Document:

exhibit4-3.htm

FIRST SUPPLEMENTAL INDENTURE

between

FIRST MERCHANTS CORPORATION

and

U.S. BANK TRUST NATIONAL ASSOCIATION

Dated as of June 30, 2010

  

  

  

 

	
TABLE OF CONTENTS

	 	 	 	 	 
	  	 	  	 	
Page

	
ARTICLE I

	
DEFINITIONS

	 	 	 
	
Section 1.1

	 	
Definition of Terms.

	 	
2

	 	 	 
	
ARTICLE II

	
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES

	 	 	 
	
Section 2.1

	 	
Designation and Principal Amount.

	 	
3

	
Section 2.2

	 	
No Maturity.

	 	
3

	
Section 2.3

	 	
Form and Payment.

	 	
3

	
Section 2.4

	 	
Global Debenture.

	 	
4

	
Section 2.5

	 	
Interest.

	 	
5

	
Section 2.6

	 	
Forms of Declaration and Guarantee Agreement.

	 	
6

	
Section 2.7

	 	
Events of Default.

	 	
6

	 	 	 
	
ARTICLE III

	
REDEMPTION OF THE DEBENTURES

	 	 	 
	
Section 3.1

	 	
Optional Redemption.

	 	
6

	
Section 3.2

	 	
Redemption Procedures.

	 	
6

	
Section 3.3

	 	
No Sinking Fund.

	 	
6

	 	 	 
	
ARTICLE IV

	
EXTENSION OF INTEREST PAYMENT PERIOD

	 	 	 
	
Section 4.1

	 	
Extension of Interest Payment Period.

	 	
7

	
Section 4.2

	 	
Notice of Extension.

	 	
7

	
Section 4.3

	 	
Limitation of Transactions.

	 	
8

	 	 	 
	
ARTICLE V

	
EXPENSES

	 	 	 
	
Section 5.1

	 	
Payment of Expenses.

	 	
8

	
Section 5.2

	 	
Payment Upon Resignation or Removal.

	 	
9

	 	 	 
	
ARTICLE VI

	
COVENANT TO LIST ON EXCHANGE

	 	 	 
	
Section 6.1

	 	
Listing on an Exchange.

	 	
9

  

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ARTICLE VII

	
FORM OF DEBENTURE

	 	 	 
	
Section 7.1

	 	
Form of Debenture.

	 	
9

	
Section 7.2

	 	
Legend and Transfer of Debentures.

	 	
9

	 	 	 
	
ARTICLE VIII

	
ORIGINAL ISSUE OF DEBENTURES

	 	 	 
	
Section 8.1

	 	
Original Issue of Debentures.

	 	
11

	 	 	 
	
ARTICLE IX

	
MISCELLANEOUS

	 	 	 
	
Section 9.1

	 	
Ratification of Indenture.

	 	
11

	
Section 9.2

	 	
Trustee Not Responsible for Recitals.

	 	
11

	
Section 9.3

	 	
Governing Law.

	 	
11

	
Section 9.4

	 	
Separability.

	 	
12

	
Section 9.5

	 	
Counterparts.

	 	
12

  

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THIS FIRST SUPPLEMENTAL INDENTURE, dated as of June 30, 2010 (the “First Supplemental Indenture”), between FIRST MERCHANTS CORPORATION, an Indiana corporation (hereinafter sometimes called the “Company”), and U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association, as trustee (hereinafter sometimes called the “Trustee”) under the Indenture dated as of June 30, 2010 between the Company and the Trustee (the “Indenture”).

WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of the Company’s unsecured junior subordinated debentures to be issued from time to time in one or more series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered as provided in the Indenture;

WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of such securities to be known as its Fixed Rate Perpetual Junior Subordinated Debentures, Series A (the “Debentures”), the form and substance of such Debentures and the terms, provisions and conditions thereof to be set forth as provided in the Indenture and this First Supplemental Indenture;

WHEREAS, the Company and First Merchants Capital Trust III, a Delaware statutory trust (the “Trust”), propose to exchange for 46,400 shares of outstanding Fixed Rate Cumulative Perpetual Preferred Stock, Series A, $1,000 liquidation preference per share, of the Company (the “Series A Preferred Stock”) $46,400,000 aggregate liquidation amount of the Trust’s Fixed Rate Capital Securities (the “Capital Securities”), representing preferred undivided beneficial interests in the assets of the Trust, and the Trust proposes to use the Series A Preferred Stock, together with the proceeds of the issuance and sale by the Trust to the Company of $1,435,000 aggregate liquidation amount of its Fixed Rate Common Securities (the “Common Securities”), to purchase $47,835,000 aggregate principal amount of the Debentures; and

WHEREAS, the Company has requested that the Trustee execute and deliver this First Supplemental Indenture and all requirements necessary to make this First Supplemental Indenture a valid instrument in accordance with its terms, and to make the Debentures, when executed by the Company, and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed, and the execution and delivery of this First Supplemental Indenture has been duly authorized in all respects.

NOW THEREFORE, in consideration of the purchase and acceptance of the Debentures by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Debentures and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows:

  

  

  

ARTICLE I

DEFINITIONS

Section 1.1       Definition of Terms.  Unless the context otherwise requires:

(a)           a term defined in the Indenture has the same meaning when used in this First Supplemental Indenture;

(b)           a term defined anywhere in this First Supplemental Indenture has the same meaning throughout;

(c)           the singular includes the plural and vice versa;

(d)           a reference to a Section or Article is to a Section or Article of this First Supplemental Indenture;

(e)           headings are for convenience of reference only and do not affect interpretation;

(f)            the following terms have the meanings given to them in the Declaration:  (i) Capital Securities Certificate; (ii) Delaware Trustee; (iii) Distributions; (iv) Exchange Agreement; (v) Guarantee; (vi) Property Trustee; and (vii) Trust Securities; and

(g)           the following terms have the meanings given to them in this Section 1.1(g):

“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.

“Common Stock” means the common stock, $0.125 stated value per share, of the Company.

“Compound Interest” shall have the meaning set forth in Section 4.1.

“Coupon Rate” shall have the meaning set forth in Section 2.5(a).

“Creditor” shall have the meaning set forth in Section 5.1.

“Declaration” means the Amended and Restated Declaration of Trust and Trust Agreement of First Merchants Capital Trust III, a Delaware statutory trust, dated as of June 30, 2010.

“Deferred Interest” shall have the meaning set forth in Section 4.1.

“Dissolution Event” means the dissolution of the Trust and distribution of the Debentures held by the Property Trustee pro rata to the holders of the Trust Securities in liquidation of such holders’ interests in the Trust in accordance with the Declaration, such event to occur, subject to approval of the Appropriate Federal Banking Agency, at the option of the Company at any time upon the terms and conditions set forth in the Declaration.

  

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“Extended Interest Payment Period” shall have the meaning set forth in Section 4.1.

“Global Debenture” shall have the meaning set forth in Section 2.4(a).

“Holder” means any person in whose name at the time a Debenture is registered on the Security Register.

“Interest Payment Date” shall have the meaning set forth in Section 2.5(a).

“Interest Period” means the period beginning on (and including) the date of issue and ending on (but excluding) the first Interest Payment Date and each successive period beginning on (and including) the Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date.

“Non Book-Entry Capital Securities” shall have the meaning set forth in Section 2.4(a).

“Redemption Price” shall have the meaning set forth in Section 3.1.

ARTICLE II

GENERAL TERMS AND CONDITIONS OF THE DEBENTURES

Section 2.1       Designation and Principal Amount.  There is hereby authorized a series of Debt Securities designated as the “Fixed Rate Perpetual Junior Subordinated Debentures, Series A”, in aggregate principal amount of $47,835,000.

Section 2.2       No Maturity.  The Debentures shall be perpetual, but shall be redeemable as provided in Article III and subject to acceleration as provided in Article V of the Indenture.

Section 2.3       Form and Payment.  Except as provided in Section 2.4, the Debentures shall be issued as Registered Securities without interest coupons. Principal and interest on the Debentures issued in certificated form will be payable, the transfer of such Debentures will be registrable and such Debentures will be exchangeable for Debentures bearing identical terms and provisions at the office or agency of the Trustee in Wilmington, Delaware; provided, however, that payment of interest may be made at the option of the Company by check mailed to the Holder entitled thereto at such address as shall appear in the Security Register or by wire transfer to an account appropriately designated by the Holder entitled thereto. Notwithstanding the foregoing, so long as the Holder of any Debentures is the Property Trustee, the payment of the principal of and interest (including Compound Interest and Additional Interest, if any) on such Debentures held by the Property Trustee will be made at such place and to such account as may be designated by the Property Trustee.  There are no additional amounts payable on such Debentures pursuant to Section 10.6 of the Indenture.  The Trustee shall serve as the Security Registrar with respect to the Debentures and shall maintain the Security Register at its Corporate Trust Office.

  

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Section 2.4        Global Debenture.  (a)  In connection with a Dissolution Event,

(i)            the Debentures in certificated form may be presented to the Trustee by the Property Trustee in exchange for a global Debenture in an aggregate principal amount equal to the aggregate principal amount of all outstanding Debentures (a “Global Debenture”), to be registered in the name of the Depositary, or its nominee, and delivered by the Trustee to the Depositary for crediting to the accounts of its participants pursuant to the instructions of the Administrative Trustees.  In such case, the Trustee shall act as the Global Exchange Agent.  The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this First Supplemental Indenture. Payments on the Debentures issued as a Global Debenture will be made to the Depositary; and

(ii)           if any Capital Securities are held in non book-entry certificated form (“Non Book-Entry Capital Securities”), the Debentures in certificated form may be presented to the Trustee by the Property Trustee and any Capital Security Certificate which represents Non Book-Entry Capital Securities will be deemed to represent beneficial interests in Debentures presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Capital Securities until such Capital Security Certificates are presented to the Security Registrar of the Debentures for transfer or reissuance, at which time such Non Book-Entry Capital Security Certificates will be canceled and a Debenture, registered in the name of the holder of the Capital Security Certificate or the transferee of the holder of such Capital Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Capital Security Certificate canceled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture and this First Supplemental Indenture. Any Debentures exchanged for Capital Securities represented by a Capital Securities Certificate bearing the legend set forth in Section 5.4 of the Declaration shall bear such legend and the last paragraph of such Section 5.4 shall apply, mutatis mutandis, to such Debentures. On issue of such Debentures, Debentures with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been canceled.

(b)           A Global Debenture may be transferred, in whole but not in part, only by the Depositary to another nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary, or to a successor Depositary selected or approved by the Company or to a nominee of such successor Depositary. The Depositary shall initially be The Depository Trust Company, New York, New York.

(c)           Except as otherwise provided in or pursuant to this First Supplemental Indenture, a Global Debenture shall be exchangeable for Debentures in definitive registered form only if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary and a successor Depositary is not appointed by the Company within 90 days of the date the Company is so informed in writing or becomes aware of such condition, (ii) the Depository ceases to be registered as a “clearing agency” under the Securities Exchange Act of 1934, as amended, (iii) an Event of Default, as defined in the Indenture, has occurred and is continuing with respect to the Debentures, or (iv) the Company, in its sole discretion, determines that the Debentures shall no longer be represented by such Global Debenture. Upon the occurrence of any of (i) through (iv) above, the Company shall execute and, subject to Article II of the Indenture, the Trustee, upon Company Order, shall authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. In the event the Company determines that the Debentures shall no longer be represented by a Global Debenture pursuant to clause (iv) above, the Company shall execute and, subject to Section 3.05 of the Indenture, the Trustee, upon receipt of an Officers’ Certificate evidencing such determination by the Company, shall authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. Upon the exchange of the Global Debenture for such Debentures in definitive registered form without coupons, in authorized denominations, the Global Debenture shall be canceled by the Trustee. Such Debentures in definitive registered form issued in exchange for the Global Debenture shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Debt Securities to the Depositary for delivery to the Persons in whose names such Debt Securities are so registered.

  

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Section 2.5       Interest.  (a)  Each Debenture will bear interest at a rate of (A)  5.00% per annum for the period from and including June 30, 2010 to but excluding February 20, 2014, and (B) 9.00% per annum thereafter (the “Coupon Rate”) until the principal thereof is paid or made available for payment, and to the extent that payment of such interest is enforceable under applicable law, on any overdue installment of interest at the applicable Coupon Rate, compounded quarterly, payable quarterly in arrears on each February 15, May 15, August 15 and November 15 (each, an “Interest Payment Date”), commencing on August 15, 2010, to the Person in whose name such Debenture or any predecessor Debenture is registered at the close of business on the relevant record date, which will be, as long as the Capital Securities are in book-entry form (or, if no Capital Securities remain outstanding, as long as the Debentures remain in book-entry form), one Business Day prior to the relevant Interest Payment Date and, in the event the Capital Securities are not in book-entry form (or, if no Capital Securities remain outstanding, in the event the Debentures are not in book-entry form), the last day of the month next preceding each Interest Payment Date, except as otherwise provided pursuant to the provisions of Article IV.

(b)           The amount of interest payable for any period less than a full quarterly interest period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in such period. The amount of interest payable for any full quarterly interest period shall be computed by dividing the applicable rate per annum by four. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay).

  

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Section 2.6       Forms of Declaration and Guarantee Agreement.  The Declaration shall be substantially in the form set forth in Exhibit B and the Guarantee Agreement shall be substantially in the form set forth in Exhibit C.

Section 2.7       Events of Default.  The Event of Default described in Section 5.1(d) of the Indenture shall not apply to the Debentures.

Section 2.8       Agreed Tax Treatment.  Pursuant to Section 3.1(z) of the Indenture, and notwithstanding Section 3.15 of the Indenture, each Debenture issued hereunder shall provide that the Company, and by its acceptance of a Debenture or a beneficial interest therein, the Holder of, or any Person that acquires a beneficial interest in, such Debenture, agree that for United States federal, state and local tax purposes such Debenture constitutes equity in the Company.

ARTICLE III

REDEMPTION OF THE DEBENTURES

Section 3.1       Optional Redemption.  The Debentures are redeemable at the option of the Company, in whole or in part, subject to the approval of the Appropriate Federal Banking Agency, (i) at any time while the Capital Securities or the Debentures are held by the United States Department of the Treasury in conjunction with Troubled Asset Relief Program assistance provided to the Company or (ii) at any time on or after June 30, 2015, at a redemption price (the “Redemption Price”) equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon (including Compound Interest, if any) to the date of redemption.

Section 3.2       Redemption Procedures.  Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Debentures to be prepaid at its registered address. Unless the Company defaults in payment of the Redemption Price, on and after the redemption date interest shall cease to accrue on such Debentures called for redemption. If the Debentures are only partially redeemed pursuant to Section 3.1, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided that if at the time of redemption the Debentures are registered as a Global Debenture, the Depositary shall determine, in accordance with its procedures, the principal amount of such Debentures held by each Depositary participant to be redeemed. The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines; provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price is to be paid.

Section 3.3        No Sinking Fund.  The Debentures are not entitled to the benefit of any sinking fund.

  

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ARTICLE IV

EXTENSION OF INTEREST PAYMENT PERIOD

This Article IV and the provisions set forth in the form of Debenture, but not the provisions of Section 3.13 of the Indenture, shall apply to the deferral of interest on the Debentures:

Section 4.1       Extension of Interest Payment Period.  Provided that no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of the Debentures, to defer payments of interest by extending the interest payment period of such Debentures for a period not exceeding 20 consecutive quarterly periods (the “Extended Interest Payment Period”), during which Extended Interest Payment Period no interest shall be due and payable. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, will bear interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extended Interest Payment Period (“Compound Interest”). At the end of the Extended Interest Payment Period, the Company shall pay all interest accrued and unpaid on the Debentures, including any Compound Interest (together, “Deferred Interest”) that shall be payable to the Holders in whose names the Debentures are registered in the Security Register on the record date for the first Interest Payment Date after the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such previous or further extensions thereof shall not exceed 20 consecutive quarterly periods. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Company may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period.

Section 4.2       Notice of Extension.  (a)  If the Property Trustee is the only registered Holder at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to the Property Trustee and the Trustee of its selection of such Extended Interest Payment Period one Business Day before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable, or (ii) if the Debentures are then listed on the Nasdaq National Market or other national securities exchange, the date the Company is required to give notice of the record date, or the date such Distributions are payable to such organization or to holders of the Capital Securities issued by the Trust.

(b)           If the Property Trustee is not the only Holder at the time the Company selects an Extended Interest Payment Period, the Company shall give the Holders of the Debentures notice of its election of such Extended Interest Payment Period not later than the tenth Business Day prior to the next succeeding Interest Payment Date; provided that if the Debentures are then listed on the Nasdaq National Market or other national securities exchange and the Company is required to give notice of the record date or the Interest Payment Date to such organization or to Holders of the Debentures prior to such date, the Company shall give notice of its election at least one Business Day prior to the date it is required to give such notice of the record date.

  

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(c)           The quarterly period in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarterly periods permitted in the maximum Extended Interest Payment Period permitted under Section 4.1.

Section 4.3       Limitation of Transactions.  If the Company shall exercise its right to defer payment of interest as provided in Section 4.1 and the Extended Interest Payment Period is continuing, the Company shall be subject to the limitations set forth in Section 10.8 of the Indenture.

ARTICLE V

EXPENSES

Section 5.1       Payment of Expenses.  In connection with the offering, sale and issuance of the Debentures to the Property Trustee and in connection with the sale of the Trust Securities by the Trust (including the exchange of the Capital Securities for the Series A Preferred Stock), the Company, in its capacity as borrower with respect to the Debentures, shall:

(a)           pay all costs and expenses relating to the offering, sale and issuance of the Trust Securities and the Debentures, including any exchange fees payable pursuant to the Exchange Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 6.7 of the Indenture;

(b)           be responsible for and shall pay all debts and obligations (other than with respect to the Trust Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization, maintenance and dissolution of the Trust, the fees and expenses (including reasonable counsel fees and expenses) of the Property Trustee, the Delaware Trustee and the Administrative Trustees (including any amounts payable under Article VIII of the Declaration), 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 agent(s), exchange rate agent(s), registrar(s), transfer agent(s), 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 Property Trustee of the rights of the holders of the Capital Securities issued by the Trust);

(c)           be liable for any indemnification obligations arising with respect to the Declaration; and

(d)           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.

  

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The Company’s obligations under this Section 5.1 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 Company’s obligations under this Section 5.1 directly against the Company and the Company 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 Company. The Company agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 5.1.

The provisions of this Section shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this First Supplemental Indenture.

Section 5.2       Payment Upon Resignation or Removal.  Upon termination of this First Supplemental Indenture or the Indenture or the removal or resignation of the Trustee, unless otherwise stated, the Company shall pay to the Trustee all amounts accrued to the date of such termination, removal or resignation that are payable pursuant to Section 6.7 of the Indenture. Upon termination of the Declaration or the removal or resignation of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to Section 8.10 of the Declaration, the Company shall pay to the Delaware Trustee or the Property Trustee, as the case may be, all amounts accrued to the date of such termination, removal or resignation.

ARTICLE VI

COVENANT TO LIST ON EXCHANGE

Section 6.1       Listing on an Exchange.  If the Debentures are distributed to the holders of the Trust Securities issued by the Trust, and the Capital Securities are then so listed, the Company will use its commercially reasonable efforts to list such Debentures on the Nasdaq Global Select Market or with another organization on which the Capital Securities of the Trust are then listed.

ARTICLE VII

FORM OF DEBENTURE

Section 7.1       Form of Debenture.  The Debentures, and the Trustee’s Certificate of Authentication to be endorsed thereon, are to be substantially in the forms attached hereto as Exhibit A.

Section 7.2       Legend and Transfer of Debentures.  Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restrictive legend set forth below:

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.  EACH PURCHASER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.  ANY TRANSFEREE OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THE SECURITIES REPRESENTED BY THIS INSTRUMENT EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT WHICH IS THEN EFFECTIVE UNDER THE SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO THE ISSUER OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

  

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NO EMPLOYEE BENEFIT OR OTHER PLAN 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”), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY (A “PLAN ASSET ENTITY”), AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN, MAY ACQUIRE OR HOLD THESE DEBENTURES OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION (“PTCE”) 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING OR THE REQUIREMENTS OF U.S. DEPARTMENT OF LABOR REGULATION SECTION 2550.401c-1 ARE SATISFIED SUCH THAT NEITHER THESE DEBENTURES HELD BY THE PURCHASER OR HOLDER NOR THE ASSETS OF THE COMPANY CONSTITUTE “PLAN ASSETS” UNDER ERISA OR THE CODE. ANY PURCHASER OR HOLDER OF THESE DEBENTURES OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING HEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH “PLAN ASSETS” OF ANY PLAN, OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING OR U.S. DEPARTMENT OF LABOR REGULATION SECTION 2550.401c-1.”

  

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The Debentures may not be assigned or transferred unless the Trustee and the Company receives an opinion of counsel satisfactory to the Trustee and the Company stating that such transfer (i) does not contravene the restrictive legends outlined above, and (ii) will not cause the Company to be an "Investment Company" or under the "control" of an "Investment Company" within the meaning of the Investment Company Act of 1940, as amended.  The opinion of counsel will not be required in connection with a transfer by a Holder who is a division of the United States Government, including the Department of the Treasury, or any Affiliate thereof.

ARTICLE VIII

ORIGINAL ISSUE OF DEBENTURES

Section 8.1       Original Issue of Debentures.  Debentures in the aggregate principal amount of $47,835,000, may, upon execution of this First Supplemental Indenture or upon any written order of the Company setting forth the amount therefor, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures to or upon the written order of the Company, signed by its Chairman of the Board, its President, any Senior Executive Vice President, any Executive Vice President or any Senior Vice President and its Secretary or any Assistant Secretary, without any further action by the Company.

ARTICLE IX

MISCELLANEOUS

Section 9.1       Ratification of Indenture.  The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided.

Section 9.2       Trustee Not Responsible for Recitals.  The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this First Supplemental Indenture or the Debentures issued hereunder (other than its Certificate of Authentication).

Section 9.3       Governing Law.  This First Supplemental Indenture and each Debenture shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of such State without regard to conflicts of laws principles.

  

-11-

  

Section 9.4       Separability.  In case any one or more of the provisions contained in this First Supplemental 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 First Supplemental Indenture or of the Debentures, but this First Supplemental Indenture and the Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

Section 9.5       Counterparts.  This First Supplemental 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.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

  

-12-

  

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental 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 K. Hardwick

	 	
Name:

	
Mark K. Hardwick

	 	
Title:

	
Chief Financial Officer and Executive Vice President

	 	  	  
	 	  	  
	 	  	  
	 	
U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee

	 	  	  
	 	
By:

	
/s/ Annette Morgan

	 	
Name:

	
Annette E. Morgan

	 	
Title:

	
Assistant Vice President

  

-13-

  

EXHIBIT A

(FORM OF FACE OF DEBENTURE)

FIRST MERCHANTS CORPORATION

Fixed Rate Perpetual Junior Subordinated Debentures, Series A

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.  EACH PURCHASER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.  ANY TRANSFEREE OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THE SECURITIES REPRESENTED BY THIS INSTRUMENT EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT WHICH IS THEN EFFECTIVE UNDER THE SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO THE ISSUER OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

NO EMPLOYEE BENEFIT OR OTHER PLAN 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”), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY (A “PLAN ASSET ENTITY”), AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN, MAY ACQUIRE OR HOLD THESE DEBENTURES OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION (“PTCE”) 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING OR THE REQUIREMENTS OF U.S. DEPARTMENT OF LABOR REGULATION SECTION 2550.401c-1 ARE SATISFIED SUCH THAT NEITHER THESE DEBENTURES HELD BY THE PURCHASER OR HOLDER NOR THE ASSETS OF THE COMPANY CONSTITUTE “PLAN ASSETS” UNDER ERISA OR THE CODE. ANY PURCHASER OR HOLDER OF THESE DEBENTURES OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING HEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH “PLAN ASSETS” OF ANY PLAN, OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING OR U.S. DEPARTMENT OF LABOR REGULATION SECTION 2550.401c-1.

 

  

A-1

  

The following legend applies if this Security is a Global Security:  Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the Issuer or its agent for registration of transfer, exchange or payment, and any certificate 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 is made to Cede & Co. or 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 is not a deposit or other obligation of a depository institution and is not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

	
CUSIP NO.___________

	
PRINCIPAL AMOUNT:  $                      

REGISTERED NO.

FIRST MERCHANTS CORPORATION

Fixed Rate Perpetual Junior Subordinated Debentures, Series A

First Merchants Corporation, a corporation duly organized and existing under the laws of the State of Indiana (hereinafter called the “Company,” which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to                     , or registered assigns, interest on the principal sum of                      Dollars ($                    ) from June 30, 2010 or from the most recent Interest Payment Date to which interest has been paid or duly provided for quarterly (subject to deferral as set forth herein) on February 15, May 15, August 15 and November 15 of each year commencing August 15, 2010, at a rate of (A) 5.00% per annum for the period from and including June 30, 2010 to but excluding February 20, 2014, and (B) 9.00% per annum thereafter (the “Coupon Rate”), together with Additional Sums, if any, as provided in Section 10.7 of the Indenture, until the principal hereof is paid or made available for payment; provided, however, that any overdue installment of interest (after giving effect to any Extension Period permitted by this Security) shall bear Additional Interest at the Coupon Rate (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the date such installment was due until it is paid or made available for payment. The amount of interest payable for any period less than a full quarterly interest period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in such period. The amount of interest payable for any full quarterly interest period shall be computed by dividing the applicable rate per annum by four. The interest 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 Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the last calendar day (whether or not a Business Day, as defined below) of the month next preceding such Interest Payment Date. If an Interest Payment Date is not a Business Day, interest on this Security shall be payable on the next day that is a Business Day, with the same force and effect as if made on such Interest Payment Date, and without any interest or other payment with respect to the delay. “Business Day” as used hereinabove is a day other than a Saturday, a Sunday or any other day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to remain closed or are customarily closed.

  

A-2

  

Any interest not punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not more than 15 days and not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time during the term of this Security, from time to time to defer the payment of interest on this Security for up to 20 consecutive quarterly interest payment periods with respect to each deferral period (each an “Extension Period”), during which Extension Period the Company shall have the right to make a partial payment of interest on any Interest Payment Date, at the end of which the Company shall pay all interest then accrued and unpaid including any Additional Interest, as provided below; provided, however, that no Extension Period may end other than at the end of a full quarterly interest period; and provided, further, however, that during any such Extension Period, the Company shall not (i) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to this Security (except for any partial payments of interest with respect to and permitted under the Securities of this series), or (ii) 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 (other than (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 any one or more employees, officers, directors, consultants or independent contractors, 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 an exchange, redemption 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 other 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 the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, or the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto, (e) payments by the Company under the Guarantee Agreement, or (f) 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). Prior to the termination of any such Extension Period, the Company may extend such Extension Period and further defer the payment of interest, provided that no Extension Period shall exceed 20 consecutive quarterly interest payment periods or end other than at the end of a full quarterly interest period. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period, subject to the above conditions. 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 that the payment of such interest shall be legally enforceable) at the Coupon Rate, compounded quarterly and calculated as set forth in the first paragraph of this Security, from the dates on which amounts would otherwise have been due and payable until paid or made available for payment. The Company shall give the Holder of this Security and the Trustee notice of its election to begin any Extension Period at least one Business Day prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral or, so long as such Securities are held by or on behalf of First Merchants Capital Trust III, at least one Business Day prior to the earlier of (i) the next succeeding date on which Distributions on the Capital Securities of such Issuer Trust would be payable but for such deferral, and (ii) the date on which the Property Trustee of such Issuer Trust is required to give notice to holders of such Capital Securities of the record date or the date such Distributions are payable.

  

A-3

  

Payment of interest, including Additional Interest, on this Security will be made in immediately available funds at the office or agency of the Company maintained for that purpose in Muncie, Indiana, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, at the option of the Company, payment of interest may be paid by check mailed to the Person entitled thereto at such Person’s last address as it appears in the Security Register or, upon written request of a Holder of $1,000,000 or more in aggregate principal amount of Securities of this series not less than 15 calendar days prior to the applicable Interest Payment Date, by wire transfer to such account as may have been designated by such Person. Payment of principal of and interest, including Additional Interest, on this Security upon its redemption will be made against presentation of this Security at the office or agency of the Company maintained for that purpose in Muncie, Indiana.

  

A-4

  

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature or its duly authorized agent under the Indenture referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.

DATED: ______________

	  	  	  	
FIRST MERCHANTS CORPORATION

	  	  	  	  	  
	  	  	  	  	  
	  	  	  	
By:

	  
	  	  	  	
Name:

	
Mark K. Hardwick

	  	  	  	
Title:

	
Chief Financial Officer and Executive Vice President

	  	  	  	  	  
	
Attest:

	  	  	  	  
	  	
Secretary

	  	  	  

  

A-5

  

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

 

Dated:  ______________

	  	
U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee

	  	  	  
	  	
By:

	  
	  	  	
Authorized Signatory

	  	  	  
	  	  	
OR

	  	  	  
	 	  	
,

	  	  	
as Authenticating Agent for the Trustee

	  	  	  
	  	
By:

	  
	  	  	
Authorized Signatory

[Reverse of Debenture]

FIRST MERCHANTS CORPORATION

FIXED RATE JUNIOR SUBORDINATED DEBENTURES, SERIES A

This Security is one of a duly authorized issue of junior subordinated securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an indenture dated as of June 30, 2010, as amended or supplemented from time to time (herein called the “Indenture”), between the Company and U.S. Bank Trust National Association (herein called the “Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $47,835,000. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture unless otherwise defined in this Security.

The Securities are redeemable at the option of the Company, in whole or in part, subject to the approval of the Appropriate Federal Banking Agency, (i) at any time while the Capital Securities or this Security are held by the United States Department of the Treasury in conjunction with Troubled Asset Relief Program assistance provided to the Company or (ii) at any time on or after June 30, 2015, at a redemption price (the “Redemption Price”) equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon (including Compound Interest, if any) to the date of redemption.

  

A-6

  

The Securities of this series are not subject to repayment at the option of the Holder hereof. The Securities of this series will not be entitled to any sinking fund.

The indebtedness evidenced by the Securities of this series is, to the extent and in the manner set forth in the Indenture, subordinate and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Debt of the Company, and each Holder of the Securities of this series, by accepting the same, agrees to and shall be bound by the provisions of the Indenture with respect hereto. The Securities of this series shall rank on a parity with all Trust Related Securities, including, without limitation, the Guarantee Agreement related to the Capital Securities of First Merchants Capital Trust III.

If an Event of Default, as defined in the Indenture, with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of all series to be affected, acting together. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities of all series at the time Outstanding affected by certain provisions of the Indenture, acting together, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with those provisions of the Indenture. Certain past defaults under the Indenture and their consequences may be waived under the Indenture by the Holders of a majority in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series. All of the rights of the Holders set forth in this paragraph are subject to the rights of the holders of Capital Securities as set forth in the Indenture. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

The provisions contained in Sections 4.1 and 4.3 and Article XVII of the Indenture for defeasance of the entire indebtedness on this Security and certain restrictive covenants and certain Events of Default do not apply to this Security.

Upon due presentment for registration of transfer of this Security at the office or agency of the Company in the City of Muncie, Indiana, a new Security or Securities of this series in authorized denominations of $1,000 or integral multiples thereof for an equal aggregate principal amount will be issued to the transferee in exchange herefor, as provided in the Indenture and subject to the limitations provided therein and to the limitations described below, without charge except for any tax or other governmental charge imposed in connection therewith.

  

A-7

  

If this Security is a Global Security, this Security is exchangeable for definitive Securities in registered form only if (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for this Security or if at any time the Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and a successor depositary is not appointed within 90 days, (y) the Company in its sole discretion determines that this Security shall no longer be represented by Global Securities, or (z) an Event of Default with respect to the Securities represented hereby has occurred and is continuing. If this Security is exchangeable pursuant to the preceding sentence, it shall be exchangeable for definitive Securities in registered form, bearing interest, including  Additional Interest, at the same rate, having the same date of issuance, redemption provisions and other terms and of authorized denominations aggregating a like amount.

If this Security is a Global Security, this Security may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. Except as provided above, owners of beneficial interests in this global Security will not be entitled to receive physical delivery of Securities in definitive form and will not be considered the Holders hereof for any purpose under the Indenture.

Subject to the rights of holders of Senior Debt of the Company set forth in this Security and the Indenture referred to above, no reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest, including any Additional Interest, on this Security at the times, place and rate, and in the coin or currency, herein prescribed, except as otherwise provided in this Security.

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

No recourse shall be had for the payment of the principal of or the interest, including Additional Interest, on this Security, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.

 

  

A-8

  

ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM – as tenants in common

TEN ENT – as tenants by the entireties

JT TEN – as joint tenants with right of survivorship and not as tenants in common

	
UNIF GIFT MIN ACT – 

	 	
Custodian

	 
	  	
(Cust)

	  	
(Minor)

Under Uniform Gifts to Minors Act _________________

(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto

Please Insert Social Security or Other Identifying Number of Assignee ____________________

	  
	
(Please print or type name and address including postal zip code of Assignee)

the within Security of First Merchants Corporation and does hereby irrevocably constitute and appoint _____________ attorney to transfer the said Security on the books of the Company, with full power of substitution in the premises.

Dated:  _____________

NOTICE:  The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever.

 

A-9exhibit4-4.htm

GUARANTEE AGREEMENT

 

 

by and between

 

 

FIRST MERCHANTS CORPORATION,

as Guarantor

 

 

and

 

 

U.S. BANK TRUST NATIONAL ASSOCIATION,

as Guarantee Trustee

 

 

relating to

 

 

FIRST MERCHANTS CAPITAL TRUST III

 

 

Dated as of June 30, 2010

 

  

  

 

 

	
TABLE OF CONTENTS

	  
	  	  	
Page

	
ARTICLE I

	  
	  	  	  
	
DEFINITIONS

	  
	 	 
	
Section 1.1

	
Definitions

	
2

	 	 	 
	
ARTICLE II

	  
	  	  	  
	
TRUST INDENTURE ACT

	  
	 	 
	
Section 2.1

	
Trust Indenture Act; Application

	
5

	
Section 2.2

	
List of Holders

	
5

	
Section 2.3

	
Reports by the Guarantee Trustee

	
5

	
Section 2.4

	
Periodic Reports to the Guarantee Trustee

	
5

	
Section 2.5

	
Evidence of Compliance with Conditions Precedent

	
6

	
Section 2.6

	
Events of Default; Waiver

	
6

	
Section 2.7

	
Event of Default; Notice

	
6

	
Section 2.8

	
Conflicting Interests

	
6

	 	 	 
	
ARTICLE III

	  
	  	  	  
	
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

	  
	 	 
	
Section 3.1

	
Powers and Duties of the Guarantee Trustee

	
7

	
Section 3.2

	
Certain Rights of Guarantee Trustee

	
8

	
Section 3.3

	
Compensation; Indemnity; Fees

	
10

	 	 	 
	
ARTICLE IV

	  
	  	  	  
	
GUARANTEE TRUSTEE

	  
	 	 
	
Section 4.1

	
Guarantee Trustee; Eligibility

	
11

	
Section 4.2

	
Appointment, Removal and Resignation of the Guarantee Trustee

	
11

	 	 	 
	
ARTICLE V

	  
	  	  	  
	
GUARANTEE

	  
	 	 
	
Section 5.1

	
Guarantee

	
12

	
Section 5.2

	
Waiver of Notice and Demand

	
12

	
Section 5.3

	
Obligations Not Affected

	
12

  

-i-

 

	
Section 5.4

	
Rights of Holders

	
13

	
Section 5.5

	
Guarantee of Payment

	
13

	
Section 5.6

	
Subrogation

	
13

	
Section 5.7

	
Independent Obligations

	
14

	 	 	 
	
ARTICLE VI

	  
	  	  	  
	
COVENANTS AND SUBORDINATION

	  
	 	 
	
Section 6.1

	
Subordination

	
14

	
Section 6.2

	
Pari Passu Guarantees

	
14

	 	 	 
	
ARTICLE VII

	  
	  	  	  
	
TERMINATION

	  
	 	 
	
Section 7.1

	
Termination

	
14

	 	 	 
	
ARTICLE VIII

	  
	  	  	  
	
MISCELLANEOUS

	  
	 	 
	
Section 8.1

	
Successors and Assigns

	
15

	
Section 8.2

	
Amendments

	
15

	
Section 8.3

	
Notices

	
15

	
Section 8.4

	
Benefit

	
16

	
Section 8.5

	
Governing Law

	
16

	
Section 8.6

	
Counterparts

	
16

	
Section 8.7

	
Incorporation by Reference

	
16

	
Section 8.8

	
Waiver of Jury Trial

	
16

	
Section 8.9

	
Force Majeure

	
16

  

-ii-

 

 

THIS GUARANTEE AGREEMENT, dated as of June 30, 2010, between FIRST MERCHANTS CORPORATION, an Indiana corporation (the “Guarantor”), having its principal office at 200 East Jackson Street, P.O. Box 792, Muncie, Indiana 47305-2814, and U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association, 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 III, a Delaware statutory trust (the “Issuer Trust”).

 

RECITALS

 

WHEREAS, pursuant to an Amended and Restated Declaration of Trust and Trust Agreement, of even date herewith (the “Trust Agreement”), among First Merchants Corporation, as Depositor, the Property Trustee, the Delaware Trustee, and the Administrative Trustees (each as named therein) and the holders from time to time of undivided beneficial interests in the assets of the Issuer Trust, the Issuer Trust is issuing $46,400,000 aggregate Liquidation Amount (as defined in the Trust Agreement) of its Fixed Rate Trust Preferred Securities (liquidation amount $1,000 per capital security) (the “Capital Securities”), representing preferred undivided beneficial interests in the assets of the Issuer Trust and having the terms set forth in the Trust Agreement; and

 

WHEREAS, the Capital Securities will be issued by the Issuer Trust, and the proceeds thereof, together with the proceeds from the issuance of the Issuer Trust’s Common Securities (as defined herein), will be used to purchase the Debentures of the Guarantor, which Debentures will be deposited with U.S. Bank Trust National Association, as Property Trustee under the Trust Agreement, as trust assets; and

 

WHEREAS, as an incentive for the Holders to purchase Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the 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 of Capital Securities by each Holder, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time.

  

 

 

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                      Definitions.

 

  For all purposes of this Guarantee Agreement, except as otherwise expressly provided or unless the context otherwise requires:

 

(a)           The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

 

(b)           All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;

 

(c)           The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

 

(d)           All accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles;

 

(e)           Unless the context otherwise requires, any reference to an “Article” or a “Section” refers to an Article or a Section, as the case may be, of this Guarantee Agreement; and

 

(f)           The words “hereby,” “herein,” “hereof” and “hereunder” and other words of similar import refer to this Guarantee Agreement as a whole and not to any particular Article, Section or other subdivision.

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Board of Directors” means the board of directors of the Guarantor or any committee of the board of directors of the Guarantor, comprised of one or more members of the board of directors of the Guarantor or officers of the Guarantor, or both.

 

“Capital Securities” has the meaning specified in the recitals to this Guarantee Agreement.

 

“Common Securities” means the securities representing common undivided beneficial interests in the assets of the Issuer Trust.

 

“Debentures” shall have the meaning specified in the Trust Agreement.

 

“Distributions” shall have the meaning specified in the Trust Agreement.

  

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“Event of Default” means (i) a default by the Guarantor in any of its payment obligations under this Guarantee Agreement or (ii) a default by the Guarantor in any other obligation hereunder that remains unremedied for 30 days.

 

“Guarantee Agreement” means this Guarantee Agreement, as modified, amended or supplemented from time to time.

 

“Guarantee Payments” means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by or on behalf of the Issuer Trust:  (i) any accumulated and unpaid Distributions required to be paid on the Capital Securities, to the extent the Issuer Trust shall have funds on hand available therefor at such time; (ii) the Redemption Price with respect to any Capital Securities called for redemption by the Issuer Trust, to the extent the Issuer Trust shall have funds on hand available therefor at such time; and (iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of the Issuer Trust, unless Debentures are distributed to the Holders, the lesser of (a) the Liquidation Distribution with respect to the Capital Securities, to the extent that the Issuer Trust shall have funds on hand available therefor at such time, and (b) the amount of assets of the Issuer Trust remaining available for distribution to Holders on liquidation of the Issuer.

 

“Guarantee Trustee” means U.S. Bank Trust National Association, solely in its capacity as Guarantee Trustee and not in its individual capacity, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee.

 

“Guarantor” has the meaning specified in the first paragraph of this Guarantee Agreement.

 

“Holder” means any Holder (as defined in the Trust Agreement) 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, the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee Trustee.

 

“Indenture” means the Indenture, dated as of June 30, 2010, between First Merchants Corporation and U.S. Bank Trust National Association, as trustee, as supplemented by the First Supplemental Indenture, dated as of June 30, 2010, between First Merchants Corporation and U.S. Bank Trust National Association, as the same may be modified, amended or supplemented from time to time.

 

“Issuer Trust” has the meaning specified in the first paragraph of this Guarantee Agreement.

 

“Liquidation Distribution” shall have the meaning specified in the Trust Agreement.

 

“List of Holders” has the meaning specified in Section 2.2(a).

  

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“Majority in Liquidation Amount of the Capital Securities” means, except as provided by the Trust Indenture Act, Capital Securities representing more than 50% of the aggregate Liquidation Amount (as defined in the Trust Agreement) of all Capital Securities then Outstanding (as defined in the Trust Agreement).

 

“Officers’ Certificate” means, with respect to any Person, a certificate signed by the Chairman or a Vice Chairman of the Board of Directors of such Person or the President or a Vice President of such Person, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of such Person. Any Officers’ Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include:

 

(a)           a statement by each officer signing the Officers’ Certificate that such officer 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 such officer in rendering the Officers’ Certificate;

 

(c)           a statement that 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 such 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, business trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

 

“Redemption Price” shall have the meaning set forth in the Trust Agreement.

 

“Responsible Officer” means, with respect to the Guarantee Trustee, any Senior Vice President, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or Assistant Trust Officer or any other officer of the Corporate Trust Department of the Guarantee Trustee and also means, with respect to a particular matter, any other officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject and, in each case, who shall have direct responsibility for the administration of this Guarantee Agreement.

 

“Successor Guarantee Trustee” means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1.

 

“Trust Agreement” means the Amended and Restated Declaration of Trust and Trust Agreement of the Issuer Trust referred to in the recitals to this Guarantee Agreement, as modified, amended or supplemented from time to time.

 

“Trust Indenture Act” means the Trust Indenture Act of 1939 as in force at the date as of which this Guarantee Agreement was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture Act” means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.

  

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“Vice President,” when used with respect to the Guarantor, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title “vice president.”

 

ARTICLE II

 

TRUST INDENTURE ACT

 

Section 2.1                      Trust Indenture Act; Application.  (a)  This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions.

 

(b)           Except as otherwise expressly provided herein, if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control.

 

(c)           The application of the Trust Indenture Act to this Guarantee Agreement shall not affect the nature of the Capital Securities as equity securities representing undivided beneficial interests in the assets of the Issuer Trust.

 

Section 2.2                      List of Holders.  (a)  The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee (a) semiannually, on or before January 31 and July 31 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders (a “List of Holders”) as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders.

 

(b)           The Guarantee Trustee shall comply with the requirements of Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.

 

Section 2.3                      Reports by the Guarantee Trustee.

 

  Not later than February 28th of each year, commencing in 2011, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. If this Guarantee Agreement shall have been qualified under the Trust Indenture Act, the Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act.

  

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Section 2.4                      Periodic Reports to the Guarantee Trustee.

 

  The Guarantor shall provide to the Guarantee Trustee and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act, in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act, provided that such documents, reports and information shall be required to be provided to the Securities and Exchange Commission only if this Guarantee Agreement shall have been qualified under the Trust Indenture Act.  In such event, delivery of such reports, information and documents to the Guarantee Trustee shall be for informational purposes only and the Guarantee Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Guarantee Trustee shall be entitled to rely exclusively on Officers’ Certificates).

 

Section 2.5                      Evidence of Compliance with Conditions Precedent.

 

  The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer of the Guarantor pursuant to Section 314(c)(1) may be given in the form of an Officers’ Certificate.

 

Section 2.6                      Events of Default; Waiver.

 

  The Holders of at least a Majority in Liquidation Amount of the Capital Securities may, by vote, 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 Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

 

Section 2.7                      Event of Default; Notice.  (a)  The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default known to the Guarantee Trustee, transmit by mail, first class postage prepaid, to the Holders, notice of any such Event of Default known to the Guarantee Trustee, unless such Event of Default has been cured before the giving of such notice, provided that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders.

 

(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, or a Responsible Officer charged with the administration of this Guarantee Agreement shall have obtained written notice, of such Event of Default.

 

Section 2.8                      Conflicting Interests.

 

  The Trust Agreement and the Indenture shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

  

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ARTICLE III

 

POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

 

Section 3.1                      Powers and Duties of the Guarantee Trustee.  (a)  This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Guarantee Trustee hereunder. The right, title and interest of the Guarantee Trustee, as such, hereunder shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, 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 has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.

 

(c)           The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement (including pursuant to Section 2.1), and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. If an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, 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 Agreement 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 Agreement (including pursuant to Section 2.1), 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 Agreement (including pursuant to Section 2.1); 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 Agreement (but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act 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 on their face to the requirements of this Guarantee Agreement);

  

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(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 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 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 exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and

 

(iv)       no provision of this Guarantee Agreement 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 or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it.

 

Section 3.2                      Certain Rights of Guarantee Trustee.  (a)  Subject to the provisions of Section 3.1:

 

(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 reasonably 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 Agreement shall be sufficiently evidenced by an Officers’ Certificate unless otherwise prescribed herein.

 

(iii)       Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take 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 Officers’ Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor.

 

(iv)       The Guarantee Trustee may consult with legal counsel of its section, and the advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction.

  

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(v)       The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement 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 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 that nothing contained in this Section 3.2(a)(v) shall be taken to 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 Agreement.

 

(vi)       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, and, if the Guarantee Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole expense of the Company and shall incur no liability of any kind by reason of such inquiry or investigation.

 

(vii)       The Guarantee 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 Guarantee 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 hereunder.

 

(viii)                  Whenever in the administration of this Guarantee Agreement 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 (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions.

 

(ix)       The Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement.

 

(x)       In no event shall the Guarantee Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Guarantee Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

  

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(xi)       The Guarantee Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Guarantee Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Guarantee Trustee at the Corporate Trust Office of the Guarantee Trustee, and such notice references the Capital Securities and this Guarantee Agreement.

 

(xii)       The rights, privileges, protections, immunities and benefits given to the Guarantee Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Guarantee Trustee and each agent and other Person employed to act hereunder.

 

(xiii)                  The Guarantee Trustee may request that the Guarantor deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Guarantee Agreement.

 

(b)           No provision of this Guarantee Agreement 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 to act in accordance with such power and authority.

 

Section 3.3                      Compensation; Indemnity; Fees.

 

  The Guarantor agrees:

 

(a)           to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as may be agreed in writing by the Guarantor and the Guarantee Trustee 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);

 

(b)           to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Guarantee Trustee in accordance with any provision of this Guarantee Agreement (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 bad faith; and

 

(c)           to indemnify the Guarantee Trustee, any Affiliate of the Guarantee Trustee and any officer, director, shareholder, employee, representative or agent of the Guarantee Trustee (each, an “Indemnified Person”) for, and to hold each Indemnified Person harmless against, any loss, liability 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 this Guarantee Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.

 

The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement.

  

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The provisions of this Section 3.3 shall survive the termination of this Guarantee Agreement or the resignation or removal of the Guarantee Trustee.

 

ARTICLE IV

 

GUARANTEE TRUSTEE

 

Section 4.1                      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 Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then, for the purposes of this Section 4.1 and to the extent permitted by the Trust Indenture Act, 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 Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2.

 

(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 and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.

 

Section 4.2                      Appointment, Removal and Resignation of the Guarantee Trustee.  (a)  Subject to Section 4.2(c), the Guarantee Trustee may be appointed or removed at any time (i) by the Guarantor with or without cause at any time when an Event of Default has not occurred and is continuing, or (ii) by the action of the Holders of a Majority in Liquidation Amount of the Capital Securities delivered to the Guarantee Trustee and the Guarantor (x) for cause or (y) if a Debenture Event of Default (as defined in the Trust Agreement) shall have occurred and be continuing at any time.

 

(b)           Subject to Section 4.2(c), the Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by giving written notice thereof to the Holders and the Guarantor.

 

(c)           The Guarantee Trustee appointed hereunder shall hold office until a Successor Guarantee Trustee shall have been appointed and shall have accepted such appointment. No removal or resignation of a Guarantee Trustee shall be effective 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 and, in the case of any resignation, the resigning Guarantee Trustee.

  

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(d)           If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Holders and the Guarantor of a notice of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, 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.

 

ARTICLE V

 

GUARANTEE

 

Section 5.1                      Guarantee.  The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer Trust), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer Trust may have or assert, except the defense of payment. 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 Trust to pay such amounts to the Holders.

 

Section 5.2                      Waiver of Notice and Demand.  The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, the Issuer Trust 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 5.3                      Obligations Not Affected.  The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement 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 Trust of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer Trust;

 

(b)           the extension of time for the payment by the Issuer Trust of any portion of the Distributions (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Debentures as provided in the Indenture), 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;

 

(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 Trust granting indulgence or extension of any kind;

  

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(d)           the voluntary or involuntary liquidation, dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer Trust or any of the assets of the Issuer Trust;

 

(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 (other than payment of the underlying obligation), it being the intent of this Section 5.3 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 the consent of, the Guarantor with respect to the happening of any of the foregoing.

 

Section 5.4                      Rights of Holders.  The Guarantor expressly acknowledges that:  (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) 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 Agreement or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement without first instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust or any other Person.

 

Section 5.5                      Guarantee of Payment.  This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer Trust) or upon the distribution of Debentures to Holders as provided in the Trust Agreement.

 

Section 5.6                      Subrogation.  The Guarantor shall be subrogated to all rights (if any) of the Holders against the Issuer Trust in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement; 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 which 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 Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. 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.

  

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Section 5.7                      Independent Obligations.  The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer Trust 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 Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof.

 

ARTICLE VI

 

COVENANTS AND SUBORDINATION

 

Section 6.1                      Subordination.  The obligations of the Guarantor under this Guarantee Agreement will constitute unsecured obligations of the Guarantor and will rank subordinate and junior in right of payment to all Senior Debt (as defined in the Indenture) of the Guarantor to the extent and in the manner set forth in the Indenture with respect to the Debentures, and the provisions of Article Eighteen of the Indenture will apply, mutatis mutandis, to the obligations of the Guarantor hereunder. The obligations of the Guarantor hereunder do not constitute Senior Debt (as defined in the Indenture) of the Guarantor.

 

Section 6.2                      Pari Passu Guarantees.  The obligations of the Guarantor under this Guarantee Agreement shall rank pari passu with the obligations of the Guarantor under (i) any similar guarantee agreements issued by the Guarantor on behalf of the holders of preferred or capital securities issued by any statutory trust, (ii) the Indenture and the Debt Securities (as defined therein) issued thereunder; (iii) any expense agreements entered into by the Guarantor in connection with the offering of preferred or capital securities by any statutory trust, and (iv) any other security, guarantee or other agreement or obligation that is expressly stated to rank pari passu with the obligations of the Guarantor under this Guarantee Agreement or with any obligation that ranks pari passu with the obligations of the Guarantor under this Guarantee Agreement.

 

ARTICLE VII

 

TERMINATION

 

Section 7.1                      Termination.  This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price of all Capital Securities, (ii) the distribution of Debentures to the Holders in exchange for all of the Capital Securities or (iii) full payment of the amounts payable in accordance with Article IX of the Trust Agreement upon liquidation of the Issuer Trust. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder is required to repay any sums paid with respect to Capital Securities or this Guarantee Agreement.

  

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ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.1                      Successors and Assigns.  All guarantees and agreements contained in this Guarantee Agreement 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 a consolidation, merger or sale involving the Guarantor that is permitted under Article Eight of the Indenture and pursuant to which the successor or assignee agrees in writing to perform the Guarantor’s obligations hereunder, the Guarantor shall not assign its obligations hereunder, and any purported assignment other than in accordance with this provision shall be void.

 

Section 8.2                      Amendments.  Except with respect to any changes that do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in Liquidation Amount of the Capital Securities. The provisions of Article VI of the Trust Agreement concerning meetings of the Holders shall apply to the giving of such approval.

 

Section 8.3                      Notices.  Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows:

 

(a)           if given to the Guarantor, to the address or telecopy number set forth below or such other address or telecopy number as the Guarantor may give notice to the Guarantee Trustee and the Holders:

 

	
  

	
First Merchants Corporation

	
  

	
200 East Jackson Street

	
  

	
P.O. Box 792

	
  

	
Muncie, Indiana 47305-2814

	
  

	
Attention:  Mark K. Hardwick, Chief Financial Officer and Executive

	
  

	
                      Vice President

	
  

	
Telecopy:  (765) 747-1447

 

(b)           if given to the Guarantee Trustee, to the address or telecopy number set forth below or such other address or telecopy number as the Guarantee Trustee may give notice to the Guarantor and Holders:

 

	
  

	
U.S. Bank Trust National Association

	
  

	
300 Delaware Avenue, 9th Floor

	
  

	
Wilmington, Delaware  19801

	
  

	
Attention:  Corporate Trust Group

	
  

	
Telecopy:  (302) 576-3717

  

-15-

 

 

	
  

	
with a copy to:

 

	
  

	
First Merchants Capital Trust III

	
  

	
c/o First Merchants Corporation

	
  

	
200 East Jackson Street

	
  

	
P.O. Box 792

	
  

	
Muncie, Indiana 47305-2814

	
  

	
Attention:  Mark K. Hardwick, Chief Financial Officer and Executive

	
  

	
                         Vice President

	
  

	
Telecopy:  (765) 747-1447

 

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

 

All notices hereunder 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 8.4                      Benefit.  This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Capital Securities.

 

Section 8.5                      Governing Law.  THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 8.6                      Counterparts.  This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

 

Section 8.7                      Incorporation by Reference.  In connection with its appointment and acting hereunder, the Guarantee Trustee is entitled to all rights, privileges, protections, benefits, immunities and indemnities provided to it as Property Trustee under the Trust Agreement.

 

Section 8.8                      Waiver of Jury Trial.  EACH OF THE GUARANTOR AND THE GUARANTEE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE AGREEMENT, THE CAPITAL SECURITIES OR THE TRANSACTION CONTEMPLATED HEREBY.

 

Section 8.9                      Force Majeure.  In no event shall the Guarantee Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Guarantee Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Guarantee Agreement as of the day and year first above written.

 

	
  

	
FIRST MERCHANTS CORPORATION, as Guarantor

 

By: /s/ Mark K. Hardwick

	
  

	
Name:  Mark K. Hardwick

	
  

	
Title:  Chief Financial Officer and

	
  

	
              Executive Vice President

 

	
  

	
U.S. BANK TRUST NATIONAL ASSOCIATION,

	
  

	
as Guarantee Trustee

 

By: /s/ Annette Morgan

      Authorized Signature

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