trust  Securities" means Common Securities and Capital  Securities of the
Trust.

      "Trustee" means Wilmington  Trust Company,  and, subject to the provisions
of Article VI hereof,  shall also include its  successors and assigns as Trustee
hereunder.

                                   ARTICLE II
                                   DEBENTURES

      Section 2.1. Authentication and Dating. Upon the execution and delivery of
this  Indenture,  or from time to time  thereafter,  Debentures  in an aggregate
principal amount not in excess of  $56,702,000.00  may be executed and delivered
by the Company to the Trustee for authentication,  and the Trustee, upon receipt
of a written authentication order from the Company, shall thereupon authenticate


                                       8
<PAGE>

and make available for delivery said  Debentures to or upon the written order of
the Company,  signed by its Chairman of the Board of Directors,  Chief Executive
Officer, Vice Chairman,  the President,  one of its Managing Directors or one of
its Vice  Presidents  without  any  further  action  by the  Company  hereunder.
Notwithstanding  anything to the contrary contained herein, the Trustee shall be
fully  protected in relying  upon the  aforementioned  authentication  order and
written  order  in   authenticating   and   delivering   said   Debentures.   In
authenticating  such Debentures,  and accepting the additional  responsibilities
under this  Indenture  in relation  to such  Debentures,  the  Trustee  shall be
entitled to receive,  and (subject to Section  6.1) shall be fully  protected in
relying upon:

      (a) a copy of any Board Resolution or Board  Resolutions  relating thereto
and, if applicable,  an appropriate  record of any action taken pursuant to such
resolution, in each case certified by the Secretary or an Assistant Secretary of
the Company, as the case may be; and

      (b) an Opinion of Counsel  prepared in accordance  with Section 14.6 which
shall also state:

                  (1) that such Debentures,  when authenticated and delivered by
            the Trustee and issued by the Company in each case in the manner and
            subject to any conditions specified in such Opinion of Counsel, will
            constitute  valid and legally  binding  obligations  of the Company,
            subject  to  or  limited  by  applicable   bankruptcy,   insolvency,
            reorganization,  conservatorship, receivership, moratorium and other
            statutory or  decisional  laws  relating to or affecting  creditors'
            rights or the reorganization of financial  institutions  (including,
            without limitation, preference and fraudulent conveyance or transfer
            laws),  heretofore or hereafter enacted or in effect,  affecting the
            rights of creditors generally; and

                  (2) that all laws and requirements in respect of the execution
            and  delivery by the Company of the  Debentures  have been  complied
            with and that  authentication  and delivery of the Debentures by the
            Trustee will not violate the terms of this Indenture.

      The Trustee  shall have the right to decline to  authenticate  and deliver
any  Debentures  under this Section if the Trustee,  being advised in writing by
counsel,  determines  that  such  action  may  not  lawfully  be  taken  or if a
Responsible  Officer  of the  Trustee in good faith  shall  determine  that such
action would expose the Trustee to personal liability to existing holders.

      The  definitive  Debentures  shall  be  typed,  printed,  lithographed  or
engraved on steel engraved  borders or may be produced in any other manner,  all
as determined by the officers  executing such Debentures,  as evidenced by their
execution of such Debentures.

      Section  2.2.  Form  of  Trustee's  Certificate  of  Authentication.   The
Trustee's   certificate  of   authentication  on  all  Debentures  shall  be  in
substantially the following form:

      This  is  one  of  the  Debentures  referred  to in  the  within-mentioned
Indenture.

      WILMINGTON TRUST COMPANY, as Trustee

      By
        ----------------------------------
      Authorized Signer

      Section 2.3. Form and Denomination of Debentures.  The Debentures shall be
substantially in the form of Exhibit A attached hereto.  The Debentures shall be
in registered, certificated form without coupons and in minimum denominations of
$100,000.00  and any  multiple of  $1,000.00 in excess  thereof.  Any  attempted
transfer of the  Debentures in a block having an aggregate  principal  amount of
less  than


                                       9
<PAGE>

$100,000.00  shall be deemed to be void and of no legal effect  whatsoever.  Any
such purported  transferee shall be deemed not to be a holder of such Debentures
for any purpose,  including,  but not limited to the receipt of payments on such
Debentures,  and such purported  transferee  shall be deemed to have no interest
whatsoever in such Debentures.  The Debentures shall be numbered,  lettered,  or
otherwise  distinguished  in such manner or in accordance with such plans as the
officers  executing the same may  determine  with the approval of the Trustee as
evidenced by the execution and authentication thereof.

      Section 2.4.  Execution of Debentures.  The Debentures  shall be signed in
the name and on behalf of the Company by the manual or  facsimile  signature  of
its Chairman of the Board of Directors,  Chief Executive Officer, Vice Chairman,
President,  one  of  its  Managing  Directors  or  one  of  its  Executive  Vice
Presidents,  Senior Vice Presidents or Vice Presidents.  Only such Debentures as
shall bear thereon a certificate  of  authentication  substantially  in the form
herein before recited,  executed by the Trustee or the  Authenticating  Agent by
the manual signature of an authorized signer,  shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such certificate by
the  Trustee or the  Authenticating  Agent upon any  Debenture  executed  by the
Company shall be conclusive  evidence  that the Debenture so  authenticated  has
been duly authenticated and delivered  hereunder and that the holder is entitled
to the benefits of this Indenture.

      In case any  officer  of the  Company  who shall  have  signed  any of the
Debentures  shall cease to be such officer before the Debentures so signed shall
have been  authenticated  and  delivered  by the  Trustee or the  Authenticating
Agent,  or disposed  of by the  Company,  such  Debentures  nevertheless  may be
authenticated  and delivered or disposed of as though the Person who signed such
Debentures  had not ceased to be such officer of the Company;  and any Debenture
may be signed on behalf of the Company by such Persons as, at the actual date of
the execution of such  Debenture,  shall be the proper  officers of the Company,
although at the date of the execution of this  Indenture any such person was not
such an officer.

      Every Debenture shall be dated the date of its authentication.

      Section 2.5.  Exchange and  Registration  of Transfer of  Debentures.  The
Company  shall  cause to be kept,  at the  office or agency  maintained  for the
purpose of registration of transfer and for exchange as provided in Section 3.2,
a register (the  "Debenture  Register") for the Debentures  issued  hereunder in
which, subject to such reasonable  regulations as it may prescribe,  the Company
shall  provide for the  registration  and transfer of all  Debentures as in this
Article II provided.  The Debenture  Register shall be in written form or in any
other form  capable of being  converted  into  written  form within a reasonable
time.

      Debentures to be exchanged may be surrendered  at the Principal  Office of
the Trustee or at any office or agency to be  maintained by the Company for such
purpose as provided in Section 3.2, and the Company shall  execute,  the Company
or the Trustee shall register and the Trustee or the Authenticating  Agent shall
authenticate and make available for delivery in exchange  therefor the Debenture
or Debentures which the Securityholder  making the exchange shall be entitled to
receive.  Upon due presentment for  registration of transfer of any Debenture at
the  Principal  Office of the  Trustee or at any office or agency of the Company
maintained  for such  purpose as provided  in Section  3.2,  the  Company  shall
execute,  the  Company or the  Trustee  shall  register  and the  Trustee or the
Authenticating  Agent shall  authenticate and make available for delivery in the
name of the  transferee or  transferees  a new  Debenture  for a like  aggregate
principal  amount.  Registration or registration of transfer of any Debenture by
the Trustee or by any agent of the Company  appointed  pursuant to Section  3.2,
and delivery of such Debenture,  shall be deemed to complete the registration or
registration of transfer of such Debenture.

      All Debentures  presented for  registration of transfer or for exchange or
payment   shall  (if  so   required  by  the  Company  or  the  Trustee  or  the
Authenticating  Agent)  be duly  endorsed  by,  or be


                                       10
<PAGE>

accompanied  by  a  written  instrument  or  instruments  of  transfer  in  form
satisfactory  to the Company and the  Trustee or the  Authenticating  Agent duly
executed by the holder or his attorney duly authorized in writing.

      No  service  charge  shall be made for any  exchange  or  registration  of
transfer of Debentures,  but the Company or the Trustee may require payment of a
sum  sufficient to cover any tax, fee or other  governmental  charge that may be
imposed in connection therewith.

      The Company or the Trustee shall not be required to exchange or register a
transfer of any  Debenture  for a period of 15 days next  preceding  the date of
selection of Debentures for redemption.

      Notwithstanding  anything  herein to the contrary,  Debentures  may not be
transferred except in compliance with the restricted securities legend set forth
below,  unless otherwise  determined by the Company,  upon the advice of counsel
expert in securities law, in accordance with applicable law:

      THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY
THE  UNITED  STATES OR ANY AGENCY OR FUND OF THE UNITED  STATES,  INCLUDING  THE
FEDERAL DEPOSIT INSURANCE CORPORATION.

      THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED  (THE  "SECURITIES  ACT"),  ANY  STATE  SECURITIES  LAWS  OR  ANY  OTHER
APPLICABLE   SECURITIES   LAW.   NEITHER  THIS  SECURITY  NOR  ANY  INTEREST  OR
PARTICIPATION  HEREIN MAY BE REOFFERED,  SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED,
ENCUMBERED  OR  OTHERWISE  DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR
UNLESS SUCH  TRANSACTION  IS EXEMPT  FROM,  OR NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  AGREES  TO OFFER,  SELL OR
OTHERWISE  TRANSFER  THIS  SECURITY  ONLY (A) TO THE COMPANY,  (B) PURSUANT TO A
REGISTRATION  STATEMENT  THAT HAS BEEN DECLARED  EFFECTIVE  UNDER THE SECURITIES
ACT,  (C) TO A  PERSON  WHOM  THE  SELLER  REASONABLY  BELIEVES  IS A  QUALIFIED
INSTITUTIONAL  BUYER IN A TRANSACTION  MEETING THE  REQUIREMENTS OF RULE 144A SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE
WITH  RULE  144A,  (D)  TO A  NON-U.S.  PERSON  IN AN  OFFSHORE  TRANSACTION  IN
ACCORDANCE  WITH RULE 903 OR RULE 904 (AS  APPLICABLE) OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH  (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY  FOR  ITS OWN  ACCOUNT,  OR FOR THE  ACCOUNT  OF SUCH AN  INSTITUTIONAL
ACCREDITED  INVESTOR,  FOR  INVESTMENT  PURPOSES  AND NOT WITH A VIEW TO, OR FOR
OFFER  OR  SALE  IN  CONNECTION  WITH,  ANY  DISTRIBUTION  IN  VIOLATION  OF THE
SECURITIES  ACT,  OR (F)  PURSUANT  TO ANY OTHER  AVAILABLE  EXEMPTION  FROM THE
REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER,  SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF  COUNSEL,  CERTIFICATION  AND/OR  OTHER  INFORMATION  SATISFACTORY  TO  IT IN
ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

      THE  HOLDER  OF  THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  ALSO  AGREES,
REPRESENTS  AND  WARRANTS  THAT  IT  IS  NOT  AN  EMPLOYEE  BENEFIT,  INDIVIDUAL
RETIREMENT  ACCOUNT  OR  OTHER  PLAN OR  ARRANGEMENT  SUBJECT  TO TITLE I OF THE
EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  ("ERISA"),  OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")


                                       11
<PAGE>

(EACH A "PLAN"),  OR AN ENTITY WHOSE UNDERLYING  ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S  INVESTMENT IN THE ENTITY,  AND NO PERSON  INVESTING  "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST  THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER
U.S.  DEPARTMENT OF LABOR PROHIBITED  TRANSACTION CLASS EXEMPTION 96-23,  95-60,
91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING
OF THIS  SECURITY IS NOT  PROHIBITED  BY SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE WITH RESPECT TO SUCH  PURCHASE OR HOLDING.  ANY  PURCHASER OR HOLDER OF
THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE  BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA,  OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS  APPLICABLE,  A  TRUSTEE  OR OTHER  PERSON  ACTING  ON  BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY  EMPLOYEE  BENEFIT  PLAN OR PLAN TO  FINANCE  SUCH  PURCHASE,  OR (ii)  SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED  TRANSACTION UNDER SECTION 406 OF ERISA
OR  SECTION  4975 OF THE CODE FOR  WHICH  THERE IS NO  APPLICABLE  STATUTORY  OR
ADMINISTRATIVE EXEMPTION.

      THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED  ONLY IN BLOCKS HAVING
AN AGGREGATE  PRINCIPAL  AMOUNT OF NOT LESS THAN  $100,000.00  AND  MULTIPLES OF
$1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO
BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

      THE HOLDER OF THIS SECURITY  AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

      Section 2.6. Mutilated,  Destroyed, Lost or Stolen Debentures. In case any
Debenture shall become  mutilated or be destroyed,  lost or stolen,  the Company
shall execute,  and upon its written request the Trustee shall  authenticate and
deliver, a new Debenture bearing a number not contemporaneously  outstanding, in
exchange and  substitution  for the  mutilated  Debenture,  or in lieu of and in
substitution for the Debenture so destroyed,  lost or stolen.  In every case the
applicant  for a  substituted  Debenture  shall  furnish to the  Company and the
Trustee  such  security or  indemnity as may be required by them to save each of
them harmless,  and, in every case of destruction,  loss or theft, the applicant
shall also furnish to the Company and the Trustee evidence to their satisfaction
of the  destruction,  loss or  theft  of  such  Debenture  and of the  ownership
thereof.

      The Trustee may authenticate  any such  substituted  Debenture and deliver
the same  upon the  written  request  or  authorization  of any  officer  of the
Company. Upon the issuance of any substituted Debenture, the Company may require
the payment of a sum  sufficient to cover any tax or other  governmental  charge
that may be  imposed  in  relation  thereto  and any  other  expenses  connected
therewith.  In case any Debenture which has matured or is about to mature or has
been called for redemption in full shall become mutilated or be destroyed,  lost
or stolen,  the Company may, instead of issuing a substitute  Debenture,  pay or
authorize the payment of the same (without  surrender thereof except in the case
of a mutilated Debenture) if the applicant for such payment shall furnish to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless and, in case of destruction,  loss or theft, evidence
satisfactory to the Company and to the Trustee of the destruction, loss or theft
of such Debenture and of the ownership thereof.


                                       12
<PAGE>

      Every  substituted  Debenture  issued  pursuant to the  provisions of this
Section 2.6 by virtue of the fact that any such Debenture is destroyed,  lost or
stolen shall  constitute  an additional  contractual  obligation of the Company,
whether or not the  destroyed,  lost or stolen  Debenture  shall be found at any
time,  and shall be entitled to all the benefits of this  Indenture  equally and
proportionately  with any and all other  Debentures duly issued  hereunder.  All
Debentures  shall be held and owned  upon the  express  condition  that,  to the
extent permitted by applicable law, the foregoing  provisions are exclusive with
respect to the  replacement or payment of mutilated,  destroyed,  lost or stolen
Debentures   and  shall   preclude   any  and  all  other   rights  or  remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the  replacement  or payment of negotiable  instruments or other
securities without their surrender.

      Section 2.7. Temporary  Debentures.  Pending the preparation of definitive
Debentures,  the Company may execute and the Trustee shall authenticate and make
available  for  delivery  temporary   Debentures  that  are  typed,  printed  or
lithographed.   Temporary   Debentures  shall  be  issuable  in  any  authorized
denomination, and substantially in the form of the definitive Debentures in lieu
of which they are issued but with such  omissions,  insertions and variations as
may be  appropriate  for temporary  Debentures,  all as may be determined by the
Company.  Every such temporary Debenture shall be executed by the Company and be
authenticated by the Trustee upon the same conditions and in  substantially  the
same manner,  and with the same effect,  as the definitive  Debentures.  Without
unreasonable  delay the Company  will  execute and deliver to the Trustee or the
Authenticating  Agent  definitive  Debentures and thereupon any or all temporary
Debentures may be surrendered in exchange therefor,  at the principal  corporate
trust office of the Trustee or at any office or agency maintained by the Company
for  such   purpose  as  provided  in  Section  3.2,  and  the  Trustee  or  the
Authenticating  Agent shall  authenticate  and make  available  for  delivery in
exchange for such temporary Debentures a like aggregate principal amount of such
definitive  Debentures.  Such  exchange  shall be made by the Company at its own
expense and without any charge therefor except that in case of any such exchange
involving a  registration  of transfer the Company may require  payment of a sum
sufficient  to cover  any  tax,  fee or other  governmental  charge  that may be
imposed in relation thereto. Until so exchanged,  the temporary Debentures shall
in all  respects  be  entitled  to the same  benefits  under this  Indenture  as
definitive Debentures authenticated and delivered hereunder.

      Section 2.8. Payment of Interest and Additional Interest.  Interest at the
Interest Rate and any Additional Interest on any Debenture that is payable,  and
is  punctually  paid or duly  provided  for, on any  Interest  Payment  Date for
Debentures  shall be paid to the Person in whose name said  Debenture (or one or
more  Predecessor  Securities)  is  registered  at the close of  business on the
regular record date for such interest  installment  except that interest and any
Additional  Interest payable on the Maturity Date shall be paid to the Person to
whom principal is paid.

      Each  Debenture  shall  bear  interest  for the period  beginning  on (and
including)  the date of  original  issuance  and ending on (but  excluding)  the
Interest Payment Date in September 2012 at a rate per annum of 6.495%, and shall
bear interest for each successive  Distribution Period beginning on or after the
Interest Payment Date in September 2012 at a rate per annum equal to the 3-Month
LIBOR,  determined as described in Section 2.10, plus 1.56% (the "Coupon Rate"),
applied to the principal amount thereof, until the principal thereof becomes due
and payable, and on any overdue principal and to the extent that payment of such
interest is  enforceable  under  applicable  law  (without  duplication)  on any
overdue installment of interest (including  Additional Interest) at the Interest
Rate in effect for each applicable period compounded  quarterly.  Interest shall
be payable (subject to any relevant  Extension  Period)  quarterly in arrears on
each Interest Payment Date with the first  installment of interest to be paid on
the Interest Payment Date in September 2007.


                                       13
<PAGE>

      Any interest on any  Debenture,  including  Additional  Interest,  that is
payable,  but is not  punctually  paid or duly  provided  for,  on any  Interest
Payment Date (herein called  "Defaulted  Interest")  shall forthwith cease to be
payable to the registered  holder on the relevant  regular record date by virtue
of having been such holder;  and such  Defaulted  Interest  shall be paid by the
Company to the  Persons  in whose  names such  Debentures  (or their  respective
Predecessor  Securities)  are  registered  at the close of business on a special
record date for the payment of such Defaulted Interest,  which shall be fixed in
the following  manner:  the Company shall notify the Trustee in writing at least
25 days prior to the date of the  proposed  payment  of the amount of  Defaulted
Interest proposed to be paid on each such Debenture and the date of the proposed
payment,  and at the same time the  Company  shall  deposit  with the Trustee an
amount of money equal to the aggregate  amount proposed to be paid in respect of
such Defaulted  Interest or shall make arrangements  satisfactory to the Trustee
for such  deposit  prior to the date of the  proposed  payment,  such money when
deposited  to be held in trust for the benefit of the  Persons  entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a
special record date for the payment of such  Defaulted  Interest which shall not
be more than 15 nor less than 10 days prior to the date of the proposed  payment
and not less than 10 days after the  receipt by the Trustee of the notice of the
proposed payment.  The Trustee shall promptly notify the Company of such special
record  date and,  in the name and at the  expense of the  Company,  shall cause
notice of the proposed payment of such Defaulted Interest and the special record
date therefor to be mailed,  first class postage prepaid, to each Securityholder
at its address as it appears in the  Debenture  Register,  not less than 10 days
prior to such  special  record  date.  Notice of the  proposed  payment  of such
Defaulted  Interest and the special  record date therefor  having been mailed as
aforesaid,  such Defaulted  Interest shall be paid to the Persons in whose names
such Debentures (or their respective  Predecessor  Securities) are registered on
such special record date and shall be no longer payable.

      The Company may make payment of any Defaulted  Interest on any  Debentures
in any other  lawful  manner after notice given by the Company to the Trustee of
the  proposed  payment  method;  provided,  however,  the  Trustee  in its  sole
discretion deems such payment method to be practical.

      Any interest (including  Additional  Interest) scheduled to become payable
on an Interest  Payment Date occurring  during an Extension  Period shall not be
Defaulted  Interest  and shall be payable on such other date as may be specified
in the terms of such Debentures.

      The term  "regular  record  date" as used in this  Section  shall mean the
close of business on the 15th  Business Day preceding  the  applicable  Interest
Payment Date.

      Subject  to the  foregoing  provisions  of this  Section,  each  Debenture
delivered  under this Indenture upon  registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest accrued
and unpaid, and to accrue, that were carried by such other Debenture.

      Section  2.9.   Cancellation  of  Debentures  Paid,  etc.  All  Debentures
surrendered for the purpose of payment, redemption,  exchange or registration of
transfer,  shall,  if  surrendered  to the  Company  or  any  paying  agent,  be
surrendered  to the Trustee and promptly  canceled by it, or, if  surrendered to
the Trustee or any  Authenticating  Agent, shall be promptly canceled by it, and
no Debentures  shall be issued in lieu thereof except as expressly  permitted by
any  of the  provisions  of  this  Indenture.  All  Debentures  canceled  by any
Authenticating  Agent shall be  delivered  to the  Trustee.  The  Trustee  shall
destroy all canceled Debentures unless the Company otherwise directs the Trustee
in writing.  If the Company shall acquire any of the Debentures,  however,  such
acquisition   shall  not  operate  as  a  redemption  or   satisfaction  of  the
indebtedness  represented  by such  Debentures  unless  and  until  the same are
surrendered to the Trustee for cancellation.

      Section 2.10.  Computation of Interest. The amount of interest payable (i)
for any Distribution Period commencing on or after the date of original issuance
but before the Interest  Payment


                                       14
<PAGE>

Date in September 2012 will be computed on the basis of a 360-day year of twelve
30-day months,  and (ii) for the Distribution  Period commencing on the Interest
Payment Date in September 2012 and each succeeding  Distribution  Period will be
calculated by applying the Interest Rate to the principal amount  outstanding at
the commencement of the Distribution Period on the basis of the actual number of
days in the  Distribution  Period  concerned  divided  by 360.  All  percentages
resulting from any calculations on the Debentures will be rounded, if necessary,
to  the  nearest  one  hundred-thousandth  of  a  percentage  point,  with  five
one-millionths  of a  percentage  point  rounded  upward  (e.g.,  9.876545%  (or
..09876545) being rounded to 9.87655% (or .0987655),  and all dollar amounts used
in or resulting from such  calculation will be rounded to the nearest cent (with
one-half cent being rounded upward)).

      (a) "3-Month LIBOR" means the London  interbank  offered interest rate for
three-month,  U.S.  dollar  deposits  determined by the Trustee in the following
order of priority:

            (1) the rate  (expressed as a percentage per annum) for U.S.  dollar
      deposits  having a  three-month  maturity  that  appears on  Reuters  Page
      LIBOR01 as of 11:00 a.m. (London time) on the related  Determination  Date
      (as defined below). "Reuters Page LIBOR01" means the display designated as
      "LIBOR01"  on  Reuters  or such other  page as may  replace  Reuters  Page
      LIBOR01  on that  service  or such other  service  or  services  as may be
      nominated by the British  Bankers'  Association as the information  vendor
      for the purpose of  displaying  London  interbank  offered  rates for U.S.
      dollar deposits;

            (2) if such rate cannot be identified  on the related  Determination
      Date,  the Trustee  will  request  the  principal  London  offices of four
      leading  banks in the  London  interbank  market to  provide  such  banks'
      offered quotations  (expressed as percentages per annum) to prime banks in
      the London  interbank market for U.S. dollar deposits having a three-month
      maturity as of 11:00 a.m. (London time) on such Determination  Date. If at
      least two  quotations  are provided,  3-Month LIBOR will be the arithmetic
      mean of such quotations;

            (3) if fewer than two such  quotations  are provided as requested in
      clause (2) above,  the Trustee will request four major New York City banks
      to provide such banks' offered  quotations  (expressed as percentages  per
      annum) to  leading  European  banks for loans in U.S.  dollars as of 11:00
      a.m.  (London  time) on such  Determination  Date.  If at  least  two such
      quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
      quotations; and

            (4) if fewer than two such  quotations  are provided as requested in
      clause (3) above,  3-Month LIBOR will be a 3-Month LIBOR  determined  with
      respect to the  Distribution  Period  immediately  preceding  such current
      Distribution Period.

      If the rate for U.S. dollar  deposits  having a three-month  maturity that
initially  appears on Reuters Page LIBOR01 as of 11:00 a.m. (London time) on the
related  Determination  Date is  superseded  on the  Reuters  Page  LIBOR01 by a
corrected rate by 12:00 noon (London time) on such Determination  Date, then the
corrected rate as so  substituted on the applicable  page will be the applicable
3-Month LIBOR for such Determination Date.

      (b) The  Interest  Rate  for any  Distribution  Period  will at no time be
higher than the maximum  rate then  permitted by New York law as the same may be
modified by United States law.

      (c)  "Determination  Date" means the date that is two London  Banking Days
(i.e.,  a  business  day in which  dealings  in  deposits  in U.S.  dollars  are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.


                                       15
<PAGE>

      (d) The Trustee shall notify the Company,  the  Institutional  Trustee and
any  securities  exchange or interdealer  quotation  system on which the Capital
Securities are listed,  of the Coupon Rate and the  Determination  Date for each
Distribution Period, in each case as soon as practicable after the determination
thereof  but in no event  later than the  thirtieth  (30th) day of the  relevant
Distribution Period. Failure to notify the Company, the Institutional Trustee or
any securities  exchange or interdealer  quotation system, or any defect in said
notice,  shall not affect the  obligation  of the Company to make payment on the
Debentures at the applicable  Coupon Rate.  Any error in the  calculation of the
Coupon Rate by the Trustee may be corrected  at any time by notice  delivered as
above provided.  Upon the request of a holder of a Debenture,  the Trustee shall
provide the Coupon Rate then in effect and, if  determined,  the Coupon Rate for
the next Distribution Period.

      (e) Subject to the corrective  rights set forth above,  all  certificates,
communications, opinions, determinations, calculations, quotations and decisions
given,  expressed,  made or obtained for the purposes of the provisions relating
to the payment and  calculation of interest on the Debentures and  distributions
on the Capital  Securities by the Trustee or the Institutional  Trustee will (in
the  absence  of  willful  default,  bad  faith  and  manifest  error) be final,
conclusive  and binding on the Trust,  the Company and all of the holders of the
Debentures and the Capital Securities, and no liability shall (in the absence of
willful  default,  bad faith or  manifest  error)  attach to the  Trustee or the
Institutional  Trustee in connection with the exercise or non-exercise by either
of them or their respective powers, duties and discretion.

      Section  2.11.  Extension  of  Interest  Payment  Period.  So  long  as no
Acceleration Event of Default has occurred and is continuing,  the Company shall
have the right,  from time to time, and without causing an Event of Default,  to
defer payments of interest on the  Debentures by extending the interest  payment
period on the  Debentures  at any time and from time to time  during the term of
the Debentures,  for up to 20 consecutive  quarterly periods (each such extended
interest payment period, an "Extension  Period"),  during which Extension Period
no interest (including Additional Interest) shall be due and payable (except any
Additional Sums that may be due and payable).  No Extension  Period may end on a
date other than an Interest Payment Date. During an Extension  Period,  interest
will continue to accrue on the Debentures, and interest on such accrued interest
will  accrue at an annual  rate  equal to the  Interest  Rate in effect for such
Extension  Period,  compounded  quarterly from the date such interest would have
been payable were it not for the Extension  Period,  to the extent  permitted by
law (such interest referred to herein as "Additional  Interest").  At the end of
any such  Extension  Period the Company  shall pay all interest then accrued and
unpaid on the Debentures (together with Additional Interest thereon);  provided,
however,  that no Extension Period may extend beyond the Maturity Date; provided
further,  however,  that during any such Extension Period, the Company shall not
and shall not permit  any  Affiliate  to (i)  declare  or pay any  dividends  or
distributions on, or redeem,  purchase,  acquire,  or make a liquidation payment
with respect to, any of the Company's or such  Affiliate's  capital stock (other
than  payments  of  dividends  or  distributions  to the  Company)  or make  any
guarantee  payments  with  respect to the  foregoing or (ii) make any payment of
principal of or interest or premium,  if any, on or repay,  repurchase or redeem
any debt  securities of the Company or any Affiliate that rank pari passu in all
respects with or junior in interest to the Debentures  (other than, with respect
to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions
of shares of capital  stock of the  Company in  connection  with any  employment
contract,  benefit plan or other similar  arrangement with or for the benefit of
one or more employees,  officers, directors or consultants, in connection with a
dividend  reinvestment or stockholder  stock purchase plan or in connection with
the issuance of capital stock of the Company (or securities  convertible into or
exercisable  for  such  capital  stock)  as   consideration  in  an  acquisition
transaction  entered into prior to the  applicable  Extension  Period,  (b) as a
result of any  exchange or  conversion  of any class or series of the  Company's
capital  stock (or any capital  stock of a  subsidiary  of the  Company) for any
class or series of the Company's  capital stock or of any class or series of the
Company's  indebtedness for any class or series of the Company's  capital stock,
(c) the  purchase of  fractional  interests in shares of the  Company's  capital
stock pursuant to the conversion or exchange provisions of such capital stock or


                                       16
<PAGE>

the security being converted or exchanged,  (d) any declaration of a dividend in
connection with any stockholders'  rights plan, or the issuance of rights, stock
or other  property  under any  stockholders'  rights plan, or the  redemption or
repurchase of rights  pursuant  thereto,  (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon  exercise of such  warrants,  options or other  rights is the same stock as
that on which the  dividend  is being paid or ranks pari passu with or junior to
such  stock  and any  cash  payments  in lieu of  fractional  shares  issued  in
connection therewith,  or (f) payments under the Capital Securities  Guarantee).
Prior to the termination of any Extension Period, the Company may further extend
such  period,  provided  that such period  together  with all such  previous and
further consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods,  or extend  beyond  the  Maturity  Date.  Upon the  termination  of any
Extension  Period and upon the payment of all accrued  and unpaid  interest  and
Additional Interest, the Company may commence a new Extension Period, subject to
the foregoing requirements.  No interest or Additional Interest shall be due and
payable  during  an  Extension  Period,  except  at the end  thereof,  but  each
installment  of interest that would  otherwise  have been due and payable during
such Extension Period shall bear Additional  Interest to the extent permitted by
applicable  law.  The Company  must give the Trustee  notice of its  election to
begin or  extend  an  Extension  Period  by the  close of  business  at least 15
Business Days prior to the Interest  Payment Date with respect to which interest
on the  Debentures  would have been payable  except for the election to begin or
extend such  Extension  Period.  The Trustee  shall give notice of the Company's
election to begin a new Extension Period to the Securityholders.

      Section 2.12. CUSIP Numbers. The Company in issuing the Debentures may use
"CUSIP"  numbers (if then  generally in use),  and, if so, the Trustee shall use
CUSIP  numbers in notices of redemption  as a  convenience  to  Securityholders;
provided, however, that any such notice may state that no representation is made
as to the  correctness of such numbers either as printed on the Debentures or as
contained in any notice of a redemption  and that reliance may be placed only on
the  other  identification  numbers  printed  on the  Debentures,  and any  such
redemption  shall not be affected by any defect in or omission of such  numbers.
The  Company  will  promptly  notify the Trustee in writing of any change in the
CUSIP numbers.

      Section 2.13. Global Debentures.

      (a) Upon the  election  of the  holder of  outstanding  Debentures,  which
election need not be in writing,  the  Debentures  owned by such holder shall be
issued in the form of one or more Global  Debentures  registered  in the name of
the Depositary or its nominee. Each Global Debenture issued under this Indenture
shall be registered in the name of the Depositary  designated by the Company for
such Global  Debenture or a nominee  thereof,  delivered to such Depositary or a
nominee  thereof or custodian  therefor and shall contain such legends as may be
required by the Depositary  and each such Global  Debenture  shall  constitute a
single Debenture for all purposes of this Indenture.

      (b)  Notwithstanding  any other  provision  in this  Indenture,  no Global
Debenture may be exchanged in whole or in part for Debentures registered, and no
transfer of a Global  Debenture  in whole or in part may be  registered,  in the
name of any Person  other than the  Depositary  for such Global  Debenture  or a
nominee thereof unless (i) such  Depositary  advises the Trustee and the Company
in  writing  that such  Depositary  is no  longer  willing  or able to  properly
discharge  its  responsibilities  as  Depositary  with  respect  to such  Global
Debenture,  and no qualified successor is appointed by the Company within ninety
(90) days of receipt by the Company of such notice,  (ii) such Depositary ceases
to be a clearing  agency  registered  under the Exchange Act and no successor is
appointed by the Company  within ninety (90) days after  obtaining  knowledge of
such event,  (iii) the Company  executes  and  delivers to the Trustee a Company
order stating that the Company elects to terminate the book-entry system through
the  Depositary  or  (iv)  an  Event  of  Default  shall  have  occurred  and be
continuing.  Upon the  occurrence  of any event  specified in clause (i),  (ii),
(iii) or (iv) above,  the Trustee shall notify the


                                       17
<PAGE>

Depositary  and  instruct  the  Depositary  to notify all  owners of  beneficial
interests in such Global  Debenture of the  occurrence  of such event and of the
availability of Debentures to such owners of beneficial interests requesting the
same. Upon the issuance of such Debentures and the registration in the Debenture
Register  of such  Debentures  in the  names of the  holders  of the  beneficial
interests  therein,  the Trustee  shall  recognize  such  holders of  beneficial
interests as holders.

      (c) If any Global  Debenture is to be exchanged  for other  Debentures  or
canceled in part, or if another Debenture is to be exchanged in whole or in part
for a beneficial  interest in any Global Debenture,  then either (i) such Global
Debenture  shall be so surrendered  for exchange or  cancellation as provided in
this  Article  II or (ii) the  principal  amount  thereof  shall be  reduced  or
increased  by an amount  equal to the  portion  thereof  to be so  exchanged  or
canceled,  or equal to the  principal  amount of such other  Debentures to be so
exchanged for a beneficial  interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Debenture registrar, whereupon
the Trustee,  in accordance  with the Applicable  Depositary  Procedures,  shall
instruct the Depositary or its authorized representative to make a corresponding
adjustment  to its records.  Upon any such  surrender or  adjustment of a Global
Debenture by the  Depositary,  accompanied  by  registration  instructions,  the
Company  shall  execute  and the  Trustee  shall  authenticate  and  deliver any
Debentures  issuable  in  exchange  for such  Global  Debenture  (or any portion
thereof) in accordance  with the  instructions  of the  Depositary.  The Trustee
shall  not be liable  for any delay in  delivery  of such  instructions  and may
conclusively  rely  on,  and  shall be  fully  protected  in  relying  on,  such
instructions.

      (d) Every  Debenture  authenticated  and delivered  upon  registration  of
transfer of, or in exchange for or in lieu of, a Global Debenture or any portion
thereof  shall be  authenticated  and  delivered in the form of, and shall be, a
Global  Debenture,  unless such  Debenture is registered in the name of a Person
other than the Depositary for such Global Debenture or a nominee thereof.

      (e) Debentures distributed to holders of Book-Entry Capital Securities (as
defined  in the  Declaration)  upon  the  dissolution  of  the  Trust  shall  be
distributed in the form of one or more Global Debentures  registered in the name
of a Depositary or its nominee, and deposited with the Debentures registrar,  as
custodian  for such  Depositary,  or with  such  Depositary,  for  credit by the
Depositary to the respective accounts of the beneficial owners of the Debentures
represented  thereby  (or such other  accounts as they may  direct).  Debentures
distributed  to holders  of Capital  Securities  other than  Book-Entry  Capital
Securities  upon the dissolution of the Trust shall not be issued in the form of
a Global Debenture or any other form intended to facilitate  book-entry  trading
in beneficial interests in such Debentures.

      (f) The  Depositary or its nominee,  as the  registered  owner of a Global
Debenture,  shall be the holder of such Global  Debenture for all purposes under
this  Indenture  and the  Debentures,  and owners of  beneficial  interests in a
Global Debenture shall hold such interests pursuant to the Applicable Depositary
Procedures.  Accordingly,  any  such  owner's  beneficial  interest  in a Global
Debenture  shall be shown only on, and the  transfer of such  interest  shall be
effected only through,  records  maintained by the  Depositary or its nominee or
its Depositary  Participants.  The Debentures registrar and the Trustee shall be
entitled  to deal with the  Depositary  for all  purposes  under this  Indenture
relating to a Global Debenture  (including the payment of principal and interest
thereon and the giving of  instructions  or  directions  by owners of beneficial
interests therein and the giving of notices) as the sole holder of the Debenture
and shall have no  obligations  to the owners of beneficial  interests  therein.
Neither the Trustee nor the  Debentures  registrar  shall have any  liability in
respect of any transfers effected by the Depositary.

      (g) The rights of owners of  beneficial  interests  in a Global  Debenture
shall be  exercised  only through the  Depositary  and shall be limited to those
established by law and agreements  between such owners and the Depositary and/or
its Depositary Participants.


                                       18
<PAGE>

      (h) No holder of any beneficial  interest in any Global  Debenture held on
its  behalf by a  Depositary  shall have any rights  under this  Indenture  with
respect to such  Global  Debenture,  and such  Depositary  may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner of
such Global  Debenture  for all purposes  whatsoever.  None of the Company,  the
Trustee nor any agent of the Company or the Trustee will have any responsibility
or  liability  for any aspect of the records  relating  to or  payments  made on
account of beneficial  ownership interests of a Global Debenture or maintaining,
supervising  or  reviewing  any records  relating to such  beneficial  ownership
interests.  Notwithstanding  the  foregoing,  nothing  herein shall  prevent the
Company,  the  Trustee or any agent of the  Company or the  Trustee  from giving
effect to any written certification, proxy or other authorization furnished by a
Depositary  or impair,  as between a Depositary  and such holders of  beneficial
interests,  the operation of customary  practices  governing the exercise of the
rights of the Depositary (or its nominee) as holder of any Debenture.

                                  ARTICLE III.
                       PARTICULAR COVENANTS OF THE COMPANY

      Section 3.1. Payment of Principal,  Premium and Interest; Agreed Treatment
of the Debentures.

      (a) The Company  covenants and agrees that it will duly and punctually pay
or cause to be paid the  principal of and premium,  if any, and interest and any
Additional  Interest and other payments on the  Debentures at the place,  at the
respective  times  and  in  the  manner  provided  in  this  Indenture  and  the
Debentures.  Each  installment  of interest on the Debentures may be paid (i) by
mailing  checks  for  such  interest  payable  to the  order of the  holders  of
Debentures  entitled thereto as they appear on the registry books of the Company
if a request for a wire transfer has not been received by the Company or (ii) by
wire  transfer to any account with a banking  institution  located in the United
States  designated  in writing by such Person to the paying  agent no later than
the related record date. Notwithstanding the foregoing, so long as the holder of
this Debenture is the Institutional Trustee, the payment of the principal of and
interest on this Debenture will be made in immediately  available  funds at such
place and to such account as may be designated by the Institutional Trustee.

      (b) The Company will treat the Debentures as indebtedness, and the amounts
payable in respect of the principal  amount of such Debentures as interest,  for
all United States federal  income tax purposes.  All payments in respect of such
Debentures  will be made free and clear of United States  withholding tax to any
beneficial  owner thereof that has provided an Internal  Revenue Service Form W8
BEN (or any substitute or successor  form)  establishing  its non-United  States
status for United States federal income tax purposes.

      (c) As of the date of this Indenture, the Company has no present intention
to exercise its right under  Section  2.11 to defer  payments of interest on the
Debentures by commencing an Extension Period.

      (d) As of the  date of this  Indenture,  the  Company  believes  that  the
likelihood that it would exercise its right under Section 2.11 to defer payments
of interest on the  Debentures  by  commencing  an Extension  Period at any time
during  which  the  Debentures   are   outstanding  is  remote  because  of  the
restrictions  that would be imposed on the  Company's  ability to declare or pay
dividends  or  distributions  on, or to redeem,  purchase or make a  liquidation
payment  with  respect to, any of its  outstanding  equity and on the  Company's
ability to make any payments of principal  of or interest on, or  repurchase  or
redeem, any of its debt securities that rank pari passu in all respects with (or
junior in interest to) the Debentures.

      Section 3.2. Offices for Notices and Payments,  etc. So long as any of the
Debentures  remain  outstanding,   the  Company  will  maintain  in  Wilmington,
Delaware, an office or agency where the


                                       19
<PAGE>

Debentures  may be  presented  for  payment,  an  office  or  agency  where  the
Debentures may be presented for  registration of transfer and for exchange as in
this Indenture  provided and an office or agency where notices and demands to or
upon the  Company in  respect  of the  Debentures  or of this  Indenture  may be
served.  The Company will give to the Trustee  written notice of the location of
any such office or agency and of any change of location thereof. Until otherwise
designated  from  time to time by the  Company  in a notice to the  Trustee,  or
specified as  contemplated  by Section 2.5, such office or agency for all of the
above purposes shall be the office or agency of the Trustee. In case the Company
shall fail to maintain  any such office or agency in  Wilmington,  Delaware,  or
shall fail to give such notice of the  location or of any change in the location
thereof,  presentations and demands may be made and notices may be served at the
Principal Office of the Trustee.

      In  addition  to any such  office or agency,  the Company may from time to
time  designate one or more offices or agencies  outside  Wilmington,  Delaware,
where the  Debentures  may be  presented  for  registration  of transfer and for
exchange in the manner provided in this Indenture, and the Company may from time
to  time  rescind  such  designation,  as the  Company  may  deem  desirable  or
expedient;  provided,  however,  that no such designation or rescission shall in
any manner  relieve the Company of its obligation to maintain any such office or
agency in Wilmington,  Delaware,  for the purposes above mentioned.  The Company
will  give to the  Trustee  prompt  written  notice of any such  designation  or
rescission thereof.

      Section 3.3.  Appointments  to Fill  Vacancies in  Trustee's  Office.  The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint,  in the manner  provided in Section 6.9, a Trustee,  so that there
shall at all times be a Trustee hereunder.

      Section 3.4. Provision as to Paying Agent.

      (a) If the Company shall appoint a paying agent other than the Trustee, it
will cause such paying agent to execute and deliver to the Trustee an instrument
in which such agent shall agree with the  Trustee,  subject to the  provision of
this Section 3.4,

            (1)  that it will  hold all sums  held by it as such  agent  for the
            payment of the  principal  of and premium,  if any, or interest,  if
            any, on the  Debentures  (whether  such sums have been paid to it by
            the Company or by any other obligor on the  Debentures) in trust for
            the benefit of the holders of the Debentures;

            (2) that it will  give the  Trustee  prompt  written  notice  of any
            failure by the Company (or by any other  obligor on the  Debentures)
            to make any  payment of the  principal  of and  premium,  if any, or
            interest,  if any, on the Debentures  when the same shall be due and
            payable; and

            (3) that it will, at any time during the continuance of any Event of
            Default,  upon the written request of the Trustee,  forthwith pay to
            the Trustee all sums so held in trust by such paying agent.

      (b) If the  Company  shall act as its own  paying  agent,  it will,  on or
before each due date of the  principal  of and  premium,  if any, or interest or
other  payments,  if any, on the  Debentures,  set aside,  segregate and hold in
trust for the benefit of the holders of the  Debentures a sum  sufficient to pay
such  principal,  premium,  interest or other  payments so becoming due and will
notify the  Trustee in  writing  of any  failure to take such  action and of any
failure by the Company (or by any other  obligor under the  Debentures)  to make
any  payment of the  principal  of and  premium,  if any,  or  interest or other
payments, if any, on the Debentures when the same shall become due and payable.


                                       20
<PAGE>

      Whenever  the  Company  shall  have  one or  more  paying  agents  for the
Debentures,  it will,  on or prior  to each  due  date of the  principal  of and
premium, if any, or interest,  if any, on the Debentures,  deposit with a paying
agent a sum sufficient to pay the principal, premium, interest or other payments
so  becoming  due,  such sum to be held in trust for the  benefit of the Persons
entitled thereto and (unless such paying agent is the Trustee) the Company shall
promptly notify the Trustee in writing of its action or failure to act.

      (c)  Anything in this  Section 3.4 to the  contrary  notwithstanding,  the
Company  may, at any time,  for the  purpose of  obtaining  a  satisfaction  and
discharge  with  respect to the  Debentures,  or for any other  reason,  pay, or
direct  any  paying  agent to pay to the  Trustee  all sums held in trust by the
Company or any such paying  agent,  such sums to be held by the Trustee upon the
trusts herein contained.

      (d)  Anything in this  Section 3.4 to the  contrary  notwithstanding,  the
agreement  to hold sums in trust as provided  in this  Section 3.4 is subject to
Sections 12.3 and 12.4.

      Section  3.5.  Certificate  to Trustee.  The Company  will  deliver to the
Trustee  on or before  120 days after the end of each  fiscal  year,  so long as
Debentures are outstanding  hereunder,  a Certificate stating that in the course
of the  performance  by the  signers of their  duties as officers of the Company
they would normally have knowledge of any default during such fiscal year by the
Company in the performance of any covenants contained herein, stating whether or
not they have  knowledge of any such default  and, if so,  specifying  each such
default of which the signers have knowledge and the nature and status thereof. A
form of this Certificate is attached hereto as Exhibit B.

      Section  3.6.  Additional  Sums.  If and for so long as the  Trust  is the
holder of all Debentures  and the Trust is required to pay any additional  taxes
(including withholding taxes), duties, assessments or other governmental charges
as a result  of a Tax  Event,  the  Company  will pay  such  additional  amounts
("Additional  Sums")  on the  Debentures  as shall be  required  so that the net
amounts  received  and  retained  by the Trust  after  paying  taxes  (including
withholding taxes),  duties,  assessments or other governmental  charges will be
equal to the  amounts the Trust  would have  received if no such taxes,  duties,
assessments  or other  governmental  charges had been imposed.  Whenever in this
Indenture or the  Debentures  there is a reference in any context to the payment
of principal of or interest on the  Debentures,  such mention shall be deemed to
include  mention  of  payments  of the  Additional  Sums  provided  for in  this
paragraph to the extent that,  in such  context,  Additional  Sums are,  were or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express  mention of the payment of Additional  Sums (if  applicable)  in any
provisions  hereof shall not be construed as excluding  Additional Sums in those
provisions  hereof where such express  mention is not made;  provided,  however,
that the deferral of the payment of interest during an Extension Period pursuant
to Section 2.11 shall not defer the payment of any  Additional  Sums that may be
due and payable.

      Section 3.7.  Compliance with Consolidation  Provisions.  The Company will
not, while any of the Debentures remain outstanding,  consolidate with, or merge
into, or merge into itself,  or sell or convey all or  substantially  all of its
property  to any other  Person  unless the  provisions  of Article XI hereof are
complied with.

      Section 3.8.  Limitation on Dividends.  If Debentures are initially issued
to the Trust or a trustee of such Trust in connection with the issuance of Trust
Securities by the Trust (regardless of whether Debentures continue to be held by
such  Trust) and (i) there shall have  occurred  and be  continuing  an Event of
Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the Capital Securities  Guarantee,  or (iii) the Company shall
have  given  notice  of its  election  to  defer  payments  of  interest  on the
Debentures by extending the interest  payment period as provided herein and such
period, or any extension  thereof,  shall be continuing,  then the Company shall
not, and shall not allow any Affiliate of the Company to, (x) declare or pay any
dividends  or  distributions  on,  or  redeem,


                                       21
<PAGE>

purchase,  acquire,  or make a  liquidation  payment with respect to, any of the
Company's capital stock or its Affiliates' capital stock (other than payments of
dividends or distributions  to the Company) or make any guarantee  payments with
respect to the  foregoing or (y) make any payment of principal of or interest or
premium,  if any, on or repay,  repurchase or redeem any debt  securities of the
Company or any Affiliate  that rank pari passu in all respects with or junior in
interest to the  Debentures  (other  than,  with  respect to clauses (x) and (y)
above, (1) repurchases,  redemptions or other  acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan or
other  similar  arrangement  with or for the  benefit of one or more  employees,
officers,  directors or consultants,  in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities  convertible  into or  exercisable  for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable  Extension  Period, if any, (2) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary  of the Company) for any class or series of the  Company's
capital  stock or of any class or series of the Company's  indebtedness  for any
class or series of the Company's  capital stock,  (3) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange  provisions  of such capital stock or the security  being  converted or
exchanged,   (4)  any   declaration  of  a  dividend  in  connection   with  any
stockholders'  rights plan, or the issuance of rights,  stock or other  property
under any  stockholders'  rights plan, or the redemption or repurchase of rights
pursuant thereto,  (5) any dividend in the form of stock,  warrants,  options or
other rights where the dividend  stock or the stock  issuable  upon  exercise of
such  warrants,  options or other  rights is the same stock as that on which the
dividend  is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional  shares issued in connection  therewith,  or
(6) payments under the Capital Securities Guarantee).

      Section  3.9.  Covenants  as to the  Trust.  For  so  long  as  the  Trust
Securities remain outstanding,  the Company shall maintain 100% ownership of the
Common  Securities;  provided,  however,  that any  permitted  successor  of the
Company  under this  Indenture  may succeed to the  Company's  ownership of such
Common Securities. The Company, as owner of the Common Securities, shall, except
in  connection  with a  distribution  of  Debentures  to the  holders  of  Trust
Securities  in  liquidation  of the Trust,  the  redemption  of all of the Trust
Securities  or  certain  mergers,  consolidations  or  amalgamations,   each  as
permitted by the  Declaration,  cause the Trust (a) to remain a statutory trust,
(b) to otherwise  continue to be classified as a grantor trust for United States
federal income tax purposes, and (c) to cause each holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Debentures.

      Section 3.10.  Additional Junior Indebtedness.  The Company shall not, and
it shall not cause or permit any  Subsidiary of the Company to, incur,  issue or
be  obligated  on  any  Additional  Junior  Indebtedness,   either  directly  or
indirectly, by way of guarantee,  suretyship or otherwise, other than Additional
Junior  Indebtedness  (i) that, by its terms,  is expressly  stated to be either
junior and subordinate or pari passu in all respects to the Debentures, and (ii)
of which the Company has notified  (and, if then required  under the  applicable
guidelines of the  regulating  entity,  has received  approval from) the Federal
Reserve, if the Company is a bank holding company, or the OTS, if the Company is
a savings and loan holding company.

      Section 3.11. Subsidiary;  Insured Depository Institution.  So long as any
of the Debentures remain outstanding,  at least one operating  Subsidiary of the
Company shall be an insured depository  institution,  as such term is defined in
Section 3(c)(2) of the Federal Deposit Insurance Act, as amended.


                                       22
<PAGE>

                                  ARTICLE IV.
                       SECURITYHOLDERS' LISTS AND REPORTS
                         BY THE COMPANY AND THE TRUSTEE

      Section 4.1. Securityholders' Lists. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee:

      (a) on each regular record date for the  Debentures,  a list, in such form
as the  Trustee  may  reasonably  require,  of the  names and  addresses  of the
Securityholders of the Debentures as of such record date; and

      (b) at such other times as the  Trustee may request in writing,  within 30
days after the  receipt by the  Company of any such  request,  a list of similar
form and  content as of a date not more than 15 days prior to the time such list
is furnished;

except that no such lists need be  furnished  under this  Section 4.1 so long as
the  Trustee  is in  possession  thereof  by reason of its  acting as  Debenture
registrar.

      Section 4.2. Preservation and Disclosure of Lists.

      (a) The  Trustee  shall  preserve,  in as current a form as is  reasonably
practicable,  all  information  as to the names and  addresses of the holders of
Debentures  (1) contained in the most recent list furnished to it as provided in
Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so
acting) hereunder.  The Trustee may destroy any list furnished to it as provided
in Section 4.1 upon receipt of a new list so furnished.

      (b) In case three or more holders of Debentures  (hereinafter  referred to
as  "applicants")  apply in writing to the  Trustee  and  furnish to the Trustee
reasonable  proof that each such applicant has owned a Debenture for a period of
at least 6 months preceding the date of such  application,  and such application
states  that  the  applicants  desire  to  communicate  with  other  holders  of
Debentures  with  respect to their  rights  under this  Indenture  or under such
Debentures  and is  accompanied  by a  copy  of  the  form  of  proxy  or  other
communication which such applicants propose to transmit,  then the Trustee shall
within 5 Business Days after the receipt of such  application,  at its election,
either:

            (1) afford such applicants  access to the  information  preserved at
            the  time by the  Trustee  in  accordance  with  the  provisions  of
            subsection (a) of this Section 4.2, or

            (2) inform such applicants as to the  approximate  number of holders
            of Debentures  whose names and addresses  appear in the  information
            preserved  at the  time  by  the  Trustee  in  accordance  with  the
            provisions  of  subsection  (a) of this  Section  4.2, and as to the
            approximate  cost of  mailing  to such  Securityholders  the form of
            proxy or other communication, if any, specified in such application.

      If the Trustee  shall elect not to afford such  applicants  access to such
information,  the Trustee shall,  upon the written  request of such  applicants,
mail to each  Securityholder  whose name and address  appear in the  information
preserved  at the time by the  Trustee  in  accordance  with the  provisions  of
subsection  (a) of  this  Section  4.2 a copy  of the  form of  proxy  or  other
communication  which is specified in such  request  with  reasonable  promptness
after a tender to the Trustee of the  material  to be mailed and of payment,  or
provision for the payment, of the reasonable expenses of mailing,  unless within
five days after such tender,  the Trustee shall mail to such applicants and file
with the  Securities  and  Exchange  Commission,  if  permitted  or  required by
applicable  law,  together  with a copy of the material to be mailed,  a written
statement to the effect that, in the opinion of the Trustee,  such mailing would
be contrary to the


                                       23
<PAGE>

best interests of the holders of all Debentures, as the case may be, or would be
in violation of applicable  law. Such written  statement shall specify the basis
of such opinion. If said Commission, as permitted or required by applicable law,
after  opportunity  for a hearing upon the  objections  specified in the written
statement  so  filed,  shall  enter an order  refusing  to  sustain  any of such
objections  or if,  after the entry of an order  sustaining  one or more of such
objections,  said  Commission  shall  find,  after  notice and  opportunity  for
hearing,  that all the  objections so sustained have been met and shall enter an
order so  declaring,  the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of such order and the
renewal  of  such  tender;  otherwise  the  Trustee  shall  be  relieved  of any
obligation or duty to such applicants respecting their application.

      (c) Each and every  holder of  Debentures,  by  receiving  and holding the
same,  agrees with the Company and the Trustee  that neither the Company nor the
Trustee  nor any  paying  agent  shall  be held  accountable  by  reason  of the
disclosure of any such  information as to the names and addresses of the holders
of  Debentures  in accordance  with the  provisions  of  subsection  (b) of this
Section 4.2,  regardless of the source from which such  information was derived,
and that the  Trustee  shall not be held  accountable  by reason of mailing  any
material pursuant to a request made under said subsection (b).

      Section 4.3. Reports by the Company.  (a) The Company shall furnish to the
holders of the Capital  Securities and to prospective  purchasers of the Capital
Securities,  upon  their  request,  the  information  required  to be  furnished
pursuant to Rule 144A(d)(4) under the Securities Act.

      (b) The Company shall furnish to (i) the Bank of New York,  with a copy to
FTN Financial  Capital Markets and Keefe,  Bruyette & Woods,  Inc., and (ii) any
beneficial owner of the Capital Securities reasonably identified to the Company,
a completed  quarterly  report in the form  attached  hereto as Exhibit C, which
report shall be so furnished by the Company not later than 50 days after the end
of each of the first  three  fiscal  quarters of each fiscal year of the Company
and not later than 100 days  after the end of each  fiscal  year of the  Company
along with a copy of the Company's  most  recently  filed (1) FR Y-9C filed with
the Federal Reserve if the Company is a bank holding company, (2) FR Y-9SP filed
with the Federal  Reserve if the Company is a small bank holding  company or (3)
H-(b)11 filed with the OTS if the Company is a savings and loan holding company.

                                   ARTICLE V.
                   REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                            UPON AN EVENT OF DEFAULT

      Section 5.1. Events of Default.  "Event of Default," wherever used herein,
means any one of the  following  events  (whatever  the reason for such Event of
Default  and  whether it shall be  voluntary  or  involuntary  or be effected by
operation  of law or pursuant to any  judgment,  decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

      (a)  the  Company  defaults  in the  payment  of  any  interest  upon  any
Debenture,  including any Additional Interest in respect thereof,  following the
nonpayment  of any such  interest  for twenty or more  consecutive  Distribution
Periods; or

      (b)  the  Company  defaults  in the  payment  of all  or any  part  of the
principal of (or premium,  if any, on) any Debentures as and when the same shall
become due and payable either at maturity,  upon  redemption,  by declaration of
acceleration or otherwise; or

      (c) the Company  defaults in the performance  of, or breaches,  any of its
covenants or  agreements  in this  Indenture  or in the terms of the  Debentures
established  as  contemplated  in  this  Indenture  (other  than a  covenant  or
agreement a default in whose  performance  or whose  breach is elsewhere in this
Section  specifically dealt with), and continuance of such default or breach for
a period


                                       24
<PAGE>

of 60 days after there has been given,  by registered or certified  mail, to the
Company by the  Trustee or to the  Company  and the Trustee by the holders of at
least 25% in aggregate principal amount of the outstanding Debentures, a written
notice  specifying  such  default or breach and  requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or

      (d) a court of  competent  jurisdiction  shall enter a decree or order for
relief in respect of the  Company in an  involuntary  case under any  applicable
bankruptcy, insolvency,  reorganization or other similar law now or hereafter in
effect,  or appointing a receiver,  liquidator,  assignee,  custodian,  trustee,
sequestrator (or similar official) of the Company or for any substantial part of
its property,  or ordering the winding-up or liquidation of its affairs and such
decree  or  order  shall  remain  unstayed  and in  effect  for a  period  of 90
consecutive days; or

      (e) the  Company  shall  commence a  voluntary  case under any  applicable
bankruptcy, insolvency,  reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking  possession
by a receiver, liquidator, assignee, trustee, custodian,  sequestrator (or other
similar official) of the Company or of any substantial part of its property,  or
shall make any general  assignment  for the benefit of creditors,  or shall fail
generally to pay its debts as they become due; or

      (f)  the  Trust  shall  have  voluntarily  or  involuntarily   liquidated,
dissolved, wound-up its business or otherwise terminated its existence except in
connection with (i) the  distribution of the Debentures to holders of such Trust
Securities in liquidation of their  interests in the Trust,  (ii) the redemption
of  all  of  the  outstanding   Trust   Securities  or  (iii)  certain  mergers,
consolidations or amalgamations, each as permitted by the Declaration.

      If an Acceleration  Event of Default occurs and is continuing with respect
to the Debentures,  then, and in each and every such case,  unless the principal
of the Debentures shall have already become due and payable,  either the Trustee
or the  holders  of not  less  than 25% in  aggregate  principal  amount  of the
Debentures then outstanding hereunder,  by notice in writing to the Company (and
to the Trustee if given by Securityholders), may declare the entire principal of
the Debentures and the interest accrued  thereon,  if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately due
and payable.  If an Event of Default under  Section  5.1(b) or (c) occurs and is
continuing  with  respect to the  Debentures,  then,  and in each and every such
case,  unless the principal of the Debentures  shall have already become due and
payable,  either the  Trustee or the  holders of not less than 25% in  aggregate
principal  amount of the Debentures  then  outstanding  hereunder,  by notice in
writing to the  Company  (and to the Trustee if given by  Securityholders),  may
proceed to remedy the default or breach thereunder by such appropriate  judicial
proceedings  as the Trustee or such holders shall deem most  effectual to remedy
the defaulted  covenant or enforce the provisions of this Indenture so breached,
either by suit in equity or by action at law, for damages or otherwise.

      The foregoing  provisions,  however, are subject to the condition that if,
at any time after the  principal of the  Debentures  shall have been so declared
due and payable, and before any judgment or decree for the payment of the moneys
due shall have been obtained or entered as hereinafter provided, (i) the Company
shall pay or shall deposit with the Trustee a sum  sufficient to pay all matured
installments  of  interest  upon all the  Debentures  and the  principal  of and
premium, if any, on the Debentures which shall have become due otherwise than by
acceleration  (with  interest  upon such  principal  and  premium,  if any,  and
Additional  Interest) and such amount as shall be sufficient to cover reasonable
compensation  to the  Trustee and each  predecessor  Trustee,  their  respective
agents, attorneys and counsel, and all other amounts due to the Trustee pursuant
to Section  6.6, if any,  and (ii) all Events of Default  under this  Indenture,
other than the non-payment of the principal of or premium, if any, on Debentures
which shall have become due by  acceleration,  shall have been cured,  waived or
otherwise


                                       25
<PAGE>

remedied  as  provided  herein -- then and in every  such case the  holders of a
majority in aggregate  principal amount of the Debentures then  outstanding,  by
written  notice to the Company and to the  Trustee,  may waive all  defaults and
rescind and annul such declaration and its  consequences,  but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent  default
or shall impair any right consequent thereon.

      In case the Trustee  shall have  proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such  rescission  or  annulment  or for any other  reason or shall  have been
determined  adversely to the  Trustee,  then and in every such case the Company,
the Trustee and the holders of the Debentures shall be restored  respectively to
their  several  positions  and rights  hereunder,  and all rights,  remedies and
powers of the  Company,  the  Trustee and the  holders of the  Debentures  shall
continue as though no such proceeding had been taken.

      Section 5.2. Payment of Debentures on Default; Suit Therefor.  The Company
covenants  that upon the  occurrence of an Event of Default  pursuant to Section
5.1(a) or (b) then,  upon demand of the  Trustee,  the  Company  will pay to the
Trustee,  for the benefit of the holders of the Debentures the whole amount that
then shall have  become due and  payable on all  Debentures  for  principal  and
premium,  if any, or  interest,  or both,  as the case may be,  with  Additional
Interest  accrued on the Debentures (to the extent that payment of such interest
is enforceable under applicable law and, if the Debentures are held by the Trust
or a trustee of such Trust, without duplication of any other amounts paid by the
Trust or a trustee in respect thereof);  and, in addition thereto,  such further
amount as shall be  sufficient  to cover the costs and  expenses of  collection,
including a reasonable  compensation to the Trustee,  its agents,  attorneys and
counsel, and any other amounts due to the Trustee under Section 6.6. In case the
Company shall fail forthwith to pay such amounts upon such demand,  the Trustee,
in its own name and as  trustee  of an  express  trust,  shall be  entitled  and
empowered to institute  any actions or  proceedings  at law or in equity for the
collection  of the sums so due and unpaid,  and may prosecute any such action or
proceeding  to judgment or final  decree,  and may enforce any such  judgment or
final decree  against the Company or any other  obligor on such  Debentures  and
collect in the manner  provided by law out of the property of the Company or any
other  obligor on such  Debentures  wherever  situated  the moneys  adjudged  or
decreed to be payable.

      In case there shall be pending  proceedings  for the bankruptcy or for the
reorganization  of the  Company  or any other  obligor on the  Debentures  under
Bankruptcy  Law, or in case a receiver or trustee shall have been  appointed for
the property of the Company or such other  obligor,  or in the case of any other
similar judicial  proceedings  relative to the Company or other obligor upon the
Debentures,  or to the  creditors  or  property  of the  Company  or such  other
obligor,  the Trustee,  irrespective  of whether the principal of the Debentures
shall  then be due  and  payable  as  therein  expressed  or by  declaration  of
acceleration  or otherwise  and  irrespective  of whether the Trustee shall have
made any  demand  pursuant  to the  provisions  of this  Section  5.2,  shall be
entitled and empowered, by intervention in such proceedings or otherwise,

      (i)   to file  and  prove a claim  or  claims  for  the  whole  amount  of
            principal   and  interest   owing  and  unpaid  in  respect  of  the
            Debentures,

      (ii)  in case of any  judicial  proceedings,  to file such proofs of claim
            and other  papers or  documents  as may be necessary or advisable in
            order to have the  claims of the  Trustee  (including  any claim for
            reasonable compensation to the Trustee and each predecessor Trustee,
            and  their  respective  agents,   attorneys  and  counsel,  and  for
            reimbursement  of all other amounts due to the Trustee under Section
            6.6),   and  of  the   Securityholders   allowed  in  such  judicial
            proceedings  relative  to the  Company  or any other  obligor on the
            Debentures,  or to the  creditors or property of the Company or such
            other obligor,  unless


                                       26
<PAGE>

            prohibited by applicable law and  regulations,  to vote on behalf of
            the  holders of the  Debentures  in any  election  of a trustee or a
            standby trustee in arrangement, reorganization, liquidation or other
            bankruptcy or insolvency  proceedings or Person  performing  similar
            functions in comparable proceedings,

      (iii) to  collect  and  receive  any moneys or other  property  payable or
            deliverable on any such claims, and

      (iv)  to  distribute  the same  after the  deduction  of its  charges  and
            expenses.

Any  receiver,  assignee or trustee in bankruptcy  or  reorganization  is hereby
authorized by each of the  Securityholders to make such payments to the Trustee,
and, in the event that the Trustee  shall consent to the making of such payments
directly to the Securityholders,  to pay to the Trustee such amounts as shall be
sufficient to cover  reasonable  compensation to the Trustee,  each  predecessor
Trustee  and their  respective  agents,  attorneys  and  counsel,  and all other
amounts due to the Trustee under Section 6.6.

      Nothing  herein  contained  shall be construed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any  Securityholder  any
plan of  reorganization,  arrangement,  adjustment or composition  affecting the
Debentures  or the rights of any holder  thereof or to authorize  the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.

      All rights of action and of  asserting  claims  under this  Indenture,  or
under  any of the  Debentures,  may be  enforced  by  the  Trustee  without  the
possession of any of the Debentures,  or the production  thereof at any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable  benefit of the holders of the
Debentures.

      In any  proceedings  brought  by the  Trustee  (and  also any  proceedings
involving the  interpretation  of any  provision of this  Indenture to which the
Trustee  shall be a  party),  the  Trustee  shall be held to  represent  all the
holders of the Debentures,  and it shall not be necessary to make any holders of
the Debentures parties to any such proceedings.

      Section  5.3.  Application  of Moneys  Collected  by  Trustee.  Any moneys
collected  by the  Trustee  pursuant  to this  Article V shall be applied in the
following  order, at the date or dates fixed by the Trustee for the distribution
of such moneys,  upon presentation of the several Debentures in respect of which
moneys have been collected,  and stamping thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:

      First:  To the payment of costs and expenses  incurred by, and  reasonable
fees of, the  Trustee,  its  agents,  attorneys  and  counsel,  and of all other
amounts due to the Trustee under Section 6.6;

      Second: To the payment of all Senior Indebtedness of the Company if and to
the extent required by Article XV;

      Third:  To the payment of the amounts then due and unpaid upon  Debentures
for principal (and premium, if any), and interest on the Debentures,  in respect
of which or for the benefit of which money has been collected,  ratably, without
preference  or  priority  of any  kind,  according  to the  amounts  due on such
Debentures (including Additional Interest); and

      Fourth: The balance, if any, to the Company.


                                       27
<PAGE>

      Section 5.4.  Proceedings by  Securityholders.  No holder of any Debenture
shall have any right to institute any suit,  action or proceeding for any remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of  Default  with  respect to the  Debentures  and unless the
holders of not less than 25% in  aggregate  principal  amount of the  Debentures
then  outstanding  shall have given the Trustee a written  request to  institute
such  action,  suit or  proceeding  and shall have  offered to the Trustee  such
reasonable  indemnity  as  it  may  require  against  the  costs,  expenses  and
liabilities  to be  incurred  thereby,  and the  Trustee  for 60 days  after its
receipt of such  notice,  request  and offer of  indemnity  shall have failed to
institute any such action, suit or proceeding.

      Notwithstanding any other provisions in this Indenture, however, the right
of any holder of any Debenture to receive  payment of the principal of, premium,
if any, and interest,  on such  Debenture when due, or to institute suit for the
enforcement of any such payment,  shall not be impaired or affected  without the
consent of such holder and by  accepting a Debenture  hereunder  it is expressly
understood,  intended and covenanted by the taker and holder of every  Debenture
with every  other such  taker and  holder and the  Trustee,  that no one or more
holders of Debentures shall have any right in any manner whatsoever by virtue or
by availing  itself of any  provision of this  Indenture  to affect,  disturb or
prejudice  the rights of the  holders of any other  Debentures,  or to obtain or
seek to obtain  priority  over or  preference  to any other such  holder,  or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all holders of Debentures.  For the
protection and  enforcement  of the  provisions of this Section,  each and every
Securityholder  and the Trustee shall be entitled to such relief as can be given
either at law or in equity.

      Section  5.5.  Proceedings  by  Trustee.  In case of an Event  of  Default
hereunder the Trustee may in its  discretion  proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate  judicial  proceedings
as the  Trustee  shall deem most  effectual  to protect  and enforce any of such
rights,  either  by suit in  equity  or by  action  at law or by  proceeding  in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement  contained  in this  Indenture  or in aid of the exercise of any power
granted in this  Indenture,  or to enforce  any other legal or  equitable  right
vested in the Trustee by this Indenture or by law.

      Section 5.6. Remedies  Cumulative and Continuing;  Delay or Omission Not a
Waiver.  Except as  otherwise  provided in Section  2.6, all powers and remedies
given by this Article V to the Trustee or to the  Securityholders  shall, to the
extent  permitted by law, be deemed  cumulative  and not  exclusive of any other
powers and remedies  available to the Trustee or the holders of the  Debentures,
by judicial  proceedings or otherwise,  to enforce the performance or observance
of the  covenants  and  agreements  contained  in this  Indenture  or  otherwise
established  with  respect to the  Debentures,  and no delay or  omission of the
Trustee or of any holder of any of the Debentures to exercise any right,  remedy
or power  accruing  upon any  Event  of  Default  occurring  and  continuing  as
aforesaid shall impair any such right, remedy or power, or shall be construed to
be a waiver of any such default or an acquiescence  therein; and, subject to the
provisions of Section 5.4,  every power and remedy given by this Article V or by
law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed  expedient,  by the Trustee (in accordance  with
its duties under Section 6.1) or by the Securityholders.

      Section 5.7.  Direction of Proceedings  and Waiver of Defaults by Majority
of  Securityholders.  The holders of a majority in aggregate principal amount of
the Debentures affected (voting as one class) at the time outstanding shall have
the right to direct the time, method, and place of conducting any proceeding for
any remedy available to the Trustee,  or exercising any trust or power conferred
on the Trustee with respect to such Debentures; provided, however, that (subject
to the provisions of Section 6.1) the Trustee shall have the right to decline to
follow any such  direction  if the Trustee  shall  determine  that the action so
directed  would be unjustly  prejudicial  to the holders not taking


                                       28
<PAGE>

part in such  direction or if the Trustee  being  advised by counsel  determines
that the action or  proceeding  so  directed  may not  lawfully be taken or if a
Responsible   Officer  of  the  Trustee  shall  determine  that  the  action  or
proceedings so directed would involve the Trustee in personal liability.

      The holders of a majority in aggregate  principal amount of the Debentures
at the time  outstanding  may on behalf of the holders of all of the  Debentures
waive (or modify any previously  granted waiver of) any past default or Event of
Default, and its consequences,  except a default (a) in the payment of principal
of,  premium,  if any, or interest on any of the  Debentures,  (b) in respect of
covenants or provisions  hereof which cannot be modified or amended  without the
consent  of the  holder of each  Debenture  affected,  or (c) in  respect of the
covenants  contained in Section 3.9; provided,  however,  that if the Debentures
are held by the Trust or a trustee of such trust, such waiver or modification to
such  waiver  shall  not  be  effective  until  the  holders  of a  majority  in
Liquidation Amount of Trust Securities of the Trust shall have consented to such
waiver or modification to such waiver, provided, further, that if the consent of
the holder of each outstanding  Debenture is required,  such waiver shall not be
effective  until each  holder of the Trust  Securities  of the Trust  shall have
consented to such  waiver.  Upon any such waiver,  the default  covered  thereby
shall be deemed to be cured for all purposes of this  Indenture and the Company,
the Trustee and the holders of the Debentures  shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any  subsequent  or other  default  or Event of  Default  or  impair  any  right
consequent  thereon.  Whenever any default or Event of Default  hereunder  shall
have been waived as permitted by this Section,  said default or Event of Default
shall for all purposes of the  Debentures  and this  Indenture be deemed to have
been cured and to be not continuing.

      Section 5.8. Notice of Defaults.  The Trustee shall,  within 90 days after
the actual  knowledge by a Responsible  Officer of the Trustee of the occurrence
of a default with respect to the Debentures, mail to all Securityholders, as the
names and addresses of such holders appear upon the Debenture  Register,  notice
of all defaults with respect to the Debentures known to the Trustee, unless such
defaults  shall have been  cured  before  the  giving of such  notice  (the term
"defaults"  for the purpose of this Section 5.8 being  hereby  defined to be the
events  specified in clauses (a), (b), (c), (d), (e) and (f) of Section 5.1, not
including  periods of grace, if any, provided for therein);  provided,  however,
that, except in the case of default in the payment of the principal of, premium,
if any, or interest on any of the Debentures,  the Trustee shall be protected in
withholding  such notice if and so long as a Responsible  Officer of the Trustee
in good faith determines that the withholding of such notice is in the interests
of the Securityholders.

      Section  5.9.  Undertaking  to Pay Costs.  All  parties to this  Indenture
agree,  and each holder of any  Debenture  by his  acceptance  thereof  shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture,  or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party  litigant in such suit of an  undertaking  to pay the costs of such
suit,  and that  such  court  may in its  discretion  assess  reasonable  costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such  suit,  having  due  regard to the  merits  and good faith of the claims or
defenses made by such party litigant;  provided, however, that the provisions of
this Section 5.9 shall not apply to any suit  instituted by the Trustee,  to any
suit instituted by any Securityholder,  or group of Securityholders,  holding in
the aggregate more than 10% in principal  amount of the Debentures  outstanding,
or to any suit  instituted  by any  Securityholder  for the  enforcement  of the
payment of the  principal of (or premium,  if any) or interest on any  Debenture
against the Company on or after the same shall have become due and payable.


                                       29
<PAGE>

                                  ARTICLE VI.
                             CONCERNING THE TRUSTEE

      Section 6.1. Duties and  Responsibilities of Trustee.  With respect to the
holders of Debentures issued hereunder,  the Trustee, prior to the occurrence of
an Event of  Default  with  respect  to the  Debentures  and after the curing or
waiving of all Events of Default  which may have  occurred,  with respect to the
Debentures,  undertakes  to  perform  such  duties  and only such  duties as are
specifically set forth in this Indenture, and no implied covenants shall be read
into this  Indenture  against  the  Trustee.  In case an Event of  Default  with
respect to the Debentures has occurred (which has not been cured or waived), the
Trustee  shall  exercise  such of the  rights  and  powers  vested in it by this
Indenture,  and use the same  degree of care and skill in their  exercise,  as a
prudent man would exercise or use under the  circumstances in the conduct of his
own affairs.

      No provision of this  Indenture  shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that:

      (a)  prior to the  occurrence  of an  Event of  Default  with  respect  to
Debentures  and after the curing or  waiving of all Events of Default  which may
have occurred

            (1) the  duties  and  obligations  of the  Trustee  with  respect to
            Debentures shall be determined  solely by the express  provisions of
            this  Indenture,  and the Trustee shall not be liable except for the
            performance  of such  duties  and  obligations  with  respect to the
            Debentures as are specifically  set forth in this Indenture,  and no
            implied  covenants or obligations  shall be read into this Indenture
            against the Trustee, and

            (2) in the  absence  of bad  faith on the part of the  Trustee,  the
            Trustee may conclusively rely, as to the truth of the statements and
            the  correctness  of  the  opinions  expressed  therein,   upon  any
            certificates or opinions  furnished to the Trustee and conforming to
            the  requirements  of this  Indenture;  but, in the case of any such
            certificates   or  opinions  which  by  any  provision   hereof  are
            specifically  required to be furnished  to the Trustee,  the Trustee
            shall be under a duty to examine  the same to  determine  whether or
            not they conform to the requirements of this Indenture;

      (b) the Trustee shall not be liable for any error of judgment made in good
faith by a  Responsible  Officer or Officers of the Trustee,  unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts; and

      (c) the Trustee  shall not be liable with  respect to any action  taken or
omitted to be taken by it in good faith, in accordance with the direction of the
Securityholders  pursuant to Section 5.7, relating to the time, method and place
of  conducting  any  proceeding  for any remedy  available  to the  Trustee,  or
exercising any trust or power conferred upon the Trustee, under this Indenture.

      None of the  provisions  contained  in this  Indenture  shall  require the
Trustee to expend or risk its own funds or otherwise  incur  personal  financial
liability in the  performance  of any of its duties or in the exercise of any of
its rights or powers,  if there is ground for  believing  that the  repayment of
such funds or liability  is not assured to it under the terms of this  Indenture
or indemnity  satisfactory  to the Trustee  against such risk is not  reasonably
assured to it.

      Section 6.2.  Reliance on Documents,  Opinions,  etc.  Except as otherwise
provided in Section 6.1:


                                       30
<PAGE>

      (a) the  Trustee may  conclusively  rely and shall be fully  protected  in
acting or refraining  from acting upon any resolution,  certificate,  statement,
instrument,  opinion,  report,  notice,  request,  consent,  order,  bond, note,
debenture  or other paper or  document  believed by it to be genuine and to have
been signed or presented by the proper party or parties;

      (b) any  request,  direction,  order or  demand of the  Company  mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein  specifically  prescribed);  and any Board
Resolution  may be evidenced  to the Trustee by a copy thereof  certified by the
Secretary or an Assistant Secretary of the Company;

      (c) the Trustee may consult with counsel of its  selection  and any advice
or Opinion of Counsel shall be full and complete authorization and protection in
respect of any action  taken,  suffered or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;

      (d) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this  Indenture at the request,  order or direction of
any of the Securityholders, pursuant to the provisions of this Indenture, unless
such  Securityholders  shall have offered to the Trustee reasonable  security or
indemnity  against the costs,  expenses  and  liabilities  which may be incurred
therein or thereby;

      (e) the Trustee  shall not be liable for any action taken or omitted by it
in good faith and believed by it to be  authorized  or within the  discretion or
rights or powers conferred upon it by this Indenture;  nothing  contained herein
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of  Default  with  respect to the  Debentures  (that has not been cured or
waived) to exercise  with  respect to  Debentures  such of the rights and powers
vested in it by this Indenture,  and to use the same degree of care and skill in
their exercise,  as a prudent man would exercise or use under the  circumstances
in the conduct of his own affairs;

      (f) the  Trustee  shall  not be bound to make any  investigation  into the
facts or matters stated in any resolution,  certificate,  statement, instrument,
opinion,  report, notice, request,  consent,  order, approval,  bond, debenture,
coupon or other paper or document,  unless  requested in writing to do so by the
holders  of not less  than a  majority  in  aggregate  principal  amount  of the
outstanding Debentures affected thereby; provided,  however, that if the payment
within a reasonable  time to the Trustee of the costs,  expenses or  liabilities
likely  to be  incurred  by it in the  making of such  investigation  is, in the
opinion of the Trustee,  not  reasonably  assured to the Trustee by the security
afforded  to it by  the  terms  of  this  Indenture,  the  Trustee  may  require
reasonable  indemnity  against  such  expense or  liability as a condition to so
proceeding;

      (g) the  Trustee  may  execute  any of the trusts or powers  hereunder  or
perform any duties hereunder either directly or by or through agents  (including
any Authenticating Agent) or attorneys, and the Trustee shall not be responsible
for any  misconduct  or  negligence  on the part of any such  agent or  attorney
appointed by it with due care; and

      (h) with the  exceptions  of defaults  under  Sections  5.1(a) or (b), the
Trustee  shall not be charged with  knowledge of any Default or Event of Default
with respect to the Debentures  unless a written notice of such Default or Event
of  Default  shall have been  given to the  Trustee by the  Company or any other
obligor on the Debentures or by any holder of the Debentures.

      Section 6.3. No Responsibility  for Recitals,  etc. The recitals contained
herein and in the Debentures (except in the certificate of authentication of the
Trustee or the  Authenticating  Agent) shall be taken as the  statements  of the
Company,  and the Trustee and the Authenticating  Agent assume no responsibility
for the correctness of the same. The Trustee and the  Authenticating  Agent make
no representations as to the validity or sufficiency of this Indenture or of the
Debentures.  The Trustee and


                                       31
<PAGE>

the Authenticating  Agent shall not be accountable for the use or application by
the Company of any  Debentures or the proceeds of any  Debentures  authenticated
and delivered by the Trustee or the Authenticating  Agent in conformity with the
provisions of this Indenture.

      Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents
or Registrar May Own Debentures.  The Trustee or any Authenticating Agent or any
paying agent or any transfer agent or any Debenture registrar, in its individual
or any other  capacity,  may become the owner or pledgee of Debentures  with the
same rights it would have if it were not Trustee,  Authenticating  Agent, paying
agent, transfer agent or Debenture registrar.

      Section  6.5.  Moneys to be Held in Trust.  Subject to the  provisions  of
Section  12.4,  all moneys  received by the Trustee or any paying  agent  shall,
until used or applied as herein  provided,  be held in trust for the purpose for
which they were received,  but need not be segregated from other funds except to
the extent  required by law.  The Trustee and any paying agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing  with the Company.  So long as no Event of Default  shall have
occurred and be  continuing,  all  interest  allowed on any such moneys shall be
paid from  time to time upon the  written  order of the  Company,  signed by the
Chairman of the Board of Directors,  the Chief Executive Officer, the President,
a Managing Director,  a Vice President,  the Treasurer or an Assistant Treasurer
of the Company.

      Section 6.6.  Compensation and Expenses of Trustee.  The Company covenants
and agrees to pay or reimburse  the Trustee upon its request for all  reasonable
expenses,  disbursements  and  advances  incurred  or  made  by the  Trustee  in
accordance  with  any  of  the  provisions  of  this  Indenture  (including  the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ)  except any such expense,  disbursement
or advance as may arise from its negligence or willful misconduct.  For purposes
of  clarification,  this  Section  6.6 does not  contemplate  the payment by the
Company  of  acceptance  or  annual  administration  fees  owing to the  Trustee
pursuant to the services to be provided by the Trustee  under this  Indenture or
the fees and expenses of the Trustee's counsel in connection with the closing of
the transactions  contemplated by this Indenture.  The Company also covenants to
indemnify  each of the Trustee or any  predecessor  Trustee  (and its  officers,
agents,  directors and employees) for, and to hold it harmless against,  any and
all loss, damage, claim,  liability or expense including taxes (other than taxes
based on the  income of the  Trustee)  incurred  without  negligence  or willful
misconduct on the part of the Trustee and arising out of or in  connection  with
the acceptance or administration of this trust, including the costs and expenses
of defending  itself  against any claim of  liability.  The  obligations  of the
Company  under this Section 6.6 to  compensate  and indemnify the Trustee and to
pay or reimburse  the Trustee for  expenses,  disbursements  and advances  shall
constitute additional indebtedness hereunder. Such additional indebtedness shall
be secured by a lien prior to that of the Debentures upon all property and funds
held or  collected  by the Trustee as such,  except  funds held in trust for the
benefit of the holders of particular Debentures.

      Without  prejudice  to any other  rights  available  to the Trustee  under
applicable  law,  when the  Trustee  incurs  expenses  or  renders  services  in
connection with an Event of Default specified in Section 5.1(d), (e) or (f), the
expenses  (including the reasonable charges and expenses of its counsel) and the
compensation   for  the  services  are  intended  to   constitute   expenses  of
administration  under any applicable federal or state bankruptcy,  insolvency or
other similar law.

      The provisions of this Section shall survive the resignation or removal of
the Trustee and the defeasance or other termination of this Indenture.

      Notwithstanding  anything  in  this  Indenture  or  any  Debenture  to the
contrary,  the Trustee shall have no  obligation  whatsoever to advance funds to
pay any  principal  of or  interest  on or other  amounts  with  respect  to the
Debentures or otherwise advance funds to or on behalf of the Company.


                                       32
<PAGE>

      Section  6.7.  Officers'  Certificate  as  Evidence.  Except as  otherwise
provided  in  Sections  6.1  and  6.2,  whenever  in the  administration  of the
provisions  of this  Indenture  the Trustee shall deem it necessary or desirable
that a matter be proved or  established  prior to taking or omitting  any action
hereunder,  such matter  (unless  other  evidence  in respect  thereof be herein
specifically prescribed) may, in the absence of negligence or willful misconduct
on the part of the Trustee,  be deemed to be conclusively proved and established
by an Officers' Certificate  delivered to the Trustee, and such certificate,  in
the absence of  negligence  or willful  misconduct  on the part of the  Trustee,
shall be full warrant to the Trustee for any action taken or omitted by it under
the provisions of this Indenture upon the faith thereof.

      Section 6.8.  Eligibility of Trustee.  The Trustee  hereunder shall at all
times be a corporation organized and doing business under the laws of the United
States of  America  or any state or  territory  thereof  or of the  District  of
Columbia or a corporation or other Person authorized under such laws to exercise
corporate trust powers,  having (or whose  obligations  under this Indenture are
guaranteed by an affiliate having) a combined capital and surplus of at least 50
million U.S. dollars  ($50,000,000.00) and subject to supervision or examination
by federal,  state,  territorial,  or District  of Columbia  authority.  If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid  supervising or examining  authority,  then
for the purposes of this  Section 6.8 the  combined  capital and surplus of such
corporation  shall be deemed to be its combined capital and surplus as set forth
in its most recent records of condition so published.

      The  Company  may  not,  nor  may  any  Person   directly  or   indirectly
controlling,  controlled by, or under common control with the Company,  serve as
Trustee.

      In case at any time the Trustee  shall cease to be eligible in  accordance
with the provisions of this Section 6.8, the Trustee shall resign immediately in
the manner and with the effect specified in Section 6.9.

      If the Trustee has or shall acquire any "conflicting  interest" within the
meaning of ss.  310(b) of the Trust  Indenture  Act of 1939,  the Trustee  shall
either  eliminate  such  interest  or  resign,  to the  extent and in the manner
described by this Indenture.

      Section 6.9. Resignation or Removal of Trustee

      (a) The Trustee,  or any trustee or trustees hereafter  appointed,  may at
any time resign by giving written notice of such  resignation to the Company and
by mailing  notice  thereof,  at the  Company's  expense,  to the holders of the
Debentures at their  addresses as they shall appear on the  Debenture  Register.
Upon receiving such notice of resignation,  the Company shall promptly appoint a
successor trustee or trustees by written instrument,  in duplicate,  executed by
order of its Board of Directors, one copy of which instrument shall be delivered
to the resigning Trustee and one copy to the successor Trustee.  If no successor
Trustee  shall have been so appointed and have  accepted  appointment  within 30
days  after  the  mailing  of  such  notice  of   resignation  to  the  affected
Securityholders,  the  resigning  Trustee may  petition  any court of  competent
jurisdiction for the appointment of a successor  Trustee,  or any Securityholder
who has been a bona fide holder of a Debenture  or  Debentures  for at least six
months may,  subject to the  provisions of Section 5.9, on behalf of himself and
all others similarly situated,  petition any such court for the appointment of a
successor  Trustee.  Such court may thereupon,  after such notice, if any, as it
may deem proper and prescribe, appoint a successor Trustee.

      (b) In case at any time any of the following shall occur --

            (1) the Trustee shall fail to comply with the  provisions of Section
            6.8  after  written  request  therefor  by  the  Company  or by  any
            Securityholder  who has been a bona fide  holder of a  Debenture  or
            Debentures for at least 6 months, or


                                       33
<PAGE>

            (2) the Trustee  shall cease to be eligible in  accordance  with the
            provisions  of Section  6.8 and shall fail to resign  after  written
            request therefor by the Company or by any such Securityholder, or

            (3) the  Trustee  shall  become  incapable  of  acting,  or shall be
            adjudged as bankrupt or  insolvent,  or a receiver of the Trustee or
            of its property shall be appointed, or any public officer shall take
            charge or control of the  Trustee or of its  property or affairs for
            the purpose of rehabilitation, conservation or liquidation,

            then,  in any such case,  the  Company  may remove the  Trustee  and
            appoint a successor  Trustee by written  instrument,  in  duplicate,
            executed  by order  of the  Board  of  Directors,  one copy of which
            instrument shall be delivered to the Trustee so removed and one copy
            to the successor  Trustee,  or, subject to the provisions of Section
            5.9,  any  Securityholder  who  has  been a bona  fide  holder  of a
            Debenture  or  Debentures  for at least 6 months  may,  on behalf of
            himself and all others  similarly  situated,  petition  any court of
            competent  jurisdiction  for  the  removal  of the  Trustee  and the
            appointment of a successor Trustee. Such court may thereupon,  after
            such notice, if any, as it may deem proper and prescribe, remove the
            Trustee and appoint successor Trustee.

      (c) Upon prior written notice to the Company and the Trustee,  the holders
of a  majority  in  aggregate  principal  amount of the  Debentures  at the time
outstanding may at any time remove the Trustee and nominate a successor Trustee,
which shall be deemed  appointed as successor  Trustee unless within 10 Business
Days after such nomination the Company objects thereto, in which case, or in the
case of a failure by such holders to nominate a successor  Trustee,  the Trustee
so removed or any Securityholder, upon the terms and conditions and otherwise as
in  subsection  (a) of this  Section 6.9  provided,  may  petition  any court of
competent jurisdiction for an appointment of a successor.

      (d) Any  resignation  or  removal  of the  Trustee  and  appointment  of a
successor Trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor Trustee as provided in
Section 6.10.

      Section 6.10.  Acceptance  by Successor  Trustee.  Any  successor  Trustee
appointed as provided in Section 6.9 shall execute,  acknowledge  and deliver to
the  Company  and  to its  predecessor  Trustee  an  instrument  accepting  such
appointment hereunder,  and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor  Trustee,  without any further
act, deed or conveyance, shall become vested with all the rights, powers, duties
and  obligations  with respect to the Debentures of its  predecessor  hereunder,
with like effect as if originally named as Trustee herein; but, nevertheless, on
the written  request of the  Company or of the  successor  Trustee,  the Trustee
ceasing to act shall,  upon  payment of any amounts  then due it pursuant to the
provisions  of Section 6.6,  execute and deliver an instrument  transferring  to
such  successor  Trustee  all the rights and powers of the Trustee so ceasing to
act and shall duly assign,  transfer and deliver to such  successor  Trustee all
property and money held by such retiring Trustee thereunder. Upon request of any
such  successor  Trustee,  the Company shall execute any and all  instruments in
writing for more fully and certainly vesting in and confirming to such successor
Trustee  all  such  rights  and  powers.  Any  Trustee  ceasing  to  act  shall,
nevertheless, retain a lien upon all property or funds held or collected by such
Trustee to secure any amounts then due it pursuant to the  provisions of Section
6.6.

      If a successor Trustee is appointed, the Company, the retiring Trustee and
the successor Trustee shall execute and deliver an indenture supplemental hereto
which shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights,  powers,  trusts and duties of the retiring Trustee
with  respect  to the  Debentures  as to which the  predecessor  Trustee  is not
retiring shall continue to be vested in the predecessor  Trustee,  and shall add
to or change any of the  provisions  of this  Indenture as


                                       34
<PAGE>

shall be necessary to provide for or facilitate the  administration of the Trust
hereunder by more than one Trustee,  it being  understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same  trust and that each such  Trustee  shall be  Trustee  of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder  administered by
any other such Trustee.

      No successor Trustee shall accept  appointment as provided in this Section
unless at the time of such acceptance  such successor  Trustee shall be eligible
under the provisions of Section 6.8.

      In no event shall a retiring  Trustee be liable for the acts or  omissions
of any successor Trustee hereunder.

      Upon acceptance of appointment by a successor  Trustee as provided in this
Section 6.10,  the Company  shall mail notice of the  succession of such Trustee
hereunder to the holders of Debentures  at their  addresses as they shall appear
on the  Debenture  Register.  If the Company fails to mail such notice within 10
Business Days after the acceptance of appointment by the successor Trustee,  the
successor  Trustee  shall  cause such  notice to be mailed at the expense of the
Company.

      Section 6.11.  Succession by Merger,  etc. Any corporation  into which the
Trustee may be merged or converted or with which it may be consolidated,  or any
corporation resulting from any merger,  conversion or consolidation to which the
Trustee shall be a party, or any corporation  succeeding to all or substantially
all of the corporate  trust  business of the Trustee,  shall be the successor of
the  Trustee  hereunder  without  the  execution  or  filing of any paper or any
further act on the part of any of the parties hereto;  provided such corporation
shall be otherwise eligible and qualified under this Article.

      In case at the time such  successor  to the Trustee  shall  succeed to the
trusts  created  by  this  Indenture  any  of the  Debentures  shall  have  been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate  of  authentication  of any  predecessor  Trustee,  and deliver such
Debentures  so  authenticated;  and in case at that  time any of the  Debentures
shall not have been authenticated, any successor to the Trustee may authenticate
such Debentures  either in the name of any predecessor  hereunder or in the name
of the successor Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Debentures or in this Indenture  provided
that the  certificate  of the Trustee shall have;  provided,  however,  that the
right to adopt the certificate of authentication  of any predecessor  Trustee or
authenticate  Debentures in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.

      Section   6.12.   Authenticating   Agents.   There  may  be  one  or  more
Authenticating  Agents  appointed by the Trustee upon the request of the Company
with  power  to  act  on  its  behalf  and  subject  to  its  direction  in  the
authentication  and delivery of Debentures  issued upon exchange or registration
of  transfer  thereof as fully to all  intents  and  purposes as though any such
Authenticating  Agent had been expressly  authorized to authenticate and deliver
Debentures;  provided,  however, that the Trustee shall have no liability to the
Company for any acts or  omissions of the  Authenticating  Agent with respect to
the authentication  and delivery of Debentures.  Any such  Authenticating  Agent
shall at all times be a corporation  organized and doing business under the laws
of the United States or of any state or territory  thereof or of the District of
Columbia  authorized under such laws to act as  Authenticating  Agent,  having a
combined  capital and surplus of at least  $50,000,000.00  and being  subject to
supervision  or  examination  by  federal,  state,  territorial  or  District of
Columbia authority.  If such corporation publishes reports of condition at least
annually  pursuant to law or the  requirements of such  authority,  then for the
purposes  of  this  Section  6.12  the  combined  capital  and  surplus  of such
corporation  shall be deemed to be its combined capital and surplus as set forth
in its  most  recent  report  of  condition  so  published.  If at any  time  an
Authenticating  Agent  shall  cease  to  be  eligible  in  accordance  with  the
provisions of this Section,  it shall resign  immediately in the manner and with
the effect herein specified in this Section.


                                       35
<PAGE>

      Any  corporation  into  which  any  Authenticating  Agent may be merged or
converted or with which it may be  consolidated,  or any  corporation  resulting
from any merger,  consolidation or conversion to which any Authenticating  Agent
shall be a party, or any corporation  succeeding to all or substantially  all of
the corporate trust business of any Authenticating Agent, shall be the successor
of such  Authenticating  Agent  hereunder,  if  such  successor  corporation  is
otherwise  eligible  under this Section 6.12 without the  execution or filing of
any  paper  or any  further  act on the  part  of the  parties  hereto  or  such
Authenticating Agent.

      Any  Authenticating  Agent may at any time resign by giving written notice
of  resignation  to the Trustee and to the Company.  The Trustee may at any time
terminate the agency of any Authenticating  Agent with respect to the Debentures
by giving written notice of termination to such Authenticating  Agent and to the
Company. Upon receiving such a notice of resignation or upon such a termination,
or in case at any time any Authenticating Agent shall cease to be eligible under
this Section 6.12,  the Trustee may, and upon the request of the Company  shall,
promptly  appoint a successor  Authenticating  Agent eligible under this Section
6.12,  shall give written  notice of such  appointment  to the Company and shall
mail notice of such  appointment  to all holders of  Debentures as the names and
addresses  of such  holders  appear on the  Debenture  Register.  Any  successor
Authenticating  Agent upon acceptance of its appointment  hereunder shall become
vested with all rights,  powers, duties and responsibilities with respect to the
Debentures of its predecessor hereunder, with like effect as if originally named
as Authenticating Agent herein.

      The Company  agrees to pay to any  Authenticating  Agent from time to time
reasonable compensation for its services. Any Authenticating Agent shall have no
responsibility  or liability  for any action  taken by it as such in  accordance
with the directions of the Trustee.

                                  ARTICLE VII.
                         CONCERNING THE SECURITYHOLDERS

      Section 7.1. Action by  Securityholders.  Whenever in this Indenture it is
provided  that the  holders of a specified  percentage  in  aggregate  principal
amount of the Debentures may take any action (including the making of any demand
or  request,  the giving of any  notice,  consent or waiver or the taking of any
other action) the fact that at the time of taking any such action the holders of
such  specified  percentage  have  joined  therein may be  evidenced  (a) by any
instrument  or any number of  instruments  of  similar  tenor  executed  by such
Securityholders  in person or by agent or proxy appointed in writing,  or (b) by
the record of such holders of Debentures  voting in favor thereof at any meeting
of such  Securityholders  duly called and held in accordance with the provisions
of Article VIII, or (c) by a combination of such  instrument or instruments  and
any such  record of such a meeting of such  Securityholders  or (d) by any other
method the Trustee deems satisfactory.

      If the Company shall solicit from the Securityholders any request, demand,
authorization,  direction, notice, consent, waiver or other action or revocation
of the same,  the Company  may,  at its option,  as  evidenced  by an  Officers'
Certificate,  fix  in  advance  a  record  date  for  such  Debentures  for  the
determination  of  Securityholders   entitled  to  give  such  request,  demand,
authorization,  direction, notice, consent, waiver or other action or revocation
of the same, but the Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization,  direction, notice, consent,
waiver or other  action or  revocation  of the same may be given before or after
the record date, but only the Securityholders of record at the close of business
on the record  date shall be deemed to be  Securityholders  for the  purposes of
determining whether  Securityholders of the requisite  proportion of outstanding
Debentures  have  authorized  or agreed or  consented to such  request,  demand,
authorization,  direction, notice, consent, waiver or other action or revocation
of the same, and for that purpose the outstanding  Debentures  shall be computed
as of the record date; provided, however, that no such authorization,


                                       36
<PAGE>

agreement or consent by such  Securityholders on the record date shall be deemed
effective  unless it shall become  effective  pursuant to the provisions of this
Indenture not later than 6 months after the record date.

      Section  7.2.  Proof  of  Execution  by  Securityholders.  Subject  to the
provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument
by a  Securityholder  or his  agent or  proxy  shall  be  sufficient  if made in
accordance  with such  reasonable  rules and regulations as may be prescribed by
the  Trustee or in such  manner as shall be  satisfactory  to the  Trustee.  The
ownership  of  Debentures  shall be proved  by the  Debenture  Register  or by a
certificate of the Debenture registrar.  The Trustee may require such additional
proof of any matter referred to in this Section as it shall deem necessary.

      The record of any  Securityholders'  meeting shall be proved in the manner
provided in Section 8.6.

      Section 7.3. Who Are Deemed Absolute Owners.  Prior to due presentment for
registration  of  transfer of any  Debenture,  the  Company,  the  Trustee,  any
Authenticating  Agent,  any paying agent,  any transfer  agent and any Debenture
registrar may deem the Person in whose name such  Debenture  shall be registered
upon the Debenture  Register to be, and may treat him as, the absolute  owner of
such Debenture  (whether or not such Debenture shall be overdue) for the purpose
of receiving payment of or on account of the principal of, premium,  if any, and
interest on such Debenture and for all other  purposes;  and neither the Company
nor the  Trustee  nor any  Authenticating  Agent  nor any  paying  agent nor any
transfer  agent nor any Debenture  registrar  shall be affected by any notice to
the contrary. All such payments so made to any holder for the time being or upon
his  order  shall  be  valid,  and,  to the  extent  of the sum or sums so paid,
effectual to satisfy and discharge  the  liability  for moneys  payable upon any
such Debenture.

      Section  7.4.  Debentures  Owned by  Company  Deemed Not  Outstanding.  In
determining  whether the holders of the requisite  aggregate principal amount of
Debentures  have  concurred  in any  direction,  consent  or waiver  under  this
Indenture, Debentures which are owned by the Company or any other obligor on the
Debentures or by any Person directly or indirectly  controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Debentures  shall be disregarded and deemed not to be outstanding for the
purpose of any such determination;  provided,  however, that for the purposes of
determining  whether  the  Trustee  shall be  protected  in  relying on any such
direction, consent or waiver, only Debentures which a Responsible Officer of the
Trustee actually knows are so owned shall be so disregarded. Debentures so owned
which have been  pledged in good faith may be  regarded as  outstanding  for the
purposes of this Section 7.4 if the pledgee shall establish to the  satisfaction
of the Trustee the pledgee's  right to vote such Debentures and that the pledgee
is not the Company or any such other  obligor or Person  directly or  indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any such other  obligor.  In the case of a dispute as to such  right,
any  decision  by the  Trustee  taken upon the  advice of counsel  shall be full
protection to the Trustee.

      Section 7.5.  Revocation of Consents;  Future Holders  Bound.  At any time
prior to (but not after) the  evidencing to the Trustee,  as provided in Section
7.1, of the taking of any action by the holders of the  percentage  in aggregate
principal  amount of the  Debentures  specified in this  Indenture in connection
with  such  action,  any  holder  (in cases  where no  record  date has been set
pursuant to Section 7.1) or any holder as of an applicable record date (in cases
where a record date has been set pursuant to Section 7.1) of a Debenture (or any
Debenture  issued in whole or in part in exchange or substitution  therefor) the
serial number of which is shown by the evidence to be included in the Debentures
the holders of which have consented to such action may, by filing written notice
with the  Trustee  at the  Principal  Office of the  Trustee  and upon  proof of
holding as provided in Section 7.2,  revoke such action so far as concerns  such
Debenture  (or  so far as  concerns  the  principal  amount  represented  by


                                       37
<PAGE>

any  exchanged or  substituted  Debenture).  Except as aforesaid any such action
taken by the holder of any Debenture  shall be conclusive  and binding upon such
holder and upon all future  holders  and  owners of such  Debenture,  and of any
Debenture  issued in exchange or  substitution  therefor or on  registration  of
transfer thereof,  irrespective of whether or not any notation in regard thereto
is made upon such Debenture or any Debenture  issued in exchange or substitution
therefor.

                                  ARTICLE VIII.
                            SECURITYHOLDERS' MEETINGS

      Section 8.1.  Purposes of Meetings.  A meeting of  Securityholders  may be
called  at any time and from time to time  pursuant  to the  provisions  of this
Article VIII for any of the following purposes:

      (a) to give any notice to the  Company or to the  Trustee,  or to give any
directions to the Trustee, or to consent to the waiving of any default hereunder
and its  consequences,  or to take any other  action  authorized  to be taken by
Securityholders pursuant to any of the provisions of Article V;

      (b) to remove the Trustee and nominate a successor trustee pursuant to the
provisions of Article VI;

      (c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 9.2; or

      (d) to take any other action authorized to be taken by or on behalf of the
holders of any specified aggregate principal amount of such Debentures under any
other provision of this Indenture or under applicable law.

      Section 8.2. Call of Meetings by Trustee. The Trustee may at any time call
a meeting of  Securityholders to take any action specified in Section 8.1, to be
held at such time and at such place as the Trustee  shall  determine.  Notice of
every  meeting of the  Securityholders,  setting forth the time and the place of
such  meeting  and in  general  terms the  action  proposed  to be taken at such
meeting, shall be mailed to holders of Debentures affected at their addresses as
they shall appear on the Debentures Register and, if the Company is not a holder
of Debentures,  to the Company. Such notice shall be mailed not less than 20 nor
more than 180 days prior to the date fixed for the meeting.

      Section 8.3.  Call of Meetings by Company or  Securityholders.  In case at
any time the Company pursuant to a Board Resolution,  or the holders of at least
10% in aggregate  principal  amount of the Debentures,  as the case may be, then
outstanding,   shall  have   requested   the   Trustee  to  call  a  meeting  of
Securityholders,  by written  request  setting  forth in  reasonable  detail the
action  proposed  to be taken at the  meeting,  and the  Trustee  shall not have
mailed the notice of such meeting  within 20 days after receipt of such request,
then the Company or such  Securityholders  may  determine the time and the place
for such  meeting  and may call such  meeting to take any action  authorized  in
Section 8.1, by mailing notice thereof as provided in Section 8.2.

      Section  8.4.  Qualifications  for  Voting.  To be entitled to vote at any
meeting  of  Securityholders  a  Person  shall  (a) be a  holder  of one or more
Debentures  with  respect  to which the  meeting  is being  held or (b) a Person
appointed by an  instrument  in writing as proxy by a holder of one or more such
Debentures.  The only Persons who shall be entitled to be present or to speak at
any meeting of  Securityholders  shall be the  Persons  entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel.

      Section 8.5.  Regulations.  Notwithstanding  any other  provisions of this
Indenture,  the  Trustee  may make such  reasonable  regulations  as it may deem
advisable for any meeting of Securityholders,  in


                                       38
<PAGE>

regard to proof of the holding of Debentures and of the  appointment of proxies,
and in  regard  to the  appointment  and  duties of  inspectors  of  votes,  the
submission and  examination of proxies,  certificates  and other evidence of the
right to vote,  and such other matters  concerning the conduct of the meeting as
it shall think fit.

      The  Trustee  shall,  by an  instrument  in  writing,  appoint a temporary
chairman  of the  meeting,  unless the  meeting  shall  have been  called by the
Company or by  Securityholders  as  provided  in Section  8.3, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary  chairman.  A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.

      Subject to the  provisions  of Section  7.4, at any meeting each holder of
Debentures  with respect to which such  meeting is being held or proxy  therefor
shall be entitled to one vote for each $1,000.00  principal amount of Debentures
held or represented  by him;  provided,  however,  that no vote shall be cast or
counted at any meeting in respect of any Debenture challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding.  The chairman of
the meeting shall have no right to vote other than by virtue of Debentures  held
by him or instruments in writing as aforesaid duly designating him as the Person
to vote on behalf of other Securityholders.  Any meeting of Securityholders duly
called  pursuant to the  provisions of Section 8.2 or 8.3 may be adjourned  from
time to time by a  majority  of those  present,  whether or not  constituting  a
quorum, and the meeting may be held as so adjourned without further notice.

      Section 8.6. Voting. The vote upon any resolution submitted to any meeting
of holders of Debentures  with respect to which such meeting is being held shall
be by written  ballots  on which  shall be  subscribed  the  signatures  of such
holders or of their representatives by proxy and the serial number or numbers of
the  Debentures  held or  represented  by them.  The  permanent  chairman of the
meeting shall appoint two  inspectors of votes who shall count all votes cast at
the meeting for or against any  resolution  and who shall make and file with the
secretary of the meeting  their  verified  written  reports in triplicate of all
votes cast at the  meeting.  A record in duplicate  of the  proceedings  of each
meeting of Securityholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and  affidavits by one or more Persons
having  knowledge of the facts setting forth a copy of the notice of the meeting
and showing  that said notice was mailed as provided in Section  8.2. The record
shall show the serial  numbers of the  Debentures  voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent  chairman and secretary of the meeting and one of the duplicates shall
be  delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.

      Any record so signed and  verified  shall be  conclusive  evidence  of the
matters therein stated.

      Section 8.7. Quorum;  Actions.  The Persons entitled to vote a majority in
principal  amount of the Debentures then  outstanding  shall constitute a quorum
for a meeting of Securityholders; provided, however, that if any action is to be
taken at such  meeting  with  respect to a  consent,  waiver,  request,  demand,
notice,  authorization,  direction  or other  action  which  may be given by the
holders  of not less than a  specified  percentage  in  principal  amount of the
Debentures then outstanding,  the Persons holding or representing such specified
percentage  in  principal   amount  of  the  Debentures  then  outstanding  will
constitute  a quorum.  In the absence of a quorum  within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request of
Securityholders,  be  dissolved.  In any other case the meeting may be adjourned
for a period of not less than 10 days as determined by the permanent chairman of
the meeting prior to the adjournment of such meeting. In the absence of a quorum
at any such adjourned  meeting,  such adjourned meeting may be further adjourned
for a period of not less than


                                       39
<PAGE>

10 days as  determined  by the  permanent  chairman of the meeting  prior to the
adjournment  of  such  adjourned  meeting.  Notice  of  the  reconvening  of any
adjourned  meeting  shall be given as provided in Section 8.2,  except that such
notice  need be given  only once not less than 5 days prior to the date on which
the meeting is  scheduled  to be  reconvened.  Notice of the  reconvening  of an
adjourned  meeting shall state expressly the  percentage,  as provided above, of
the principal amount of the Debentures then outstanding which shall constitute a
quorum.

      Except as limited by the  provisos in the first  paragraph of Section 9.2,
any resolution  presented to a meeting or adjourned  meeting duly  reconvened at
which a quorum is present as aforesaid may be adopted by the affirmative vote of
the  holders  of  a  majority  in  principal   amount  of  the  Debentures  then
outstanding;  provided,  however, that, except as limited by the provisos in the
first  paragraph  of Section 9.2,  any  resolution  with respect to any consent,
waiver, request, demand, notice, authorization,  direction or other action which
this Indenture expressly provides may be given by the holders of not less than a
specified  percentage in principal amount of the Debentures then outstanding may
be adopted at a meeting or an adjourned  meeting duly  reconvened and at which a
quorum is present as aforesaid only by the affirmative  vote of the holders of a
not less than such  specified  percentage in principal  amount of the Debentures
then outstanding.

      Any  resolution  passed or  decision  taken at any  meeting  of holders of
Debentures duly held in accordance with this Section shall be binding on all the
Securityholders, whether or not present or represented at the meeting.

                                   ARTICLE IX.
                             SUPPLEMENTAL INDENTURES

      Section 9.1.  Supplemental  Indentures without Consent of Securityholders.
The Company,  when  authorized by a Board  Resolution,  and the Trustee may from
time to time and at any time enter into an indenture or indentures  supplemental
hereto,  without  the  consent  of the  Securityholders,  for one or more of the
following purposes:

      (a) to  evidence  the  succession  of another  Person to the  Company,  or
successive  successions,  and the  assumption  by the  successor  Person  of the
covenants,  agreements and  obligations  of the Company,  pursuant to Article XI
hereof;

      (b) to add  to the  covenants  of  the  Company  such  further  covenants,
restrictions  or conditions  for the  protection of the holders of Debentures as
the Board of Directors shall consider to be for the protection of the holders of
such Debentures,  and to make the occurrence, or the occurrence and continuance,
of a default in any of such additional  covenants,  restrictions or conditions a
default or an Event of Default  permitting the  enforcement of all or any of the
several  remedies  provided  in this  Indenture  as herein set forth;  provided,
however,  that  in  respect  of any  such  additional  covenant  restriction  or
condition  such  supplemental  indenture may provide for a particular  period of
grace after default  (which period may be shorter or longer than that allowed in
the case of other  defaults)  or may provide for an immediate  enforcement  upon
such  default  or may limit the  remedies  available  to the  Trustee  upon such
default;

      (c) to cure any  ambiguity  or to  correct  or  supplement  any  provision
contained  herein or in any  supplemental  indenture  which may be  defective or
inconsistent  with any other provision  contained  herein or in any supplemental
indenture,  or to make such other  provisions  in regard to matters or questions
arising under this Indenture; provided that any such action shall not materially
adversely affect the interests of the holders of the Debentures;


                                       40
<PAGE>

      (d) to add to, delete from, or revise the terms of Debentures,  including,
without limitation, any terms relating to the issuance,  exchange,  registration
or transfer of  Debentures,  including  to provide for transfer  procedures  and
restrictions substantially similar to those applicable to the Capital Securities
as required by Section 2.5 (for  purposes of assuring  that no  registration  of
Debentures is required under the Securities Act);  provided,  however,  that any
such  action  shall not  adversely  affect the  interests  of the holders of the
Debentures then outstanding (it being understood,  for purposes of this proviso,
that transfer  restrictions  on Debentures  substantially  similar to those that
were  applicable  to  Capital  Securities  shall  not be  deemed  to  materially
adversely affect the holders of the Debentures);

      (e) to evidence and provide for the acceptance of appointment hereunder by
a successor  Trustee with respect to the  Debentures and to add to or change any
of the  provisions  of this  Indenture  as shall be  necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee;

      (f) to  make  any  change  (other  than  as  elsewhere  provided  in  this
paragraph) that does not adversely  affect the rights of any  Securityholder  in
any material respect; or

      (g) to provide for the  issuance of and  establish  the form and terms and
conditions  of the  Debentures,  to  establish  the  form of any  certifications
required  to be  furnished  pursuant  to the  terms  of  this  Indenture  or the
Debentures, or to add to the rights of the holders of Debentures.

      The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental  indenture,  to make any further appropriate agreements
and  stipulations  which may be therein  contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated  to,  but may in its  discretion,  enter  into any  such  supplemental
indenture  which affects the Trustee's  own rights,  duties or immunities  under
this Indenture or otherwise.

      Any  supplemental  indenture  authorized by the provisions of this Section
9.1 may be executed  by the  Company and the Trustee  without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 9.2.

      Section 9.2. Supplemental Indentures with Consent of Securityholders. With
the consent  (evidenced  as provided in Section  7.1) of the holders of not less
than a majority in  aggregate  principal  amount of the  Debentures  at the time
outstanding  affected by such supplemental  indenture  (voting as a class),  the
Company, when authorized by a Board Resolution, and the Trustee may from time to
time and at any time enter into an indenture or indentures  supplemental  hereto
for the  purpose  of adding  any  provisions  to or  changing  in any  manner or
eliminating  any of the  provisions  of this  Indenture  or of any  supplemental
indenture  or of  modifying  in any  manner  the  rights of the  holders  of the
Debentures; provided, however, that no such supplemental indenture shall without
the consent of the  holders of each  Debenture  then  outstanding  and  affected
thereby (i) change the fixed maturity of any Debenture,  or reduce the principal
amount thereof or any premium thereon,  or reduce the rate or extend the time of
payment of interest thereon,  or reduce any amount payable on redemption thereof
or make the principal  thereof or any interest or premium thereon payable in any
coin or currency other than that provided in the Debentures, or impair or affect
the right of any  Securityholder to institute suit for payment thereof or impair
the right of repayment,  if any, at the option of the holder, or (ii) reduce the
aforesaid  percentage of Debentures the holders of which are required to consent
to any such  supplemental  indenture;  provided  further,  however,  that if the
Debentures  are held by a trust or a trustee of such  trust,  such  supplemental
indenture  shall not be effective until the holders of a majority in Liquidation
Amount of Trust Securities shall have consented to such supplemental  indenture;
provided  further,  however,  that if the consent of the  Securityholder of each
outstanding  Debenture is required,  such  supplemental  indenture  shall not be
effective until each holder of the Trust Securities shall have consented to such
supplemental indenture.


                                       41
<PAGE>

      Upon  the  request  of  the  Company  accompanied  by a  Board  Resolution
authorizing  the  execution  of any such  supplemental  indenture,  and upon the
filing  with the  Trustee  of  evidence  of the  consent of  Securityholders  as
aforesaid,  the  Trustee  shall join with the Company in the  execution  of such
supplemental  indenture unless such supplemental indenture affects the Trustee's
own rights,  duties or immunities  under this  Indenture or otherwise,  in which
case the Trustee may in its  discretion,  but shall not be  obligated  to, enter
into such supplemental indenture.

      Promptly  after  the  execution  by the  Company  and the  Trustee  of any
supplemental  indenture pursuant to the provisions of this Section,  the Trustee
shall transmit by mail, first class postage prepaid,  a notice,  prepared by the
Company,  setting  forth in general  terms the  substance  of such  supplemental
indenture,  to the  Securityholders as their names and addresses appear upon the
Debenture  Register.  Any  failure of the  Trustee to mail such  notice,  or any
defect therein,  shall not, however, in any way impair or affect the validity of
any such supplemental indenture.

      It shall not be  necessary  for the consent of the  Securityholders  under
this Section 9.2 to approve the  particular  form of any  proposed  supplemental
indenture,  but it  shall  be  sufficient  if such  consent  shall  approve  the
substance thereof.

      Section 9.3. Effect of Supplemental Indentures.  Upon the execution of any
supplemental  indenture  pursuant  to the  provisions  of this  Article IX, this
Indenture  shall be and be deemed  to be  modified  and  amended  in  accordance
therewith and the respective rights, limitations of rights, obligations,  duties
and immunities under this Indenture of the Trustee,  the Company and the holders
of Debentures shall thereafter be determined,  exercised and enforced  hereunder
subject in all respects to such  modifications  and amendments and all the terms
and conditions of any such  supplemental  indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.

      Section  9.4.  Notation  on  Debentures.   Debentures   authenticated  and
delivered  after the  execution of any  supplemental  indenture  pursuant to the
provisions of this Article IX may bear a notation as to any matter  provided for
in  such  supplemental  indenture.  If the  Company  or  the  Trustee  shall  so
determine, new Debentures so modified as to conform, in the opinion of the Board
of Directors of the Company,  to any modification of this Indenture contained in
any such  supplemental  indenture  may be prepared  and executed by the Company,
authenticated  by the  Trustee  or the  Authenticating  Agent and  delivered  in
exchange for the Debentures then outstanding.

      Section  9.5.  Evidence of  Compliance  of  Supplemental  Indenture  to be
Furnished to Trustee. The Trustee, subject to the provisions of Sections 6.1 and
6.2,  shall, in addition to the documents  required by Section 14.6,  receive an
Officers'  Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental  indenture  executed pursuant hereto complies with the requirements
of this  Article  IX.  The  Trustee  shall  receive  an  Opinion  of  Counsel as
conclusive  evidence that any supplemental  indenture  executed pursuant to this
Article IX is  authorized  or  permitted  by, and conforms to, the terms of this
Article IX and that it is proper for the Trustee  under the  provisions  of this
Article IX to join in the execution thereof.

                                   ARTICLE X.
                            REDEMPTION OF SECURITIES

      Section  10.1.  Optional  Redemption.  The  Company  shall  have the right
(subject to the receipt by the Company of prior approval (i) if the Company is a
bank  holding  company,  from  the  Federal  Reserve,  if  then  required  under
applicable  capital guidelines or policies of the Federal Reserve or (ii) if the
Company is a savings and loan holding  company,  from the OTS, if then  required
under  applicable  capital  guidelines  or  policies  of the OTS) to redeem  the
Debentures,  in whole or in part,  but in all cases in


                                       42
<PAGE>

a principal amount with integral multiples of $1,000.00, on any Interest Payment
Date on or after the Interest  Payment Date in September  2012 (the  "Redemption
Date"), at the Redemption Price.

      Section 10.2. Special Event Redemption. If a Special Event shall occur and
be  continuing,  the Company shall have the right (subject to the receipt by the
Company of prior approval (i) if the Company is a bank holding company, from the
Federal  Reserve,  if then  required  under  applicable  capital  guidelines  or
policies  of the  Federal  Reserve or (ii) if the  Company is a savings and loan
holding  company,  from the  OTS,  if then  required  under  applicable  capital
guidelines or policies of the OTS) to redeem the Debentures in whole, but not in
part, at any Interest Payment Date,  within 120 days following the occurrence of
such Special Event (the  "Special  Redemption  Date") at the Special  Redemption
Price. If the Special Event redemption occurs prior to the Interest Payment Date
in September 2012, the Company shall appoint a Quotation Agent, which shall be a
designee  of the  Institutional  Trustee,  for the  purpose  of  performing  the
services  contemplated  in,  or by  reference  in,  the  definition  of  Special
Redemption  Price. Any error in the calculation of the Special  Redemption Price
by the  Quotation  Agent or the Trustee may be  corrected  at any time by notice
delivered  to the  Company  and the  holders of the  Debentures.  Subject to the
corrective rights set forth above, all certificates,  communications,  opinions,
determinations, calculations, quotations and decisions given, expressed, made or
obtained  for  the  purposes  of the  provisions  relating  to the  payment  and
calculation of the Special  Redemption Price on the Debentures by the Trustee or
the  Quotation  Agent,  as the case may be,  shall (in the  absence  of  willful
default,  bad faith or manifest  error) be final,  conclusive and binding on the
holders of the Debentures and the Company, and no liability shall attach (except
as provided  above) to the Trustee or the Quotation Agent in connection with the
exercise or non-exercise by any of them of their respective  powers,  duties and
discretion.

      Section 10.3. Notice of Redemption;  Selection of Debentures.  In case the
Company  shall  desire to exercise  the right to redeem all, or, as the case may
be,  any part of the  Debentures,  it shall  cause to be mailed a notice of such
redemption at least 30 and not more than 60 days prior to the Redemption Date or
the Special  Redemption Date to the holders of Debentures so to be redeemed as a
whole or in part at their last  addresses  as the same  appear on the  Debenture
Register. Such mailing shall be by first class mail. The notice if mailed in the
manner herein provided shall be  conclusively  presumed to have been duly given,
whether or not the holder  receives  such notice.  In any case,  failure to give
such  notice by mail or any defect in the notice to the holder of any  Debenture
designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of any other Debenture.

      Each such notice of redemption shall specify the CUSIP number,  if any, of
the  Debentures to be redeemed,  the Redemption  Date or the Special  Redemption
Date, as applicable,  the Redemption Price or the Special  Redemption  Price, as
applicable,  at which  Debentures  are to be  redeemed,  the  place or places of
payment,  that  payment  will be made upon  presentation  and  surrender of such
Debentures,  that interest accrued to the date fixed for redemption will be paid
as specified in said notice, and that on and after said date interest thereon or
on the portions  thereof to be redeemed  will cease to accrue.  If less than all
the  Debentures  are to be redeemed the notice of  redemption  shall specify the
numbers of the  Debentures  to be  redeemed.  In case the  Debentures  are to be
redeemed in part only,  the notice of redemption  shall state the portion of the
principal  amount  thereof to be redeemed  and shall state that on and after the
date fixed for redemption,  upon surrender of such Debenture, a new Debenture or
Debentures in principal  amount equal to the unredeemed  portion thereof will be
issued.

      Prior to 10:00 a.m. New York City time on the  Redemption  Date or Special
Redemption  Date,  as  applicable,  the Company will deposit with the Trustee or
with one or more paying  agents an amount of money  sufficient  to redeem on the
Redemption  Date  or  the  Special  Redemption  Date,  as  applicable,  all  the
Debentures  so called for  redemption  at the  appropriate  Redemption  Price or
Special Redemption Price.


                                       43
<PAGE>

      If all, or less than all, the Debentures  are to be redeemed,  the Company
will  give  the  Trustee  notice  not  less  than  45 nor  more  than  60  days,
respectively,  prior to the  Redemption  Date or  Special  Redemption  Date,  as
applicable,  as to the aggregate  principal  amount of Debentures to be redeemed
and the Trustee shall select,  in such manner as in its sole discretion it shall
deem  appropriate  and fair,  the  Debentures  or portions  thereof (in integral
multiples of $1,000.00) to be redeemed.

      Section 10.4.  Payment of Debentures  Called for Redemption.  If notice of
redemption  has been  given as  provided  in Section  10.3,  the  Debentures  or
portions of  Debentures  with  respect to which such notice has been given shall
become due and payable on the  Redemption  Date or Special  Redemption  Date, as
applicable,  and at the place or places stated in such notice at the  applicable
Redemption Price or Special  Redemption Price and on and after said date (unless
the Company  shall default in the payment of such  Debentures at the  Redemption
Price or Special Redemption Price, as applicable)  interest on the Debentures or
portions  of  Debentures  so called for  redemption  shall  cease to accrue.  On
presentation and surrender of such Debentures at a place of payment specified in
said notice, such Debentures or the specified portions thereof shall be paid and
redeemed by the Company at the applicable Redemption Price or Special Redemption
Price.

      Upon  presentation  of any  Debenture  redeemed in part only,  the Company
shall execute and the Trustee shall authenticate and make available for delivery
to the  holder  thereof,  at the  expense of the  Company,  a new  Debenture  or
Debentures  of  authorized  denominations,  in  principal  amount  equal  to the
unredeemed portion of the Debenture so presented.

                                  ARTICLE XI.
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

      Section 11.1.  Company May  Consolidate,  etc., on Certain Terms.  Nothing
contained in this Indenture or in the Debentures shall prevent any consolidation
or  merger  of the  Company  with or  into  any  other  Person  (whether  or not
affiliated  with the Company) or successive  consolidations  or mergers in which
the Company or its successor or successors shall be a party or parties, or shall
prevent any sale,  conveyance,  transfer or other disposition of the property of
the Company or its successor or successors as an entirety,  or  substantially as
an entirety, to any other Person (whether or not affiliated with the Company, or
its  successor  or  successors)  authorized  to acquire  and  operate  the same;
provided,  however,  that the Company hereby covenants and agrees that, upon any
such consolidation, merger (where the Company is not the surviving corporation),
sale, conveyance, transfer or other disposition, the due and punctual payment of
the principal of (and premium,  if any) and interest on all of the Debentures in
accordance with their terms,  according to their tenor, and the due and punctual
performance and observance of all the covenants and conditions of this Indenture
to be  kept  or  performed  by  the  Company,  shall  be  expressly  assumed  by
supplemental  indenture  satisfactory  in  form  to  the  Trustee  executed  and
delivered  to the Trustee by the entity  formed by such  consolidation,  or into
which the  Company  shall have been  merged,  or by the entity  which shall have
acquired such property.

      Section  11.2.  Successor  Entity to be  Substituted.  In case of any such
consolidation,  merger, sale, conveyance, transfer or other disposition and upon
the assumption by the successor entity, by supplemental indenture,  executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Debentures and the due and punctual performance and observance of all of the
covenants and  conditions  of this  Indenture to be performed or observed by the
Company,  such  successor  entity shall  succeed to and be  substituted  for the
Company, with the same effect as if it had been named herein as the Company, and
thereupon the predecessor  entity shall be relieved of any further  liability or
obligation hereunder or upon the Debentures. Such successor entity thereupon may
cause to be signed,  and may issue in its own name, any or all of the Debentures
issuable  hereunder which  theretofore shall not have been signed by the


                                       44
<PAGE>

Company and delivered to the Trustee or the Authenticating  Agent; and, upon the
order of such  successor  entity  instead of the  Company and subject to all the
terms,  conditions and limitations in this Indenture prescribed,  the Trustee or
the  Authenticating  Agent shall  authenticate  and deliver any Debentures which
previously  shall have been signed and delivered by the officers of the Company,
to  the  Trustee  or  the  Authenticating  Agent  for  authentication,  and  any
Debentures which such successor  entity  thereafter shall cause to be signed and
delivered to the Trustee or the Authenticating  Agent for that purpose.  All the
Debentures  so issued shall in all respects have the same legal rank and benefit
under this  Indenture as the  Debentures  theretofore  or  thereafter  issued in
accordance with the terms of this Indenture as though all of such Debentures had
been issued at the date of the execution hereof.

      Section  11.3.  Opinion of Counsel to be Given to  Trustee.  The  Trustee,
subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to
the  Opinion  of  Counsel  required  by  Section  9.5,  an Opinion of Counsel as
conclusive evidence that any consolidation,  merger, sale, conveyance,  transfer
or other disposition, and any assumption,  permitted or required by the terms of
this Article XI complies with the provisions of this Article XI.

                                  ARTICLE XII.
                     SATISFACTION AND DISCHARGE OF INDENTURE

      Section 12.1. Discharge of Indenture. When

      (a)   the  Company  shall  deliver to the  Trustee  for  cancellation  all
            Debentures  theretofore  authenticated  (other  than any  Debentures
            which shall have been destroyed, lost or stolen and which shall have
            been   replaced  or  paid  as  provided  in  Section  2.6)  and  not
            theretofore canceled, or

      (b)   all the  Debentures  not  theretofore  canceled or  delivered to the
            Trustee for cancellation  shall have become due and payable,  or are
            by their terms to become due and payable  within 1 year or are to be
            called for redemption within 1 year under arrangements  satisfactory
            to the  Trustee  for the  giving of notice  of  redemption,  and the
            Company shall deposit with the Trustee, in trust, funds, which shall
            be  immediately  due and payable,  sufficient  to pay at maturity or
            upon  redemption  all of the  Debentures  (other than any Debentures
            which shall have been destroyed, lost or stolen and which shall have
            been  replaced or paid as provided in Section  2.6) not  theretofore
            canceled or  delivered  to the Trustee for  cancellation,  including
            principal and premium,  if any, and interest due or to become due to
            such date of maturity or  redemption  date,  as the case may be, but
            excluding,  however,  the amount of any  moneys  for the  payment of
            principal of, and premium, if any, or interest on the Debentures (1)
            theretofore  repaid to the Company in accordance with the provisions
            of  Section  12.4,  or (2) paid to any state or to the  District  of
            Columbia pursuant to its unclaimed property or similar laws,

and if in the case of either clause (a) or clause (b) the Company shall also pay
or cause to be paid all other sums payable  hereunder by the Company,  then this
Indenture  shall  cease to be of further  effect  except for the  provisions  of
Sections  2.5,  2.6,  2.8,  3.1,  3.2,  3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall
survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6
and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by
an  Officers'  Certificate  and an Opinion of  Counsel,  each  stating  that all
conditions  precedent  herein  provided  for  relating to the  satisfaction  and
discharge of this Indenture have been complied with, and at the cost and expense
of the Company, shall execute proper instruments  acknowledging  satisfaction of
and discharging this Indenture.  The Company agrees to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred by the Trustee
in connection with this Indenture or the Debentures.


                                       45
<PAGE>

      Section 12.2. Deposited Moneys to be Held in Trust by Trustee.  Subject to
the provisions of Section 12.4, all moneys  deposited with the Trustee  pursuant
to Section  12.1 shall be held in trust in a  non-interest  bearing  account and
applied  by it to the  payment,  either  directly  or through  any paying  agent
(including the Company if acting as its own paying agent), to the holders of the
particular  Debentures  for the payment of which such moneys have been deposited
with the Trustee,  of all sums due and to become due thereon for principal,  and
premium, if any, and interest.

      Section 12.3. Paying Agent to Repay Moneys Held. Upon the satisfaction and
discharge  of this  Indenture  all moneys  then held by any paying  agent of the
Debentures (other than the Trustee) shall, upon demand of the Company, be repaid
to it or paid to the Trustee,  and thereupon such paying agent shall be released
from all further liability with respect to such moneys.

      Section 12.4.  Return of Unclaimed  Moneys.  Any moneys  deposited with or
paid to the  Trustee or any paying  agent for payment of the  principal  of, and
premium,  if any,  or  interest on  Debentures  and not  applied  but  remaining
unclaimed by the holders of Debentures for 2 years after the date upon which the
principal of, and premium,  if any, or interest on such Debentures,  as the case
may be,  shall  have  become  due and  payable,  shall,  subject  to  applicable
escheatment  laws,  be repaid to the Company by the Trustee or such paying agent
on written demand; and the holder of any of the Debentures shall thereafter look
only to the  Company  for any  payment  which  such  holder may be  entitled  to
collect,  and all  liability of the Trustee or such paying agent with respect to
such moneys shall thereupon cease.

                                 ARTICLE XIII.
                    IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
                             OFFICERS AND DIRECTORS

      Section 13.1.  Indenture and Debentures Solely Corporate  Obligations.  No
recourse for the payment of the principal of or premium,  if any, or interest on
any Debenture,  or for any claim based thereon or otherwise in respect  thereof,
and no  recourse  under or upon any  obligation,  covenant or  agreement  of the
Company  in this  Indenture  or in any  supplemental  indenture,  or in any such
Debenture,  or because of the creation of any indebtedness  represented thereby,
shall  be had  against  any  incorporator,  stockholder,  employee,  officer  or
director,  as such, past,  present or future, of the Company or of any successor
Person of the Company,  either  directly or through the Company or any successor
Person of the Company, whether by virtue of any constitution, statute or rule of
law, or by the  enforcement of any assessment or penalty or otherwise,  it being
expressly  understood  that all such  liability is hereby  expressly  waived and
released as a condition  of, and as a  consideration  for, the execution of this
Indenture and the issue of the Debentures.

                                  ARTICLE XIV.
                            MISCELLANEOUS PROVISIONS

      Section 14.1. Successors.  All the covenants,  stipulations,  promises and
agreements  of the  Company  in this  Indenture  shall bind its  successors  and
assigns whether so expressed or not.

      Section 14.2.  Official Acts by Successor Entity. Any act or proceeding by
any provision of this  Indenture  authorized or required to be done or performed
by any board,  committee  or officer  of the  Company  shall and may be done and
performed  with like force and effect by the like board,  committee,  officer or
other  authorized  Person of any  entity  that  shall at the time be the  lawful
successor of the Company.

      Section 14.3.  Surrender of Company  Powers.  The Company by instrument in
writing  executed  by  authority  of at least 2/3  (two-thirds)  of its Board of
Directors and delivered to the Trustee


                                       46
<PAGE>

may surrender any of the powers reserved to the Company and thereupon such power
so surrendered  shall terminate both as to the Company,  and as to any permitted
successor.

      Section 14.4. Addresses for Notices, etc. Any notice, consent,  direction,
request,  authorization,  waiver  or  demand  which  by any  provision  of  this
Indenture is required or permitted to be given, made, furnished or served by the
Trustee or by the Securityholders on or to the Company may be given or served in
writing by being deposited  postage prepaid by registered or certified mail in a
post office letter box addressed (until another address is filed by the Company,
with the  Trustee for the  purpose) to the  Company,  200 East  Jackson  Street,
Muncie,  Indiana  47305,  Attention:  Jami L.  Bradshaw.  Any  notice,  consent,
direction, request, authorization, waiver or demand by any Securityholder or the
Company to or upon the Trustee shall be deemed to have been  sufficiently  given
or made,  for all  purposes,  if given or made in  writing  at the office of the
Trustee,  addressed  to the  Trustee,  Rodney  Square  North,  1100 North Market
Street,   Wilmington,   Delaware   19890-1600,    Attention:   Corporate   Trust
Administration.  Any notice, consent, direction, request, authorization,  waiver
or demand on or to any Securityholder  shall be deemed to have been sufficiently
given or made, for all purposes,  if given or made in writing at the address set
forth in the Debenture Register.

      Section 14.5.  Governing Law. This  Indenture and each Debenture  shall be
deemed to be a contract made under the law of the State of New York, and for all
purposes  shall be governed by and construed in accordance  with the law of said
State, without regard to conflict of laws principles thereof.

      Section 14.6. Evidence of Compliance with Conditions  Precedent.  Upon any
application or demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to the Trustee an
Officers'  Certificate stating that in the opinion of the signers all conditions
precedent,  if any,  provided  for in this  Indenture  relating to the  proposed
action have been  complied  with and an Opinion of Counsel  stating that, in the
opinion of such counsel, all such conditions precedent have been complied with.

      Each  certificate or opinion  provided for in this Indenture and delivered
to the Trustee with respect to compliance with a condition or covenant  provided
for in this Indenture  shall include (1) a statement that the person making such
certificate  or  opinion  has  read  such  covenant  or  condition;  (2) a brief
statement as to the nature and scope of the  examination or  investigation  upon
which the  statements or opinions  contained in such  certificate or opinion are
based;  (3) a statement  that,  in the opinion of such person,  he has made such
examination  or  investigation  as is  necessary  to enable  him to  express  an
informed  opinion as to  whether  or not such  covenant  or  condition  has been
complied  with;  and (4) a statement as to whether or not in the opinion of such
person, such condition or covenant has been complied with.

      Section 14.7. Table of Contents,  Headings, etc. The table of contents and
the titles and headings of the articles and sections of this Indenture have been
inserted for  convenience  of reference  only,  are not to be  considered a part
hereof,  and shall in no way modify or restrict  any of the terms or  provisions
hereof.

      Section 14.8. Execution in Counterparts. This Indenture may be executed in
any  number  of  counterparts,  each of  which  shall be an  original,  but such
counterparts shall together constitute but one and the same instrument.

      Section  14.9.  Separability.  In case  any one or more of the  provisions
contained in this Indenture or in the Debentures 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 provisions of this Indenture or
of such Debentures, but this Indenture and such Debentures shall be construed as
if such invalid or illegal or  unenforceable  provision had never been contained
herein or therein.


                                       47
<PAGE>

      Section 14.10. Assignment. The Company will have the right at all times to
assign any of its rights or  obligations  under  this  Indenture  to a direct or
indirect wholly owned Subsidiary of the Company,  provided that, in the event of
any such  assignment,  the Company will remain liable for all such  obligations.
Subject to the  foregoing,  this  Indenture  is  binding  upon and inures to the
benefit of the parties hereto and their respective  successors and assigns. This
Indenture may not otherwise be assigned by the parties hereto.

      Section 14.11.  Acknowledgment  of Rights.  The Company agrees that,  with
respect to any Debentures held by the Trust or the Institutional  Trustee of the
Trust,  if the  Institutional  Trustee of the Trust  fails to enforce its rights
under  this  Indenture  as the holder of  Debentures  held as the assets of such
Trust  after the  holders of a majority  in  Liquidation  Amount of the  Capital
Securities of such Trust have so directed such  Institutional  Trustee, a holder
of record of such Capital  Securities  may, to the fullest  extent  permitted by
law,  institute legal  proceedings  directly against the Company to enforce such
Institutional  Trustee's rights under this Indenture  without first  instituting
any legal proceedings against such trustee or any other Person.  Notwithstanding
the  foregoing,  if an Event of Default has occurred and is continuing  and such
event is attributable to the failure of the Company to pay interest (or premium,
if any) or principal on the Debentures on the date such interest (or premium, if
any) or  principal is otherwise  payable (or in the case of  redemption,  on the
redemption  date),  the  Company  agrees  that a holder  of  record  of  Capital
Securities of the Trust may directly  institute a proceeding against the Company
for  enforcement  of payment to such  holder  directly of the  principal  of (or
premium,  if any) or interest on the  Debentures  having an aggregate  principal
amount equal to the aggregate  Liquidation  Amount of the Capital  Securities of
such holder on or after the respective due date specified in the Debentures.

                                  ARTICLE XV.
                           SUBORDINATION OF DEBENTURES

      Section 15.1. Agreement to Subordinate.  The Company covenants and agrees,
and each  holder  of  Debentures  by such  Securityholder's  acceptance  thereof
likewise  covenants and agrees,  that all Debentures  shall be issued subject to
the provisions of this Article XV; and each holder of a Debenture,  whether upon
original issue or upon transfer or assignment thereof,  accepts and agrees to be
bound by such provisions.

      The payment by the Company of the principal  of, and premium,  if any, and
interest on all Debentures  shall,  to the extent and in the manner  hereinafter
set forth, be  subordinated  and junior in right of payment to the prior payment
in full of all Senior  Indebtedness of the Company,  whether  outstanding at the
date of this  Indenture or  thereafter  incurred;  provided,  however,  that the
Debentures  shall  rank pari passu in all  material  respects  with any  current
indebtedness,  liabilities or  obligations of the Company,  or any Subsidiary of
the Company, under debt securities (or guarantees in respect of debt securities)
issued  to any  trust,  or a trustee  of a trust,  partnership  or other  entity
affiliated  with  the  Company  that  is,  directly  or  indirectly,  a  finance
subsidiary  (as such term is defined in Rule 3a-5 under the  Investment  Company
Act of 1940) or other financing  vehicle of the Company or any Subsidiary of the
Company in connection  with the issuance by that entity of preferred  securities
or other  securities  that are eligible to qualify for Tier 1 capital  treatment
(or its then equivalent) for purposes of the capital adequacy  guidelines of the
Federal Reserve, as then in effect and applicable to the Company.

      No  provision  of this  Article XV shall  prevent  the  occurrence  of any
default or Event of Default hereunder.

      Section 15.2. Default on Senior Indebtedness.  In the event and during the
continuation of any default by the Company in the payment of principal, premium,
interest  or any other  payment  due on any Senior  Indebtedness  of the Company
following  any grace  period,  or in the event that the  maturity  of any Senior
Indebtedness of the Company has been  accelerated  because of a default and such
acceleration


                                       48
<PAGE>

has not been  rescinded  or canceled and such Senior  Indebtedness  has not been
paid in full, then, in either case, no payment shall be made by the Company with
respect to the  principal  (including  redemption)  of, or  premium,  if any, or
interest on the Debentures.

      In the event that,  notwithstanding  the  foregoing,  any payment shall be
received  by the  Trustee  when such  payment  is  prohibited  by the  preceding
paragraph of this Section 15.2, such payment shall,  subject to Section 15.7, be
held in trust for the  benefit of, and shall be paid over or  delivered  to, the
holders of Senior  Indebtedness or their respective  representatives,  or to the
trustee or  trustees  under any  indenture  pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the  extent  that the  holders  of the  Senior  Indebtedness  (or  their
representative  or  representatives  or a trustee) notify the Trustee in writing
within 90 days of such  payment of the amounts  then due and owing on the Senior
Indebtedness and only the amounts  specified in such notice to the Trustee shall
be paid to the holders of Senior Indebtedness.

      Section 15.3. Liquidation,  Dissolution,  Bankruptcy.  Upon any payment by
the Company or  distribution  of assets of the Company of any kind or character,
whether in cash,  property or securities,  to creditors upon any  dissolution or
winding-up or liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due upon all Senior  Indebtedness  of the Company shall first be paid in
full, or payment  thereof  provided for in money in  accordance  with its terms,
before any  payment is made by the  Company,  on account of the  principal  (and
premium,  if any) or interest on the  Debentures.  Upon any such  dissolution or
winding-up or  liquidation  or  reorganization,  any payment by the Company,  or
distribution of assets of the Company of any kind or character, whether in cash,
property or  securities,  to which the  Securityholders  or the Trustee would be
entitled to receive from the Company,  except for the provisions of this Article
XV, shall be paid by the Company,  or by any  receiver,  trustee in  bankruptcy,
liquidating trustee,  agent or other Person making such payment or distribution,
or by the  Securityholders or by the Trustee under this Indenture if received by
them or it,  directly  to the holders of Senior  Indebtedness  (pro rata to such
holders on the basis of the respective  amounts of Senior  Indebtedness  held by
such  holders,  as  calculated  by  the  Company)  or  their  representative  or
representatives,  or to the trustee or trustees under any indenture  pursuant to
which any instruments  evidencing such Senior Indebtedness may have been issued,
as their  respective  interests may appear,  to the extent necessary to pay such
Senior  Indebtedness in full, in money or money's worth,  after giving effect to
any  concurrent  payment or  distribution  to or for the  holders of such Senior
Indebtedness,  before any payment or distribution is made to the Securityholders
or to the Trustee.

      In  the  event  that,   notwithstanding  the  foregoing,  any  payment  or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities,  prohibited by the  foregoing,  shall be received by the
Trustee before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the   holders  of  such  Senior   Indebtedness   or  their   representative   or
representatives,  or to the trustee or trustees under any indenture  pursuant to
which any instruments  evidencing such Senior Indebtedness may have been issued,
as their  respective  interests may appear,  as  calculated by the Company,  for
application to the payment of all Senior  Indebtedness,  remaining unpaid to the
extent necessary to pay such Senior  Indebtedness in full in money in accordance
with its terms, after giving effect to any concurrent payment or distribution to
or for the benefit of the holders of such Senior Indebtedness.

      For purposes of this Article XV, the words "cash,  property or securities"
shall not be deemed to include  shares of stock of the Company as reorganized or
readjusted,  or securities of the Company or any other corporation  provided for
by  a  plan  of  reorganization  or  readjustment,   the  payment  of  which  is
subordinated  at least to the extent provided in this Article XV with respect to
the Debentures to the


                                       49
<PAGE>

payment  of all  Senior  Indebtedness,  that  may at the  time  be  outstanding,
provided that (i) such Senior Indebtedness is assumed by the new corporation, if
any, resulting from any such reorganization or readjustment, and (ii) the rights
of the holders of such Senior  Indebtedness are not, without the consent of such
holders,  altered by such  reorganization or readjustment.  The consolidation of
the Company with, or the merger of the Company into, another  corporation or the
liquidation or  dissolution of the Company  following the conveyance or transfer
of its  property as an entirety,  or  substantially  as an entirety,  to another
corporation  upon the terms and  conditions  provided  for in Article XI of this
Indenture  shall  not  be  deemed  a  dissolution,  winding-up,  liquidation  or
reorganization for the purposes of this Section if such other corporation shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in
this  Section  shall  apply to claims of, or payments  to, the Trustee  under or
pursuant to Section 6.6 of this Indenture.

      Section  15.4.  Subrogation.  Subject to the payment in full of all Senior
Indebtedness,  the  Securityholders  shall be  subrogated  to the  rights of the
holders of such Senior  Indebtedness  to receive  payments or  distributions  of
cash,  property  or  securities  of  the  Company,  applicable  to  such  Senior
Indebtedness  until the principal of (and  premium,  if any) and interest on the
Debentures  shall be paid in full.  For the  purposes  of such  subrogation,  no
payments or  distributions  to the holders of such  Senior  Indebtedness  of any
cash,  property or securities to which the  Securityholders or the Trustee would
be entitled  except for the  provisions  of this Article XV, and no payment over
pursuant  to the  provisions  of this  Article  XV to or for the  benefit of the
holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as
between the Company,  its creditors other than holders of Senior Indebtedness of
the  Company,  and the  holders of the  Debentures  be deemed to be a payment or
distribution by the Company to or on account of such Senior Indebtedness.  It is
understood  that the  provisions of this Article XV are and are intended  solely
for  the  purposes  of  defining  the  relative  rights  of the  holders  of the
Securities, on the one hand, and the holders of such Senior Indebtedness, on the
other hand.

      Nothing  contained in this Article XV or elsewhere in this Indenture or in
the  Debentures  is intended to or shall  impair,  as between the  Company,  its
creditors other than the holders of Senior Indebtedness,  and the holders of the
Debentures,  the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Debentures  the principal of (and premium,  if any)
and interest on the Debentures as and when the same shall become due and payable
in accordance  with their terms,  or is intended to or shall affect the relative
rights of the holders of the Debentures and creditors of the Company, other than
the holders of Senior Indebtedness, nor shall anything herein or therein prevent
the  Trustee  or the  holder  of any  Debenture  from  exercising  all  remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the  rights,  if any,  under this  Article XV of the  holders of such  Senior
Indebtedness in respect of cash, property or securities of the Company, received
upon the exercise of any such remedy.

      Upon any payment or distribution  of assets of the Company  referred to in
this Article XV, the Trustee,  subject to the  provisions  of Article VI of this
Indenture,  and the Securityholders  shall be entitled to conclusively rely upon
any order or decree made by any court of  competent  jurisdiction  in which such
dissolution,  winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver,  trustee in bankruptcy,  liquidation  trustee,
agent or other  Person  making such  payment or  distribution,  delivered to the
Trustee or to the Securityholders,  for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other  indebtedness of the Company,  the amount thereof or payable  thereon,
the amount or amounts paid or distributed  thereon and all other facts pertinent
thereto or to this Article XV.

      Section 15.5. Trustee to Effectuate Subordination.  Each Securityholder by
such  Securityholder's  acceptance thereof authorizes and directs the Trustee on
such  Securityholder's  behalf  to


                                       50
<PAGE>

take  such  action  as  may  be  necessary  or  appropriate  to  effectuate  the
subordination  provided  in  this  Article  XV and  appoints  the  Trustee  such
Securityholder's attorney-in-fact for any and all such purposes.

      Section 15.6. Notice by the Company. The Company shall give prompt written
notice to a Responsible  Officer of the Trustee at the  Principal  Office of the
Trustee of any fact known to the Company  that would  prohibit the making of any
payment of monies to or by the Trustee in respect of the Debentures  pursuant to
the  provisions  of this  Article XV.  Notwithstanding  the  provisions  of this
Article XV or any other  provision of this  Indenture,  the Trustee shall not be
charged  with  knowledge of the  existence of any facts that would  prohibit the
making  of  any  payment  of  monies  to or by the  Trustee  in  respect  of the
Debentures  pursuant to the  provisions  of this Article XV,  unless and until a
Responsible  Officer of the Trustee at the Principal Office of the Trustee shall
have received  written notice thereof from the Company or a holder or holders of
Senior Indebtedness or from any trustee therefor;  and before the receipt of any
such written  notice,  the Trustee,  subject to the  provisions of Article VI of
this  Indenture,  shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
provided  for in this  Section at least 2  Business  Days prior to the date upon
which  by the  terms  hereof  any  money  may  become  payable  for any  purpose
(including,  without limitation, the payment of the principal of (or premium, if
any) or interest on any  Debenture),  then,  anything  herein  contained  to the
contrary  notwithstanding,  the Trustee  shall have full power and  authority to
receive  such  money and to apply the same to the  purposes  for which they were
received,  and shall not be affected by any notice to the  contrary  that may be
received by it within 2 Business Days prior to such date.

      The Trustee,  subject to the  provisions of Article VI of this  Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person  representing  himself to be a holder of Senior  Indebtedness  (or a
trustee or  representative  on behalf of such  holder),  to establish  that such
notice has been given by a holder of such  Senior  Indebtedness  or a trustee or
representative  on behalf of any such holder or  holders.  In the event that the
Trustee  determines in good faith that further evidence is required with respect
to  the  right  of any  Person  as a  holder  of  such  Senior  Indebtedness  to
participate  in any payment or  distribution  pursuant  to this  Article XV, the
Trustee  may  request  such  Person  to  furnish   evidence  to  the  reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person,  the extent to which such Person is entitled to participate in such
payment or  distribution  and any other  facts  pertinent  to the rights of such
Person  under this  Article  XV, and, if such  evidence  is not  furnished,  the
Trustee may defer any payment to such Person pending  judicial  determination as
to the right of such Person to receive such payment.

      Section 15.7. Rights of the Trustee;  Holders of Senior Indebtedness.  The
Trustee in its individual capacity shall be entitled to all the rights set forth
in this Article XV in respect of any Senior Indebtedness at any time held by it,
to the same extent as any other  holder of Senior  Indebtedness,  and nothing in
this Indenture shall deprive the Trustee of any of its rights as such holder.

      With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to  observe  only such of its  covenants  and  obligations  as are
specifically  set  forth  in  this  Article  XV,  and no  implied  covenants  or
obligations  with  respect to the holders of such Senior  Indebtedness  shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of such Senior  Indebtedness  and, subject
to the  provisions  of Article VI of this  Indenture,  the Trustee  shall not be
liable to any holder of such Senior Indebtedness if it shall pay over or deliver
to Securityholders, the Company or any other Person money or assets to which any
holder of such Senior  Indebtedness  shall be entitled by virtue of this Article
XV or otherwise.

      Nothing in this  Article XV shall apply to claims of, or payments  to, the
Trustee under or pursuant to Section 6.6.


                                       51
<PAGE>

      Section 15.8.  Subordination May Not Be Impaired.  No right of any present
or future holder of any Senior  Indebtedness to enforce  subordination as herein
provided  shall at any time in any way be  prejudiced  or impaired by any act or
failure to act on the part of the  Company,  or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company, with the
terms,  provisions and covenants of this Indenture,  regardless of any knowledge
thereof that any such holder may have or otherwise be charged with.

      Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior  Indebtedness may, at any time and from time to time,  without
the  consent  of or  notice  to  the  Trustee  or the  Securityholders,  without
incurring  responsibility  to  the  Securityholders  and  without  impairing  or
releasing  the  subordination  provided  in this  Article XV or the  obligations
hereunder  of the  holders  of the  Debentures  to the  holders  of such  Senior
Indebtedness,  do any one or more of the following: (i) change the manner, place
or terms of payment or extend  the time of payment  of, or renew or alter,  such
Senior Indebtedness,  or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument  evidencing the same or any agreement under which
such  Senior  Indebtedness  is  outstanding;  (ii)  sell,  exchange,  release or
otherwise deal with any property pledged,  mortgaged or otherwise  securing such
Senior  Indebtedness;  (iii)  release  any  Person  liable in any manner for the
collection  of such  Senior  Indebtedness;  and (iv)  exercise  or refrain  from
exercising any rights against the Company, and any other Person.

                     Signatures appear on the following page


                                       52
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Indenture to be
duly executed by their respective officers thereunto duly authorized,  as of the
day and year first above written.

                               FIRST MERCHANTS CORPORATION


                               By   /s/  Mark Hardwick
                                 -----------------------------------------------
                                    Name:  Mark Hardwick
                                    Title:  CFO & EVP


                               WILMINGTON TRUST COMPANY, as Trustee


                               By  /s/ Christopher J. Slaybaugh
                                 -----------------------------------------------
                                    Name:  Christopher J. Slaybaugh
                                    Title:  Senior Financial Services Officer


                                       53
<PAGE>

                                    EXHIBIT A

  FORM OF FIXED/FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE

                           [FORM OF FACE OF SECURITY]

      THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY
THE  UNITED  STATES OR ANY AGENCY OR FUND OF THE UNITED  STATES,  INCLUDING  THE
FEDERAL DEPOSIT INSURANCE CORPORATION.

      THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED  (THE  "SECURITIES  ACT"),  ANY  STATE  SECURITIES  LAWS  OR  ANY  OTHER
APPLICABLE   SECURITIES   LAW.   NEITHER  THIS  SECURITY  NOR  ANY  INTEREST  OR
PARTICIPATION  HEREIN MAY BE REOFFERED,  SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED,
ENCUMBERED  OR  OTHERWISE  DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR
UNLESS SUCH  TRANSACTION  IS EXEMPT  FROM,  OR NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  AGREES  TO OFFER,  SELL OR
OTHERWISE  TRANSFER  THIS  SECURITY  ONLY (A) TO THE COMPANY,  (B) PURSUANT TO A
REGISTRATION  STATEMENT  THAT HAS BEEN DECLARED  EFFECTIVE  UNDER THE SECURITIES
ACT,  (C) TO A  PERSON  WHOM  THE  SELLER  REASONABLY  BELIEVES  IS A  QUALIFIED
INSTITUTIONAL  BUYER IN A TRANSACTION  MEETING THE  REQUIREMENTS OF RULE 144A SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE
WITH  RULE  144A,  (D)  TO A  NON-U.S.  PERSON  IN AN  OFFSHORE  TRANSACTION  IN
ACCORDANCE  WITH RULE 903 OR RULE 904 (AS  APPLICABLE) OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH  (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY  FOR  ITS OWN  ACCOUNT,  OR FOR THE  ACCOUNT  OF SUCH AN  INSTITUTIONAL
ACCREDITED  INVESTOR,  FOR  INVESTMENT  PURPOSES  AND NOT WITH A VIEW TO, OR FOR
OFFER  OR  SALE  IN  CONNECTION  WITH,  ANY  DISTRIBUTION  IN  VIOLATION  OF THE
SECURITIES  ACT,  OR (F)  PURSUANT  TO ANY OTHER  AVAILABLE  EXEMPTION  FROM THE
REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER,  SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF  COUNSEL,  CERTIFICATION  AND/OR  OTHER  INFORMATION  SATISFACTORY  TO  IT IN
ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

      THE  HOLDER  OF  THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  ALSO  AGREES,
REPRESENTS  AND  WARRANTS  THAT  IT  IS  NOT  AN  EMPLOYEE  BENEFIT,  INDIVIDUAL
RETIREMENT  ACCOUNT  OR  OTHER  PLAN OR  ARRANGEMENT  SUBJECT  TO TITLE I OF THE
EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  ("ERISA"),  OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"),  OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER  OR HOLDER IS  ELIGIBLE  FOR  EXEMPTIVE  RELIEF  AVAILABLE  UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED  TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER  APPLICABLE  EXEMPTION  OR ITS  PURCHASE AND HOLDING OF
THIS  SECURITY IS NOT  PROHIBITED BY


                                      A-1
<PAGE>

SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH  RESPECT TO SUCH  PURCHASE
OR HOLDING.  ANY PURCHASER OR HOLDER OF THE  SECURITIES OR ANY INTEREST  THEREIN
WILL BE DEEMED TO HAVE  REPRESENTED  BY ITS  PURCHASE  AND HOLDING  THEREOF THAT
EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3)
OF ERISA,  OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE,  A TRUSTEE
OR OTHER PERSON  ACTING ON BEHALF OF AN EMPLOYEE  BENEFIT  PLAN OR PLAN,  OR ANY
OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE  BENEFIT PLAN OR PLAN TO
FINANCE SUCH  PURCHASE,  OR (ii) SUCH  PURCHASE  WILL NOT RESULT IN A PROHIBITED
TRANSACTION  UNDER  SECTION  406 OF ERISA OR SECTION  4975 OF THE CODE FOR WHICH
THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

      THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED  ONLY IN BLOCKS HAVING
AN AGGREGATE  PRINCIPAL  AMOUNT OF NOT LESS THAN  $100,000.00  AND  MULTIPLES OF
$1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO
BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

      THE HOLDER OF THIS SECURITY  AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

      IN CONNECTION WITH ANY TRANSFER,  THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY
THE  INDENTURE  TO  CONFIRM  THAT  THE  TRANSFER  COMPLIES  WITH  THE  FOREGOING
RESTRICTIONS.

     Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture

                                       of

                          First Merchants Corporation

                                  July 2, 2007

      First Merchants  Corporation,  an Indiana corporation (the "Company" which
term includes any successor Person under the Indenture hereinafter referred to),
for value  received  promises to pay to  Wilmington  Trust  Company,  not in its
individual  capacity  but solely as  Institutional  Trustee for First  Merchants
Capital  Trust II (the  "Holder") or  registered  assigns,  the principal sum of
fifty-six  million  seven  hundred  two  thousand  dollars  ($56,702,000.00)  on
September 15, 2037, and to pay interest on said principal sum from July 2, 2007,
or from the most  recent  Interest  Payment  Date (as  defined  below)  to which
interest has been paid or duly provided for,  quarterly  (subject to deferral as
set forth herein) in arrears on March 15, June 15,  September 15 and December 15
of each  year or if such day is not a  Business  Day,  then the next  succeeding
Business Day (each such date, an "Interest  Payment Date") (it being  understood
that  interest  accrues  for any such  non-Business  Day during  the  applicable
Distribution  Period,  beginning on or after September 15, 2012),  commencing on
the Interest  Payment Date in September  2007, at an annual rate equal to 6.495%
beginning on (and  including)  the date of original  issuance and ending on (but
excluding) the Interest Payment Date in September 2012 and at an annual rate for
each successive period beginning on (and including) the Interest Payment Date in
September  2012, and each succeeding  Interest  Payment Date, and ending on (but
excluding)  the next  succeeding  Interest  Payment  Date (each a  "Distribution
Period"), equal to 3-Month LIBOR, determined as described below, plus 1.56% (the
"Coupon  Rate"),  applied to the principal  amount  hereof,  until the principal
hereof is paid or duly provided for or made  available  for payment,  and on any
overdue  principal  and (without


                                      A-2
<PAGE>

duplication and to the extent that payment of such interest is enforceable under
applicable  law) on any overdue  installment of interest  (including  Additional
Interest) at the Interest Rate in effect for each applicable period,  compounded
quarterly,  from the dates  such  amounts  are due  until  they are paid or made
available for payment.  The amount of interest  payable (i) for any Distribution
Period  commencing  on or after the date of  original  issuance  but  before the
Interest  Payment  Date in  September  2012 will be  computed  on the basis of a
360-day  year of twelve  30-day  months,  and (ii) for the  Distribution  Period
commencing on the Interest  Payment Date in September  2012 and each  succeeding
Distribution  Period will be computed on the basis of the actual  number of days
in the Distribution Period concerned divided by 360. The interest installment so
payable,  and punctually paid or duly provided for, on any Interest Payment Date
will,  as  provided in the  Indenture,  be paid to the Person in whose name this
Debenture (or one or more Predecessor  Securities) is registered at the close of
business on the regular record date for such interest  installment,  which shall
be fifteen Business Days prior to the day on which the relevant Interest Payment
Date  occurs.  Any such  interest  installment  not so  punctually  paid or duly
provided for shall  forthwith  cease to be payable to the Holder on such regular
record date and may be paid to the Person in whose name this  Debenture  (or one
or more  Predecessor  Securities)  is  registered  at the close of business on a
special record date.

      "3-Month  LIBOR"  as used  herein,  means  the  London  interbank  offered
interest rate for three-month U.S. dollar deposits  determined by the Trustee in
the following  order of priority:  (i) the rate  (expressed as a percentage  per
annum) for U.S. dollar  deposits  having a three-month  maturity that appears on
Reuters Page LIBOR01 as of 11:00 a.m. (London time) on the related Determination
Date  ("Reuters  Page  LIBOR01"  means the display  designated  as  "LIBOR01" on
Reuters or such other page as may replace  Reuters  Page LIBOR01 on that service
or such other  service or services as may be nominated  by the British  Bankers'
Association  as the  information  vendor for the  purpose of  displaying  London
interbank offered rates for U.S. dollar  deposits);  (ii) if such rate cannot be
identified  on the related  Determination  Date,  the Trustee  will  request the
principal London offices of four leading banks in the London interbank market to
provide such banks' offered  quotations  (expressed as percentages per annum) to
prime banks in the London  interbank  market for U.S.  dollar  deposits having a
three-month  maturity as of 11:00 a.m. (London time) on such Determination Date.
If at least two  quotations  are provided,  3-Month LIBOR will be the arithmetic
mean of such quotations; (iii) if fewer than two such quotations are provided as
requested  in clause (ii) above,  the Trustee  will  request four major New York
City banks to provide such banks' offered  quotations  (expressed as percentages
per annum) to leading  European banks for loans in U.S. dollars as of 11:00 a.m.
(London time) on such  Determination  Date. If at least two such  quotations are
provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv)
if fewer than two such  quotations  are  provided as  requested  in clause (iii)
above,  3-Month  LIBOR will be a 3-Month  LIBOR  determined  with respect to the
Distribution Period immediately  preceding such current  Distribution Period. If
the rate for U.S. dollar  deposits having a three-month  maturity that initially
appears on Reuters  Page LIBOR01 as of 11:00 a.m.  (London  time) on the related
Determination Date is superseded on the Reuters Page LIBOR01 by a corrected rate
by 12:00 noon (London time) on such Determination  Date, then the corrected rate
as so substituted on the  applicable  page will be the applicable  3-Month LIBOR
for such Determination Date. As used herein, "Determination Date" means the date
that is two London  Banking  Days  (i.e.,  a business  day in which  dealings in
deposits  in  U.S.  dollars  are  transacted  in the  London  interbank  market)
preceding the commencement of the relevant Distribution Period.

      The Interest  Rate for any  Distribution  Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.

      All percentages  resulting from any calculations on the Debentures will be
rounded,  if necessary,  to the nearest one  hundred-thousandth  of a percentage
point,  with five  one-millionths  of a percentage  point rounded  upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all


                                      A-3
<PAGE>

dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).

      The  principal of and interest on this  Debenture  shall be payable at the
office or agency of the Trustee (or other paying agent appointed by the Company)
maintained  for that  purpose in any coin or  currency  of the United  States of
America  that at the time of payment is legal  tender for  payment of public and
private debts; provided,  however, that payment of interest may be made by check
mailed to the registered holder at such address as shall appear in the Debenture
Register if a request for a wire  transfer by such holder has not been  received
by the Company or by wire transfer to an account appropriately designated by the
holder  hereof.  Notwithstanding  the  foregoing,  so long as the holder of this
Debenture  is the  Institutional  Trustee,  the payment of the  principal of and
interest on this Debenture will be made in immediately  available  funds at such
place and to such account as may be designated by the Trustee.

      So  long  as  no  Acceleration  Event  of  Default  has  occurred  and  is
continuing,  the Company  shall have the right,  from time to time,  and without
causing an Event of Default,  to defer payments of interest on the Debentures by
extending  the interest  payment  period on the  Debentures at any time and from
time  to  time  during  the  term of the  Debentures,  for up to 20  consecutive
quarterly  periods (each such extended  interest  payment period,  an "Extension
Period"),  during  which  Extension  Period no  interest  (including  Additional
Interest)  shall be due and payable  (except any Additional Sums that may be due
and  payable).  No  Extension  Period may end on a date  other than an  Interest
Payment Date.  During an Extension  Period,  interest will continue to accrue on
the Debentures,  and interest on such accrued  interest will accrue at an annual
rate equal to the Interest Rate in effect for such Extension Period,  compounded
quarterly  from the date such  interest  would have been payable were it not for
the Extension  Period, to the extent permitted by law (such interest referred to
herein as "Additional  Interest").  At the end of any such Extension  Period the
Company  shall pay all  interest  then  accrued  and  unpaid  on the  Debentures
(together  with  Additional  Interest  thereon);   provided,  however,  that  no
Extension Period may extend beyond the Maturity Date; provided further, however,
that  during any such  Extension  Period,  the  Company  shall not and shall not
permit  any  Affiliate  to  engage  in  any of the  activities  or  transactions
described  on  the  reverse  side  hereof  and in the  Indenture.  Prior  to the
termination of any Extension Period, the Company may further extend such period,
provided  that  such  period   together  with  all  such  previous  and  further
consecutive  extensions  thereof  shall  not  exceed  20  consecutive  quarterly
periods,  or extend  beyond  the  Maturity  Date.  Upon the  termination  of any
Extension  Period and upon the payment of all accrued  and unpaid  interest  and
Additional Interest, the Company may commence a new Extension Period, subject to
the foregoing requirements.  No interest or Additional Interest shall be due and
payable  during  an  Extension  Period,  except  at the end  thereof,  but  each
installment  of interest that would  otherwise  have been due and payable during
such Extension Period shall bear Additional Interest.  The Company must give the
Trustee  notice of its  election to begin or extend an  Extension  Period by the
close of business at least 15 Business  Days prior to the Interest  Payment Date
with respect to which interest on the Debentures  would have been payable except
for the election to begin or extend such Extension Period.

      The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture,  subordinate  and junior in right of payment to the prior payment
in full of all Senior Indebtedness,  and this Debenture is issued subject to the
provisions of the Indenture with respect thereto. Each holder of this Debenture,
by accepting the same, (a) agrees to and shall be bound by such provisions,  (b)
authorizes  and  directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate  to acknowledge or effectuate the  subordination
so provided and (c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes.  Each holder hereof, by his or her acceptance hereof,  hereby
waives all notice of the acceptance of the  subordination  provisions  contained
herein and in the Indenture by each holder of Senior  Indebtedness,  whether now
outstanding or hereafter incurred,  and waives reliance by each such holder upon
said provisions.


                                      A-4
<PAGE>

      This  Debenture  shall not be entitled to any benefit  under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
certificate of  authentication  hereon shall have been signed by or on behalf of
the Trustee.

      The  provisions of this Debenture are continued on the reverse side hereof
and such provisions  shall for all purposes have the same effect as though fully
set forth at this place.


                                      A-5
<PAGE>

      IN WITNESS WHEREOF, the Company has duly executed this certificate.

                                FIRST MERCHANTS CORPORATION


                                By
                                  ----------------------------------------------
                                     Name:
                                     Title:


                          CERTIFICATE OF AUTHENTICATION

      This  is  one  of  the  Debentures  referred  to in  the  within-mentioned
Indenture.

                                WILMINGTON TRUST COMPANY, as Trustee


                                By:
                                   ---------------------------------------------
                                     Authorized Officer


                                      A-6
<PAGE>

                         [FORM OF REVERSE OF DEBENTURE]

      This  Debenture  is one of the  fixed/floating  rate  junior  subordinated
deferrable interest debentures of the Company,  all issued or to be issued under
and pursuant to the Indenture dated as of July 2, 2007 (the  "Indenture"),  duly
executed and delivered  between the Company and the Trustee,  to which Indenture
reference is hereby made for a description of the rights, limitations of rights,
obligations,  duties and immunities  thereunder of the Trustee,  the Company and
the holders of the Debentures. The Debentures are limited in aggregate principal
amount as specified in the Indenture.

      Upon the  occurrence  and  continuation  of a Special  Event  prior to the
Interest  Payment Date in September  2012,  the Company  shall have the right to
redeem the Debentures in whole,  but not in part, at any Interest  Payment Date,
within 120 days following the  occurrence of such Special Event,  at the Special
Redemption Price.

      In addition, the Company shall have the right to redeem the Debentures, in
whole or in part, but in all cases in a principal amount with integral multiples
of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date
in September 2012, at the Redemption Price.

      Prior to 10:00 a.m. New York City time on the  Redemption  Date or Special
Redemption  Date,  as  applicable,  the Company will deposit with the Trustee or
with one or more paying  agents an amount of money  sufficient  to redeem on the
Redemption  Date  or  the  Special  Redemption  Date,  as  applicable,  all  the
Debentures  so called for  redemption  at the  appropriate  Redemption  Price or
Special Redemption Price.

      If all, or less than all, the Debentures  are to be redeemed,  the Company
will  give  the  Trustee  notice  not  less  than  45 nor  more  than  60  days,
respectively,  prior to the  Redemption  Date or  Special  Redemption  Date,  as
applicable,  as to the aggregate  principal  amount of Debentures to be redeemed
and the Trustee shall select,  in such manner as in its sole discretion it shall
deem  appropriate  and fair,  the  Debentures  or portions  thereof (in integral
multiples of $1,000.00) to be redeemed.

      Notwithstanding the foregoing, any redemption of Debentures by the Company
shall be subject to the receipt of any and all required regulatory approvals.

      In case an  Acceleration  Event of  Default  shall  have  occurred  and be
continuing,  upon demand of the Trustee,  the principal of all of the Debentures
shall  become due and payable in the manner,  with the effect and subject to the
conditions provided in the Indenture.

      The Indenture contains provisions  permitting the Company and the Trustee,
with the  consent  of the  holders  of not less  than a  majority  in  aggregate
principal  amount  of  the  Debentures  at  the  time  outstanding,  to  execute
supplemental  indentures for the purpose of adding any provisions to or changing
in any manner or  eliminating  any of the provisions of this Indenture or of any
supplemental  indenture  or of modifying in any manner the rights of the holders
of the Debentures;  provided, however, that no such supplemental indenture shall
without  the  consent of the  holders of each  Debenture  then  outstanding  and
affected  thereby (i) change the fixed maturity of any Debenture,  or reduce the
principal  amount thereof or any premium  thereon,  or reduce the rate or extend
the time of  payment  of  interest  thereon,  or reduce  any  amount  payable on
redemption  thereof or make the  principal  thereof or any  interest  or premium
thereon  payable  in any  coin or  currency  other  than  that  provided  in the
Debentures,  or impair or affect the right of any  Securityholder  to  institute
suit for payment thereof or impair the right of repayment, if any, at the option
of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders
of which are required to consent to any such supplemental indenture.


                                      A-7
<PAGE>

      The  Indenture  also  contains  provisions  permitting  the  holders  of a
majority in aggregate principal amount of the Debentures at the time outstanding
on behalf of the  holders  of all of the  Debentures  to waive  (or  modify  any
previously  granted  waiver of) any past  default or Event of  Default,  and its
consequences,  except a default (a) in the payment of principal of, premium,  if
any,  or  interest  on any of the  Debentures,  (b) in respect of  covenants  or
provisions  hereof or of the  Indenture  which  cannot be  modified  or  amended
without the consent of the holder of each Debenture affected,  or (c) in respect
of the covenants contained in Section 3.9 of the Indenture;  provided,  however,
that if the  Debentures  are held by the Trust or a trustee of such trust,  such
waiver or  modification  to such waiver shall not be effective until the holders
of a majority in Liquidation  Amount of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver, provided, further, that
if the consent of the holder of each  outstanding  Debenture is  required,  such
waiver shall not be effective  until each holder of the Trust  Securities of the
Trust shall have  consented  to such waiver.  Upon any such waiver,  the default
covered  thereby  shall be deemed to be cured for all purposes of the  Indenture
and the Company, the Trustee and the holders of the Debentures shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any  subsequent  or other  default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by the  Indenture,  said default or Event of
Default shall for all purposes of the  Debentures and the Indenture be deemed to
have been cured and to be not continuing.

      No reference herein to the Indenture and no provision of this Debenture or
of the Indenture  shall alter or impair the obligation of the Company,  which is
absolute and  unconditional,  to pay the  principal of and premium,  if any, and
interest, including Additional Interest, on this Debenture at the time and place
and at the rate and in the money herein prescribed.

      The Company  has agreed that if  Debentures  are  initially  issued to the
Trust or a  trustee  of such  Trust in  connection  with the  issuance  of Trust
Securities by the Trust (regardless of whether Debentures continue to be held by
such  Trust) and (i) there shall have  occurred  and be  continuing  an Event of
Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the Capital Securities  Guarantee,  or (iii) the Company shall
have  given  notice  of its  election  to  defer  payments  of  interest  on the
Debentures by extending the interest  payment period as provided herein and such
Extension  Period,  or any  extension  thereof,  shall be  continuing,  then the
Company  shall not,  and shall not allow any  Affiliate  of the  Company to, (x)
declare or pay any dividends or distributions on, or redeem, purchase,  acquire,
or make a  liquidation  payment  with respect to, any of the  Company's  capital
stock or its  Affiliates'  capital  stock  (other than  payments of dividends or
distributions to the Company) or make any guarantee payments with respect to the
foregoing  or (y) make any payment of  principal  of or interest or premium,  if
any, on or repay, repurchase or redeem any debt securities of the Company or any
Affiliate that rank pari passu in all respects with or junior in interest to the
Debentures  (other  than,  with  respect  to  clauses  (x)  and (y)  above,  (1)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company  in  connection  with any  employment  contract,  benefit  plan or other
similar arrangement with or for the benefit of one or more employees,  officers,
directors  or  consultants,  in  connection  with  a  dividend  reinvestment  or
stockholder  stock  purchase plan or in connection  with the issuance of capital
stock of the Company (or securities  convertible  into or  exercisable  for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable  Extension  Period, if any, (2) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary  of the Company) for any class or series of the  Company's
capital  stock or of any class or series of the Company's  indebtedness  for any
class or series of the Company's  capital stock,  (3) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange  provisions  of such capital stock or the security  being  converted or
exchanged,   (4)  any   declaration  of  a  dividend  in  connection   with  any
stockholders'  rights plan, or the issuance of rights,  stock or other  property
under any  stockholders'  rights plan, or the redemption or repurchase of rights
pursuant thereto,  (5) any dividend in the form of stock,  warrants,  options or
other rights where the


                                      A-8
<PAGE>

dividend stock or the stock issuable upon exercise of such warrants,  options or
other  rights is the same stock as that on which the  dividend  is being paid or
ranks pari passu with or junior to such stock and any cash  payments  in lieu of
fractional  shares issued in  connection  therewith,  or (6) payments  under the
Capital Securities Guarantee).

      The Debentures are issuable only in registered,  certificated form without
coupons  and in  minimum  denominations  of  $100,000.00  and  any  multiple  of
$1,000.00 in excess  thereof.  As provided in the  Indenture  and subject to the
transfer  restrictions  and  limitations as may be contained  herein and therein
from time to time,  this Debenture is  transferable  by the holder hereof on the
Debenture  Register of the Company.  Upon due  presentment  for  registration of
transfer  of any  Debenture  at the  Principal  Office of the  Trustee or at any
office or agency of the  Company  maintained  for such  purpose as  provided  in
Section 3.2 of the  Indenture,  the Company  shall  execute,  the Company or the
Trustee  shall  register  and the  Trustee  or the  Authenticating  Agent  shall
authenticate  and make  available for delivery in the name of the  transferee or
transferees  a  new  Debenture  for  a  like  aggregate  principal  amount.  All
Debentures  presented  for  registration  of transfer or for exchange or payment
shall (if so required by the Company or the Trustee or the Authenticating Agent)
be duly endorsed by, or be accompanied by a written instrument or instruments of
transfer  in  form   satisfactory  to,  the  Company  and  the  Trustee  or  the
Authenticating Agent duly executed by the holder or his attorney duly authorized
in writing.  No service charge shall be made for any exchange or registration of
transfer of Debentures,  but the Company or the Trustee may require payment of a
sum  sufficient to cover any tax, fee or other  governmental  charge that may be
imposed in connection therewith.

      Prior to due  presentment  for  registration of transfer of any Debenture,
the Company,  the Trustee,  any  Authenticating  Agent,  any paying  agent,  any
transfer  agent and any  Debenture  registrar  may deem the Person in whose name
such Debenture  shall be registered  upon the Debenture  Register to be, and may
treat  him as,  the  absolute  owner  of such  Debenture  (whether  or not  such
Debenture  shall be  overdue)  for the  purpose  of  receiving  payment of or on
account of the principal of, premium, if any, and interest on such Debenture and
for all  other  purposes;  and  neither  the  Company  nor the  Trustee  nor any
Authenticating  Agent  nor any  paying  agent  nor any  transfer  agent  nor any
Debenture  registrar  shall be affected by any notice to the contrary.  All such
payments  so made to any holder  for the time  being or upon his order  shall be
valid,  and, to the extent of the sum or sums so paid,  effectual to satisfy and
discharge the liability for moneys payable upon any such Debenture.

      No recourse  for the payment of the  principal  of or premium,  if any, or
interest  on any  Debenture,  or for any claim  based  thereon or  otherwise  in
respect  thereof,  and no  recourse  under or upon any  obligation,  covenant or
agreement of the Company in the Indenture or in any supplemental  indenture,  or
in  any  such  Debenture,  or  because  of  the  creation  of  any  indebtedness
represented  thereby,  shall  be  had  against  any  incorporator,  stockholder,
employee,  officer or director, as such, past, present or future, of the Company
or of any  successor  Person of the  Company,  either  directly  or through  the
Company  or any  successor  Person  of the  Company,  whether  by  virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise,  it being expressly  understood that all such liability is
hereby  expressly  waived and released as a condition of, and as a consideration
for, the execution of the Indenture and the issue of the Debentures.

      Capitalized  terms used and not defined in this  Debenture  shall have the
meanings  assigned in the Indenture dated as of the date of original issuance of
this Debenture between the Trustee and the Company.

      THE  INDENTURE  AND THE  DEBENTURES  SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.


                                      A-9
<PAGE>

                                    EXHIBIT B

                         FORM OF CERTIFICATE TO TRUSTEE

      Pursuant  to  Section  3.5  of  the  Indenture   between  First  Merchants
Corporation,  as the Company (the "Company"),  and Wilmington Trust Company,  as
Trustee,  dated as of July 2, 2007 (the  "Indenture"),  the  undersigned  hereby
certifies as follows:

      1.    In my capacity as an officer of the Company,  I would  normally have
            knowledge of any default by the Company  during the last fiscal year
            in the performance of any covenants of the Company  contained in the
            Indenture.

      2.    [To my knowledge,  the Company is not in default in the  performance
            of any covenants contained in the Indenture.

            or, alternatively:

            I am aware of the default(s) in the  performance of covenants in the
            Indentures, as specified below.]

      Capitalized terms used herein, and not otherwise defined herein,  have the
respective meanings ascribed thereto in the Indenture.

      IN WITNESS WHEREOF, the undersigned has executed this Certificate.

Date:


                                      ------------------------------
                                      Name:
                                      Title:


                                      B-1
<PAGE>

                                    EXHIBIT C

                            FORM OF QUARTERLY REPORT

The Bank of New York
101 Barclay Street, 7E
New York, New York  10286
Attention:  CDO Transaction Management Group

BANK HOLDING COMPANY
As of [March 31, June 30, September 30 or December 31], 20__

Tier 1 to Risk Weighted Assets                                  _________%

Ratio of Double Leverage                                        _________%

Non-Performing Assets to Loans and OREO                         _________%

Ratio of Reserves to Non-Performing Loans                       _________%

Ratio of Net Charge-Offs to Loans                               _________%

Return on Average Assets (annualized)**                         _________%

Net Interest Margin (annualized)**                              _________%

Efficiency Ratio                                                _________%

Ratio of Loans to Assets                                        _________%

Ratio of Loans to Deposits                                      _________%

Total Assets                                                   $__________

Year to Date Income                                            $__________

---------------
*     A table describing the quarterly report calculation procedures is provided
      on page C-2

**    To  annualize  Return on  Average  Assets and Net  Interest  Margin do the
      following:

      1st  Quarter-multiply  income  statement item by 4, then divide by balance
      sheet item(s)
      2nd  Quarter-multiply  income  statement item by 2, then divide by balance
      sheet item(s)
      3rd  Quarter-divide  income  statement item by 3, then multiply by 4, then
      divide by balance sheet item(s)
      4th Quarter-should already be an annual number
      NO ADJUSTMENT SHOULD BE MADE TO BALANCE SHEET ITEMS

cc:  FTN Financial Capital Markets            Keefe, Bruyette & Woods, Inc.
     845 Crossover Lane, Suite 150            787 7th Avenue, 4th Floor
     Memphis, Tennessee  38117                New York, New York  10019
     Attention:  Structured Finance Group     Attention:  Mitchell Kleinman,
                                              General Counsel


                                      C-1
<PAGE>

                              Financial Definitions

--------------------------------------------------------------------------------
Report Item             Description of Calculation
--------------------------------------------------------------------------------
"Tier 1 Capital" to     Tier 1 Risk Ratio: Core Capital (Tier 1)/
Risk Weighted Assets    Risk-Adjusted Assets
--------------------------------------------------------------------------------
Ratio of Double         Total  equity investments in subsidiaries divided by the
Leverage                total  equity  capital.  This field is calculated at the
                        parent  company level. "Subsidiaries" include bank, bank
                        holding company, and nonbank subsidiaries.
--------------------------------------------------------------------------------
Non-Performing  Assets  Total   Nonperforming   Assets  (NPLs+  Foreclosed  Real
to Loans and OREO       Estate+  Other  Nonaccrual & Repossessed  Assets)/ Total
                        Loans + Foreclosed Real Estate
--------------------------------------------------------------------------------
Ratio of  Reserves  to  Total  Loan  Loss  and Allocated Transfer Risk Reserves/
Non-Performing Loans    Total Nonperforming Loans (Nonaccrual + Restructured)
--------------------------------------------------------------------------------
Ratio of Net            Net  charge  offs  for  the  period  as  a percentage of
Charge-Offs to Loans    average loans.
--------------------------------------------------------------------------------
Return on Assets        Net Income as a percentage of Assets.
--------------------------------------------------------------------------------
Net Interest Margin     (Net  Interest  Income  Fully  Taxable  Equivalent,   if
                        available / Average Earning Assets)
--------------------------------------------------------------------------------
Efficiency Ratio        (Noninterest   Expense)/  (Net  Interest   Income  Fully
                        Taxable  Equivalent,   if  available,  plus  Noninterest
                        Income)
--------------------------------------------------------------------------------
Ratio of Loans to       Total  Loans  &  Leases (Net of Unearned Income & Assets
                        Gross of Reserve)/ Total Assets
--------------------------------------------------------------------------------
Ratio of Loans to       Total Loans & Leases  (Net of Unearned Income & Gross of
Deposits                Reserve)/ Total Deposits  (Includes Domestic and Foreign
                        Deposits)
--------------------------------------------------------------------------------
Total Assets            The sum of total assets.  Includes cash and balances due
                        from depository institutions;  securities; federal funds
                        sold  and  securities   purchased  under  agreements  to
                        resell; loans and lease financing  receivables;  trading
                        assets;  premises  and fixed  assets;  other real estate
                        owned;  investments in  unconsolidated  subsidiaries and
                        associated    companies;    customer's    liability   on
                        acceptances  outstanding;  intangible  assets; and other
                        assets.
--------------------------------------------------------------------------------
Net Income              The  sum  of income  (loss)  before  extraordinary items
                        and  other  adjustments  and  extraordinary  items;  and
                        other adjustments, net of income taxes.
--------------------------------------------------------------------------------


                                      C-2
<PAGE>

                                   Exhibit 4.3

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

                               GUARANTEE AGREEMENT

                                 by and between

                           FIRST MERCHANTS CORPORATION

                                       and

                            WILMINGTON TRUST COMPANY

                            Dated as of July 2, 2007

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

<PAGE>

                               GUARANTEE AGREEMENT

      This GUARANTEE AGREEMENT (this "Guarantee"),  dated as of July 2, 2007, is
executed and delivered by First Merchants  Corporation,  an Indiana  corporation
(the "Guarantor"), and Wilmington Trust Company, a Delaware banking corporation,
as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of First
Merchants Capital Trust II, a Delaware statutory trust (the "Issuer").

      WHEREAS,  pursuant to an Amended and  Restated  Declaration  of Trust (the
"Declaration"),  dated as of the date hereof among Wilmington Trust Company, not
in  its  individual   capacity  but  solely  as   institutional   trustee,   the
administrators of the Issuer named therein,  the Guarantor,  as sponsor, and the
holders from time to time of undivided beneficial interests in the assets of the
Issuer,  the Issuer is issuing on the date  hereof  those  undivided  beneficial
interests,  having  an  aggregate  liquidation  amount  of  $55,000,000.00  (the
"Capital Securities"); and

      WHEREAS,  as incentive for the Holders to purchase the Capital Securities,
the Guarantor desires  irrevocably and  unconditionally  to agree, to the extent
set forth in this  Guarantee,  to pay to the Holders of Capital  Securities  the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein;

      NOW,  THEREFORE,  in  consideration  of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.

                                   ARTICLE I

                         DEFINITIONS AND INTERPRETATION

      Section 1.1. Definitions and Interpretation. In this Guarantee, unless the
context otherwise requires:

      (a)  capitalized  terms  used in this  Guarantee  but not  defined  in the
preamble  above have the  respective  meanings  assigned to them in this Section
1.1;

      (b) a term  defined  anywhere  in  this  Guarantee  has the  same  meaning
throughout;

      (c) all  references  to "the  Guarantee" or "this  Guarantee"  are to this
Guarantee as modified, supplemented or amended from time to time;

      (d) all  references in this  Guarantee to "Articles" or "Sections"  are to
Articles or Sections of this Guarantee, unless otherwise specified;

      (e) terms defined in the  Declaration  as at the date of execution of this
Guarantee have the same meanings when used in this Guarantee,  unless  otherwise
defined in this Guarantee or unless the context otherwise requires; and

      (f) a reference to the singular includes the plural and vice versa.

      "Affiliate"  has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.

      "Beneficiaries"  means  any  Person  to whom the  Issuer  is or  hereafter
becomes indebted or liable.

<PAGE>

      "Capital  Securities"  has the meaning  set forth in the  recitals to this
Guarantee.

      "Common  Securities"  means the common  securities issued by the Issuer to
the Guarantor pursuant to the Declaration.

      "Corporate  Trust  Office"  means the office of the  Guarantee  Trustee at
which the  corporate  trust  business of the  Guarantee  Trustee  shall,  at any
particular  time,  be  principally  administered,  which  office  at the date of
execution of this Guarantee is located at Rodney Square North, 1100 North Market
Street,   Wilmington,   Delaware   19890-1600,    Attention:   Corporate   Trust
Administration.

      "Covered Person" means any Holder of Capital Securities.

      "Debentures"  means the debt  securities of the Guarantor  designated  the
Fixed/Floating Rate Junior Subordinated  Deferrable Interest Debentures due 2037
held by the Institutional Trustee (as defined in the Declaration) of the Issuer.

      "Declaration  Event of Default"  means an "Event of Default" as defined in
the Declaration.

      "Event of Default" has the meaning set forth in Section 2.4(a).

      "Guarantee  Payments"  means  the  following  payments  or  distributions,
without duplication,  with respect to the Capital Securities,  to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration)  which are required to be paid on such Capital Securities to
the extent the Issuer shall have funds available  therefor,  (ii) the Redemption
Price to the extent the Issuer has funds available therefor, with respect to any
Capital  Securities  called for  redemption  by the  Issuer,  (iii) the  Special
Redemption  Price to the extent the Issuer has funds  available  therefor,  with
respect to Capital  Securities  redeemed upon the occurrence of a Special Event,
and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or
termination  of the Issuer (other than in connection  with the  distribution  of
Debentures  to the Holders of the  Capital  Securities  in exchange  therefor as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Capital Securities to the
date of payment,  to the extent the Issuer shall have funds available  therefor,
and (b) the amount of assets of the Issuer remaining  available for distribution
to Holders in  liquidation  of the Issuer  (in  either  case,  the  "Liquidation
Distribution").

      "Guarantee  Trustee" means  Wilmington  Trust  Company,  until a Successor
Guarantee Trustee has been appointed and has accepted such appointment  pursuant
to the  terms  of this  Guarantee  and  thereafter  means  each  such  Successor
Guarantee Trustee.

      "Guarantor"  means First Merchants  Corporation and each of its successors
and assigns.

      "Holder"  means any holder,  as registered on the books and records of the
Issuer,  of any Capital  Securities;  provided,  however,  that, in  determining
whether the Holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.

      "Indemnified  Person"  means the Guarantee  Trustee,  any Affiliate of the
Guarantee Trustee, or any officers, directors, shareholders,  members, partners,
employees,  representatives,  nominees,  custodians  or agents of the  Guarantee
Trustee.

      "Indenture"  means the Indenture  dated as of the date hereof  between the
Guarantor and  Wilmington  Trust  Company,  not in its  individual  capacity but
solely as trustee, and any indenture


                                       2
<PAGE>

supplemental  thereto  pursuant to which the  Debentures are to be issued to the
institutional trustee of the Issuer.

      "Issuer"  has the  meaning  set  forth in the  opening  paragraph  to this
Guarantee.

      "Liquidation  Distribution" has the meaning set forth in the definition of
"Guarantee Payments" herein.

      "Majority in liquidation amount of the Capital Securities" means Holder(s)
of outstanding  Capital  Securities,  voting together as a class, but separately
from the  holders  of  Common  Securities,  of more  than  50% of the  aggregate
liquidation   amount  (including  the  stated  amount  that  would  be  paid  on
redemption,  liquidation or otherwise,  plus accrued and unpaid Distributions to
the date upon  which the  voting  percentages  are  determined)  of all  Capital
Securities then outstanding.

      "Obligations" means any costs,  expenses or liabilities (but not including
liabilities related to taxes) of the Issuer other than obligations of the Issuer
to pay to holders of any Trust  Securities the amounts due such holders pursuant
to the terms of the Trust Securities.

      "Officer's  Certificate"  means, with respect to any Person, a certificate
signed by one  Authorized  Officer of such  Person.  Any  Officer's  Certificate
delivered with respect to compliance  with a condition or covenant  provided for
in this Guarantee shall include:

            (a) a statement that the officer  signing the Officer's  Certificate
      has read the covenant or condition and the definitions relating thereto;

            (b) a brief  statement of the nature and scope of the examination or
      investigation  undertaken  by  the  officer  in  rendering  the  Officer's
      Certificate;

            (c) a  statement  that the  officer  has made  such  examination  or
      investigation as, in such officer's  opinion,  is necessary to enable such
      officer to express an informed  opinion as to whether or not such covenant
      or condition has been complied with; and

            (d) a statement as to whether,  in the opinion of the officer,  such
      condition or covenant has been complied with.

      "Person"  means a legal  person,  including any  individual,  corporation,
estate, partnership,  joint venture,  association,  joint stock company, limited
liability  company,  trust,  unincorporated  association,  or  government or any
agency or political subdivision thereof, or any other entity of whatever nature.

      "Redemption Price" has the meaning set forth in the Indenture.

      "Responsible  Officer" means, with respect to the Guarantee  Trustee,  any
officer within the Corporate Trust Office of the Guarantee Trustee including any
Vice President, Assistant Vice President,  Secretary, Assistant Secretary or any
other officer of the Guarantee Trustee customarily  performing functions similar
to those  performed  by any of the above  designated  officers  and  also,  with
respect to a particular  corporate trust matter,  any other officer to whom such
matter is referred  because of that officer's  knowledge of and familiarity with
the particular subject.

      "Special Event" has the meaning set forth in the Indenture.

      "Special Redemption Price" has the meaning set forth in the Indenture.


                                       3
<PAGE>

      "Successor   Guarantee  Trustee"  means  a  successor   Guarantee  Trustee
possessing the qualifications to act as Guarantee Trustee under Section 3.1.

      "Trust Securities" means the Common Securities and the Capital Securities.

                                   ARTICLE II

                          POWERS, DUTIES AND RIGHTS OF
                                GUARANTEE TRUSTEE

      Section 2.1. Powers and Duties of the Guarantee Trustee.

      (a) This Guarantee shall be held by the Guarantee  Trustee for the benefit
of the Holders of the Capital  Securities,  and the Guarantee  Trustee shall not
transfer  this  Guarantee  to any Person  except a Holder of Capital  Securities
exercising  his or her  rights  pursuant  to  Section  4.4(b) or to a  Successor
Guarantee  Trustee on  acceptance  by such  Successor  Guarantee  Trustee of its
appointment to act as Successor Guarantee Trustee. The right, title and interest
of the Guarantee  Trustee shall  automatically  vest in any Successor  Guarantee
Trustee,  and such vesting and cessation of title shall be effective  whether or
not  conveyancing  documents  have been executed and  delivered  pursuant to the
appointment of such Successor Guarantee Trustee.

      (b) If an Event of Default actually known to a Responsible  Officer of the
Guarantee  Trustee has occurred and is continuing,  the Guarantee  Trustee shall
enforce this Guarantee for the benefit of the Holders of the Capital Securities.

      (c) The Guarantee  Trustee,  before the occurrence of any Event of Default
and after curing all Events of Default that may have occurred,  shall  undertake
to perform only such duties as are specifically set forth in this Guarantee, and
no implied  covenants  shall be read into this  Guarantee  against the Guarantee
Trustee.  In case an Event of Default  has  occurred  (that has not been  waived
pursuant to Section 2.4) and is actually  known to a Responsible  Officer of the
Guarantee  Trustee,  the Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Guarantee, and use the same degree of care and skill
in its exercise  thereof,  as a prudent  person would  exercise or use under the
circumstances in the conduct of his or her own affairs.

      (d) No  provision  of this  Guarantee  shall be  construed  to relieve the
Guarantee Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:

            (i) prior to the  occurrence  of any Event of Default  and after the
      curing or waiving of all such Events of Default that may have occurred:

                  (A) the duties and obligations of the Guarantee  Trustee shall
            be determined  solely by the express  provisions of this  Guarantee,
            and  the  Guarantee  Trustee  shall  not be  liable  except  for the
            performance of such duties and obligations as are  specifically  set
            forth in this  Guarantee,  and no implied  covenants or  obligations
            shall be read into this Guarantee against the Guarantee Trustee; and

                  (B) in the  absence of bad faith on the part of the  Guarantee
            Trustee,  the  Guarantee  Trustee may  conclusively  rely, as to the
            truth  of  the  statements  and  the  correctness  of  the  opinions
            expressed  therein,  upon any certificates or opinions  furnished to
            the Guarantee  Trustee and  conforming to the  requirements  of this
            Guarantee; but in the


                                       4
<PAGE>

            case of any such  certificates  or  opinions  that by any  provision
            hereof are  specifically  required to be furnished to the  Guarantee
            Trustee,  the Guarantee Trustee shall be under a duty to examine the
            same to determine whether or not they conform to the requirements of
            this Guarantee;

            (ii) the  Guarantee  Trustee  shall not be  liable  for any error of
      judgment  made in good faith by a  Responsible  Officer  of the  Guarantee
      Trustee,  unless it shall be proved that such  Responsible  Officer of the
      Guarantee  Trustee or the Guarantee  Trustee was negligent in ascertaining
      the pertinent facts upon which such judgment was made;

            (iii) the Guarantee  Trustee shall not be liable with respect to any
      action taken or omitted to be taken by it in good faith in accordance with
      the  written  direction  of the  Holders  of not less than a  Majority  in
      liquidation amount of the Capital Securities  relating to the time, method
      and place of conducting  any  proceeding  for any remedy  available to the
      Guarantee  Trustee,  or  relating  to the  exercise  of any trust or power
      conferred upon the Guarantee Trustee under this Guarantee; and

            (iv) no  provision of this  Guarantee  shall  require the  Guarantee
      Trustee  to  expend  or risk its own  funds or  otherwise  incur  personal
      financial  liability  in the  performance  of any of its  duties or in the
      exercise of any of its rights or powers,  if the  Guarantee  Trustee shall
      have reasonable  grounds for believing that the repayment of such funds is
      not reasonably assured to it under the terms of this Guarantee or security
      and indemnity,  reasonably satisfactory to the Guarantee Trustee,  against
      such risk or liability is not reasonably assured to it.

      Section 2.2. Certain Rights of Guarantee Trustee.

(a)   Subject to the provisions of Section 2.1:

            (i) The Guarantee Trustee may conclusively  rely, and shall be fully
      protected  in acting or  refraining  from  acting  upon,  any  resolution,
      certificate,  statement,  instrument,  opinion,  report, notice,  request,
      direction,  consent,  order,  bond,  debenture,  note,  other  evidence of
      indebtedness  or other paper or document  believed by it to be genuine and
      to have been signed, sent or presented by the proper party or parties.

            (ii) Any  direction  or act of the  Guarantor  contemplated  by this
      Guarantee shall be sufficiently evidenced by an Officer's Certificate.

            (iii)  Whenever,  in  the  administration  of  this  Guarantee,  the
      Guarantee  Trustee  shall  deem it  desirable  that a matter  be proved or
      established before taking, suffering or omitting any action hereunder, the
      Guarantee   Trustee   (unless  other   evidence  is  herein   specifically
      prescribed)  may,  in the  absence of bad faith on its part,  request  and
      conclusively  rely upon an Officer's  Certificate of the Guarantor  which,
      upon  receipt  of  such  request,  shall  be  promptly  delivered  by  the
      Guarantor.

            (iv)  The  Guarantee  Trustee  shall  have  no  duty  to  see to any
      recording,  filing or registration of any instrument (or any re-recording,
      refiling or re-registration thereof).

            (v) The Guarantee Trustee may consult with counsel of its selection,
      and the advice or opinion of such counsel  with  respect to legal  matters
      shall be full and complete  authorization and protection in respect of any
      action  taken,  suffered or omitted by it  hereunder  in good faith and in
      accordance with such advice or opinion. Such counsel may be counsel to the
      Guarantor or any


                                       5
<PAGE>

      of its  Affiliates  and may include any of its  employees.  The  Guarantee
      Trustee shall have the right at any time to seek  instructions  concerning
      the   administration  of  this  Guarantee  from  any  court  of  competent
      jurisdiction.

            (vi) The Guarantee  Trustee shall be under no obligation to exercise
      any of the rights or powers vested in it by this  Guarantee at the request
      or direction of any Holder,  unless such Holder shall have provided to the
      Guarantee Trustee such security and indemnity,  reasonably satisfactory to
      the Guarantee Trustee,  against the costs,  expenses (including attorneys'
      fees and  expenses  and the expenses of the  Guarantee  Trustee's  agents,
      nominees or custodians)  and  liabilities  that might be incurred by it in
      complying  with such  request  or  direction,  including  such  reasonable
      advances as may be requested by the Guarantee Trustee; provided,  however,
      that  nothing  contained  in this  Section  2.2(a)(vi)  shall  relieve the
      Guarantee  Trustee,  upon the  occurrence  of an Event of Default,  of its
      obligation  to  exercise  the  rights  and  powers  vested  in it by  this
      Guarantee.

            (vii)  The  Guarantee  Trustee  shall  not  be  bound  to  make  any
      investigation  into  the  facts  or  matters  stated  in  any  resolution,
      certificate,  statement,  instrument,  opinion,  report, notice,  request,
      direction,  consent,  order,  bond,  debenture,  note,  other  evidence of
      indebtedness or other paper or document, but the Guarantee Trustee, in its
      discretion, may make such further inquiry or investigation into such facts
      or matters as it may see fit.

            (viii) The Guarantee Trustee may execute any of the trusts or powers
      hereunder or perform any duties hereunder either directly or by or through
      agents, nominees, custodians or attorneys, and the Guarantee Trustee shall
      not be  responsible  for any  misconduct  or negligence on the part of any
      agent or attorney appointed with due care by it hereunder.

            (ix)  Any  action  taken  by the  Guarantee  Trustee  or its  agents
      hereunder  shall  bind the  Holders  of the  Capital  Securities,  and the
      signature of the Guarantee Trustee or its agents alone shall be sufficient
      and effective to perform any such action. No third party shall be required
      to inquire as to the authority of the Guarantee Trustee to so act or as to
      its  compliance  with any of the terms and  provisions of this  Guarantee,
      both of which shall be conclusively  evidenced by the Guarantee  Trustee's
      or its agent's taking such action.

            (x) Whenever in the  administration  of this Guarantee the Guarantee
      Trustee  shall deem it desirable to receive  instructions  with respect to
      enforcing  any remedy or right or taking any other action  hereunder,  the
      Guarantee  Trustee  (i) may  request  instructions  from the  Holders of a
      Majority in liquidation amount of the Capital Securities, (ii) may refrain
      from enforcing such remedy or right or taking such other action until such
      instructions  are received,  and (iii) shall be protected in  conclusively
      relying on or acting in accordance with such instructions.

            (xi) The Guarantee Trustee shall not be liable for any action taken,
      suffered,  or omitted to be taken by it in good faith, without negligence,
      and reasonably believed by it to be authorized or within the discretion or
      rights or powers conferred upon it by this Guarantee.

      (b) No provision of this  Guarantee  shall be deemed to impose any duty or
obligation on the  Guarantee  Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it  shall  be  illegal  or in  which  the  Guarantee  Trustee  shall be
unqualified or incompetent in accordance with applicable law to perform any such
act or acts or to  exercise  any  such  right,  power,  duty or  obligation.  No
permissive  power or  authority  available  to the  Guarantee  Trustee  shall be
construed to be a duty.


                                       6
<PAGE>

      Section 2.3. Not  Responsible  for Recitals or Issuance of Guarantee.  The
recitals  contained in this  Guarantee  shall be taken as the  statements of the
Guarantor,  and the  Guarantee  Trustee does not assume any  responsibility  for
their  correctness.  The  Guarantee  Trustee makes no  representation  as to the
validity or sufficiency of this Guarantee.

      Section 2.4. Events of Default; Waiver.

      (a) An Event of Default under this  Guarantee  will occur upon the failure
of the Guarantor to perform any of its payment or other obligations hereunder.

      (b) The  Holders  of a  Majority  in  liquidation  amount  of the  Capital
Securities may, voting or consenting as a class, on behalf of the Holders of all
of the Capital Securities, waive any past Event of Default and its consequences.
Upon such waiver,  any such Event of Default shall cease to exist,  and shall be
deemed to have been  cured,  for every  purpose of this  Guarantee,  but no such
waiver shall extend to any  subsequent  or other  default or Event of Default or
impair any right consequent thereon.

      Section 2.5. Events of Default; Notice.

      (a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default,  transmit by mail, first class postage prepaid, to the Holders
of the Capital  Securities and the  Guarantor,  notices of all Events of Default
actually known to a Responsible  Officer of the Guarantee  Trustee,  unless such
defaults  have been cured before the giving of such notice,  provided,  however,
that the Guarantee  Trustee shall be protected in withholding such notice if and
so long  as a  Responsible  Officer  of the  Guarantee  Trustee  in  good  faith
determines  that the  withholding  of such  notice  is in the  interests  of the
Holders of the Capital Securities.

      (b) The  Guarantee  Trustee  shall not be deemed to have  knowledge of any
Event of Default unless the Guarantee Trustee shall have received written notice
from the Guarantor or a Holder of the Capital  Securities (except in the case of
a payment  default),  or a Responsible  Officer of the Guarantee Trustee charged
with the  administration  of this Guarantee shall have obtained actual knowledge
thereof.

                                  ARTICLE III

                                GUARANTEE TRUSTEE

      Section 3.1. Guarantee Trustee; Eligibility.

      (a)   There shall at all times be a Guarantee Trustee which shall:

            (i) not be an Affiliate of the Guarantor, and

            (ii) be a corporation organized and doing business under the laws of
      the United  States of America or any State or Territory  thereof or of the
      District of  Columbia,  or Person  authorized  under such laws to exercise
      corporate trust powers,  having a combined capital and surplus of at least
      50 million  U.S.  dollars  ($50,000,000),  and subject to  supervision  or
      examination  by  Federal,  State,  Territorial  or  District  of  Columbia
      authority.  If such  corporation  publishes  reports of condition at least
      annually,  pursuant to law or to the  requirements  of the  supervising or
      examining  authority  referred to above,  then,  for the  purposes of this
      Section  3.1(a)(ii),  the combined capital and surplus of such corporation
      shall be deemed to be its combined capital and surplus as set forth in its
      most recent report of condition so published.


                                       7
<PAGE>

      (b) If at any time the Guarantee  Trustee shall cease to be eligible to so
act under Section 3.1(a),  the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 3.2(c).

      (c)  If the  Guarantee  Trustee  has or  shall  acquire  any  "conflicting
interest"  within the meaning of Section 310(b) of the Trust  Indenture Act, the
Guarantee  Trustee shall either  eliminate such interest or resign to the extent
and in the manner provided by, and subject to this Guarantee.

      Section 3.2. Appointment, Removal and Resignation of Guarantee Trustee.

      (a) Subject to Section 3.2(b),  the Guarantee  Trustee may be appointed or
removed  without  cause at any time by the  Guarantor  except during an Event of
Default.

      (b) The Guarantee  Trustee shall not be removed in accordance with Section
3.2(a) until a Successor  Guarantee  Trustee has been appointed and has accepted
such  appointment by written  instrument  executed by such  Successor  Guarantee
Trustee and delivered to the Guarantor.

      (c) The  Guarantee  Trustee  appointed to office shall hold office until a
Successor  Guarantee  Trustee shall have been  appointed or until its removal or
resignation.  The  Guarantee  Trustee may resign from office  (without  need for
prior or subsequent  accounting)  by an  instrument  in writing  executed by the
Guarantee  Trustee and delivered to the Guarantor,  which  resignation shall not
take effect  until a Successor  Guarantee  Trustee  has been  appointed  and has
accepted such appointment by an instrument in writing executed by such Successor
Guarantee  Trustee and delivered to the  Guarantor  and the resigning  Guarantee
Trustee.

      (d) If no  Successor  Guarantee  Trustee  shall  have been  appointed  and
accepted  appointment  as  provided  in this  Section  3.2  within 60 days after
delivery of an  instrument  of removal or  resignation,  the  Guarantee  Trustee
resigning or being removed may petition any court of competent  jurisdiction for
appointment of a Successor  Guarantee Trustee.  Such court may thereupon,  after
prescribing  such  notice,  if any, as it may deem  proper,  appoint a Successor
Guarantee Trustee.

      (e) No Guarantee  Trustee shall be liable for the acts or omissions to act
of any Successor Guarantee Trustee.

      (f) Upon  termination  of this  Guarantee or removal or resignation of the
Guarantee  Trustee  pursuant to this Section 3.2, the Guarantor shall pay to the
Guarantee  Trustee all amounts owing to the Guarantee Trustee under Sections 7.2
and 7.3 accrued to the date of such termination, removal or resignation.


                                       8
<PAGE>

                                   ARTICLE IV

                                    GUARANTEE

      Section 4.1. Guarantee.

      (a) The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without  duplication of amounts  theretofore
paid by the  Issuer),  as and when due,  regardless  of any defense  (except the
defense of payment by the  Issuer),  right of set-off or  counterclaim  that the
Issuer  may have or  assert.  The  Guarantor's  obligation  to make a  Guarantee
Payment  may be  satisfied  by direct  payment  of the  required  amounts by the
Guarantor  to the  Holders or by causing  the Issuer to pay such  amounts to the
Holders.

      (b) The Guarantor  hereby also agrees to assume any and all Obligations of
the Issuer and in the event any such  Obligation  is not so assumed,  subject to
the  terms  and  conditions   hereof,   the  Guarantor  hereby  irrevocably  and
unconditionally  guarantees to each  Beneficiary  the full payment,  when and as
due,  of any and  all  Obligations  to such  Beneficiaries.  This  Guarantee  is
intended  to be  for  the  benefit  of,  and  to be  enforceable  by,  all  such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.

      Section 4.2.  Waiver of Notice and Demand.  The  Guarantor  hereby  waives
notice of acceptance of this  Guarantee and of any liability to which it applies
or may apply, presentment, demand for payment, any right to require a proceeding
first  against  the Issuer or any other  Person  before  proceeding  against the
Guarantor,  protest,  notice  of  nonpayment,  notice  of  dishonor,  notice  of
redemption and all other notices and demands.

      Section  4.3.  Obligations  Not  Affected.  The  obligations,   covenants,
agreements and duties of the Guarantor  under this Guarantee  shall in no way be
affected or impaired by reason of the happening  from time to time of any of the
following:

      (a) the  release or  waiver,  by  operation  of law or  otherwise,  of the
performance  or  observance  by the Issuer of any express or implied  agreement,
covenant,  term or condition  relating to the Capital Securities to be performed
or observed by the Issuer;

      (b) the  extension  of time for the  payment  by the  Issuer of all or any
portion  of the  Distributions,  Redemption  Price,  Special  Redemption  Price,
Liquidation  Distribution  or any  other  sums  payable  under  the terms of the
Capital  Securities  or the extension of time for the  performance  of any other
obligation under,  arising out of or in connection with, the Capital  Securities
(other than an extension of time for payment of Distributions, Redemption Price,
Special  Redemption  Price,  Liquidation  Distribution or other sum payable that
results from the extension of any interest  payment  period on the Debentures or
any  extension  of  the  maturity  date  of  the  Debentures  permitted  by  the
Indenture);

      (c) any failure,  omission,  delay or lack of diligence on the part of the
Holders to enforce,  assert or exercise  any right,  privilege,  power or remedy
conferred on the Holders pursuant to the terms of the Capital Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;

      (d) the voluntary or  involuntary  liquidation,  dissolution,  sale of any
collateral, receivership,  insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization,  arrangement, composition or readjustment of debt of,
or other similar proceedings  affecting,  the Issuer or any of the assets of the
Issuer;


                                       9
<PAGE>

      (e) any invalidity of, or defect or deficiency in, the Capital Securities;

      (f) the  settlement or compromise of any obligation  guaranteed  hereby or
hereby incurred; or

      (g) any other  circumstance  whatsoever that might otherwise  constitute a
legal or equitable  discharge or defense of a guarantor,  it being the intent of
this  Section  4.3 that the  obligations  of the  Guarantor  hereunder  shall be
absolute and unconditional under any and all circumstances.

      There shall be no  obligation  of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.

      Section 4.4. Rights of Holders.

      (a) The  Holders  of a  Majority  in  liquidation  amount  of the  Capital
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee  Trustee in respect of this
Guarantee  or to direct the  exercise of any trust or power  conferred  upon the
Guarantee  Trustee under this  Guarantee;  provided,  however,  that (subject to
Section 2.1) the Guarantee Trustee shall have the right to decline to follow any
such direction if the Guarantee Trustee being advised by counsel determines that
the  action  or  proceeding  so  directed  may not  lawfully  be taken or if the
Guarantee Trustee in good faith by its board of directors or trustees, executive
committees  or a trust  committee of directors  or trustees  and/or  Responsible
Officers  shall  determine  that the action or  proceedings  so  directed  would
involve the Guarantee Trustee in personal liability.

      (b) Any Holder of Capital  Securities  may  institute  a legal  proceeding
directly  against the Guarantor to enforce the Guarantee  Trustee's rights under
this Guarantee, without first instituting a legal proceeding against the Issuer,
the  Guarantee  Trustee or any other Person.  The Guarantor  waives any right or
remedy to require that any such action be brought first against the Issuer,  the
Guarantee Trustee or any other Person before so proceeding  directly against the
Guarantor.

      Section 4.5.  Guarantee of Payment.  This Guarantee creates a guarantee of
payment and not of collection.

      Section 4.6.  Subrogation.  The  Guarantor  shall be subrogated to all (if
any) rights of the Holders of Capital  Securities  against the Issuer in respect
of any  amounts  paid to such  Holders by the  Guarantor  under this  Guarantee;
provided,  however,  that the Guarantor shall not (except to the extent required
by  mandatory  provisions  of law) be entitled to enforce or exercise  any right
that it may acquire by way of  subrogation or any  indemnity,  reimbursement  or
other agreement,  in all cases as a result of payment under this Guarantee,  if,
after giving  effect to any such  payment,  any amounts are due and unpaid under
this Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding  sentence,  the Guarantor  agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.

      Section 4.7. Independent Obligations.  The Guarantor acknowledges that its
obligations  hereunder are  independent  of the  obligations  of the Issuer with
respect to the  Capital  Securities  and that the  Guarantor  shall be liable as
principal and as debtor  hereunder to make  Guarantee  Payments  pursuant to the
terms of this Guarantee  notwithstanding the occurrence of any event referred to
in subsections (a) through (g), inclusive, of Section 4.3 hereof.

      Section 4.8.  Enforcement by a Beneficiary.  A Beneficiary may enforce the
obligations of the Guarantor  contained in Section 4.1(b)  directly  against the
Guarantor  and the  Guarantor  waives  any right or remedy to  require  that any
action be  brought  against  the  Issuer or any  other  person or entity


                                       10
<PAGE>

before  proceeding  against the Guarantor.  The Guarantor shall be subrogated to
all  rights  (if any) of any  Beneficiary  against  the Issuer in respect of any
amounts  paid  to the  Beneficiaries  by the  Guarantor  under  this  Guarantee;
provided,  however,  that the Guarantor shall not (except to the extent required
by  mandatory  provisions  of law) be entitled to enforce or exercise any rights
that it may acquire by way of  subrogation or any  indemnity,  reimbursement  or
other agreement, in all cases as a result of payment under this Guarantee, if at
the time of any such  payment,  and after  giving  effect to such  payment,  any
amounts are due and unpaid under this Guarantee.

                                   ARTICLE V

                    LIMITATION OF TRANSACTIONS; SUBORDINATION

      Section 5.1. Limitation of Transactions. So long as any Capital Securities
remain outstanding,  if (a) there shall have occurred and be continuing an Event
of Default or a  Declaration  Event of Default or (b) the  Guarantor  shall have
selected an Extension Period as provided in the Declaration and such period,  or
any  extension  thereof,  shall  have  commenced  and be  continuing,  then  the
Guarantor shall not and shall not permit any Affiliate to (x) declare or pay any
dividends  or  distributions  on,  or  redeem,  purchase,  acquire,  or  make  a
liquidation  payment with respect to, any of the Guarantor's or such Affiliate's
capital  stock  (other  than  payments  of  dividends  or  distributions  to the
Guarantor) or make any  guarantee  payments with respect to the foregoing or (y)
make any payment of  principal  of or interest or premium,  if any, on or repay,
repurchase or redeem any debt  securities of the Guarantor or any Affiliate that
rank pari passu in all  respects  with or junior in interest  to the  Debentures
(other  than,  with  respect to  clauses  (x) and (y)  above,  (i)  repurchases,
redemptions or other acquisitions of shares of capital stock of the Guarantor in
connection  with  any  employment  contract,   benefit  plan  or  other  similar
arrangement  with  or  for  the  benefit  of one or  more  employees,  officers,
directors  or  consultants,  in  connection  with  a  dividend  reinvestment  or
stockholder  stock  purchase plan or in connection  with the issuance of capital
stock of the Guarantor (or securities  convertible  into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the  occurrence  of the Event of  Default,  Declaration  Event of  Default or
Extension Period, as applicable,  (ii) as a result of any exchange or conversion
of any class or series of the Guarantor's capital stock (or any capital stock of
a  subsidiary  of the  Guarantor)  for any class or  series  of the  Guarantor's
capital stock or of any class or series of the Guarantor's  indebtedness for any
class or  series  of the  Guarantor's  capital  stock,  (iii)  the  purchase  of
fractional  interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange  provisions  of such capital stock or the security  being
converted or exchanged,  (iv) any  declaration of a dividend in connection  with
any  stockholders'  rights  plan,  or the  issuance  of  rights,  stock or other
property under any stockholders' rights plan, or the redemption or repurchase of
rights  pursuant  thereto,  (v) any  dividend  in the form of  stock,  warrants,
options or other  rights  where the dividend  stock or the stock  issuable  upon
exercise of such warrants,  options or other rights is the same stock as that on
which the  dividend  is being  paid or ranks  pari  passu with or junior to such
stock and any cash  payments in lieu of  fractional  shares issued in connection
therewith, or (vi) payments under this Guarantee).

      Section  5.2.  Ranking.   This  Guarantee  will  constitute  an  unsecured
obligation  of the Guarantor  and will rank  subordinate  and junior in right of
payment  to all  present  and  future  Senior  Indebtedness  (as  defined in the
Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital
Securities  agrees to the foregoing  provisions of this  Guarantee and the other
terms set forth herein.

      The right of the Guarantor to participate in any distribution of assets of
any of its subsidiaries upon any such subsidiary's liquidation or reorganization
or otherwise  is subject to the prior  claims of  creditors of that  subsidiary,
except to the extent the  Guarantor  may itself be  recognized  as a creditor of
that subsidiary.  Accordingly,  the Guarantor's obligations under this Guarantee
will be effectively


                                       11
<PAGE>

subordinated  to  all  existing  and  future   liabilities  of  the  Guarantor's
subsidiaries,  and claimants should look only to the assets of the Guarantor for
payments hereunder.  This Guarantee does not limit the incurrence or issuance of
other secured or unsecured debt of the Guarantor,  including Senior Indebtedness
of the  Guarantor,  under any indenture that the Guarantor may enter into in the
future or otherwise.

                                   ARTICLE VI

                                   TERMINATION

      Section 6.1. Termination. This Guarantee shall terminate as to the Capital
Securities (i) upon full payment of the Redemption  Price or Special  Redemption
Price of all Capital Securities then outstanding,  (ii) upon the distribution of
all of the  Debentures to the Holders of all of the Capital  Securities or (iii)
upon full payment of the amounts payable in accordance with the Declaration upon
dissolution of the Issuer.  This Guarantee will continue to be effective or will
be  reinstated,  as the  case  may be,  if at any time  any  Holder  of  Capital
Securities must restore payment of any sums paid under the Capital Securities or
under this Guarantee.

                                   ARTICLE VII

                                 INDEMNIFICATION

      Section 7.1. Exculpation.

      (a) No Indemnified  Person shall be liable,  responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission  performed or omitted by such
Indemnified  Person in good faith in  accordance  with this  Guarantee  and in a
manner that such Indemnified  Person reasonably  believed to be within the scope
of the authority  conferred on such  Indemnified  Person by this Guarantee or by
law, except that an Indemnified Person shall be liable for any such loss, damage
or claim incurred by reason of such Indemnified  Person's  negligence or willful
misconduct with respect to such acts or omissions.

      (b) An  Indemnified  Person  shall be fully  protected  in relying in good
faith upon the records of the Issuer or the Guarantor and upon such information,
opinions,  reports or statements presented to the Issuer or the Guarantor by any
Person as to matters the Indemnified Person reasonably  believes are within such
other Person's  professional  or expert  competence and who, if selected by such
Indemnified  Person,  has been selected with reasonable care by such Indemnified
Person, including information,  opinions,  reports or statements as to the value
and amount of the  assets,  liabilities,  profits,  losses,  or any other  facts
pertinent  to the  existence  and amount of assets from which  Distributions  to
Holders of Capital Securities might properly be paid.

      Section 7.2. Indemnification.

      (a) The Guarantor agrees to indemnify each Indemnified  Person for, and to
hold each  Indemnified  Person harmless  against,  any and all loss,  liability,
damage,  claim or expense incurred without  negligence or willful  misconduct on
the part of the  Indemnified  Person,  arising out of or in connection  with the
acceptance or administration of the trust or trusts  hereunder,  including,  but
not  limited to, the costs and  expenses  (including  reasonable  legal fees and
expenses) of the Indemnified Person defending itself against,  or investigating,
any claim or liability in connection  with the exercise or performance of any of
the Indemnified Person's powers or duties hereunder. The obligation to indemnify
as set forth in this Section 7.2 shall survive the resignation or removal of the
Guarantee Trustee and the termination of this Guarantee.


                                       12
<PAGE>

      (b) Promptly after receipt by an Indemnified Person under this Section 7.2
of notice of the commencement of any action,  such Indemnified Person will, if a
claim in respect  thereof is to be made against the Guarantor under this Section
7.2,  notify  the  Guarantor  in writing of the  commencement  thereof;  but the
failure so to notify the  Guarantor  (i) will not  relieve  the  Guarantor  from
liability  under paragraph (a) above unless and to the extent that the Guarantor
did  not  otherwise  learn  of such  action  and  such  failure  results  in the
forfeiture  by the  Guarantor of  substantial  rights and defenses and (ii) will
not, in any event, relieve the Guarantor from any obligations to any Indemnified
Person  other than the  indemnification  obligation  provided in  paragraph  (a)
above.  The Guarantor  shall be entitled to appoint  counsel of the  Guarantor's
choice at the  Guarantor's  expense to represent the  Indemnified  Person in any
action for which  indemnification  is sought (in which case the Guarantor  shall
not thereafter be responsible for the fees and expenses of any separate  counsel
retained  by the  Indemnified  Person or  Persons  except  as set forth  below);
provided,  however,  that such counsel shall be reasonably  satisfactory  to the
Indemnified Person.  Notwithstanding the Guarantor's election to appoint counsel
to represent the Guarantor in an action,  the Indemnified  Person shall have the
right to employ separate counsel  (including  local counsel),  and the Guarantor
shall bear the reasonable  fees,  costs and expenses of such separate counsel if
(i) the use of counsel  chosen by the  Guarantor  to represent  the  Indemnified
Person would  present such counsel with a conflict of interest,  (ii) the actual
or  potential  defendants  in, or targets of, any such action  include  both the
Indemnified  Person and the  Guarantor  and the  Indemnified  Person  shall have
reasonably  concluded  that there may be legal  defenses  available to it and/or
other  Indemnified  Person(s)  which are  different  from or additional to those
available to the Guarantor,  (iii) the Guarantor shall not have employed counsel
satisfactory  to the  Indemnified  Person to represent  the  Indemnified  Person
within a reasonable  time after notice of the institution of such action or (iv)
the Guarantor shall authorize the Indemnified  Person to employ separate counsel
at the  expense of the  Guarantor.  The  Guarantor  will not,  without the prior
written consent of the Indemnified  Persons,  settle or compromise or consent to
the entry of any  judgment  with  respect to any  pending or  threatened  claim,
action,  suit or proceeding in respect of which  indemnification or contribution
may be sought  hereunder  (whether or not the Indemnified  Persons are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent  includes an unconditional  release of each Indemnified  Person from all
liability arising out of such claim, action, suit or proceeding.

      Section  7.3.  Compensation;  Reimbursement  of  Expenses.  The  Guarantor
agrees:

      (a) to pay to the  Guarantee  Trustee from time to time such  compensation
for all services  rendered by it  hereunder  as the parties  shall agree to from
time to time (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust); and

      (b) except as  otherwise  expressly  provided  herein,  to  reimburse  the
Guarantee  Trustee upon request for all reasonable  expenses,  disbursements and
advances  incurred  or made  by it in  accordance  with  any  provision  of this
Guarantee   (including  the  reasonable   compensation   and  the  expenses  and
disbursements of its agents and counsel), except any such expense,  disbursement
or advance as may be attributable to its negligence or willful misconduct.

      For purposes of  clarification,  this Section 7.3 does not contemplate the
payment by the Guarantor of acceptance  or annual  administration  fees owing to
the Guarantee Trustee for services to be provided by the Guarantee Trustee under
this  Guarantee or the fees and expenses of the Guarantee  Trustee's  counsel in
connection with the closing of the transactions  contemplated by this Guarantee.
The  provisions of this Section 7.3 shall survive the  resignation or removal of
the Guarantee Trustee and the termination of this Guarantee.


                                       13
<PAGE>

                                  ARTICLE VIII

                                  MISCELLANEOUS

      Section  8.1.  Successors  and  Assigns.  All  guarantees  and  agreements
contained  in this  Guarantee  shall bind the  successors,  assigns,  receivers,
trustees and  representatives of the Guarantor and shall inure to the benefit of
the Holders of the Capital  Securities  then  outstanding.  Except in connection
with any merger or consolidation of the Guarantor with or into another entity or
any sale, transfer or lease of the Guarantor's assets to another entity, in each
case, to the extent permitted under the Indenture,  the Guarantor may not assign
its rights or delegate its  obligations  under this Guarantee  without the prior
approval  of the  Holders of at least a Majority  in  liquidation  amount of the
Capital Securities.

      Section  8.2.  Amendments.  Except with respect to any changes that do not
adversely affect the rights of Holders of the Capital Securities in any material
respect (in which case no consent of Holders will be required),  this  Guarantee
may be amended  only with the prior  approval  of the Holders of not less than a
Majority in liquidation amount of the Capital Securities.  The provisions of the
Declaration  with  respect  to  amendments  thereof  apply to the giving of such
approval.

      Section 8.3. Notices.  All notices provided for in this Guarantee shall be
in writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:

      (a) If given to the Guarantee Trustee,  at the Guarantee Trustee's mailing
address set forth below (or such other address as the Guarantee Trustee may give
notice of to the Holders of the Capital Securities and the Guarantor):

      Wilmington Trust Company
      Rodney Square North
      1100 North Market Street
      Wilmington, Delaware  19890-1600
      Attention:  Corporate Trust Administration
      Telecopy:  302-636-4140

      (b) If given to the  Guarantor,  at the  Guarantor's  mailing  address set
forth below (or such other  address as the  Guarantor  may give notice of to the
Holders of the Capital Securities and to the Guarantee Trustee):

      First Merchants Corporation
      200 East Jackson Street
      Muncie, Indiana  47305
      Attention:  Jami L. Bradshaw
      Telecopy:  765-747-1447

      (c) If given to any Holder of the Capital  Securities,  at the address set
forth on the books and records of the Issuer.

      All such  notices  shall be deemed to have been  given  when  received  in
person,  telecopied  with  receipt  confirmed,  or mailed by first  class  mail,
postage  prepaid,  except that if a notice or other document is refused delivery
or cannot be  delivered  because  of a changed  address  of which no notice  was
given,  such notice or other  document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.


                                       14
<PAGE>

      Section  8.4.  Benefit.  This  Guarantee  is solely for the benefit of the
Beneficiaries  and,  subject to Section 2.1(a),  is not separately  transferable
from the Capital Securities.

      Section  8.5.  Governing  Law.  THIS  GUARANTEE  SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE  WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).

      Section 8.6.  Counterparts.  This Guarantee may be executed in one or more
counterparts,  each of  which  shall  be an  original,  but all of  which  taken
together shall constitute one and the same instrument.

      Section 8.7 Separability.  In case one or more of the provisions contained
in this  Guarantee  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  provisions  of this  Guarantee,  but this  Guarantee
shall be construed as if such invalid or illegal or unenforceable  provision had
never been contained herein.

                     Signatures appear on the following page


                                       15
<PAGE>

      THIS GUARANTEE is executed as of the day and year first above written.

                             FIRST MERCHANTS CORPORATION, as Guarantor


                             By   /s/  Mark Hardwick
                               -----------------------------------------------
                                       Name:  Mark Hardwick
                                       Title:  CFO & EVP


                             WILMINGTON TRUST COMPANY, as Guarantee Trustee


                             By  /s/ Christopher J. Slaybaugh
                               -----------------------------------------------
                                   Name:  Christopher J. Slaybaugh
                                   Title:  Senior Financial Services Officer


                                       16

<PAGE>
                                   Exhibit 4.4

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

      THIS  CAPITAL  SECURITY  IS A GLOBAL  SECURITY  WITHIN THE  MEANING OF THE
DECLARATION  HEREINAFTER  REFERRED  TO AND IS  REGISTERED  IN  THE  NAME  OF THE
DEPOSITORY  TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL  SECURITY IS
EXCHANGEABLE  FOR CAPITAL  SECURITIES  REGISTERED  IN THE NAME OF A PERSON OTHER
THAN DTC OR ITS  NOMINEE  ONLY IN THE  LIMITED  CIRCUMSTANCES  DESCRIBED  IN THE
DECLARATION,  AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF
THIS  CAPITAL  SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF
DTC TO DTC OR  ANOTHER  NOMINEE  OF DTC) MAY BE  REGISTERED  EXCEPT  IN  LIMITED
CIRCUMSTANCES.

      UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE
OF DTC TO FIRST  MERCHANTS  CAPITAL  TRUST II OR ITS AGENT FOR  REGISTRATION  OF
TRANSFER,  EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS  REQUESTED  BY AN  AUTHORIZED
REPRESENTATIVE  OF DTC (AND ANY PAYMENT  HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER  ENTITY AS IS  REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC),  ANY
TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

      THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED  (THE  "SECURITIES  ACT"),  ANY  STATE  SECURITIES  LAWS  OR  ANY  OTHER
APPLICABLE   SECURITIES   LAW.   NEITHER  THIS  SECURITY  NOR  ANY  INTEREST  OR
PARTICIPATION  HEREIN MAY BE REOFFERED,  SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED,
ENCUMBERED  OR  OTHERWISE  DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR
UNLESS SUCH  TRANSACTION  IS EXEMPT  FROM,  OR NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  AGREES  TO OFFER,  SELL OR
OTHERWISE  TRANSFER  THIS  SECURITY  ONLY (A) TO THE  SPONSOR OR THE TRUST,  (B)
PURSUANT TO A REGISTRATION  STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES  ACT,  (C) TO A  PERSON  WHOM THE  SELLER  REASONABLY  BELIEVES  IS A
QUALIFIED  INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS  SECURITY IS ELIGIBLE  FOR RESALE  PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S.  PERSON IN AN OFFSHORE  TRANSACTION
IN ACCORDANCE  WITH RULE 903 OR RULE 904 (AS  APPLICABLE)  OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN  INSTITUTIONAL  "ACCREDITED  INVESTOR"  WITHIN THE
MEANING  OF  SUBPARAGRAPH  (A) OF RULE  501  UNDER  THE  SECURITIES  ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT,  OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL  ACCREDITED  INVESTOR,  FOR INVESTMENT  PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION  WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO

<PAGE>

THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO
REQUIRE  THE  DELIVERY  OF AN OPINION OF  COUNSEL,  CERTIFICATION  AND/OR  OTHER
INFORMATION  SATISFACTORY  TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF
TRUST,  A COPY OF WHICH MAY BE OBTAINED  FROM THE SPONSOR OR THE TRUST.  HEDGING
TRANSACTIONS  INVOLVING THIS SECURITY MAY NOT BE CONDUCTED  UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT.

      THE  HOLDER  OF  THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  ALSO  AGREES,
REPRESENTS  AND  WARRANTS  THAT  IT  IS  NOT  AN  EMPLOYEE  BENEFIT,  INDIVIDUAL
RETIREMENT  ACCOUNT  OR  OTHER  PLAN OR  ARRANGEMENT  SUBJECT  TO TITLE I OF THE
EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  ("ERISA"),  OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"),  OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER  OR HOLDER IS  ELIGIBLE  FOR  EXEMPTIVE  RELIEF  AVAILABLE  UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED  TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER  APPLICABLE  EXEMPTION  OR ITS  PURCHASE AND HOLDING OF
THIS  SECURITY IS NOT  PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH  PURCHASE OR HOLDING.  ANY  PURCHASER OR HOLDER OF THE
SECURITIES  OR ANY INTEREST  THEREIN WILL BE DEEMED TO HAVE  REPRESENTED  BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE  BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA,  OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS  APPLICABLE,  A  TRUSTEE  OR OTHER  PERSON  ACTING  ON  BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY  EMPLOYEE  BENEFIT  PLAN OR PLAN TO  FINANCE  SUCH  PURCHASE,  OR (ii)  SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED  TRANSACTION UNDER SECTION 406 OF ERISA
OR  SECTION  4975 OF THE CODE FOR  WHICH  THERE IS NO  APPLICABLE  STATUTORY  OR
ADMINISTRATIVE EXEMPTION.

      THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED  ONLY IN BLOCKS HAVING
A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK
HAVING A LIQUIDATION  AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID
AND OF NO LEGAL EFFECT WHATSOEVER.

      THE HOLDER OF THIS SECURITY  AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

      IN CONNECTION WITH ANY TRANSFER,  THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY
THE  DECLARATION  TO  CONFIRM  THAT THE  TRANSFER  COMPLIES  WITH THE  FOREGOING
RESTRICTIONS.

<PAGE>

      Certificate Number P-1                          55,000 Capital Securities
      [CUSIP NO. [_______] ]
                                  July 2, 2007

              Certificate Evidencing Fixed/Floating Rate Capital Securities

                                       of

                        First Merchants Capital Trust II

               (liquidation amount $1,000.00 per Capital Security)

      First Merchants Capital Trust II, a statutory trust created under the laws
of the State of Delaware (the  "Trust"),  hereby  certifies that Cede & Co. (the
"Holder")  is  the  registered   owner  of  capital   securities  of  the  Trust
representing  undivided  beneficial  interests  in  the  assets  of  the  Trust,
(liquidation amount $1,000.00 per capital security) (the "Capital  Securities").
Subject to the  Declaration  (as  defined  below),  the Capital  Securities  are
transferable  on the  books  and  records  of the  Trust in  person or by a duly
authorized  attorney,  upon surrender of this  Certificate  duly endorsed and in
proper form for transfer.  The Capital Securities  represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions,  preferences
and other terms and provisions of the Capital  Securities  shall in all respects
be subject to, the  provisions of the Amended and Restated  Declaration of Trust
of the  Trust  dated as of July 2,  2007,  among  Jami L.  Bradshaw  and Mark K.
Hardwick,  as  Administrators,  Wilmington Trust Company,  as Delaware  Trustee,
Wilmington Trust Company, as Institutional Trustee, First Merchants Corporation,
as Sponsor,  and the holders from time to time of undivided beneficial interests
in the  assets  of the  Trust,  including  the  designation  of the terms of the
Capital  Securities  as set  forth  in  Annex I to  such  amended  and  restated
declaration  as the same may be amended  from time to time (the  "Declaration").
Capitalized  terms used herein but not defined shall have the meaning given them
in the  Declaration.  The Holder is entitled to the benefits of the Guarantee to
the extent provided therein. The Sponsor will provide a copy of the Declaration,
the  Guarantee,  and the  Indenture  to the Holder  without  charge upon written
request to the Sponsor at its principal place of business.

      Upon receipt of this Security,  the Holder is bound by the Declaration and
is entitled to the benefits thereunder.

      By acceptance  of this  Security,  the Holder agrees to treat,  for United
States  federal  income tax purposes,  the  Debentures as  indebtedness  and the
Capital Securities as evidence of beneficial ownership in the Debentures.

      This Capital  Security is governed by, and construed in  accordance  with,
the laws of the State of Delaware,  without  regard to principles of conflict of
laws.

                       Signatures appear on following page

<PAGE>

      IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                    FIRST MERCHANTS CAPITAL TRUST II

                                    By:
                                       ---------------------------------------
                                       Name:
                                       Title:  Administrator

                          CERTIFICATE OF AUTHENTICATION

      This is one of the Capital Securities referred to in the  within-mentioned
Declaration.

                                    WILMINGTON TRUST COMPANY,
                                    as the Institutional Trustee

                                    By:
                                       ---------------------------------------
                                                  Authorized Officer

<PAGE>

                      [FORM OF REVERSE OF CAPITAL SECURITY]

      Distributions  payable  on each  Capital  Security  will be  payable at an
annual rate equal to 6.495%  beginning on (and  including)  the date of original
issuance  and  ending  on  (but  excluding)  the  Distribution  Payment  Date in
September  2012 and at an annual rate for each  successive  period  beginning on
(and  including)  the  Distribution  Payment  Date in September  2012,  and each
succeeding  Distribution  Payment Date,  and ending on (but  excluding) the next
succeeding  Distribution Payment Date (each a "Distribution  Period"),  equal to
3-Month LIBOR,  determined as described  below,  plus 1.56% (the "Coupon Rate"),
applied to the stated liquidation amount of $1,000.00 per Capital Security, such
rate  being the rate of  interest  payable on the  Debentures  to be held by the
Institutional  Trustee.  Distributions  in arrears  will bear  interest  thereon
compounded  quarterly  at the  Distribution  Rate (to the  extent  permitted  by
applicable  law).  The  term   "Distributions"  as  used  herein  includes  cash
distributions  and any such compounded  distributions  unless otherwise noted. A
Distribution  is payable only to the extent that payments are made in respect of
the  Debentures  held  by  the  Institutional  Trustee  and to  the  extent  the
Institutional   Trustee  has  funds   available   therefor.   As  used   herein,
"Determination  Date" means the date that is two London  Banking  Days (i.e.,  a
business day in which dealings in deposits in U.S. dollars are transacted in the
London interbank market) preceding the commencement of the relevant Distribution
Period. The amount of the Distribution  payable (i) for any Distribution  Period
commencing on or after the date of original issuance but before the Distribution
Payment Date in  September  2012 will be computed on the basis of a 360-day year
of twelve 30-day months, and (ii) for the Distribution  Period commencing on the
Distribution  Payment Date in September  2012 and each  succeeding  Distribution
Period  will be  calculated  by  applying  the  Distribution  Rate to the stated
liquidation amount outstanding at the commencement of the Distribution Period on
the basis of the  actual  number of days in the  Distribution  Period  concerned
divided by 360.

      "3-Month  LIBOR"  as used  herein,  means  the  London  interbank  offered
interest rate for three-month  U.S. dollar deposits  determined by the Debenture
Trustee  in the  following  order  of  priority:  (i) the rate  (expressed  as a
percentage per annum) for U.S.  dollar  deposits  having a three-month  maturity
that  appears on Reuters  Page  LIBOR01  as of 11:00 a.m.  (London  time) on the
related  Determination Date ("Reuters Page LIBOR01" means the display designated
as "LIBOR01"  on Reuters or such other page as may replace  Reuters Page LIBOR01
on that  service or such other  service or services as may be  nominated  by the
British  Bankers'  Association  as the  information  vendor  for the  purpose of
displaying  London interbank  offered rates for U.S. dollar  deposits);  (ii) if
such rate cannot be identified on the related  Determination Date, the Debenture
Trustee will request the principal  London  offices of four leading banks in the
London interbank market to provide such banks' offered quotations  (expressed as
percentages  per annum) to prime banks in the London  interbank  market for U.S.
dollar deposits having a three-month  maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided,  3-Month LIBOR
will be the  arithmetic  mean of such  quotations;  (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will  request  four  major New York City banks to provide  such  banks'  offered
quotations  (expressed as percentages  per annum) to leading  European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at  least  two  such  quotations  are  provided,  3-Month  LIBOR  will be the
arithmetic mean of such  quotations;  and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution  Period immediately  preceding
such current  Distribution Period. If the rate for U.S. dollar deposits having a
three-month  maturity that initially appears on Reuters Page LIBOR01 as of 11:00
a.m.  (London  time) on the  related  Determination  Date is  superseded  on the
Reuters  Page LIBOR01 by a corrected  rate by 12:00 noon  (London  time) on such
Determination

<PAGE>

Date,  then the corrected rate as so substituted on the applicable  page will be
the applicable 3-Month LIBOR for such Determination Date.

      The  Distribution  Rate  for any  Distribution  Period  will at no time be
higher than the maximum  rate then  permitted by New York law as the same may be
modified by United States law.

      All percentages  resulting from any calculations on the Capital Securities
will be  rounded,  if  necessary,  to the nearest  one  hundred-thousandth  of a
percentage point, with five  one-millionths of a percentage point rounded upward
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all
dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).

      Except  as  otherwise  described  below,   Distributions  on  the  Capital
Securities  will be cumulative,  will accrue from the date of original  issuance
and will be payable  quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date") (it being
understood  that  interest  accrues  for any such  non-Business  Day  during the
applicable  Distribution  Period,  beginning on or after  September  15,  2012),
commencing on the  Distribution  Payment Date in September  2007.  The Debenture
Issuer has the right under the  Indenture  to defer  payments of interest on the
Debentures,  so long as no  Acceleration  Event of Default has  occurred  and is
continuing,  by extending the interest  payment  period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the  Debentures,  subject to the  conditions  described  below,  during which
Extension  Period no interest  shall be due and  payable.  During any  Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period,  compounded  quarterly from the date such
interest  would have been payable were it not for the Extension  Period,  to the
extent  permitted  by law (such  interest  referred  to  herein  as  "Additional
Interest").  No  Extension  Period may end on a date  other than a  Distribution
Payment  Date. At the end of any such  Extension  Period,  the Debenture  Issuer
shall pay all interest then accrued and unpaid on the Debentures  (together with
Additional Interest thereon);  provided,  however,  that no Extension Period may
extend  beyond the Maturity  Date.  Prior to the  termination  of any  Extension
Period, the Debenture Issuer may further extend such period,  provided that such
period  together  with all such  previous  and  further  consecutive  extensions
thereof shall not exceed 20 consecutive  quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing  requirements.  No
interest or  Additional  Interest  shall be due and payable  during an Extension
Period,  except at the end thereof,  but each installment of interest that would
otherwise  have been due and payable  during such  Extension  Period  shall bear
Additional Interest.  During any Extension Period,  Distributions on the Capital
Securities  shall be deferred for a period  equal to the  Extension  Period.  If
Distributions are deferred, the Distributions due shall be paid on the date that
the related  Extension Period  terminates,  to Holders of the Securities as they
appear on the books and  records  of the Trust on the  record  date  immediately
preceding such date.  Distributions  on the Securities must be paid on the dates
payable  (after giving  effect to any  Extension  Period) to the extent that the
Trust has funds available for the payment of such  distributions in the Property
Account of the Trust.  The  Trust's  funds  available  for  Distribution  to the
Holders  of the  Securities  will be  limited  to  payments  received  from  the
Debenture  Issuer.  The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

<PAGE>

      The Capital Securities shall be redeemable as provided in the Declaration.

<PAGE>
                                  Exhibit 10.1

                           FIRST MERCHANTS CORPORATION

                            55,000 Capital Securities

                     Fixed/Floating Rate Capital Securities
               (Liquidation Amount $1,000.00 per Capital Security)

                               PLACEMENT AGREEMENT

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

                                                                   June 29, 2007

FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee  38117

Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York  10019

Ladies and Gentlemen:

      First Merchants Corporation,  an Indiana corporation (the "Company"),  and
its financing subsidiary, First Merchants Capital Trust II, a Delaware statutory
trust (the "Trust," and hereinafter  together with the Company, the "Offerors"),
hereby confirm their agreement (this  "Agreement")  with you as placement agents
(the "Placement Agents"), as follows:

Section 1. Issuance and Sale of Securities.

      1.1.  Introduction.  The Offerors propose to issue and sell at the Closing
(as defined in Section 2.3.1 hereof) 55,000 of the Trust's  Fixed/Floating  Rate
Capital Securities,  with a liquidation amount of $1,000.00 per capital security
(the "Capital  Securities"),  to First  Tennessee Bank National  Association,  a
national  banking  association  organized under the laws of the United States of
America,  Alesco Preferred  Funding XVI, Ltd., a company with limited  liability
established  under the laws of the Cayman Islands,  and PFW III, Ltd., a company
with limited  liability  established  under the laws of the Cayman  Islands (the
"Purchasers") pursuant to the terms of Subscription  Agreements entered into, or
to be entered into on or prior to the Closing Date (as defined in Section  2.3.1
hereof),   between  the  Offerors   and  the   Purchasers   (the   "Subscription
Agreements"), the forms of which are attached hereto as Exhibit A-1, Exhibit A-2
and Exhibit A-3 and incorporated herein by this reference.

      1.2.  Operative  Agreements.  The  Capital  Securities  shall be fully and
unconditionally  guaranteed on a subordinated  basis by the Company with respect
to distributions and amounts payable upon  liquidation,  redemption or repayment
(the  "Guarantee")   pursuant  and  subject  to  the  Guarantee  Agreement  (the
"Guarantee  Agreement"),  to be dated as of the Closing  Date and  executed  and
delivered by the Company and Wilmington Trust Company  ("WTC"),  as trustee (the
"Guarantee  Trustee"),  for the benefit  from time to time of the holders of the
Capital Securities. The entire proceeds from the sale by the


<PAGE>

Trust to the holders of the Capital Securities shall be combined with the entire
proceeds from the sale by the Trust to the Company of its common securities (the
"Common Securities"),  and shall be used by the Trust to purchase $56,702,000.00
in principal amount of the Fixed/Floating  Rate Junior  Subordinated  Deferrable
Interest  Debentures (the  "Debentures") of the Company.  The Capital Securities
and the Common  Securities for the Trust shall be issued  pursuant to an Amended
and Restated  Declaration of Trust among WTC, as Delaware trustee (the "Delaware
Trustee"),  WTC, as institutional  trustee (the  "Institutional  Trustee"),  the
Administrators  named  therein,  and the Company,  to be dated as of the Closing
Date and in substantially the form heretofore  delivered to the Placement Agents
(the "Trust Agreement"). The Debentures shall be issued pursuant to an Indenture
(the  "Indenture"),  to be dated as of the Closing Date, between the Company and
WTC, as indenture trustee (the "Indenture Trustee"). The documents identified in
this  Section  1.2 and in Section 1.1 are  referred to herein as the  "Operative
Documents."

      1.3.  Rights of Purchasers.  The Capital  Securities  shall be offered and
sold by the Trust directly to the Purchasers without  registration of any of the
Capital Securities,  the Debentures or the Guarantee under the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities laws
in reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors agree that this Agreement
shall be  incorporated  by reference  into the  Subscription  Agreements and the
Purchasers shall be entitled to each of the benefits of the Placement Agents and
the Purchasers under this Agreement and shall be entitled to enforce obligations
of the Offerors under this Agreement as fully as if the Purchasers  were parties
to this Agreement.  The Offerors and the Placement Agents have entered into this
Agreement to set forth their  understanding  as to their  relationship and their
respective rights, duties and obligations.

      1.4. Legends.  Upon original issuance thereof,  and until such time as the
same is no longer  required under the applicable  requirements of the Securities
Act, the Capital  Securities  and Debentures  certificates  shall each contain a
legend as required pursuant to any of the Operative Documents.

Section 2. Purchase of Capital Securities.

      2.1.  Exclusive  Rights;  Purchase  Price.  From the date hereof until the
Closing Date (which date may be extended by mutual agreement of the Offerors and
the Placement  Agents),  the Offerors  hereby grant to the Placement  Agents the
exclusive  right  to  arrange  for the  sale of the  Capital  Securities  to the
Purchasers at a purchase price of $1,000.00 per Capital Security.

      2.2. Subscription Agreements.  The Offerors hereby agree to evidence their
acceptance  of  the  subscription  by  countersigning  a  copy  of  each  of the
Subscription Agreements and returning the same to the Placement Agents.

      2.3. Closing and Delivery of Payment.

            2.3.1.  Closing;  Closing Date. The sale and purchase of the Capital
Securities by the Offerors to the Purchasers  shall take place at a closing (the
"Closing")  at the offices of Lewis,  Rice & Fingersh,  L.C., at 10:00 a.m. (St.
Louis time) on July 2, 2007, or such other business day as may be agreed upon by
the Offerors  and the  Placement  Agents (the  "Closing  Date").  Payment by the
Purchasers  shall  be  payable  in the  manner  set  forth  in the  Subscription
Agreements and shall be made prior to or on the Closing Date.

            2.3.2.  Delivery.  The certificates for the Capital Securities shall
be in definitive form, each registered in the name of the applicable  Purchaser,
or Purchaser  designee,  and in the aggregate  amount of the Capital  Securities
purchased by the Purchaser.


                                       2
<PAGE>

            2.3.3. Transfer Agent. Not less than two full business days prior to
the Closing Date, a global Capital  Securities  certificate  in definitive  form
shall be made available by or on behalf of the Offerors to the Placement  Agents
and the  Institutional  Trustee for  inspection  and delivery to the  Depository
Trust Company ("DTC") or its custodian.

      2.4.  Costs and Expenses.  Whether or not this  Agreement is terminated or
the sale of the Capital Securities is consummated,  the Company hereby covenants
and agrees that it shall pay or cause to be paid (directly or by  reimbursement)
all reasonable costs and expenses incident to the performance of the obligations
of  the  Offerors  under  this  Agreement,  including  all  fees,  expenses  and
disbursements  of counsel  and  accountants  for the  Offerors;  all  reasonable
expenses  incurred by the Offerors  incident to the  preparation,  execution and
delivery of the Trust Agreement, the Indenture, and the Guarantee; and all other
reasonable costs and expenses  incident to the performance of the obligations of
the  Company  hereunder  and  under  the Trust  Agreement.  Notwithstanding  the
foregoing,  the fees and disbursements of any trustee appointed under any of the
Operative  Documents  and its  counsel  shall  be paid as  specified  in the fee
agreement between the Placement Agents and Wilmington Trust Company.

      2.5.  Failure to Close. If any of the conditions to the Closing  specified
in this  Agreement  shall not have been  fulfilled  to the  satisfaction  of the
Placement  Agents or if the Closing  shall not have  occurred on or before 10:00
a.m. (St. Louis time) on July 2, 2007,  then each party hereto,  notwithstanding
anything  to the  contrary in this  Agreement,  shall be relieved of all further
obligations  under this Agreement without thereby waiving any rights it may have
by  reason  of such  nonfulfillment  or  failure;  provided,  however,  that the
obligations  of the parties under  Sections 2.4, 7.5, 9 and 11.2 shall not be so
relieved and shall continue in full force and effect.

Section  3.  Closing  Conditions.  The  obligations  of the  Purchasers  and the
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing  Date,  of the  representations  and  warranties  of the Offerors
contained in this Agreement,  to the accuracy, at and as of the Closing Date, of
the  statements  of the  Offerors  made  in any  certificates  pursuant  to this
Agreement,  to the performance by the Offerors of their  respective  obligations
under this  Agreement,  to  compliance,  at and as of the Closing  Date,  by the
Offerors with their respective agreements herein contained, and to the following
further conditions:

      3.1. Opinions of Counsel.  On the Closing Date, the Placement Agents shall
have received the  following  favorable  opinions,  each dated as of the Closing
Date: (a) from Bingham McHale LLP, counsel for the Offerors and addressed to the
Purchasers,  the Placement Agents and WTC in substantially the form set forth on
Exhibit B-1 attached hereto and incorporated herein by this reference,  (b) from
Richards,  Layton & Finger,  P.A.,  special Delaware counsel to the Offerors and
addressed  to  the  Purchasers,  the  Placement  Agents  and  the  Offerors,  in
substantially the form set forth on Exhibit B-2 attached hereto and incorporated
herein by this reference and (c) from Lewis, Rice & Fingersh,  L.C., special tax
counsel to the Offerors, and addressed to the Placement Agents and the Offerors,
addressing the items set forth on Exhibit B-3 attached  hereto and  incorporated
herein by this reference, subject to the receipt by Lewis, Rice & Fingersh, L.C.
of a representation letter from the Company in the form set forth in Exhibit B-3
completed in a manner reasonably  satisfactory to Lewis,  Rice & Fingersh,  L.C.
(collectively,  the "Offerors'  Counsel  Opinions").  In rendering the Offerors'
Counsel  Opinions,  counsel to the Offerors may rely as to factual  matters upon
certificates or other documents furnished by officers, directors and trustees of
the Offerors (copies of which shall be delivered to the Placement Agents and the
Purchasers)  and by  government  officials,  and upon such  other  documents  as
counsel to the Offerors may, in their reasonable opinion,  deem appropriate as a
basis for the Offerors'  Counsel  Opinions.  Counsel to the Offerors may specify
the  jurisdictions  in which they are admitted to practice and that they are not
admitted to practice in any other jurisdiction and are not experts in the law of
any other jurisdiction.  If the Offerors' counsel is not admitted to practice in
the State of New York, the opinion of Offerors'


                                       3
<PAGE>

counsel may assume,  for purposes of the opinion,  that the laws of the State of
New York are substantively  identical,  in all respects material to the opinion,
to the internal laws of the state in which such counsel is admitted to practice.
Such Offerors'  Counsel Opinions shall not state that they are to be governed or
qualified  by, or that they are  otherwise  subject  to, any  treatise,  written
policy  or  other  document  relating  to  legal  opinions,  including,  without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).

      3.2.  Officer's  Certificate.  At the Closing Date, the Purchasers and the
Placement Agents shall have received  certificates from an authorized officer of
the Company,  dated as of the Closing Date, stating that (i) the representations
and  warranties  of the  Offerors  set forth in  Section  5 hereof  are true and
correct as of the Closing  Date and that the  Offerors  have  complied  with all
agreements  and  satisfied  all  conditions  on their  part to be  performed  or
satisfied at or prior to the Closing Date, (ii) since the date of this Agreement
the  Offerors  have  not  incurred  any  liability  or  obligation,   direct  or
contingent,  or  entered  into  any  material  transactions,  other  than in the
ordinary  course of  business,  which is  material  to the  Offerors,  and (iii)
covering such other matters as the Placement Agents may reasonably request.

      3.3. Administrator's  Certificate. At the Closing Date, the Purchasers and
the  Placement  Agents  shall  have  received  a  certificate  of  one  or  more
Administrators  of the Trust,  dated as of the Closing  Date,  stating  that the
representations  and warranties of the Trust set forth in Section 5 are true and
correct  as of the  Closing  Date and  that  the  Trust  has  complied  with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.

      3.4. Purchase Permitted by Applicable Laws; Legal Investment. The purchase
of and payment for the Capital  Securities  as described in this  Agreement  and
pursuant  to the  Subscription  Agreements  shall (a) not be  prohibited  by any
applicable law or governmental regulation, (b) not subject the Purchasers or the
Placement Agents to any penalty or, in the reasonable judgment of the Purchasers
and the  Placement  Agents,  other onerous  conditions  under or pursuant to any
applicable law or governmental regulation,  and (c) be permitted by the laws and
regulations  of the  jurisdictions  to which the  Purchasers  and the  Placement
Agents are subject.

      3.5.  Consents and Permits.  The Company and the Trust shall have received
all consents,  permits and other  authorizations,  and made all such filings and
declarations,  as may be required from any person or entity pursuant to any law,
statute,  regulation or rule (federal, state, local and foreign), or pursuant to
any  agreement,  order or decree to which the Company or the Trust is a party or
to which either is subject, in connection with the transactions  contemplated by
this Agreement.

      3.6. Information. Prior to or on the Closing Date, the Offerors shall have
furnished  to the  Placement  Agents  such  further  information,  certificates,
opinions and documents  addressed to the  Purchasers  and the Placement  Agents,
which  the  Placement  Agents  may  reasonably   request,   including,   without
limitation,  a complete set of the Operative Documents or any other documents or
certificates  required  by this  Section  3;  and all  proceedings  taken by the
Offerors  in  connection  with  the  issuance,  offer  and  sale of the  Capital
Securities as herein  contemplated shall be reasonably  satisfactory in form and
substance to the Placement Agents.

      If any condition specified in this Section 3 shall not have been fulfilled
when  and  as  required  in  this  Agreement,  or if  any  of  the  opinions  or
certificates  mentioned  above  or  elsewhere  in this  Agreement  shall  not be
reasonably  satisfactory  in form and  substance to the Placement  Agents,  this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date.  Notice of such  termination  shall be
given to the  Offerors in writing or by  telephone  or  facsimile  confirmed  in
writing.


                                       4
<PAGE>

Section 4.  Conditions  to the Offerors'  Obligations.  The  obligations  of the
Offerors to sell the Capital  Securities to the  Purchasers  and  consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and  as of the  Closing  Date,  of the  representations  and  warranties  of the
Placement  Agents  contained  in this  Agreement  and to the  following  further
conditions:

      4.1.  Executed  Agreement.  The  Offerors  shall  have  received  from the
Placement Agents an executed copy of this Agreement.

      4.2.  Fulfillment of Other  Obligations.  The Placement  Agents shall have
fulfilled  all of their other  obligations  and duties  required to be fulfilled
under this Agreement prior to or at the Closing.

Section 5.  Representations and Warranties of the Offerors.  Except as set forth
on the Disclosure Schedule (as defined in Section 11.1) attached hereto, if any,
the Offerors jointly and severally represent and warrant to the Placement Agents
and the Purchasers as of the date hereof and as of the Closing Date as follows:

      5.1. Securities Law Matters.

            (a) Neither the Company nor the Trust, nor any of their "Affiliates"
(as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")), nor any person acting on any of their behalf has,  directly or indirectly,
made offers or sales of any security,  or solicited  offers to buy any security,
under circumstances that would require the registration under the Securities Act
of any of the Capital Securities, the Guarantee or the Debentures (collectively,
the "Securities").

            (b) Neither the Company nor the Trust, nor any of their  Affiliates,
nor any person  acting on its or their  behalf has (i) other than the  Placement
Agents,  offered for sale or solicited  offers to purchase the Securities,  (ii)
engaged in any form of offering,  general  solicitation  or general  advertising
(within the meaning of Regulation D) in connection with any offer or sale of any
of the  Securities,  or (iii)  engaged or will engage in any  "directed  selling
efforts"  within the meaning of Regulation S of the Securities Act  ("Regulation
S") with respect to the Securities.

            (c) The  Securities  satisfy the  eligibility  requirements  of Rule
144A(d)(3) under the Securities Act.

            (d) Neither the Company nor the Trust is or, after giving  effect to
the  offering and sale of the Capital  Securities  and the  consummation  of the
transactions described in this Agreement,  will be an "investment company" or an
entity "controlled" by an "investment  company," in each case within the meaning
of  Section  3(a)  of the  Investment  Company  Act of  1940,  as  amended  (the
"Investment  Company  Act"),  without  regard to Section 3(c) of the  Investment
Company Act.

            (e)  Neither  the Company nor the Trust has paid or agreed to pay to
any person or entity  (other than the  Placement  Agents) any  compensation  for
soliciting another to purchase any of the Securities.

      5.2. Organization,  Standing and Qualification of the Trust. The Trust has
been duly created and is validly  existing in good standing as a statutory trust
under the  Delaware  Statutory  Trust Act (the  "Statutory  Trust Act") with the
power and authority to own property and to conduct the business it transacts and
proposes to transact  and to enter into and  perform its  obligations  under the
Operative  Documents.  The Trust is duly  qualified  to  transact  business as a
foreign  entity  and is in good  standing  in each  jurisdiction  in which  such
qualification is necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust. The Trust is not
a party  to or  otherwise  bound  by any  agreement  other  than  the  Operative
Documents.  The Trust is and will,  under


                                       5
<PAGE>

current law, be  classified  for federal  income tax purposes as a grantor trust
and not as an association taxable as a corporation.

      5.3. Trust Agreement.  The Trust Agreement has been duly authorized by the
Company and, on the Closing Date,  will have been duly executed and delivered by
the  Company  and  the   Administrators   of  the  Trust,   and,   assuming  due
authorization,   execution  and  delivery  by  the  Delaware   Trustee  and  the
Institutional Trustee, will be a valid and binding obligation of the Company and
such  Administrators,  enforceable  against them in  accordance  with its terms,
subject to (a)  applicable  bankruptcy,  insolvency,  moratorium,  receivership,
reorganization,  liquidation and other laws relating to or affecting  creditors'
rights generally,  and (b) general  principles of equity  (regardless of whether
considered  and applied in a proceeding  in equity or at law)  ("Bankruptcy  and
Equity").  Each of the  Administrators of the Trust is an employee or a director
of the Company or of a financial  institution  subsidiary of the Company and has
been duly authorized by the Company to execute and deliver the Trust Agreement.

      5.4. Guarantee Agreement and the Indenture.  Each of the Guarantee and the
Indenture has been duly authorized by the Company and, on the Closing Date, will
have  been duly  executed  and  delivered  by the  Company,  and,  assuming  due
authorization,  execution and delivery by the Guarantee Trustee,  in the case of
the Guarantee, and by the Indenture Trustee, in the case of the Indenture,  will
be a valid and  binding  obligation  of the  Company  enforceable  against it in
accordance with its terms, subject to Bankruptcy and Equity.

      5.5. Capital Securities and Common Securities.  The Capital Securities and
the Common Securities have been duly authorized by the Trust Agreement and, when
issued  and  delivered  against  payment  therefor  on the  Closing  Date to the
Purchasers,  in the case of the Capital  Securities,  and to the Company, in the
case of the Common  Securities,  will be validly issued and represent  undivided
beneficial  interests in the assets of the Trust. None of the Capital Securities
or the Common  Securities is subject to preemptive or other similar  rights.  On
the Closing Date, all of the issued and  outstanding  Common  Securities will be
directly owned by the Company free and clear of any pledge,  security  interest,
claim, lien or other encumbrance.

      5.6.  Debentures.  The Debentures have been duly authorized by the Company
and, at the Closing  Date,  will have been duly  executed  and  delivered to the
Indenture Trustee for authentication in accordance with the Indenture, and, when
authenticated in the manner provided for in the Indenture and delivered  against
payment therefor by the Trust, will constitute valid and binding  obligations of
the Company  entitled to the benefits of the Indenture  enforceable  against the
Company in accordance with their terms, subject to Bankruptcy and Equity.

      5.7.  Power  and  Authority.  This  Agreement  has been  duly  authorized,
executed and  delivered by the Company and the Trust and  constitutes  the valid
and binding  obligation  of the Company and the Trust,  enforceable  against the
Company and the Trust in accordance  with its terms,  subject to Bankruptcy  and
Equity.

      5.8. No Defaults. The Trust is not in violation of the Trust Agreement or,
to the knowledge of the  Administrators,  any  provision of the Statutory  Trust
Act. The execution, delivery and performance by the Company or the Trust of this
Agreement  or  the  Operative  Documents  to  which  it  is  a  party,  and  the
consummation of the transactions  contemplated  herein or therein and the use of
the proceeds  therefrom,  will not conflict with or constitute a breach of, or a
default  under,  or result in the creation or imposition of any lien,  charge or
other  encumbrance  upon any property or assets of the Trust, the Company or any
of the Company's  Subsidiaries  (as defined in Section 5.11 hereof)  pursuant to
any  contract,  indenture,  mortgage,  loan  agreement,  note,  lease  or  other
instrument to which the Trust, the Company or any of its Subsidiaries is a party
or by which it or any of them may be bound,  or to which any of the  property or
assets of any of them is subject, except for a conflict,  breach, default, lien,
charge or encumbrance which


                                       6
<PAGE>

could not, singly or in the aggregate, reasonably be expected to have a Material
Adverse  Effect  nor will  such  action  result  in any  violation  of the Trust
Agreement  or  the  Statutory  Trust  Act  or  require  the  consent,  approval,
authorization  or order of any court or  governmental  agency  or body.  As used
herein,  the term "Material  Adverse  Effect" means any one or more effects that
individually  or in the  aggregate  are  material  and adverse to the  Offerors'
ability to consummate the transactions  contemplated  herein or in the Operative
Documents or any one or more effects that  individually  or in the aggregate are
material  and  adverse to the  condition  (financial  or  otherwise),  earnings,
affairs,  business,  prospects or results of  operations  of the Company and its
Subsidiaries taken as whole,  whether or not occurring in the ordinary course of
business.

      5.9. Organization,  Standing and Qualification of the Company. The Company
has been duly  incorporated  and is validly  existing as a  corporation  in good
standing  under the laws of  Indiana,  with all  requisite  corporate  power and
authority  to own its  properties  and conduct the  business  it  transacts  and
proposes to transact,  and is duly qualified to transact business and is in good
standing as a foreign  corporation in each jurisdiction  where the nature of its
activities requires such qualification,  except where the failure of the Company
to be so  qualified  would  not,  singly or in the  aggregate,  have a  Material
Adverse Effect.

      5.10.  Subsidiaries  of the  Company.  Each of the  Company's  significant
subsidiaries  (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
incorporated herein by this reference. Each Significant Subsidiary has been duly
organized  and is validly  existing and in good  standing  under the laws of the
jurisdiction in which it is chartered or organized, with all requisite power and
authority  to own its  properties  and conduct the  business  it  transacts  and
proposes to transact,  and is duly qualified to transact business and is in good
standing  as a foreign  entity  in each  jurisdiction  where  the  nature of its
activities  requires  such  qualification,  except where the failure of any such
Significant Subsidiary to be so qualified would not, singly or in the aggregate,
have a Material  Adverse  Effect.  All of the issued and  outstanding  shares of
capital stock of the Significant  Subsidiaries (a) have been duly authorized and
are validly  issued,  (b) are fully paid and  nonassessable,  and (c) are wholly
owned,  directly or  indirectly,  by the Company  free and clear of any security
interest,  mortgage,  pledge,  lien,  encumbrance,  restriction  upon  voting or
transfer, preemptive rights, claim, equity or other defect.

      5.11.  Permits.  The Company and each of its  subsidiaries  (as defined in
Section  1-02(x) of Regulation S-X to the Securities  Act) (the  "Subsidiaries")
have all  requisite  power  and  authority,  and all  necessary  authorizations,
approvals, orders, licenses,  certificates and permits of and from regulatory or
governmental  officials,  bodies and tribunals, to own or lease their respective
properties and to conduct their  respective  businesses as now being  conducted,
except  such  authorizations,  approvals,  orders,  licenses,  certificates  and
permits  which,  if not obtained  and  maintained,  would not,  singly or in the
aggregate,  have a Material  Adverse Effect,  and neither the Company nor any of
its  Subsidiaries  has  received  any  notice  of  proceedings  relating  to the
revocation  or  modification  of any  such  authorizations,  approvals,  orders,
licenses,  certificates  or permits which,  singly or in the  aggregate,  if the
failure to be so licensed or approved is the subject of an unfavorable decision,
ruling or finding,  would,  singly or in the aggregate,  have a Material Adverse
Effect;  and the  Company  and  its  Subsidiaries  are in  compliance  with  all
applicable laws,  rules,  regulations and orders and consents,  the violation of
which would, singly or in the aggregate, have a Material Adverse Effect.

      5.12. Conflicts, Authorizations and Approvals. Neither the Company nor any
of its Subsidiaries is in violation of its respective articles or certificate of
incorporation,  charter or by-laws or  similar  organizational  documents  or in
default in the performance or observance of any obligation,  agreement, covenant
or condition  contained in any contract,  indenture,  mortgage,  loan agreement,
note,  lease or other agreement or instrument to which either the Company or any
of its Subsidiaries is a party,


                                       7
<PAGE>

or by which it or any of them may be bound or to which  any of the  property  or
assets of the Company or any of its Subsidiaries is subject, the effect of which
violation or default in performance or observance  would have,  singly or in the
aggregate, a Material Adverse Effect.

      5.13. Holding Company  Registration and Deposit Insurance.  The Company is
duly registered (i) as a bank holding company or financial holding company under
the Bank Holding  Company Act of 1956, as amended,  and the  regulations  of the
Board of Governors of the Federal Reserve System (the "Federal Reserve") or (ii)
as a savings and loan holding  company  under the Home Owners' Loan Act of 1933,
as amended, and the regulations of the Office of Thrift Supervision (the "OTS"),
and the deposit accounts of the Company's Subsidiary depository institutions are
insured by the Federal  Deposit  Insurance  Corporation  ("FDIC") to the fullest
extent  permitted  by law and the rules  and  regulations  of the  FDIC,  and no
proceedings for the termination of such insurance are pending or threatened.

      5.14. Financial Statements.

            (a) The  consolidated  balance  sheets of the Company and all of its
Subsidiaries  as of  December  31,  2006  and  December  31,  2005  and  related
consolidated income statements and statements of changes in shareholders' equity
for the three years ended December 31, 2006 together with the notes thereto, and
the consolidated balance sheets of the Company and all of its Subsidiaries as of
March 31, 2007 and the related  consolidated income statements and statements of
changes in shareholders'  equity for the three months then ended, copies of each
of which have been provided to the Placement  Agents  (together,  the "Financial
Statements"),   have  been  prepared  in  accordance  with  generally   accepted
accounting  principles applied on a consistent basis (except as may be disclosed
therein) and fairly present in all material respects the financial  position and
the results of operations and changes in shareholders' equity of the Company and
all of its Subsidiaries as of the dates and for the periods indicated  (subject,
in the case of  interim  financial  statements,  to  normal  recurring  year-end
adjustments,  none of which  shall be  material).  The books and  records of the
Company and all of its Subsidiaries have been, and are being,  maintained in all
material respects in accordance with generally  accepted  accounting  principles
and any other  applicable  legal and  accounting  requirements  and reflect only
actual transactions.

            (b) The information in the Company's most recently filed (i) FR Y-9C
filed with the Federal Reserve if the Company is a bank holding company, (ii) FR
Y-9SP  filed with the  Federal  Reserve if the  Company is a small bank  holding
company or (iii) H-(b)11 filed with the OTS if the Company is a savings and loan
holding company (the "Regulatory Report"),  previously provided to the Placement
Agents fairly  presents in all material  respects the financial  position of the
Company and,  where  applicable,  all of its  Subsidiaries  as of the end of the
period represented by such Regulatory Report.

            (c) Since the respective  dates of the Financial  Statements and the
Regulatory Report, there has been no material adverse change or development with
respect to the  financial  condition  or  earnings of the Company and all of its
Subsidiaries, taken as a whole.

            (d) The  accountants  of the Company  who  certified  the  Financial
Statements  are   independent   public   accountants  of  the  Company  and  its
Subsidiaries  within  the  meaning  of the  Securities  Act  and the  rules  and
regulations thereunder.

      5.15.  Exchange Act  Reporting.  The reports filed with the Securities and
Exchange  Commission  (the  "Commission")  by the Company  under the  Securities
Exchange Act of 1934, as amended (the "1934 Act") and the regulations thereunder
at the time they  were  filed  with the  Commission  complied  as to form in all
material respects with the requirements of the 1934 Act and such reports did not
contain an untrue  statement of a material fact or omit to state a material fact
required to be stated  therein or necessary to make the statements  therein,  in
light of the circumstances in which they were made, not misleading.


                                       8
<PAGE>

      5.16. Regulatory  Enforcement Matters.  Neither the Company nor any of its
Subsidiaries  is  subject or is party to, or has  received  any notice or advice
that any of them may become subject or party to, any investigation  with respect
to, any  cease-and-desist  order,  agreement,  consent agreement,  memorandum of
understanding or other regulatory  enforcement action,  proceeding or order with
or by, or is a party to any commitment  letter or similar  undertaking to, or is
subject to any  directive  by, or has been since January 1, 2004, a recipient of
any  supervisory  letter from, or since  January 1, 2004,  has adopted any board
resolutions  at the request of, any  Regulatory  Agency (as defined  below) that
currently  restricts  in any material  respect the conduct of their  business or
that in any material  manner  relates to their  capital  adequacy,  their credit
policies,  their ability or authority to pay dividends or make  distributions to
their  shareholders  or make  payments  of  principal  or interest on their debt
obligations,   their   management  or  their   business   (each,  a  "Regulatory
Agreement"),  nor has the Company or any of its Subsidiaries  been advised since
January 1, 2004,  by any  Regulatory  Agency that it is  considering  issuing or
requesting  any  such  Regulatory  Agreement.  There is no  material  unresolved
violation,  criticism or exception by any Regulatory  Agency with respect to any
report or statement  relating to any  examinations  of the Company or any of its
Subsidiaries.  As used herein, the term "Regulatory Agency" means any federal or
state  agency   charged  with  the   supervision  or  regulation  of  depository
institutions,  bank, financial or savings and loan holding companies, or engaged
in  the   insurance  of   depository   institution   deposits,   or  any  court,
administrative  agency or commission or other governmental agency,  authority or
instrumentality  having supervisory or regulatory  authority with respect to the
Company  or  any  of  its  Subsidiaries.  Neither  the  Company  nor  any of the
Subsidiaries is currently  unable to pay dividends or make  distributions to its
shareholders with respect to any class of its equity  securities,  or prohibited
from paying principal or interest on its debt obligations,  due to a restriction
or limitation, whether by statute, contract or otherwise, and, in the reasonable
judgment  of the  Company's  management,  neither  the  Company  nor  any of the
Subsidiaries  will be unable in the foreseeable  future to pay dividends or make
distributions with respect to any class of equity  securities,  or be prohibited
from paying principal or interest on its debt obligations,  due to a restriction
or limitation, whether by statute, contract or otherwise.

      5.17.  No Material  Change.  Since  December 31,  2006,  there has been no
material adverse change or development with respect to the condition  (financial
or otherwise),  earnings, affairs, business,  prospects or results of operations
of the  Company or its  Subsidiaries  on a  consolidated  basis,  whether or not
arising in the ordinary course of business.

      5.18.  No  Undisclosed  Liabilities.  Neither  the  Company nor any of its
Subsidiaries  has any  material  liability,  whether  known or unknown,  whether
asserted or  unasserted,  whether  absolute or  contingent,  whether  accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including  any  liability  for  taxes  (and  there is no past or  present  fact,
situation,  circumstance,  condition  or other  basis for any  present or future
action, suit, proceeding,  hearing, charge,  complaint,  claim or demand against
the Company or its Subsidiaries  giving rise to any such liability),  except (i)
for  liabilities  set  forth  in  the  Financial   Statements  and  (ii)  normal
fluctuation  in the amount of the  liabilities  referred  to in clause (i) above
occurring  in the  ordinary  course of  business  of the  Company and all of its
Subsidiaries  since the date of the most recent  balance  sheet  included in the
Financial Statements.

      5.19. Litigation. No charge, investigation,  action, suit or proceeding is
pending or, to the knowledge of the Offerors,  threatened,  against or affecting
the Company or its Subsidiaries or any of their respective  properties before or
by any  courts  or any  regulatory,  administrative  or  governmental  official,
commission, board, agency or other authority or body, or any arbitrator, wherein
an  unfavorable  decision,  ruling  or  finding  could  have,  singly  or in the
aggregate, a Material Adverse Effect.

      5.20.  Deferral of Interest  Payments  on  Debentures.  The Company has no
present  intention to exercise  its option to defer  payments of interest on the


                                       9
<PAGE>

Debentures  as  provided  in  the  Indenture.  The  Company  believes  that  the
likelihood that it would exercise its right to defer payments of interest on the
Debentures as provided in the Indenture at any time during which the  Debentures
are outstanding is remote because of the  restrictions  that would be imposed on
the  Company's  ability to declare or pay dividends or  distributions  on, or to
redeem, purchase,  acquire or make a liquidation payment with respect to, any of
the Company's capital stock and on the Company's ability to make any payments of
principal,  interest or premium on, or repay,  repurchase or redeem,  any of its
debt securities that rank pari passu in all respects with, or junior in interest
to, the Debentures.

Section  6.  Representations  and  Warranties  of  the  Placement  Agents.  Each
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:

      6.1. Organization, Standing and Qualification.

            (a) FTN Financial  Capital  Markets is a division of First Tennessee
Bank  National  Association,  a national  banking  association  duly  organized,
validly existing and in good standing under the laws of the United States,  with
full power and authority to own,  lease and operate its  properties  and conduct
its business as currently being conducted. FTN Financial Capital Markets is duly
qualified to transact business as a foreign  corporation and is in good standing
in each other  jurisdiction  in which it owns or leases property or conducts its
business  so as to require  such  qualification  and in which the  failure to so
qualify would,  individually or in the aggregate, have a material adverse effect
on the condition  (financial or  otherwise),  earnings,  business,  prospects or
results of operations of FTN Financial Capital Markets.

            (b) Keefe,  Bruyette & Woods,  Inc. is a corporation duly organized,
validly  existing and in good standing  under the laws of the State of New York,
with full power and  authority  to own,  lease and  operate its  properties  and
conduct its business as currently being conducted. Keefe, Bruyette & Woods, Inc.
is duly qualified to transact  business as a foreign  corporation and is in good
standing  in each  other  jurisdiction  in which it owns or leases  property  or
conducts  its  business  so as to require  such  qualification  and in which the
failure to so qualify would,  individually or in the aggregate,  have a material
adverse effect on the condition  (financial or otherwise),  earnings,  business,
prospects or results of operations of Keefe, Bruyette & Woods, Inc.

      6.2. Power and Authority.  The Placement Agent has all requisite power and
authority to enter into this  Agreement,  and this  Agreement  has been duly and
validly   authorized,   executed  and  delivered  by  the  Placement  Agent  and
constitutes  the legal,  valid and binding  agreement  of the  Placement  Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy  and  Equity  and  except  as  any  indemnification  or  contribution
provisions thereof may be limited under applicable securities laws.

      6.3.  General  Solicitation.  In the  case of the  offer  and  sale of the
Capital Securities,  no form of general  solicitation or general advertising was
used by the Placement Agent or its  representatives  including,  but not limited
to, advertisements,  articles,  notices or other communications published in any
newspaper,  magazine or similar medium or broadcast over  television or radio or
any  seminar  or  meeting  whose  attendees  have been  invited  by any  general
solicitation or general advertising.

      6.4.  Purchasers.  The Placement Agent has made such reasonable inquiry as
is  necessary  to  determine  that  each  Purchaser  is  acquiring  the  Capital
Securities  for its own  account,  and  that the  Purchasers  do not  intend  to
distribute the Capital  Securities in contravention of the Securities Act or any
other applicable securities laws.

      6.5. Qualified Purchasers. The Placement Agent has not offered or sold and
will not arrange for the offer or sale of the Capital  Securities  except (i) to
those the Placement Agent  reasonably  believes are  "accredited  investors" (as
defined in Rule 501 of Regulation D), (ii) in an offshore transaction


                                       10
<PAGE>

complying  with Rule 903 of Regulation S, or (iii) in any other manner that does
not require  registration of the Capital Securities under the Securities Act. In
connection  with  each such  sale,  the  Placement  Agent has taken or will take
reasonable  steps to ensure that the  purchasers  is aware that (a) such sale is
being made in reliance on an exemption  under the  Securities Act and (b) future
transfers of the Capital  Securities  will not be made except in compliance with
applicable securities laws.

      6.6.   Offering   Circulars.   Neither   the   Placement   Agent  nor  its
representatives  will include any non-public  information about the Company, the
Trust or any of their  Affiliates  in any  registration  statement,  prospectus,
offering  circular or private  placement  memorandum used in connection with any
purchase of Capital  Securities  without the prior written  consent of the Trust
and the Company.

Section 7. Covenants of the Offerors.  The Offerors  covenant and agree with the
Placement Agents and the Purchasers as follows:

      7.1.  Compliance with  Representations  and Warranties.  During the period
from the date of this  Agreement to the Closing  Date,  the  Offerors  shall use
their best efforts and take all action  necessary or  appropriate to cause their
representations  and  warranties  contained in Section 5 hereof to be true as of
the Closing Date, after giving effect to the  transactions  contemplated by this
Agreement, as if made on and as of the Closing Date.

      7.2.  Sale  and  Registration  of  Securities.   The  Offerors  and  their
Affiliates  shall not nor shall any of them  permit any  person  acting on their
behalf (other than the Placement  Agents),  to directly or indirectly  (i) sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the  Securities  Act) that would or could be  integrated
with the sale of the  Capital  Securities  in a manner  that would  require  the
registration  under the  Securities Act of the Securities or (ii) make offers or
sales of any such Security,  or solicit  offers to buy any such Security,  under
circumstances  that would  require the  registration  of any of such  Securities
under the Securities Act.

      7.3.  Use of Proceeds.  The Trust shall use the proceeds  from the sale of
the Capital Securities and the Common Securities to purchase the Debentures from
the Company.

      7.4.  Investment  Company.  The Offerors  shall not engage,  or permit any
Subsidiary to engage,  in any activity which would cause it or any Subsidiary to
be an "investment company" under the provisions of the Investment Company Act.

      7.5.  Reimbursement  of  Expenses.  If the sale of the Capital  Securities
provided for herein is not  consummated  (i) because any  condition set forth in
Section 3 hereof is not satisfied, or (ii) because of any refusal,  inability or
failure on the part of the Company or the Trust to perform any agreement  herein
or comply  with any  provision  hereof  other  than by reason of a breach by the
Placement  Agents,  the Company shall reimburse the Placement Agents upon demand
for all of their pro rata share of out-of-pocket  expenses (including reasonable
fees and  disbursements  of counsel) in an amount not to exceed  $50,000.00 that
shall have been  incurred by them in connection  with the proposed  purchase and
sale of the Capital Securities. Notwithstanding the foregoing, the Company shall
have no obligation to reimburse  the  Placement  Agents for their  out-of-pocket
expenses  if the sale of the  Capital  Securities  fails to  occur  because  the
Placement Agents fail to fulfill a condition set forth in Section 4.

      7.6. Directed Selling Efforts, Solicitation and Advertising. In connection
with any offer or sale of any of the  Securities,  the  Offerors  shall not, nor
shall  either of them  permit any of their  Affiliates  or any person  acting on
their behalf,  other than the Placement  Agents,  to (i) engage in any "directed
selling  efforts" within the meaning of Regulation S, or (ii) engage in any form
of general solicitation or general advertising (as defined in Regulation D).


                                       11
<PAGE>

      7.7.  Compliance with Rule 144A(d)(4) under the Securities Act. So long as
any of the Securities are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3)  under the Securities  Act, the Offerors will,  during
any period in which they are not subject to and in compliance with Section 13 or
15(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),
or the Offerors are not exempt from such reporting  requirements pursuant to and
in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder
of such restricted  securities and to each prospective  purchaser (as designated
by such holder) of such restricted  securities,  upon the request of such holder
or  prospective  purchaser  in  connection  with  any  proposed  transfer,   any
information required to be provided by Rule 144A(d)(4) under the Securities Act,
if  applicable.  This covenant is intended to be for the benefit of the holders,
and the prospective  purchasers designated by such holders, from time to time of
such restricted securities. The information provided by the Offerors pursuant to
this Section 7.7 will not, at the date thereof,  contain any untrue statement of
a  material  fact or omit to  state  any  material  fact  necessary  to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading.

      7.8.  Book-Entry  Registration.  Each  Offeror  will  cooperate  with  the
Placement Agents and use all commercially reasonable efforts to make the Capital
Securities,  and in the event the Debentures  are  distributed to holders of the
Capital  Securities,  to  make  the  Debentures,   eligible  for  clearance  and
settlement  as  book-entry  securities  through the  facilities of DTC, and will
execute,  deliver and comply with all  representations  made to, and  agreements
with, DTC and Nasdaq's PORTAL system.

Section 8. Covenants of the Placement Agents.  The Placement Agents covenant and
agree with the Offerors that,  during the period from the date of this Agreement
to the Closing Date, the Placement  Agents shall use their best efforts and take
all  action  necessary  or  appropriate  to  cause  their   representations  and
warranties  contained in Section 6 to be true as of Closing  Date,  after giving
effect to the transactions  contemplated by this Agreement, as if made on and as
of the Closing Date.  The  Placement  Agents  further  covenant and agree not to
engage in hedging  transactions  with respect to the Capital  Securities  unless
such transactions are conducted in compliance with the Securities Act.

Section 9. Indemnification.

      9.1. Indemnification  Obligation. The Offerors shall jointly and severally
indemnify and hold harmless the Placement  Agents and the Purchasers and each of
their respective agents, employees,  officers and directors and each person that
controls either of the Placement Agents or the Purchasers  within the meaning of
Section 15 of the  Securities Act or Section 20 of the Exchange Act, and agents,
employees,  officers and directors or any such  controlling  person of either of
the  Placement  Agents  or the  Purchasers  (each  such  person  or  entity,  an
"Indemnified  Party")  from and  against any and all  losses,  claims,  damages,
judgments,  liabilities or expenses, joint or several, to which such Indemnified
Party may become  subject  under the  Securities  Act, the Exchange Act or other
federal or state  statutory  law or  regulation,  or at common law or  otherwise
(including in settlement of any litigation,  if such settlement is effected with
the written consent of the Offerors),  insofar as such losses, claims,  damages,
judgments, liabilities or expenses (or actions in respect thereof) arise out of,
or are based upon, or relate to, in whole or in part,  (a) any untrue  statement
or alleged  untrue  statement of a material  fact  contained in any  information
(whether  written or oral) or documents  executed in favor of, furnished or made
available to the Placement Agents or the Purchasers by the Offerors,  or (b) any
omission or alleged  omission to state in any  information  (whether  written or
oral) or  documents  executed in favor of,  furnished  or made  available to the
Placement  Agents or the  Purchasers by the Offerors a material fact required to
be stated  therein or necessary to make the statements  therein not  misleading,
and shall reimburse each  Indemnified  Party for any legal and other expenses as
such expenses are reasonably  incurred by such  Indemnified  Party in connection
with investigating,  defending, settling,  compromising or paying any such loss,
claim, damage, judgments, liability, expense or action described in this Section
9.1. In addition to their other


                                       12
<PAGE>

obligations  under this Section 9, the Offerors hereby agree that, as an interim
measure  during the  pendency of any claim,  action,  investigation,  inquiry or
other  proceeding  arising  out of, or based  upon,  or related  to the  matters
described above in this Section 9.1, they shall reimburse each Indemnified Party
on a quarterly  basis for all  reasonable  legal or other  expenses  incurred in
connection   with   investigating   or   defending   any  such  claim,   action,
investigation,  inquiry or other  proceeding,  notwithstanding  the absence of a
judicial determination as to the propriety and enforceability of the possibility
that  such  payments  might  later be held to have been  improper  by a court of
competent  jurisdiction.  To the  extent  that  any such  interim  reimbursement
payment is so held to have been improper,  each Indemnified Party shall promptly
return such amounts to the Offerors  together with  interest,  determined on the
basis of the prime rate (or other  commercial  lending rate for borrowers of the
highest credit  standing)  announced  from time to time by First  Tennessee Bank
National Association (the "Prime Rate"). Any such interim reimbursement payments
which are not made to an  Indemnified  Party  within  30 days of a  request  for
reimbursement  shall  bear  interest  at the  Prime  Rate  from the date of such
request.

      9.2. Conduct of Indemnification Proceedings.  Promptly after receipt by an
Indemnified  Party  under this  Section 9 of notice of the  commencement  of any
action,  such  Indemnified  Party shall,  if a claim in respect thereof is to be
made against the  Offerors  under this Section 9, notify the Offerors in writing
of the  commencement  thereof;  but,  subject to Section 9.4, the omission to so
notify the  Offerors  shall not  relieve  them from any  liability  pursuant  to
Section 9.1 which the Offerors may have to any  Indemnified  Party unless and to
the extent that the  Offerors  did not  otherwise  learn of such action and such
failure by the  Indemnified  Party results in the  forfeiture by the Offerors of
substantial rights and defenses.  In case any such action is brought against any
Indemnified  Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided,  however, if the defendants in
any such action  include  both the  Indemnified  Party and the  Offerors and the
Indemnified  Party shall have reasonably  concluded that there may be a conflict
between the  positions of the Offerors and the  Indemnified  Party in conducting
the defense of any such action or that there may be legal defenses  available to
it and/or other  Indemnified  Parties which are different  from or additional to
those available to the Offerors,  the Indemnified  Party shall have the right to
select  separate  counsel  to  assume  such  legal  defenses  and  to  otherwise
participate in the defense of such action on behalf of such  Indemnified  Party.
Upon  receipt of notice  from the  Offerors to such  Indemnified  Party of their
election to so assume the defense of such action and approval by the Indemnified
Party of counsel,  the Offerors  shall not be liable to such  Indemnified  Party
under this Section 9 for any legal or other  expenses  subsequently  incurred by
such  Indemnified  Party in connection  with the defense  thereof unless (i) the
Indemnified  Party  shall have  employed  such  counsel in  connection  with the
assumption  of legal  defenses in  accordance  with the proviso in the preceding
sentence (it being  understood,  however,  that the Offerors shall not be liable
for the expenses of more than one separate counsel  representing the Indemnified
Parties who are parties to such  action),  or (ii) the  Offerors  shall not have
employed counsel  reasonably  satisfactory to the Indemnified Party to represent
the  Indemnified  Party within a reasonable time after notice of commencement of
the  action,  in each of which  cases the fees and  expenses  of counsel of such
Indemnified Party shall be at the expense of the Offerors.

      9.3. Contribution.  If the indemnification  provided for in this Section 9
is required by its terms,  but is for any reason  held to be  unavailable  to or
otherwise  insufficient to hold harmless an Indemnified  Party under Section 9.1
in respect of any losses, claims,  damages,  liabilities or expenses referred to
herein or therein,  then the  Offerors  shall  contribute  to the amount paid or
payable by such Indemnified  Party as a result of any losses,  claims,  damages,
judgments,  liabilities or expenses referred to herein (i) in such proportion as
is appropriate to reflect the relative benefits received by the Offerors, on the
one hand, and the  Indemnified  Party,  on the other hand,  from the offering of
such Capital Securities,  or (ii) if the allocation provided by clause (i) above
is not permitted by applicable  law, in such  proportion  as is  appropriate  to
reflect not only the relative  benefits referred to in clause (i) above but also
the relative


                                       13
<PAGE>

fault of the Offerors,  on the one hand, and the Placement  Agents, on the other
hand, in connection  with the  statements  or omissions or  inaccuracies  in the
representations  and warranties  herein or other breaches which resulted in such
losses,  claims,  damages,  judgments,  liabilities or expenses,  as well as any
other  relevant  equitable  considerations.  The  respective  relative  benefits
received by the  Offerors,  on the one hand,  and the Placement  Agents,  on the
other  hand,  shall be deemed to be in the same  proportion,  in the case of the
Offerors,  as the total price paid to the  Offerors  for the Capital  Securities
sold by the  Offerors to the  Purchasers  (net of the  compensation  paid to the
Placement Agents hereunder,  but before deducting expenses),  and in the case of
the Placement Agents,  as the compensation  received by them, bears to the total
of such amounts paid to the  Offerors  and received by the  Placement  Agents as
compensation.  The relative fault of the Offerors and the Placement Agents shall
be determined by reference to, among other things,  whether the untrue statement
or alleged  untrue  statement  of a  material  fact or the  omission  or alleged
omission  of a  material  fact  or  the  inaccurate  or the  alleged  inaccurate
representation  and/or warranty relates to information  supplied by the Offerors
or the Placement Agents and the parties' relative intent,  knowledge,  access to
information  and  opportunity  to correct or prevent such statement or omission.
The provisions  set forth in Section 9.2 with respect to notice of  commencement
of any action shall apply if a claim for contribution is made under this Section
9.3; provided, however, that no additional notice shall be required with respect
to any action for which notice has been given under  Section 9.2 for purposes of
indemnification.  The Offerors and the Placement  Agents agree that it would not
be just  and  equitable  if  contribution  pursuant  to this  Section  9.3  were
determined by pro rata allocation or by any other method of allocation that does
not take  account of the  equitable  considerations  referred to in this Section
9.3.  The  amount  paid or payable  by an  Indemnified  Party as a result of the
losses, claims, damages, judgments,  liabilities or expenses referred to in this
Section 9.3 shall be deemed to  include,  subject to the  limitations  set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection  with  investigating  or defending any such action or claim. In no
event shall the liability of the Placement Agents hereunder be greater in amount
than the dollar  amount of the  compensation  (net of  payment of all  expenses)
received by the Placement Agents upon the sale of the Capital  Securities giving
rise to such obligation. No person found guilty of fraudulent  misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution  from  any  person  who was not  found  guilty  of such  fraudulent
misrepresentation.

      9.4.  Additional  Remedies.  The  indemnity  and  contribution  agreements
contained in this Section 9 are in addition to any  liability  that the Offerors
may otherwise have to any Indemnified Party.

      9.5.  Additional  Indemnification.  The Company  shall  indemnify and hold
harmless  the Trust  against  all loss,  liability,  claim,  damage and  expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.

Section 10. Rights and Responsibilities of Placement Agents.

      10.1.  Reliance.  In  performing  their duties under this  Agreement,  the
Placement Agents shall be entitled to rely upon any notice, signature or writing
which  they  shall in good  faith  believe  to be  genuine  and to be  signed or
presented by a proper party or parties.  The Placement  Agents may rely upon any
opinions or certificates  or other documents  delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchasers.

      10.2.  Rights of Placement  Agents.  In connection with the performance of
their duties under this Agreement,  the Placement Agents shall not be liable for
any error of  judgment  or any action  taken or  omitted to be taken  unless the
Placement  Agents were  grossly  negligent or engaged in willful  misconduct  in
connection  with such  performance  or  non-performance.  No  provision  of this
Agreement  shall require the Placement  Agents to expend or risk their own funds
or  otherwise  incur any  financial  liability  on behalf of the  Purchasers  in
connection with the performance of any of their duties hereunder.  The


                                       14
<PAGE>

Placement  Agents shall be under no  obligation to exercise any of the rights or
powers vested in them by this Agreement.

Section 11. Miscellaneous.

      11.1. Disclosure Schedule. The term "Disclosure Schedule," as used herein,
means the schedule, if any, attached to this Agreement that sets forth items the
disclosure of which is necessary or  appropriate  as an exception to one or more
representations or warranties contained in Section 5 hereof;  provided, that any
item set forth in the Disclosure Schedule as an exception to a representation or
warranty shall be deemed an admission by the Offerors that such item  represents
an exception, fact, event or circumstance that is reasonably likely to result in
a  Material  Adverse  Effect.  The  Disclosure  Schedule  shall be  arranged  in
paragraphs  corresponding to the section numbers contained in Section 5. Nothing
in the Disclosure  Schedule shall be deemed adequate to disclose an exception to
a  representation  or  warranty  made  herein  unless  the  Disclosure  Schedule
identifies  the  exception  with  reasonable  particularity  and  describes  the
relevant  facts in reasonable  detail.  Without  limiting the  generality of the
immediately  preceding sentence,  the mere listing (or inclusion of a copy) of a
document or other item in the Disclosure  Schedule shall not be deemed  adequate
to disclose an exception to a representation  or warranty made herein unless the
representation or warranty has to do with the existence of the document or other
item  itself.  Information  provided  by the  Company  in  response  to any  due
diligence  questionnaire shall not be deemed part of the Disclosure Schedule and
shall  not be  deemed  to be an  exception  to one or  more  representations  or
warranties contained in Section 5 hereof unless such information is specifically
included on the  Disclosure  Schedule in accordance  with the provisions of this
Section 11.1.

      11.2.  Legal Expenses.  At Closing,  the Placement  Agents shall provide a
credit for the  Offerors'  transaction-related  legal  expenses in the amount of
$10,000.00.  If the sale of the Capital  Securities  provided  for herein is not
consummated  (i)  because  any  condition  set forth in  Section 4 hereof is not
satisfied,  or (ii) because of any refusal,  inability or failure on the part of
either or both of the Placement Agents to perform any agreement herein or comply
with any provision hereof other than by reason of a breach by the Offerors,  the
Placement  Agents  shall  reimburse  the  Offerors  upon demand for all of their
out-of-pocket  expenses (including reasonable fees and disbursements of counsel)
in an amount not to exceed $10,000.00.

      11.3.  Non-Disclosure.  Except as required by  applicable  law,  including
without limitation securities laws and regulations promulgated  thereunder,  (i)
the Offerors  shall not, and will cause their advisors and  representatives  not
to, issue any press release or other public statement regarding the transactions
contemplated  by this  Agreement or the Operative  Documents  prior to or on the
Closing Date and (ii) following the Closing Date, the Offerors shall not include
in any press release,  other public statement or other  communication  regarding
the transactions  contemplated by this Agreement or the Operative Documents, any
reference to the Placement Agents, WTC, the Purchasers,  the term "PreTS" or any
derivations  thereof,  or the  terms and  conditions  of this  Agreement  or the
Operative Documents.  Notwithstanding anything to the contrary, the Offerors may
(1) consult any tax advisor  regarding U.S.  federal income tax treatment or tax
structure of the transaction contemplated under this Agreement and the Operative
Documents  and (2) disclose to any and all persons,  without  limitation  of any
kind, the U.S. Federal income tax structure (in each case, within the meaning of
Treasury  Regulation ss.  1.6011-4) of the transaction  contemplated  under this
Agreement and the Operative  Documents and all materials of any kind  (including
opinions or other tax  analyses)  that are  provided to you relating to such tax
treatment and tax structure. For this purpose, "tax structure" is limited to any
facts relevant to the U.S.  federal income tax treatment of the  transaction and
does not include information relating to identity of the parties.

      11.4.  Notices.  Prior to the  Closing,  and  thereafter  with  respect to
matters pertaining to this Agreement only, all notices and other  communications
provided for or permitted  hereunder shall be made


                                       15
<PAGE>

in writing by hand-delivery,  first-class  mail, telex,  telecopier or overnight
air courier guaranteeing next day delivery:

      if to the Placement Agents, to:

                        FTN Financial Capital Markets
                        845 Crossover Lane, Suite 150
                        Memphis, Tennessee  38117
                        Telecopier:  901-435-4706
                        Telephone:  800-456-5460
                        Attention:  James D. Wingett

                              and

                        Keefe, Bruyette & Woods, Inc.
                        787 7th Avenue
                        4th Floor
                        New York, New York  10019
                        Telecopier:  212-403-2000
                        Telephone:  212-403-1004
                        Attention:  Mitchell Kleinman, General Counsel

      with a copy to:

                        Lewis, Rice & Fingersh, L.C.
                        500 North Broadway, Suite 2000
                        St. Louis, Missouri  63102
                        Telecopier:  314-241-6056
                        Telephone:  314-444-7600
                        Attention:  Thomas C. Erb, Esq.

                              and

                        Sidley Austin LLP
                        787 7th Avenue
                        New York, New York  10019
                        Telecopier:  212-839-5599
                        Telephone:  212-839-5300
                        Attention:  Renwick Martin, Esq.

      if to the Offerors, to:

                        First Merchants Corporation
                        200 East Jackson Street
                        Muncie, Indiana  47305
                        Telecopier:  765-747-1447
                        Telephone:  765-747-1333
                        Attention:  Jami L. Bradshaw


                                       16
<PAGE>

      with a copy to:

                        Bingham McHale LLP
                        2700 Market Tower
                        10 West  Market Street
                        Indianapolis, Indiana 46204
                        Telecopier: 317-236-9907
                        Telephone: 317-968-5403
                        Attention:  David R. Prechtel, Esq.

      All such  notices  and  communications  shall be  deemed to have been duly
given (i) at the time  delivered by hand,  if  personally  delivered,  (ii) five
business days after being  deposited in the mail,  postage  prepaid,  if mailed,
(iii) when  answered  back,  if telexed,  (iv) the next business day after being
telecopied,  or (v) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing,  the  foregoing  notice  provisions  shall be  superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Offerors,  and their respective counsel, may change their respective
notice  addresses  from time to time by written  notice to all of the  foregoing
persons.

      11.5. Parties in Interest, Successors and Assigns. Except as expressly set
forth  herein,  this  Agreement is made solely for the benefit of the  Placement
Agents, the Purchasers and the Offerors and any person controlling the Placement
Agents,  the  Purchasers  or the Offerors and their  respective  successors  and
assigns;  and no other person shall acquire or have any right under or by virtue
of this  Agreement.  This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.

      11.6.  Counterparts.  This Agreement may be executed by the parties hereto
in separate  counterparts,  each of which when so executed shall be deemed to be
an original and all of which taken  together  shall  constitute one and the same
agreement.

      11.7.  Headings.  The headings in this  Agreement are for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

      11.8.  Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE INTERNAL LAWS (AND NOT THE LAWS  PERTAINING TO CONFLICTS OF
LAWS) OF THE STATE OF NEW YORK.

      11.9.  Entire  Agreement.  This  Agreement,  together  with the  Operative
Documents and the other documents  delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive  statement of the
agreement  and  understanding  of the  parties  hereto in respect of the subject
matter  contained  herein  and  therein.  There are no  restrictions,  promises,
warranties or undertakings, other than those set forth or referred to herein and
therein.  This  Agreement,  together with the Operative  Documents and the other
documents  delivered in connection  with the  transaction  contemplated  by this
Agreement,  supersedes  all prior  agreements  and  understandings  between  the
parties with respect to such subject matter.

      11.10.  Severability.  In the event that any one or more of the provisions
contained  herein,  or the  application  thereof in any  circumstances,  is held
invalid,  illegal or unenforceable in any respect for any reason,  the validity,
legality and  enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the


                                       17
<PAGE>

Placement Agents' and the Purchasers' rights and privileges shall be enforceable
to the fullest extent permitted by law.

      11.11.  Survival.  The Placement  Agents and the  Offerors,  respectively,
agree that the  representations,  warranties and agreements made by each of them
in this Agreement and in any certificate or other instrument  delivered pursuant
hereto shall remain in full force and effect and shall  survive the delivery of,
and payment for, the Capital Securities.

                     Signatures appear on the following page


                                       18
<PAGE>

      If this Agreement is  satisfactory  to you,  please so indicate by signing
the  acceptance of this  Agreement and deliver such  counterpart to the Offerors
whereupon this Agreement will become binding  between us in accordance  with its
terms.

                                    Very truly yours,

                                    FIRST MERCHANTS CORPORATION


                                    By /s/  Mark Hardwick
                                      ----------------------------------------
                                          Name:  Mark Hardwick
                                          Title:  CFO & EVP


                                    FIRST MERCHANTS CAPITAL TRUST II


                                    By:  /s/  Mark Hardwick
                                       ---------------------------------------
                                    Name:  Mark Hardwick
                                         -------------------------------------
                                    Title:  Administrator

CONFIRMED AND ACCEPTED,
as of the date first set forth above

FTN FINANCIAL CAPITAL MARKETS,
a division of First Tennessee Bank National Association,
as a Placement Agent


By: /s/  Doug Duncan
    --------------------------------------------
Name: Doug Duncan
    --------------------------------------------
Title: Vice President
      ------------------------------------------

KEEFE, BRUYETTE & WOODS, INC.,
a New York corporation, as a Placement Agent

By:  /s/  Peter J. Wirth
    --------------------------------------------
Name:  Peter J. Wirth
     -------------------------------------------
Title: Managing Director
      ------------------------------------------


                                       19
<PAGE>

                                   EXHIBIT A-1

                         FORM OF SUBSCRIPTION AGREEMENT

                        FIRST MERCHANTS CAPITAL TRUST II
                           FIRST MERCHANTS CORPORATION

                             SUBSCRIPTION AGREEMENT

                                  July 2, 2007

      THIS SUBSCRIPTION  AGREEMENT (this "Agreement") made among First Merchants
Capital  Trust II (the  "Trust"),  a statutory  trust created under the Delaware
Statutory  Trust Act  (Chapter 38 of Title 12 of the Delaware  Code,  12 Del. C.
ss.ss. 3801, et seq.), First Merchants Corporation, an Indiana corporation, with
its principal offices located at 200 East Jackson Street,  Muncie, Indiana 47305
(the "Company" and,  collectively  with the Trust,  the  "Offerors"),  and First
Tennessee Bank National Association (the "Purchaser").

                                    RECITALS:

      A. The Trust  desires to issue 55,000 of its  Fixed/Floating  Rate Capital
Securities (the "Capital Securities"),  liquidation amount $1,000.00 per Capital
Security,  representing  an undivided  beneficial  interest in the assets of the
Trust  (the  "Offering"),  to be issued  pursuant  to an  Amended  and  Restated
Declaration of Trust (the  "Declaration")  by and among the Company,  Wilmington
Trust Company ("WTC"),  the  administrators  named therein,  and the holders (as
defined therein),  which Capital  Securities are to be guaranteed by the Company
with respect to  distributions  and payments upon  liquidation,  redemption  and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and

      B. The proceeds from the sale of the Capital  Securities  will be combined
with the  proceeds  from the sale by the  Trust  to the  Company  of its  common
securities,  and will be used by the Trust to purchase an  equivalent  amount of
Fixed/Floating  Rate Junior  Subordinated  Deferrable Interest Debentures of the
Company (the  "Debentures") to be issued by the Company pursuant to an indenture
to be executed by the Company and WTC, as trustee (the "Indenture"); and

      C. In  consideration  of the premises and the mutual  representations  and
covenants hereinafter set forth, the parties hereto agree as follows:

                                   ARTICLE I

                     PURCHASE AND SALE OF CAPITAL SECURITIES

      1.1. Upon the execution of this Agreement,  the Purchaser hereby agrees to
purchase from the Trust 33,000 Capital  Securities at a price equal to $1,000.00
per Capital  Security (the  "Purchase  Price") and the Trust agrees to sell such
Capital  Securities to the Purchaser  for said  Purchase  Price.  The rights and
preferences  of the Capital  Securities  are set forth in the  Declaration.  The
Purchase  Price is payable in immediately  available  funds on July 2, 2007 (the
"Closing  Date").  The  Offerors  shall  provide  the  Purchaser  wire  transfer
instructions no later than 3 days prior to the Closing Date.

      1.2.  The  Placement  Agreement,  dated  June  29,  2007  (the  "Placement
Agreement"), among the Offerors and the placement agents identified therein (the
"Placement Agents") includes certain  representations and warranties,  covenants
and conditions to closing and certain other matters governing


                                     A-1-1
<PAGE>

the Offering.  The Placement  Agreement is hereby incorporated by reference into
this  Agreement and the  Purchaser  shall be entitled to each of the benefits of
the Placement  Agents and the Purchaser under the Placement  Agreement and shall
be entitled to enforce the  obligations  of the  Offerors  under such  Placement
Agreement as fully as if the Purchaser were a party to such Placement Agreement.

      1.3. Anything herein or in the Placement  Agreement  notwithstanding,  the
Offerors  acknowledge  and agree that, so long as Purchaser holds some or all of
the Capital  Securities,  the Purchaser may in its discretion  from time to time
transfer or sell,  or sell or grant  participation  interests in, some or all of
such  Capital  Securities  to  one or  more  parties,  provided  that  any  such
transaction complies, as applicable,  with the registration  requirements of the
Securities  Act of  1933,  as  amended  (the  "Securities  Act")  and any  other
applicable  securities  laws,  is  pursuant  to an  exemption  therefrom,  or is
otherwise not subject thereto.

                                   ARTICLE II

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

      2.1. The Purchaser  understands and acknowledges  that none of the Capital
Securities,  the  Debentures nor the Guarantee  have been  registered  under the
Securities  Act or any other  applicable  securities  law, are being offered for
sale  by  the  Trust  in  transactions  not  requiring  registration  under  the
Securities Act, and may not be offered,  sold, pledged or otherwise  transferred
by the Purchaser except in compliance with the registration  requirements of the
Securities Act or any other applicable securities laws, pursuant to an exemption
therefrom or in a transaction not subject thereto.

      2.2. The Purchaser  represents and warrants that,  except as  contemplated
under Section 1.3 hereof,  it is purchasing  the Capital  Securities for its own
account,  for  investment,  and not  with a view  to,  or for  offer  or sale in
connection with, any distribution  thereof in violation of the Securities Act or
other  applicable  securities  laws,  subject to any requirement of law that the
disposition  of its  property be at all times  within its control and subject to
its  ability  to  resell  such  Capital  Securities  pursuant  to  an  effective
registration  statement under the Securities Act or under Rule 144A or any other
exemption  from  registration  available  under the  Securities Act or any other
applicable securities law.

      2.3. The Purchaser  represents  and warrants that neither the Offerors nor
the  Placement  Agents are acting as a  fiduciary  or  financial  or  investment
adviser for the Purchaser.

      2.4. The  Purchaser  represents  and warrants  that it is not relying (for
purposes  of making any  investment  decision  or  otherwise)  upon any  advice,
counsel or  representations  (whether written or oral) of the Offerors or of the
Placement Agents.

      2.5. The Purchaser  represents and warrants that (a) it has consulted with
its own legal, regulatory, tax, business,  investment,  financial and accounting
advisers in connection  herewith to the extent it has deemed  necessary,  (b) it
has had a reasonable  opportunity  to ask questions of and receive  answers from
officers  and  representatives  of  the  Offerors  concerning  their  respective
financial  condition and results of  operations  and the purchase of the Capital
Securities,  and any such questions have been answered to its satisfaction,  (c)
it has had the opportunity to review all publicly  available records and filings
concerning  the Offerors and it has carefully  reviewed such records and filings
that it considers relevant to making an investment decision, and (d) it has made
its own  investment  decisions  based upon its own  judgment,  due diligence and
advice  from such  advisers  as it has  deemed  necessary  and not upon any view
expressed by the Offerors or the Placement Agents.

      2.6.  The  Purchaser  represents  and  warrants  that  it is a  "qualified
institutional buyer" as defined under Rule 144A under the Securities Act. If the
Purchaser is a dealer of the type described in


                                     A-1-2
<PAGE>

paragraph  (a)(1)(ii) of Rule 144A under the Securities Act, it owns and invests
on a  discretionary  basis not less than U.S.  $25,000,000.00  in  securities of
issuers   that  are  not   affiliated   with  it.   The   Purchaser   is  not  a
participant-directed  employee plan, such as a 401(k) plan, or any other type of
plan referred to in paragraph  (a)(1)(i)(D)  or  (a)(1)(i)(E) of Rule 144A, or a
trust fund  referred to in  paragraph  (a)(1)(i)(F)  of Rule 144A that holds the
assets of such a plan, unless investment  decisions with respect to the plan are
made solely by the fiduciary, trustee or sponsor of such plan.

      2.7. The Purchaser  represents and warrants that on each day from the date
on which it acquires the Capital  Securities  through and  including the date on
which it disposes of its interests in the Capital  Securities,  either (i) it is
not (a) an  "employee  benefit  plan" (as defined in Section  3(3) of the United
States Employee  Retirement  Income Security Act of 1974, as amended  ("ERISA"))
which is subject to the  provisions of Part 4 of Subtitle B of Title I of ERISA,
or any entity whose  underlying  assets  include the assets of any such plan (an
"ERISA  Plan"),  (b) any other "plan" (as defined in Section  4975(e)(1)  of the
United States  Internal  Revenue Code of 1986, as amended (the "Code")) which is
subject  to the  provisions  of  Section  4975 of the Code or any  entity  whose
underlying assets include the assets of any such plan (a "Plan"),  (c) an entity
whose underlying  assets include the assets of any such ERISA Plan or other Plan
by reason of Department of Labor regulation section 2510.3-101 or otherwise,  or
(d) a governmental or church plan that is subject to any federal, state or local
law which is substantially  similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code (a "Similar  Law");  or (ii) the purchase,  holding and
disposition of the Capital  Securities by it will satisfy the  requirements  for
exemptive relief under Prohibited  Transaction  Class Exemption  ("PTCE") 84-14,
PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 or a similar exemption, or, in the
case of a plan  subject  to a  Similar  Law,  will not  result  in a  non-exempt
violation of such Similar Law.

      2.8.  The  Purchaser  represents  and warrants  that it is  acquiring  the
Capital  Securities as principal for its own account for investment  and, except
as  contemplated  under Section 1.3 hereof,  not for sale in connection with any
distribution  thereof.  It was not formed solely for the purpose of investing in
the Capital Securities, and additional capital or similar contributions were not
specifically  solicited  from any person owning a beneficial  interest in it for
the purpose of enabling it to purchase any Capital Securities.  The Purchaser is
not a (i) partnership,  (ii) common trust fund or (iii) special trust,  pension,
profit  sharing or other  retirement  trust fund or plan in which the  partners,
beneficiaries  or  participants,  as  applicable,  may designate the  particular
investments to be made or the allocation of any investment  among such partners,
beneficiaries  or  participants,  and except as  contemplated  under Section 1.3
hereof, it agrees that it shall not hold the Capital  Securities for the benefit
of any other  person  and shall be the sole  beneficial  owner  thereof  for all
purposes  and that it shall  not sell  participation  interests  in the  Capital
Securities  or enter  into any  other  arrangement  pursuant  to which any other
person shall be entitled to a  beneficial  interest in the  distribution  on the
Capital Securities.  The Capital Securities  purchased directly or indirectly by
the Purchaser  constitute  an investment of no more than 40% of its assets.  The
Purchaser  understands  and agrees  that any  purported  transfer of the Capital
Securities to a purchaser which would cause the  representations  and warranties
of Section 2.6 and this Section 2.8 to be  inaccurate  shall be null and void ab
initio and the Offerors  retain the right to resell any Capital  Securities sold
to non-permitted transferees.

      2.9. The  Purchaser  represents  and  warrants  that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties  specified  herein,  and to consummate the transactions  contemplated
herein and it has full right and power to subscribe for Capital  Securities  and
perform its obligations pursuant to this Agreement.

      2.10.  The  Purchaser  represents  and warrants  that no filing  with,  or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental  body, agency or court having  jurisdiction over the
Purchaser,  other than those that have been made or  obtained,  is  necessary or


                                     A-1-3
<PAGE>

required for the  performance  by the  Purchaser of its  obligations  under this
Agreement or to consummate the transactions contemplated herein.

      2.11.  The Purchaser  represents and warrants that this Agreement has been
duly authorized, executed and delivered by the Purchaser.

      2.12. The Purchaser  understands  and  acknowledges  that the Company will
rely  upon  the   truth  and   accuracy   of  the   foregoing   acknowledgments,
representations,  warranties  and  agreements  and  agrees  that,  if any of the
acknowledgments,  representations,  warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate,  it
shall promptly notify the Company.

      2.13.  The Purchaser  understands  that no public market exists for any of
the Capital  Securities,  and that it is unlikely that a public market will ever
exist for the Capital Securities.

                                  ARTICLE III

                                  MISCELLANEOUS

      3.1. Any notice or other  communication  given  hereunder  shall be deemed
sufficient  if in writing  and sent by  registered  or  certified  mail,  return
receipt  requested,  international  courier or delivered by hand against written
receipt therefor,  or by facsimile  transmission and confirmed by telephone,  to
the following addresses,  or such other address as may be furnished to the other
parties as herein provided:

            To the Offerors:  First Merchants Corporation
                              200 East Jackson Street
                              Muncie, Indiana  47305
                              Attention:  Jami L. Bradshaw
                              Fax:  765-747-1447

            To the Purchaser: First Tennessee Bank National Association
                              845 Crossover Lane, Suite 150
                              Memphis, Tennessee  38117
                              Attention:  David Work
                              Fax:  901-435-7983

            Unless otherwise expressly provided herein,  notices shall be deemed
to have been given on the date of mailing,  except  notice of change of address,
which shall be deemed to have been given when received.

      3.2. This Agreement shall not be changed,  modified or amended except by a
writing  signed by the  parties to be  charged,  and this  Agreement  may not be
discharged  except by performance  in accordance  with its terms or by a writing
signed by the party to be charged.

      3.3. Upon the execution and delivery of this  Agreement by the  Purchaser,
this Agreement  shall become a binding  obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.

      3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE  PARTIES  HERETO,  THE  PARTIES  EXPRESSLY  AGREE  THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE


                                     A-1-4
<PAGE>

WITH AND  GOVERNED  BY THE LAWS OF THE  STATE OF NEW  YORK,  WITHOUT  REGARD  TO
PRINCIPLES OF CONFLICTS OF LAW.

      3.5. The parties agree to execute and deliver all such further  documents,
agreements  and  instruments  and take such other and  further  action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

      3.6. This  Agreement may be executed in one or more  counterparts  each of
which shall be deemed an original,  but all of which shall  together  constitute
one and the same instrument.

      3.7. In the event that any one or more of the provisions contained herein,
or the application  thereof in any  circumstances,  is held invalid,  illegal or
unenforceable  in any  respect  for  any  reason,  the  validity,  legality  and
enforceability of any such provision in every other respect and of the remaining
provisions  hereof  shall  not be in any way  impaired  or  affected,  it  being
intended  that all of the Offerors' and the  Purchaser's  rights and  privileges
shall be enforceable to the fullest extent permitted by law.

                     Signatures appear on the following page


                                     A-1-5
<PAGE>

      IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the day
and year first written above.

FIRST TENNESSEE BANK NATIONAL ASSOCIATION

By:
   ---------------------------------
Print Name:
            ------------------------
Title:
       -----------------------------

                                    FIRST MERCHANTS CORPORATION

                                    By:
                                       ---------------------------------------

                                    Name:
                                         -------------------------------------

                                    Title:
                                          ------------------------------------

                                    FIRST MERCHANTS CAPITAL TRUST II

                                    By:
                                       ---------------------------------------

                                    Name:
                                         -------------------------------------

                                    Title:  Administrator


                                     A-1-6
<PAGE>

                                   EXHIBIT A-2

                         FORM OF SUBSCRIPTION AGREEMENT

                        FIRST MERCHANTS CAPITAL TRUST II
                           FIRST MERCHANTS CORPORATION

                             SUBSCRIPTION AGREEMENT

                                  July 2, 2007

      THIS SUBSCRIPTION  AGREEMENT (this "Agreement") made among First Merchants
Capital  Trust II (the  "Trust"),  a statutory  trust created under the Delaware
Statutory  Trust Act  (Chapter 38 of Title 12 of the Delaware  Code,  12 Del. C.
ss.ss. 3801, et seq.), First Merchants Corporation, an Indiana corporation, with
its principal offices located at 200 East Jackson Street,  Muncie, Indiana 47305
(the "Company" and,  collectively  with the Trust, the  "Offerors"),  and Alesco
Preferred Funding XVI, Ltd. (the "Purchaser").

                                    RECITALS:

      A. The Trust  desires to issue 55,000 of its  Fixed/Floating  Rate Capital
Securities (the "Capital Securities"),  liquidation amount $1,000.00 per Capital
Security,  representing  an undivided  beneficial  interest in the assets of the
Trust  (the  "Offering"),  to be issued  pursuant  to an  Amended  and  Restated
Declaration of Trust (the  "Declaration")  by and among the Company,  Wilmington
Trust Company ("WTC"),  the  administrators  named therein,  and the holders (as
defined therein),  which Capital  Securities are to be guaranteed by the Company
with respect to  distributions  and payments upon  liquidation,  redemption  and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and

      B. The proceeds from the sale of the Capital  Securities  will be combined
with the  proceeds  from the sale by the  Trust  to the  Company  of its  common
securities,  and will be used by the Trust to purchase an  equivalent  amount of
Fixed/Floating  Rate Junior  Subordinated  Deferrable Interest Debentures of the
Company (the  "Debentures") to be issued by the Company pursuant to an indenture
to be executed by the Company and WTC, as trustee (the "Indenture"); and

      C. In  consideration  of the premises and the mutual  representations  and
covenants hereinafter set forth, the parties hereto agree as follows:

                                    ARTICLE I

                     PURCHASE AND SALE OF CAPITAL SECURITIES

      1.1. Upon the execution of this Agreement,  the Purchaser hereby agrees to
purchase from the Trust 15,000 Capital  Securities at a price equal to $1,000.00
per Capital  Security (the  "Purchase  Price") and the Trust agrees to sell such
Capital  Securities to the Purchaser  for said  Purchase  Price.  The rights and
preferences  of the Capital  Securities  are set forth in the  Declaration.  The
Purchase  Price is payable in immediately  available  funds on July 2, 2007 (the
"Closing  Date").  The  Offerors  shall  provide  the  Purchaser  wire  transfer
instructions no later than 3 days prior to the Closing Date.

      1.2. The certificate for the Capital  Securities shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.


                                     A-2-1
<PAGE>

      1.3.  The  Placement  Agreement,  dated  June  29,  2007  (the  "Placement
Agreement"),  among the Offerors and the  Placement  Agents  identified  therein
includes  certain  representations  and warranties,  covenants and conditions to
closing  and  certain  other  matters  governing  the  Offering.  The  Placement
Agreement  is hereby  incorporated  by  reference  into this  Agreement  and the
Purchaser shall be entitled to each of the benefits of the Placement  Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors  under such  Placement  Agreement as fully as if the
Purchaser were a party to such Placement Agreement.

                                   ARTICLE II

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

      2.1. The Purchaser  understands and acknowledges  that neither the Capital
Securities,  the  Debentures nor the Guarantee  have been  registered  under the
Securities  Act of  1933,  as  amended  (the  "Securities  Act"),  or any  other
applicable  securities  law,  are  being  offered  for  sale  by  the  Trust  in
transactions not requiring registration under the Securities Act, and may not be
offered,  sold,  pledged or otherwise  transferred  by the  Purchaser  except in
compliance with the registration requirements of the Securities Act or any other
applicable  securities  laws,  pursuant  to  an  exemption  therefrom  or  in  a
transaction not subject thereto.

      2.2. The Purchaser represents, warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not  acquiring  the Capital  Securities  for the account or benefit of any
such  U.S.  person,  (iii)  the  offer  and sale of  Capital  Securities  to the
Purchaser  constitutes  an  "offshore  transaction"  under  Regulation  S of the
Securities Act, and (iv) it will not engage in hedging  transactions with regard
to the Capital  Securities  unless such transactions are conducted in compliance
with the  Securities  Act and the  Purchaser  agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.

      2.3. The  Purchaser  represents  and warrants  that it is  purchasing  the
Capital Securities for its own account, for investment,  and not with a view to,
or for offer or sale in connection with, any  distribution  thereof in violation
of the  Securities  Act or other  applicable  securities  laws,  subject  to any
requirement  of law that the  disposition of its property be at all times within
its  control  and  subject to its  ability  to resell  such  Capital  Securities
pursuant to an effective  registration  statement  under the  Securities  Act or
under Rule 144A or any other  exemption from  registration  available  under the
Securities Act or any other applicable Securities law.

      2.4. The  Purchaser  represents  and  warrants  that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties  specified  herein,  and to consummate the transactions  contemplated
herein and it has full right and power to subscribe for Capital  Securities  and
perform its obligations pursuant to this Agreement.

      2.5. The  Purchaser,  a Cayman  Islands  Company whose  business  includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business  matters that it is capable of evaluating  the merits and
risks of  purchasing  the Capital  Securities,  has had the  opportunity  to ask
questions of, and receive answers and request  additional  information from, the
Offerors  and is aware that it may be required to bear the  economic  risk of an
investment in the Capital Securities.

      2.6.  The  Purchaser  represents  and  warrants  that no filing  with,  or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental  body, agency or court having  jurisdiction over the
Purchaser,  other than those that have been made or  obtained,  is  necessary or


                                     A-2-2
<PAGE>

required for the  performance  by the  Purchaser of its  obligations  under this
Agreement or to consummate the transactions contemplated herein.

      2.7. The Purchaser  represents  and warrants that this  Agreement has been
duly authorized, executed and delivered by the Purchaser.

      2.8. The Purchaser  represents  and warrants that (i) the Purchaser is not
in violation or default of any term of its Memorandum of Association or Articles
of  Association,  of  any  provision  of  any  mortgage,  indenture,   contract,
agreement, instrument or contract to which it is a party or by which it is bound
or of any judgment,  decree, order, writ or, to its knowledge, any statute, rule
or regulation applicable to the Purchaser which would prevent the Purchaser from
performing  any material  obligation set forth in this  Agreement;  and (ii) the
execution,  delivery and performance of and compliance with this Agreement,  and
the  consummation of the  transactions  contemplated  herein,  will not, with or
without  the  passage of time or giving of notice,  result in any such  material
violation,  or be in conflict  with or constitute a default under any such term,
or the  suspension,  revocation,  impairment,  forfeiture or  non-renewal of any
permit,  license,  authorization  or approval  applicable to the Purchaser,  its
business or operations  or any of its assets or  properties  which would prevent
the  Purchaser  from  performing  any  material  obligations  set  forth in this
Agreement.

      2.9.  The  Purchaser  represents  and  warrants  that the  Purchaser is an
exempted company with limited liability duly incorporated,  validly existing and
in good standing under the laws of the jurisdiction where it is organized,  with
full power and authority to perform its obligations under this Agreement.

      2.10. The Purchaser  understands  and  acknowledges  that the Company will
rely  upon  the   truth  and   accuracy   of  the   foregoing   acknowledgments,
representations,  warranties  and  agreements  and  agrees  that,  if any of the
acknowledgments,  representations,  warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate,  it
shall promptly notify the Company.

      2.11.  The Purchaser  understands  that no public market exists for any of
the Capital  Securities,  and that it is unlikely that a public market will ever
exist for the Capital Securities.

                                   ARTICLE III

                                  MISCELLANEOUS

      3.1. Any notice or other  communication  given  hereunder  shall be deemed
sufficient  if in writing  and sent by  registered  or  certified  mail,  return
receipt  requested,  international  courier or delivered by hand against written
receipt therefor,  or by facsimile  transmission and confirmed by telephone,  to
the following addresses,  or such other address as may be furnished to the other
parties as herein provided:

            To the Offerors:  First Merchants Corporation
                              200 East Jackson Street
                              Muncie, Indiana  47305
                              Attention:  Jami L. Bradshaw
                              Fax:  765-747-1447

            To the Purchaser: Alesco Preferred Funding XVI, Ltd.
                              Walker House
                              87 Mary Street
                              P.O. Box 908GT
                              George Town
                              Cayman Islands


                                     A-2-3
<PAGE>

            Unless otherwise expressly provided herein,  notices shall be deemed
to have been given on the date of mailing,  except  notice of change of address,
which shall be deemed to have been given when received.

      3.2. This Agreement shall not be changed,  modified or amended except by a
writing  signed by the  parties to be  charged,  and this  Agreement  may not be
discharged  except by performance  in accordance  with its terms or by a writing
signed by the party to be charged.

      3.3. Upon the execution and delivery of this  Agreement by the  Purchaser,
this Agreement  shall become a binding  obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.

      3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE  PARTIES  HERETO,  THE  PARTIES  EXPRESSLY  AGREE  THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

      3.5. The parties agree to execute and deliver all such further  documents,
agreements  and  instruments  and take such other and  further  action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

      3.6. This  Agreement may be executed in one or more  counterparts  each of
which shall be deemed an original,  but all of which shall  together  constitute
one and the same instrument.

      3.7. In the event that any one or more of the provisions contained herein,
or the application  thereof in any  circumstances,  is held invalid,  illegal or
unenforceable  in any  respect  for  any  reason,  the  validity,  legality  and
enforceability of any such provision in every other respect and of the remaining
provisions  hereof  shall  not be in any way  impaired  or  affected,  it  being
intended  that all of the Offerors' and the  Purchaser's  rights and  privileges
shall be enforceable to the fullest extent permitted by law.

                     Signatures appear on the following page


                                     A-2-4
<PAGE>

       IN WITNESS  WHEREOF,  I have set my hand the day and year  first  written
above.

ALESCO PREFERRED FUNDING XVI, LTD.

By:
   ---------------------------------
Print Name:
            ------------------------
Title:
       -----------------------------

      IN WITNESS WHEREOF, this Subscription  Agreement is agreed to and accepted
as of the day and year first written above.

                                    FIRST MERCHANTS CORPORATION

                                    By:
                                       ---------------------------------------

                                    Name:
                                         -------------------------------------

                                    Title:
                                          ------------------------------------

                                    FIRST MERCHANTS CAPITAL TRUST II

                                    By:
                                       ---------------------------------------

                                    Name:
                                         -------------------------------------

                                    Title:  Administrator


                                     A-2-5
<PAGE>

                                   EXHIBIT A-2

                         FORM OF SUBSCRIPTION AGREEMENT

                        FIRST MERCHANTS CAPITAL TRUST II
                           FIRST MERCHANTS CORPORATION

                             SUBSCRIPTION AGREEMENT

                                  July 2, 2007

      THIS SUBSCRIPTION  AGREEMENT (this "Agreement") made among First Merchants
Capital  Trust II (the  "Trust"),  a statutory  trust created under the Delaware
Statutory  Trust Act  (Chapter 38 of Title 12 of the Delaware  Code,  12 Del. C.
ss.ss. 3801, et seq.), First Merchants Corporation, an Indiana corporation, with
its principal offices located at 200 East Jackson Street,  Muncie, Indiana 47305
(the "Company" and,  collectively with the Trust, the "Offerors"),  and PFW III,
Ltd. (the "Purchaser").

                                    RECITALS:

      A. The Trust  desires to issue 55,000 of its  Fixed/Floating  Rate Capital
Securities (the "Capital Securities"),  liquidation amount $1,000.00 per Capital
Security,  representing  an undivided  beneficial  interest in the assets of the
Trust  (the  "Offering"),  to be issued  pursuant  to an  Amended  and  Restated
Declaration of Trust (the  "Declaration")  by and among the Company,  Wilmington
Trust Company ("WTC"),  the  administrators  named therein,  and the holders (as
defined therein),  which Capital  Securities are to be guaranteed by the Company
with respect to  distributions  and payments upon  liquidation,  redemption  and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and

      B. The proceeds from the sale of the Capital  Securities  will be combined
with the  proceeds  from the sale by the  Trust  to the  Company  of its  common
securities,  and will be used by the Trust to purchase an  equivalent  amount of
Fixed/Floating  Rate Junior  Subordinated  Deferrable Interest Debentures of the
Company (the  "Debentures") to be issued by the Company pursuant to an indenture
to be executed by the Company and WTC, as trustee (the "Indenture"); and

      C. In  consideration  of the premises and the mutual  representations  and
covenants hereinafter set forth, the parties hereto agree as follows:

                                    ARTICLE I

                     PURCHASE AND SALE OF CAPITAL SECURITIES

      1.1. Upon the execution of this Agreement,  the Purchaser hereby agrees to
purchase from the Trust 7,000  Capital  Securities at a price equal to $1,000.00
per Capital  Security (the  "Purchase  Price") and the Trust agrees to sell such
Capital  Securities to the Purchaser  for said  Purchase  Price.  The rights and
preferences  of the Capital  Securities  are set forth in the  Declaration.  The
Purchase  Price is payable in immediately  available  funds on July 2, 2007 (the
"Closing  Date").  The  Offerors  shall  provide  the  Purchaser  wire  transfer
instructions no later than 3 days prior to the Closing Date.

      1.2. The certificate for the Capital  Securities shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.


                                     A-3-1
<PAGE>

      1.3.  The  Placement  Agreement,  dated  June  29,  2007  (the  "Placement
Agreement"),  among the Offerors and the  Placement  Agents  identified  therein
includes  certain  representations  and warranties,  covenants and conditions to
closing  and  certain  other  matters  governing  the  Offering.  The  Placement
Agreement  is hereby  incorporated  by  reference  into this  Agreement  and the
Purchaser shall be entitled to each of the benefits of the Placement  Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors  under such  Placement  Agreement as fully as if the
Purchaser were a party to such Placement Agreement.

                                   ARTICLE II

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

      2.1. The Purchaser  understands and acknowledges  that neither the Capital
Securities,  the  Debentures nor the Guarantee  have been  registered  under the
Securities  Act of  1933,  as  amended  (the  "Securities  Act"),  or any  other
applicable  securities  law,  are  being  offered  for  sale  by  the  Trust  in
transactions not requiring registration under the Securities Act, and may not be
offered,  sold,  pledged or otherwise  transferred  by the  Purchaser  except in
compliance with the registration requirements of the Securities Act or any other
applicable  securities  laws,  pursuant  to  an  exemption  therefrom  or  in  a
transaction not subject thereto.

      2.2. The Purchaser represents, warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not  acquiring  the Capital  Securities  for the account or benefit of any
such  U.S.  person,  (iii)  the  offer  and sale of  Capital  Securities  to the
Purchaser  constitutes  an  "offshore  transaction"  under  Regulation  S of the
Securities Act, and (iv) it will not engage in hedging  transactions with regard
to the Capital  Securities  unless such transactions are conducted in compliance
with the  Securities  Act and the  Purchaser  agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.

      2.3. The  Purchaser  represents  and warrants  that it is  purchasing  the
Capital Securities for its own account, for investment,  and not with a view to,
or for offer or sale in connection with, any  distribution  thereof in violation
of the  Securities  Act or other  applicable  securities  laws,  subject  to any
requirement  of law that the  disposition of its property be at all times within
its  control  and  subject to its  ability  to resell  such  Capital  Securities
pursuant to an effective  registration  statement  under the  Securities  Act or
under Rule 144A or any other  exemption from  registration  available  under the
Securities Act or any other applicable Securities law.

      2.4. The  Purchaser  represents  and  warrants  that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties  specified  herein,  and to consummate the transactions  contemplated
herein and it has full right and power to subscribe for Capital  Securities  and
perform its obligations pursuant to this Agreement.

      2.5. The  Purchaser,  a Cayman  Islands  Company whose  business  includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business  matters that it is capable of evaluating  the merits and
risks of  purchasing  the Capital  Securities,  has had the  opportunity  to ask
questions of, and receive answers and request  additional  information from, the
Offerors  and is aware that it may be required to bear the  economic  risk of an
investment in the Capital Securities.

      2.6.  The  Purchaser  represents  and  warrants  that no filing  with,  or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental  body, agency or court having  jurisdiction over the
Purchaser,  other than those that have been made or  obtained,  is  necessary or


                                     A-3-2
<PAGE>

required for the  performance  by the  Purchaser of its  obligations  under this
Agreement or to consummate the transactions contemplated herein.

      2.7. The Purchaser  represents  and warrants that this  Agreement has been
duly authorized, executed and delivered by the Purchaser.

      2.8. The Purchaser  represents  and warrants that (i) the Purchaser is not
in violation or default of any term of its Memorandum of Association or Articles
of  Association,  of  any  provision  of  any  mortgage,  indenture,   contract,
agreement, instrument or contract to which it is a party or by which it is bound
or of any judgment,  decree, order, writ or, to its knowledge, any statute, rule
or regulation applicable to the Purchaser which would prevent the Purchaser from
performing  any material  obligation set forth in this  Agreement;  and (ii) the
execution,  delivery and performance of and compliance with this Agreement,  and
the  consummation of the  transactions  contemplated  herein,  will not, with or
without  the  passage of time or giving of notice,  result in any such  material
violation,  or be in conflict  with or constitute a default under any such term,
or the  suspension,  revocation,  impairment,  forfeiture or  non-renewal of any
permit,  license,  authorization  or approval  applicable to the Purchaser,  its
business or operations  or any of its assets or  properties  which would prevent
the  Purchaser  from  performing  any  material  obligations  set  forth in this
Agreement.

      2.9.  The  Purchaser  represents  and  warrants  that the  Purchaser is an
exempted company with limited liability duly incorporated,  validly existing and
in good standing under the laws of the jurisdiction where it is organized,  with
full power and authority to perform its obligations under this Agreement.

      2.10. The Purchaser  understands  and  acknowledges  that the Company will
rely  upon  the   truth  and   accuracy   of  the   foregoing   acknowledgments,
representations,  warranties  and  agreements  and  agrees  that,  if any of the
acknowledgments,  representations,  warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate,  it
shall promptly notify the Company.

      2.11.  The Purchaser  understands  that no public market exists for any of
the Capital  Securities,  and that it is unlikely that a public market will ever
exist for the Capital Securities.

                                  ARTICLE III

                                  MISCELLANEOUS

      3.1. Any notice or other  communication  given  hereunder  shall be deemed
sufficient  if in writing  and sent by  registered  or  certified  mail,  return
receipt  requested,  international  courier or delivered by hand against written
receipt therefor,  or by facsimile  transmission and confirmed by telephone,  to
the following addresses,  or such other address as may be furnished to the other
parties as herein provided:

            To the Offerors:  First Merchants Corporation
                              200 East Jackson Street
                              Muncie, Indiana  47305
                              Attention:  Jami L. Bradshaw
                              Fax:  765-747-1447

            To the Purchaser: PFW III, Ltd.
                              Walker House
                              87 Mary Street
                              P.O. Box 908GT
                              George Town
                              Cayman Islands


                                     A-3-3
<PAGE>

            Unless otherwise expressly provided herein,  notices shall be deemed
to have been given on the date of mailing,  except  notice of change of address,
which shall be deemed to have been given when received.

      3.2. This Agreement shall not be changed,  modified or amended except by a
writing  signed by the  parties to be  charged,  and this  Agreement  may not be
discharged  except by performance  in accordance  with its terms or by a writing
signed by the party to be charged.

      3.3. Upon the execution and delivery of this  Agreement by the  Purchaser,
this Agreement  shall become a binding  obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.

      3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE  PARTIES  HERETO,  THE  PARTIES  EXPRESSLY  AGREE  THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

      3.5. The parties agree to execute and deliver all such further  documents,
agreements  and  instruments  and take such other and  further  action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

      3.6. This  Agreement may be executed in one or more  counterparts  each of
which shall be deemed an original,  but all of which shall  together  constitute
one and the same instrument.

      3.7. In the event that any one or more of the provisions contained herein,
or the application  thereof in any  circumstances,  is held invalid,  illegal or
unenforceable  in any  respect  for  any  reason,  the  validity,  legality  and
enforceability of any such provision in every other respect and of the remaining
provisions  hereof  shall  not be in any way  impaired  or  affected,  it  being
intended  that all of the Offerors' and the  Purchaser's  rights and  privileges
shall be enforceable to the fullest extent permitted by law.

                     Signatures appear on the following page


                                     A-3-4
<PAGE>

      IN  WITNESS  WHEREOF,  I have set my hand the day and year  first  written
above.

PFW III, LTD.

By:
   ---------------------------------
Print Name:
            ------------------------
Title:
       -----------------------------

      IN WITNESS WHEREOF, this Subscription  Agreement is agreed to and accepted
as of the day and year first written above.

                                    FIRST MERCHANTS CORPORATION

                                    By:
                                       ---------------------------------------

                                    Name:
                                         -------------------------------------

                                    Title:
                                          ------------------------------------

                                    FIRST MERCHANTS CAPITAL TRUST II

                                    By:
                                       ---------------------------------------

                                    Name:
                                         -------------------------------------

                                    Title:  Administrator


                                     A-3-5
<PAGE>

                                       EXHIBIT B-1

                             FORM OF COMPANY COUNSEL OPINION

                                       July 2, 2007

First Tennessee Bank National Association  FTN Financial Capital Markets
845 Crossover Lane, Suite 150              845 Crossover Lane, Suite 150
Memphis, Tennessee  38117                  Memphis, Tennessee  38117

Alesco Preferred Funding XVI, Ltd.         Keefe, Bruyette & Woods, Inc.
Walker House                               787 7th Avenue, 4th Floor
87 Mary Street                             New York, New York  10019
P. O. Box 908GT
George Town                                Wilmington Trust Company
Cayman Islands                             Rodney Square North
                                           1100 North Market Street
PFW III, Ltd.                              Wilmington, Delaware  19890-1600
Walker House
87 Mary Street
P. O. Box 908GT
George Town
Cayman Islands

Ladies and Gentlemen:

       We have acted as counsel to First Merchants  Corporation (the "Company"),
an Indiana corporation in connection with a certain Placement  Agreement,  dated
June 29,  2007,  (the  "Placement  Agreement"),  between  the  Company and First
Merchants Capital Trust II (the "Trust"), on one hand, and FTN Financial Capital
Markets and Keefe, Bruyette & Woods, Inc. (the "Placement Agents"), on the other
hand.  Pursuant  to the  Placement  Agreement,  and  subject  to the  terms  and
conditions stated therein, the Trust will issue and sell to First Tennessee Bank
National Association,  Alesco Preferred Funding XVI, Ltd. and PFW III, Ltd. (the
"Purchasers"),  $55,000,000.00 aggregate principal amount of Fixed/Floating Rate
Capital  Securities  (liquidation  amount  $1,000.00 per capital  security) (the
"Capital Securities").

       Capitalized  terms used herein and not  otherwise  defined shall have the
same meanings ascribed to them in the Placement Agreement.

       The law covered by the opinions expressed herein is limited to the law of
the United States of America and of the State of Indiana.

       We have  made  such  investigations  of law  as,  in our  judgment,  were
necessary  to render  the  following  opinions.  We have also  reviewed  (a) the
Company's Articles of Incorporation,  as amended,  and its By-Laws,  as amended;
and (b) such corporate documents,  records,  information and certificates of the
Company and the  Subsidiaries,  certificates  of public  officials or government
authorities and other documents as we have deemed  necessary or appropriate as a
basis for the opinions  hereinafter  expressed.  As to certain facts material to
our  opinions,   we  have  relied,   with  your  permission,   upon  statements,
certificates or representations, including those delivered or made in connection
with the above-referenced  transaction, of officers and other representatives of
the Company and the Subsidiaries and the Trust.


                                     B-1-1
<PAGE>

       As used herein,  the phrases "to the best of our  knowledge" or "known to
us" or other similar phrases mean the actual knowledge of the attorneys who have
had active involvement in the transactions  described above or who have prepared
or signed  this  opinion  letter,  or who  otherwise  have  devoted  substantial
attention to legal matters for the Company.

       Based upon and subject to the  foregoing  and the further  qualifications
set forth below, we are of the opinion as of the date hereof that:

      1. The Company is validly  existing and in good standing under the laws of
the State of Indiana and is duly  registered as a bank holding company under the
Bank  Holding  Company  Act  of  1956,  as  amended.  Each  of  the  Significant
Subsidiaries  is validly  existing  and in good  standing  under the laws of its
jurisdiction  of   organization.   Each  of  the  Company  and  the  Significant
Subsidiaries  has  full  corporate  power  and  authority  to own or  lease  its
properties  and to conduct its business as such business is currently  conducted
in all material respects.  To the best of our knowledge,  all outstanding shares
of capital stock of the Significant  Subsidiaries  have been duly authorized and
validly issued,  and are fully paid and nonassessable  except to the extent such
shares  may be  deemed  assessable  under 12 U.S.C.  Section  1831o or 12 U.S.C.
Section 55, and are owned of record and beneficially, directly or indirectly, by
the Company.

      2. The issuance,  sale and delivery of the  Debentures in accordance  with
the terms and conditions of the Placement  Agreement and the Operative Documents
have been duly authorized by all necessary actions of the Company. The issuance,
sale and delivery of the  Debentures by the Company and the  issuance,  sale and
delivery of the Capital Securities and the Common Securities by the Trust do not
give rise to any  preemptive or other rights to subscribe for or to purchase any
shares of capital stock or equity  securities of the Company or the  Significant
Subsidiaries  pursuant to the corporate  Articles of  Incorporation  or Charter,
By-Laws  or  other  governing  documents  of  the  Company  or  the  Significant
Subsidiaries,  or,  to the  best  of  our  knowledge,  any  agreement  or  other
instrument  to which  either the  Company or the  Subsidiaries  is a party or by
which the Company or the Significant Subsidiaries may be bound.

      3. The Company has all requisite corporate power to enter into and perform
its obligations under the Placement  Agreement and the Subscription  Agreements,
and the Placement  Agreement and the Subscription  Agreements have been duly and
validly  authorized,  executed and delivered by the Company and  constitute  the
legal,  valid and binding  obligations of the Company  enforceable in accordance
with their terms,  except as the  enforcement  thereof may be limited by general
principles of equity and by bankruptcy or other laws affecting creditors' rights
generally, and except as the indemnification and contribution provisions thereof
may be limited under  applicable laws and certain  remedies may not be available
in the case of a non-material breach.

      4. Each of the Indenture,  the Trust Agreement and the Guarantee Agreement
has been duly authorized,  executed and delivered by the Company, and is a valid
and legally binding obligation of the Company enforceable in accordance with its
terms,  subject  to  the  effect  of  bankruptcy,  insolvency,   reorganization,
receivership,  moratorium  and other laws  affecting  the rights and remedies of
creditors generally and of general principles of equity.

      5. The Debentures have been duly authorized, executed and delivered by the
Company,  are entitled to the benefits of the Indenture and are legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with  their   terms,   subject  to  the   effect  of   bankruptcy,   insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.


                                     B-1-2
<PAGE>

      6. To the best of our knowledge,  neither the Company,  the Trust, nor any
of the  Subsidiaries  is in breach or violation  of, or default  under,  with or
without  notice  or lapse of time or both,  its  Articles  of  Incorporation  or
Charter, By-Laws or other governing documents (including without limitation, the
Trust  Agreement).  The  execution,  delivery and  performance  of the Placement
Agreement and the Operative  Documents and the  consummation of the transactions
contemplated by the Placement  Agreement and the Operative  Documents do not and
will not (i) result in the creation or imposition of any material  lien,  claim,
charge, encumbrance or restriction upon any property or assets of the Company or
the  Subsidiaries,  or (ii)  conflict  with,  constitute  a  material  breach or
violation of, or constitute a material default under,  with or without notice or
lapse of time or both,  any of the terms,  provisions  or  conditions of (A) the
Articles of  Incorporation or Charter,  By-Laws or other governing  documents of
the  Company  or the  Subsidiaries,  or (B) to the  best of our  knowledge,  any
material contract, indenture, mortgage, deed of trust, loan or credit agreement,
note,  lease,  franchise,  license or any other agreement or instrument to which
the  Company  or the  Subsidiaries  is a party or by which any of them or any of
their  respective  properties may be bound or (C) any order,  decree,  judgment,
franchise,  license,  permit,  rule  or  regulation  of any  court,  arbitrator,
government,  or  governmental  agency or  instrumentality,  domestic or foreign,
known to us having  jurisdiction  over the Company or the Subsidiaries or any of
their respective  properties which, in the case of each of (i) or (ii) above, is
material to the Company and the Subsidiaries on a consolidated basis.

      7.  Except  for  filings,  registrations  or  qualifications  that  may be
required by applicable securities laws, no authorization,  approval,  consent or
order of, or filing,  registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is required under
the  laws  of  the  State  of  Indiana  in  connection  with  the   transactions
contemplated  by  the  Placement   Agreement  and  the  Operative  Documents  in
connection with the offer and sale of the Capital  Securities as contemplated by
the Placement Agreement and the Operative Documents.

      8. To the best of our knowledge  (i) no action,  suit or proceeding at law
or in equity is pending or  threatened  to which the  Company,  the Trust or the
Subsidiaries  are or may be a party,  and (ii) no action,  suit or proceeding is
pending  or  threatened  against  or  affecting  the  Company,  the Trust or the
Subsidiaries or any of their properties,  before or by any court or governmental
official,  commission,  board or other administrative agency, authority or body,
or any  arbitrator,  wherein an  unfavorable  decision,  ruling or finding could
reasonably be expected to have a material  adverse effect on the consummation of
the  transactions  contemplated  by the  Placement  Agreement  and the Operative
Documents  or the issuance and sale of the Capital  Securities  as  contemplated
therein or the condition (financial or otherwise),  earnings, affairs, business,
or results of operations  of the Company,  the Trust and the  Subsidiaries  on a
consolidated basis.

      9. Assuming the truth and accuracy of the  representations  and warranties
of the  Placement  Agents in the Placement  Agreement and the  Purchasers in the
Subscription  Agreements,  it is not necessary in connection  with the offering,
sale and delivery of the Capital  Securities,  the  Debentures and the Guarantee
Agreement (or the  Guarantee) to register the same under the  Securities  Act of
1933,  as  amended,  under  the  circumstances  contemplated  in  the  Placement
Agreement and the Subscription Agreements.

      10.  Neither the Company  nor the Trust is or after  giving  effect to the
offering  and  sale  of the  Capital  Securities  and  the  consummation  of the
transactions  described  in the  Placement  Agreement  will be,  an  "investment
company" or an entity  "controlled"  by an  "investment  company,"  in each case
within the meaning of the  Investment  Company Act of 1940, as amended,  without
regard to Section 3(c) of such Act.


                                     B-1-3
<PAGE>

      The opinion  expressed in the first two sentences of numbered  paragraph 1
of this  opinion is based  solely upon certain  certificates  and  confirmations
issued by the applicable  governmental officer or authority with respect to each
of the Company and the Significant Subsidiaries.

      With respect to the  foregoing  opinions,  since no member of this firm is
actively  engaged in the  practice of law in the States of Delaware or New York,
we do not  express  any  opinions  as to the  laws of such  states  and have (i)
relied, with your approval, upon the opinion of Richards,  Layton & Finger, P.A.
with respect to matters of Delaware law and (ii) assumed, with your approval and
without rendering any opinion to such effect,  that the laws of the State of New
York, in all respects material to this opinion,  are substantively  identical to
the laws of the State of Indiana, without regard to conflict of law provisions.

      The  opinions  expressed  herein are  rendered  to you solely  pursuant to
Section 3.1(a) of the Placement  Agreement.  As such, they may be relied upon by
you only and may not be used or relied upon by any other  person for any purpose
whatsoever without our prior written consent.

                                    Very truly yours,


                                     B-1-4
<PAGE>

                                   EXHIBIT B-2

                        FORM OF DELAWARE COUNSEL OPINION

To Each of the Persons
Listed on Schedule A Hereto

            Re: First Merchants Capital Trust II

Ladies and Gentlemen:

            We have  acted as  special  Delaware  counsel  for  First  Merchants
Capital Trust II, a Delaware  statutory trust (the "Trust"),  in connection with
the matters set forth herein.  At your request,  this opinion is being furnished
to you.

            For  purposes  of giving the  opinions  hereinafter  set forth,  our
examination  of documents  has been limited to the  examination  of originals or
copies of the following:

            (a) The  Certificate  of Trust of the  Trust  (the  "Certificate  of
Trust"),  as filed  in the  office  of the  Secretary  of State of the  State of
Delaware (the "Secretary of State") on June 29, 2007;

            (b) The Declaration of Trust, dated as of June 29, 2007, among First
Merchants Corporation, an Indiana corporation (the "Company"),  Wilmington Trust
Company,   a  Delaware  banking   corporation   ("WTC"),   as  trustee  and  the
administrators named therein (the "Administrators");

            (c) The  Amended  and  Restated  Declaration  of Trust of the Trust,
dated as of July 2, 2007 (including the form of Capital  Securities  Certificate
attached thereto as Exhibits A-1 and A-2 and the terms of the Capital Securities
attached  as Annex I) (the  "Declaration  of  Trust"),  among  the  Company,  as
sponsor,  WTC, as Delaware  trustee (the "Delaware  Trustee") and  institutional
trustee (the "Institutional  Trustee"), the Administrators and the holders, from
time to time, of undivided beneficial interests in the assets of the Trust;

            (d) The  Placement  Agreement,  dated June 29, 2007 (the  "Placement
Agreement"), among the Company, the Trust, and FTN Financial Capital Markets and
Keefe, Bruyette & Woods, Inc., as placement agents;

            (e)  The   Subscription   Agreements,   dated   July  2,  2007  (the
"Subscription Agreement"), among (i) the Trust, the Company and Alesco Preferred
Funding XVI, Ltd.,  (ii) the Trust,  the Company and PFW III, Ltd. and (iii) the
Trust, the Company and First Tennessee Bank National  Association (the documents
identified  in items (c)  through  (e)  being  collectively  referred  to as the
"Operative Documents");

            (f) The  Capital  Securities  being  issued on the date  hereof (the
"Capital Securities");

            (g) The  Common  Securities  being  issued on the date  hereof  (the
"Common  Securities")  (the  documents  identified  in items  (f) and (g)  being
collectively referred to as the "Trust Securities"); and

            (h) A  Certificate  of Good  Standing for the Trust,  dated June 29,
2007, obtained from the Secretary of State.


                                     B-2-1
<PAGE>

            Capitalized  terms used herein and not otherwise defined are used as
defined  in the  Declaration  of  Trust,  except  that  reference  herein to any
document shall mean such document as in effect on the date hereof.  This opinion
is being delivered pursuant to Section 3.1 of the Placement Agreement.

            For purposes of this  opinion,  we have not  reviewed any  documents
other  than the  documents  listed in  paragraphs  (a)  through  (h)  above.  In
particular,  we have not reviewed any document (other than the documents  listed
in paragraphs (a) through (h) above) that is referred to in or  incorporated  by
reference  into the documents  reviewed by us. We have assumed that there exists
no provision in any document that we have not reviewed that is inconsistent with
the  opinions   stated  herein.   We  have  conducted  no  independent   factual
investigation  of our own but  rather  have  relied  solely  upon the  foregoing
documents,  the statements and  information set forth therein and the additional
matters  recited or  assumed  herein,  all of which we have  assumed to be true,
complete and accurate in all material respects.

            With  respect to all  documents  examined by us, we have assumed (i)
the authenticity of all documents submitted to us as authentic  originals,  (ii)
the conformity with the originals of all documents  submitted to us as copies or
forms, and (iii) the genuineness of all signatures.

            For  purposes  of  this  opinion,  we  have  assumed  (i)  that  the
Declaration of Trust  constitutes the entire agreement among the parties thereto
with  respect to the  subject  matter  thereof,  including  with  respect to the
creation,  operation,  and termination of the Trust, and that the Declaration of
Trust and the  Certificate  of Trust are in full  force and  effect and have not
been  amended   further,   (ii)  that  there  are  no  proceedings   pending  or
contemplated,  for  the  merger,  consolidation,   liquidation,  dissolution  or
termination  of the Trust,  (iii)  except to the extent  provided in paragraph 1
below, the due creation, due formation or due organization,  as the case may be,
and valid existence in good standing of each party to the documents  examined by
us under the laws of the  jurisdiction  governing  its  creation,  formation  or
organization,  (iv) that each party to the documents examined by us is qualified
to do  business  in each  jurisdiction  where  such  qualification  is  required
generally  or  necessary in order for such party to enforce its rights under the
documents examined by us, (v) the legal capacity of each natural person who is a
party to the  documents  examined  by us, (vi) except to the extent set forth in
paragraph 2 below, that each of the parties to the documents  examined by us has
the power and authority to execute and deliver,  and to perform its  obligations
under, such documents, (vii) except to the extent provided in paragraph 3 below,
that each of the parties to the  documents  examined by us has duly  authorized,
executed and delivered such documents, (viii) the receipt by each Person to whom
a Capital Security is to be issued by the Trust (the "Capital Security Holders")
of a Capital  Security  Certificate for the Capital Security and the payment for
the Capital  Securities  acquired by it, in accordance  with the  Declaration of
Trust and the  Subscription  Agreement,  (ix) that the  Capital  Securities  are
issued and sold to the Holders of the Capital  Securities in accordance with the
Declaration  of Trust and the  Subscription  Agreement,  (x) the  receipt by the
Person (the "Common  Securityholder") to whom the common securities of the Trust
representing  common undivided  beneficial  interests in the assets of the Trust
(the "Common Securities" and, together with the Capital  Securities,  the "Trust
Securities") are to be issued by the Trust of a Common Security  Certificate for
the Common Securities and the payment for the Common Securities  acquired by it,
in accordance with the Declaration of Trust, (xi) that the Common Securities are
issued and sold to the Common  Securityholder in accordance with the Declaration
of Trust,  (xii) that each of the  parties to the  documents  reviewed by us has
agreed to and  received  the  stated  consideration  for the  incurrence  of its
obligations under such documents,  (xiii) that each of the documents reviewed by
us  (other  than the  Declaration  of  Trust)  is a legal,  valid,  binding  and
enforceable  obligation  of the  parties  thereto in  accordance  with the terms
thereof  and (xiv)  that the Trust  derives  no income  from or  connected  with
sources within the State of Delaware and has no assets,  activities  (other than
having a trustee and the filing of  documents  with the  Secretary  of State) or
employees in the State of Delaware.  We have not participated in the preparation
of any offering  materials  with respect to the Trust  Securities  and assume no
responsibility for its contents.


                                     B-2-2
<PAGE>

            This  opinion  is  limited  to the  laws of the  State  of  Delaware
(excluding  the  securities  laws of the  State  of  Delaware),  and we have not
considered  and  express  no  opinion  on the  laws of any  other  jurisdiction,
including federal laws and rules and regulations  relating thereto. Our opinions
are  rendered  only with  respect to Delaware  laws and rules,  regulations  and
orders thereunder that are currently in effect.

            We express no opinion as to (i) the effect of  suretyship  defenses,
or  defenses  in the nature  thereof,  with  respect to the  obligations  of any
applicable  guarantor,  joint obligor,  surety,  accommodation  party,  or other
secondary  obligor or any provisions of the Declaration of Trust with respect to
indemnification  or  contribution  and (ii) the accuracy or  completeness of any
exhibits or schedules to the Operative Documents.  No opinion is given herein as
to the  choice  of law or  internal  substantive  rules of law that any court or
other  tribunal  may apply to the  transactions  contemplated  by the  Operative
Documents.

            We express no opinion  as to the  enforceability  of any  particular
provision of the Declaration of Trust or the other Operative  Documents relating
to remedies after default.

            We express no opinion  as to the  enforceability  of any  particular
provision of any of the Operative Documents relating to (i) waivers of rights to
object to jurisdiction  or venue,  or consents to  jurisdiction  or venue,  (ii)
waivers of rights to (or methods  of) service of process,  or rights to trial by
jury, or other rights or benefits bestowed by operation of law, (iii) waivers of
any applicable defenses, setoffs, recoupments, or counterclaims, (iv) waivers or
variations of provisions  which are not capable of waiver or variation under the
Uniform  Commercial  Code  ("UCC")  of the  State,  (v) the  grant of  powers of
attorney to any person or entity,  or (vi)  exculpation or exoneration  clauses,
indemnity  clauses,  and clauses  relating  to releases or waivers of  unmatured
claims or rights.

            We have made no examination of, and no opinion is given herein as to
the  Trustee's  or the  Trust's  title to or other  ownership  rights in, or the
existence of any liens,  charges or encumbrances  on, or adverse claims against,
any asset or property held by the Institutional Trustee or the Trust. We express
no opinion as to the creation, validity,  attachment,  perfection or priority of
any  mortgage,  security  interest or lien in any asset or property  held by the
Institutional Trustee or the Trust.

            We  express  no  opinion  as to  the  effect  of  events  occurring,
circumstances arising, or changes of law becoming effective or occurring,  after
the date hereof on the matters  addressed in this opinion letter,  and we assume
no  responsibility  to inform you of additional or changed facts,  or changes in
law, of which we may become aware.

            We express no  opinion as to any  requirement  that any party to the
Operative  Documents (or any other persons or entities  purportedly  entitled to
the benefits  thereof) qualify or register to do business in any jurisdiction in
order to be able to  enforce  its  rights  thereunder  or  obtain  the  benefits
thereof.

            Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered  necessary or
appropriate,  and subject to the  assumptions,  qualifications,  limitations and
exceptions set forth herein, we are of the opinion that:

            1. The Trust has been duly  created and is validly  existing in good
standing as a statutory trust under the Delaware Statutory Trust Act (12 Del. C.
ss. 3801, et seq.) (the "Act"). All filings required under the laws of the State
of Delaware  with respect to the creation and valid  existence of the Trust as a
statutory trust have been made.


                                     B-2-3
<PAGE>

            2.  Under the  Declaration  of Trust and the Act,  the Trust has the
trust power and  authority to (A) execute and deliver the  Operative  Documents,
(B) perform its  obligations  under such  Operative  Documents and (C) issue the
Trust Securities.

            3.  The  execution  and  delivery  by the  Trust  of  the  Operative
Documents, and the performance by the Trust of its obligations thereunder,  have
been duly authorized by all necessary trust action on the part of the Trust.

            4. The Declaration of Trust  constitutes a legal,  valid and binding
obligation  of  the  Company,  the  Trustees  and  the  Administrators,  and  is
enforceable  against  the  Company,  the  Trustees  and the  Administrators,  in
accordance with its terms.

            5. Each of the Operative  Documents  constitutes a legal,  valid and
binding  obligation of the Trust,  enforceable  against the Trust, in accordance
with its terms.

            6. The Capital  Securities have been duly authorized for issuance by
the Declaration of Trust,  and, when duly executed and delivered to and paid for
by the  purchasers  thereof in accordance  with the  Declaration  of Trust,  the
Subscription Agreement and the Placement Agreement,  the Capital Securities will
be validly issued,  fully paid and, subject to the  qualifications  set forth in
paragraph 8 below, nonassessable undivided beneficial interests in the assets of
the Trust and will entitle the Capital Securities Holders to the benefits of the
Declaration of Trust.  The issuance of the Capital  Securities is not subject to
preemptive or other similar rights under the Act or the Declaration of Trust.

            7. The Common  Securities  have been duly authorized for issuance by
the Declaration of Trust and, when duly executed and delivered to the Company as
Common  Security  Holder in accordance  with the  Declaration of Trust,  will be
validly issued,  fully paid and, subject to paragraph 8 below and Section 9.1(b)
of the  Declaration  of Trust  (which  provides  that the  Holder of the  Common
Securities  are  liable  for  debts and  obligations  of  Trust),  nonassessable
undivided  beneficial  interests in the assets of the Trust and will entitle the
Common Security Holder to the benefits of the Declaration of Trust. The issuance
of the Common  Securities is not subject to  preemptive or other similar  rights
under the Act or the Declaration of Trust.

            8. Under the  Declaration  of Trust and the Act,  the Holders of the
Capital  Securities,  as beneficial owners of the Trust, will be entitled to the
same  limitation  of  personal  liability  extended to  stockholders  of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.  We note that the Holders of the Capital  Securities and the Holder
of the Common Securities may be obligated, pursuant to the Declaration of Trust,
(A) to provide  indemnity  and/or  security in connection  with and pay taxes or
governmental  charges  arising from  transfers or exchanges of Capital  Security
Certificates and the issuance of replacement Capital Security Certificates,  and
(B)  to  provide  security  or  indemnity  in  connection  with  requests  of or
directions to the Institutional  Trustee to exercise its rights and powers under
the Declaration of Trust.

            9. Neither the execution,  delivery and  performance by the Trust of
the  Operative  Documents,  nor  the  consummation  by the  Trust  of any of the
transactions  contemplated  thereby,  requires  the consent or approval  of, the
authorization  of, the  withholding  of  objection on the part of, the giving of
notice to, the filing,  registration or qualification with, or the taking of any
other action in respect of, any governmental authority or agency of the State of
Delaware,  other than the filing of the  Certificate of Trust with the Secretary
of State (which Certificate of Trust has been duly filed).

            10. Neither the execution,  delivery and performance by the Trust of
the Trust  Documents,  nor the  consummation  by the  Trust of the  transactions
contemplated  thereby, (i) is in


                                     B-2-4
<PAGE>

violation of the  Declaration  of Trust or of any law, rule or regulation of the
State of Delaware  applicable to the Trust or (ii) to the best of our knowledge,
without  independent  investigation,  violates,  contravenes  or  constitutes  a
default  under,  or results in a breach of or in the creation of any lien (other
than as permitted  by the  Operative  Documents)  upon any property of the Trust
under any indenture,  mortgage,  chattel  mortgage,  deed of trust,  conditional
sales  contract,  bank loan or credit  agreement,  license or other agreement or
instrument to which the Trust is a party or by which it is bound.

            11. Assuming that the Trust will not be taxable as a corporation for
federal income tax purposes,  but rather will be classified for such purposes as
a grantor trust under Subpart E, Part I of Subchapter J of the Internal  Revenue
Code of 1986,  as  amended,  the Trust will not be  subject  to any tax,  fee or
governmental charge under the laws of the State of Delaware.

            The  opinions  expressed  in  paragraph  4, 5, 6, 7 and 8 above  are
subject,  as to enforcement,  to the effect upon the Declaration of Trust of (i)
bankruptcy, insolvency, moratorium, receivership,  reorganization,  liquidation,
fraudulent  conveyance  and  transfer,  and other  similar  laws  relating to or
affecting  the rights and remedies of creditors  generally,  (ii)  principles of
equity,  including  applicable law relating to fiduciary  duties  (regardless of
whether  considered  and applied in a proceeding in equity or at law), and (iii)
the effect of  applicable  public  policy on the  enforceability  of  provisions
relating to indemnification or contribution.

            Circular 230 Notice. Any advice contained in this communication with
respect to any federal tax matter was not intended or written to be used, and it
cannot be used by any taxpayer,  for the purpose of avoiding  penalties that the
Internal Revenue Service may impose on the taxpayer.  If any such advice is made
to any person  other than to our  client for whom the advice was  prepared,  the
advice  expressed above is being delivered to support the promotion or marketing
(by a person other than Richards,  Layton & Finger) of the transaction or matter
discussed  or  referenced,  and such  taxpayer  should seek advice  based on the
taxpayer's particular circumstances from an independent tax advisor.

            In basing the  opinions  set forth  herein on "our  knowledge,"  the
words "our  knowledge"  signify that no information has come to the attention of
the attorneys in the firm who are directly involved in the representation of the
Trust in this  transaction  that  would give us actual  knowledge  that any such
opinions are not accurate. Except as otherwise stated herein, we have undertaken
no independent investigation or verification of such matters.

            We consent to your  relying as to matters of Delaware  law upon this
opinion in connection  with the Placement  Agreement.  We also consent to Lewis,
Rice &  Fingersh,  L.C.'s  and  Bingham  McHale  LLP's  relying as to matters of
Delaware law upon this  opinion in  connection  with  opinions to be rendered by
them on the date hereof  pursuant to the Placement  Agreement.  Except as stated
above,  without our prior written consent,  this opinion may not be furnished or
quoted to, or relied upon by, any other Person for any purpose.

                                    Very truly yours,


                                     B-2-5
<PAGE>

                                   SCHEDULE A

Wilmington Trust Company

FTN Financial Capital Markets

Keefe, Bruyette & Woods, Inc.

First Tennessee Bank National Association

Alesco Preferred Funding XVI, Ltd.

PFW III, Ltd.

First Merchants Corporation


                                     B-2-6
<PAGE>

                                       EXHIBIT B-3

                                TAX COUNSEL OPINION ITEMS

1.    The Debentures  will be classified as indebtedness of the Company for U.S.
      federal income tax purposes.

2.    The  Trust  will  be  characterized  as a  grantor  trust  and  not  as an
      association taxable as a corporation for U.S. federal income tax purposes.


                                     B-3-1
<PAGE>

Lewis, Rice & Fingersh, L.C.
500 N. Broadway, Suite 2000
St. Louis, Missouri  63102

      Re:   Representations  Concerning  the  Issuance  of  Junior  Subordinated
            Deferrable Interest Debentures (the "Debentures") to First Merchants
            Capital  Trust II (the  "Trust") and Sale of Trust  Securities  (the
            "Trust Securities") of the Trust

Ladies and Gentlemen:

      In  accordance  with  your  request,   First  Merchants  Corporation  (the
"Company")  hereby makes the following  representations  in connection  with the
preparation  of your opinion  letter as to the United States  federal income tax
consequences  of the issuance by the Company of the  Debentures to the Trust and
the sale of the Trust Securities.

      Company hereby represents that:

      1. The sole assets of the Trust will be the Debentures,  any interest paid
on the Debentures to the extent not distributed,  proceeds of the Debentures, or
any of the foregoing.

      2.  The  Company  intends  to use the net  proceeds  from  the sale of the
Debentures for general corporate purposes.

      3. The Trust was not formed to conduct  any trade or  business  and is not
authorized to conduct any trade or business.  The Trust exists for the exclusive
purposes  of (i)  issuing  and  selling  the Trust  Securities,  (ii)  using the
proceeds from the sale of Trust Securities to acquire the Debentures,  and (iii)
engaging only in activities necessary or incidental thereto.

      4. The Company has not entered into an agency  agreement with the Trust or
authorized the trustee to act as its agent in dealing with third parties. To the
Company's knowledge,  after due inquiry, the Trust has not acted as the agent of
the Company or of anyone else in dealing with third parties.

      5. The Trust was formed to facilitate  direct  investment in the assets of
the Trust,  and the existence of multiple  classes of ownership is incidental to
that  purpose.  There is no intent to provide  holders of such  interests in the
Trust with diverse interests in the assets of the Trust.

      6. The Company intends to create a  debtor-creditor  relationship  between
the Company, as debtor, and the Trust, as a creditor, upon the issuance and sale
of the  Debentures to the Trust by the Company.  The Company will (i) record and
at all times continue to reflect the Debentures as  indebtedness on its separate
books  and  records  for  financial  accounting  purposes,  and (ii)  treat  the
Debentures as indebtedness for all United States tax purposes.

      7. During each year,  the Trust's  income will consist  solely of payments
made by the Company with respect to the  Debentures.  Such  payments will not be
derived from the active conduct of a financial  business by the Trust.  Both the
Company's  obligation to make such payments and the  measurement  of the amounts
payable by the Company are defined by the terms of the  Debentures.  Neither the
Company's  obligation to make such payments nor the  measurement  of the amounts
payable  by the  Company  is  dependent  on income or  profits of Company or any
affiliate of the Company.


                                     B-3-2
<PAGE>

      8. The Company expects that it will be able to make, and will make, timely
payment of amounts  identified  by the  Debentures  as principal and interest in
accordance  with  the  terms  of  the  Debentures  with  available   capital  or
accumulated earnings.

      9. The Company  presently has no intention to defer  interest  payments on
the Debentures,  and it considers the likelihood of such a deferral to be remote
because,  if it were to exercise  its right to defer  payments of interest  with
respect  to the  Debentures,  it would not be  permitted  to  declare or pay any
dividends  or  distributions  on,  or  redeem,  purchase,  acquire,  or  make  a
liquidation  payment  with  respect to, any capital  stock of the Company or any
affiliate of the Company (other than payments of dividends or  distributions  to
the Company or payments of dividends from direct or indirect subsidiaries of the
Company to their  parent  corporations,  which also shall be direct or  indirect
subsidiaries  of the Company) or make any payment of principal of or interest or
premium, if any, on or repay,  repurchase,  or redeem any debt securities of the
Company or any  affiliate  of the Company  that rank pari passu in all  respects
with or junior in interest to the  Debentures,  in each case  subject to limited
exceptions  stated  in  Section  2.11 of the  Indenture  to be  entered  into in
connection with the issuance of the Debentures.

      10. The Company has no present  intention  (a) to take the position that a
deferral of interest payments on the Debentures is not a remote contingency,  or
(b) to make an explicit  disclosure on the Company's tax return,  under Reg. ss.
1.1275-2(h)(5)   that  its  determination  as  holder  with  respect  to  remote
contingency status is different from its determination as issuer.

      11.  Immediately after the issuance of the Debentures,  the debt-to-equity
ratio of the Company (as  determined  for  financial  accounting  purposes,  but
excluding  deposit  liabilities from the Company's debt) will be within standard
depository  institution industry norms and, in any event, will be no higher than
four to one (4 : 1).

      12. To the best of our  knowledge,  the Company is currently in compliance
with all federal,  state, and local capital  requirements,  except to the extent
that  failure  to comply  with any such  requirements  would not have a material
adverse effect on the Company and its affiliates.

      13.  The  Company  will not issue any class of common  stock or  preferred
stock senior to the Debentures during their term.

      14. The Internal Revenue Service has not challenged the interest deduction
on any class of the  Company's  subordinated  debt in the last ten (10) years on
the basis that such debt constitutes equity for federal income tax purposes.

      The  above  representations  are  accurate  as of the date  below and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise  notified by us in writing.  The undersigned  understands that you
will rely on the foregoing in connection with rendering  certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.

                                    Very truly yours,

                                    FIRST MERCHANTS CORPORATION

Date: June 29, 2007                 By:   ___________________________________

                                    Title:___________________________________


                                     B-3-3
<PAGE>

                                        EXHIBIT C

                                 SIGNIFICANT SUBSIDIARIES

First Merchants Bank, National Association

Lafayette Bank and Trust Company, National Association

Commerce National Bank

First Merchants Bank of Central Indiana, National Association


                                      C-1