Document:

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Exhibit 4(c)

OFFICERS’ CERTIFICATE

(Under Section 301 of the Subordinated Indenture of

PPL Capital Funding, Inc. and PPL Corporation)

          The undersigned James E. Abel, Treasurer of PPL CAPITAL FUNDING, INC. (the “Company”), in
accordance with Section 301 of the Subordinated Indenture, dated as of March 1, 2007, as heretofore
supplemented (the “Subordinated Indenture”, capitalized terms used herein and not defined herein
having the meanings specified in the Subordinated Indenture), of the Company and PPL CORPORATION
(the “Guarantor”), to The Bank of New York, as Trustee (the “Trustee”), does hereby establish for
the series of Securities established in Supplemental Indenture No. 1, dated as of March 1, 2007
(the “Supplemental Indenture”), the following terms and characteristics (the lettered clauses set
forth below corresponding to the lettered clauses of Section 301 of the Subordinated Indenture),
and the undersigned James E. Abel, Vice President — Finance and Treasurer of the Guarantor, does
hereby approve of such terms and characteristics on behalf of the Guarantor:

(a) the title of the Securities of such series shall be “2007 Series A Junior Subordinated
Notes due 2067” (the “Notes”);

(b) the aggregate principal amount of Notes which may be authenticated and delivered under
the Subordinated Indenture shall be limited to $500,000,000, except as contemplated in
Section 301(b) and the last paragraph of Section 301 of the Subordinated Indenture;

(c) subject to the provisions of Section 307 of the Subordinated Indenture, interest on the
Notes (other than interest payable at Maturity) shall be payable to the Person or Persons in
whose name the Notes are registered at the close of business on the Regular Record Date for
such interest, which shall be the fifteenth calendar day (whether or not a Business Day)
immediately preceding the corresponding Interest Payment Date; provided, however, that if
the Notes are issued and held by a securities depositary in global or book-entry only form
as contemplated in clause (r) below, the Regular Record Date shall be the close of business
on the Business Day preceding the corresponding Interest Payment Date; interest payable at
Maturity shall be paid to the Person to whom principal shall be paid;

 

 

(d) the Stated Maturity of the principal of the Notes shall be March 30, 2067 and any
accrued and theretofore unpaid interest on the Notes shall be due and payable at such date;
in addition, reference is made to clause (g) below; the Company shall not have the right to
extend the Maturity of the Notes as contemplated by Section 301(d) of the Indenture;

(e) the Notes shall bear interest at (i) the rate of 6.70% per annum (the “Fixed Coupon
Rate”) up to, but not including, March 30, 2017 (the “Fixed Rate Period”), and (ii) a rate
equal to the Three-Month LIBOR Rate (as defined below) plus 2.665% per annum, reset
quarterly on the LIBOR Rate Reset Dates (as defined below) (the “Floating Coupon Rate” and,
together with the Fixed Rate Coupon Rate, the “Coupon Rate”), from March 30, 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 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 March 30 and
September 30 of each year during the Fixed Rate Period and quarterly in arrears on March 30,
June 30, September 30 and December 30 of each year during the Floating Rate Period (each, an
“Interest Payment Date”), commencing September 30, 2007 for the Fixed Rate Period and June
30, 2017 for the Floating Rate Period.

With respect to the Notes, 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 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 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 the
Interest Payment Date or Redemption Date, as applicable. During the Floating Rate Period,
if any Interest Payment Date, other than a Redemption Date or the Stated Maturity of the
Notes, 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

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Redemption Date or the Stated Maturity of the Notes 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
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.

“Calculation Agent” means The Bank of New York, or other 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 second paragraph of this paragraph (e), March
30, June 30, September 30 and December 30 of each year, commencing March 30, 2017.

“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.

“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
for a three-month period commencing on the first day of that Interest Period and ending on
the next Interest Payment Date (for purposes of this definition, the “Relevant Period”) that
appears on Reuters LIBOR01 Page as of 11:00 a.m. (London time) on the LIBOR Interest
Determination Date for that Interest Period. 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 LIBOR rate shall be determined on the basis of the rates at which
deposits in U.S. dollars for the Relevant Period and in a principal amount of not less than
$1,000,000 are offered to prime banks in the London interbank market by four major banks in
the London interbank market, selected by the Calculation Agent (after consultation with the
Company), at

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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 mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) 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 mean (rounded upward if necessary to
the nearest whole multiple of 0.00001%) 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 first day of that Interest Period for
loans in U.S. dollars to leading European banks for the Relevant Period and in a principal
amount of not less than $1,000,000. However, if fewer than three banks selected by the
Calculation Agent to provide quotations are quoting as described above, the Three-Month
LIBOR Rate for that Interest Period shall be the same as the Three-Month LIBOR Rate as
determined for the previous Interest Period or, in the case of the Interest Period
commencing on March 30, 2017, the interest rate on the Notes shall be 8.015%. The
establishment of the Three-Month LIBOR Rate for each Interest Period commencing on or after
March 30, 2017 by the Calculation Agent shall (in the absence of manifest error) be final
and binding.

Pursuant to Section 312 of the Subordinated Indenture and Section 2 of Supplemental
Indenture No. 1 thereto, the Company shall have the right, at any time and from time to time
during the term of the Notes, to defer the payment of 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 Maturity of the Notes. 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 Notes
shall accrue interest at a rate equal to the Coupon Rate then applicable to the Notes, 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 Notes are registered at the close of business on the Regular Record
Date for the Interest 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 Maturity of the Notes. 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

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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 Notes;

(f) the Corporate Trust Office of the Trustee in New York, New York shall be the office or
agency of the Company at which the principal of and any premium and interest, on the Notes
shall be payable, at which registration of transfer and exchange of Notes may be effected
and at which notices and demands to or upon the Company or the Guarantor in respect of the
Notes and the Subordinated Indenture may be served; provided, however, that the Company and
the Guarantor each reserve the right to change, by one or more Officer’s Certificates
supplemental to this Officers’ Certificate, any such office or agency; and provided,
further, that the Company and the Guarantor each reserve the right to designate, by one or
more Officer’s Certificates supplemental to this Officers’ Certificate, its principal office
in Allentown, Pennsylvania or the office of the Guarantor or the Guarantor’s subsidiary, PPL
Electric Utilities Corporation in Allentown, Pennsylvania, as any such office or agency; the
Trustee shall be the initial Security Registrar and Paying Agent for the Notes; provided,
that the Company and the Guarantor each reserve the right, by one or more Officer’s
Certificates supplemental to this Officers’ Certificate, to designate a different Security
Registrar or a different or additional Paying Agent (which in each case, may be the Company,
the Guarantor or any Affiliate of either of them) and to remove and replace any Security
Registrar or Paying Agent;

(g) the Notes shall be redeemable at the option of the Company as and to the extent provided
in the form of Note attached hereto and hereby authorized and approved;

(h) [not applicable];

(i) the Notes shall be issued in denominations of $1,000 and integral multiples thereof,
unless otherwise authorized by the Company and the Guarantor;

(j) [not applicable];

(k) [not applicable];

(l) [not applicable];

(m) [not applicable];

(n) [not applicable];

(o) reference is hereby made to the provisions of Supplemental Indenture No. 1 for certain
covenants of the Company and the Guarantor for the benefit of the Holders of the Notes;

(p) [not applicable];

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(q) the only obligations or instruments which shall be considered Eligible Obligations in
respect of the Notes shall be Government Obligations; and the provisions of Section 701 and
702 of the Subordinated Indenture and Section 4 of Article One of the Supplemental Indenture
shall apply to the Notes;

(r) the Notes may be issued in global form (the “Global Notes”) and the depository for the
Global Notes shall initially be The Depository Trust Company (“DTC”); provided, that
the Company reserves the right to provide for another depository, registered as a clearing
agency under the Exchange Act, to act as depository for the Global Notes (DTC and any such
successor depository, the “Depositary”); beneficial interests in Notes issued in global form
may not be exchanged in whole or in part for individual certificated Notes in definitive
form, and no transfer of a Global Note in whole or in part may be registered in the name of
any Person other than the Depositary or its nominee except that if the Depositary (A) has
notified the Company that it is unwilling or unable to continue as depository for the Global
Notes or (B) has ceased to be a clearing agency registered under the Exchange Act and, in
either case, a successor depository is not appointed by the Company within 90 days after
such notice or cessation, the Company shall execute, and the Trustee, upon receipt of a
Company Order for the authentication and delivery of definitive Notes, shall authenticate
and deliver Notes in definitive certificated form in an aggregate principal amount equal to
the principal amount of the Global Note representing such Notes in exchange for such Global
Note, such definitive Notes to be registered in the names provided by the Depositary; each
Global Note (i) shall represent and shall be denominated in an amount equal to the aggregate
principal amount of the outstanding Notes to be represented by such Global Note, (ii) shall
be registered in the name of the Depositary or its nominee, (iii) shall be delivered by the
Trustee to the Depositary, its nominee, any custodian for the Depositary or otherwise
pursuant to the Depositary’s instruction and (iv) shall bear a legend restricting the
transfer of such Global Note to any person other than the Depositary or its nominee; none of
the Company, the Guarantor, the Trustee, any Paying Agent or any Authenticating Agent shall
have any responsibility or liability for any aspect of the records relating to, or payments
made on account of, beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership interests;

(s) [not applicable];

(t) reference is made to clause (r) above; no service charge shall be made for the
registration of transfer or exchange of Notes; provided, however, that the Company may
require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection with the exchange or transfer;

(u) reference is hereby made to clause (e) above ;

(v) the Notes shall be entitled to the benefits of Article Fourteen of the Subordinated
Indenture and the Guarantees to be endorsed on the Notes shall be substantially in the form
established in the Supplemental Indenture;

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(w) (i) except as otherwise determined by the proper officers of the Company and communicated
to the Trustee in a Company Order or as established in one or more Officer’s Certificates
supplemental to this Officers’ Certificate, the Notes shall be substantially in the form of Note
attached hereto, which form is hereby authorized and approved and shall have such further terms as
are set forth in such form.

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          IN WITNESS WHEREOF, we have hereunto signed our names this day of March, 2007.

	 	 	 	 	 
	 

	 	PPL CAPITAL FUNDING, INC.	 	 
	 
	 	 	 	 
	 

	 	/s/ James E. Abel
 

Name: James E. Abel
	 	 
	 

	 	Title: Treasurer	 	 
	 
	 	 	 	 
	 

	 	PPL CORPORATION	 	 
	 
	 	 	 	 
	 

	 	/s/ James E. Abel
 

Name: James E. Abel
	 	 
	 

	 	Title: Vice-President-Finance and Treasurer	 	 

 

 

EXHIBIT A

FORM OF NOTE

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE TO BE 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 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.

 

PPL CAPITAL FUNDING, INC.

2007 Series A Junior Subordinated Notes due 2067

Fully and Unconditionally Guaranteed as to Payment of Principal

and any Interest and Premium by

PPL CORPORATION

	 	 	 
	Original Issue Date:
	 	 
	 
	 	 
	Stated Maturity:
	 	March 30, 2067
	 
	 	 
	Initial Interest Rate:
	 	6.70%
	 
	 	 
	Interest Payment Dates during Fixed Rate Period:
	 	March 30 and September 30
	 
	 	 
	First Interest Payment Date during Fixed Rate Period:
	 	September 30, 2007
	 
	 	 
	Interest Payment Dates during Floating Rate Period:
	 	March 30, June 30, September 30 and December 30
	 
	 	 
	First Interest Payment Date during Floating Rate
Period
	 	June 30, 2017

This Security is not a Discount Security within

the meaning of the within-mentioned Indenture

 

	 	 	 	 	 
	Principal Amount
	 	No.

	$
	 	CUSIP

          PPL CAPITAL FUNDING, INC., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the “Company,” which term includes any successor under the
Indenture referred to below), for value received, hereby promises to pay to      , or
registered assigns, the principal sum of        ($      ) on the
Stated Maturity specified above, and to pay interest on said principal sum from the Original Issue
Date specified above or from the most recent Interest Payment Date, subject to deferral as set

 

 

forth herein, (a) at the rate of 6.70% per annum, in like coin and currency, semi-annually in
arrears on March 30 and September 30 of each year until March 30, 2017, and thereafter (b) at the
rate per annum equal to the Three-Month LIBOR Rate plus 2.665% (determined in the manner set forth
in the Officers’ Certificate hereinafter referred to), reset quarterly on the LIBOR Rate Reset
Dates, in like coin and currency, quarterly in arrears on March 30, June 30, September 30 and
December 30 of each year (each, an “Interest Payment Date”), until the principal hereof is paid or
duly provided for, plus (c) interest to the extent permitted by applicable law, on any interest
payment that is not made on the applicable Interest Payment Date, which shall accrue at the then
prevailing rate per annum borne by this Security, compounded semi-annually or quarterly, as
applicable. The interest so payable, and paid or duly provided for, on any Interest Payment Date
shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on the “Regular Record Date”
for such interest installment, which shall be the close of business on the fifteenth calendar day
(whether or not a Business Day (as hereinafter defined)) immediately preceding such Interest
Payment Date, provided that if this Security is held by a securities depository in book-entry form,
the Regular Record Date will be the close of business on the Business Day immediately preceding
such Interest Payment Date. Notwithstanding the foregoing, interest payable at Maturity shall be
paid to the Person to whom principal shall be paid. Except as otherwise provided in the Indenture,
any such interest not so paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice of which shall
be given to Holders of Securities of this series not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of this series may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said Indenture. While this
Security bears interest at a fixed rate, the amount of interest payable on this Security 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 while this
Security bears interest at the Three-Month LIBOR Rate, the amount of interest payable on this
Security for any period shall be computed by multiplying the Three-Month LIBOR 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.

          Payment of the principal of and premium, if any, on this Security and interest hereon due at
Maturity shall be made upon presentation of this Security at the corporate trust office of The Bank
of New York in New York, New York or at such other office or agency as may be designated for such
purpose by the Company from time to time. Payment of interest, if any, on this Security (other
than interest due at Maturity) shall be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register, except that (a) if such Person shall
be a securities depositary, such payment may be made by such other means in lieu of check as shall
be agreed upon by the Company, the Trustee or other Paying Agent and such Person and (b) if such
Person is a Holder of $10,000,000 or more in aggregate principal amount of Securities of this
series such payment may be in immediately

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available funds by wire transfer to such account as may have been designated in writing by the
Person entitled thereto as set forth herein in time for the Paying Agent to make such payments in
accordance with its normal procedures. Any such designation for wire transfer purposes shall be
made by filing the appropriate information with the Trustee at its Corporate Trust Office in The
City of New York not less than fifteen calendar days prior to the applicable payment date and,
unless revoked by written notice to the Trustee received on or prior to the Regular Record Date
immediately preceding the applicable Interest Payment Date, shall remain in effect with respect to
any further interest payments (other than interest payments due at Maturity) with respect to this
Security payable to such Holder. Payment of the principal of and premium, if any, and interest, if
any, on this Security, as aforesaid, shall be made in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of public and private
debts.

          This Security is one of a duly authorized issue of securities of the Company (herein called
the “Securities”), issued and issuable in one or more series under a Subordinated Indenture, dated
as of March 1, 2007 (such Indenture as originally executed and delivered and as supplemented or
amended from time to time thereafter, together with any constituent instruments establishing the
terms of particular Securities, being herein called the “Indenture”), among the Company, PPL
Corporation (herein called the “Guarantor,” which term includes any successor under the Indenture)
and The Bank of New York, as Trustee (herein called the “Trustee,” which term includes any
successor trustee under the Indenture), to which Indenture, all indentures supplemental thereto and
the Officers’ Certificate filed with the Trustee on March 20, 2007, creating the series designated
on the face hereof (herein called the “Officers’ Certificate”) reference is hereby made for a
description of the respective rights, limitations of rights, duties and immunities of the Company,
the Guarantor, the Trustee and the Holders of the Securities thereunder and of the terms and
conditions upon which the Securities are, and are to be, authenticated and delivered. The
acceptance of this Security shall be deemed to constitute the consent and agreement by the Holder
hereof to all of the terms and provisions of the Indenture. This Security is one of the series
designated above.

          While this Security bears interest at a fixed rate, if any Interest Payment Date or any
Redemption Date shall not be a Business Day, payment of the amounts due on this Security on such
date shall be made on the next succeeding Business Day, and, if such payment is made or duly
provided for on such next succeeding Business Day, no interest shall accrue on such amounts for the
period from and after such Interest Payment Date or Redemption Date, as the case may be, to such
Business Day. While this Security bears interest at the Three-Month LIBOR Rate, (a) if any
Interest Payment Date, other than a Redemption Date or the Stated Maturity of this Security, 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, and (b) if any
Redemption Date or the Stated Maturity of this Security shall not be a Business Day, payment of the
amounts due on this Security on such date shall be made on the next succeeding Business Day, and,
if such payment is made or duly provided for on such next succeeding Business Day, no interest
shall accrue on such amounts for the period from and after such Redemption Date or Stated Maturity,
as the case may be, to such Business Day. While this Security bears interest at the Three-Month
LIBOR Rate, if any LIBOR Rate Reset Date shall not be 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 the LIBOR
Business Day is in the

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next succeeding calendar month, the LIBOR Rate Reset Date shall be the immediately preceding
LIBOR Business Day.

          The Company shall have the right, at any time and from time to time during the term of this
Security and in accordance with the Indenture, to defer the payment of interest hereon 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 Maturity of this Security. During any 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 while this Security bears interest at a
fixed rate and quarterly while this Security bears interest at the Three-Month LIBOR Rate. Any
deferred interest on this Security shall accrue interest at a rate equal to the Coupon Rate then
applicable to this Security, to the extent permitted by applicable law. At the end of any Optional
Deferral Period, the Company shall pay all interest accrued and unpaid (together with interest
thereon) to the Person in whose name this Security is registered at the close of business on the
Regular Record Date for the Interest 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 Maturity of this Security. 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
of this series.

          This Security is also subject to redemption at the election of the Company before March 30,
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 March 30, 2017, this Security is subject to redemption 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 March 30, 2017, a Tax Event (as defined below) shall occur, this Security shall be
subject to redemption 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.

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          If before March 30, 2017, a Rating Agency Event (as defined below) shall occur, this Security
shall be subject to redemption 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 this Security 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 this
Security from the Redemption Date to March 30, 2017 (assuming, solely for the purposes of this
calculation, that the principal amount of this Security to be redeemed was payable on March 30,
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 35
basis points.

          “Comparable Treasury Issue” means, with respect to any Redemption Date, the United States
Treasury security selected by the Quotation Agent as having an actual or interpolated maturity
comparable to the time period from the Redemption Date to March 30, 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.

          “Comparable Treasury Price” means with respect to any Redemption Date, (1) 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 (2) 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 set forth in this Security.

          “Reference Treasury Dealer” means (1) each of Barclays Capital Inc., J. P. Morgan Securities
Inc. and Morgan Stanley & Co. Incorporated and their respective successors, unless any of them
ceases to be a primary U.S. Government securities dealer in New York City (a “Primary Treasury
Dealer”), in which case the Company shall substitute another Primary Treasury Dealer, and (2) any
two other Primary Treasury Dealers selected by the Company.

          “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Quotation Agent, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal
amount) as provided 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.

          “Treasury Rate” means, with respect to any Redemption Date, 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.

13

 

          “Rating Agency Event” means a change by any nationally recognized statistical rating
organization within the meaning of Rule 15c3-1 under the Exchange Act that currently publishes a
rating for the Company or the Guarantor in the equity credit criteria for securities such as this
Security resulting in a lower equity credit to the Company or the Guarantor, as certified in an
Officer’s Certificate to the Trustee by the Company or the Guarantor, as applicable, than the
equity credit assigned by such rating agency to this Security on March 16, 2007.

          “Rating Agency Event Make-Whole Amount” means an amount equal to the greater of (i) 100% of
the principal amount of this Security 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 this Security from the Redemption Date to March 30, 2017 (assuming, solely for the
purposes of this calculation, that the principal amount of this Security to be redeemed was payable
on March 30, 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.

          “Tax Event” means the receipt by the Guarantor or the Company of an Opinion of Counsel
experienced in such matters to the effect that, as a result of (a) 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; (b) any judicial decision or any official administrative pronouncement, ruling,
regulatory procedure, notice or announcement (including any notice or announcement of intent to
issue or adopt any such administrative pronouncement, ruling, regulatory procedure or regulation)
(each, an “Administrative Action”); (c) 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 March 16, 2007, there is more than an insubstantial risk that interest payable by the Company
or the Guarantor on this Security is not deductible, or within 90 days would not be deductible, in
whole or in part, by the Company or the Guarantor 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 this Security 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 this Security from the Redemption Date to March 30, 2017 (assuming, solely for the
purposes of this calculation, that the principal amount of this Security to be redeemed was payable
on March 30, 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.

          Promptly after the calculation of the Redemption Price of this Security, the Company shall
give the Trustee notice thereof and the Trustee shall have no responsibility for any such
calculation.

14

 

          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 this Security 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 this Security.

          In the event of redemption of this Security 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 indebtedness evidenced by this Security is, to the extent provided in the Indenture,
subordinated and subject in right of payment to the prior payment in full of all Senior
Indebtedness of the Company, and this Security is issued subject to the provisions of the Indenture
with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each
Holder hereof, by his acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of Senior
Indebtedness of the Company, whether now outstanding or hereafter incurred, and waives reliance by
each such Holder upon said provisions.

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

          The Indenture permits, with certain exceptions as therein provided, the Trustee to enter into
one or more supplemental indentures for the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, the Indenture with the consent of the Holders of
not less than a majority in aggregate principal amount of the Securities of all series then
Outstanding under the Indenture, considered as one class; provided, however, that
if there shall be Securities of more than one series Outstanding under the Indenture and if a
proposed supplemental indenture shall directly affect the rights of the Holders of Securities of
one or more, but less than all, of such series, then the consent only of the Holders of a majority
in aggregate principal amount of the Outstanding Securities of all series so directly affected,
considered as one class, shall be required; and provided, further, that if the
Securities of any series shall have been issued in more than one Tranche and if the proposed
supplemental indenture shall directly affect the rights of the Holders of Securities of one or
more, but less than all, of such Tranches, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all Tranches so directly affected,
considered as one class, shall be required; and provided, further, that the
Indenture permits the Trustee to enter into one or more supplemental indentures for limited
purposes without the consent of any Holders of Securities. The Indenture also contains provisions
permitting the Holders of a majority in principal amount of the Securities then Outstanding, on
behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder

15

 

of this Security shall be conclusive and binding upon such Holder and upon all future Holders
of this Security and of any Security issued upon the registration of transfer hereof or in exchange
therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this
Security.

          No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and premium, if any, and interest, if any, on this Security at the times, place
and rate, in the coin or currency, and in the manner, herein prescribed.

          As provided in the Indenture and subject to certain limitations therein and herein set forth,
this Security or any portion of the principal amount hereof shall be deemed to have been paid for
all purposes of the Indenture and to be no longer Outstanding thereunder, and, at the election of
the Company, the Company’s entire indebtedness in respect thereof shall be satisfied and
discharged, if there has been irrevocably deposited with the Trustee or any Paying Agent (other
than the Company or the Guarantor), in trust, money in an amount which shall be sufficient and/or
Eligible Obligations, the principal of and interest on which when due, without any regard to
reinvestment thereof, shall provide moneys which, together with moneys so deposited, shall be
sufficient to pay when due the principal of and premium, if any, and interest, if any, on this
Security when due.

          The Indenture contains terms, provisions and conditions relating to the consolidation or
merger of the Company or the Guarantor with or into, and the conveyance or other transfer, or
lease, of assets to, another Person, to the assumption by such other Person, in certain
circumstances, of all of the obligations of the Company or the Guarantor under the Indenture and on
the Securities (or the Guarantees endorsed thereon, as the case may be) and to the release and
discharge of the Company or the Guarantor, as the case may be, in certain circumstances, from such
obligations.

          As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon surrender of this Security
for registration of transfer at the office of The Bank of New York in New York, New York or such
other office or agency as may be designated by the Company from time to time, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Securities of this series of authorized denominations and of like
tenor and aggregate principal amount, shall be issued to the designated transferee or transferees.

          The Securities of this series are issuable only as registered Securities, without coupons, and
in denominations of $1,000 and integral multiples thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of the same series and Tranche, of any authorized
denominations, as requested by the Holder surrendering the same, and of like tenor upon surrender
of the Security or Securities to be exchanged at the office of The Bank of New York in New York,
New York or such other office or agency as may be designated by the Company from time to time.

          The Company shall not be required to execute and the Security Registrar shall not be required
to register the transfer of or exchange of (a) Securities of this series during a period

16

 

of 15 days immediately preceding the date notice is given identifying the serial numbers of
the Securities of this series called for redemption or (b) any Security so selected for redemption
in whole or in part, except the unredeemed portion of any Security being redeemed in part.

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

          Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the absolute owner hereof for all purposes (subject to Sections 305 and
307 of the Indenture), whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

          The Indenture and the Securities shall be governed by and construed in accordance with the
laws of the State of New York (including, without limitation, Section 5-1401 of the New York
General Obligations Law or any successor to such statute), except to the extent that the Trust
Indenture Act shall be applicable.

          As used herein, “Business Day” means any day, other than a Saturday or Sunday, that is not a
day on which banking institutions or trust companies are generally authorized or required by law,
regulation or executive order to close in The City of New York or other city in which is located
any Paying Agent for the Securities of this series. All other terms used in this Security which
are defined in the Indenture shall have the meanings assigned to them in the Indenture.

          As provided in the Indenture, no recourse shall be had for the payment of the principal of or
premium, if any, or interest on any Securities, any Guarantees or any part thereof, or for any
claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or
upon any obligation, covenant or agreement under the Indenture, against, and no personal liability
whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director,
as such, past, present or future of the Company or the Guarantor or of any predecessor or successor
of either of them (either directly or through the Company or the Guarantor, as the case may be, or
a predecessor or successor of either of them), whether by virtue of any constitutional provision,
statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly agreed and understood that the Indenture and this Security and the Guarantee endorsed
hereon are solely corporate obligations and that any such personal liability is hereby expressly
waived and released as a condition of, and as part of the consideration for, the execution of the
Indenture and the issuance of this Security and such Guarantee.

          By acceptance of this Security or a beneficial interest in this Security, each Holder hereof
and any person acquiring a beneficial interest herein, agrees that for United States federal, state
and local tax purposes it is intended that this Security constitute indebtedness.

          Unless the certificate of authentication hereon has been executed by the Trustee or an
Authenticating Agent by manual signature, this Security shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

17

 

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

	 	 	 	 	 	 	 
	 	 	PPL CAPITAL FUNDING, INC.	 	 
	 
	 	 	 	 	 	 
	[SEAL]

	 	By:	 	 	 	 
	 

	 	 	 	 

Treasurer
	 	 

Attested:

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Assistant Secretary
	 	 

18

 

GUARANTEE

     PPL Corporation, a corporation organized under the laws of the Commonwealth of
Pennsylvania (the “Guarantor”, which term includes any successor under the Indenture
(the “Indenture”) referred to in the Security upon which this Guarantee is
endorsed), for value received, hereby fully and unconditionally guarantees to the
Holder of the Security upon which this Guarantee is endorsed, the due and punctual
payment of the principal of, and premium, if any, and interest, if any, on such
Security when and as the same shall become due and payable, whether at the Stated
Maturity, by declaration of acceleration, call for redemption, or otherwise, in
accordance with the terms of such Security and of the Indenture. In case of the
failure of PPL Capital Funding, Inc., a corporation organized under the laws of the
State of Delaware (the “Company,” which term includes any successor under the
Indenture), punctually to make any such payment (and subject to the Company’s right
to defer the Stated Maturity of interest payments as provided in the Security upon
which this Guarantee is endorsed), the Guarantor hereby agrees to cause such payment
to be made punctually when and as the same shall become due and payable, whether at
the Stated Maturity or by declaration of acceleration, call for redemption or
otherwise, and as if such payment were made by the Company.

     The Guarantor hereby agrees that its obligations hereunder shall be absolute
and unconditional irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of such Security or the Indenture, any failure to
enforce the provisions of such Security or the Indenture, or any waiver,
modification or indulgence granted to the Company with respect thereto, by the
Holder of such Security or the Trustee or any other circumstance which may otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor;
provided, however, that notwithstanding the foregoing, no such waiver, modification
or indulgence shall, without the consent of the Guarantor, increase the principal
amount of such Security, or increase the interest rate thereon, or change any
redemption provisions thereof (including any change to increase any premium payable
upon redemption thereof) or change the Stated Maturity thereof.

     The Guarantor hereby waives the benefits of diligence, presentment, demand for
payment, any requirement that the Trustee or the Holder of such Security exhaust any
right or take any action against the Company or any other Person, filing of claims
with a court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest or notice with respect to
such Security or the indebtedness evidenced thereby and all demands whatsoever, and
covenants that this Guarantee will not be discharged in respect of such Security
except by complete performance of the obligations contained in such Security and in
this Guarantee. This Guarantee shall constitute a guaranty of payment and not of
collection. The Guarantor hereby agrees that, in the event of a default in payment
of principal, or premium, if any, or interest, if any, on such Security, whether at
its Stated Maturity, by declaration of

19

 

acceleration, call for redemption, or otherwise, legal proceedings may be
instituted by the Trustee on behalf of, or by, the Holder of such Security, subject
to the terms and conditions set forth in the Indenture, directly against the
Guarantor to enforce this Guarantee without first proceeding against the Company.

     The obligations of the Guarantor hereunder with respect to such Security shall
be continuing and irrevocable until the date upon which the entire principal of,
premium, if any, and interest, if any, on such Security has been, or has been deemed
pursuant to the provisions of Article Seven of the Indenture to have been, paid in
full or otherwise discharged.

     The obligations evidenced by this Guarantee are, to the extent provided in the
Indenture, subordinated and subject in right of payment to the prior payment in full
of all Senior Indebtedness (as defined in the Indenture) of the Guarantor, and this
Guarantee is issued subject to the provisions of the Indenture with respect thereto.
Each Holder of a Security upon which this Guarantee is endorsed, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in fact for any and all such purposes. Each
Holder hereof, by his acceptance hereof, hereby waives all notice of the acceptance
of the subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such Holder upon said provisions.

     The Guarantor shall be subrogated to all rights of the Holder of such Security
upon which this Guarantee is endorsed against the Company in respect of any amounts
paid by the Guarantor on account of such Security pursuant to the provisions of this
Guarantee or the Indenture; provided, however, that the Guarantor shall not be
entitled to enforce or to receive any payments arising out of, or based upon, such
right of subrogation until the principal of, and premium, if any, and interest, if
any, on all Securities issued under the Indenture shall have been paid in full.

     This Guarantee shall remain in full force and effect and continue
notwithstanding any petition filed by or against the Company for liquidation or
reorganization, the Company becoming insolvent or making an assignment for the
benefit of creditors or a receiver or trustee being appointed for all or any
significant part of the Company’s assets, and shall, to the fullest extent permitted
by law, continue to be effective or reinstated, as the case may be, if at any time
payment of the Security upon which this Guarantee is endorsed, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by the Holder of such Security, whether as a “voidable preference,”
“fraudulent transfer,” or otherwise, all as though such payment or performance had
not been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned on such Security, such Security shall, to

20

 

the fullest extent permitted by law, be reinstated and deemed paid only by such
amount paid and not so rescinded, reduced, restored or returned.

     This Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication of the Security upon which this Guarantee is endorsed
shall have been manually executed by or on behalf of the Trustee under the
Indenture.

     All terms used in this Guarantee which are defined in the Indenture shall have
the meanings assigned to them in such Indenture.

     This Guarantee shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be governed by and construed in
accordance with the laws of the State of New York.

     IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be executed as
of the date first written above.

	 	 	 	 	 	 	 
	 	 	PPL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Vice President — Finance and Treasurer
	 	 

21

 

CERTIFICATE OF AUTHENTICATION

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

	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	THE BANK OF NEW YORK,	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	as Trustee	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

Authorized Signatory
	 	 

22

 

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

 

[please insert social security or other identifying number of assignee]

 

[please print or typewrite name and address of assignee]

 

the within Security of PPL CAPITAL FUNDING, INC. and does hereby irrevocably constitute and
appoint                     , Attorney, to transfer said Security on
the books of the within-mentioned Company, with full power of substitution in the premises.

Dated:                     

 

Notice: The signature to this assignment must correspond with the name as written upon the
face of the Security in every particular without alteration or enlargement or any change
whatsoever.

23exv4wxdy

 

Exhibit 4(d)

          Replacement Capital Covenant, dated as of March 20, 2007 (this “Replacement Capital
Covenant”), by PPL Capital Funding, Inc., a Delaware corporation (together with its successors and
assigns, the “Corporation”), and PPL Corporation, a Pennsylvania corporation (together with its
successors and assigns, the “Guarantor”), 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 (the “Subordinated Notes”), which Subordinated
Notes were issued pursuant to, and fully and unconditionally guaranteed by the Guarantor in
accordance with, the Subordinated Indenture, dated as of March 1, 2007, as supplemented (the
“Subordinated Indenture”), among the Corporation, the Guarantor, and The Bank of New York, as
trustee.

          B. This Replacement Capital Covenant is the “Replacement Capital Covenant” referred to in the
Prospectus Supplement, dated March 16, 2007, relating to the Subordinated Notes which supplements
the Corporation’s Prospectus, dated March 9, 2007 (together, the “Prospectus”).

          C. The Corporation and the Guarantor, in entering into and disclosing the content of this
Replacement Capital Covenant in the manner provided below, are 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 and the Guarantor 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 and the Guarantor acknowledge that reliance by each Covered Debtholder upon
the covenants in this Replacement Capital Covenant is reasonable and foreseeable by the Corporation
and the Guarantor and that, were the Corporation or the Guarantor to disregard their respective
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 and the Guarantor hereby covenant and agree 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, Repurchase, Defeasance or Purchase of Subordinated
Notes. The Corporation and the Guarantor hereby promise and covenant to and for the benefit of
each Covered Debtholder that the Corporation shall not redeem or repurchase, or defease or
discharge any portion of the principal amount of the Subordinated Notes through the deposit of
money and/or Eligible Obligations as contemplated by Section 701 of the Subordinated Indenture
(herein referred to as “defeasance”), and the Guarantor shall not purchase 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:

     (i) the Applicable Common Equity Percentage of (a) the aggregate amount of the net cash
proceeds the Guarantor, the Corporation and their Subsidiaries have received from the sale
of the Guarantor’s Common Stock and rights to acquire the Guarantor’s Common Stock, (b) the
Market Value of any of the Guarantor’s Common Stock and rights to acquire the Guarantor’s

 

 

Common Stock that the Guarantor, the Corporation and their Subsidiaries have delivered
as consideration for property or assets in an arms length transaction; (c) the aggregate
amount of the net cash proceeds the Guarantor, the Corporation and their Subsidiaries have
received from the sale of Mandatorily Convertible Preferred Stock and (d) the Market Value
of any of the Guarantor’s 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 (d), securities for which the Guarantor, the Corporation or any
of their Subsidiaries has received equity credit from any NRSRO; plus

     (ii) the Applicable Other Replacement Capital Securities Percentage of the aggregate
amount of net cash proceeds the Guarantor, the Corporation and their Subsidiaries have
received from the sale of Replacement Capital Securities (other than the securities set
forth in clause (i) above);

in each case, to Persons other than the Guarantor, the Corporation and their 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 and the Guarantor represent and warrant 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 then outstanding long-term
indebtedness for money borrowed of the Guarantor or the Corporation that is Eligible Debt;

     (ii) if only one series of such 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 Guarantor and the Corporation have 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 occurring 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

-2-

 

     (v) in connection with such identification of a new series of Covered Debt, the
Corporation and the Guarantor shall give the notice provided for in Section 3(c) 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 Guarantor or the Corporation has become the Covered Debt in accordance
with this Section 3(b), on the date on which the Guarantor or the Corporation issues a new series
of Eligible Subordinated Debt, then 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 and the Guarantor
described in Recital C, the Corporation and the Guarantor covenant that (i) simultaneously with the
execution of this Replacement Capital Covenant or as soon as practicable after the date hereof (x)
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 (y) the Guarantor shall file a copy of this Replacement Capital
Covenant with the Commission as an exhibit to a Current Report on Form 8-K under the Securities
Exchange Act; (ii) so long as the Guarantor is a reporting company under the Securities Exchange
Act, the Guarantor shall include in each annual report filed with the Commission on Form 10-K 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 is filed with the Commission; (iii) if a series of the long-term indebtedness for money
borrowed of the Corporation or the Guarantor (1) becomes Covered Debt or (2) 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 Guarantor shall
report such change in the Guarantor’s next quarterly report on Form 10-Q or annual report on Form
10-K, as applicable; (iv) if, and only if, the Guarantor ceases to be a reporting company under the
Securities Exchange Act, the Guarantor shall post on its website the information otherwise required
to be included in Securities Exchange Act filings pursuant to clauses (ii) and (iii) of this
Section 3(c); and (v) promptly upon request by any Holder of Covered Debt, such Holder will be
provided with an executed 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) March 30, 2037, or if earlier, the date on which the
Subordinated Notes are otherwise paid, redeemed, defeased or purchased in full, (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 the termination of this Replacement Capital Covenant and the
obligations of the Corporation hereunder, (iii) the date on which neither the Corporation nor the
Guarantor has any series of outstanding 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 Subordinated Indenture. From and after the Termination Date, the obligations of
the Corporation and the Guarantor 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 and the Guarantor with the consent of the

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Holders of a majority by 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 the Guarantor (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 (or rights to acquire Common Stock) as
Replacement Capital Securities, if the Corporation or the Guarantor has been advised in writing by
a nationally recognized independent accounting firm that there is more than an insubstantial risk
that the failure to do so would result in a reduction in the Guarantor’s earnings per share as
calculated for financial reporting purposes, (ii) the effect of such amendment or supplement is
solely to impose additional restrictions on the ability of the Corporation, the Guarantor or their
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 Common Stock or rights to acquire Common Stock, which are covered by
clause (i) above) and an officer of each of the Corporation and the Guarantor 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 each of the Corporation and the Guarantor 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.

          (b) This Replacement Capital Covenant shall be binding upon the Corporation and the Guarantor
and their respective 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 and
the Guarantor 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). Other than the Covered Debtholders
as provided in the previous sentence, 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 Supplemental
Indenture.

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          (c) All demands, notices, requests and other communications to the Corporation or the
Guarantor 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 or the Guarantor, 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 or the Guarantor by a national or international courier service, on the date of receipt
by the Corporation or the Guarantor, as applicable (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 or the Guarantor
at the address set forth below, or at such other address as the Guarantor may thereafter notify to
Covered Debtholders or post on its website as the address for notices under this Replacement
Capital Covenant:

If to the Corporation, to:

PPL Capital Funding, Inc.

c/o PPL Corporation

Two North Ninth Street

Allentown, Pennsylvania 18101-1179

Attention: Treasurer

Telephone: (610) 774-5987

Telecopy: (610) 774-5106

If to the Guarantor, to:

PPL Corporation

Two North Ninth Street

Allentown, Pennsylvania 18101-1179

Attention: Treasurer

Telephone: (610) 774-5987

Telecopy: (610) 774-5106

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

	 	 	 	 	 
	 	PPL CAPITAL FUNDING, INC.

 	 
	 	By:  	/s/ James E. Abel
 	 
	 	 	Name:  	James E. Abel 	 
	 	 	Title:  	Treasurer 	 
	 

	 	 	 	 	 
	 	PPL CORPORATION

 	 
	 	By:  	/s/ James E. Abel
 	 
	 	 	Name:  	James E. Abel 	 
	 	 	Title:  	Vice President-Finance and Treasurer 	 
	 

 

 

Definitions

          “Alternative Payment Mechanism” means, with respect to any Qualifying Capital Securities,
provisions in the related transaction documents that require the issuer (or, in the case of
securities that are guaranteed by the Guarantor, the Guarantor), 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 (or, in the case of securities that are guaranteed by the
Guarantor, contribute the proceeds of such issuance to the issuer and cause the issuer to apply
such 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 or the Guarantor 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) that the Corporation or the Guarantor 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, the Guarantor and their Subsidiaries, up to the
Preferred Cap (as defined in (d) below) in the case of APM Qualifying Securities that are
Qualifying Preferred Stock;

          (b) permit the Corporation or the Guarantor to pay current Distributions on any Distribution
Date out of any source of funds but (x) require the Corporation or the Guarantor to pay deferred
Distributions only out of eligible proceeds and (y) prohibit the Corporation or the Guarantor 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, require the Corporation or
the Guarantor not to redeem or repurchase any securities that rank pari passu with or junior to any
APM Qualifying Securities that the Corporation or the Guarantor 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 or the Guarantor to issue (or use commercially
reasonable efforts to issue) APM Qualifying Securities to:

     (A) in the case of APM Qualifying Securities that are Common Stock and rights
to purchase Common Stock, 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), (x) to an
aggregate amount of such securities, the net proceeds from the issuance thereof
pursuant to the Alternative Payment Mechanism is equal to 2% of the Guarantor’s
market capitalization or (y) 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 (the amount in clause (x) or (y)
is referred to as the “Common Cap”); and

     (B) in the case of APM Qualifying Securities that are Qualifying Preferred
Stock, an amount from the issuance thereof pursuant to the related Alternative
Payment

I-1

 

Mechanism (including at any point in time from all prior issuances thereof
pursuant to such Alternative Payment Mechanism) equal to 25% of the 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 or the Guarantor, at its option, to provide that if the Corporation
or the Guarantor 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 surviving or resulting entity’s voting stock 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 or the
Guarantor include a share cap limiting the issuance of APM Qualifying Securities consisting of
Common Stock and Qualifying Warrants, in each case to a maximum issuance cap to be set at the
discretion of the Corporation or the Guarantor; provided that such maximum issuance cap will be
subject to the Corporation’s or the Guarantor’s agreement to use commercially reasonable efforts to
increase the maximum issuance cap when reached and (i) 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 or the Guarantor cannot
increase the maximum issuance 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 or the Guarantor’s authorized common
stock for purposes of satisfying their obligations to pay deferred distributions;

          (b) neither the Corporation nor the Guarantor shall 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 or the Guarantor 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 or the Guarantor 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 any maximum issuance cap
referred to above, as applicable; and

          (d) if the Corporation or the Guarantor 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 or the Guarantor 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

I-2

 

Common Cap, the Preferred Cap and any maximum issuance cap referred to above, 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; or

          (b) Qualifying Warrants; and

          (c) Qualifying 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 or the Guarantor to
issue Qualifying Warrants.

          “Applicable Common Equity Percentage” means (a) 200% with respect to any redemption, purchase
or defeasance of Subordinated Notes prior to the Stepdown Date and (b) 400% with respect to any
redemption, purchase or defeasance of Subordinated Notes on or after the Stepdown Date and on or
prior to the Termination Date.

          “Applicable Other Replacement Capital Securities Percentage” means: (i) in respect of any
Qualifying Capital Securities described in clause (i) of the definition of that term or any Debt
Exchangeable for Equity, 300% with respect to any redemption, purchase or defeasance of
Subordinated Notes on or after the Stepdown Date and prior to the Termination Date, (ii) 200% with
respect to any redemption, purchase or defeasance of Subordinated Notes on or after the Stepdown
Date and prior to the Termination Date in respect of any Qualifying Capital Securities described in
clause (ii) of the definition of such term; and (iii) 100% in respect of any other redemption,
purchase or defeasance.

          “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, 25% of the stated or principal amount of such
securities then outstanding; and

I-3

 

     (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 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 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.

          “Business Day” means each day other than (a) a Saturday or Sunday or (b) a day on which
banking institutions in The City of New York are authorized or required by law or executive order
to remain closed or, on or after March 30, 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 or the Guarantor, as applicable
(including equity securities held as treasury shares and equity securities sold pursuant to our
dividend reinvestment plan and 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 or
the Guarantor, as applicable (including a security that tracks the performance of, or relates to
the results of, a business, unit or division of the Corporation or the Guarantor), 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 or the Guarantor, as applicable 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 or the Guarantor 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.

I-4

 

          “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 of the Guarantor 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 debt securities, subject to customary
anti-dilution adjustments and (ii) debt securities of the Corporation or the Guarantor that are not
redeemable at the option of the issuer or the holder thereof prior to the settlement of the stock
purchase contracts;

          (b) provides that the investors directly or indirectly grant to the Guarantor 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 of the Guarantor pursuant to such stock purchase contracts;

          (c) includes a remarketing feature pursuant to which the debt securities of the Guarantor are
remarketed to new investors commencing not later than 30 days prior to the settlement date of the
purchase contract;

          (d) provides for the proceeds raised in the remarketing to be used to purchase common stock of
the Guarantor 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 Guarantor 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 or the Guarantor that include a provision requiring the Corporation or the Guarantor 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 or the Guarantor) (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 or the Guarantor that ranks pari passu with or junior
to all other preferred stock of the Corporation or the Guarantor, as applicable (in this
definition, “preferred stock”);

          (b) provides that the investors directly or indirectly grant to the Corporation or the
Guarantor 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 or the Guarantor
pursuant to such stock purchase contracts;

          (c) includes a remarketing feature pursuant to which the subordinated debt of the Corporation
or the Guarantor 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

I-5

 

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 or the Guarantor 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
or the Guarantor 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;

          (e) is subject to a Qualifying Capital Replacement 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) after the issuance of such preferred stock of the Corporation or the Guarantor, 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 a 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, 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, (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 and (e) has a remaining life
to maturity of not less than five years. 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.

I-6

 

          “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, (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 and (e) has a remaining life to maturity of not less than five
years. 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.

          “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.

          “Initial Covered Debt” means the Corporation’s 4.33% Notes Exchange Series A Due March 1,
2009.

          “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 will redeem or purchase such securities only with
the proceeds of replacement capital securities that have terms and provisions at the time of
redemption or purchase that receive as much or more equity-like credit than the securities then
being redeemed or purchased, raised within 180 days of the applicable redemption or purchase date.

          “Mandatorily Convertible Preferred Stock” means cumulative 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 of the
Corporation or the Guarantor 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, subject to customary
anti-dilution adjustments.

          “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 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

I-7

 

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 the net proceeds of which the issuer may
apply to pay such Distributions pursuant to such provision may not exceed the Preferred Cap;

          (b) other than in the case of non-cumulative preferred stock, if the provisions described in
clause (a) do not require such issuance and sale within one year of such failure, prohibit the
issuer from repurchasing 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; and

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

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 or the Guarantor 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 or the Guarantor’s commercially reasonable

I-8

 

efforts to obtain such consent or approval or a regulatory authority instructs the Corporation
or the Guarantor not to sell or offer for sale APM Qualifying Securities at such time;

          (b) trading in securities generally (or in the Guarantor’s Common Stock or the preferred stock
of the Corporation or the Guarantor) 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
or the Guarantor’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 or
the Guarantor, 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 or the
Guarantor, is not otherwise required by law and would have a material adverse effect on the
business of the Corporation or the Guarantor 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 or the Guarantor 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 or the Guarantor 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 or the Guarantor 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

I-9

 

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.

          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 or the
Guarantor 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 or the Guarantor would otherwise
endeavor to issue preferred stock, shall be limited to circumstances affecting markets where the
preferred stock of the Corporation or the Guarantor 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 notice date or purchase or defeasance date means the
period (i) beginning on the date that is 180 days prior to delivery of notice of such redemption or
the date of such purchase or defeasance and (ii) ending on such notice date or purchase date.
Measurement Periods cannot run concurrently.

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

I-10

 

          (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), or

     (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 and securities convertible into or exchangeable for Common Stock) that in the
determination of the Board of Directors of the Corporation or the Guarantor, reasonably construing
the definitions and other terms of the Replacement Capital Covenant, meet one of the following
criteria:

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

     (A) junior subordinated debt securities and guarantees issued by the
Corporation, the Guarantor or any of their Subsidiaries with respect to such
securities if the junior subordinated debt securities and guarantees (1) rank pari
passu with or junior to the Subordinated Notes or the Guarantor’s guarantee thereof
upon the liquidation, dissolution or winding up of the Corporation or the Guarantor,
respectively, (2) are Non-Cumulative, (3) have no maturity or a maturity of at least
60 years and (4) are subject to a Qualifying Replacement Capital Covenant;

     (B) securities issued by the Corporation, the Guarantor or any of their
Subsidiaries that (1) rank pari passu with or junior to the Subordinated Notes or
the Guarantor’s guarantee thereof upon the liquidation, dissolution or winding up of
the Corporation or the Guarantor, respectively, (2) have no maturity or a maturity
of at least 60 years and (3)(a) are Non-Cumulative and are subject to a Qualifying
Replacement Capital Covenant or (b) have a Mandatory Trigger Provision and an
Optional Deferral Provision and are subject to Intent-Based Replacement Disclosure;

I-11

 

     (C) securities issued by the Corporation, the Guarantor or any of their
Subsidiaries that (1) rank pari passu with or junior to the Subordinated Notes or
the Guarantor’s guarantee thereof upon the liquidation, dissolution or winding up of
the Corporation or the Guarantor, respectively, (2) have no maturity or a maturity
of at least 40 years, (3) are subject to a Qualifying Replacement Capital Covenant
and (4) have a Mandatory Trigger Provision and an Optional Deferral Provision; or

     (D) Qualifying Preferred Stock; or

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

     (A) non-cumulative preferred stock issued by the Corporation, the Guarantor or
any of their Subsidiaries that ranks junior to the Subordinated Notes or the
Guarantor’s guarantee thereof upon a liquidation, dissolution or winding up of the
Corporation or the Guarantor, respectively, and (1) (a) has no maturity or a final
maturity of at least 60 years and (b) is subject to Intent-Based Replacement
Disclosure; or (2) (a) has no maturity or a final maturity of at least 40 years and
(x) is subject to a Qualifying Replacement Covenant or (y) is subject to
Intent-Based Replacement Disclosure and has a Mandatory Trigger Provision; or (3)
(a) has no maturity or a final maturity of at least 25 years, (b) is subject to a
Qualifying Replacement Covenant and (c) has a Mandatory Trigger Provision;

     (B) preferred stock issued by the Corporation, the Guarantor or any of their
Subsidiaries that ranks junior to the Subordinated Notes or the Guarantor’s
guarantee thereof upon a liquidation, dissolution or winding up of the Corporation
or the Guarantor, respectively, and (1) has no prepayment obligation on the part of
the issuer thereof, whether at the election of the holders or otherwise, and (2) (a)
has no maturity or a maturity of at least 60 years and (b) is subject to a
Qualifying Replacement Capital Covenant;

     (C) securities issued by the Corporation, the Guarantor or their Subsidiaries
that (1) rank pari passu with or junior to the Subordinated Notes or the Guarantor’s
guarantee thereof upon a liquidation, dissolution or winding up of the Corporation
or the Guarantor, respectively, (2) have no maturity or a maturity of at least 60
years and an Optional Deferral Provision, and (3) either (a) are subject to a
Qualifying Replacement Capital Covenant or (b) have a Mandatory Trigger Provision
and are subject to Intent-Based Replacement Disclosure;

     (D) securities issued by the Corporation, the Guarantor or their Subsidiaries
that (1) rank pari passu with or junior to the Subordinated Notes or the Guarantor’s
guarantee thereof upon a liquidation, dissolution or winding up of the Corporation
or the Guarantor, respectively, (2) are Non-Cumulative, (3) have no maturity or a
maturity of at least 40 years and (4) either (a) are subject to a Qualifying
Replacement Capital Covenant or (b) have a Mandatory Trigger Provision and an
Optional Deferral Provision and are subject to Intent-Based Replacement Disclosure;

     (E) securities issued by the Corporation, the Guarantor or their Subsidiaries
that (1) rank junior to all of the senior and subordinated debt of the Corporation
or the

I-12

 

Guarantor other than the Subordinated Notes and securities ranking pari passu
with the Subordinated Notes, (2) have an Optional Deferral Provision and a Mandatory
Trigger Provision and (3) have no maturity or a maturity of at least 60 years and
are subject to a Qualifying Replacement Capital Covenant; or

     (F) other securities issued by the Corporation, the Guarantor or their
Subsidiaries that (1) rank upon a liquidation, dissolution or winding-up of the
Corporation or the Guarantor pari passu with or junior to the Subordinated Notes or
the Guarantor’s guarantee thereof, respectively, (2) have no maturity or a maturity
of at least 25 years and (3) are subject to a Qualifying Replacement Capital
Covenant and have a Mandatory Trigger Provision and an Optional Deferral Provision;
or

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

     (A) all securities described under clauses (i) and (ii) of this definition;

     (B) preferred stock issued by the Corporation or the Guarantor that (1) has no
maturity or a maturity of at least 60 years and (2) is subject to Intent-Based
Replacement Disclosure;

     (C) securities issued by the Corporation, the Guarantor or their Subsidiaries
that (1) rank pari passu with or junior to the Subordinated Notes or the Guarantor’s
guarantee thereof upon a liquidation, dissolution or winding up of the Corporation
or the Guarantor, respectively, (2) either (a) have no maturity or a maturity of at
least 60 years and Intent-Based Replacement Disclosure or (b) have no maturity or a
maturity of at least 30 years and are subject to a Qualifying Replacement Capital
Covenant and (3) have an Optional Deferral Provision;

     (D) securities issued by the Corporation, the Guarantor or their Subsidiaries
that (1) rank junior to all of the senior and subordinated debt of the Corporation
or the Guarantor other than the Subordinated Notes and securities ranking pari passu
with the Subordinated Notes or the Guarantor’s guarantee thereof, respectively, (2)
have a Mandatory Trigger Provision and an Optional Deferral Provision and (3) have
no maturity or a maturity of at least 30 years and are subject to Intent-Based
Replacement Disclosure; or

     (E) preferred stock issued by the Corporation, the Guarantor or their
Subsidiaries that ranks junior to the Subordinated Notes or the Guarantor’s
guarantee thereof upon a liquidation ,dissolution or winding up of the Corporation
or the Guarantor, respectively, and has 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 the Guarantor or their Subsidiaries that (a) ranks pari passu with or junior to all
other preferred stock of the Corporation or the Guarantor, respectively, 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.

I-13

 

          “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 or the Guarantor, 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 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 receive as much or more
equity-like credit than the securities then being redeemed, defeased or purchased, raised within
the six month 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 (or, in the case
of the Initial Covered Debt, one year prior to the final maturity date of the Initial Covered
Debt), (b) if the Corporation elects to redeem, or the Corporation, the Guarantor or a Subsidiary
of either of them elects to repurchase or repurchases, such Covered Debt either in whole or in part
with the consequence that after giving effect to such redemption or repurchase the outstanding
principal amount of such Covered Debt is less than $100,000,000, the applicable redemption or
repurchase date and (c) if such Covered Debt is not Eligible Subordinated Debt, the date on which
the Corporation or the Guarantor 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;

          (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.

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

          “Securities” has the meaning specified in Recital B.

I-14

 

          “Stepdown Date” means March 30, 2017.

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

          “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.

          “Supplemental Indenture” means Supplemental Indenture No. 1, dated as of March 1, 2007, to the
Subordinated Indenture among the Corporation, the Guarantor and The Bank of New York, as Trustee.

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

I-15

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