Document:

EX-4.1 SECURITIES RESOLUTION NO. 5

 

Exhibit 4.1

CERTIFIED COPY

OF

SECURITIES RESOLUTION NO. 5

OF

WISCONSIN ENERGY CORPORATION

     I, KEITH H. ECKE, Assistant Corporate Secretary of WISCONSIN ENERGY CORPORATION (the
“Company”), do hereby certify that the attached is a true and correct copy of Securities Resolution
No. 5 under the Indenture dated as of March 15, 1999, between the Company and The Bank of New York
Trust Company, N.A. (as successor to JPMorgan Trust Company, National Association) (successor to
Bank One Trust Company, N.A.) (successor to The First National Bank of Chicago), as Trustee, which
has been duly adopted by the Vice President and Treasurer of the Company pursuant to authorization
delegated to him by the Board of Directors (the “Board”) of the Company at a meeting duly called
and held on December 7, 2006 and by the Finance Committee of the Board at a meeting duly called and
held on April 26, 2007; that a quorum of each of said Board and the Finance Committee,
respectively, were present at said meeting and voted throughout; and I do further certify that said
resolution has not been rescinded and remains in full force and effect.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of said
WISCONSIN ENERGY CORPORATION this 11th day of May, 2007.

	 	 	 	 	 
	 

	 	/s/ Keith H. Ecke
 

Keith H. Ecke

Assistant Corporate Secretary
	 	 

(CORPORATE SEAL)

 

 

2007 SERIES A JUNIOR SUBORINATED NOTES DUE 2067

SECURITIES RESOLUTION NO. 5

OF

WISCONSIN ENERGY CORPORATION

     The actions described below are taken by the Board (as defined in the Indenture referred to
below) of WISCONSIN ENERGY CORPORATION (the “Company”), or by an Officer or committee of Officers
pursuant to Board delegation, pursuant to resolutions adopted by the Board of Directors of the
Company as of December 7, 2006, resolutions adopted by the Finance Committee of the Board of
Directors of the Company as of April 26, 2007 and Section 2.01 of the Indenture dated as of March
15, 1999 (the “Indenture”) between the Company and The Bank of New York Trust Company, N.A. (as
successor to JPMorgan Trust Company, National Association) (successor to Bank One Trust Company,
N.A.) (successor to The First National Bank of Chicago), as trustee. Terms used herein and not
defined have the same meaning as in the Indenture.

     RESOLVED, that a new series of Securities is authorized as follows:

1. The title of the series is 2007 Series A Junior Subordinated Notes due 2067 (“Junior
Subordinated Notes”).

2. The form of the Junior Subordinated Notes shall be substantially in the form of Exhibit 1
hereto.

3. The Junior Subordinated Notes shall have the terms set forth in Exhibit 1.

4. The Junior Subordinated Notes shall have such other terms as are set forth in Exhibit 2 hereto.

	5.	 	The Junior Subordinated Notes shall be sold to the underwriter(s) named in the Prospectus
Supplement dated May 8, 2007 on the following terms:

Aggregate Principal Amount: $500,000,000

Price to Public: 99.734%

Underwriting Discount: 1.00%

Closing Date: May 11, 2007

     This Securities Resolution shall be effective as of May 8, 2007.

 

 

EXHIBIT 1

			
	 	 	 
	No.                     
	 	$                    

WISCONSIN ENERGY CORPORATION

2007 Series A Junior Subordinated Notes due 2067

WISCONSIN ENERGY CORPORATION

	 	 	 	 	 
	promises to pay to
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	or registered assigns

the principal sum of 

on May 15, 2067

	 	
 
 

	 	
Dollars 

			
	Interest Payment Dates:	 	Fixed Rate Period – May 15 and November 15

Floating Rate Period – February 15, May 15,
August 15 and

               
               
      November 15

			
	Record Dates:	 	So long as the Notes remain in book-entry only form registered in the name of The
Depository Trust Company (“DTC”) or its nominee, the record date for each interest payment
date will be the business day immediately preceding the applicable interest payment date. If
the Notes are not in book-entry only form registered in the name of DTC or its nominee, the
record date for each interest payment date will be the fifteenth calendar day (whether or not
a business day) immediately preceding the applicable interest payment date.

	 	 	 	 	 
	 

	 	Dated:	 	 
	 
	 	 	 	 
	THE BANK OF NEW YORK

	 	WISCONSIN ENERGY CORPORATION	 	 
	TRUST COMPANY, N.A.
	 	 	 	 
	Transfer Agent and Paying Agent
	 	 	 	 
	 
	 	 	 	 
	 

	 	by	 	 
	 
	 	 	 	 
	Authenticated:

	 	 

[Title of Authorized Officer]
	 	 
	 
	 	 	 	 
	THE BANK OF NEW YORK

	 	(CORPORATE SEAL)	 	 
	TRUST COMPANY, N.A.
	 	 	 	 
	Registrar, by
	 	 	 	 
	 
	 	 	 	 
	  

Authorized
Signature

	 	  

Assistant
Corporate Secretary
	 	 

1

 

Wisconsin Energy Corporation

2007 Series A Junior Subordinated Notes due 2067

	1.	 	Interest.
	 
	 	 	Wisconsin Energy Corporation (the “Company”), a Wisconsin corporation, promises to pay
interest on the principal amount of the Securities (as defined in Section 4) at the rates
and in the manner set forth below. The stated maturity of the principal of the Securities
shall be May 15, 2067 (the “Stated Maturity”), and any accrued and theretofore unpaid
interest on the Securities shall be due and payable at such date.
	 
	 	 	The Securities shall bear interest at (i) the rate of 6.25% per annum (the “Fixed Coupon
Rate”) up to, but not including, May 15, 2017 (the “Fixed Rate Period”), and (ii) a rate
equal to the Three-Month LIBOR Rate (as defined below) plus 211.25 basis points (2.1125%)
per annum, reset quarterly on the LIBOR Rate Reset Dates (as defined below) (the “Floating
Coupon Rate” and, together with the Fixed Coupon Rate, the “Coupon Rate”), from May 15, 2017
up to, but not including, the Stated Maturity (the “Floating Rate Period”), and shall bear
interest on any overdue principal at the prevailing Coupon Rate and (to the extent that
payment of such interest is enforceable under applicable law) on any overdue or deferred
installment of interest at the then prevailing Coupon Rate, compounded semi-annually for the
Fixed Rate Period and quarterly for the Floating Rate Period, payable (subject to the right
of the Company to defer interest payments, as described below) semi-annually in arrears on
May 15 and November 15 of each year during the Fixed Rate Period and quarterly in arrears on
February 15, May 15, August 15 and November 15 of each year during the Floating Rate Period
(each, an “Interest Payment Date”), commencing November 15, 2007 for the Fixed Rate Period
and August 15, 2017 for the Floating Rate Period.
	 
	 	 	With respect to the Securities, the term “Interest Period” shall mean each period from, and
including, an Interest Payment Date to, but excluding, the next succeeding Interest Payment
Date, except that the first Interest Period shall commence on the date of original issuance.
	 
	 	 	During the Fixed Rate Period, the amount of interest payable for any semi-annual interest
accrual period shall be computed on the basis of a 360-day year consisting of twelve 30-day
months (and for any period shorter than a full semi-annual period, on the basis of the
actual number of days elapsed during such period using 30-day calendar months), and during
the Floating Rate Period, the amount of interest payable for any quarterly Interest Period
shall be computed by multiplying the Floating Coupon Rate for that quarterly Interest Period
by a fraction, the numerator of which shall be the actual number of days elapsed during that
quarterly Interest Period (determined by including the first day of the Interest Period and
excluding the last day), and the denominator of which shall be 360. During the Fixed Rate
Period, if an Interest Payment Date or a Redemption Date (as defined below) falls on a day
that is not a Business Day (as defined below), the payment of interest and principal shall
be made on the next succeeding Business Day, and no interest on such payment shall accrue
for the period from and after the Interest Payment Date or Redemption Date, as applicable.
During the Floating Rate Period, if any Interest

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	 	 	Payment Date, other than a Redemption Date or the Stated Maturity of the Securities, falls
on a day that is not a Business Day, the Interest Payment Date shall be postponed to the
next day that is a Business Day, except that if that Business Day is in the next succeeding
calendar month, the Interest Payment Date shall be the immediately preceding Business Day.
During the Floating Rate Period, if a Redemption Date or the Stated Maturity of the
Securities falls on a day that is not a Business Day, the payment of interest and principal
shall be made on the next succeeding Business Day, and no interest on such payment shall
accrue for the period from and after such Redemption Date or the Stated Maturity. During
the Floating Rate Period, if any LIBOR Rate Reset Date (as defined below) falls on a day
that is not a LIBOR Business Day, the LIBOR Rate Reset Date shall be postponed to the next
day that is a LIBOR Business Day, except that if that LIBOR Business Day is in the next
succeeding calendar month, the LIBOR Rate Reset Date shall be the immediately preceding
LIBOR Business Day. During the Floating Rate Period, the interest rate in effect on any
LIBOR Rate Reset Date shall be the applicable interest rate as reset on that date and the
interest rate applicable to any other day shall be the interest rate as reset on the
immediately preceding LIBOR Rate Reset Date.
	 
	 	 	“Business Day” means any day that is not a Saturday, a Sunday, a day on which banking
institutions in New York City are not required to be open or a day on which the Federal
Reserve Bank of New York is not open.
	 
	 	 	“Calculation Agent” means The Bank of New York Trust Company, N.A., or other successor firm
appointed by the Company to act as calculation agent.
	 
	 	 	“LIBOR Business Day” means any business day on which dealings in deposits in U.S. Dollars
are transacted in the London Inter-Bank Market.
	 
	 	 	“LIBOR Interest Determination Date” means the second LIBOR Business Day preceding each LIBOR
Rate Reset Date.
	 
	 	 	“LIBOR Rate Reset Date” means, subject to the fourth paragraph of this Section 1, February
15, May 15, August 15 and November 15 of each year, commencing May 15, 2017.
	 
	 	 	“Redemption Date” means the date fixed for such redemption by or pursuant to this Securities
Resolution.
	 
	 	 	“Reuters LIBOR01 Page” means the display designated on page LIBOR01 on Reuters Page (or such
other page as may replace the LIBOR01 page on such service or such other service as may be
nominated by the British Bankers’ Association for the purpose of displaying London interbank
offered rates for U.S. Dollar deposits).
	 
	 	 	“Reuters Page” means the display on Reuters Money 3000 Service, or any successor service, on
the Reuters LIBOR01 Page or any replacement page or pages on that service.

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	 	 	“Three-Month LIBOR Rate” means, with respect to each Interest Period commencing on a LIBOR
Rate Reset Date, the rate (expressed as a percentage per annum) for deposits in U.S. dollars
having a three-month maturity that appears on Reuters LIBOR01 Page as of 11:00 a.m. (London
time) on the LIBOR Interest Determination Date for that Interest Period as determined by the
Calculation Agent. If such rate does not appear on the Reuters LIBOR01 Page as of 11:00
a.m. (London time) on the LIBOR Interest Determination Date for that Interest Period, such
Three-Month LIBOR Rate shall be determined on the basis of the rates at which deposits in
U.S. dollars for a three-month period commencing on the applicable LIBOR Rate Reset Date and
ending on the next LIBOR Rate Reset Date (for purposes of this definition, the “Relevant
Period”) and in a principal amount that is representative for a single transaction in U.S.
dollars in that market at that time are offered to prime banks in the London Inter-Bank
Market by the London offices of four major reference banks in the London Inter-Bank Market,
selected by the Calculation Agent (after consultation with the Company), at approximately
11:00 a.m., London time on the LIBOR Interest Determination Date for that Interest Period.
The Calculation Agent shall request the principal London office of each of such banks to
provide a quotation of its rate. If at least two such quotations are provided, the
Three-Month LIBOR Rate with respect to that Interest Period shall be the arithmetic average
(rounded, if necessary, to the nearest one-hundredth (0.01) of a percent) of such
quotations. If fewer than two quotations are provided, the Three-Month LIBOR Rate with
respect to that Interest Period shall be the arithmetic average (rounded, if necessary, to
the nearest one-hundredth (0.01) of a percent) of the rates quoted by three major banks in
New York City, selected by the Calculation Agent (after consultation with the Company), at
approximately 11:00 a.m., New York City time, on the LIBOR Interest Determination Date for
loans in U.S. dollars to leading European banks for the Relevant Period and in a principal
amount that is representative for a single transaction in U.S. dollars in that market at
that time. However, if fewer than three banks selected by the Calculation Agent to provide
quotations are quoting as described above, the interest rate for that Interest Period shall
be the rate in effect on that LIBOR Interest Determination Date. The establishment of the
Three-Month LIBOR Rate for each Interest Period commencing on or after May 15, 2017 by the
Calculation Agent shall (in the absence of manifest error) be final and binding.
	 
	 	 	The Company shall have the right, at any time and from time to time during the term of the
Securities, to defer the payment of all or part of the current and accrued interest for a
period not exceeding 10 consecutive years (each period, commencing on the date that the
first such payment would otherwise be made, an “Optional Deferral Period”); provided that no
Optional Deferral Period shall extend beyond the Stated Maturity of the Securities. During
an Optional Deferral Period, interest (calculated for each Interest Period in the manner
provided herein, as if the interest payment had not been so deferred) shall be compounded
semi-annually during the Fixed Rate Period and quarterly during the Floating Rate Period.
Any deferred interest on the Securities shall accrue interest at a rate equal to the Coupon
Rate then applicable to the Securities, to the extent permitted by applicable law. At the
end of the Optional Deferral Period, the Company shall pay all interest accrued and unpaid
(together with interest thereon) to the person in whose name the Securities are registered
at the close of business on the record date for the Interest

4

 

	 	 	Payment Date on which such Optional Deferral Period ended; provided that any such accrued
and unpaid interest payable at the Stated Maturity or any Redemption Date shall be paid to
the person to whom principal is payable.
	 
	 	 	Prior to the termination of any such Optional Deferral Period, the Company may further defer
the payment of interest, provided that such Optional Deferral Period together with all such
previous and further deferrals of interest payments shall not exceed 10 consecutive years at
any one time or extend beyond the Stated Maturity of the Securities. Upon the termination of
any such Optional Deferral Period and the payment of all amounts then due, including
interest on deferred interest payments, the Company may elect to begin a new Optional
Deferral Period, subject to the above requirements. No interest shall be due and payable
during an Optional Deferral Period, except at the end thereof. The Company shall give the
Trustee notice of its election of an Optional Deferral Period at least 10 days and not more
than 60 days before the applicable Interest Payment Date. The Trustee shall promptly forward
notice of such election to each Holder of record of the Securities.
	 
	2.	 	Method of Payment.
	 
	 	 	The Company will pay interest on the Securities to the persons who are registered holders of
the Securities at the close of business on the record date for the next Interest Payment
Date, except as otherwise provided in the Indenture. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for payment of public
and private debts. The Company may pay principal and interest by check payable in such
money. It may mail an interest check to a holder’s registered address.
	 
	3.	 	Securities Agents.
	 
	 	 	Initially, The Bank of New York Trust Company, N.A. will act as Paying Agent, Transfer Agent
and Registrar. The Company may change any Paying Agent or Transfer Agent without notice.
The Company or any Affiliate may act in any such capacity. Subject to certain conditions,
the Company may change the Trustee.
	 
	4.	 	Indenture.
	 
	 	 	The Company issued the securities of this series (the “Securities”) under an Indenture dated
as of March 15, 1999 (the “Indenture”) between the Company and The Bank of New York Trust
Company, N.A. (as successor to JPMorgan Trust Company, National Association) (successor to
Bank One Trust Company, N.A.) (successor to The First National Bank of Chicago) (the
“Trustee”). The terms of the Securities include those stated in the Indenture and in the
Securities Resolution establishing the Securities and those made part of the Indenture by
the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb). Securityholders are
referred to the Indenture, the Securities Resolution and such Act for a statement of such
terms.

5

 

	5.	 	Redemption.
	 
	 	 	The Securities will be redeemable at the election of the Company before May 15, 2017, at any
time in whole and from time to time in part, upon not less than 30 nor more than 60 days’
notice given as provided in the Indenture, at a Redemption Price equal to the Make-Whole
Amount (as defined below), plus any accrued and unpaid interest thereon to, but not
including, the Redemption Date.
	 
	 	 	On or after May 15, 2017, the Securities will be redeemable at the election of the Company,
at any time in whole and from time to time in part, at a Redemption Price equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to, but not including,
the Redemption Date.
	 
	 	 	If before May 15, 2017, a Tax Event (as defined below) shall occur and be continuing, the
Securities may be redeemable at the election of the Company, in whole but not in part, at
any time within 90 days following the occurrence of the Tax Event, at a Redemption Price
equal to the Tax Event Make-Whole Amount (as defined below), plus any accrued and unpaid
interest thereon to, but not including, the Redemption Date.
	 
	 	 	If before May 15, 2017, a Rating Agency Event (as defined below) shall occur and be
continuing, the Securities may be redeemable at the election of the Company, in whole and
from time to time in part, at a Redemption Price equal to the Rating Agency Event Make-Whole
Amount (as defined below), plus any accrued and unpaid interest thereon to, but not
including, the Redemption Date.
	 
	 	 	“Make-Whole Amount” means an amount equal to the greater of (i) 100% of the principal amount
of the Securities being redeemed or (ii) as determined by the Quotation Agent (as defined
below) as of the Redemption Date, the sum of the present value of each scheduled payment of
principal of and interest on the Securities from the Redemption Date to May 15, 2017
(assuming, solely for the purposes of this calculation, that the principal amount of the
Securities to be redeemed was payable on May 15, 2017), discounted to the Redemption Date on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a
discount rate equal to the Treasury Rate (as defined below) plus 25 basis points.
	 
	 	 	“Comparable Treasury Issue” means, with respect to any Redemption Date, the United States
Treasury security selected by the Quotation Agent as having a maturity comparable to the
time period from the Redemption Date to May 15, 2017 that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new issues of
corporate debt securities with a term to maturity comparable to such time period. If no
United States Treasury security has a maturity which is within a period from three months
before to three months after May 15, 2017, the two most closely corresponding United States
Treasury securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
(as defined below) shall be interpolated or extrapolated on a straight-line basis, rounding
to the nearest month using such securities.

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	 	 	“Comparable Treasury Price” means, with respect to any Redemption Date, (i) the average,
after excluding the highest and lowest such Reference Treasury Dealer Quotations (as defined
below), of up to five Reference Treasury Dealer Quotations for such Redemption Date, or (ii)
if the Quotation Agent obtains fewer than five such Reference Treasury Dealer Quotations,
the average of all such Reference Treasury Dealer Quotations received.
	 
	 	 	“Quotation Agent” means a Reference Treasury Dealer selected by the Company for the purpose
of performing the functions of the Quotation Agent under the terms of this Securities
Resolution.
	 
	 	 	“Rating Agency Event” means a change by any nationally recognized statistical rating
organization within the meaning of Rule 15c3-1 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), that currently publishes a rating for the Company (and any
successor statistical rating organization) in the equity credit criteria for securities such
as the Securities resulting in a lower equity credit to the Company, as certified in an
Officer’s Certificate to the Trustee by the Company, than the equity credit assigned by such
rating agency to the Securities on May 8, 2007.
	 
	 	 	“Rating Agency Event Make-Whole Amount” means an amount equal to the greater of (i) 100% of
the principal amount of the Securities being redeemed or (ii) as determined by the Quotation
Agent as of the Redemption Date, the sum of the present value of each scheduled payment of
principal of and interest on the Securities from the Redemption Date to May 15, 2017
(assuming, solely for the purposes of this calculation, that the principal amount of the
Securities to be redeemed was payable on May 15, 2017), discounted to the Redemption Date on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a
discount rate equal to the Treasury Rate plus 50 basis points.
	 
	 	 	“Reference Treasury Dealer” means J.P. Morgan Securities Inc., Citigroup Global Markets Inc.
and up to three additional nationally recognized investment banking firms specified by the
Company that are primary U.S. Government Securities dealers.
	 
	 	 	“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Quotation Agent, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) as provided in writing to the Quotation Agent by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such
Redemption Date.
	 
	 	 	“Tax Event” means the receipt by the Company of an Opinion of Counsel experienced in such
matters to the effect that, as a result of (i) any amendment to, clarification of, or change
(including any announced prospective change) in the laws or treaties (or any regulations
thereunder) of the United States or any political subdivision or taxing authorities thereof
or therein; (ii) any judicial decision or any official administrative pronouncement, ruling,
regulatory procedure, notice or announcement (including any

7

 

	 	 	notice or announcement of intent to issue or adopt any such administrative pronouncement,
ruling, regulatory procedure or regulation) (each, an “Administrative Action”); or (iii) any
amendment to, clarification of, or change in the official position or the interpretation of
any such Administrative Action or judicial decision or any interpretation or pronouncement
that provides for a position with respect to such Administrative Action or judicial decision
that differs from the theretofore generally accepted position, in each case by any
legislative body, court, governmental authority or regulatory body, irrespective of the time
or manner in which such amendment, clarification or change is introduced or made known,
which amendment, clarification, or change is effective, or which Administrative Action is
taken or which judicial decision, interpretation or pronouncement is issued, in each case
after May 8, 2007, there is more than an insubstantial risk that interest payable by the
Company on the Securities is not deductible, or within 90 days would not be deductible, in
whole or in part, by the Company for United States federal income tax purposes.
	 
	 	 	“Tax Event Make-Whole Amount” means an amount equal to the greater of (i) 100% of the
principal amount of the Securities being redeemed or (ii) as determined by the Quotation
Agent as of the Redemption Date, the sum of the present value of each scheduled payment of
principal of and interest on the Securities from the Redemption Date to May 15, 2017
(assuming, solely for the purposes of this calculation, that the principal amount of the
Securities to be redeemed was payable on May 15, 2017), discounted to the Redemption Date on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a
discount rate equal to the Treasury Rate plus 50 basis points.
	 
	 	 	“Treasury Rate” means (i) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical release
designated “H.15(519)” or any successor publication which is published weekly by the Federal
Reserve and which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the
maturity corresponding to the time period from the Redemption Date to May 15, 2017 (if no
maturity is within three months before or after such time period, yields for the two
published maturities most closely corresponding to such time period shall be determined by
the Quotation Agent and the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (ii) if such release (or
any successor release) is not published during the week preceding the calculation date or
does not contain such yields, the rate per annum equal to the semi-annual equivalent yield
to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date. The Treasury Rate shall be calculated on the third
Business Day preceding the Redemption Date.
	 
	 	 	Promptly after the calculation of the Redemption Price of the Securities, the Company shall
give the Trustee notice thereof and the Trustee shall have no responsibility for any such
calculation.

8

 

	 	 	Notice of redemption shall be given by mail to Holders of Securities of this series, not
less than 30 days nor more than 60 days prior to the date fixed for redemption, all as
provided in the Indenture. As provided in the Indenture, notice of redemption at the
election of the Company as aforesaid may state that such redemption shall be conditional
upon the receipt by the applicable Paying Agent or Agents of money sufficient to pay the
principal of and premium, if any, and interest, if any, on the Securities on or prior to the
date fixed for such redemption; a notice of redemption so conditioned shall be of no force
or effect if such money is not so received and, in such event, the Company shall not be
required to redeem the Securities.
	 
	 	 	In the event of redemption of the Securities in part only, a new Security or Securities of
this series, of like tenor, representing the unredeemed portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
	 
	 	 	The Securities shall not be entitled to the benefit of any sinking fund or analogous
provision.
	 
	 	 	Procedures for redemption of the Securities will be governed by Article 3 of the Indenture.
	 
	6.	 	Subordination
	 
	 	 	The Company resolves, and each Holder of the Securities issued hereunder by such Holder’s
acceptance thereof covenants and agrees, that all Securities shall be issued subject to the
provisions of this Section 6; and each Holder of the Securities, whether upon original issue
or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.
	 
	 	 	The payment by the Company of the principal of, premium, if any, and interest on the
Securities issued hereunder shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below), whether outstanding at the date of this Securities
Resolution or thereafter incurred.
	 
	 	 	This Section 6 shall constitute a continuing offer to all persons who, in reliance upon such
provisions, become holders of, or continue to hold, Senior Indebtedness, and such provisions
are made for the benefit of the holders of Senior Indebtedness and such holders are made
obligees hereunder and they and/or each of them may enforce such provisions.
	 
	 	 	No provision of this Section 6 shall prevent the occurrence of any default or Event of
Default with respect to the Securities.
	 
	 	 	“Senior Indebtedness” means all of the Company’s obligations whether presently existing or
from time to time hereafter incurred, created, assumed or existing, to pay principal,
premium, interest, penalties, fees and any other payment in respect of any of

9

 

	 	 	the following: (i) all indebtedness for money borrowed; (ii) all indebtedness evidenced by
securities, debentures, bonds or other similar instruments issued by the Company; (iii) all
capital lease obligations; (iv) all obligations of the Company issued or assumed as the
deferred purchase price of property, all conditional sales obligations of the Company and
all obligations of the Company under any title retention agreements (but excluding trade
accounts payable arising in the ordinary course of business); (v) all obligations of the
Company for reimbursement under letters of credit, banker’s acceptances, security purchase
facilities or similar facilities issued for the account of the Company; (vi) all obligations
of the types referred to in clauses (i), (ii), (iii), (iv) and (v) above of others which the
Company has assumed, guaranteed or otherwise becomes liable for, under any agreement; and
(vii) all obligations of the types referred to in clauses (i), (ii), (iii), (iv) and (v)
above of others which are secured by any lien on any of the Company’s property, whether or
not such obligation is assumed by the Company; provided, that, the term
“Senior Indebtedness” shall not include: (a) any indebtedness or obligation in which the
instrument creating or evidencing the same or the assumption or guarantee of the same
expressly provides that such indebtedness or obligation is not superior in right of payment
to, or is pari passu with, the Securities, or (b) trade obligations incurred in the ordinary
course of business.
	 
	 	 	In the event and during the continuation of any default by the Company in the payment of
principal, premium, interest or any other amount due on any Senior Indebtedness (and after
expiration of any applicable grace period), and such default has not been cured or waived or
ceased to exist, or in the event that the maturity of any Senior Indebtedness has been and
remains accelerated because of a default, then, in either case, no payment shall be made by
the Company to the Holders of the Securities with respect to the principal (including any
redemption payment) of, interest on, or any other amount owing in respect of, the
Securities.
	 
	 	 	Upon any payment by the Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any dissolution or
winding-up or liquidation or reorganization of the Company, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts
due upon all Senior Indebtedness shall first be paid in full, or payment thereof provided
for in money in accordance with its terms, before any payment or distribution is made by the
Company to the Holders of the Securities on account of the principal of, premium, if any,
interest on, or any other amount owing in respect of, the Securities; and upon any such
dissolution or winding-up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Securities or the Trustee would be entitled to
receive from the Company, except for the provisions of this Section 6, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
person making such payment or distribution, or by the Holders of the Securities or by the
Trustee if received by them or it, directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness held by such
holders, as calculated by the Company) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any

10

 

	 	 	instruments evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in
money or money’s worth, after giving effect to any concurrent payment or distribution to or
for the holders of such Senior Indebtedness, before any payment or distribution is made to
the Holders of Securities or to the Trustee.
	 
	 	 	In the event that, notwithstanding the foregoing, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities, prohibited by
the foregoing, shall be received by the Trustee or the Holders of the Securities before all
Senior Indebtedness is paid in full, or provision is made for such payment in money in
accordance with its terms, such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any indenture
pursuant to which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for application to
the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay such
Senior Indebtedness in full in money in accordance with its terms, after giving effect to
any concurrent payment or distribution to or for the benefit of the holders of such Senior
Indebtedness.
	 
	 	 	For purposes of this Section 6, the words “cash, property or securities” shall not be deemed
to include shares of stock of the Company as reorganized or readjusted, or securities of the
Company or any other company provided for by a plan of reorganization or readjustment, the
payment of which is subordinated, at least to the extent provided in this Section 6 with
respect to the Securities, to the payment of all Senior Indebtedness that may at the time be
outstanding; provided, however, that (i) such Senior Indebtedness is assumed by the new
company, if any, resulting from any such reorganization or readjustment, and (ii) the rights
of the holders of such Senior Indebtedness are not, without the consent of such holders,
altered by such reorganization or readjustment. The consolidation of the Company with, or
the merger of the Company into, another company or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another company upon the terms and conditions provided for
in Article 5 of the Indenture shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 6 if such other company shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions stated in
Article 5 of the Indenture. Nothing in this Section 6 shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 7.06 of the Indenture.
	 
	 	 	Subject to the payment in full of all Senior Indebtedness, the rights of the Holders of the
Securities shall be subrogated to the rights of the holders of such Senior Indebtedness to
receive payments or distributions of cash, property or securities of the Company applicable
to such Senior Indebtedness until the principal of, premium, if any, and interest on, and
all other amounts owing in respect of, the Securities shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Holders of the

11

 

	 	 	Securities or the Trustee would be entitled except for the provisions of this Section 6, and
no payment over pursuant to the provisions of this Section 6, to or for the benefit of the
holders of such Senior Indebtedness by Holders of the Securities or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness, and the
Holders of the Securities be deemed to be a payment by the Company to or on account of such
Senior Indebtedness. It is understood that the provisions of this Section 6 are and are
intended solely for the purposes of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of Senior Indebtedness on the other hand.
	 
	 	 	Nothing contained in this Section 6 or elsewhere in this Securities Resolution or the
Indenture or in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the Securities,
the obligation of the Company, which is absolute and unconditional, to pay to the Holders of
the Securities the principal of (and premium, if any) and interest on and all other amounts
owing in respect of the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities and creditors of the Company, other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any Holder of the
Securities from exercising all remedies otherwise permitted by applicable law upon default
under the Indenture, as amended and supplemented by this Securities Resolution, subject to
the rights, if any, under this Section 6 of the holders of such Senior Indebtedness in
respect of cash, property or securities of the Company received upon the exercise of any
such remedy.
	 
	 	 	Upon any payment or distribution of assets of the Company referred to in this Section 6, the
Trustee, subject to the provisions of Section 7.01 of the Indenture, and the Holders of the
Securities, shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization
proceedings are pending, or a certificate of the receiver, trustee in bankruptcy,
liquidation trustee, agent or other person making such payment or distribution, delivered to
the Trustee or to the Holders of the Securities, for the purposes of ascertaining the
persons entitled to participate in such distribution, the holders of Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to this Section
6.
	 
	 	 	Each Holder of the Securities, by such Holder’s acceptance thereof, authorizes and directs
the Trustee on such Holder’s behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Section 6 and appoints the Trustee as such
Holder’s attorney-in-fact for any and all such purposes.
	 
	 	 	The Company shall give prompt written notice to a Trust Officer of any fact known to the
Company that would prohibit the making of any payment of monies to or by the Trustee in
respect of the Securities pursuant to the provisions of this Section 6. Notwithstanding the
provisions of this Section 6 or any other provision of the Indenture and this Securities
Resolution, the Trustee shall not be charged with knowledge of the

12

 

	 	 	existence of any facts that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Securities pursuant to the provisions of this Section 6 unless and
until a Trust Officer shall have received written notice thereof from the Company or a
holder or holders of Senior Indebtedness or from any representative or trustee therefor; and
before the receipt of any such written notice, the Trustee, subject to the provisions of
Section 7.01 of the Indenture, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the notice
provided for in this Section 6 at least two Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (or premium, if any) or interest on the
Securities) then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same to the
purposes for which they were received, and shall not be affected by any notice to the
contrary that may be received by it within two Business Days prior to such date.
	 
	 	 	The Trustee, subject to the provisions of Section 7.01 of the Indenture, shall be entitled
to rely on the delivery to it of a written notice by a person representing himself to be a
holder of Senior Indebtedness (or a representative or trustee on behalf of such holder) to
establish that such notice has been given by a holder of such Senior Indebtedness or a
representative or trustee on behalf of any such holder or holders. In the event that the
Trustee determines in good faith that further evidence is required with respect to the right
of any person as a holder of such Senior Indebtedness to participate in any payment or
distribution pursuant to this Section 6, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of such person
under this Section 6, and if such evidence is not furnished, the Trustee may defer any
payment to such person pending judicial determination as to the right of such person to
receive such payment.
	 
	 	 	The Trustee in its individual capacity shall be entitled to all the rights set forth in this
Section 6 in respect of any Senior Indebtedness at any time held by it, to the same extent
as any other holder of Senior Indebtedness, and nothing in the Indenture or this Securities
Resolution shall deprive the Trustee of any of its rights as such holder.
	 
	 	 	With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to
observe only such of its covenants and obligations as are specifically set forth in this
Section 6, and no implied covenants or obligations with respect to the holders of such
Senior Indebtedness shall be read into the Indenture or this Securities Resolution against
the Trustee. Except as set forth in any Securities Resolution under this Indenture
establishing any Senior Indebtedness, the Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness and, subject to the provisions of Section 7.01 of
the Indenture, the Trustee shall not be liable to any holder of Senior Indebtedness if it
shall pay over or deliver to Holders of Securities, the Company or any other person cash,
property or securities to which any holder of Senior Indebtedness shall be entitled by
virtue of this Section 6 or otherwise.

13

 

	 	 	No right of any present or future holder of any Senior Indebtedness to enforce subordination
as herein provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Company with the terms, provisions and
covenants of the Indenture or this Securities Resolution, regardless of any knowledge
thereof that any such holder may have or otherwise be charged with.
	 
	 	 	Without in any way limiting the generality of the foregoing paragraph, the holders of Senior
Indebtedness may, at any time and from time to time, without the consent of or notice to the
Trustee or the Holders of the Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the subordination provided in this Section
6 or the obligations hereunder of the Holders of the Securities to the holders of such
Senior Indebtedness, do any one or more of the following: (i) change the manner, place or
terms of payment or extend the time of payment of, or renew or alter, such Senior
Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any
instrument evidencing the same or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing such Senior Indebtedness; (iii) release any person liable in
any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other person.
	 
	7.	 	Denominations, Transfer, Exchange.
	 
	 	 	The Securities are in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Transfer Agent may require a holder, among
other things, to furnish appropriate endorsements and transfer documents and to pay any
taxes and fees required by law or the Indenture. The Transfer Agent need not exchange or
register the transfer of any Security or portion of a Security selected for redemption.
Also, it need not exchange or register the transfer of any Securities for a period of 15
days before a selection of Securities to be redeemed.
	 
	8.	 	Persons Deemed Owners.
	 
	 	 	The registered holder of a Security may be treated as its owner for all purposes.
	 
	9.	 	Amendments and Waivers.
	 
	 	 	Subject to certain exceptions, the Indenture or the Securities may be amended with the
consent of the holders of a majority in principal amount of the securities of all series
affected by the amendment. Subject to certain exceptions, a default on a series may be
waived with the consent of the holders of a majority in principal amount of the series.
	 
	 	 	Without the consent of any Securityholder, the Indenture or the Securities may be amended,
among other things, to cure any ambiguity, omission, defect or inconsistency;

14

 

	 	 	to provide for assumption of Company obligations to Securityholders; or to make any change
that does not materially adversely affect the rights of any Securityholder.
	 
	10.	 	Restrictive Covenants.
	 
	 	 	The Securities are unsecured general obligations of the Company initially limited to
$500,000,000 principal amount. The Company may from time to time without notice to, or the
consent of, the Holders of the Securities, create and issue further securities of the same
series, equal in rank to the Securities in all respects (or in all respects except for the
payment of interest accruing prior to the issue date of the new securities or except for the
first payment of interest following the issue date of the new securities) so that the new
securities may be consolidated and form a single series with the Securities and have the
same terms as to status, redemption or otherwise as the Securities. The Indenture does not
limit or restrict the amount of other unsecured debt.
	 
	 	 	In addition to the restrictions on the Securities contained in the Indenture, the Securities
will be subject to the following additional restrictive covenants:
	 
	 	 	Unless the Company shall have paid all accrued and payable interest on the Securities,
except as provided below, the Company shall not, and shall not permit any of the Company’s
subsidiaries to: (i) declare or pay any dividends or distributions, or redeem, purchase,
acquire or make a liquidation payment, on any shares of the Company’s capital stock, (ii)
make any payment of principal of, or interest or premium, if any, on or repay, purchase or
redeem any of the Company’s debt securities that rank upon the Company’s liquidation on a
parity with or junior to the Securities, or (iii) make any payments with respect to any
guarantee by the Company of debt securities if such guarantee ranks upon liquidation on a
parity with or junior to the Securities.
	 
	 	 	The foregoing provisions shall not prevent or restrict the Company from making, and the
Company shall be permitted at any time, including during an Optional Deferral Period, to
make any of the following: (i) purchases, redemptions or other acquisitions of the
Company’s capital stock in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of employees, officers, directors or agents or a
stock purchase or dividend reinvestment plan, or the satisfaction of the Company’s
obligations pursuant to any contract or security outstanding on the date that the payment of
interest is deferred requiring the Company to purchase, redeem or acquire its capital stock;
(ii) any payment, repayment, redemption, purchase, acquisition or declaration of a dividend
as a result of any reclassification of the Company’s capital stock or the exchange or
conversion of all or a portion of one class or series of its capital stock for another class
or series of its capital stock; (iii) the purchase of fractional interests in shares of the
Company’s capital stock pursuant to the conversion or exchange provisions of its capital
stock or the security being converted or exchanged, or in connection with the settlement of
stock purchase contracts; (iv) dividends or distributions paid or made in the Company’s
capital stock (or rights to acquire its capital stock), or repurchases, redemptions or
acquisitions of capital stock in connection with the issuance or exchange of capital stock
(or of securities convertible into or exchangeable for shares of the Company’s capital
stock) and distributions in connection with the settlement of stock

15

 

	 	 	purchase contracts outstanding on the date that the payment of interest on the Securities is
deferred; (v) redemptions, exchanges or repurchases of, or with respect to, any rights
outstanding under a shareholder rights plan or the declaration or payment thereunder of a
dividend or distribution of or with respect to rights in the future; and (vi) payments under
any preferred trust securities, subordinated debentures or junior subordinated debentures,
or guarantees of the foregoing, in each case that rank equal in right of payment to the
Securities, so long as the amount of payments made on account of such securities or
guarantees is paid on all such securities and guarantees then outstanding on a pro rata
basis in proportion to the full payment to which each series of such securities and
guarantees is then entitled if paid in full.
	 
	11.	 	Successors.
	 
	 	 	When a successor assumes all the obligations of the Company under the Securities and the
Indenture, the Company will be released from those obligations.
	 
	12.	 	Defeasance Prior to Redemption or Maturity.
	 
	 	 	Subject to certain conditions, the Company at any time may terminate some or all of its
obligations under the Securities and the Indenture if the Company deposits with the Trustee
money or U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity. U.S. Government Obligations are securities backed by
the full faith and credit of the United States of America or certificates representing an
ownership interest in such Obligations.
	 
	13.	 	Defaults and Remedies.
	 
	 	 	An Event of Default includes: (i) default in payment of principal or any premium when due on
the Securities; (ii) default in payment of interest when due and payable that continues for
30 days (subject to the Company’s right to defer interest payments as set forth in Section
1); and (iii) certain events of bankruptcy, insolvency or reorganization involving the
Company as set forth in Section 6.01 of the Indenture. An Event of Default with respect to
the Securities shall not include a failure to comply with the covenants under the Indenture
or this Securities Resolution. If an Event of Default occurs and is continuing (other than
certain events of bankruptcy, insolvency or reorganization), the Trustee or the holders of
at least 25% in aggregate principal amount of the Securities then outstanding may declare
the principal amount of the Securities, and any accrued interest thereon, to be due and
payable immediately. If an Event of Default occurs due to certain events of bankruptcy,
insolvency or reorganization, the principal amount of all the outstanding Securities, and
any accrued interest thereon, will automatically, and without any declaration or other
action on the part of the Trustee or any holder of the Securities, become immediately due
and payable.
	 
	 	 	Securityholders may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any trust or

16

 

	 	 	power. The Trustee may withhold from Securityholders notice of any continuing default
(except a default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company is required to furnish an annual compliance
certificate to the Trustee.
	 
	14.	 	Trustee Dealings with Company.
	 
	 	 	The Bank of New York Trust Company, N.A., the Trustee under the Indenture, in its individual
or any other capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with those persons, as if it were not
Trustee.
	 
	15.	 	No Recourse Against Others.
	 
	 	 	A director, officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
	 
	16.	 	Authentication.
	 
	 	 	The Securities shall not be valid until authenticated by a manual signature of the
Registrar.
	 
	17.	 	Abbreviations.
	 
	 	 	Customary abbreviations may be used in the name of a Securityholder or an assignee, such as:
TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants
with right of survivorship and not as tenants in common), CUST (=custodian), U/G/M/A
(=Uniform Gifts to Minors Act), and U/T/M/A (=Uniform Transfers to Minors Act).

The Company will furnish to any Securityholder upon written request and without charge a copy of
the Indenture and the Securities Resolution, which contains the text of the Securities in larger
type. Requests may be made to: Corporate Secretary, Wisconsin Energy Corporation, 231 West
Michigan Street, P.O. Box 1331, Milwaukee, Wisconsin 53201.

17

 

EXHIBIT 2

Junior Subordinated Notes

Supplemental Terms

     In addition to the terms set forth in Exhibit 1 to Securities Resolution No. 5, the Junior
Subordinated Notes shall have the following terms:

     Section 1. Definitions. Capitalized terms used and not defined in either Exhibit 1 or
2 shall have the meaning given such terms in the Indenture. The following is an additional
definition applicable to the Junior Subordinated Notes:

“Depositary” means, with respect to the Junior Subordinated Notes issued as one or
more global Securities, The Depository Trust Company, New York, New York, or any successor
thereto registered under the Securities Exchange Act of 1934 or other applicable statute or
regulation.

     Section 2. Securities Issuable as Global Securities.

     (a) The Junior Subordinated Notes shall be issued in the form of one or more permanent global
Securities and shall, except as otherwise provided in this Section 2, be registered only in the
name of the Depositary or its nominee. Each global Security shall bear a legend substantially to
the following effect:

“Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation (“DTC”), to the Company 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 is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.”

     (b) If at any time (i) the Depositary with respect to the Junior Subordinated Notes notifies
the Company that it is unwilling or unable to continue as Depositary for such global Security or
(ii) the Depositary for the Junior Subordinated Notes shall no longer be eligible or in good
standing under the Securities Exchange Act of 1934 or other applicable statute or regulation, the
Company shall appoint a successor Depositary with respect to such global Security. If a successor
Depositary for such global Security is not appointed by the Company within 90 days after the
Company receives such notice or becomes aware of such ineligibility, the Transfer Agent shall
register the exchange of such global Security for an equal principal amount of Registered
Securities in the manner provided in Section 2.07 of the Indenture.

 

 

     (c) The Transfer Agent shall register the transfer or exchange of a global Security for
Registered Securities pursuant to Section 2.07 of the Indenture if (i) a Default or Event of
Default shall have occurred and be continuing with respect to the Junior Subordinated Notes, or
(ii) the Company determines that the Junior Subordinated Notes shall no longer be represented by
global Securities.

     (d) In any exchange provided for in the preceding paragraphs (b) or (c), the Company will
execute, and the Registrar will authenticate and deliver, Registered Securities. Registered
Securities issued in exchange for a global Security shall be in such names and denominations as the
Depositary for such global Security shall instruct the Registrar. The Registrar shall deliver such
Registered Securities to the persons in whose names such Securities are so registered.

     (e) The Junior Subordinated Notes will trade in the Depositary’s Same-Day Funds Settlement
System. All payments of principal and interest on global Securities will be made by the Company in
immediately available funds.EX-4.2 REPLACEMENT CAPITAL COVENANT

 

Exhibit 4.2

          Replacement Capital Covenant, dated as of May 11, 2007 (this “Replacement Capital Covenant”),
by Wisconsin Energy Corporation, a Wisconsin corporation (together with its successors and assigns,
the “Corporation”), in favor of and for the benefit of each Covered Debtholder (as defined below).

Recitals

          A. On the date hereof, the Corporation is issuing $500,000,000 aggregate principal amount of
its 2007 Series A Junior Subordinated Notes due 2067 (including any such junior subordinated notes
issued after the date hereof that may be consolidated and form a single series with such junior
subordinated notes issued on the date hereof, the “Subordinated Notes”).

          B. This Replacement Capital Covenant is the “Replacement Capital Covenant” referred to in the
Prospectus Supplement, dated May 8, 2007, relating to the Subordinated Notes which supplements the
Corporation’s Prospectus, dated May 7, 2007 (together, the “Prospectus”).

          C. The Corporation, in entering into and disclosing the content of this Replacement Capital
Covenant in the manner provided below, is doing so with the intent that the covenants provided for
in this Replacement Capital Covenant be enforceable by each Covered Debtholder and that the
Corporation be estopped from disregarding the covenants in this Replacement Capital Covenant, in
each case to the fullest extent permitted by applicable law.

          D. The Corporation acknowledges that reliance by each Covered Debtholder upon the covenants in
this Replacement Capital Covenant is reasonable and foreseeable by the Corporation and that, were
the Corporation to disregard its covenants in this Replacement Capital Covenant, each Covered
Debtholder would have sustained an injury as a result of its reliance on such covenants.

          NOW, THEREFORE, the Corporation hereby covenants and agrees as follows in favor of and for the
benefit of each Covered Debtholder.

          SECTION 1. Definitions. Capitalized terms used in this Replacement Capital Covenant
(including the Recitals) have the meanings set forth in Schedule I hereto.

          SECTION 2. Limitations on Redemption, Defeasance or Purchase of Subordinated Notes. The
Corporation hereby promises and covenants to and for the benefit of each Covered Debtholder that
the Corporation shall not redeem, purchase or defease or discharge any portion of the principal
amount of the Subordinated Notes through the deposit of money and/or U.S. Government Obligations as
contemplated by Section 8.02 of the Indenture (herein referred to as “defeasance”), and shall cause
its Subsidiaries not to purchase, all or any part of the Subordinated Notes on or before the
Termination Date except to the extent that the principal amount repaid or defeased or the
applicable redemption or purchase price does not exceed the sum of the following amounts raised
through the issuance of Replacement Capital Securities:

     (a) the Applicable Percentage of (i) the aggregate amount of the net cash proceeds the
Corporation and its Subsidiaries have received from the sale of Common Stock and Rights to
acquire Common Stock, and (ii) the Market Value of any Common Stock that has been issued in
connection with the conversion into or exchange for Common Stock of any convertible or

 

 

exchangeable securities, other than, in the case of (ii), securities for which the
Corporation or any of its Subsidiaries has received equity credit from any NRSRO;
plus

     (b) the aggregate amount of net cash proceeds received by the Corporation and its
Subsidiaries from the sale of Replacement Capital Securities (other than the securities set
forth in clause (a) above);

in each case, to Persons other than the Corporation and its Subsidiaries within the applicable
Measurement Period (without double counting proceeds received in any prior Measurement Period);
provided that the limitations in this Section 2 shall not restrict the repayment, redemption or
other acquisition of any Subordinated Notes that have been previously defeased or purchased in
accordance with this Replacement Capital Covenant.

          SECTION 3. Covered Debt. (a) The Corporation represents and warrants that the Initial
Covered Debt is Eligible Debt.

          (b) On or during the 30-day period immediately preceding any Redesignation Date with respect
to the Covered Debt then in effect, the Corporation shall identify the series of Eligible Debt that
will become the Covered Debt on and after such Redesignation Date in accordance with the following
procedures:

     (i) the Corporation shall identify each series of its then outstanding long-term
indebtedness for money borrowed that is Eligible Debt;

     (ii) if only one series of the Corporation’s then outstanding long-term indebtedness
for money borrowed is Eligible Debt, such series shall become the Covered Debt commencing on
the related Redesignation Date;

     (iii) if the Corporation has more than one outstanding series of long-term indebtedness
for money borrowed that is Eligible Debt, then the Corporation shall identify the series
that has the latest stated final maturity date as of the date the Corporation is applying
the procedures in this Section 3(b), and such series shall become the Covered Debt on the
related Redesignation Date;

     (iv) the series of outstanding long-term indebtedness for money borrowed that is
determined to be Covered Debt pursuant to clause (ii) or (iii) above shall be the Covered
Debt for purposes of this Replacement Capital Covenant for the period commencing on the
related Redesignation Date and continuing to but not including the Redesignation Date as of
which a new series of outstanding long-term indebtedness is next determined to be the
Covered Debt pursuant to the procedures set forth in this Section 3(b); and

     (v) in connection with such identification of a new series of Covered Debt (including
pursuant to the paragraph below), the Corporation shall, as provided in Section 3(c), give a
notice and file with the Commission a current report on Form 8-K under the Securities
Exchange Act including or incorporating by reference this Replacement Capital Covenant as an
exhibit within the time frame provided for in such section.

          Notwithstanding any other provisions of this Replacement Capital Covenant, if a series of
Eligible Senior Debt of the Corporation has become the Covered Debt in accordance with this Section
3(b), on the date on which the Corporation issues a new series of Eligible Subordinated Debt, then

-2-

 

immediately upon such issuance such new series of Eligible Subordinated Debt shall become the
Covered Debt and the applicable series of Eligible Senior Debt shall cease to be the Covered Debt.

          (c) Notice. In order to give effect to the intent of the Corporation described in Recital C,
the Corporation covenants that (i) simultaneously with the execution of this Replacement Capital
Covenant or as soon as practicable after the date hereof (A) notice shall be given to the Holders
of the Initial Covered Debt and the trustee under the indenture establishing such debt, in the
manner provided in the indenture or similar instrument relating to the Initial Covered Debt, of
this Replacement Capital Covenant and the rights granted to such Holders hereunder and (B) the
Corporation shall file a copy of this Replacement Capital Covenant with the Commission as an
exhibit to a Current Report on Form 8-K (or any successor form) under the Securities Exchange Act;
(ii) so long as the Corporation is a reporting company under the Securities Exchange Act, the
Corporation shall include in each Annual Report on Form 10-K (or any successor form) filed with the
Commission under the Securities Exchange Act a description of the covenant set forth in Section 2
and identify the series of long-term indebtedness for borrowed money that is Covered Debt as of the
date such Form 10-K (or any successor form) is filed with the Commission; (iii) if a series of the
Corporation’s long-term indebtedness for money borrowed (A) becomes Covered Debt or (B) ceases to
be Covered Debt, notice shall be given of such occurrence within 30 days to the holders of such
long-term indebtedness for money borrowed in the manner provided for in the indenture or other
instrument under which such long-term indebtedness for money borrowed was issued, and the
Corporation shall report such change in a Current Report on Form 8-K (or any successor form), which
must include or incorporate by reference this Replacement Capital Covenant, and in the
Corporation’s next Quarterly Report on Form 10-Q (or any successor form) or Annual Report on Form
10-K (or any successor form), as applicable; (iv) upon succession of any new entity as the
Corporation hereunder as a result of a merger, consolidation, binding share exchange, sale, lease
or transfer of all or substantially all of the assets or other business combination of the
Corporation as it existed prior thereto, notice of such occurrence shall be given within 30 days to
the holders of the Covered Debt in the manner provided for in the indenture or other instrument
under which such long-term indebtedness for money borrowed was issued and the Corporation shall
report such change in a Current Report on Form 8-K (or any successor form), which must include or
incorporate by reference this Replacement Capital Covenant, and in the Corporation’s next Quarterly
Report on Form 10-Q (or any successor form) or Annual Report on Form 10-K (or any successor form),
as applicable; (v) if, and only if, the Corporation ceases to be a reporting company under the
Securities Exchange Act, the Corporation will (A) post on its website (or any other similar
electronic platform generally available to the public) the information otherwise required to be
included in Securities Exchange Act filings pursuant to clauses (ii) and (iii) of this Section 3(c)
and (B) cause a notice of the execution of this Replacement Capital Covenant to be posted on the
Bloomberg screen for the Initial Covered Debt or any successor Bloomberg screen and each similar
third-party vendor’s screen the Corporation reasonably believes is appropriate (each an “Investor
Screen”) and cause a hyperlink of the execution of this Replacement Capital Covenant to be included
on the Investor Screen for each series of Covered Debt, in each case to the extent permitted by
Bloomberg or such similar third-party vendor, as the case may be; and (vi) promptly upon request by
any Holder of Covered Debt, such Holder will be provided with a conformed copy of this Replacement
Capital Covenant.

          SECTION 4. Termination, Amendment and Waiver. (a) The obligations of the Corporation pursuant
to this Replacement Capital Covenant shall remain in full force and effect until the earliest date
(the “Termination Date”) to occur of (i) May 15, 2037, or if earlier, the date on which the
Subordinated Notes are otherwise paid, redeemed, defeased or purchased in full (in compliance with
the terms of Section 2 of this Replacement Capital Covenant), (ii) the date, if any, on which the
Holders of a majority by principal amount of the then-effective series of Covered Debt consent or
agree in writing to

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the termination of this Replacement Capital Covenant and the obligations of the Corporation
hereunder, (iii) the date on which the Corporation has no series of then outstanding long-term
indebtedness for money borrowed that is Eligible Senior Debt or Eligible Subordinated Debt (in each
case without giving effect to the rating requirement in clause (b) of the definition of each such
term) and (iv) the date on which the Subordinated Notes are accelerated as a result of an event of
default under the Indenture and the Securities Resolution. From and after the Termination Date,
the obligations of the Corporation pursuant to this Replacement Capital Covenant shall be of no
further force and effect.

          (b) This Replacement Capital Covenant may be amended or supplemented from time to time by a
written instrument signed by the Corporation with the consent of the Holders of at least a majority
in principal amount of the then-effective series of Covered Debt, provided that this Replacement
Capital Covenant may be amended or supplemented from time to time by a written instrument signed
only by the Corporation (and without the consent of the Holders of the then-effective series of
Covered Debt) if any of the following apply (it being understood that any such amendment or
supplement may fall into one or more of the following): (i) such amendment or supplement
eliminates Common Stock, Rights to acquire Common Stock, Debt Exchangeable for Common Equity and/or
Mandatorily Convertible Preferred Stock as Replacement Capital Securities, if, in the case of this
clause, after the date of this Replacement Capital Covenant, an accounting standard or interpretive
guidance of an existing accounting standard issued by an organization or regulator that has
responsibility for establishing or interpreting accounting standards in the United States becomes
effective such that there is more than an insubstantial risk that the failure to eliminate Common
Stock, Rights to acquire Common Stock, Debt Exchangeable for Common Equity and/or Mandatorily
Convertible Preferred Stock as Replacement Capital Securities would result in a reduction in the
Corporation’s earnings per share as calculated in accordance with generally accepted accounting
principles in the United States (“EPS”), or the Corporation otherwise has been advised in writing
by a nationally recognized independent accounting firm that there is more than an insubstantial
risk that the failure to eliminate such securities as Replacement Capital Securities would result
in a reduction of the Corporation’s EPS, (ii) the effect of such amendment or supplement is solely
to impose additional restrictions on the ability of the Corporation or its Subsidiaries to redeem,
defease or purchase the Subordinated Notes or to impose additional restrictions on, or to eliminate
certain of, the types of securities qualifying as Replacement Capital Securities (other than
securities which are covered by clause (i) above) and an officer of the Corporation has delivered
to the Holders of the then-effective series of Covered Debt in the manner provided for in the
indenture or other instrument with respect to such Covered Debt a written certificate to that
effect, (iii) such amendment or supplement extends the date specified in Section 4(a)(i), the
Stepdown Date or both, or (iv) such amendment or supplement is not adverse to the rights of the
Covered Debtholders hereunder and an officer of the Corporation has delivered to the Holders of the
then-effective series of Covered Debt in the manner provided for in the indenture or other
instrument with respect to such Covered Debt a written certificate stating that, in his or her
determination, such amendment or supplement is not adverse to the Covered Debtholders.

          (c) For purposes of Sections 4(a) and 4(b), the Holders whose consent or agreement is required
to terminate, amend or supplement the obligations of the Corporation under this Replacement Capital
Covenant shall be the Holders of the then-effective Covered Debt as of a record date established by
the Corporation that is not more than 30 days prior to the date on which the Corporation proposes
that such termination, amendment or supplement becomes effective.

          SECTION 5. Miscellaneous. (a) This Replacement Capital Covenant shall be governed by and
construed in accordance with the laws of the State of New York.

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          (b) This Replacement Capital Covenant shall be binding upon the Corporation and its successors
and assigns and shall inure to the benefit of the Covered Debtholders as they exist from
time-to-time (it being understood and agreed by the Corporation that any Person who is a Covered
Debtholder at the time such Person acquires, holds or sells Covered Debt shall retain its status as
a Covered Debtholder for so long as the series of long-term indebtedness for borrowed money owned
by such Person is Covered Debt and, if such Person initiates a claim or proceeding to enforce its
rights under this Replacement Capital Covenant after the Corporation has violated its covenants in
Section 2 and before the series of long-term indebtedness for money borrowed held by such Person is
no longer Covered Debt, such Person’s rights under this Replacement Capital Covenant shall not
terminate by reason of such series of long-term indebtedness for money borrowed no longer being
Covered Debt). The Corporation agrees that, if at any time the Covered Debt is held by a trust
(for example, where the Covered Debt is part of an issuance of trust preferred securities), a
holder of the securities issued by such trust may enforce (including by instituting legal
proceedings) this Replacement Capital Covenant directly against the Corporation as though such
holder owned the Covered Debt directly, and the holders of such trust securities shall be deemed
Holders of Covered Debt for purposes of this Replacement Capital Covenant for so long as the
indebtedness held by such trust remains Covered Debt hereunder. Other than the Covered Debtholders
as provided in the two previous sentences, no other Person shall have any rights under this
Replacement Capital Covenant or be deemed a third party beneficiary of this Replacement Capital
Covenant. In particular, no holder of the Subordinated Notes is a third party beneficiary of this
Replacement Capital Covenant, it being understood that such holders may have rights under the
Indenture and the Securities Resolution.

          (c) All demands, notices, requests and other communications to the Corporation under this
Replacement Capital Covenant shall be deemed to have been duly given and made if in writing and (i)
if served by personal delivery upon the Corporation, on the day so delivered (or, if such day is
not a Business Day, the next succeeding Business Day), (ii) if delivered by registered post or
certified mail, return receipt requested, or sent to the Corporation by a national or international
courier service, on the date of receipt by the Corporation (or, if such date of receipt is not a
Business Day, the next succeeding Business Day), or (iii) if sent by telecopier, on the day
telecopied, or if not a Business Day, the next succeeding Business Day, provided that the telecopy
is promptly confirmed by telephone confirmation thereof, and in each case to the Corporation at the
address set forth below, or at such other address as the Corporation may thereafter notify to
Covered Debtholders or post on its website as the address for notices under this Replacement
Capital Covenant:

Wisconsin Energy Corporation

231 West Michigan Street

P.O. Box 1331

Milwaukee, Wisconsin 53201

Attention: Treasurer

Telephone: (414) 221-2345

Telecopy: (414) 221-2511

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          IN WITNESS WHEREOF, the Corporation has caused this Replacement Capital Covenant to
be executed by a duly authorized officer, as of the day and year first above written.

	 	 	 	 	 
	 	WISCONSIN ENERGY CORPORATION

 	 
	 	By:  	/s/
Jeffrey West 	 
	 	 	Name:  	Jeffrey West 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 

 

 

Definitions

          “Alternative Payment Mechanism” means, with respect to any Qualifying Capital Securities,
provisions in the related transaction documents that require the issuer, in its discretion, to
issue (or use commercially reasonable efforts to issue) one or more types of APM Qualifying
Securities raising eligible proceeds at least equal to the deferred Distributions on such
Qualifying Capital Securities and apply the proceeds to pay unpaid Distributions on such Qualifying
Capital Securities, commencing on the earlier of (x) the first Distribution Date after commencement
of a deferral period on which the Corporation pays current Distributions on such Qualifying Capital
Securities and (y) the fifth anniversary of the commencement of such deferral period, and that:

          (a) define “eligible proceeds” to mean, for purposes of such Alternative Payment Mechanism,
the net proceeds (after underwriters’ or placement agents’ fees, commissions or discounts and other
expenses relating to the issuance or sale, where applicable, and including the fair market value of
property received by the Corporation or any of its Subsidiaries as consideration for such
securities) that the Corporation has received during the 180 days prior to the related Distribution
Date from the issuance of APM Qualifying Securities to Persons other than the Corporation and its
Subsidiaries, up to the Preferred Cap (as defined in (d) below) in the case of APM Qualifying
Securities that are Qualifying Preferred Stock or Mandatorily Convertible Preferred Stock;

          (b) permit the Corporation to pay current Distributions on any Distribution Date out of any
source of funds but (x) require the Corporation to pay deferred Distributions only out of eligible
proceeds and (y) prohibit the Corporation from paying deferred Distributions out of any source of
funds other than eligible proceeds;

          (c) if deferral of Distributions continues for more than one year (or such shorter period as
may be provided for in the terms of such securities), require the Corporation not to redeem or
purchase any APM Qualifying Securities or any securities that rank pari passu with or junior to any
APM Qualifying Securities that the Corporation has issued to settle deferred Distributions in
respect to that deferral period until at least one year after all deferred Distributions have been
paid (a “Repurchase Restriction”);

          (d) limit the obligation of the Corporation to issue (or use commercially reasonable efforts
to issue) APM Qualifying Securities up to:

          (A) in the case of APM Qualifying Securities that are Common Stock or
Qualifying Warrants, either (i) during the first five years of any deferral period
or (ii) with respect to deferred Distributions attributable to the first five
years of any deferral period (provided that such limitation shall not apply after
the ninth anniversary of the commencement of any deferral period), to a number of
shares of Common Stock and rights to purchase a number of shares of Common Stock,
in the aggregate, not in excess of 2% of the outstanding number of shares of
Common Stock, in each case as of the date of the Corporation’s most recent
publicly available consolidated financial statements at the time of such issuance
(the “Common Cap”); and

          (B) in the case of APM Qualifying Securities that are Qualifying Preferred
Stock or Mandatorily Convertible Preferred Stock, an amount from the issuance of
such Qualifying Preferred Stock and then-still outstanding Mandatorily Convertible
Preferred Stock pursuant to the related Alternative Payment Mechanism (including,
in

I-1

 

the case of Qualifying Preferred Stock, at any point in time from all prior
issuances thereof pursuant to such Alternative Payment Mechanism) equal to 25% of
the initial liquidation or principal amount of the Qualifying Capital Securities
that are the subject of the related Alternative Payment Mechanism (the “Preferred
Cap”);

          (e) in the case of Qualifying Capital Securities other than Qualifying Preferred Stock,
include a Bankruptcy Claim Limitation Provision; and

          (f) permit the Corporation, at its option, to provide that if the Corporation is involved in a
merger, consolidation, amalgamation, binding share exchange or conveyance, transfer or lease of
assets substantially as an entirety to any other person or a similar transaction (a “business
combination”) where immediately after the consummation of the business combination more than 50% of
the voting stock of the surviving entity of the business combination, or the entity to whom all or
substantially all of the Corporation’s assets are conveyed, transferred or leased, is owned by the
shareholders of the other party to the business combination, then clauses (a), (b) and (c) above
will not apply to any deferral period that is terminated on the next Distribution Date following
the date of consummation of the business combination;

provided (and it being understood) that:

          (a) the Alternative Payment Mechanism may at the discretion of the Corporation include a share
cap limiting the issuance of APM Qualifying Securities consisting of Common Stock, Qualifying
Warrants and Mandatorily Convertible Preferred Stock, in each case to a maximum issuance cap to be
set at the discretion of the Corporation (a “Share Cap”); provided that such Share Cap will be
subject to the Corporation’s agreement to use commercially reasonable efforts to increase the Share
Cap when reached and (i) only to the extent it can do so and simultaneously satisfy their future
fixed or contingent obligations under other securities and derivative instruments that provide for
settlement or payment in shares of Common Stock or (ii) if the Corporation cannot increase the
Share Cap as contemplated in the preceding clause, by requesting its Board of Directors to adopt a
resolution for shareholder vote at the next occurring annual shareholders meeting to increase the
number of shares of the Corporation’s authorized Common Stock for purposes of satisfying their
obligations to pay deferred distributions;

          (b) the Corporation shall not be obligated to issue (or use commercially reasonable efforts to
issue) APM Qualifying Securities for so long as a Market Disruption Event has occurred and is
continuing;

          (c) if, due to a Market Disruption Event or otherwise, the Corporation is able to raise and
apply some, but not all, of the eligible proceeds necessary to pay all deferred Distributions on
any Distribution Date, the Corporation will apply any available eligible proceeds to pay accrued
and unpaid Distributions on the applicable Distribution Date in chronological order subject to the
Common Cap, the Preferred Cap, and the Share Cap (if any), as applicable; and

          (d) if the Corporation has outstanding more than one class or series of securities under which
it is obligated to sell a type of APM Qualifying Securities and apply some part of the proceeds to
the payment of deferred Distributions, then on any date and for any period the amount of net
proceeds received by the Corporation from those sales and available for payment of deferred
Distributions on such securities shall be applied to such securities on a pro rata basis up to the
Common Cap, the

I-2

 

Preferred Cap and the Share Cap (if any), as applicable, in proportion to the total amounts
that are due on such securities.

          “APM Qualifying Securities” means, with respect to an Alternative Payment Mechanism, any Debt
Exchangeable for Preferred Equity or any Mandatory Trigger Provision, one or more of the following
(as designated in the transaction documents for any Qualifying Capital Securities that include an
Alternative Payment Mechanism or a Mandatory Trigger Provision or for any Debt Exchangeable for
Preferred Equity):

          (a) Common Stock;

          (b) Qualifying Warrants;

          (c) Qualifying Preferred Stock; and

          (d) Mandatorily Convertible Preferred Stock

provided that if the APM Qualifying Securities for any Alternative Payment Mechanism, any Debt
Exchangeable for Preferred Equity or any Mandatory Trigger Provision include both Common Stock and
Qualifying Warrants, such Alternative Payment Mechanism, Debt Exchangeable for Preferred Equity or
Mandatory Trigger Provision may permit, but need not require, the Corporation to issue Qualifying
Warrants.

          “Applicable Percentage” means 200% with respect to any redemption, purchase or defeasance of
Subordinated Notes prior to the Termination Date.

          “Bankruptcy Claim Limitation Provision” means, with respect to any Qualifying Capital
Securities that have an Alternative Payment Mechanism or a Mandatory Trigger Provision, provisions
that, upon any liquidation, dissolution, winding up or reorganization or in connection with any
insolvency, receivership or proceeding under any bankruptcy law with respect to the issuer, limit
the claim of the holders of such Qualifying Capital Securities to Distributions that accumulate
during (a) any deferral period, in the case of Qualifying Capital Securities that have an
Alternative Payment Mechanism or (b) any period in which the issuer fails to satisfy one or more
financial tests set forth in the terms of such securities or related transaction agreements, in the
case of Qualifying Capital Securities having a Mandatory Trigger Provision, to:

     (i) in the case of Qualifying Capital Securities having an Alternative Payment
Mechanism or Mandatory Trigger Provision with respect to which the APM Qualifying Securities
do not include Qualifying Preferred Stock or Mandatorily Convertible Preferred Stock, 25% of
the stated or principal amount of such securities then outstanding; and

     (ii) in the case of any other Qualifying Capital Securities, an amount not in excess of
the sum of (x) the amount of accumulated and unpaid Distributions (including compounded
amounts) that relate to the earliest two years of the portion of the deferral period for
which Distributions have not been paid and (y) an amount equal to the excess, if any, of the
Preferred Cap over the aggregate amount of net proceeds from the sale of Qualifying
Preferred Stock or Mandatorily Convertible Preferred Stock that the issuer has applied to
pay such Distributions pursuant to the Alternative Payment Mechanism or the Mandatory
Trigger Provision, provided that the holders of such securities are deemed to agree that, to
the extent the remaining claim exceeds the amount set

I-3

 

forth in subclause (x), the amount they receive in respect of such excess shall not
exceed the amount they would have received had the claim for such excess ranked pari passu
with the interests of the holders, if any, of Qualifying Preferred Stock or Mandatorily
Convertible Preferred Stock.

          “Business Day” means each day other than (a) a Saturday or Sunday, (b) a day on which banking
institutions in The City of New York are authorized or required by law to remain closed or (c) a
day on which the Federal Reserve Bank of New York is not open, and, on or after May 15, 2017, a day
that is not a London business day. A “London business day” is any day on which dealings in
deposits in U.S. dollars are transacted in the London interbank market.

          “Commission” means the United States Securities and Exchange Commission.

          “Common Cap” has the meaning specified in the definition of Alternative Payment Mechanism.

          “Common Stock” means any equity securities of the Corporation (including equity securities
held as treasury shares and equity securities sold pursuant to any dividend reinvestment plan or
employee benefit plans) that have no preference in the payment of dividends or amounts payable upon
the liquidation, dissolution or winding up of the Corporation (including a security that tracks the
performance of, or relates to the results of, a business, unit or division of the Corporation), and
any securities that have no preference in the payment of dividends or amounts payable upon the
liquidation, dissolution or winding up of the Corporation and are issued in exchange therefor in
connection with a merger, consolidation, binding share exchange, business combination,
recapitalization or other similar event.

          “Corporation” has the meaning specified in the introduction to this instrument.

          “Covered Debt” means (a) at the date of this Replacement Capital Covenant and continuing to
but not including the first Redesignation Date, the Initial Covered Debt and (b) thereafter,
commencing with each Redesignation Date and continuing to but not including the next succeeding
Redesignation Date, the Eligible Debt identified pursuant to Section 3(b) as the Covered Debt for
such period.

          “Covered Debtholder” means each Person (whether a Holder or a beneficial owner holding through
a participant in a clearing agency) that buys, holds or sells long-term indebtedness for money
borrowed of the Corporation during the period that such long-term indebtedness for money borrowed
is Covered Debt.

          “Debt Exchangeable for Equity” means Debt Exchangeable for Common Equity or Debt Exchangeable
for Preferred Equity.

          “Debt Exchangeable for Common Equity” means a security or combination of securities (together
in this definition, “such securities”) that:

          (a) gives the holder a beneficial interest in (i) a fractional interest in a stock purchase
contract for a share of Common Stock that will be settled in three years or less, with the number
of shares of common stock purchasable pursuant to such stock purchase contract to be within a range
established at the time of issuance of such securities and (ii) debt securities of the Corporation
that are not redeemable at the option of the issuer or the holder thereof prior to the settlement
of the stock purchase contracts;

I-4

 

          (b) provides that the investors directly or indirectly grant to the Corporation a security
interest in such debt securities and their proceeds (including any substitute collateral permitted
under the transaction documents) to secure the investors’ direct or indirect obligation to purchase
Common Stock pursuant to such stock purchase contracts;

          (c) includes a remarketing feature pursuant to which the debt securities of the Corporation
are remarketed to new investors commencing not later than the settlement date of the purchase
contract; and

          (d) provides for the proceeds raised in the remarketing to be used to purchase Common Stock
under the stock purchase contracts and, if there has not been a successful remarketing by the
settlement date of the purchase contract, provides that the stock purchase contracts will be
settled by the Corporation exercising its remedies as a secured party with respect to its debt
securities or other collateral directly or indirectly pledged by investors in the Debt Exchangeable
for Common Equity.

          “Debt Exchangeable for Preferred Equity” means a security or combination of securities
(together in this definition, “such securities”) that:

          (a) gives the holder a beneficial interest in (i) subordinated debt securities of the
Corporation that include a provision requiring the Corporation to issue (or use commercially
reasonable efforts to issue) one or more types of APM Qualifying Securities raising proceeds at
least equal to the deferred Distributions on such subordinated debt securities commencing not later
than the second anniversary of the commencement of such deferral period and that are the most
junior subordinated debt of the Corporation (or rank pari passu with the most junior subordinated
debt of the Corporation) (in this definition, “subordinated debt”) and (ii) a fractional interest
in a stock purchase contract for a share of Qualifying Preferred Stock of the Corporation that
ranks pari passu with or junior to all other preferred stock of the Corporation, as applicable (in
this definition, “preferred stock”);

          (b) provides that the investors directly or indirectly grant to the Corporation a security
interest in such subordinated debt securities and their proceeds (including any substitute
collateral permitted under the transaction documents) to secure the investors’ direct or indirect
obligation to purchase preferred stock of the Corporation pursuant to such stock purchase
contracts;

          (c) includes a remarketing feature pursuant to which the subordinated debt of the Corporation
is remarketed to new investors commencing not later than the first Distribution Date that is at
least five years after the date of issuance of securities or earlier in the event of an early
settlement event based on: (i) the dissolution of the issuer of such debt exchangeable for
preferred equity or (ii) one or more financial tests set forth in the terms of the instrument
governing such debt exchangeable for preferred equity;

          (d) provides for the proceeds raised in the remarketing to be used to purchase preferred stock
of the Corporation under the stock purchase contracts and, if there has not been a successful
remarketing by the first Distribution Date that is six years after the date of issuance of such
securities, provides that the stock purchase contracts will be settled by the Corporation
exercising its remedies as a secured party with respect to its subordinated debt securities or
other collateral directly or indirectly pledged by investors in the Debt Exchangeable for Preferred
Equity;

I-5

 

          (e) is subject to a Qualifying Replacement Capital Covenant that will apply to such securities
and preferred stock of the Corporation, and will not include Debt Exchangeable for Equity as a
Replacement Capital Security; and

          (f) if applicable, after the issuance of such preferred stock of the Corporation, provides the
holders of such securities with a beneficial interest in such preferred stock of the Corporation.

          “Distribution Date” means, as to any securities or combination of securities, the dates on
which periodic Distributions on such securities are scheduled to be made.

          “Distribution Period” means, as to any securities or combination of securities, each period
from and including the later of the issuance date and the most recent Distribution Date for such
securities to but not including the next succeeding Distribution Date for such securities.

          “Distributions” means, as to a security or combination of securities, dividends, interest
payments or other income distributions to the holders thereof that are not Subsidiaries of the
Corporation.

          “Eligible Debt” means, at any time, indebtedness, other than the Subordinated Notes, that is
Eligible Subordinated Debt or, if no Eligible Subordinated Debt is then outstanding, Eligible
Senior Debt.

          “Eligible Senior Debt” means, at any time in respect of any issuer, each series of outstanding
unsecured long-term indebtedness for money borrowed of such issuer that (a) upon a bankruptcy,
liquidation, dissolution or winding up of the issuer, ranks most senior among the issuer’s then
outstanding classes of unsecured indebtedness for money borrowed, (b) is then assigned a rating by
at least one NRSRO (provided that this clause (b) shall apply on a Redesignation Date only if on
such date the issuer has outstanding senior long-term indebtedness for money borrowed that
satisfies the requirements of clauses (a), (c) and (d) that is then assigned a rating by at least
one NRSRO), (c) has an outstanding principal amount of not less than $100,000,000, and (d) was
issued through or with the assistance of a commercial or investment banking firm or firms acting as
underwriters, initial purchasers or placement or distribution agents. For purposes of this
definition as applied to securities with a CUSIP number, each issuance of long-term indebtedness
for money borrowed that has (or, if such indebtedness is held by a trust or other intermediate
entity established directly or indirectly by the issuer, the securities of such intermediate entity
that have) a separate CUSIP number shall be deemed to be a series of the issuer’s long-term
indebtedness for money borrowed that is separate from each other series of such indebtedness.

          “Eligible Subordinated Debt” means, at any time in respect of any issuer, each series of the
issuer’s then-outstanding unsecured long-term indebtedness for money borrowed that (a) upon a
bankruptcy, liquidation, dissolution or winding up of the issuer, ranks senior to the Subordinated
Notes and subordinate to the issuer’s then outstanding series of unsecured indebtedness for money
borrowed that ranks most senior, (b) is then assigned a rating by at least one NRSRO (provided that
this clause (b) shall apply on a Redesignation Date only if on such date the issuer has outstanding
subordinated long-term indebtedness for money borrowed that satisfies the requirements in clauses
(a), (c) and (d) that is then assigned a rating by at least one NRSRO), (c) has an outstanding
principal amount of not less than $100,000,000, and (d) was issued through or with the assistance
of a commercial or investment banking firm or firms acting as underwriters, initial purchasers or
placement or distribution agents. For purposes of this definition as applied to securities with a
CUSIP number, each issuance of long-term indebtedness for money borrowed that has (or, if such
indebtedness is held by a trust or other intermediate entity

I-6

 

established directly or indirectly by the issuer, the securities of such intermediate entity
that have) a separate CUSIP number shall be deemed to be a series of the issuer’s long-term
indebtedness for money borrowed that is separate from each other series of such indebtedness.

          “Holder” means, as to the Covered Debt then in effect, each holder of such Covered Debt as
reflected on the securities register maintained by or on behalf of the Corporation with respect to
such Covered Debt.

          “Indenture” means the Indenture, dated as of March 15, 1999, between the Corporation and The
Bank of New York Trust Company, N.A. (as successor to JPMorgan Trust Company, National Association)
(successor to Bank One Trust Company, N.A.) (successor to The First National Bank of Chicago), as
trustee.

          “Initial Covered Debt” means the Corporation’s 6.20% Senior Notes due April 1, 2033 (CUSIP
976657 AG 1).

          “Intent-Based Replacement Disclosure” means, as to any security or combination of securities,
that the issuer has publicly stated its intention, either in the prospectus or other offering
document under which such securities were initially offered for sale or in filings with the
Commission made by the issuer under the Securities Exchange Act prior to or contemporaneously with
the issuance of such securities, that the issuer, to the extent the securities provide the issuer
with equity credit, will redeem, purchase or defease such securities only with the proceeds of
replacement capital securities that have terms and provisions at the time of redemption, purchase
or defeasance that are as much or more equity-like than the securities then being redeemed,
purchased or defeased, raised within 180 days of the applicable redemption or purchase date.

          “Mandatorily Convertible Preferred Stock” means preferred stock with (a) no prepayment
obligation on the part of the issuer thereof, whether at the election of the holders or otherwise,
and (b) a requirement that the preferred stock convert into Common Stock within three years from
the date of its issuance at a conversion ratio within a range established at the time of issuance
of the preferred stock.

          “Mandatory Trigger Provision” means, as to any Qualifying Capital Securities, provisions in
the terms thereof or of the related transaction agreements that:

          (a) require, or at its option in the case of non-cumulative perpetual preferred stock permit,
the issuer of such Qualifying Capital Securities to make payment of Distributions on such
securities only pursuant to the issue and sale of APM Qualifying Securities, within no more than
two years of a failure of the issuer to satisfy one or more financial tests set forth in the terms
of such Qualifying Capital Securities or related transaction agreements, in an amount such that the
net proceeds of such sale are at least equal to the amount of unpaid Distributions on such
Qualifying Capital Securities (including without limitation all deferred and accumulated amounts),
and in either case require the application of the net proceeds of such sale to pay such unpaid
Distributions, provided that (i) such Mandatory Trigger Provision shall limit the issuance and sale
of Common Stock and Qualifying Warrants the proceeds of which may be applied to pay such
Distributions pursuant to such provision to the Common Cap, unless the Mandatory Trigger Provision
requires such issuance and sale within one year of such failure, and (ii) the amount of Qualifying
Preferred Stock or Mandatorily Convertible Preferred Stock the net proceeds of which the issuer may
apply to pay such Distributions pursuant to such provision may not exceed the Preferred Cap;

I-7

 

          (b) other than in the case of non-cumulative preferred stock, prohibit the issuer from
repurchasing any APM Qualifying Securities or any securities that are pari passu with or junior to
its APM Qualifying Securities, the proceeds of which were used to pay deferred Distributions since
such failure before the date six months after the issuer applies the net proceeds of the sales
described in clause (a) to pay such unpaid Distributions in full;

          (c) other than in the case of non-cumulative perpetual preferred stock, include a Bankruptcy
Claim Limitation Provision; and

          (d) if deferral of Distributions continues for more than one year (or such shorter period as
may be provided for in the terms of such securities), require the Corporation not to redeem or
purchase any APM Qualifying Securities or any securities that rank pari passu with or junior to any
APM Qualifying Securities that the Corporation has issued to settle deferred Distributions in
respect to that deferral period until at least one year after all deferred Distributions have been
paid;

provided (and it being understood) that:

          (a) the issuer will not be obligated to issue (or use commercially reasonable efforts to
issue) any such APM Qualifying Securities for so long as a Market Disruption Event has occurred and
is continuing;

          (b) if, due to a Market Disruption Event or otherwise, the issuer is able to raise and apply
some, but not all, of the eligible proceeds necessary to pay all deferred Distributions on any
Distribution Date, the issuer will apply any available eligible proceeds to pay accrued and unpaid
Distributions on the applicable Distribution Date in chronological order subject to the Common Cap
and Preferred Cap, as applicable; and

          (c) if the issuer has outstanding more than one class or series of securities under which it
is obligated to sell a type of any such APM Qualifying Securities and applies some part of the
proceeds to the payment of deferred Distributions, then on any date and for any period the amount
of net proceeds received by the issuer from those sales and available for payment of deferred
Distributions on such securities shall be applied to such securities on a pro rata basis up to the
Common Cap and the Preferred Cap, as applicable, in proportion to the total amounts that are due on
such securities.

          No remedy other than Permitted Remedies will arise by the terms of such securities or related
transaction agreements in favor of the holders of such securities as a result of the issuer’s
failure to pay Distributions because of the Mandatory Trigger Provision until Distributions have
been deferred for one or more Distribution Periods that total together at least ten years.

          “Market Disruption Events” means the occurrence or existence of any of the following events or
sets of circumstances:

          (a) the Corporation would be required to obtain the consent or approval of its shareholders or
a regulatory body (including, without limitation, any securities exchange) or governmental
authority to issue or sell APM Qualifying Securities and such consent or approval has not yet been
obtained notwithstanding the Corporation’s commercially reasonable efforts to obtain such consent
or approval or a regulatory authority instructs the Corporation not to sell or offer for sale APM
Qualifying Securities at such time;

I-8

 

          (b) trading in securities generally (or in the Common Stock or the preferred stock of the
Corporation) on the New York Stock Exchange or any other national securities exchange or
over-the-counter market on which the Common Stock and/or the Corporation’s preferred stock is then
listed or traded shall have been suspended or the settlement of such trading generally shall have
been materially disrupted or minimum prices shall have been established on any such exchange or
market by the Commission, by the relevant exchange or by any other regulatory body or governmental
body having jurisdiction, and the establishment of such minimum prices materially disrupts or
otherwise has a material adverse effect on trading in, or the issuance and sale of, Common Stock
and/or such preferred stock;

          (c) a banking moratorium shall have been declared by the federal or state authorities of the
United States and such moratorium materially disrupts or otherwise has a material adverse effect on
trading in, or the issuance and sale of, the APM Qualifying Securities;

          (d) a material disruption shall have occurred in commercial banking or securities settlement
or clearance services in the United States and such disruption materially disrupts or otherwise has
a material adverse effect on trading in, or the issuance and sale of, the APM Qualifying
Securities;

          (e) the United States shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States, there shall have been a declaration of a
national emergency or war by the United States or there shall have occurred any other national or
international calamity or crisis and such event materially disrupts or otherwise has a material
adverse effect on trading in, or the issuance and sale of, the APM Qualifying Securities;

          (f) there shall have occurred such a material adverse change in general domestic or
international economic, political or financial conditions, including without limitation as a result
of terrorist activities, and such change materially disrupts or otherwise has a material adverse
effect on trading in, or the issuance and sale of, the APM Qualifying Securities;

          (g) an event occurs and is continuing as a result of which the offering document for such
offer and sale of APM Qualifying Securities would, in the reasonable judgment of the Corporation,
contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and either (a) the
disclosure of that event at such time, in the reasonable judgment of the Corporation, is not
otherwise required by law and would have a material adverse effect on the business of the
Corporation or (b) the disclosure relates to a previously undisclosed proposed or pending material
business transaction, the disclosure of which would impede the ability of the Corporation to
consummate such transaction, provided that no single suspension period contemplated by this
paragraph (g) shall exceed 90 consecutive days and multiple suspension periods contemplated by this
paragraph (g) shall not exceed an aggregate of 180 days in any 360-day period; or

          (h) the Corporation reasonably believes, for reasons other than those referred to in paragraph
(g) above, that the offering document for such offer and sale of APM Qualifying Securities would
not be in compliance with a rule or regulation of the Commission and the Corporation is unable to
comply with such rule or regulation or such compliance is unduly burdensome, provided that no
single suspension period contemplated by this paragraph (h) shall exceed 90 consecutive days and
multiple suspension periods contemplated by this paragraph (h) shall not exceed an aggregate of 180
days in any 360-day period.

I-9

 

          The definition of “Market Disruption Event” as used in any Qualifying Capital Securities may
include less than all of the paragraphs outlined above, as determined by the Corporation at the
time of issuance of such securities, and in the case of clauses (a), (b), (c) and (d), as
applicable to a circumstance where the Corporation would otherwise endeavor to issue preferred
stock, shall be limited to circumstances affecting markets where the preferred stock of the
Corporation trades or where a listing for its trading is being sought.

          “Market Value” means, on any date, (i) in the case of Common Stock, the closing sale price per
share of Common Stock (or if no closing sale price is reported, the average of the bid and ask
prices or, if more than one in either case, the average of the average bid and the average ask
prices) on that date as reported in composite transactions by the New York Stock Exchange or, if
the Common Stock is not then listed on the New York Stock Exchange, as reported by the principal
U.S. securities exchange on which the Common Stock is traded or quoted; if the Common Stock is not
either listed or quoted on any U.S. securities exchange on the relevant date, the market price will
be the average of the mid-point of the bid and ask prices for the Common Stock on the relevant date
submitted by at least three nationally recognized independent investment banking firms selected by
the Corporation for this purpose and (ii) in the case of Rights to acquire Common Stock, a value
determined by a nationally recognized independent investment banking firm selected by the
Corporation’s Board of Directors (or a duly authorized committee thereof) for this purpose.

          “Measurement Period” with respect to any redemption, purchase or defeasance of Subordinated
Notes, means the period (i) beginning on the date that is 180 days prior to the date of delivery of
notice of such redemption (such date of delivery, the “notice date”) or the date of such purchase
or defeasance and (ii) ending on such notice date or the date of such purchase or defeasance.
Measurement Periods cannot run concurrently.

          “Most Junior Subordinated Debt” means debt securities of the Corporation that rank upon the
Corporation’s liquidation, dissolution or winding-up junior to all of the Corporation’s other
long-term indebtedness for money borrowed (other than the Corporation’s long-term indebtedness for
money borrowed from time to time outstanding that by its terms ranks pari passu with such
securities) and pari passu with the claims of the Corporation’s trade creditors.

          “Non-Cumulative” means, with respect to any securities, that the issuer thereof may
elect not to make any number of periodic Distributions without any remedy arising under the terms
of the securities or related agreements in favor of the holders, other than one or more Permitted
Remedies. Securities that include an Alternative Payment Mechanism shall also be deemed to be
Non-Cumulative for all purposes of this Replacement Capital Covenant.

          “NRSRO” means a nationally recognized statistical rating organization within the meaning of
Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act.

          “Optional Deferral Provision” means, as to any securities, a provision in the terms thereof or
of the related transaction agreements to the effect that either:

          (a) (i) the issuer of such securities may, in its sole discretion, defer in whole or in part
payment of Distributions on such securities for one or more consecutive Distribution Periods of up
to five years or, if a Market Disruption Event is continuing, ten years, without any remedy other
than Permitted Remedies and (ii) such securities are subject to an Alternative Payment Mechanism
(provided that such Alternative Payment Mechanism need not apply during the first five years of any
deferral period

I-10

 

and need not include a Common Cap, Preferred Cap, Bankruptcy Claim Limitation Provision or
Repurchase Restriction); or

          (b) the issuer of such securities may, in its sole discretion, defer or skip in whole or in
part payment of Distributions on such securities for one or more consecutive Distribution Periods
up to at least ten years, without any remedy other than Permitted Remedies.

     “Permitted Remedies” means, with respect to any securities, one or more of the following
remedies:

     (a) rights in favor of the holders of such securities permitting such holders to elect
one or more directors of the issuer (including any such rights required by the listing
requirements of any stock or securities exchange on which such securities may be listed or
traded), and

     (b) complete or partial prohibitions on the issuer paying Distributions on or
repurchasing Common Stock or other securities that rank pari passu with or junior as to
Distributions to such securities for so long as Distributions on such securities, including
unpaid Distributions, remain unpaid.

     “Person” means any individual, corporation, partnership, joint venture, trust, limited
liability company, corporation or other entity, unincorporated organization or government or any
agency or political subdivision thereof.

     “Preferred Cap” has the meaning specified in the definition of Alternative Payment Mechanism.

     “Prospectus” has the meaning specified in Recital B.

     “Qualifying Capital Securities” means securities (other than Common Stock, Rights to acquire
Common Stock, Mandatorily Convertible Preferred Stock and Debt Exchangeable for Equity) that rank
pari passu with or junior to the Most Junior Subordinated Debt of the Corporation upon its
liquidation, dissolution or winding up and, in the determination of the Corporation’s Board of
Directors reasonably construing the definitions and other terms of this Replacement Capital
Covenant, meet one of the following criteria:

     (a) in connection with any redemption, defeasance or purchase of Subordinated Notes on
or prior to the Stepdown Date:

     (i) securities issued by the Corporation or its Subsidiaries that (A) have no
maturity or a maturity of at least 60 years and (B) either (x) are subject to a
Qualifying Replacement Capital Covenant and are Non-Cumulative or (y) have a
Mandatory Trigger Provision and an Optional Deferral Provision and are subject to
Intent-Based Replacement Disclosure; or

     (ii) securities issued by the Corporation or its Subsidiaries that (A) have
no maturity or a maturity of at least 40 years, (B) are subject to a Qualifying
Replacement Capital Covenant, (C) have an Optional Deferral Provision and (D) have
a Mandatory Trigger Provision; or

I-11

 

     (iii) securities issued by the Corporation or its Subsidiaries that (A) have
no maturity or a maturity of at least 60 years, (B) are subject to a Qualifying
Replacement Capital Covenant and (C) have an Optional Deferral Provision;

     (iv) securities issued by the Corporation or its Subsidiaries that (A) have no
maturity or a maturity of at least 60 years and (B) are subject to Intent-Based
Replacement Disclosure and (C) are Non-Cumulative;

     (v) securities issued by the Corporation or its Subsidiaries that (A) have no
maturity or a maturity of at least 60 years, (B) have an Optional Deferral Provision
and (C) have a Mandatory Trigger Provision;

     (vi) securities issued by the Corporation or its Subsidiaries that (A) have no
maturity or a maturity of at least 40 years, (B) are subject to a Qualifying
Replacement Capital Covenant and (C) are Non-Cumulative;

     (vii) securities issued by the Corporation or its Subsidiaries that (A) either
(x) have no maturity or a maturity of at least 40 years and are subject to
Intent-Based Replacement Disclosure or (y) have no maturity or a maturity of at
least 25 years and are subject to a Qualifying Replacement Capital Covenant, (B)
have an Optional Deferral Provision and (C) have a Mandatory Trigger Provision; or

     (viii) any other preferred stock issued by the Corporation that (A) has no
prepayment obligation on the part of the issuer thereof, whether at the election of
the holders or otherwise, (B) has no maturity or a maturity of at least 60 years and
(C) is subject to a Qualifying Replacement Capital Covenant; or

     (b) in connection with any redemption, defeasance or purchase of the Subordinated Notes
after the Stepdown Date:

     (i) all securities described under clause (a) of this definition;

     (ii) securities issued by the Corporation or its Subsidiaries that (A) have no
maturity or a maturity of at least 60 years, (B) are subject to Intent-Based
Replacement Disclosure and (C) have an Optional Deferral Provision;

     (iii) securities issued by the Corporation or its Subsidiaries that (A) have no
maturity or a maturity of at least 40 years, (B) are subject to a Qualifying
Replacement Capital Covenant and (C) have an Optional Deferral Provision;

     (iv) securities issued by the Corporation or its Subsidiaries that (A) either
(x) have no maturity or a maturity of at least 40 years and are subject to
Intent-Based Replacement Disclosure or (y) have no maturity or a maturity of at
least 25 years and are subject to a Qualifying Replacement Capital Covenant and (B)
are Non-Cumulative;

     (v) securities issued by the Corporation or its Subsidiaries that (A) have no
maturity or a maturity of at least 25 years, (B) are subject to Intent-Based
Replacement Disclosure, (C) have an Optional Deferral Provision and (D) have a
Mandatory Trigger Provision; or

I-12

 

     (vi) any other preferred stock issued by the Corporation that (A) has no
prepayment obligation on the part of the issuer thereof, whether at the election of
the holders or otherwise and (B) either (x) has no maturity or a maturity of at
least 60 years and is subject to Intent-Based Replacement Disclosure or (y) has no
maturity or a maturity of at least 40 years and is subject to a Qualifying
Replacement Capital Covenant.

          “Qualifying Preferred Stock” means non-cumulative perpetual preferred stock issued by the
Corporation or its Subsidiaries that (a) ranks pari passu with or junior to all other preferred
stock of the Corporation and contains no remedies other than Permitted Remedies and (b) either (i)
is subject to Intent-Based Replacement Disclosure and has a provision that prohibits the issuer
from paying any dividends thereon upon its failure to satisfy one or more financial tests set forth
therein or (ii) is subject to a Qualifying Replacement Capital Covenant.

          “Qualifying Replacement Capital Covenant” means (i) a replacement capital covenant
substantially similar to this Replacement Capital Covenant or (ii) a replacement capital covenant,
as identified by the Board of Directors of the Corporation, acting in good faith and in its
reasonable discretion and reasonably construing the definitions and other terms of this Replacement
Capital Covenant, (a) entered into by an issuer that at the time it enters into such replacement
capital covenant is a reporting company under the Securities Exchange Act and (b) that restricts
the issuer from redeeming, defeasing or purchasing identified securities except to the extent of
the applicable percentage of the net proceeds of specified replacement capital securities that have
terms and provisions at the time of redemption, defeasance or purchase that are as much or more
equity-like than the securities then being redeemed, defeased or purchased, raised within the 180
day period prior to the applicable redemption, defeasance or purchase date.

          “Qualifying Warrants” means net share settled warrants to purchase Common Stock that have an
exercise price greater than the current stock market price of the issuer’s Common Stock as of their
date of issuance, that do not entitle the issuer to redeem for cash and the holders of such
warrants are not entitled to require the issuer to repurchase for cash in any circumstance.

          “Redesignation Date” means, as to the Covered Debt in effect at any time, the earliest of (a)
the date that is two years prior to the final maturity date of such Covered Debt, (b) if the
Corporation elects to redeem, or the Corporation or a Subsidiary of the Corporation elects to
purchase or purchases, such Covered Debt either in whole or in part with the consequence that after
giving effect to such redemption or purchase the outstanding principal amount of such Covered Debt
is less than $100,000,000, the applicable redemption or purchase date and (c) if such Covered Debt
is not Eligible Subordinated Debt, the date on which the Corporation issues long-term indebtedness
for money borrowed that is Eligible Subordinated Debt.

          “Replacement Capital Covenant” has the meaning specified in the introduction to this
instrument.

          “Replacement Capital Securities” means

     (a) Common Stock and Rights to acquire Common Stock;

     (b) Mandatorily Convertible Preferred Stock;

I-13

 

     (c) Debt Exchangeable for Equity; and

     (d) Qualifying Capital Securities.

          “Repurchase Restriction” has the meaning specified in the definition of Alternative Payment
Mechanism.

          “Rights to acquire Common Stock” includes any right to acquire Common Stock, including any
right to acquire Common Stock pursuant to a stock purchase plan or employee benefit plan. Rights
to acquire Common Stock shall include Qualifying Warrants.

          “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Securities Resolution” means Securities Resolution No. 5 under the Indenture, dated as of May
8, 2007.

          “Share Cap” has the meaning specified in the definition of Alternative Payment Mechanism.

          “Stepdown Date” means May 15, 2017.

          “Subordinated Notes” has the meaning specified in Recital A.

          “Subsidiary” means, at any time, any Person the shares of stock or other ownership interests
of which having ordinary voting power to elect a majority of the board of directors or other
managers of such Person are at the time owned, or the management or policies of which are otherwise
at the time controlled, directly or indirectly through one or more intermediaries (including other
Subsidiaries) or both, by another Person.

          “Termination Date” has the meaning specified in Section 4(a).

I-14

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