Document:

EX-4.2

 

Exhibit 4.2

 

FIRST SUPPLEMENTAL INDENTURE

between

THE PROGRESSIVE CORPORATION

and

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

Supplemental to Junior Subordinated Indenture

dated as of June 21, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	ARTICLE ONE
	 	Definitions	 	 	1	 
	Section 1.01.
	 	Definitions	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE TWO
	 	General Terms and Conditions of the Debentures	 	 	10	 
	Section 2.01.
	 	Designation, Principal Amount and Authorized Denominations	 	 	10	 
	Section 2.02.
	 	Repayment	 	 	11	 
	Section 2.03.
	 	Form	 	 	14	 
	Section 2.04.
	 	Rate of Interest; Interest Payment Date	 	 	14	 
	Section 2.05.
	 	Interest Deferral	 	 	15	 
	Section 2.06.
	 	Alternative Payment Mechanism	 	 	16	 
	Section 2.07.
	 	Events of Default	 	 	20	 
	Section 2.08.
	 	Securities Registrar; Paying Agent; Delegation of Trustee Duties	 	 	23	 
	Section 2.09.
	 	Limitation on Claims in the Event of Bankruptcy,	 	 	 	 
	 
	 	Insolvency or Receivership	 	 	24	 
	Section 2.10.
	 	Location of Payment	 	 	24	 
	Section 2.11.
	 	No Sinking Fund	 	 	24	 
	Section 2.12.
	 	Subordination	 	 	25	 
	Section 2.13.
	 	Defeasance	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE THREE
	 	Covenants	 	 	25	 
	Section 3.01.
	 	Dividend and Other Payment Stoppages	 	 	25	 
	Section 3.02.
	 	Additional Limitation on Deferral Over One Year	 	 	26	 
	 
	 	 	 	 	 	 
	ARTICLE FOUR
	 	Redemption of the Debentures	 	 	27	 
	Section 4.01.
	 	Redemption Price	 	 	27	 
	Section 4.02.
	 	Limitation on Partial Redemption	 	 	27	 
	 
	 	 	 	 	 	 
	ARTICLE FIVE
	 	Repayment of Debentures	 	 	27	 
	Section 5.01.
	 	Repayments	 	 	27	 
	Section 5.02.
	 	Selection of the Debentures to be Repaid	 	 	27	 
	Section 5.03.
	 	Notice of Repayment	 	 	28	 
	Section 5.04.
	 	Deposit of Repayment Amount	 	 	28	 
	Section 5.05.
	 	Repayment of Debentures	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE SIX
	 	Original Issue of Debentures	 	 	29	 
	Section 6.01.
	 	Calculation of Original Issue Discount	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE SEVEN
	 	Supplemental Indentures	 	 	29	 
	Section 7.01.
	 	Supplemental Indentures Without Consent of Holders	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE EIGHT
	 	Miscellaneous	 	 	30	 
	Section 8.01.
	 	Effectiveness	 	 	30	 
	Section 8.02.
	 	Successors and Assigns	 	 	30	 
	Section 8.03
	 	Effect of Recitals	 	 	31	 
	Section 8.04.
	 	Ratification of Indenture	 	 	31	 
	Section 8.05.
	 	Governing Law	 	 	31	 
	Section 8.06.
	 	Severability	 	 	31	 

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FIRST SUPPLEMENTAL INDENTURE

     First Supplemental Indenture, dated as of June 21, 2007 (the “First Supplemental Indenture”),
between The Progressive Corporation, an Ohio corporation (the “Issuer”), having its principal
office at 6300 Wilson Mills Road, Mayfield Village, Ohio 44143, and The Bank of New York Trust
Company, N.A., a national banking association, as trustee (hereinafter called the “Trustee”).

RECITALS OF THE ISSUER

     The Issuer and the Trustee entered into a Junior Subordinated Indenture, dated as of June 21,
2007 (the “Indenture”).

     Section 8.1 of the Indenture provides that the Issuer and the Trustee, without the consent of
any Holder, may enter into a supplemental indenture to establish the form or terms of Securities of
any series as permitted by Section 2.3 thereof.

     Pursuant to Section 2.3 of the Indenture, the Issuer desires to provide for the establishment
of a series of Securities under the Indenture, and the form and terms thereof, as hereinafter set
forth.

     The Issuer has requested that the Trustee execute and deliver this First Supplemental
Indenture. The Issuer has delivered to the Trustee an Opinion of Counsel and an Officers’
Certificate pursuant to Section 2.4 of the Indenture to the effect, among other things, that all
conditions precedent provided for in the Indenture to the Trustee’s execution and delivery of this
First Supplemental Indenture have been complied with. All acts and things necessary have been done
and performed to make this First Supplemental Indenture enforceable in accordance with its terms,
and the execution and delivery of this First Supplemental Indenture has been duly authorized in all
respects.

     NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the
premises and the purchase of the Debentures (as herein defined) by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the
Debentures, as follows:

ARTICLE ONE

Definitions

Section 1.01. Definitions

     For all purposes of this First Supplemental Indenture, except as otherwise expressly provided
herein or unless the context otherwise requires:

          (a) Terms defined in the Indenture have the same meanings when used in this First Supplemental
Indenture unless otherwise defined herein.

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

 

 

          (c) The words “herein”, “hereof” and “hereunder” and other words of similar import refer to
this First Supplemental Indenture as a whole and not to any particular Article, Section or other
subdivision, and any reference to an Article, Section or other subdivision refers to an Article,
Section or other subdivision of this First Supplemental Indenture unless otherwise specified.

          (d) Any reference herein to “interest” shall include any Additional Interest, except where the
context requires otherwise.

     In addition, the following terms used in this First Supplemental Indenture have the following
respective meanings:

     “Additional Interest” means the interest, if any, that shall accrue on any interest on the
Debentures the payment of which has not been made on the applicable Interest Payment Date,
compounded on each subsequent Interest Payment Date.

     “Applicable Spread” means (i) with respect to a redemption of all outstanding Debentures in
connection with a Tax Event, 0.50%, (ii) with respect to a redemption of all outstanding Debentures
in connection with a Rating Agency Event, 0.50% and (iii) in all other cases, 0.25%.

     “Business Day” means any day other than (i) a Saturday or Sunday, (ii) a day on which banking
institutions in The City of New York are authorized or required by law or executive order to remain
closed, (iii) a day on which the corporate trust office of the Trustee is closed for business or
(iv) on or after June 15, 2017, a day that is not a London Banking Day.

     “Business Combination” means any transaction that is subject to Section 9.1 of the Indenture.

     “Calculation Agent” means, with respect to the Debentures, The Bank of New York Trust Company,
N.A., or any other firm appointed by the Issuer, acting as calculation agent in respect of the
Debentures.

     “Commercially Reasonable Efforts” to sell Qualifying Capital Securities means commercially
reasonable efforts to complete the offer and sale of Qualifying Capital Securities to Persons other
than Subsidiaries in public offerings or private placements, provided that the Issuer shall not be
considered to have made Commercially Reasonable Efforts to effect a sale of Qualifying Capital
Securities if it determines not to pursue or complete such sale solely due to pricing, coupon,
dividend rate or dilution considerations.

     “Common Equity Issuance Cap” has the meaning specified in Section 2.06(a).

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     “Common Shares” means (i) the Issuer’s common shares, including common shares issued pursuant
to any dividend reinvestment plan or the Issuer’s employee benefit plans, (ii) a security of the
Issuer ranking upon the Issuer’s liquidation, dissolution or winding up junior to Qualifying
Non-Cumulative Preferred Shares and pari passu with the common shares that tracks the performance
of, or relates to the results of, a business, unit or division of the Issuer or its Subsidiaries,
and (iii) any securities issued in exchange for the securities described in clause (i) or (ii)
above in connection with a merger, consolidation, binding share exchange, business combination,
recapitalization or other similar event.

     “Current Stock Market Price” means, with respect to the Common Shares on any date, (i) the
closing sale price per share (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 (a) as reported in composite transactions by the New York Stock Exchange or
(b) if the Common Shares are not then listed on the New York Stock Exchange on such date, as
reported by the principal U.S. securities exchange on which the Common Shares are traded or quoted
or (ii) if the Common Shares are not listed on any U.S. securities exchange on such date, the last
quoted bid price for the Common Shares in the over-the-counter market on such date as reported by
the National Quotation Bureau or similar organization or (iii) if the Common Shares are not so
quoted, the average of the mid-point of the last bid and ask prices for the Common Shares on such
date from each of at least three nationally recognized independent investment banking firms
selected by the Issuer for this purpose.

     “Date of QCS Notice” has the meaning specified in Section 2.02(a).

     “Debentures” has the meaning specified in Section 2.01(a).

     “Deferral Period” means the period commencing on an Interest Payment Date with respect to
which the Issuer elects to defer interest pursuant to Section 2.05 and ending on the earlier of (i)
the tenth anniversary of that Interest Payment Date or (ii) the next Interest Payment Date on which
the Issuer has paid all deferred interest and all other accrued interest on the Debentures.

     “Depositary” means, with respect to the Securities of any series issuable or issued in whole
or in part in the form of one or more Global Securities, The Depository Trust Company (or any
successor thereto).

     “Eligible Proceeds” means, for each relevant Interest Payment Date, the net proceeds (after
deducting underwriters’ or placement agents’ fees, commissions or discounts and other expenses
relating to the issuance or sale) the Issuer has received during the 180-day period prior to such
Interest Payment Date from the issuance or sale of Qualifying APM Securities (excluding sales of
Qualifying Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares in excess
of the Preferred Shares Issuance Cap) to Persons that are not Subsidiaries.

     “Final Maturity Date” has the meaning specified in Section 2.02(b).

     “First Supplemental Indenture” means this instrument as originally executed or as it from time
to time may be supplemented or amended by one or more agreements supplemental hereto.

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     “Fixed Rate Portion” has the meaning specified in Section 2.06(a).

     “Global Security” means a Security evidencing all or part of a series of Debentures, issued to
the Depositary or its nominee for such series, and registered in the name of such Depositary or its
nominee.

     “Indenture” has the meaning specified in the Recitals.

     “Intent-Based Replacement Disclosure” has the meaning specified in the Replacement Capital
Covenant.

     “Interest Payment Dates” has the meaning specified in Section 2.04.

     “Interest Period” means a Semi-Annual Interest Period or a Quarterly Interest Period, as the
case may be.

     “Issuer” has the meaning specified in the Recitals.

     “LIBOR Determination Date” means the second London Banking Day immediately preceding the first
day of the relevant Quarterly Interest Period.

     “London Banking Day” means any day on which commercial banks are open for general business
(including dealings in deposits in U.S. dollars) in London, England.

     “Make-Whole Redemption Price” means, with respect to a redemption of the Debentures in whole
or in part, the present value of a principal payment on June 15, 2017 and scheduled payments of
interest that would have accrued from the Redemption Date to June 15, 2017 on the Debentures being
redeemed, 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 determined
and provided to the Issuer by the Treasury Dealer) plus the Applicable Spread, plus accrued and
unpaid interest to the Redemption Date.

     “Mandatorily Convertible Preferred Shares” means Preferred Shares with (i) no prepayment
obligation of the liquidation preference on the part of the Issuer, whether at the election of the
holders or otherwise, and (ii) a requirement that the Preferred Shares mandatorily convert into
Common Shares within three years from the date of its issuance at a conversion ratio within a range
established at the time of issuance of such Preferred Shares.

     “Market Disruption Event” means, with respect to the issuance or sale of Qualifying Capital
Securities pursuant to Section 2.02 or Qualifying APM Securities pursuant to Section 2.06, the
occurrence or existence of any of the following events or set of circumstances:

          (i) Trading in securities generally, or in shares of the Issuer’s securities specifically, on
the New York Stock Exchange or any other national securities exchange or in the over-the-counter
market on which Qualifying APM Securities or Qualifying Capital Securities, as the case may be, are
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 United States Securities and Exchange

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Commission, by the relevant exchange or by any other regulatory agency or governmental body
having jurisdiction such that trading shall have been materially disrupted;

          (ii) The Issuer would be required to obtain the consent or approval of the Issuer’s
shareholders or a regulatory body (including, without limitation, any securities exchange) or
governmental authority to issue or sell Qualifying APM Securities pursuant to Section 2.06 or to
issue Qualifying Capital Securities pursuant to Section 2.02, as the case may be, and such consent
or approval has not yet been obtained notwithstanding the Issuer’s commercially reasonable efforts
to obtain such consent or approval;

          (iii) A banking moratorium shall have been declared by the federal or state authorities of the
United States such that the issuance of, or market trading in, the Qualifying APM Securities or the
Qualifying Capital Securities, as applicable, has been disrupted or ceased;

          (iv) A material disruption shall have occurred in commercial banking or securities settlement
or clearance services in the United States such that the issuance of, or market trading in, the
Qualifying APM Securities or the Qualifying Capital Securities, as applicable, has been disrupted
or ceased;

          (v) 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 such that, in any such case, the issuance of, or market trading
in, the Qualifying APM Securities or the Qualifying Capital Securities, as applicable, has been
disrupted or ceased;

          (vi) 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, or the effect of international conditions on the financial markets in the
United States shall be such that the issuance of, or market trading in, Qualifying APM Securities
or Qualifying Capital Securities, as applicable, shall have been materially disrupted;

          (vii) An event occurs and is continuing as a result of which the offering document for such
offer and sale of Qualifying APM Securities or Qualifying Capital Securities, as the case may be,
in the reasonable judgment of the Issuer, would 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 (x) the disclosure of that event at such time, in the reasonable
judgment of the Issuer, is not otherwise required by law and would have a material adverse effect
on the business of the Issuer or (y) the disclosure relates to a previously undisclosed proposed or
pending material business transaction, provided that no single suspension period contemplated by
this clause (vii) shall exceed 90 consecutive days and multiple suspension periods contemplated by
this clause (vii) shall not exceed an aggregate of 180 days in any 360-day period; or

          (viii) The Issuer reasonably believes that the offering document for such offer and sale of
Qualifying APM Securities or Qualifying Capital Securities, as the case may be, would not be in
compliance with a rule or regulation of the United States Securities and

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Exchange Commission (for reasons other than those referred to in clause (vii) above), and the
Issuer determines it is unable to comply with such rule or regulation or such compliance is unduly
burdensome, provided that no single suspension period contemplated by this clause (viii)
shall exceed 90 consecutive days and multiple suspension periods contemplated by this clause (viii)
shall not exceed an aggregate of 180 days in any 360-day period.

     “Pari Passu Securities” means debt securities of the Issuer that rank in right of payment upon
liquidation on a parity with the Debentures, and includes the Debentures.

     “Permitted Remedies” has the meaning specified in the Replacement Capital Covenant.

     “Preferred Shares” means the preferred shares of the Issuer.

     “Preferred Shares Issuance Cap” has the meaning specified in Section 2.06(a).

     “Qualifying APM Securities” means Common Shares, Qualifying Non-Cumulative Preferred Shares,
Qualifying Warrants and Mandatorily Convertible Preferred Shares, provided that the Issuer may
amend this definition in accordance with Section 2.06(e).

     “Qualifying Capital Securities” has the meaning specified in the Replacement Capital Covenant.

     “Qualifying Non-Cumulative Preferred Shares” means the Issuer’s non-cumulative Preferred
Shares that (w) rank pari passu with or junior to all of the Issuer’s other Preferred Shares, (x)
are perpetual, (y) are subject to (a) a Qualifying Replacement Capital Covenant or (b) both (i)
mandatory suspension of dividends in the event the Issuer breaches certain financial metrics
specified in the offering documents relating to such Preferred Shares and (ii) Intent-Based
Replacement Disclosure, and (z) as to which, in both clauses (a) and (b) the transaction documents
for such Preferred Shares shall provide for no remedies as a consequence of non-payment of
distributions other than Permitted Remedies.

     “Qualifying Replacement Capital Covenant” has the meaning specified in the Replacement Capital
Covenant.

     “Qualifying Warrants” means any net share-settled warrants to purchase Common Shares (i) which
have an exercise price at the time of issuance greater than the Current Shares Market Price and
(ii) which the Issuer is not entitled to redeem for cash and the holders of which are not entitled
to require the Issuer to purchase for cash in any circumstances.

     “Quarterly Interest Payment Date” shall have the meaning specified in Section 2.04.

     “Quarterly Interest Period” means the period beginning on and including June 15, 2017 and
ending on but excluding the next Interest Payment Date and each successive period beginning on and
including an Interest Payment Date and ending on but excluding the next Interest Payment Date.

     “Rating Agency Event” means that any nationally recognized statistical rating organization
within the meaning of Section 3(a)(62) of the Securities Exchange Act of 1934 that

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then publishes a rating for the Issuer (a “rating agency”) amends, clarifies or changes the
criteria it uses to assign equity credit to securities such as the Debentures, which amendment,
clarification or change results in:

	 	(i)	 	the shortening of the length of time the Debentures are assigned a
particular level of equity credit by that rating agency as compared to the length
of time they would have been assigned that level of equity credit by that rating
agency or its predecessor on the issue date of the Debentures, or
	 
	 	(ii)	 	the lowering of the equity credit (including up to a lesser amount)
assigned to the Debentures by that rating agency as compared to the equity credit
assigned by that rating agency or its predecessor on the issue date of the
Debentures.

     “Redemption Date” has the meaning specified in Section 4.01.

     “Redemption Price” has the meaning specified in Section 4.01.

     “Regular Record Date” means (i) with respect to a Semi-Annual Interest Payment Date, June 1 or
December 1, as the case may be, immediately preceding the relevant Semi-Annual Interest Payment
Date, and (ii) with respect any Quarterly Interest Payment Date, March 1, June 1, September 1 and
December 1, as the case may be, immediately preceding the relevant Quarterly Interest Payment Date.

     “Repayment Date” means the Scheduled Maturity Date, each Quarterly Interest Payment Date
thereafter until the Issuer shall have repaid or redeemed all of the Debentures and, to the extent
that any principal is repaid thereon, the Final Maturity Date.

     “Replacement Capital Covenant” means the Replacement Capital Covenant, dated as of June 21,
2007, by the Issuer, as the same may be amended or supplemented from time to time in accordance
with the provisions thereof and Section 2.02(a)(vii) hereof.

     “Responsible Officer of the Paying Agent” means, with respect to the Trustee in its capacity
as Paying Agent, any officer within the corporate trust department (or any successor department,
unit or division) who has direct responsibility for the administration of the Paying Agent
functions of the Indenture.

     “Reuters Page LIBOR01” means the display so designated on the Reuters 3000 Xtra (or such other
page as may replace that page on that service, or such other service as may be nominated by the
Issuer as the information vendor, for the purpose of displaying rates or prices comparable to the
London Interbank Offered Rate for U.S. dollar deposits).

     “Scheduled Maturity Date” has the meaning specified in Section 2.02(a).

     “Securities Registrar” means, with respect to the Debentures, The Bank of New York Trust
Company, N.A., or any other firm appointed by the Issuer, acting as securities registrar for the
Debentures.

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     “Securities Registrar Office” means the office of the applicable Securities Registrar at which
at any particular time its corporate agency business shall principally be administered, which
office at the date hereof is the Corporate Trust Office of the Trustee.

     “Semi-Annual Interest Payment Date” has the meaning specified in Section 2.04.

     “Semi-Annual Interest Period” means the period beginning on and including June 21, 2007 and
ending on but excluding the first Interest Payment Date thereafter and each successive period
beginning on and including an Interest Payment Date and ending on but excluding the next Interest
Payment Date until June 15, 2017.

     “Share Cap Amount” has the meaning specified in Section 2.06(a).

     “Shares Available for Issuance” has the meaning specified in Section 2.06(a).

     “Subsidiary” means a corporation more than 50% of the outstanding voting stock of which is
owned, directly or indirectly, by the Issuer. For the purposes of this definition, “voting stock”
means stock which ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of any contingency.

     “Tax Event” means the receipt by the Issuer of an opinion of counsel experienced in such
matters to the effect that, as a result of any:

	 	(i)	 	amendment to or change (including any officially announced proposed
change) in the laws or regulations of the United States or any political
subdivision or taxing authority of or in the United States that is effective on or
after June 21, 2007;
	 
	 	(ii)	 	official administrative decision or judicial decision or administrative
action or other official pronouncement interpreting or applying those laws or
regulations that is announced on or after June 21, 2007; or
	 
	 	(iii)	 	threatened challenge asserted in connection with an audit of the
Issuer or any of its Subsidiaries, or a threatened challenge asserted in writing
against the Issuer, any of its Subsidiaries or any tax payer that has raised
capital through the issuance of securities that are substantially similar to the
Debentures and which securities, as of their issue date, were rated investment
grade by at least one nationally recognized statistical rating organization within
the meaning of Rule 15c3-1 under the U.S. Securities Exchange Act of 1934, as
amended,

there is more than an insubstantial increase in the risk that interest payable by the Issuer on the
Debentures is not, or within 90 days of the date of such opinion will not be, deductible by the
Issuer, in whole or in part, for United States federal income tax purposes.

     “Three-Month LIBOR” means, with respect to any Quarterly Interest Period, 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 Quarterly Interest Period that appears on Reuters Page

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LIBOR01 as of 11:00 a.m., London time, on the LIBOR Determination Date for that Quarterly
Interest Period. If such rate does not appear on Reuters Page LIBOR01, Three-Month LIBOR will be
determined on the basis of the rates at which deposits in U.S. dollars for a three-month period
commencing on the first day of that Quarterly Interest 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 Issuer),
at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Quarterly
Interest Period. The Calculation Agent will request the principal London office of each of these
banks to provide a quotation of its rate. If at least two such quotations are provided,
Three-Month LIBOR with respect to that Quarterly Interest Period will 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, Three-Month LIBOR with respect to that Quarterly Interest
Period will 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 Issuer), at approximately 11:00 a.m., New York City time, on the
first day of that Quarterly Interest Period for loans in U.S. dollars to leading European banks for
a three-month period commencing on the first day of that Quarterly Interest 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, Three-Month LIBOR for that
Quarterly Interest Period will be the same as Three-Month LIBOR as determined for the previous
Quarterly Interest Period or, in the case of the Quarterly Interest Period beginning on June 15,
2017, 5.360%. The establishment of Three-Month LIBOR for each Quarterly Interest Period by the
Calculation Agent shall be final and binding (in the absence of manifest error).

     “Trading Day” means a day on which Common Shares are traded on the New York Stock Exchange, or
if not then listed on the New York Stock Exchange, a day on which Common Shares are traded or
quoted on the principal U.S. securities exchange on which it is listed or quoted, or if not then
listed or quoted on a U.S. securities exchange, a day on which Common Shares are quoted in the
over-the-counter market.

     “Treasury Dealer” means J.P. Morgan Securities Inc. and Goldman, Sachs & Co. (or their
successors) or, if J.P. Morgan Securities Inc. and Goldman, Sachs & Co., (or their successors)
refuse to act as Treasury Dealer for the purpose of determining the Make-Whole Redemption Price or
ceases to be a primary U.S. government securities dealer, another nationally recognized investment
banking firm that is a primary U.S. government securities dealer specified by the Issuer to act as
Treasury Dealer for the purpose of determining the Make-Whole Redemption Price.

     “Treasury Price” means, with respect to a Redemption Date, the bid-side price for the Treasury
Security as of the third Trading Day preceding the Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve Bank of New York on
that Trading Day and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities”,
as determined by the Treasury Dealer, except that: (i) if that release (or any successor release)
is not published or does not contain that price information on that Trading Day or (ii) if the
Treasury Dealer determines that the price information is not reasonably reflective of the actual
bid-side price of the Treasury Security prevailing at 3:30 p.m.,

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New York City time, on that Trading Day, then Treasury Price will instead mean the bid-side price for
the Treasury Security at or around 3:30 p.m., New York City time, on that Trading Day (expressed on
a next Trading Day settlement basis) as determined by the Treasury Dealer through such alternative
means as are commercially reasonable under the circumstances.

     “Treasury Rate” means, with respect to a Redemption Date, the semi-annual equivalent yield to
maturity of the Treasury Security that corresponds to the Treasury Price (calculated by the
Treasury Dealer in accordance with standard market practice and computed as of the second Trading
Day preceding the Redemption Date).

     “Treasury Security” means the United States Treasury security that the Treasury Dealer
determines would be appropriate to use, at the time of determination and in accordance with
standard market practice, in pricing the Debentures being redeemed in a tender offer based on a
spread to United States Treasury yields.

ARTICLE TWO

General Terms and Conditions of the Debentures

Section 2.01. Designation, Principal Amount and Authorized Denominations

          (a) Designation

          Pursuant to Section 2.3 of the Indenture, there is hereby established a series of Securities
of the Issuer designated as the 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due
2067 (the “Debentures”), the principal amount of which to be issued shall be in accordance with
Section 2.01(b) hereof and as set forth in any order executed by the Issuer for the authentication
and delivery of Debentures pursuant to the Indenture, and the form and terms of which shall be as
set forth hereinafter.

          (b) Principal Amount; Additional Debentures

          Debentures in an initial aggregate principal amount of $1,000,000,000, upon execution of this
First Supplemental Indenture, shall be executed by the Issuer and delivered to the Trustee, and the
Trustee shall thereupon authenticate and deliver said Debentures in accordance with an order
executed by the Issuer. At any time and from time to time after the execution and delivery of this
First Supplemental Indenture, without the consent of any Holders, the Issuer may execute and
deliver additional Debentures to the Trustee for authentication, together with an order executed by
the Issuer for the authentication and delivery of such additional Debentures, so long as such
additional Debentures are fungible for U.S. tax purposes with the Debentures issued as of the date
of this First Supplemental Indenture. Any additional Debentures so issued shall be governed by
this First Supplemental Indenture and shall rank equally and ratably in right of payment with the
Debentures issued on the date of this First Supplemental Indenture and, together with the
Debentures issued as of the date of this First Supplemental Indenture, shall be treated as a single
series of Debentures for all purposes.

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          (c) Authorized Denominations

          The denominations in which Debentures shall be issuable is $1,000 principal amount and
integral multiples thereof.

Section 2.02. Repayment

          (a) Scheduled Maturity Date

               (i) The principal amount of, and all accrued and unpaid interest on, the Debentures shall be
payable in full on June 15, 2037 or, if such day is not a Business Day, the following Business Day
(the “Scheduled Maturity Date”) to the extent of net proceeds received by the Issuer to the Date of
QCS Notice from the issuance of Qualifying Capital Securities as contemplated by Section
2.02(a)(iv). In the event the Issuer has delivered an Officers’ Certificate to the Trustee
pursuant to clause (v) of this Section 2.02(a) in connection with the Scheduled Maturity Date, (x)
the principal amount of Debentures payable on the Scheduled Maturity Date, if any, shall be the
principal amount set forth in the notice of repayment, if any, accompanying such Officers’
Certificate, (y) such principal amount of Debentures shall be repaid on the Scheduled Maturity Date
pursuant to Article 5 hereof, and (z) subject to clause (ii) of this Section 2.02(a), the remaining
Debentures shall remain outstanding and shall be payable on the immediately succeeding Quarterly
Interest Payment Date to the extent of net proceeds received by the Issuer to the Date of QCS
Notice, without duplication of prior amounts received, of the issuance of Qualifying Capital
Securities as contemplated by Section 2.02(a)(iv), and to like extent on each Quarterly Interest
Payment Date thereafter until the Debentures are paid in full, or such earlier date on which they
are redeemed pursuant to Article 4 hereof or become due and payable pursuant to Section 5.1 of the
Indenture.

               (ii) In the event the Issuer has delivered an Officers’ Certificate to the Trustee pursuant to
clause (v) of this Section 2.02(a) in connection with any Quarterly Interest Payment Date, (x) the
principal amount of the Debentures payable on such Quarterly Interest Payment Date shall be the
principal amount set forth in the notice of repayment, if any, accompanying such Officers’
Certificate, (y) such principal amount shall be repaid on such Quarterly Interest Payment Date
pursuant to Article 5 hereof to the extent of net proceeds received by the Issuer to the Date of
QCS Notice, without duplication of prior amounts received, of the issuance of Qualifying Capital
Securities as contemplated by Section 2.02 (a)(iv), and (z) the remaining Debentures shall remain
outstanding and shall be payable on the immediately succeeding Quarterly Interest Payment Date to
the extent of net proceeds received by the Issuer to the Date of QCS Notice, without duplication of
prior amounts received, of the issuance of Qualifying Capital Securities as contemplated by Section
2.02 (a)(iv), and on each Quarterly Interest Payment Date thereafter to like extent until the
Debentures are paid in full, or such earlier date on which they are redeemed pursuant to Article 4
hereof or become due and payable pursuant to Section 5.1 of the Indenture.

               (iii) The obligation of the Issuer to repay the Debentures pursuant to this Section 2.02(a) on
any date prior to the Final Maturity Date shall be subject to (x) its obligations under Article
Thirteen of the Indenture to the holders of Senior Indebtedness and

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(y) its obligations under Section 2.05 hereof with respect to the payment of deferred interest on
the Debentures.

               (iv) Until the Debentures are paid in full:

                    (A) the Issuer shall use Commercially Reasonable Efforts, subject to a Market Disruption
Event, to raise sufficient net proceeds from the issuance of Qualifying Capital Securities during a
180-day period ending on the date, not more than 15 and not less than ten Business Days prior to
the Scheduled Maturity Date, on which the Issuer delivers the notice required by clause (v) of this
Section 2.02(a) and Section 5.01, to permit repayment of the Debentures in full on the Scheduled
Maturity Date pursuant to clause (i) of this Section 2.02(a); and

                    (B) if the Issuer is unable for any reason to raise sufficient net proceeds from the issuance
of Qualifying Capital Securities to permit repayment in full of the Debentures on the Scheduled
Maturity Date or any subsequent Quarterly Interest Payment Date, the Issuer shall use Commercially
Reasonable Efforts, subject to a Market Disruption Event, to raise sufficient net proceeds from the
issuance of Qualifying Capital Securities during a 90-day period ending on the date, not more than
15 and not less than ten Business Days prior to the following Quarterly Interest Payment Date, on
which the Issuer delivers the notice required by clause (v) of this Section 2.02(a) and Section
5.01, to permit repayment of the Debentures in full on such following Quarterly Interest Payment
Date pursuant to clause (i) of this Section 2.02(a); and

                    (C) the Issuer shall apply any such net proceeds to the repayment of the Debentures as
provided in clause (vi) of this Section 2.02(a).

For the avoidance of doubt, the Issuer is not obligated to sell any securities other than
Qualifying Capital Securities to raise net proceeds for repayment of the Debentures pursuant to
this Section 2.02(a), or to apply the proceeds of any such sale of other securities to repayment of
the Debentures pursuant to this Section 2.02(a), and no Holder of Debentures may require the Issuer
to issue any such other securities in satisfaction of its obligations under this Section 2.02(a).

               (v) The Issuer, if it has not raised sufficient net proceeds from the issuance of Qualifying
Capital Securities pursuant to clause (iv) above in connection with any Repayment Date, shall
deliver an Officers’ Certificate to the Trustee (who shall forward such certificate to each Holder
of the Debentures) no more than 15 and no less than ten Business Days prior to such Repayment Date
(the date of such delivery, the “Date of QCS Notice”) stating the amount of net proceeds, if any,
raised pursuant to clause (iv) above in connection with such Repayment Date. The Issuer shall be
excused from its obligation to use Commercially Reasonable Efforts to sell Qualifying Capital
Securities pursuant to clause (iv) above if such Officers’ Certificate further certifies that: (A)
a Market Disruption Event was existing during the 180-day period preceding the date of such
Officers’ Certificate or, in the case of any Repayment Date after the Scheduled Maturity Date, the
90-day period preceding the date of such Officers’ Certificate; and (B) either (x) the Market
Disruption Event continued for the entire 180-day period or 90-day period, as the case may be, or
(y) the Market Disruption Event continued for only part of the period but the Issuer was unable
after Commercially Reasonable Efforts to raise

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sufficient net proceeds during the rest of that period to permit repayment of the Debentures
in full. Each Officers’ Certificate delivered pursuant to this clause (v), unless no principal
amount of Debentures is to be repaid on the applicable Repayment Date, shall be accompanied by a
notice of repayment pursuant to Section 5.01 setting forth the principal amount of the Debentures
to be repaid on such Repayment Date, which amount shall be determined after giving effect to clause
(vi) of this Section 2.02(a). In the event the Issuer fails to deliver an Officer’s Certificate to
the Trustee in the manner described herein in connection with a Repayment Date, the Issuer shall be
deemed to have confirmed that sufficient proceeds have been raised from an issuance of Qualifying
Capital Securities, and all outstanding principal will be due on such Repayment Date.

               (vi) Payments in respect of the Debentures on any Repayment Date will be applied, first, to
deferred interest on the Debentures to the extent of Eligible Proceeds raised pursuant to Section
2.06; second, to pay current interest on the Debentures to the extent not paid from other sources;
and third, to repay the outstanding principal amount of the Debentures, subject to a minimum
principal amount of $5,000,000 to be repaid on any Repayment Date; provided that if the
Issuer is obligated to sell Qualifying Capital Securities and apply the net proceeds therefrom to
payments of principal of or interest on any Pari Passu Securities in addition to the Debentures,
then on any date and for any period, the amount of net proceeds received by the Issuer from those
sales and available for such payments shall be applied to the Debentures and those other Pari Passu
Securities having the same scheduled maturity date as the Debentures pro rata in accordance with
their respective outstanding principal amounts, and no such payments shall be made to any other
such Pari Passu Securities having a later scheduled maturity date until the principal of and all
accrued and unpaid interest on the Debentures have been paid in full, except to the extent
permitted by Sections 3.01 and 2.06(c). If the Issuer raises less than $5,000,000 of net proceeds
from the sale of Qualifying Capital Securities during the relevant 180-day or 90-day period, the
Issuer will not be required to repay any Debentures on the Scheduled Maturity Date or the next
Quarterly Interest Payment Date, as applicable. On the next Quarterly Interest Payment Date as of
which the Issuer has raised at least $5,000,000 of net proceeds during the 180-day period (or, if
shorter, the period beginning on the date on which the Issuer last repaid any principal amount of
Debentures) ending on the date not more than 15 and not less than ten Business Days prior to such
Quarterly Interest Payment Date, on which the Issuer delivers the notice required by clause (v) of
this Section 2.02(a) and Section 5.01, the Issuer shall be required to repay a principal amount of
the Debentures equal to the entire net proceeds from the sale of Qualifying Capital Securities
during such 180-day or shorter period on such Quarterly Interest Payment Date.

               (vii) The Issuer shall not amend the Replacement Capital Covenant to impose additional
restrictions on the type or amount of Qualifying Capital Securities that the Issuer may include for
purposes of determining whether or to what extent repayment, redemption or purchase of the
Debentures is permitted under the Replacement Capital Covenant, except with the consent of Holders
of a majority in principal amount of the Debentures. Except as aforesaid, the Issuer may amend or
supplement the Replacement Capital Covenant in accordance with its terms and without the consent of
the Holders of the Debentures.

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          (b) Final Maturity Date

          The principal of, and all accrued and unpaid interest on, all outstanding Debentures shall be
due and payable on June 15, 2067 or, if such date is not a Business Day, the following Business Day
(the “Final Maturity Date”), regardless of the amount of Qualifying Capital Securities the Issuer
may have issued and sold by that time.

Section 2.03. Form

     The Debentures shall be substantially in the form of Exhibit A attached hereto and shall be
issued in fully registered definitive form without interest coupons. Principal of and interest on
the Debentures will be payable, the transfer of such Debentures will be registrable and such
Debentures will be exchangeable for Debentures bearing identical terms and provisions, and notices
and demands to or upon the Issuer in respect of the Debentures and the Indenture may be served, at
the Corporate Trust Office of the Trustee, and the Issuer appoints the Trustee as its agent for the
foregoing purposes, provided that payment of interest may be made at the option of the Issuer by
check mailed to the Holders at such address as shall appear in the Securities Register or by wire
transfer in immediately available funds to the bank account number of the Holders specified in
writing by the Holders not less than ten days before the relevant Interest Payment Date and entered
in the Securities Register by the Securities registrar. The Debentures may be presented for
registration of transfer or exchange at the Securities Registrar Office.

     The Debentures initially are issuable solely as Global Securities. The Debentures shall be
physically transferred to all beneficial owners in definitive form in exchange for their beneficial
interests in a Global Security if the Depositary with respect to such Global Securities notifies
the Issuer that it is unwilling or unable to continue as Depositary for such Global Security or if
it ceases to be a clearing agency registered under the Exchange Act, as the case may be, and a
successor Depositary is not appointed by the Issuer within 90 days of such notice.

Section 2.04. Rate of Interest; Interest Payment Date

          (a) Rate of Interest; Accrual

          The Debentures shall bear interest from and including June 21, 2007, to but excluding, June
15, 2017 (or any earlier date on which the Debentures are redeemed pursuant to Article Four), at
the rate of 6.70% per annum, computed on the basis of a 360-day year consisting of twelve 30-day
months. Commencing on and including June 15, 2017, the Debentures shall bear interest at an annual
rate of Three-Month LIBOR plus 2.0175% (the “Floating Rate”), computed for each Quarterly Interest
Period on the basis of a 360-day year and the actual number of days elapsed. Except as provided in
Section 2.04(b), interest will accrue from and including each Interest Payment Date to, but
excluding, the immediately succeeding Interest Payment Date. Accrued interest that is not paid on
the applicable Interest Payment Date, including interest deferred pursuant to Section 2.05, will
bear Additional Interest, to the extent permitted by law, at the interest rate in effect from time
to time provided in this Section 2.04(a), from the relevant Interest Payment Date, compounded on
each subsequent Interest Payment Date.

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          (b) Interest Payment Dates

          Subject to the other provisions hereof, accrued interest on the Debentures shall be payable
(i) semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15,
2007 and ending on June 15, 2017, or if any such day is not a Business Day, the following Business
Day (and no interest shall accrue as a result of such postponement) (each such date, a “Semi-Annual
Interest Payment Date”), and (ii) thereafter, quarterly in arrears on March 15, June 15, September
15 and December 15 of each year, commencing on September 15, 2017, or if any such day is not a
Business Day, the following Business Day (each such date, a “Quarterly Interest Payment Date” and,
together with Semi-Annual Interest Payment Dates, each, an “Interest Payment Date”), except that if
such Business Day is in the immediately succeeding calendar month, such Quarterly Interest Payment
Date shall be the immediately preceding Business Day (and interest shall accrue to but excluding
the date that interest is actually paid).

          (c) Interest Payment to Holders

          Interest will be payable to the Persons in whose name the Debentures are registered at the
close of business on the Regular Record Date immediately preceding the relevant Interest Payment
Date, except that interest payable at maturity shall be paid to the Person to whom principal is
paid.

Section 2.05. Interest Deferral

          (a) Option to Defer Interest Payments

               (i) Subject to other provisions hereof, the Issuer shall have the right, at any time and from
time to time, to defer the payment of interest on the Debentures for one or more consecutive
Interest Periods that do not exceed ten years for any single Deferral Period, provided that no
Deferral Period shall extend beyond the Final Maturity Date or the earlier repayment or redemption
in full of the Debentures. If the Issuer has paid all deferred interest on the Debentures, the
Issuer shall have the right to elect to begin a new Deferral Period pursuant to this Section 2.05.

               (ii) At the end of any Deferral Period, the Issuer shall pay all deferred interest on the
Debentures (including Additional Interest thereon) to the Persons in whose names the Debentures are
registered in the Securities Register at the close of business on the Regular Record Date with
respect to the Interest Payment Date at the end of such Deferral Period.

               (iii) The Issuer may elect to pay interest on any Interest Payment Date during any Deferral
Period to the extent permitted by Section 2.05(b).

          (b) Payment of Deferred Interest

          Subject to a Market Disruption Event as described under Section 2.06(b), the Issuer will not
pay any deferred interest on the Debentures from any source other than Eligible Proceeds prior to
the Final Maturity Date, except at any time that the principal amount of the Debentures has been
accelerated and such acceleration has not been rescinded or in the case of a

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Business Combination to the extent described below in Section 2.05(c). Notwithstanding the
foregoing, the Issuer may pay current interest from any available funds.

          (c) Business Combination Exception

          If (i) the Issuer is involved in a Business Combination where immediately after its
consummation more than 50% of the voting shares of the surviving entity of such Business
Combination, or the Person to whom all or substantially all of the Issuer’s properties or assets
are conveyed, transferred or leased in such Business Combination, is owned, directly or indirectly,
by the shareholders of the other party to such Business Combination, and (ii) at the time the
Business Combination is consummated a Deferral Period is continuing, then Section 2.05(b) shall not
apply to any payment of deferred interest for such Deferral Period, if such Deferral Period is
terminated on the next Interest Payment Date following the date of consummation of the Business
Combination.

          (d) Notice of Deferral

          The Issuer shall give written notice of its election to commence or continue any Deferral
Period to the Trustee and the Holders of the Debentures at least one Business Day and not more than
60 Business Days before the next Interest Payment Date. Such notice shall be given to the Trustee
and each Holder of Debentures at such Holder’s address appearing in the Security Register by
first-class mail, postage prepaid.

Section 2.06. Alternative Payment Mechanism

          (a) Obligation to Issue Qualifying APM Securities

          Immediately following the earlier of (i) the first Interest Payment Date following the
commencement of a Deferral Period on which the Issuer pays any current interest on the Debentures
(which the Issuer may do from any source of funds) or (ii) the fifth anniversary of the
commencement of the Deferral Period, the Issuer, subject to the occurrence and continuation of a
Market Disruption Event as described under Section 2.06(b) and subject to Section 2.05(b) and
Section 2.06(c), shall issue one or more types of Qualifying APM Securities until the Issuer has
raised an amount of Eligible Proceeds at least equal to the aggregate amount of accrued and unpaid
deferred interest (including compounding interest thereon) on the Debentures. The Issuer shall
apply such Eligible Proceeds on the next Interest Payment Date to the payment of deferred interest
in accordance with this Section 2.06. The requirement set forth in this Section 2.06(a) shall be
in effect until the end of such Deferral Period. Notwithstanding (and as a qualification to) the
foregoing:

               (i) the Issuer shall not be required to issue Common Shares or, if the definition of
Qualifying APM Securities has been amended to eliminate Common Shares, Qualifying Warrants prior to
the fifth anniversary of the commencement of a Deferral Period, to the extent that the number of
Common Shares issued or issuable upon exercise of Qualifying Warrants to be applied for purposes of
funding deferred interest hereunder, together with the number of Common Shares previously issued or
issuable upon exercise of Qualifying Warrants previously issued during such Deferral Period, to the
extent still outstanding, and applied for such purposes, would exceed an amount equal to 2% of the
total number of issued and

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outstanding Common Shares reported in the Issuer’s then most recent publicly available
consolidated financial statements immediately prior to the date of such issuance (the “Common
Equity Issuance Cap”); provided that the Common Equity Issuance Cap will cease to apply
with respect to a Deferral Period following the fifth anniversary of the commencement of such
Deferral Period, at which point the Issuer must pay any deferred interest, regardless of the time
at which it was deferred, pursuant to this Section 2.06, subject to a Market Disruption Event and
the Share Cap Amount; and provided, further, that if the Common Equity Issuance Cap
is reached during a Deferral Period and the Issuer subsequently pays all deferred interest, the
Common Equity Issuance Cap will cease to apply with respect to such Deferral Period at the
termination of such Deferral Period and will not apply again unless and until the Issuer starts a
new Deferral Period;

               (ii) the Issuer shall not be permitted to issue Qualifying Non-Cumulative Preferred Shares or
Mandatorily Convertible Preferred Shares to the extent that the net proceeds of any issuance of
Qualifying Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares, together
with the net proceeds of all prior issuances of Qualifying Non-Cumulative Preferred Shares and
Mandatorily Convertible Preferred Shares during the current and all prior Deferral Periods, to the
extent still outstanding, would exceed 25% of the aggregate principal amount of the Debentures (the
“Preferred Share Issuance Cap”); and

               (iii) notwithstanding the Common Equity Issuance Cap and the Preferred Share Issuance Cap, so
long as there are outstanding Debentures, the Issuer shall not be permitted, subject to the
provisions of the three immediately succeeding paragraphs, to sell Common Shares, Qualifying
Warrants or Mandatorily Convertible Preferred Shares to pay deferred interest on the Debentures if
the number of Common Shares to be issued (or which would be issuable upon exercise or conversion of
such Qualifying Warrants or Mandatorily Convertible Preferred Shares) to pay such deferred interest
would be in excess of an amount (the “Share Cap Amount”, subject to adjustment as provided in the
second succeeding paragraph) equal to the greater of (a) 150,000,000 Common Shares plus the number
of Common Shares that the Issuer repurchases or that are added to Shares Available for Issuance (as
defined below) pursuant to the second paragraph below, in either case after the date of issuance of
the Debentures (the “Fixed Rate Portion” of the Share Cap Amount, provided that the Fixed Rate
Portion shall not exceed 250,000,000 shares), in the aggregate, during the period the Debentures
are outstanding or (b) on any date on which the Issuer is otherwise obligated to sell Qualifying
APM Securities pursuant to this Section 2.06, the Issuer’s then effective Shares Available for
Issuance; provided that if the issued and outstanding Common Shares are changed into a
different number of shares or a different class by reason of any share split, reverse share split,
share dividend, reclassification, recapitalization, split-up, combination, exchange of shares or
other similar transaction, the Fixed Rate Portion of the Share Cap Amount shall be correspondingly
adjusted. If the Issuer issues additional Debentures, then the Share Cap Amount will be increased
accordingly.

               The Issuer’s “Shares Available for Issuance” shall be calculated as of any day in two steps.
First, from the number of authorized and unissued Common Shares, the maximum number of Common
Shares that can be issued under existing options, warrants, convertible securities, any
equity-linked contracts, any equity compensation plans for directors,

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officers or employees and other plans and agreements which require or permit the Issuer to
issue a determinable number of Common Shares shall be deducted. After deduction of that number of
Common Shares from authorized and unissued Common Shares, the remaining available Common Shares
shall be allocated on a pro rata basis or on such other basis as the Issuer deems appropriate to
the obligation to issue securities under this Section 2.06 and to any other similar commitment that
is of an indeterminate nature and under which the Issuer is then required to issue Common Shares.
If the Shares Available for Issuance are zero after the two steps described above, there shall be
no obligation to obtain additional Common Shares other than the obligation to use commercially
reasonable efforts to seek adoption of a shareholder vote at the Issuer’s next occurring annual
shareholders’ meeting to increase the number of authorized Common Shares as described below.

               The Issuer in any event shall use its commercially reasonable efforts to increase Shares
Available for Issuance to at least 250,000,000 Common Shares by not later than five years after
initial issuance of the Debentures. Once Shares Available for Issuance are at least 250,000,000
Common Shares, then the Share Cap Amount shall automatically be amended to mean 250,000,000 Common
Shares minus the number of Common Shares, if any, sold prior to such date to settle deferred
interest pursuant to this Section 2.06 and thereafter will not be determined in part by reference
to Shares Available for Issuance. Promptly after each increase in the Share Cap Amount of
50,000,000 Common Shares, the Issuer will file a current report on Form 8-K with the Securities and
Exchange Commission giving notice of such increase.

               In addition to the Issuer’s obligation described in the preceding paragraph, if the Share Cap
Amount has been reached and such amount is not sufficient to allow the Issuer to raise sufficient
Eligible Proceeds to pay all deferred interest then accrued in full, the Issuer shall use its
commercially reasonable efforts to increase the Share Cap Amount (which it may do in its discretion
without the approval of any Holder) (1) only to the extent that the Issuer can do so and
simultaneously satisfy its future fixed or contingent obligations under other securities and
derivative instruments that provide for settlement or payment in Common Shares or (2) if the Issuer
cannot increase the Share Cap Amount as contemplated in the preceding clause (1), by requesting the
Issuer’s Board of Directors to adopt a resolution for shareholder vote at the next occurring annual
shareholders meeting to increase the number of the Issuer’s authorized Common Shares for purposes
of satisfying the Issuer’s obligations to pay deferred interest.

               For the avoidance of doubt, (x) once the Issuer reaches the Common Equity Issuance Cap for a
Deferral Period, the Issuer shall not be obligated to issue more Common Shares, or if the
definition of Qualifying APM Securities has been amended to eliminate Common Shares, more
Qualifying Warrants pursuant to this Section 2.06(a) prior to the fifth anniversary of the
commencement of such Deferral Period even if the number of outstanding Common Shares subsequently
increases, and (y) so long as the definition of Qualifying APM Securities has not been amended to
eliminate Common Shares, the sale of Qualifying Warrants to pay deferred interest is an option that
may be exercised at the Issuer’s sole discretion, subject to the Common Equity Issuance Cap and the
Share Cap Amount, and the Issuer is not obligated to sell Qualifying Warrants or to apply the
proceeds of any such sale to pay deferred interest on the Debentures, and no class of holders of
the Issuer’s securities, or any other party, may require the Issuer to issue Qualifying Warrants in
satisfaction of its obligations under this Section 2.06(a).

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          (b) Market Disruption Event

          Section 2.06(a) shall not apply, with respect to any Interest Payment Date, if the Issuer
shall have provided to the Trustee (which the Trustee will promptly forward upon receipt to each
Holder of Debentures) no more than 15 and no less than ten Business Days prior to such Interest
Payment Date an Officers’ Certificate stating that (i) a Market Disruption Event was existing after
the immediately preceding Interest Payment Date and (ii) either (A) the Market Disruption Event
continued for the entire period from the Business Day immediately following the preceding Interest
Payment Date to the Business Day immediately preceding the date on which such Officers’ Certificate
is provided or (B) the Market Disruption Event continued for only part of such period, but the
Issuer was unable despite using commercially reasonable efforts to raise sufficient Eligible
Proceeds during the rest of that period to pay all accrued and unpaid interest.

          (c) Partial Payment of Deferred Interest

               (i) If the Issuer has raised some but not all Eligible Proceeds necessary to pay all deferred
interest on any Interest Payment Date pursuant to this Section 2.06, such Eligible Proceeds shall
be applied to pay accrued and unpaid interest on the applicable Interest Payment Date in
chronological order based on the date each payment was first deferred, subject to the Common Equity
Issuance Cap, the Preferred Shares Issuance Cap and the Share Cap Amount, as applicable, and
payment on each installment of deferred interest shall be distributed to Holders of the Debentures
on a pro rata basis.

               (ii) If the Issuer has other outstanding Pari Passu Securities under which the Issuer is
obligated to sell securities that are Qualifying APM Securities and apply the Eligible Proceeds to
the payment of deferred interest or distributions, then on any date and for any period the amount
of Eligible Proceeds received by the Issuer from those sales and available for payment of the
deferred interest and distributions shall be applied to the Debentures and those other Pari Passu
Securities on a pro rata basis up to the Common Equity Issuance Cap or the Preferred Shares
Issuance Cap and the Share Cap Amount (or comparable provisions in the instruments governing those
other Pari Passu Securities) in proportion to the total amounts that are due on the Debentures and
such other Pari Passu Securities.

          (d) Qualifying Warrants

          If the Issuer sells Qualifying Warrants to pay deferred interest to satisfy its obligations
pursuant to this Section 2.06, the Issuer shall use commercially reasonable efforts, subject to the
Common Equity Issuance Cap, to set the terms of such Qualifying Warrants so as to raise sufficient
proceeds from their issuance to pay all deferred interest on the Debentures in accordance with this
Section 2.06.

          (e) Qualifying APM Securities Definition Change

          The Issuer may, without the consent of any Holders of the Debentures, amend the definition of
Qualifying APM Securities in Section 1.01 to eliminate Common Shares or Qualifying Warrants (but
not both) and/or Mandatorily Convertible Preferred Shares from the definition of Qualifying APM
Securities if, after the date of the first issuance of any Debentures,

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an accounting standard or interpretive guidance of an existing accounting standard issued by
an organization or regulator that has responsibility for establishing or interpreting accounting
standards in the United States becomes effective such that there is more than an insubstantial risk
that failure to eliminate Common Shares, Qualifying Warrants and/or Mandatorily Convertible
Preferred Shares, as the case may be, from the definition would result in a reduction in the
Issuer’s earnings per share as calculated in accordance with generally accepted accounting
principles in the United States. The Issuer shall send written notice to the Trustee (who shall
promptly forward such notice to each Holder of the Debentures) in advance of any such change in the
definition of Qualifying APM Securities.

Section 2.07. Events of Default

          (a) Solely for purposes of the Debentures, Section 5.1 (other than the last paragraph thereof)
of the Indenture shall be deleted and replaced by the following (capitalized terms used in the
following text that are not defined in the Indenture but are defined herein shall have the meanings
ascribed to such terms herein):

SECTION 5.1. Events of Default Defined; Acceleration of Maturity; Waiver
of Default.

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

     (1) default in the payment of accrued interest in full on the
Debentures on any Interest Payment Date (whether or not such Interest
Payment Date commenced a Deferral Period) and the failure of the Issuer on
or before the conclusion of a ten-year period following such Interest
Payment Date to pay interest (including compounded interest) then accrued in
full; or

     (2) default in the payment of principal on the Debentures when due,
whether on the Scheduled Maturity Date or the Final Maturity Date, upon
redemption, upon a declaration of acceleration, or otherwise, except that
the failure to use Commercially Reasonable Efforts to issue Qualifying
Capital Securities pursuant to Section 2.02(a)(iv) shall not constitute an
Event of Default; or

     (3) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Issuer in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Issuer a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or

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composition of or in respect of the Issuer under any applicable Federal
or State law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Issuer or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 90
consecutive days; or

     (4) the commencement by the Issuer of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or
order for relief in respect of the Issuer in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy
or insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable Federal or State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official of
the Issuer or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Issuer in furtherance of any such
action.

     If the Issuer gives a timely written notice of its election to commence
or continue a Deferral Period on any Interest Payment Date (and, if such
notice continues a Deferral Period, the Deferral Period has not continued
for ten years), then no “default” or “Event of Default” shall be deemed to
arise from the Issuer’s non-payment of interest on such Interest Payment
Date.

     If the Issuer fails to pay principal on the Debentures on the Scheduled
Maturity Date or any subsequent Interest Payment Date as a result of the
failure to raise sufficient proceeds from the issuance of Qualifying Capital
Securities despite the Issuer’s Commercially Reasonable Efforts to do so
pursuant to Section 2.02(a)(iv), such failure shall not constitute a
“default” or “Event of Default” hereunder.

     When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in clauses (3) and (4) set forth in this
Section 5.01, the expenses (including the reasonable charges and expenses of
its counsel) and the compensation for such services are intended to
constitute expenses of administration under any bankruptcy law.

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     If an Event of Default (other than an Event of Default specified in (3)
or (4) above) with respect to the Debentures occurs and is continuing, then
in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the outstanding Debentures may declare the
principal amount of all of the Debentures and interest accrued but unpaid
thereon, if any, to be due and payable immediately, by a notice in writing
to the Issuer (and to the Trustee if given by the Holders), and upon any
such declaration, such amount shall become immediately due and payable. If
an Event of Default specified in (3) or (4) above occurs, the principal
amount of all the Debentures (or, if any Debentures are Original Issue
Discount Securities, such portion of the principal amount of such Debentures
as may be specified by the terms thereof) shall automatically, and without
any declaration or other action on the part of the Trustee or any Holder,
become immediately due and payable.

     At any time after such a declaration of acceleration with respect to
the Debentures has been made and before a judgment or decree for payment of
the money due has been obtained by the Trustee as provided in Article Five
of the Indenture, the Holders of a majority in aggregate principal amount of
the outstanding Debentures by written notice to the Issuer and the Trustee,
may rescind and annul such declaration and its consequences if:

     (x) the Issuer has paid or deposited with the Trustee a sum sufficient
to pay:

     (A) all Additional Interest on all Debentures,

     (B) the principal of (and premium, if any, on) the Debentures
which has become due otherwise than by such declaration of
acceleration and all interest accrued thereon at the rate or rates
prescribed therefor in the Debentures,

     (C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in the Debentures, and

     (D) all sums paid or advanced by the Trustee hereunder and the
agreed upon compensation and reasonable expenses, disbursements and
advances of the Trustee, its agents and counsel; and

     (y) all Events of Default with respect to the Debentures, other than
the non-payment of the principal of the Debentures which has become due
solely by such declaration of acceleration, have been cured or waived as
provided under Section 5.10 of the Indenture.

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     No such rescission shall affect any subsequent Event of Default or
impair any right consequent thereon.

          (b) The Trustee shall provide to the Holders of the Debentures such notices as it shall from
time to time provide with respect to the Debentures under Section 5.11 of the Indenture. In
addition, the Trustee shall provide to the Holders of the Debentures notice of any Event of Default
or event that, with the giving of notice or lapse of time, or both, would become an Event of
Default with respect to the Debentures within 90 days after the actual knowledge of a Responsible
Officer of the Trustee of such Event of Default or other event. However, except in cases of a
default or an Event of Default in payment on the Debentures, the Trustee will be protected in
withholding the notice if one of its Responsible Officers determines that withholding of the notice
is in the interest of such Holders.

          (c) The Issuer’s failure to pay interest on the Debentures during a Deferral Period in
accordance with Sections 2.05 and 2.06 of this First Supplemental Indenture shall constitute a
default under the Indenture, but in no event shall constitute an Event of Default. Notwithstanding
anything to the contrary in the Indenture or this First Supplemental Indenture, the Trustee shall
have no obligation to exercise any remedies hereunder unless and except to the extent directed in
writing to do so by the Holders of a majority in principal amount of the outstanding Debentures in
accordance with and subject to the conditions set forth in Section 5.8 of the Indenture. The
Trustee may conclusively assume that Sections 2.05 and 2.06 of this First Supplemental Indenture
have been complied with unless the Issuer or the Holders of 25% in aggregate principal amount of
the Debentures have given the Trustee written notice to the contrary.

          (d) For the avoidance of doubt, and without prejudice to any other remedies that may be
available to the Trustee or the Holders of the Debentures under the Indenture, no breach by the
Issuer of any covenant or obligation under the Indenture or the terms of the Debentures or the
terms of this First Supplemental Indenture, including the Issuer’s obligations under Section
2.02(a)(iv), Section 2.05 or Section 2.06, shall be an Event of Default with respect to the
Debentures, other than those specified in this Section 2.07; and except as provided herein and in
the Indenture with respect to Events of Default, and as provided in Section 2.07(c) above, the
Trustee shall be under no duty or obligation to exercise any remedies or otherwise take any action
in respect of any other default that may occur under or in respect of this First Supplemental
Indenture or the Indenture.

Section 2.08. Securities Registrar; Paying Agent; Delegation of Trustee Duties

          (a) The Issuer appoints the Trustee as Securities Registrar and Paying Agent with respect to
the Debentures.

          (b) Notwithstanding any provision contained herein, to the extent permitted by applicable law,
the Trustee may delegate its duty to provide such notices and to perform such other duties as may
be required to be provided or performed by the Trustee under the Indenture, and, to the extent such
obligation has been so delegated, the Trustee shall not be responsible for monitoring the
compliance of, nor be liable for the default or misconduct of, any such designee.

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	Section 2.09.	 	Limitation on Claims in the Event of Bankruptcy, Insolvency or Receivership

     Each Holder, by such Holder’s acceptance of the Debentures, agrees that if a bankruptcy event
of the Issuer shall occur prior to the redemption or repayment of such Debentures, such Holder
shall have no claim for, and thus no right to receive, any deferred interest pursuant to Section
2.05 that has not been paid pursuant to Sections 2.05 and 2.06 to the extent the amount of such
interest exceeds the sum of (x) interest that relates to the earliest two years of the portion of
the Deferral Period for which interest has not been paid and (y) an amount equal to such Holder’s
pro rata share of the excess, if any, of the Preferred Shares Issuance Cap over the aggregate
amount of net proceeds from the sale of Qualifying Non-Cumulative Preferred Shares and unconverted
Mandatorily Convertible Preferred Shares that the Issuer has applied to pay deferred interest
pursuant to the alternative payment mechanism set forth in Section 2.06; provided that each Holder
is deemed to agree that to the extent the claim for deferred interest exceeds the amount set forth
in clause (x), the amount it receives in respect of such excess shall not exceed the amount it
would have received had the claim for such excess ranked pari passu with the interests of the
holders, if any, of Qualifying Non-Cumulative Preferred Shares.

			
	Section 2.10.	 	Location of Payment

     Solely for the purposes of the Debentures, the text of Section 3.1 of the Indenture following
the first sentence thereof shall be deleted and replaced by the following (capitalized terms used
in the following text that are not defined in the Indenture but are defined herein shall have the
meanings ascribed to such terms herein):

     Payment of the principal of (and premium, if any) and interest on the
Debentures will be made at the Paying Agent office, in such coin or currency
of the United States of America as at the time of payment is legal tender
for payment of public and private debts; provided, however, that at the
option of the Issuer payment of interest may be made (i) by check mailed to
the address of the Person entitled thereto as such address shall appear in
the Securities Register or (ii) by wire transfer in immediately available
funds at such place and to such bank account number as may be designated by
the Person entitled thereto as specified in the Securities Register in
writing not less than ten days before the relevant Interest Payment Date.
The office where the Debentures may be presented or surrendered for payment
and the office where the Debentures may be surrendered for transfer or
exchange and where notices and demands to or upon the Issuer in respect of
the Debentures and the Indenture may be served shall be the Paying Agent
office.

			
	Section 2.11.	 	No Sinking Fund

     The Debentures shall not be subject to any sinking fund or analogous provisions.

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Section 2.12. Subordination

     The subordination provisions of Article Thirteen of the Indenture shall apply to the
Debentures.

Section 2.13. Defeasance

     The provisions of Section 10.1(B) of the Indenture (relating to discharge of the Indenture)
shall apply to the Debentures.

ARTICLE THREE

Covenants

Section 3.01. Dividend and Other Payment Stoppages

     So long as any Debentures remain outstanding, if the Issuer has given notice of its election
to defer interest payments on the Debentures but the related Deferral Period has not yet commenced
or a Deferral Period is continuing, the Issuer shall not, and shall not permit any Subsidiary to:

          (a) declare or pay any dividends or other distributions on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any shares of capital stock of the Issuer;

          (b) make any payment of principal of, or interest or premium, if any, on, or repay, purchase
or redeem any of the Issuer’s debt securities that rank upon the Issuer’s liquidation on a parity
with or junior to the Debentures; or

          (c) make any guarantee payments regarding any guarantee issued by the Issuer of securities of
any Subsidiary if the guarantee ranks upon the Issuer’s liquidation on a parity with or junior to
the Debentures;

provided, however, the restrictions in clauses (a), (b) and (c) above do not apply
to:

               (i) any purchase, redemption or other acquisition of shares of its capital stock by the Issuer
in connection with;

     (A) any employment contract, benefit plan or other similar arrangement
with or for the benefit of any one or more of its employees, officers,
directors, consultants or independent contractors;

     (B) the satisfaction of the Issuer’s obligations pursuant to any
contract entered into in the ordinary course of business prior to the
beginning of the applicable Deferral Period;

     (C) a dividend reinvestment or shareholder purchase plan; or

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     (D) the issuance of shares of the Issuer’s capital stock, or securities
convertible into or exercisable for such shares, as consideration in an
acquisition transaction, the definitive agreement for which is entered into
prior to the applicable Deferral Period;

               (ii) any exchange, redemption or conversion of any class or series of the Issuer’s capital
stock, or shares of the capital stock of one of its Subsidiaries, for any other class or series of
the Issuer’s capital stock, or of any class or series of the Issuer’s indebtedness for any class or
series of the Issuer’s capital stock;

               (iii) any purchase of fractional interests in shares of the Issuer’s capital stock pursuant to
the conversion or exchange provisions of such shares or the securities being converted or
exchanged;

               (iv) any declaration of a dividend in connection with any shareholder rights plan, or the
issuance of rights, stock or other property under any shareholder rights plan, or the redemption or
purchase of rights pursuant thereto; or

               (v) any dividend in the form of stock, warrants, options or other rights where the dividend
stock issuable upon exercise of such warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks equally with or junior to such stock;

               (vi) (A) any payment of current or deferred interest on Pari Passu Securities that is made pro
rata to the amounts due on such Pari Passu Securities; provided that such payments are made in
accordance with Section 2.06(c)(ii) to the extent it applies, and (B) any payments of principal or
current or deferred interest on Pari Passu Securities that, if not made, would cause the Issuer to
breach the terms of the instrument governing such Pari Passu Securities; or

               (vii) any payment of principal in respect of Pari Passu Securities having the same scheduled
maturity date as the Debentures, as required under a provision of such other Pari Passu Securities
that is substantially the same as the provisions in Section 2.02(a), and that is made on a pro rata
basis among one or more series of Pari Passu Securities having such a provision and the Debentures.

Section 3.02. Additional Limitation on Deferral Over One Year

     If any Deferral Period lasts longer than one year, the Issuer may not redeem or purchase any
securities of the Issuer that on the Issuer’s bankruptcy or liquidation rank pari passu with or
junior to any of its Qualifying APM Securities the proceeds of which were applied, pursuant to
Section 2.06, to fund deferred interest on the Debentures during the relevant Deferral Period until
the first anniversary of the date on which all deferred interest on the Debentures has been paid.
However, if the Issuer is involved in a Business Combination where immediately after its
consummation more than 50% of the voting shares of the surviving entity of such Business
Combination, or the Person to whom all or substantially all of the Issuer’s properties or assets
are conveyed, transferred or leased in such Business Combination, is owned, directly or indirectly,
by the shareholders of the other party to such Business Combination, then the immediately

-26-

 

preceding sentence shall not apply during the Deferral Period that is terminated on the next
Interest Payment Date following the date of consummation of such Business Combination.

ARTICLE FOUR

Redemption of the Debentures

Section 4.01. Redemption Price

     The Debentures shall be redeemable in accordance with Article Twelve of the Indenture. The
Debentures are redeemable in whole or in part at the option of the Issuer at any time and from time
to time after the date of this First Supplemental Indenture. In the case of any redemption, the
Redemption Price shall be equal to (1) in the case of any redemption on or after June 15, 2017,
100% of the principal amount of the Debentures being redeemed plus accrued and unpaid interest to
the Redemption Date or (2) in the case of any redemption prior to June 15, 2017, the greater of (i)
100% of the principal amount of the Debentures being redeemed plus accrued and unpaid interest to
the Redemption Date and (ii) the Make-Whole Redemption Price (the price set forth in (1) or (2), as
applicable, the “Redemption Price”). If a proposed redemption of Debentures is not to be for all
of the Debentures in whole, the Issuer may not effect such redemption unless at least $25,000,000
aggregate principal amount of the Debentures, excluding any Debentures held by the Issuer or any of
its affiliates, remains outstanding after giving effect to such redemption. The date on which
Debentures are to be redeemed pursuant hereto is referred to as the “Redemption Date”.

Section 4.02. Limitation on Partial Redemption

     Notwithstanding the foregoing, the Issuer may not redeem the Debentures in part if the
principal amount of the Debentures has been accelerated pursuant to Section 5.1 of the Indenture
(as amended by Section 2.07(a) hereof) and such acceleration has not been rescinded. In addition,
the Issuer may not redeem the Debentures in part unless all accrued and unpaid interest, including
deferred interest, has been paid in full on all Outstanding Debentures for all Interest Periods
terminating on or before the Redemption Date.

ARTICLE FIVE

Repayment of Debentures

Section 5.01. Repayments

     The Issuer, not more than 15 nor less than ten Business Days prior to each Repayment Date
(unless a shorter notice shall be satisfactory to the Trustee), shall notify the Trustee of the
principal amount of Debentures to be repaid on such date pursuant to Section 2.02(a).

Section 5.02. Selection of the Debentures to be Repaid

     If less than all the Debentures are to be repaid on any Repayment Date (unless the Debentures
are issued in the form of a Global Security), the particular Debentures to be repaid shall be
selected not more than 60 days prior to such Repayment Date by the Trustee, from the Outstanding
Debentures not previously repaid or called for redemption, by such method as then may be required
by law or if no such legal requirement shall then exist, by lot or such other

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method as the Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of a portion of the principal amount of any Debentures, provided that the
portion of the principal amount of any Debentures not repaid shall be in an authorized denomination
(which shall not be less than the minimum authorized denomination).

     The Trustee shall promptly notify the Issuer in writing of the Debentures selected for partial
repayment and the principal amount thereof to be repaid. For all purposes hereof, unless the
context otherwise requires, all provisions relating to the repayment of Debentures shall relate, in
the case of any Debentures repaid or to be repaid only in part, to the portion of the principal
amount of such Debentures which has been or is to be repaid.

Section 5.03. Notice of Repayment

     Notice of repayment shall be given by first-class mail, postage prepaid, mailed not earlier
than the 60th day, and not later than the 30th day, prior to the Repayment Date, to each
Holder of Debentures to be repaid, at the address of such Holder as it appears in the Security
Register.

     Each notice of repayment shall identify the Debentures to be repaid (including the Debentures’
CUSIP number, if a CUSIP number has been assigned to the Debentures) and shall state:

          (a) the Repayment Date;

          (b) if less than all Outstanding Debentures are to be repaid, the identification (and, in the
case of partial repayment, the respective principal amounts) of the particular Debentures to be
repaid;

          (c) that on the Repayment Date, the principal amount of the Debentures to be repaid will
become due and payable upon each such Debentures or portion thereof, and that interest thereon, if
any, shall cease to accrue on and after said date; and

          (d) the place or places where such Debentures are to be surrendered for payment of the
principal amount thereof.

     Notice of repayment shall be given by the Issuer or, if the Issuer timely notifies the
Trustee, at the Issuer’s request, by the Trustee in the name and at the expense of the Issuer and
shall be irrevocable. The notice, if mailed in the manner herein provided, shall be conclusively
presumed to have been duly given, whether or not the Holders receive such notice. In any case, a
failure to give such notice by mail or any defect in the notice to any Holder of any Debentures
designated for repayment as a whole or in part shall not affect the validity of the proceedings for
the repayment of any other Debentures.

Section 5.04. Deposit of Repayment Amount

     Prior to 11:00 a.m. New York City time on the Repayment Date specified in the notice of
repayment given as provided in Section 5.03, the Issuer will deposit with the Trustee or with one
or more Paying Agents (or if the Issuer is acting as its own Paying Agent, the Issuer will
segregate and hold in trust as provided in Section 3.4 of the Indenture) an amount of money, in

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immediately available funds, sufficient to pay the principal amount of, and any accrued
interest on, all the Debentures which are to be repaid on that date.

Section 5.05. Repayment of Debentures

     If any notice of repayment has been given as provided in Section 5.03, the Debentures or
portion of the Debentures with respect to which such notice has been given shall become due and
payable on the date and at the place or places stated in such notice. On surrender of such
Debentures at a place of payment in said notice specified, the said Debentures or the specified
portions thereof shall be paid by the Issuer at their principal amount, together with accrued
interest to but excluding the Repayment Date; provided that, except in the case of a
repayment in full of all Outstanding Debentures, installments of interest due on or prior to the
Repayment Date will be payable to the Holders of such Debentures, registered as such at the close
of business on the relevant Regular Record Dates according to their terms and the provisions of
Section 3.1 of the Indenture.

     Upon surrender of any Debentures repaid in part only, the Issuer shall execute and the Trustee
shall authenticate and make available for delivery to the Holders thereof, at the expense of the
Issuer, a new Debenture, of authorized denominations, in aggregate principal amount equal to the
portion of the Debentures not repaid and so presented and having the same Scheduled Maturity Date
and other terms. If a Global Security is so surrendered, such new Debentures will be a new Global
Security.

     If any Debentures required to be repaid shall not be so repaid upon surrender thereof, the
principal of such Debentures shall bear interest from the applicable Repayment Date until paid at
the rate prescribed therefor in the Debentures.

ARTICLE SIX

Original Issue of Debentures

Section 6.01. Calculation of Original Issue Discount

     If during any calendar year any original issue discount shall have accrued on the Debentures,
the Issuer shall file with each Paying Agent (including the Trustee if it is a Paying Agent)
promptly at the end of each calendar year (a) a written notice specifying the amount of original
issue discount (including daily rates and accrual periods) accrued on Outstanding Securities as of
the end of such year and (b) such other specific information relating to such original issue
discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to
time.

ARTICLE SEVEN

Supplemental Indentures

Section 7.01. Supplemental Indentures Without Consent of Holders

     Solely for purposes of the Debentures, Section 8.1 of the Indenture shall be deleted and
replaced with the following (capitalized terms used in the following text that are not defined in
the Indenture but are defined herein shall have the meanings ascribed to such terms herein):

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          SECTION 8.1. Supplemental Indentures Without Consent of Holders

     Without the consent of any Holders, the Issuer, when authorized by a
resolution of the Board of Directors, and the Trustee, at any time and from
time to time, may supplement or amend the Indenture and this First
Supplemental Indenture for any of the following purposes:

     (1) to evidence the succession of another Person to the Issuer and the
assumption by any such successor of the covenants of the Issuer herein and
in the Debentures; or

     (2) to add to or modify the covenants of the Issuer for the benefit of
the Holders of Debentures or to surrender any right or power herein
conferred upon the Issuer; provided that no such amendment or modification
may add Events of Default or acceleration events with respect to the
Debentures; or

     (3) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Debentures; or

     (4) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein or in any supplemental indenture, or to make any other provisions
with respect to matters or questions arising under this Indenture, provided
such action shall not adversely affect the interests of the Holders of
Debentures in any material respect; or

     (5) to make any changes to the Indenture or this First Supplemental
Indenture in order to conform the Indenture and this First Supplemental
Indenture to the final prospectus supplement provided to investors in
connection with the offering of the Debentures.

ARTICLE EIGHT

Miscellaneous

Section 8.01. Effectiveness

     This First Supplemental Indenture will become effective upon its execution and delivery.

Section 8.02. Successors and Assigns

     All covenants and agreements in the Indenture, as supplemented and amended by this First
Supplemental Indenture, by the Issuer shall bind its successors and assigns, whether so expressed
or not.

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Section 8.03 Effect of Recitals

     The recitals contained herein and in the Debentures, except the Trustee’s certificates of
authentication, shall be taken as the statements of the Issuer, and the Trustee does not assume any
responsibility for their correctness. The Trustee makes no representations as to the validity or
sufficiency of this First Supplemental Indenture or of the Debentures. The Trustee shall not be
accountable for the use or application by the Issuer of the Debentures or the proceeds thereof.

Section 8.04. Ratification of Indenture

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

Section 8.05. Governing Law

     This First Supplemental Indenture and the Debentures shall be governed by and construed in
accordance with the laws of the State of New York.

Section 8.06. Severability

     If any provision of the Indenture, as supplemented and amended by this First Supplemental
Indenture, shall be held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions herein contained or
render the same invalid, inoperative or unenforceable to any extent whatever.

* * *

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

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     IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be
duly executed as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	[Corporate Seal]	 	THE PROGRESSIVE CORPORATION	 	 
	 	 	 	 	 	 	 	 	 
	Attest:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	By:	 	 

	 	By:	 	 	 
	 	 	 	 	 	 	 	 	 
	Name:

	 	Charles E. Jarrett	 	Name:	 
	 	 	 
	Title:

	 	Vice President, Secretary and Chief Legal Officer	 	Title:
	 		 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 		 	 
	 

	 	 	 	Title:
	 	Authorized Signatory	 	 

 

 

EXHIBIT A

FORM OF DEBENTURES

The Debentures are to be substantially in the following form and shall bear the following legend
and shall include the Trustee’s certificate of authentication in the form required by Section 2.2
of the Indenture:

[If a Global Security:] [THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS
SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF
THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED

IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]

	 	 	 
	No. •

	 	Principal Amount: $•
	Issue Date: •
	 	 

THE PROGRESSIVE CORPORATION

6.70% FIXED-TO-FLOATING RATE

JUNIOR SUBORDINATED DEBENTURES DUE 2067

     The Progressive Corporation, a corporation organized and existing under the laws of the State
of Ohio (hereinafter called the “Issuer”, which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay to • [If Global
Security:] [Cede & Co.,] or registered assigns, the principal sum of • dollars ($•) as may be
revised from time to time on Schedule I hereto on June 15, 2037, or if such day is not a Business
Day, the following Business Day (the “Scheduled Maturity Date”) or any subsequent Interest Payment
Date (as defined in the First Supplemental Indenture) to the extent set forth in the First
Supplemental Indenture. If that amount is not paid in full on the Scheduled Maturity Date or any
subsequent Interest Payment Date, the remaining principal amount will be due and payable on the
Final Maturity Date. The Final Maturity Date will be June 15, 2067, or if such day is not a
Business Day, the following Business Day.

     The Issuer further promises to pay interest on said principal sum from and including June 21,
2007, or from and including the most recent Interest Payment Date on which interest has been paid
or duly provided for, until the principal thereof is paid or made available for payment
semi-annually (subject to deferral as set forth herein) in arrears on June 15 and December 15 of
each year, commencing on December 15, 2007 and ending on June 15, 2017, at the rate of 6.70% per
annum (computed on the basis of a 360-day year consisting of twelve 30-day months), and thereafter
to pay interest on said outstanding principal sum quarterly in arrears on March 15, June 15,
September 15, and December 15 of each year, commencing on September 15, 2017 at a floating annual
rate equal to Three-Month LIBOR (as defined in the First Supplemental Indenture) plus 2.0175%
(computed on the basis of a 360-day year and the actual number of days elapsed in the 360-day
year). Accrued interest that is not paid on the

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applicable Interest Payment
Date, including interest deferred pursuant to Section 2.05 of the First Supplemental
Indenture, will bear Additional Interest, to the extent permitted by law, at the interest rate in
effect from time to time provided in Section 2.04(a) of the First Supplemental Indenture, from the
relevant Interest Payment Date, compounded on each subsequent Interest Payment Date.

     In the event that any Semi-Annual Interest Payment Date on which interest is payable on this
Security is not a Business Day, then payment of the interest payable on such date will be made on
the immediately succeeding day that is a Business Day (and, in the case of payments on or prior to
June 15, 2017, without any interest or other payment in respect of any such delay) with the same
force and effect as if made on the date the payment was originally payable. In the event that any
Quarterly Interest Payment Date on which interest is payable on this Security is not a Business
Day, then payment of the interest payable on such date shall be postponed to the immediately
succeeding day that is a Business Day, provided that if such Business Day is in the
immediately succeeding calendar month, such Interest Payment Date shall be the immediately
preceding Business Day, and interest will accrue to but excluding the date on which the interest is
actually paid. A “Business Day” shall mean any day other than (i) a Saturday or Sunday, (ii) 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 (iii) on or after June 15, 2017, a day that is not a London
Banking Day. “London Banking Day” means any day on which commercial banks are open for general
business (including dealings in deposits in U.S. dollars) in London, England. The interest
installment so payable, and punctually paid or duly provided for, on any Interest Payment Date, as
provided in the Indenture, will 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 June 1 or December 1, as the case may be, immediately
preceding such Interest Payment Date until June 15, 2017 (whether or not a Business Day), and shall
be March 1, June 1, September 1 and December 1, as the case may be, immediately preceding the
relevant Interest Payment Date after June 15, 2017. Any such interest installment not so
punctually paid or duly provided for (other than interest deferred in accordance with the next
paragraph) 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 Additional
Interest on such date to be fixed by the Trustee (the “Special Record Date”), notice whereof shall
be given to Holders of Securities of this series not less than ten 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.

     The Issuer shall have the right at any time or from time to time during the term of this
Security to defer payment of interest on this Security for one or more consecutive Interest Periods
(each a “Deferral Period”) that do not exceed ten years for the applicable Deferral Period, during
which Deferral Periods the Issuer shall have the right, subject to Sections 2.05 and 2.06 of the
First Supplemental Indenture, to make partial payments of interest on any Interest Payment Date,
and at the end of which the Issuer shall pay all interest then accrued and unpaid;
provided, however, that no Deferral Period shall extend beyond the Final Maturity
Date or the earlier repayment or redemption in full of the Securities. Upon the termination of any
Deferral

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Period and upon the payment of all deferred interest then due, the Issuer may elect to
begin a
new Deferral
Period, subject to the above requirements. Except as provided in Section 2.06 of
the First Supplemental Indenture, no interest shall be due and payable during a Deferral Period
except at the end thereof.

     So long as any Securities remain outstanding, if the Issuer has given notice of its election
to defer interest payments on the Securities but the related Deferral Period has not yet commenced
or a Deferral Period is continuing, the Issuer shall not, and shall not permit any Subsidiary to,
(i) declare or pay any dividends or other distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any shares of the Issuer’s capital stock, (ii) make any
payment of principal of, or interest or premium, if any, on or repay, purchase or redeem any debt
securities of the Issuer that rank upon the Issuer’s liquidation on a parity with this Security
(including this Security, the “Pari Passu Securities”) or junior to this Security or (iii) make any
guarantee payments regarding any guarantee issued by the Issuer of securities of any Subsidiary if
the guarantee ranks upon the Issuer’s liquidation on a parity with or junior to this Security
(other than (a) any purchase, redemption or other acquisition of shares of its capital stock by the
Issuer in connection with (1) any employment contract, benefit plan or other similar arrangement
with or for the benefit of any one or more of its employees, officers, directors, consultants or
independent contractors, (2) the satisfaction of the Issuer’s obligations pursuant to any contract
entered into in the ordinary course of business prior to the beginning of the applicable Deferral
Period, (3) a dividend reinvestment or shareholder purchase plan, or (4) the issuance of shares of
the Issuer’s capital stock, or securities convertible into or exercisable for such shares, as
consideration in an acquisition transaction entered into prior to the applicable Deferral Period,
(b) any exchange, redemption or conversion of any class or series of the Issuer’s capital stock, or
the capital stock of one of its Subsidiaries, for any other class or series of its capital stock,
or of any class or series of its indebtedness for any class or series of its capital stock, (c) any
purchase of fractional interests in shares of the Issuer’s capital stock pursuant to the conversion
or exchange provisions of such shares or the securities being converted or exchanged, (d) any
declaration of a dividend in connection with any shareholder rights plan, or the issuance of
rights, stock or other property under any shareholder rights plan, or the redemption or purchase of
rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights
where the dividend stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks equally with or junior to such
stock, (f) (1) any payment of current or deferred interest on Pari Passu Securities that is made
pro rata to the amounts due on such Pari Passu Securities (including the this Security); provided
that such payments are made in accordance with Section 2.06(c)(ii) of the First Supplemental
Indenture to the extent it applies, and (2) any payments of principal or current or deferred
interest on Pari Passu Securities that, if not made, would cause the Issuer to breach the terms of
the instrument governing such Pari Passu Securities; or (g) any payment of principal in respect of
Pari Passu Securities having the same scheduled maturity date as this Security, as required under a
provision of such other Pari Passu Securities that is substantially the same as the provisions in
Section 2.02(a) of the First Supplemental Indenture, and that is made on a pro rata basis among one
or more series of Pari Passu Securities (including this Security) having such a provision. In
addition, if any Deferral Period lasts longer than one year, the Issuer may not redeem or purchase
any securities of the Issuer that on the Issuer’s bankruptcy or liquidation rank pari passu or
junior to any of its Qualifying APM Securities the proceeds of which were used to settle deferred
interest on the

A-3 

 

Debentures during the relevant Deferral Period until the first anniversary of the
date on which all deferred interest on this
Security has been paid. However, if the Issuer is involved in a Business Combination where
immediately after its consummation more than 50% of the voting shares of the surviving entity of
such Business Combination, or the Person to whom all or substantially all of the Issuer’s
properties or assets are conveyed, transferred or leased in such Business Combination, is owned,
directly or indirectly, by the shareholders of the other party to such Business Combination, then
the immediately preceding sentence will not apply during the Deferral Period that is terminated on
the next Interest Payment Date following the date of consummation of such Business Combination.

     The Issuer shall give written notice of its election to commence or continue any Deferral
Period to the Trustee and the Holders of all Securities then Outstanding at least one Business Day
and not more than 60 Business Days before the next Interest Payment Date. Such notice shall be
given to the Trustee and each Holder of this Security at such Holder’s address appearing in the
Security Register by first-class mail, postage prepaid.

     Payment of the principal of (and premium, if any) and interest on this Security will be made
at the paying agency office or agency of the Issuer maintained for that purpose in the United
States, in such coin or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that, at the
option of the Issuer, payment of interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire
transfer in immediately available funds at such place and to such bank account number as may be
designated by the Person entitled thereto as specified in the Securities Register in writing not
less than ten days before the relevant Interest Payment Date.

     The indebtedness evidenced by this Security is, to the extent provided in the Indenture,
subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness,
and this 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 such Holder’s behalf to take such actions as
may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the
Trustee such Holder’s attorney-in-fact for any and all such purposes. Each Holder hereof, by such
Holder’s acceptance hereof, 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 Issuer and, by acceptance of this Security or a beneficial interest in this Security, each
Holder hereof and any person acquiring a beneficial interest herein, agree that for United States
federal, state and local tax purposes, it is intended that this Security constitute indebtedness.

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

A-4 

 

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

A-5 

 

     IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

	 	 	 	 	 	 	 	 
	[Corporate Seal]	 	THE PROGRESSIVE CORPORATION

 
	Attest:	 	 	 	By:  	 	 
	Name:	 	 	 	 	Name:  	 	 
	Title:	 	 	 	 	Title:  	 	 
	 	 	 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

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

	 	 	 	 	 
	 	THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

 	 
	Dated:                                         	By:  	

 	 
	 	 	Name:
Title:      Authorized Signatory 	 
	 	 	 	 
	 

A-6 

 

(FORM OF REVERSE OF DEBENTURES)

     This Security is one of a duly authorized issue of securities of the Issuer (herein called the
"Securities”), issued and to be issued in one or more series under the Junior Subordinated
Indenture, dated as of June 21, 2007 (herein called the “Base Indenture”), between the Issuer and
The Bank of New York Trust Company, N.A., as trustee (the “Trustee”), as amended and supplemented
by the First Supplemental Indenture, dated as of June 21, 2007, between the Issuer and the Trustee
(the “First Supplemental Indenture”, and together with the Base Indenture, the “Indenture”), to
which Indenture and all other indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities thereunder of the
Trustee, the Issuer and the Holders of the Securities, and of the terms upon which the Securities
are, and are to be, authenticated and delivered. By the terms of the Indenture, the Securities are
issuable in series that may vary as to amount, date of maturity, rate of interest, rank and in any
other respect provided in the Indenture.

     All terms used in this Security that are defined in the Indenture shall have the meanings
assigned to them in the Indenture.

     The Securities shall be redeemable at the option of the Issuer in accordance with the terms of
the Indenture. The Securities are redeemable in whole or in part at the option of the Issuer at
any time after the date hereof. In the case of any redemption, the Redemption Price shall be equal
to (1) in the case of any redemption on or after June 15, 2017, 100% of the principal amount of the
Securities being redeemed plus accrued and unpaid interest to the Redemption Date or (2) in the
case of any redemption prior to June 15, 2017, the greater of (i) 100% of the principal amount plus
accrued and unpaid interest to the Redemption Date, and (ii) the Make-Whole Redemption Price. If
the Securities are not redeemed in whole, the Issuer may not effect such redemption unless at least
$25 million aggregate principal amount of the Securities, excluding any Securities held by the
Issuer or any of its affiliates, remains outstanding after giving effect to such redemption.

     Notwithstanding the foregoing, the Issuer may not redeem the Securities in part if the
principal amount of the Securities has been accelerated pursuant to Section 5.1 of the Base
Indenture (as amended by Section 2.07(a) of the First Supplemental Indenture) and such acceleration
has not been rescinded. In addition, the Issuer may not redeem the Securities in part unless all
accrued and unpaid interest, including deferred interest, has been paid in full on all Outstanding
Securities for all Interest Periods terminating on or before the Redemption Date.

     No sinking fund is provided for the Securities.

     The Indenture contains provisions for satisfaction and discharge of the entire indebtedness of
this Security upon compliance by the Issuer with certain conditions set forth in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the Issuer and the Trustee
at any time to enter into a supplemental indenture or indentures for the purpose of modifying in
any manner the rights and obligations of the Issuer and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the

A-7 

 

Outstanding Securities to be affected by such supplemental indenture. The Indenture also
contains provisions permitting Holders of specified percentages in principal amount of the
Securities at the time Outstanding, on behalf of the Holders of all Securities, to waive compliance
by the Issuer with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

     As provided in and subject to the provisions of the Indenture, (i) if an Event of Default
(other than an Event of Default relating to certain insolvency events, as set forth in the
Indenture) with respect to the Securities at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the entire principal amount and all accrued but unpaid interest
of all the Securities to be due and payable immediately, by a notice in writing to the Issuer (and
to the Trustee if given by Holders), and (ii) if an Event of Default relating to insolvency events
as set forth in the Indenture occurs, the principal amount of the Securities shall automatically
become due and payable; provided that in any such case the payment of principal and
interest (including any Additional Interest) on such Securities shall remain subordinated to the
extent provided in Article Eleven of the Indenture.

     The Holder of this Security, by such Holder’s acceptance hereof, agrees that if a bankruptcy
event of the Issuer shall occur prior to the redemption or repayment of such Securities, such
Holder shall have no claim for, and thus no right to receive, any deferred interest pursuant to
Section 2.05 that has not been paid pursuant to Sections 2.05 and 2.06 to the extent the amount of
such interest exceeds the sum of (x) interest that relates to the earliest two years of the portion
of the Deferral Period for which interest has not been paid and (y) an amount equal to such
Holder’s pro rata share of the excess, if any, of the Preferred Shares Issuance Cap over the
aggregate amount of net proceeds from the sale of Qualifying Non-Cumulative Preferred Shares and
unconverted Mandatorily Convertible Preferred Shares that has been applied to fund deferred
interest pursuant to the alternative payment mechanism set forth in Section 2.06; provided that
each Holder is deemed to agree that to the extent the remaining claim exceeds the amount set forth
in clause (x), the amount it receives in respect of such excess shall not exceed the amount it
would have received had the claim for such excess ranked pari passu with the interests of the
holders, if any, of Qualifying Non-Cumulative Preferred Shares.

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

     As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Securities Register, upon surrender of this
Security for registration of transfer at the office or agency of the Issuer maintained under
Section 3.2 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Issuer and the Securities Registrar duly executed by, the Holder hereof
or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized

A-8 

 

denominations and for the same aggregate principal amount, will be issued to the designated
transferee or transferees. No service charge shall be made for any such registration of transfer
or exchange, but the Issuer 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 Issuer, the
Trustee and any agent of the Issuer or the Trustee shall have the right to treat and shall treat
the Person in whose name this Security is registered as the owner hereof for all purposes, whether
or not this Security be overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.

     The Securities are issuable only in registered form without coupons in minimum denominations
of $1,000 and any integral multiples of $1,000 in excess thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate
principal amount of Securities of a different authorized denomination, as requested by the Holder
surrendering the same.

     The Issuer and, by its acceptance of this Security or a beneficial interest therein, the
Holder of, and any Person that acquires a beneficial interest in, this Security agree to treat for
United States Federal income tax purposes (i) the Securities as indebtedness of the Issuer, and
(ii) the stated interest on the Securities as ordinary interest income that is includible in the
Holder’s or beneficial owner’s gross income at the time the interest is paid or accrued in
accordance with the Holder’s or beneficial owner’s regular method of tax accounting, and otherwise
to treat the Securities as described in the final prospectus supplement provided to investors in
connection with the offering of the Securities.

     THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.

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

A-9 

 

ASSIGNMENT

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

 

 

 

(Insert assignee’s social security or tax identification number)

 

 

(Insert address and zip code of assignee)

agent to transfer this Security on the books of the Securities Registrar. The agent may substitute
another to act for him or her.

	 	 	 
	Dated:

	 	Signature:
	 
	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	Signature Guarantee:
	 
	 	 
	 
	 	 
	 

	 	 

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

     Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements
of the Securities Registrar, which requirements include membership or participation in the Security
Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be
determined by the Securities Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.

A-10 

 

SCHEDULE I

SCHEDULE OF PRINCIPAL AMOUNT REDUCTIONS

     Principal amount of Debentures outstanding represented by this Security as of      ,     :     .

     Thereafter, the following decreases have been made:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date of Repayment,	 	Principal Amount	 	 	 	 	 	Notation Made by or
	Redemption	 	Repaid, Redeemed	 	Principal Amount	 	on Behalf of the
	or Purchase	 	or Purchased	 	Remaining	 	Trustee
	 
	 	$	 	 	 	$	 	 	 	 	 	 

-1-EX-4.4

 

Exhibit 4.4

REPLACEMENT CAPITAL COVENANT

     REPLACEMENT CAPITAL COVENANT, dated as of •, 2007 (this “Replacement Capital Covenant”),
by The Progressive Corporation, an Ohio corporation (together with its successors and assigns, the
“Corporation”), in favor of and for the benefit of each Covered Debtholder (as defined below).

RECITALS

     A. On
the date hereof, the Corporation is issuing $1,000,000,000 aggregate
principal amount of its 6.70%
Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “Debentures”).

     B. This Replacement Capital Covenant is the “Replacement Capital Covenant” referred to in the
Corporation’s Prospectus Supplement, dated June 18, 2007,
to the Corporation’s prospectus, dated June 18, 2007,
included in the registration statement on Form S-3 (File No. 333-143824), relating to the Debentures.

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

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

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

SECTION 1. Definitions

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

SECTION 2. Limitations on Repayment, Redemption and Purchase of Debentures

     The Corporation hereby promises and covenants to and for the benefit of each Covered
Debtholder that the Corporation shall not repay, redeem or purchase, nor shall any Subsidiary of
the Corporation purchase, any of the Debentures prior to the Termination Date except to the extent
that the principal amount repaid or the applicable redemption or purchase price does not exceed the
sum of the Applicable Percentages of the following amounts:

     (i) the aggregate amount of net cash proceeds received by the Corporation and its
Subsidiaries since the most recent Measurement Date (without double counting proceeds received
in any prior Measurement Period) from the sale of Replacement Capital Securities, plus

     (ii) (A) the aggregate amount of net cash proceeds received by the Corporation and its
Subsidiaries from the sale of Common Shares and Qualifying Warrants and (B) the Current Stock
Market Price of any Common Shares that the Corporation and its Subsidiaries have issued
(determined as of the date of issuance) in connection with the conversion of any convertible
or

 

 

exchangeable securities, other than securities for which the Corporation or any of its
Subsidiaries has received equity credit from any NRSRO, in each case since the most recent
Measurement Date (without double counting proceeds received in any prior Measurement Period),

in each case to Persons other than the Corporation and its Subsidiaries. For purposes of this
Replacement Capital Covenant, the terms “repay” and “repayment” include the defeasance by the
Corporation of the Debentures as well as the satisfaction and discharge of its obligations under
the Indenture with respect to the Debentures.

SECTION 3. Covered Debt

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

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

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

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

     (iii) if the Corporation has more than one outstanding series of long-term indebtedness
for money borrowed that is Eligible Debt, then the Corporation shall identify the series that
has the latest 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 excluding the Redesignation Date as of which a new
series of outstanding long-term indebtedness for money borrowed is next determined to be the
Covered Debt pursuant to the procedures set forth in this Section 3(b); and

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

     (c) Notice. In order to give effect to the intent of the Corporation described in Recital C,
the Corporation covenants that (i) simultaneously with the execution of this Replacement Capital
Covenant or as soon as practicable after the date hereof, it shall (x) give notice to the Holders
of the Initial Covered Debt, in the manner provided in the indenture relating to the Initial
Covered Debt, of this Replacement Capital Covenant and the rights granted to such Holders hereunder
and (y) file a copy of this Replacement Capital Covenant with the Commission as an exhibit to a
Form 8-K under the Securities Exchange Act; (ii) so long as the Corporation is a reporting company
under the Securities Exchange Act, the Corporation shall include in each annual report 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

- 2 -

 

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 Corporation’s long-term indebtedness for money
borrowed (1) becomes Covered Debt or (2) ceases to be Covered Debt, the Corporation shall give
notice 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, fiscal agency agreement or other instrument
under which such long-term indebtedness for money borrowed was issued and report such change in a
current report on Form 8-K including or incorporating by reference this Replacement Capital
Covenant, and in the Corporation’s next annual report on Form 10-K, as applicable; (iv) if, and
only if, the Corporation ceases to be a reporting company under the Securities Exchange Act, the
Corporation shall (x) 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 (y)
cause a notice of the execution of this Replacement Capital Covenant to be posted on the Bloomberg
screen for the Covered Debt or any successor Bloomberg screen and each similar third-party vendor’s
screen the Corporation reasonably believes is appropriate (each an “Investor Screen”) and cause a
hyperlink to a definitive copy of this Replacement Capital Covenant to be included on the Investor
Screen for each series of Covered Debt, in each case to the extent permitted by Bloomberg or such
similar third-party vendor, as the case may be; and (v) promptly upon request by any Holder of
Covered Debt, the Corporation shall provide such Holder with a copy of this Replacement Capital
Covenant as executed.

     (d) The Corporation agrees that, if at any time the Covered Debt is held by a trust (for
example, where the Covered Debt is part of an issuance of trust preferred securities), a holder of
the securities issued by such trust may enforce (including by instituting legal proceedings) this
Replacement Capital Covenant directly against the Corporation as though such holder owned Covered
Debt directly, and such holder shall be deemed to be a holder of “Covered Debt” for purposes of
this Replacement Capital Covenant for so long as the indebtedness held by such trust remains
Covered Debt hereunder.

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)
the date, if any, on which the Holders of a majority in 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, (ii) the date on which the Corporation
ceases to have 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), (iii) June 15, 2047 or, if earlier, the date on which the Debentures are otherwise
repaid, redeemed or purchased in full in accordance with this Replacement Capital Covenant, and
(iv) the date on which the Debentures become accelerated due to the occurrence of an event of
default. From and after the Termination Date, the obligations of the Corporation pursuant to this
Replacement Capital Covenant shall be of no further force and effect.

     (b) This Replacement Capital Covenant may be amended or supplemented from time to time by a
written instrument signed by the Corporation with the consent of the Holders of a majority in
principal amount of the then-effective series of Covered Debt, provided that this Replacement
Capital Covenant may be amended or supplemented from time to time by a written instrument signed
only by the Corporation (and without the consent of any Covered Debtholder) if (i) such amendment
or supplement eliminates Common Shares, Qualifying Warrants, Mandatorily Convertible Preferred
Shares and/or Debt Exchangeable for Common Equity as a Replacement Capital Security and, in the
case of this clause (i), after the date of this Replacement Capital Covenant, an accounting
standard or interpretive guidance of an existing accounting standard issued by an organization or
regulator that has responsibility for establishing or interpreting accounting standards in the
United States becomes effective such that there is more than an

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insubstantial risk that failure to eliminate Common Shares, Qualifying Warrants, Mandatorily
Convertible Preferred Shares and/or Debt Exchangeable for Common Equity as a Replacement Capital
Security would result in a reduction in the Corporation’s earnings per share as calculated in
accordance with generally accepted accounting principles in the United States, (ii) such amendment
or supplement is not adverse to the Holders of the then-effective series of Covered Debt and an
officer of the Corporation has delivered to the Holders of the then-effective series of Covered
Debt in the manner provided for in the indenture, fiscal agency agreement 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 Holders of the then-effective series of Covered Debt,
or (iii) the effect of such amendment or supplement is solely to impose additional restrictions on,
or eliminate (subject to clause (i) in the circumstances where it applies) certain of, the types of
securities qualifying as Replacement Capital Securities, and an officer of the Corporation has
delivered to the Holders of the then-effective series of Covered Debt in the manner provided for in
the indenture, fiscal agency agreement or other instrument with respect to such Covered Debt a
written certificate to that effect.

     (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 its successors
and assigns and shall inure to the benefit of the Covered Debtholders as they exist from
time-to-time (it being understood and agreed by the Corporation that any Person who is a Covered
Debtholder 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
an action, 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).

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

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The Progressive Corporation

6300 Wilson Mills Road

Mayfield Village, Ohio 44143

Attention: Treasurer

[Remainder of Page Intentionally Left Blank]

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

	 	 	 	 	 
	 	THE PROGRESSIVE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

Schedule I

SCHEDULE I

DEFINITIONS

     “Alternative Payment Mechanism” means, with respect to any Qualifying Capital Securities,
provisions in the related transaction documents permitting the Corporation, in its sole discretion,
to defer or skip in whole or in part payment of Distributions on such Qualifying Capital Securities
for one or more consecutive Distribution Periods not to exceed ten years and requiring the
Corporation to issue (or use Commercially Reasonable Efforts to issue) one or more types of APM
Qualifying Securities raising eligible proceeds at least equal to the deferred Distributions on
such Qualifying Capital Securities and apply the proceeds to pay unpaid Distributions on such
Qualifying Capital Securities, commencing on the earlier of (x) the first Distribution Date after
commencement of a deferral period on which the Corporation pays current Distributions on such
Qualifying Capital Securities and (y) the fifth anniversary of the commencement of such deferral
period, and that:

     (i) 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 of the relevant securities, where applicable, and
including the fair market value of property received by the Corporation or any of its Subsidiaries
as consideration for such APM Qualifying Securities) that the Corporation has received during the
180 days prior to the related Distribution Date from the issuance of APM Qualifying Securities, up
to the Preferred Cap in the case of APM Qualifying Securities that are Qualifying Non-Cumulative
Preferred Shares or Mandatorily Convertible Preferred Shares;

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

     (iii) if deferral of Distributions continues for more than one year (or such shorter period as
provided for in the terms of such securities), require the Corporation and its Subsidiaries not to
repay, redeem or purchase any of its securities ranking junior to or pari passu with any APM
Qualifying Securities on a bankruptcy or liquidation of the Corporation the proceeds of which were
used to settle deferred interest during the relevant deferral period until at least one year after
all deferred Distributions have been paid (a “Repurchase Restriction”), other than the following
(none of which shall be restricted or prohibited by a Repurchase Restriction):

     (A) purchases of such securities by the Corporation’s Subsidiaries in connection
with the distribution thereof or market-making or other secondary-market activities;

     (B) purchases, redemptions or other acquisitions of Common Shares in connection
with any employment contract, benefit plan or other similar arrangement with or for
the benefit of employees, officers, directors or consultants; or

     (C) purchases of Common Shares pursuant to a contractually binding requirement
to buy Common Shares entered into prior to the beginning of the

I-1 

 

related deferral period, including under a contractually binding stock
repurchase plan;

     (iv) may include a provision that, notwithstanding the Common Cap and the Preferred Cap, for
purposes of paying deferred Distributions, limits the Corporation’s ability to sell Common Shares,
Qualifying Warrants or Mandatorily Convertible Preferred Shares above the Share Cap;

     (v) in the case of Qualifying Capital Securities other than Qualifying Non-Cumulative
Preferred Shares, include a Bankruptcy Claim Limitation Provision;

     (vi) permit the Corporation, at its option, to provide that if it is involved in a merger,
consolidation, amalgamation, binding share exchange or conveyance, transfer or lease of assets
substantially as an entirety to any other person or a similar transaction (a “Business
Combination”) where immediately after the consummation of the Business Combination more than 50% of
the voting stock of the surviving entity of the Business Combination or the Person to whom all or
substantially all of the Corporation’s assets have been transferred, conveyed or leased is owned,
directly or indirectly, by the shareholders of the other party to the Business Combination, then
clauses (i) through (iii) of this definition will not apply to any deferral period that is
terminated on the next Distribution Date following the date of the Business Combination;

     (vii) limit the obligation of the Corporation to issue (or use Commercially Reasonable Efforts
to issue) APM Qualifying Securities that are Common Shares and Qualifying Warrants to settle
deferred Distributions pursuant to the Alternative Payment Mechanism either (A) during the first
five years of any deferral period or (B) before an anniversary of the commencement of any deferral
period that is not earlier than the fifth such anniversary and not later than the ninth such
anniversary (as designated in the terms of such Qualifying Capital Securities) with respect to
deferred Distributions attributable to the first five years of such deferral period, either:

     (X) to an aggregate amount of such securities, the net proceeds from the issuance of
which is equal to 2% of the product of the average of the Current Stock Market Price of the
Common Shares on the ten consecutive trading days ending on the fourth trading day
immediately preceding the date of issuance multiplied by the total number of issued and
outstanding Common Shares as of the date of the Corporation’s most recent publicly
available consolidated financial statements; or

     (Y) to a number of Common Shares and Qualifying Warrants, in the aggregate, not in
excess of 2% of the outstanding number of Common Shares (such limitation set forth in (X)
or (Y), the “Common Cap”); and

     (viii) limit the right of the Corporation to issue APM Qualifying Securities that are
Qualifying Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares to settle
deferred Distributions pursuant to the Alternative Payment Mechanism to an aggregate amount of
Qualifying Non-Cumulative Preferred Shares and still-outstanding Mandatorily Convertible Preferred
Shares, the net proceeds from the issuance of which with respect to all deferral periods is equal
to 25% of the liquidation or principal amount of such Qualifying Capital Securities (the “Preferred
Cap”);

     provided (and it being understood) that:

I-2 

 

               (A) the Corporation shall not be obligated to issue (or use Commercially Reasonable
Efforts to issue) APM Qualifying Securities for so long as a Market Disruption Event has
occurred and is continuing;

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

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

     (i) Common Shares;

     (ii) Qualifying Warrants;

     (iii) Qualifying Non-Cumulative Preferred Shares; or

     (iv) Mandatorily Convertible Preferred Shares;

provided (and it being understood) that (i) if the APM Qualifying Securities for any Alternative
Payment Mechanism or Mandatory Trigger Provision include both Common
Shares and
Qualifying Warrants, such Alternative Payment Mechanism or Mandatory Trigger Provision may permit,
but need not require, the Corporation to issue Qualifying Warrants and (ii) such Alternative
Payment Mechanism or Mandatory Trigger Provision may permit, but need not require, the Corporation
to issue Mandatorily Convertible Preferred Shares.

     “Applicable Percentage” means:

     (i) in the case of any Common Shares or Qualifying Warrants, (a) 133% with respect to any
repayment, redemption or purchase prior to June 15, 2017, (b) 200% with respect to any repayment,
redemption or purchase on or after June 15, 2017 and prior to June 15, 2037 and (c) 400% with
respect to any repayment, redemption or purchase on or after June 15, 2037;

     (ii) in the case of any Mandatorily Convertible Preferred Shares, Debt Exchangeable for Common
Equity, Debt Exchangeable for Preferred Equity or any Qualifying Capital Securities described in
clause (i) of the definition of such term, (a) 100% with respect to any

I-3 

 

repayment, redemption or purchase prior to June 15, 2037 and (b) 300% with respect to any
repayment, redemption or purchase on or after June 15, 2037;

     (iii) in the case of any Qualifying Capital Securities described in clause (ii) of the
definition of such term, (a) 100% with respect to any repayment, redemption or purchase prior to
June 15, 2037 and (b) 200% with respect to any repayment, redemption or purchase on or after June
15, 2037; and

     (iv) in the case of any Qualifying Capital Securities described in clause (iii) of the
definition of such term, 100%.

     “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 securities to Distributions that accumulate during (A) any
deferral period, in the case of 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 securities that have a Mandatory
Trigger Provision, to:

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

     (ii) in the case of any other Qualifying Capital Securities, an amount not in excess of the
sum of (x) the first two years of accumulated and unpaid Distributions 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 Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares that is
still outstanding 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 Qualifying
Capital Securities are deemed to agree that, to the extent the remaining claim exceeds the amount
set forth in clause (x), the amount they receive in respect of such excess shall not exceed the
amount they would have received the claim for such excess ranked pari passu with the interests of
the holders, if any, of Qualifying Non-Cumulative Preferred Shares.

     “Business Combination” has the meaning specified in clause (vi) of the definition of
Alternative Payment Mechanism.

     “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.

     “Commercially Reasonable Efforts” means, for purposes of selling APM Qualifying Securities,
commercially reasonable efforts to complete the offer and sale of APM Qualifying Securities to
third parties that are not Subsidiaries of the Corporation in public offerings or private
placements. The Corporation shall not be considered to have made Commercially

I-4 

 

Reasonable Efforts to effect a sale of APM Qualifying Securities if it determines not to
pursue or complete such sale due to pricing, coupon, dividend rate or dilution considerations.

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

     “Common Cap” has the meaning specified in clause (vii) of the definition of Alternative
Payment Mechanism.

     “Common Shares” means (i) common shares of the Corporation, including common shares issued
pursuant to any dividend reinvestment plan or employee benefit plan of the Corporation, (ii) a
security of the Corporation, ranking upon the Corporation’s liquidation, dissolution or winding up
junior to its Qualifying Non-Cumulative Preferred Shares and pari passu with its Common Shares,
that tracks the performance of, or relates to the results of, a business, unit or division of the
Corporation, and (iii) any securities issued in exchange for the securities described in clause (i)
or (ii) above in connection with a Business Combination.

     “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 excluding the first Redesignation Date, the Initial Covered Debt and (b) thereafter, commencing
with each Redesignation Date and continuing to but excluding 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 to the extent that that Person holds (whether as a
Holder or a beneficial owner holding through a participant in a clearing agency) long-term
indebtedness for money borrowed of the Corporation during the period that such long-term
indebtedness for money borrowed is Covered Debt.

     “Current Stock Market Price” means, with respect to the Common Shares on any date, (i) the
closing sale price per share (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, (ii)
if the Common Shares are not then listed on the New York Stock Exchange, as reported by the
principal U.S. securities exchange on which the Common Shares are traded or quoted on the relevant
date or, (iii) if the Common Shares are not listed on any U.S. securities exchange on the relevant
date, the last quoted bid price for the Common Shares in the over-the-counter market on the
relevant date as reported by the National Quotation Bureau or similar organization, or (iv) if the
Common Shares are not so quoted, the average of the mid-point of the last bid and ask prices for
the Common Shares on the relevant date from each of at least three nationally recognized
independent investment banking firms selected by the Corporation for this purpose.

     “Debentures” has the meaning specified in Recital A.

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

     (i) gives the holder a beneficial interest in (a) subordinated debt securities of the
Corporation that are not redeemable prior to the settlement date of a related stock purchase
contract and (b) a fractional interest in the related stock purchase contract for a Common Share
that will be settled in three years or less, with the number of Common Shares purchasable

I-5 

 

pursuant to such stock purchase contract to be within a range established at the time of
issuance of such subordinated debt securities and having customary anti-dilution provisions;

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

     (iii) includes a remarketing feature pursuant to which such subordinated debt securities are
remarketed to new investors commencing not later than the last Distribution Date that is at least
one month prior to the settlement date of the stock purchase contract; and

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

     (i) gives the holder a beneficial interest in (a) subordinated debt securities of the
Corporation or one of its Subsidiaries (in this definition, the “issuer”) that include a provision
permitting the issuer to defer Distributions in whole or in part on such securities for one or more
Distribution Periods of up to at least seven years without any remedies other than Permitted
Remedies and that are the most junior subordinated debt of the issuer (or rank pari passu with the
most junior subordinated debt of the issuer) and (b) an interest in a stock purchase contract that
obligates the holder to acquire a beneficial interest in the Company’s Qualifying Non-Cumulative
Preferred Shares;

     (ii) provides that the holders directly or indirectly grant to the Corporation a security
interest in such subordinated debt securities and their proceeds (including any substitute
collateral permitted under the transaction documents) to secure the investors’ direct or indirect
obligation to purchase Qualifying Non-Cumulative Preferred Shares pursuant to such stock purchase
contracts;

     (iii) includes a remarketing feature pursuant to which such subordinated debt securities are
remarketed to new investors commencing not later than the first Distribution Date that is at least
five years after the date of issuance of such securities or earlier in the event of an early
settlement event based on (a) the dissolution of the issuer of such Debt Exchangeable for Preferred
Equity or (b) one or more financial tests set forth in the terms of the instrument governing such
Debt Exchangeable for Preferred Equity;

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

I-6 

 

     (v) includes a Qualifying Replacement Capital Covenant that will apply to such securities and
to any Qualifying Non-Cumulative Preferred Shares issued pursuant to the stock purchase contracts;
provided that such Qualifying Replacement Capital Covenant will not include Debt Exchangeable for
Common Equity or Debt Exchangeable for Preferred Equity as “Replacement Capital Securities”; and

     (vi) if applicable, after the issuance of such Qualifying Non-Cumulative Preferred Shares,
provides the holders with a beneficial interest in such Qualifying Non-Cumulative Preferred Shares.

     “Distribution Date” means, as to any Qualifying Capital Securities, Debt Exchangeable for
Common Equity or Debt Exchangeable for Preferred Equity, the dates on which Distributions on such
securities are scheduled to be made.

     “Distribution Period” means, as to any Qualifying Capital Securities, Debt Exchangeable for
Common Equity or Debt Exchangeable for Preferred Equity, each period from and including a
Distribution Date for such securities to but excluding the next succeeding Distribution Date for
such securities.

     “Distribution Rate Step-Up” means, as to any Qualifying Capital Securities, Debt Exchangeable
for Common Equity or Debt Exchangeable for Preferred Equity, that the rate at which Distributions
accrue or are paid on such securities increases over time (including by an increase in the fixed
rate of Distributions in the case of securities that accrue and pay Distributions at a fixed rate
or by an increase in the margin above the applicable index in the case of securities that accrue
and pay Distributions based upon a margin above an index, but not including an increase in the rate
of Distributions merely because the index used in calculating such rate increases).

     “Distributions” means, as to any Qualifying Capital Securities, Debt Exchangeable for Common
Equity or Debt Exchangeable for Preferred Equity, dividends, interest 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, and (d) was
issued through or with the assistance of a commercial or investment banking firm or firms acting as
underwriters, initial purchasers or placement or distribution agents. For purposes of this
definition as applied to securities with a CUSIP number, each issuance of long-term indebtedness
for money borrowed that has (or, if such indebtedness is held by a trust or other intermediate
entity established directly or indirectly by the issuer, the securities of such intermediate entity
that have) a separate CUSIP number shall be deemed to be a series of

I-7 

 

the issuer’s long-term indebtedness for money borrowed that is separate from each other series
of such indebtedness.

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

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

     “Indenture”
means the Junior Subordinated Indenture, dated June 21, 2007, between the Corporation
and The Bank of New York Trust Company, N.A., as Trustee, as amended and supplemented by a First
Supplemental Indenture, dated June 21, 2007.

     “Initial Covered Debt” means the Corporation’s 6.25% Senior Notes due December 1, 2032, which
have CUSIP No. 743315AL7.

     “Intent-Based Replacement Disclosure” means, as to any Qualifying Non-Cumulative Preferred
Shares or Qualifying Capital 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 and its subsidiaries,
to the extent such securities provide the issuer with equity credit for purposes of rating by an
NRSRO, will repay, redeem or purchase such securities only with the proceeds of replacement capital
securities that have terms and provisions at the time of repayment, redemption or purchase that are
as or more equity-like than the securities then being repaid, redeemed or purchased, raised within
180 days prior to the applicable repayment, redemption or purchase date.

     “Mandatorily Convertible Preferred Shares” means cumulative preferred shares 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 such preferred shares convert into common shares of the
issuer within three years from the date of its issuance at a conversion ratio within a range
established at the time of issuance of such preferred shares and having customary anti-dilution
provisions.

I-8 

 

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

     (i) require the issuer of such 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 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 securities (including without limitation all
deferred and accumulated amounts) and require the application of the net proceeds of such sale to
pay such unpaid Distributions, provided that (a) if the Mandatory Trigger Provision does not
require the issuance and sale within one year of such failure, the amount of Common Shares and/or
Qualifying Warrants the net proceeds of which the issuer must apply to pay such Distributions
pursuant to such provision may not exceed the Common Cap and (b) the amount of Qualifying
Non-Cumulative Preferred Shares and still outstanding Mandatorily Convertible Preferred Shares the
net proceeds of which the issuer may apply to pay such Distributions pursuant to such provision may
not exceed the Preferred Cap;

     (ii) if the provisions described in clause (i) above do not require such issuance and sale
within one year of such failure, include a Repurchase Restriction;

     (iii) prohibit the issuer of such securities from redeeming or purchasing any of its
securities ranking upon the Corporation’s liquidation, dissolution or winding up junior to or pari
passu with any APM Qualifying Securities the proceeds of which were used to settle deferred
interest during the relevant Deferral Period prior to the date six months after the issuer applies
the net proceeds of the sales described in (i) to pay such deferred Distributions in full; and

     (iv) 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) 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, Preferred Cap and
Share 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 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.

I-9 

 

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 Qualifying Capital 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 Event” means the occurrence or existence of any of the following events or
sets of circumstances:

     (i) trading in securities generally, or shares of the Corporation’s securities specifically,
on the New York Stock Exchange or any other national securities exchange, or in the
over-the-counter market on which APM Qualifying Securities are 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, the
relevant exchange or by any other regulatory body or governmental agency having jurisdiction such
that trading shall have been materially disrupted;

     (ii) the Corporation would be required to obtain the consent or approval of the Corporation’s
shareholders or a regulatory body (including, without limitation, any securities exchange) or
governmental authority to issue or sell APM Qualifying Securities pursuant to the Alternative
Payment Mechanism and that consent or approval has not yet been obtained notwithstanding the
Corporation’s Commercially Reasonable Efforts to obtain that consent or approval;

     (iii) a banking moratorium shall have been declared by the federal or state authorities of the
United States such that the issuance of, or market trading in, the APM Qualifying Securities has
been disrupted or ceased;

     (iv) a material disruption shall have occurred in commercial banking or securities settlement
or clearance services in the United States such that the issuance of, or market trading in, the APM
Qualifying Securities has been disrupted or ceased;

     (v) 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 such that the issuance of, or market trading in, the APM
Qualifying Securities has been disrupted or ceased;

     (vi) 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, or the effect of international conditions on the financial markets in the
United States shall be such that the issuance of, or market trading in, the APM Qualifying
Securities has been materially disrupted;

     (vii) an event occurs and is continuing as a result of which the offering document for the
offer and sale of APM Qualifying Securities would, in the reasonable judgment of the Corporation,
contain an untrue statement of a material fact or omit to state a material fact required to be
stated in that offering document or necessary to make the statements in that offering document not
misleading and either (a) the disclosure of that event at such time, in the reasonable judgment of
the Corporation, is not otherwise required by law and would have a material adverse

I-10 

 

effect on the Corporation or (b) the disclosure relates to a previously undisclosed proposed
or pending material business transaction, provided that no single suspension period described in
this clause (vii) shall exceed 90 consecutive days and multiple suspension periods described in
this clause (vii) shall not exceed an aggregate of 180 days in any 360-day period; or

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

The definition of “Market Disruption Event” as used in any Replacement Capital Securities may
include less than all of the paragraphs outlined above, as determined by the Corporation at the
time of issuance of such securities, and in the case of clauses (i), (ii) and (iii) above, as
applicable to a circumstance where the Corporation would otherwise endeavor to issue preferred
shares, shall be limited to circumstances affecting markets where the Corporation’s preferred
shares traded or where a listing for their trading is being sought.

     “Measurement Date” means (a) with respect to any repayment, redemption or purchase of the
Debentures on or prior to the Scheduled Maturity Date, the date that is 180 days prior to delivery
of notice of such repayment or redemption or the date of such purchase; and (b) with respect to any
repayment, redemption or purchase of the Debentures after the Scheduled Maturity Date, the date
that is 90 days prior to the date of such repayment, redemption or purchase, except that, if during
the 90-day (or any shorter) period preceding the date that is 90 days prior to the date of such
repayment, redemption or purchase, the Corporation or its Subsidiaries issued Replacement Capital
Securities to Persons other than the Corporation and its Subsidiaries but no repayment, redemption
or purchase was made pursuant to Section 2 in connection therewith, the date upon which such 90-day
(or shorter) period prior to the date of such repayment, redemption or purchase began.

     “Measurement Period” means, with respect to any date on which notice of repayment or
redemption is delivered with respect to the Debentures or on which the Corporation purchases, or
any Subsidiary of the Corporation purchases, any Debentures, the period beginning on the
Measurement Date with respect to such notice or purchase date and ending on such notice or purchase
date, as the case may be. Measurement Periods cannot run concurrently.

     “No Payment Provision” means a provision or provisions in the transaction documents for
securities (referred to in this definition as “such securities”) that include the following:

     (i) an Alternative Payment Mechanism; and

     (ii) an Optional Deferral Provision modified and supplemented from the general definition of
that term to provide that 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 has occurred and is continuing, ten
years, without any remedy other than Permitted Remedies and the obligations (and limitations on
obligations) described in the definition of “Alternative Payment Mechanism” applying.

I-11 

 

     “Non-Cumulative” means, with respect to any Qualifying Capital Securities, that the issuer 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.

     “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 Qualifying Capital Securities, a provision in
the terms thereof or of the related transaction agreements to the effect that:

     (a) (i) the issuer of such Qualifying Capital 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 Qualifying Capital 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, Share Cap, Bankruptcy Claims Limitation Provision or Repurchase Restriction); or

     (b) the issuer of such Qualifying Capital 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 of up to ten years without any remedy other than Permitted Remedies.

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

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

     (b) complete or partial prohibitions on the issuer paying Distributions on or repurchasing
common shares 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 or corporation, unincorporated organization or government or any agency or
political subdivision thereof.

     “Preferred Cap” has the meaning specified in clause (viii) of the definition of Alternative
Payment Mechanism.

     “Qualifying Capital Securities” means securities or combinations of securities (other than
Common Shares, Qualifying Warrants, Mandatorily Convertible Preferred Shares, Debt Exchangeable for
Common Equity and Debt Exchangeable for Preferred Equity) that, in the determination of the
Corporation’s Board of Directors reasonably construing the definitions and other terms of this
Replacement Capital Covenant, meet one of the following criteria:

I-12 

 

     (i) in connection with any repayment, redemption or purchase of Debentures prior to June 15,
2017:

     (A) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to the Debentures upon the liquidation, dissolution or winding up of the
Corporation, (2) have no maturity or a maturity of at least 60 years and (3) either:

     (x) (I) are subject to a Qualifying Replacement Capital Covenant and (II) have a
No Payment Provision or are Non-Cumulative, or

     (y) (I) have a Mandatory Trigger Provision and are subject to Intent-Based
Replacement Disclosure and (II) have an Optional Deferral Provision or a No Payment
Provision;

     (B) preferred shares issued by the Corporation or its Subsidiaries that (1) are
Non-Cumulative, (2) have no prepayment obligation on the part of the issuer thereof,
whether at the election of the holders or otherwise, (3) have no maturity or a maturity of
at least 60 years and (4) either:

     (x) are subject to a Qualifying Replacement Capital Covenant, or

     (y) have a Mandatory Trigger Provision and are subject to Intent-Based
Replacement Disclosure; or

     (C) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
or junior to the Debentures upon the liquidation, dissolution or winding up of the
Corporation, (2) have no maturity or a maturity of at least 40 years, (3) are subject to a
Qualifying Replacement Capital Covenant and (4) have an Optional Deferral Provision and a
Mandatory Trigger Provision; or

     (ii) in connection with any repayment, redemption or purchase of Debentures at any time on or
after June 15, 2017 but prior to June 15, 2037:

     (A) securities described under clause (i) of this definition that would be Qualifying
Capital Securities prior to June 15, 2017;

     (B) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to the Debentures upon a liquidation, dissolution or winding up of the
Corporation, (2) have no maturity or a maturity of at least 60 years, (3) are subject to a
Qualifying Replacement Capital Covenant and (4) have an Optional Deferral Provision;

     (C) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to the Debentures upon a liquidation, dissolution or winding up of the
Corporation, (2) have no maturity or a maturity of at least 60 years, (3) are
Non-Cumulative or have a No Payment Provision and (4) are subject to Intent-Based
Replacement Disclosure;

     (D) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to the Debentures upon a liquidation, dissolution or winding up of the
Corporation, (2) have no maturity or a maturity of at least 40 years, (3) are

I-13 

 

Non-Cumulative or have a No Payment Provision and (d) are subject to a Qualifying
Replacement Capital Covenant;

     (E) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to the Debentures upon a liquidation, dissolution or winding up of the
Corporation, (2) have no maturity or a maturity of at least 40 years, (3) have an Optional
Deferral Provision and a Mandatory Trigger Provision and (4) are subject to Intent-Based
Replacement Disclosure;

     (F) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to the Debentures upon a liquidation, dissolution or winding-up of the
Corporation, (2) have no maturity or a maturity of at least 25 years, (3) are subject to a
Qualifying Replacement Capital Covenant and (4) have an Optional Deferral Provision and a
Mandatory Trigger Provision;

     (G) cumulative preferred shares issued by the Corporation or its Subsidiaries that (1)
have no prepayment obligation on the part of the issuer thereof, whether at the election of
the holders or otherwise, (2) have no maturity or a maturity of at least 60 years and (3)
are subject to a Qualifying Replacement Capital Covenant; or

     (H) securities issued by the Corporation or its Subsidiaries that rank (i) senior to
the Debentures and securities that are pari passu with the Debentures but (ii) junior to
all other debt securities of the Corporation (other than (x) the Debentures and securities
that are pari passu with the Debentures and (y) securities that are pari passu with such
Qualifying Capital Securities) upon its liquidation, dissolution or winding-up, and (2)
either:

     (x) have no maturity or a maturity of at least 60 years and either (I) are (a)
Non-Cumulative or subject to a No Payment Provision and (b) subject to a Qualifying
Replacement Capital Covenant or (II) have a Mandatory Trigger Provision and an
Optional Deferral Provision and are subject to Intent-Based Replacement Disclosure,
or

     (y) have no maturity or a maturity of at least 40 years, 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 repayment, redemption or purchase of Debentures at any time on or
after June 15, 2037:

     (A) securities described under clause (ii) of this definition that would be Qualifying
Capital Securities on or after June 15, 2017 but prior to June 15, 2037;

     (B) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to the Debentures upon a liquidation, dissolution or winding up of the
Corporation, (2) have an Optional Deferral Provision and (3) either:

     (x) have no maturity or a maturity of at least 60 years and are subject to
Intent-Based Replacement Disclosure, or

I-14 

 

     (y) have no maturity or a maturity of at least 40 years and are subject to a
Qualifying Replacement Capital Covenant;

     (C) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to the Debentures upon a liquidation, dissolution or winding up of the
Corporation, (2) have no maturity or a maturity of at least 40 years and are subject to
Intent-Based Replacement Disclosure and (3) are Non-Cumulative or have a No Payment
Provision;

     (D) securities issued by the Corporation or its Subsidiaries that rank (1) senior to
the Debentures and securities that are pari passu with the Debentures but junior to all
other debt securities of the Corporation (other than (x) the Debentures and securities that
are pari passu with the Debentures and (y) securities that are pari passu with such
Qualifying Capital Securities) upon its liquidation, dissolution or winding-up, and (2)
either:

     (x) have no maturity or a maturity of at least 60 years and either (i) have an
Optional Deferral Provision and are subject to a Qualifying Replacement Capital
Covenant or (ii) (a) are Non-Cumulative or have a No Payment Provision and (b) are
subject to Intent-Based Replacement Disclosure, or

     (y) have no maturity or a maturity of at least 40 years and either (i) (a) are
Non-Cumulative or have a No Payment Provision and (b) are subject to a Qualifying
Replacement Capital Covenant or (ii) are subject to Intent-Based Replacement
Disclosure and have a Mandatory Trigger Provision and an Optional Deferral Provision;
or

     (E) cumulative preferred shares issued by the Corporation or its Subsidiaries that
either (1) have no maturity or a maturity of at least 60 years and are subject to
Intent-Based Replacement Disclosure or (2) have a maturity of at least 40 years and are
subject to a Qualifying Replacement Capital Covenant.

Notwithstanding the foregoing, no securities or combination of securities will be included in
Qualifying Capital Securities if such securities (i) applying the tests set forth above, are
required to include Intent-Based Replacement Disclosure and (ii) include a Distribution Rate
Step-Up.

     “Qualifying Non-Cumulative Preferred Shares” means non-cumulative preferred shares of the
Corporation that rank pari passu with or junior to all other preferred shares of the Corporation,
are perpetual and are subject to (a) a Qualifying Replacement Capital Covenant or (b) both (i)
mandatory suspension of dividends in the event the Corporation breaches certain financial metrics
specified in the offering documents relating to such preferred shares and (ii) Intent-Based
Replacement Disclosure, provided that with respect to both clauses (a) and (b) the transaction
documents shall provide for no remedies as a consequence of non-payment of Distributions other than
Permitted Remedies.

     “Qualifying Replacement Capital Covenant” means a replacement capital covenant that is
substantially similar to this Replacement Capital Covenant or a replacement capital covenant, as
identified by the Corporation’s Board of Directors acting in good faith and in its reasonable
discretion and reasonably construing the definitions and other terms of this Replacement Capital
Covenant, (i) entered into by a company that at the time it enters into such replacement capital

I-15 

 

covenant is a reporting company under the Securities Exchange Act and (ii) that restricts the
related issuer from repaying, redeeming or purchasing, and its Subsidiaries from purchasing,
identified securities, except to the extent of the applicable percentage of the net proceeds from
the issuance of specified replacement capital securities that have terms and provisions at the time
of repayment, redemption or purchase that are as or more equity-like than the securities then being
repaid, redeemed or purchased within the 180-day period prior to the applicable repayment,
redemption or purchase date; provided that the term of such replacement capital covenant shall be
determined at the time of issuance of the related Replacement Capital Securities taking into
account the other characteristics of such securities.

     “Qualifying Warrants” means any net share-settled warrants to purchase the Common Shares that
(i) have an exercise price greater than the Current Stock Market Price of the Common Shares, and
(ii) the Corporation is not entitled to redeem for cash and the holders of which are not entitled
to require the Corporation to purchase for cash in any circumstances.

     “Redesignation Date” means, as to the Covered Debt in effect at any time, the earliest of (a)
the date that is two years prior to the final maturity date of such Covered Debt, (b) if the
Corporation elects to redeem, or the Corporation or a Subsidiary of the Corporation elects to
repurchase, 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 of the Corporation, the date on which the Corporation issues
long-term indebtedness for money borrowed that is Eligible Subordinated Debt.

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

     “Replacement Capital Securities” means Mandatorily Convertible Preferred Shares, Debt
Exchangeable for Common Equity, Debt Exchangeable for Preferred Equity and Qualifying Capital
Securities.

     “Repurchase Restriction” has the meaning specified in clause (iii) of the definition of
Alternative Payment Mechanism.

     “Scheduled Maturity Date” has the meaning specified in the Supplemental Indenture.

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

     “Share Cap” means, with respect to any Qualifying Capital Securities, a limit on the total
number of Common Shares that may be issued by the Corporation pursuant to the Alternative Payment
Mechanism with respect to such Qualifying Capital Securities or on the total number of Common
Shares underlying all Qualifying Warrants and Mandatorily Convertible Preferred Shares that may be
issued by the Corporation pursuant to such Alternative Payment Mechanism, provided that the product
of such Share Cap and the Market Value of the Common Shares as of the date of issuance of such
Qualifying Capital Securities shall not represent a lower proportion of the aggregate principal or
liquidation amount, as applicable, of such Qualifying Capital Securities than the product of the
Share Cap applicable to the Debentures and the Current Stock Market Price of the Common Shares as
of the date of issuance of such Debentures represents of the aggregate principal amount of such
Debentures at the time of issuance.

I-16 

 

     “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 (and as of the date of this Replacement Capital Covenant
includes Progressive County Mutual Insurance Company, a mutual company affiliate of the
Corporation).

     “Supplemental
Indenture” means the First Supplemental Indenture, dated
as of June 21, 2007, between
the Corporation and The Bank of New York Trust Company, N.A., as Trustee, to the Indenture.

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

I-17

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