Exhibit 4.2
CERTIFICATE OF DESIGNATIONS
OF
SERIES B NON-CUMULATIVE PERPETUAL PREFERRED STOCK
OF
PRINCIPAL FINANCIAL GROUP, INC.
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Principal Financial Group, Inc., a Delaware corporation (the
"Corporation"), does hereby certify:
That the following resolutions were duly adopted by the Board of
Directors of the Corporation (the "Board of Directors") at a meeting duly
convened and held on June 7, 2005 (the "June 7 Resolutions") and by the Pricing
Committee (the "Committee") of the Board of Directors by unanimous written
consent on June 14, 2005 (the "June 14 Resolutions") pursuant to authority
conferred upon the Board of Directors by the provisions of the amended and
restated certificate of incorporation of the Corporation authorizing the
Corporation to issue up to 500 million shares of preferred stock, par value
$0.01 per share ("Preferred Stock"), and pursuant to authority conferred upon
the Committee in accordance with Section 141(c) of the General Corporation Law
of the State of Delaware, Article III, Section 3.01 of the amended and restated
by-laws of the Corporation (the "by-laws") and resolutions of the Board of
Directors adopted at a meeting duly convened and held on June 7, 2005:
1. On June 7, 2005, the Board of Directors adopted the following
resolution authorizing the Committee to act on behalf of the Board
of Directors in connection with the issuance of a new series of
Preferred Stock:
"RESOLVED, that Principal Financial Group, Inc. (the "Corporation")
be, and it hereby is, authorized to issue shares of the Corporation's Series A
Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share (the "Series
A Preferred Shares"), and shares of the Series B Non-Cumulative Perpetual
Preferred Stock, par value $0.01 per share (the "Series B Preferred Shares", and
together with the Series A Preferred Shares, the "Preferred Shares"), with an
initial public offering price of the Preferred Shares not to exceed US$550
million in the aggregate, and individually not to exceed US$325 million per
series, to be issued from time to time, together or separately, upon such terms
as the Pricing Committee (as defined below) or the officers designated below
shall determine, as provided in the immediately succeeding resolutions."
2. On June 14, 2005, the Committee, pursuant to the authority
conferred upon it by Section 141(c) of the General Corporation Law
of the State of Delaware, Article III, Section 3.01 of the by-laws
of the
Corporation and the June 7 Resolutions, duly adopted the following
resolution:
"RESOLVED, that pursuant to a resolution of the Board of Directors
(the "Board of Directors") of Principal Financial Group, Inc., a Delaware
corporation (the "Corporation") adopted on June 7, 2005, the issuance of two
series of preferred stock of the Corporation, designated as the Series A
Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share (the "Series
A Preferred Shares") and the Series B Non-Cumulative Perpetual Preferred Stock,
par value $0.01 per share (the "Series B Preferred Shares"), respectively, is
hereby authorized, and the designation, voting powers, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
and restrictions of the Series A Preferred Shares and Series B Preferred Shares,
in addition to those set forth in the amended and restated certificate of
incorporation of the Corporation, are hereby fixed as set forth on Annex A and
Annex B, respectively."
3. Accordingly, the designation, voting powers, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations and restrictions of the Series B
Preferred Shares, as set forth in Annex B to the June 14
Resolutions, have been fixed as follows:
SECTION 1. Designation. The distinctive serial designation of such
series is "Series B Non-Cumulative Perpetual Preferred Stock" ("Series B
Preferred Stock"). Each share of Series B Preferred Stock shall be identical in
all respects to every other share of Series B Preferred Stock.
SECTION 2. Number of Shares. The number of shares of Series B
Preferred Stock shall be 10,000,000. Such number may from time to time be
increased (but not in excess of the total number of authorized shares of
Preferred Stock) or decreased (but not below the number of shares of Series B
Preferred Stock then outstanding) by the Board of Directors. Shares of Series B
Preferred Stock that are redeemed, purchased or otherwise acquired by the
Corporation shall be cancelled and shall revert to authorized but unissued
shares of Preferred Stock undesignated as to series.
SECTION 3. Definitions. As used herein with respect to the Series B
Preferred Stock:
"3-Month LIBOR" means, with respect to any Dividend Period, the rate
(expressed as a percentage per annum) for deposits in U.S. dollars for a 3-month
period commencing on the first day of that Dividend Period that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the Dividend Determination
Date for that Dividend Period. If such rate does not appear on Telerate Page
3750, 3-Month LIBOR will be determined on the basis of the rates at which
deposits in U.S. dollars for a 3-month period commencing on the first day of
that Dividend 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
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banks in the London interbank market selected by the Calculation Agent, at
approximately 11:00 a.m., London time on the Dividend Determination Date for
that Dividend Period. The Calculation Agent will request the principal London
office of each of such banks to provide a quotation of its rate. If at least two
such quotations are provided, 3-Month LIBOR with respect to that Dividend Period
will be the arithmetic mean (rounded upward if necessary to the nearest .00001
of 1%) of such quotations. If fewer than two quotations are provided, 3-Month
LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded
upward if necessary to the nearest .00001 of 1%) of the rates quoted by three
major banks in New York City selected by the Calculation Agent, at approximately
11:00 a.m., New York City time, on the first day of that Dividend Period for
loans in U.S. dollars to leading European banks for a 3-month period commencing
on the first day of that Dividend Period and in a principal amount of not less
than $1,000,000. However, if the banks selected by the Calculation Agent to
provide quotations are not quoting as described above, 3-Month LIBOR for that
Dividend Period will be the same as 3-Month LIBOR as determined for the previous
Dividend Period. The establishment of 3-Month LIBOR for each Dividend Period by
the Calculation Agent shall (in the absence of manifest error) be final and
binding.
"10-year Treasury CMT" means the rate determined in accordance with
the following provisions:
(a) With respect to any Dividend Determination Date and the Dividend
Period that begins immediately thereafter, the 10-year Treasury CMT means
the rate per annum for deposits for a 10-year period commencing on the
Dividend Determination Date displayed on the Bloomberg interest rate page
most nearly corresponding to Telerate Page 7051 containing the caption
"...Treasury Constant Maturities... Federal Reserve Board Release
H.15...Mondays Approximately 3:45 P.M.," and the column for the Designated
CMT Maturity Index.
(b) If such rate is no longer displayed on the relevant page, or is
not so displayed by 3:00 P.M., New York City time, on the applicable
Dividend Determination Date, then the 10-year Treasury CMT for such
Dividend Determination Date will be such treasury constant maturity rate
for the Designated CMT Maturity Index as is published in H.15(519).
(c) If such rate is no longer displayed on the relevant page, or if
not published by 3:00 P.M., New York City time, on the applicable Dividend
Determination Date, then the 10-year Treasury CMT for such Dividend
Determination Date will be such constant maturity treasury rate for the
Designated CMT Maturity Index (or other United States Treasury rate for
the Designated CMT Maturity Index) for the applicable Dividend
Determination Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the
rate formerly displayed on the
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Bloomberg interest rate page most nearly corresponding to Telerate Page
7051 and published in H.15(519).
(d) If such information is not provided by 3:00 P.M., New York City
time, on the applicable Dividend Determination Date, then the 10-year
Treasury CMT for such Dividend Determination Date will be calculated by
the Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market offered rates as of approximately
3:30 P.M., New York City time, on such Dividend Determination Date
reported, according to their written records, by three leading primary
United States government securities dealers in The City of New York (each,
a "Reference Dealer") selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest)),
for the most recently issued direct noncallable fixed rate obligations of
the United States ("Treasury Debentures") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one
year.
(e) If the Calculation Agent is unable to obtain three such Treasury
Debentures quotations, the 10-year Treasury CMT for the applicable
Dividend Determination Date will be calculated by the Calculation Agent
and will be a yield to maturity based on the arithmetic mean of the
secondary market offered rates as of approximately 3:30 P.M., New York
City time, on the applicable Dividend Determination Date of three
Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Debentures with an original maturity of the number of years that
is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an
amount of at least $100 million.
(f) If three or four (and not five) of such Reference Dealers are
quoting as set forth above, then the 10-year Treasury CMT will be based on
the arithmetic mean of the offered rates obtained and neither the highest
nor lowest of such quotes will be eliminated; provided, however, that if
fewer than three Reference Dealers selected by the Calculation Agent are
quoting as set forth above, the 10-year Treasury CMT with respect to the
applicable Dividend Determination Date will remain the 10-year Treasury
CMT for the immediately preceding Dividend Period. If two Treasury
Debentures with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated
CMT Maturity Index, then the quotes for the Treasury Debentures with the
shorter remaining term to maturity will be used.
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"30-year Treasury CMT" has the meaning specified under the
definition of 10-year Treasury CMT, except that (i) each reference to "10-year"
in the definition of the "10-year Treasury CMT" will be "30-year" for the
purposes of the "30-year Treasury CMT" and (ii) the Designated CMT Maturity
Index for the 30-year Treasury CMT shall be 30 years.
"Adjustable Rate" has the meaning assigned to such term in Section
4(b)(ii).
"Adjusted Shareholders' Equity Amount" has the meaning assigned to
such term in Section 5(e).
"Annual Statement" has the meaning assigned to such term in Section
5(e).
"Benchmark Quarter End Test Date" has the meaning assigned to such
term in Section 5(a)(ii).
"Benchmark Rates" has the meaning assigned to such term in Section
4(b)(ii).
"Bloomberg" means Bloomberg Financial Markets Commodities News.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the City of New York are not authorized
or obligated by law, regulation or executive order to close.
"Calculation Agent" means Computershare Trust Company, Inc., or its
successor appointed by the Corporation, acting as calculation agent.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act. The Depository
Trust Corporation will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Commission" has the meaning assigned to such term in Section 5(e).
"Common Stock" means the common stock of the Corporation.
"Company Action Level RBC" has the meaning assigned to such term in
Section 5(e).
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"Consolidated Net Income Amount" has the meaning assigned to such
term in Section 5(e).
"Covered Insurance Subsidiaries" has the meaning assigned to such
term in Section 5(e).
"Covered Insurance Subsidiaries' Most Recent Weighted Average NAIC
RBC Ratio" has the meaning assigned to such term in Section 5(e).
"Designated CMT Maturity Index" means the original period to
maturity of the U.S. Treasury securities with respect to which the 10-year
Treasury CMT or 30-year Treasury CMT, as applicable, will be calculated (which
are ten years and thirty years, respectively).
"Dividend Declaration Date" has the meaning assigned to such term in
Section 5(a).
"Dividend Determination Date" means the second London Banking Day
immediately preceding the first day of the relevant Dividend Period in the
Floating Rate Period.
"Dividend Parity Stock" has the meaning assigned to such term in
Section 8(b).
"Dividend Payment Date" has the meaning assigned to such term in
Section 4(a).
"Dividend Period" means each period commencing on a Dividend Payment
Date and continuing to but not including the next succeeding Dividend Payment
Date (except that the first Dividend Period shall commence upon the date of
initial issuance of the Series B Preferred Stock).
"Dividend Rate" means the rate at which dividends will accrue in
respect of any Dividend Period, as determined pursuant to the terms of Section
4, whether by Remarketing or otherwise.
"Election Date" means, with respect to any proposed Remarketing, a
date as determined by the Corporation that is no later than the fifth Business
Day prior to the proposed Remarketing Date.
"Final Quarter End Test Date" and "Preliminary Quarter End Test
Date" have the meanings assigned to such terms in Section 5(e).
"Fixed Rate" means the Dividend Rate during the Initial Fixed Rate
Period and any subsequent Fixed Rate Period as determined by a Remarketing.
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"Fixed Rate Period" means the Initial Fixed Rate Period and each
period set by the Corporation during a Remarketing for which the Fixed Rate
determined in such Remarketing will apply; provided, however, that a Fixed Rate
Period must be for a duration of at least six months and may not end on a day
other than a Dividend Payment Date.
"Floating Rate" means the Dividend Rate during a Floating Rate
Period calculated pursuant to Section 4(b)(ii).
"Floating Rate Period" means any period during which a Floating Rate
is in effect.
"General Account Admitted Assets" has the meaning assigned to such
term in Section 5(e).
"Initial Dividend Rate" means 6.518% per annum.
"Initial Fixed Rate Period" means June 17, 2005 until the Dividend
Payment Date in June 2035.
"Insurance Subsidiary" has the meaning assigned to such term in
Section 5(e).
"Issue Date" means the initial date of delivery of shares of Series
B Preferred Stock.
"Junior Stock" means the Common Stock and any other class or series
of stock of the Corporation hereafter authorized over which Series B Preferred
Stock has preference or priority in the payment of dividends and in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"Liquidation Preference" has the meaning assigned to such term in
Section 6(a).
"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.
"Model Act" has the meaning assigned to such term in Section 5(e).
"NAIC" has the meaning assigned to such term in Section 5(e).
"New Common Equity Amount" has the meaning assigned to such term in
Section 5(e).
"Notice of Election" has the meaning assigned to such term in
Section 4(b)(iii).
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"Owner" means each Person who is the beneficial owner of a Series B
Preferred Stock Certificate as reflected in the records of the Clearing Agency
or, if a Clearing Agency Participant is not the Owner, then as reflected in the
records of a Person maintaining an account with the Clearing Agency (directly or
indirectly, in accordance with the rules of the Clearing Agency).
"Parity Stock" means any other class or series of stock of the
Corporation that ranks on a parity with Series B Preferred Stock in the payment
of dividends and in the distribution of assets on any liquidation, dissolution
or winding up of the Corporation. Any other class or series of stock of the
Corporation will not be deemed to rank senior to (or other than on a parity
with) the Series B Preferred Stock in the payment of dividends solely because
such other class or series of stock does not include the limitation on payment
of dividends (and the related exceptions) provided for in Section 5 and,
accordingly, the Corporation may pay dividends on the shares of any such other
class of series of stock that is otherwise Parity Stock for periods during which
the Corporation may not pay dividends on the Series B Preferred Stock because of
such limitation without violating the requirements of Section 4(d).
"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.
"Quarter End" has the meaning assigned to such term in Section 5(e).
"Remarketing" means the conduct by which a Fixed Rate shall be
determined in accordance with the Remarketing Procedures.
"Remarketing Agent" means Lehman Brothers, Inc., its successors or
assigns, or such other remarketing agent appointed to such capacity by the
Corporation.
"Remarketing Agreement" means the agreement between the Corporation
and Lehman Brothers Inc., as Remarketing Agent, dated as of the Issue Date.
"Remarketing Date" means any Business Day no later than the third
Business Day prior to any Remarketing Settlement Date.
"Remarketing Procedures" means those procedures set forth in Section
4(b)(iii) hereof.
"Remarketing Settlement Date" means, to the extent applicable, (i)
the first Business Day of the next Dividend Period following the expiration of
the Initial Fixed Rate Period; (ii) any Dividend Payment Date during a Floating
Rate Period; or (iii) any Dividend Payment Date during a time in which shares of
Series B Preferred Stock are not redeemable in a subsequent Fixed Rate Period
and the date set by the Corporation during a time in which shares of Series B
Preferred Stock are redeemable in a subsequent Fixed Rate Period.
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"Securities Act" has the meaning assigned to such term in Section
5(e).
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Series B Preferred Stock Certificate" means a certificate
evidencing ownership of a share or shares of Series B Preferred Stock.
"Telerate Page 3750" means the display page so designated on the
Moneyline/Telerate Service (or such other page as may replace that page on that
service, or such other service as may be nominated as the information vendor,
for the purpose of displaying rates or prices comparable to London Interbank
Offered Rate for U.S. dollar deposits).
"Telerate Page 7051" means the display page so designated on the
MoneyLine/Telerate Service (or any successor service), on such page (or any
other page as may replace such page on that service), for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519).
"Total Adjusted Capital" has the meaning assigned to such term in
Section 5(e).
"Trailing Four Quarters Consolidated Net Income" has the meaning
assigned to such term in Section 5(e).
"U.S. GAAP" has the meaning assigned to such term in Section 5(e).
"Year End" has the meaning assigned to such term in Section 5(e).
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SECTION 4. Dividends.
(a) General.
(i) DIVIDEND PAYMENT DATES, DIVIDEND RATE, ETC. Subject to Section
5, holders of Series B Preferred Stock shall be entitled to receive, when,
as and if declared by the Board of Directors, but only out of funds
legally available therefor, cash dividends at the applicable Dividend Rate
applied to the Liquidation Preference per share, accruing on each share of
Series B Preferred Stock (i) if issued on the Issue Date, from June 17,
2005, and (ii) if issued thereafter, from (x) the date of issue if such
date is a Dividend Payment Date and (y) from the immediately preceding
Dividend Payment Date if the date of issue is other than a Dividend
Payment Date, payable quarterly on the 30th day of each March, June,
September and December in each year (each such date a "Dividend Payment
Date"), commencing on September 30, 2005, with respect to the Dividend
Period (or portion thereof) ending on the day preceding such respective
Dividend Payment Date, to holders of record on the respective date, not
more than 60 nor less than 10 days preceding such Dividend Payment Date,
fixed for that purpose by the Board of Directors in advance of payment of
each particular dividend. During the Initial Fixed Rate Period, the
Dividend Rate shall be the Initial Dividend Rate. For each Dividend Period
thereafter, the Dividend Rate shall be determined in accordance with
Section 4(b).
(ii) BUSINESS DAY CONVENTION. If any Dividend Payment Date with
respect to a Fixed Rate Period is not a Business Day, then dividends will
be payable on the first Business Day following such Dividend Payment Date,
without accrual to the actual payment date. If any Dividend Payment Date
with respect to a Floating Rate Period is not a Business Day, then
dividends will be payable on the first Business Day following such
Dividend Payment Date unless such day is in the next calendar month, in
which case dividends shall be payable on the first Business Day preceding
such Dividend Payment Date and dividends, in each case, shall accrue to
the actual payment date.
(iii) DAY COUNT CONVENTION. The amount of dividends payable per
share of Series B Preferred Stock on each Dividend Payment Date relating
to a Fixed Rate Period will be computed on the basis of a 360-day year of
twelve-30 day months. The amount of dividends payable per share of Series
B Preferred Stock on each Dividend Payment Date relating to a Floating
Rate Period will be computed by multiplying the per annum Dividend Rate in
effect for such Dividend Period by a fraction, the numerator of which will
be the actual number of days in such Dividend Period (or portion thereof)
(determined by including the first day thereof and excluding the last day
thereof) and the denominator of which will be 360, and multiplying the
rates obtained by $25.
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(b) Remarketing.
(i) FIXED RATE PERIOD. Prior to the expiration of the Initial Fixed
Rate Period, the Corporation will have the option to remarket the Series B
Preferred Stock to establish a new Fixed Rate with respect to the Series B
Preferred Stock (to be in effect after the Initial Fixed Rate Period);
provided, however, that (A) the Corporation may effect a Remarketing only
if and for so long as the Series B Preferred Stock is issued solely in
global, fully registered form to a Clearing Agency and (B) if the
Corporation has initiated a Remarketing but at or prior to the related
Remarketing Settlement Date the Series B Preferred Stock is no longer
issued solely in global, fully registered form to a Clearing Agency, the
Remarketing shall terminate and shall not be consummated. In the event
that clause (A) or clause (B) of the proviso set forth in the previous
sentence applies, the Dividend Rate for the next succeeding Dividend
Period shall be determined pursuant to Section 4(b)(ii). Any new Fixed
Rate so established will be in effect for such Fixed Rate Period as the
Corporation determines in connection with the Remarketing, provided that a
Fixed Rate Period must be for a duration of at least six months and must
end on a Dividend Payment Date. Prior to the expiration of any Fixed Rate
Period after the Initial Fixed Rate Period, the Corporation will have the
option, subject to the proviso set forth in the first sentence of this
Section 4(b)(i), to remarket the Series B Preferred Stock to establish a
new Fixed Rate for a new Fixed Rate Period (to be in effect after the
expiration of the then current Dividend Period).
If the Remarketing Agent, pursuant to the Remarketing
Procedures described in Section 4(b)(iii), has determined that it will be
able to remarket all Series B Preferred Stock tendered or deemed tendered
for purchase in the Remarketing at a Fixed Rate and at the per share
Liquidation Preference, prior to 4:00 P.M., New York City time, on any
Remarketing Date, the Dividend Rate for the new Fixed Rate Period will be
the Fixed Rate determined by the Remarketing Agent, which will be the rate
per annum (rounded to the nearest one-thousandth (0.001) of one percent
per annum) that the Remarketing Agent determines, in its sole judgment, to
be the lowest Fixed Rate per annum that will enable it to remarket all
Series B Preferred Stock tendered or deemed tendered for Remarketing at
the per share Liquidation Preference.
(ii) FLOATING RATE PERIOD. If the Series B Preferred Stock is not
redeemed and the Corporation does not elect or is not entitled to remarket
the Series B Preferred Stock pursuant to this Section 4 or has terminated
a Remarketing or if the Remarketing Agent is unable to remarket all of the
Series B Preferred Stock tendered or deemed tendered for a purchase price
of $25 per share of Series B Preferred Stock pursuant to the Remarketing
procedures described above or if the Remarketing has been terminated in
accordance with the requirements of Section 4(b)(i)(B), the Dividend Rate
shall be the Floating Rate and the new Dividend Period shall be a Floating
Rate Period, subject to the
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Corporation's right to subsequently remarket the Series B Preferred Stock
to again establish a Fixed Rate for a new Fixed Rate Period. During any
Floating Rate Period, the Corporation may elect to remarket the Series B
Preferred Stock prior to any Dividend Payment Date relating to a Floating
Rate Period in order to again establish a new Fixed Rate for a new Fixed
Rate Period (to be in effect after the expiration of the then current
Dividend Period).
The Calculation Agent shall calculate the Floating Rate on the
applicable Dividend Determination Date relating to that Floating Rate
Period as follows:
Except as provided below, the Floating Rate for any Floating
Rate Period for the Series B Preferred Stock will be reset quarterly and
will be equal to the Adjustable Rate plus 2.10%. The "Adjustable Rate" for
any Dividend Period will be equal to the highest of the 3-month LIBOR, the
10-year Treasury CMT and the 30-year Treasury CMT (collectively, the
"Benchmark Rates") for such Dividend Period during the Floating Rate
Period. In the event that the Calculation Agent determines in good faith
that for any reason:
(1) any one of the Benchmark Rates cannot be determined for any
Dividend Period, the Adjustable Rate for such Dividend Period will
be equal to the higher of whichever two of such rates can be so
determined;
(2) only one of the Benchmark Rates can be determined for any
Dividend Period, the Adjustable Rate for such Dividend Period will
be equal to whichever such rate can be so determined; or
(3) none of the Benchmark Rates can be determined for any Dividend
Period, the Adjustable Rate for the preceding Dividend Period will
be continued for such Dividend Period, provided that if such
preceding Dividend Period was a Fixed Rate Period, the Fixed Rate
for the preceding Dividend Period will be continued for such
Dividend Period.
Each of the 10-year Treasury CMT and the 30-year Treasury CMT
shall be rounded to the nearest hundredth (0.01) of one percent and
3-month LIBOR shall be rounded to the nearest one-hundred-thousandth
(0.00001) of one percent. The Floating Rate with respect to each Dividend
Period that occurs within a Floating Rate Period will be calculated as
promptly as practicable by the Calculation Agent according to the
appropriate method described above.
If a new Fixed Rate for a new Fixed Rate Period is set in a
Remarketing (as described in this Section 4), a new Fixed Rate Period
shall commence following the expiration of the then current Dividend
Period. If a new Fixed Rate for a new Fixed Rate Period is not set, for
any reason, including after the expiration of the Initial Fixed Rate
Period, in accordance with the terms of
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Section 4(b)(iii) hereof, a Floating Rate Period and the corresponding
Floating Rate determined or redetermined in accordance with this Section
4(b)(ii) shall be in effect unless and until the Corporation remarkets the
Series B Preferred Stock and sets a new Fixed Rate for a new Fixed Rate
Period in accordance with this Section 4(b)(i) and 4(b)(iii).
(iii) REMARKETING PROCEDURES. If the Corporation elects to conduct a
Remarketing of the Series B Preferred Stock for the purpose of
establishing a new Fixed Rate for a new Fixed Rate Period, the Corporation
shall, not less than 10 nor more than 35 Business Days prior to the
related Election Date, notify in writing the Clearing Agency, the
Remarketing Agent and the Calculation Agent. Such notice shall describe
the Remarketing and shall indicate the length of the proposed new Fixed
Rate Period, the proposed Remarketing Date and any redemption provisions
that will apply during such new Fixed Rate Period. The Corporation shall
have the right to terminate a Remarketing on any day prior to the date of
the Remarketing of the Series B Preferred Stock by notice of such
termination to the Clearing Agency (or the holders, as applicable), the
Remarketing Agent and the Calculation Agent.
Not later than 4:00 P.M., New York City time, on an Election
Date, each Owner of Series B Preferred Stock may give, through the
facilities of the Clearing Agency, a written notice to the Corporation of
its election ("Notice of Election") (i) to retain and not to have all or
any portion of the Series B Preferred Stock owned by it remarketed in the
Remarketing or (ii) to tender all or any portion of such Series B
Preferred Stock for purchase in the Remarketing (such portion, in either
case, is to be at the per share Liquidation Preference or any integral
multiple thereof). Any Notice of Election given to the Corporation will be
irrevocable and may not be conditioned upon the level at which the Fixed
Rate is established in the Remarketing. Promptly after 4:30 P.M., New York
City time, on such Election Date, the Corporation, based on the Notices of
Election received by it through the Clearing Agency prior to such time,
will notify the Remarketing Agent of the number of shares of Series B
Preferred Stock to be retained by holders of Series B Preferred Stock and
the number of shares of Series B Preferred Stock tendered or deemed
tendered for purchase in the Remarketing.
If any holder gives a Notice of Election to tender shares of
Series B Preferred Stock as described in (ii) in the immediately preceding
paragraph, the Series B Preferred Stock so subject to such Notice of
Election will be deemed tendered for purchase in the Remarketing,
notwithstanding any failure by such holder to deliver or properly deliver
such Series B Preferred Stock to the Remarketing Agent for purchase. If
any holder of shares of Series B Preferred Stock fails timely to deliver a
Notice of Election, as described above, such shares of Series B Preferred
Stock will be deemed tendered for purchase in such Remarketing,
notwithstanding such failure or the failure by such holder to deliver
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or properly deliver such shares of Series B Preferred Stock to the
Remarketing Agent for purchase.
The right of each holder of Series B Preferred Stock to have
shares of Series B Preferred Stock tendered for purchase in the
Remarketing shall be limited to the extent that (i) the Remarketing Agent
conducts a Remarketing pursuant to the terms of the Remarketing Agreement,
(ii) Series B Preferred Stock tendered have not been called for
redemption, (iii) the Remarketing Agent is able to find a purchaser or
purchasers for tendered Series B Preferred Stock at a Fixed Rate and (iv)
such purchaser or purchasers deliver the purchase price therefore to the
Remarketing Agent.
Any holder of Series B Preferred Stock that desires to
continue to retain a number of Series B Preferred Stock, but only if the
Fixed Rate is not less than a specified rate per annum, shall submit a
Notice of Election to tender such Series B Preferred Stock pursuant to
this Section 4(b)(iii) and separately notify the Remarketing Agent of its
interest at the telephone number set forth in the notice of Remarketing
delivered pursuant to this Section 4(b)(iii). If such holder so notifies
the Remarketing Agent, the Remarketing Agent will give priority to such
holder's purchase of such number of Series B Preferred Stock in the
Remarketing, provided that the Fixed Rate is not less than such specified
rate.
If holders submit Notices of Election to retain all of the
Series B Preferred Stock then outstanding, the Fixed Rate will be the rate
determined by the Remarketing Agent, in its sole discretion, as the rate
that would have been established had a Remarketing been held on the
related Remarketing Date.
On any Remarketing Date on which the Remarketing is to be
conducted, the Remarketing Agent will use commercially reasonable efforts
to remarket, at a price equal to 100% of the per share Liquidation
Preference, shares of Series B Preferred Stock tendered or deemed tendered
for purchase. If, as a result of such efforts, on any Remarketing Date,
the Remarketing Agent has determined that it will be able to remarket all
shares of Series B Preferred Stock tendered or deemed tendered for
purchase in the Remarketing at a Fixed Rate and at the per share
Liquidation Preference, prior to 4:00 P.M., New York City time, on such
Remarketing Date, the Remarketing Agent will determine the Fixed Rate,
which will be the rate per annum (rounded to the nearest one-thousandth
(0.001) of one percent per annum) which the Remarketing Agent determines,
in its sole judgment, to be the lowest Fixed Rate per annum, if any, that
will enable it to remarket all shares of Series B Preferred Stock tendered
or deemed tendered for Remarketing at the per share Liquidation
Preference. By approximately 4:30 P.M., New York City time, on a
Remarketing Date, the Remarketing Agent shall advise, by telephone, (i)
the Clearing Agency Participant, the Corporation and the Calculation Agent
of any new Fixed Rate established pursuant to the Remarketing and the
number of remarketed shares of Series B Preferred Stock sold in the
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Remarketing; (ii) each purchaser of a remarketed share of Series B
Preferred Stock (or the Clearing Agency Participant thereof) of such new
Fixed Rate and the number of remarketed shares of Series B Preferred Stock
such purchaser is to purchase; and (iii) each purchaser to give
instructions to its Clearing Agency Participant to pay the purchase price
on the Remarketing Settlement Date in same day funds against delivery of
the remarketed Series B Preferred Stock purchased through the facilities
of the Clearing Agency Participant.
If the Remarketing Agent is unable to remarket by 4:00 P.M.,
New York City time on the third Business Day prior to the Remarketing
Settlement Date, all shares of Series B Preferred Stock tendered or deemed
tendered for purchase at the per share Liquidation Preference, the
Dividend Rate for the next Dividend Period shall be the Floating Rate and
the new Dividend Period shall be a Floating Rate Period. In such case, no
shares of Series B Preferred Stock will be sold in the Remarketing and
each holder will continue to hold its shares of Series B Preferred Stock
at such Floating Rate during such Floating Rate Period.
All shares of Series B Preferred Stock tendered or deemed
tendered in the Remarketing will be automatically delivered to the account
of the Remarketing Agent through the facilities of the Clearing Agency
against payment of the purchase price therefor on the Remarketing
Settlement Date. The Remarketing Agent will make payment to the Clearing
Agency Participant of each tendering holder of Series B Preferred Stock in
the Remarketing through the facilities of the Clearing Agency by the close
of business on the Remarketing Settlement Date. In accordance with the
Clearing Agency's normal procedures, on the Remarketing Settlement Date,
the transaction described above with respect to each share of Series B
Preferred Stock tendered or deemed tendered for purchase and sold in the
Remarketing will be executed through the Clearing Agency and the account
of the Clearing Agency Participant, will be debited and credited and such
Series B Preferred Stock delivered by book entry as necessary to effect
purchases and sales of such shares of Series B Preferred Stock. The
Clearing Agency is expected to make payment in accordance with its normal
procedures.
If any holder selling Series B Preferred Stock in the
Remarketing fails to deliver such Series B Preferred Stock, the Clearing
Agency Participant of such selling holder and of any other person that was
to have purchased Series B Preferred Stock in the Remarketing may deliver
to any such other person a number of shares of Series B Preferred Stock
that is less than the number of shares of Series B Preferred Stock that
otherwise was to be purchased by such person. In such event the number of
shares of Series B Preferred Stock to be so delivered will be determined
by such Clearing Agency Participant and delivery of such lesser number of
shares of Series B Preferred Stock will constitute good delivery.
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The Remarketing Agent is not obligated to purchase any shares
of Series B Preferred Stock that would otherwise remain unsold in a
Remarketing. Neither the Corporation nor the Remarketing Agent shall be
obligated in any case to provide funds to make payment upon tender of
shares of Series B Preferred Stock for Remarketing.
(c) Non-Cumulative Dividends. Dividends on shares of Series B
Preferred Stock shall be non-cumulative. To the extent that any dividends
payable on the shares of Series B Preferred Stock on any Dividend Payment
Date are not declared and paid, in full or otherwise, on such Dividend
Payment Date, then such unpaid dividends shall not cumulate and shall
cease to accrue and be payable and the Corporation shall have no
obligation to pay dividends accrued for such Dividend Period after the
Dividend Payment Date for such Dividend Period or to pay interest with
respect to such dividends, whether or not dividends are declared on Series
B Preferred Stock for any subsequent Dividend Period.
(d) Priority of Dividends.
(i) JUNIOR STOCK. So long as any share of Series B Preferred Stock
remains outstanding, during a Dividend Period no dividend whatsoever shall
be paid or declared and no distribution shall be made on any Junior Stock,
other than a dividend payable solely in Junior Stock, and no shares of
Junior Stock shall be purchased, redeemed or otherwise acquired for
consideration by the Corporation, directly or indirectly (other than as a
result of a reclassification of Junior Stock for or into Junior Stock, or
the exchange or conversion of one share of Junior Stock for or into
another share of Junior Stock, and other than through the use of the
proceeds of a substantially contemporaneous sale of other shares of Junior
Stock), unless the full dividends for such Dividend Period on all
outstanding shares of Series B Preferred Stock have been paid or declared
and a sum sufficient for the payment thereof set aside. Subject to this
Section 4(d)(i), but not otherwise, such dividends (payable in cash, stock
or otherwise), as may be determined by the Board of Directors may be
declared and paid on any Junior Stock from time to time out of any funds
legally available therefor, and the shares of Series B Preferred Stock
shall not be entitled to participate in any such dividend.
(ii) PARITY STOCK. When dividends for any Dividend Payment Date are
not paid in full upon the shares of Series B Preferred Stock for any
reason other than the restrictions on payment of dividends set forth in
Section 5, and not paid in full upon any Parity Stock, all dividends
declared upon shares of Series B Preferred Stock and all Parity Stock for
such Dividend Payment Date shall be declared pro rata so that the
respective amounts of such dividends shall bear the same ratio to each
other as all dividends per share on the shares of Series B Preferred Stock
and all such Parity Stock otherwise payable on such Dividend Payment Date
(subject to their having been declared by the Board of Directors out of
legally available funds and including, in the case of any Parity Stock
that bears
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cumulative dividends, all accrued but unpaid dividends) bear to each
other. When dividends for any Dividend Payment Date are not paid in full
upon the shares of Series B Preferred Stock because of the restriction on
payment of dividends set forth in Section 5 and not paid in full upon any
Parity Stock that includes a restriction on dividends substantially
similar to the restriction in Section 5, then all dividends declared upon
shares of Series B Preferred Stock and such Parity Stock for such Dividend
Payment Date shall be declared pro rata so that the respective amounts of
such dividends shall bear the same ratio to each other as all dividends
per share on the shares of Series B Preferred Stock and all such other
Parity Stock otherwise payable on such Dividend Payment Date (subject to
their having been declared by the Board of Directors out of legally
available funds and including, in the case of any such other Parity Stock
that bears cumulative dividends, all accrued but unpaid dividends) bear to
each other.
(e) Dividend Payment Dates for Other Preferred Stock. For so long as
any shares of Series B Preferred Stock are outstanding, the Corporation
shall not issue any shares of Preferred Stock having dividend payment
dates other than the Dividend Payment Dates for the Series B Preferred
Stock.
SECTION 5. Restrictions on Declaration and Payment of Dividends.
(a) Tests for Suspension. Notwithstanding Section 4(a), neither the
Board of Directors nor any committee of the Board of Directors may declare
dividends on the Series B Preferred Stock for payment on any Dividend
Payment Date in an aggregate amount exceeding the New Common Equity Amount
as of the date of declaration (the "Dividend Declaration Date") for such
Dividend Payment Date if:
(i) the Covered Insurance Subsidiaries' Most Recent Weighted
Average NAIC RBC Ratio was less than 175% (subject to Section
5(d)(iii)); or
(ii) (x) the Trailing Four Quarters Consolidated Net Income
for the period ending on the Preliminary Quarter End Test Date for
such Dividend Payment Date is zero or a negative amount and (y) the
Adjusted Shareholders' Equity Amount as of each of the Preliminary
Quarter End Test Date and the Final Quarter End Test Date for such
Dividend Payment Date has declined by 10% or more as compared to the
Adjusted Shareholders' Equity Amount as of the tenth Quarter End
prior to such Final Quarter End Test Date (such date for such
Dividend Payment Date and related Final Quarter End Test Date, the
"Benchmark Quarter End Test Date").
Additionally, and without limiting the foregoing provisions of
this Section 5(a), if the Corporation has failed the test in Section
5(a)(ii) as to a prior
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Dividend Payment Date, then neither the Board of Directors nor any
committee of the Board of Directors may declare dividends on the Series B
Preferred Stock for payment thereafter in an aggregate amount exceeding
the New Common Equity Amount as of the Dividend Declaration Date for a
Dividend Payment Date until the Dividend Declaration Date for the first
Dividend Payment Date thereafter for which, as of the related Final
Quarter End Test Date, the Adjusted Shareholders' Equity Amount has
increased or has declined by less than 10%, in either case as compared to
the Adjusted Shareholders' Equity Amount as of the Benchmark Quarter End
Test Date for such prior Dividend Payment Date.
(b) Potential Dividend Suspension Notice. If as of the Preliminary
Quarter End Test Date for any Dividend Payment Date (x) the Trailing Four
Quarters Consolidated Net Income for the period ending on such Preliminary
Quarter End Test Date is zero or a negative amount and (y) the Adjusted
Shareholders' Equity Amount as of such Preliminary Quarter End Test Date
has declined by 10% or more as compared to the Adjusted Shareholders'
Equity Amount as of the date that is eight quarters prior to such
Preliminary Quarter End Test Date, then the Corporation shall give notice
of such circumstance by first class mail, postage prepaid, addressed to
the holders of record of the shares of Series B Preferred Stock at their
respective last addresses appearing on the books of the Corporation, and
shall file a copy of such notice on Form 8-K with the Commission (or, if
the Corporation is not then a reporting company under the Securities
Exchange Act, post a copy of such notice on the Corporation's website), by
not later than the first Dividend Payment Date following such Preliminary
Quarter End Test Date. Such notice shall (i) set forth the Trailing Four
Quarters Consolidated Net Income for the period ending on such Preliminary
Quarter End Test Date and the Adjusted Shareholders' Equity Amount as of
such Preliminary Quarter End Test Date and as of the date that is eight
quarters prior to such Preliminary Quarter End Test Date, and (ii) state
that the Corporation may be limited by the terms of the Series B Preferred
Stock from declaring and paying dividends on such Dividend Payment Date
unless the Corporation, through the generation of earnings or issuance of
new Common Stock, increases its Adjusted Shareholders' Equity Amount by an
amount specified in such notice by the second Quarter End after the date
of such notice. The Corporation need not give any notice under this
Section 5(b) during any period in which the Corporation's ability to
declare and pay dividends is limited by reason of the application of
Section 5(a).
(c) Dividend Suspension Notice. By not later than the 15th day prior
to each Dividend Payment Date for which dividends are being suspended by
reason of either of the tests set forth in Section 5(a), and the
Corporation is not otherwise able to pay dividends on the Series B
Preferred Stock out of the New Common Equity Amount, the Corporation shall
give notice of such suspension by first class mail, postage prepaid,
addressed to the holders of record of the shares of Series B Preferred
Stock at their respective last addresses appearing on the
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books of the Corporation, and shall file a copy of such notice on Form 8-K
with the Commission (or, if the Corporation is not then a reporting
company under the Securities Exchange Act, post a copy of such notice on
the Corporation's website). Such notice, in addition to stating that
dividends will be suspended, shall (i) if dividends are suspended by
reason of the test set forth in Section 5(a)(i), set forth the fact that
the Covered Insurance Subsidiaries' Most Recent Weighted Average NAIC RBC
Ratio was less than 175% and (ii) if such suspension is by reason of the
test set forth in Section 5(a)(ii), set forth the Adjusted Shareholders'
Equity Amount as of the most recent Quarter End and the amount by which
the Adjusted Shareholders' Equity Amount must increase in order for
declaration and payment of dividends to be resumed.
(d) Interpretive Provisions; Qualifications, Etc. In order to give
effect to the foregoing, the following provisions apply:
(i) Neither the Board of Directors nor a committee of the
Board of Directors may declare dividends on the Series B Preferred
Stock for payment on any Dividend Declaration Date (x) that is more
than 60 days prior to the related Dividend Payment Date or (y) that
is earlier than the date on which the Corporation's financial
statements for the most recently completed quarter prior to the
related Dividend Payment Date have been filed or furnished to the
Commission on Form 10-K, Form 10-Q or Form 8-K; provided, however,
if the Board of Directors determines to delay filing the
Corporation's financial statements as of and for the period ended on
a Final Quarter End Test Date with the Commission to a date later
than the date on which "accelerated filers" within the meaning of
Rule 12b-2 under the Securities Exchange Act are required to file
such financial statements, whether because of concerns over accuracy
of such financial statements or their compliance with U.S. GAAP or
otherwise, then the Board of Directors or a committee of the Board
of Directors may determine whether the Corporation is permitted
under Section 5(a) to declare dividends on the Series B Preferred
Stock based upon the Corporation's financial statements most
recently filed with, or furnished to the Commission.
(ii) Except as expressly provided otherwise in this Section 5,
all references in this Section 5 to financial statements of the
Corporation shall be deemed to be to financial statements prepared
in accordance with U.S. GAAP, consistently applied, and, for so long
as the Corporation is a reporting company under the Securities
Exchange Act, filed by the Corporation with, or furnished by it to,
the Commission under the Securities Exchange Act. If at any relevant
time or for any relevant period the Corporation is not a reporting
company under the Securities Exchange Act, then (x) for all relevant
dates and periods the Corporation shall prepare and post on its
website the financial statements that it would have
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been required to file with the Commission had it continued to be a
reporting company under the Securities Exchange Act, in each case on
or before the dates that the Corporation would have been required to
file such financial statements with the Commission under the
Securities Exchange Act had it continued to be an "accelerated
filer" within the meaning of Rule 12b-2 under the Securities
Exchange Act, and (y) the provisions of this Section 5 shall be read
mutatis mutandis to give effect to such provision.
(iii) The limitation on dividends provided for in Section
5(a)(i) shall be of no force and effect if, as of a Dividend
Declaration Date, the combined total assets of the Insurance
Subsidiaries do not account for 25% or more of the consolidated
total assets of the Corporation as reflected on its most recent
consolidated financial statements.
(iv) All financial terms used in this Section 5 that are not
specifically defined, including within the definitions of defined
terms, shall be determined in accordance with U.S. GAAP as applied
to and reflected in the related financial statements of the
Corporation as of the relevant dates and for the relevant period,
except as provided in the next sentence. If because of a change in
U.S. GAAP that results in a periodic charge, a cumulative adjustment
or a restatement:
(x) the Corporation's Consolidated Net Income Amount for the
quarter in which such change takes effect is higher or lower than it
would have been absent such change by the greater of $25 million or
5%, and the Trailing Four Quarters Consolidated Net Income is higher
or lower than it would have been absent such change, then, for
purposes of the calculations described under Section 5(a)(ii),
commencing with the fiscal quarter for which such changes in U.S.
GAAP becomes effective and ending with the third quarter thereafter,
such Trailing Four Quarters Consolidated Net Income shall be
calculated on a pro forma basis without giving effect to such change
in U.S. GAAP; or
(y) the Adjusted Shareholders' Equity Amount as of the Quarter
End in which such change takes effect is higher or lower than it
would have been absent such change by the greater of $65 million or
1%, then, for purposes of the calculations described under Section
5(a)(ii) and the last sentence of Section 5(a), and for so long as
such calculations with respect to such quarter are required to be
performed, the Adjusted Shareholders' Equity Amount shall be
calculated on a pro forma without giving effect to such change in
U.S. GAAP.
(e) Definitions. The following terms have the meanings indicated:
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"Adjusted Shareholders' Equity Amount" means, as of any Quarter End,
the shareholders' equity of the Corporation as reflected on its consolidated
balance sheet as of such Quarter End excluding accumulated other comprehensive
income and loss as reflected on such consolidated balance sheet, (i) subject to
Section 5(d)(iv) and (ii) except that any increase in shareholders' equity
resulting from the issuance of preferred stock (other than the Series A
Preferred Stock and the Series B Preferred Stock ) during the period from and
including the Final Quarter End Test Date for a Dividend Period as to which the
Corporation fails the test set forth in Section 5(a)(ii) through the first
Quarter End thereafter as of which the Adjusted Shareholders' Equity Amount has
declined by less than 10% or increased as compared to such amount on the
Benchmark Quarter End Test Date shall not be taken into account in calculating
the Adjusted Shareholders' Equity Amount as of such Quarter End during such
period.
"Annual Statement" means, as to an Insurance Subsidiary, the annual
statement of such Insurance Subsidiary containing its statutory balance sheet
and income statement as required to be filed by it with one or more state
insurance commissioners or other state insurance regulatory authorities.
"Benchmark Quarter End Test Date" has the meaning specified in
Section 5(a)(ii).
"Commission" means the Securities and Exchange Commission.
"Company Action Level RBC" has the meaning specified in subsection J
of Section 1 (or the relevant successor section, if any) of the Model Act.
"Consolidated Net Income Amount" means, for any fiscal quarter of
the Corporation, its consolidated net income as reflected on its consolidated
statement of operations for such fiscal quarter, subject to Section 5(d)(iv).
"Covered Insurance Subsidiaries" means, as of any Year End,
Insurance Subsidiaries that account for 80% or more of the combined General
Account Admitted Assets of the Corporation's Insurance Subsidiaries as of such
Year End. The Corporation's Insurance Subsidiaries as of a Year End shall be
identified by first ranking the Insurance Subsidiaries from largest to smallest
based upon the amount of each Insurance Subsidiary's General Account Admitted
Assets and then, beginning with the Insurance Subsidiary that has the largest
amount of General Account Admitted Assets as of such Year End, identifying such
Insurance Subsidiaries as Covered Insurance Subsidiaries until the ratio of the
combined General Account Admitted Assets of the Insurance Subsidiaries so
identified to the combined General Account Admitted Assets of all of the
Insurance Subsidiaries as of such Year End equals or exceeds 80%.
"Covered Insurance Subsidiaries' Most Recent Weighted Average NAIC
RBC Ratio" means, as of any date, an amount (expressed as a percentage)
calculated as:
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(x) the sum of the Total Adjusted Capital of each of the Covered
Insurance Subsidiaries shown on such Covered Insurance Subsidiary's most
recently filed Annual Statement, divided by
(y) the sum of the Company Action Level RBC of each of the Covered
Insurance Subsidiaries as shown on such Covered Insurance Subsidiary's
most recently filed Annual Statement.
"Dividend Declaration Date" has the meaning specified in Section
5(a).
"Final Quarter End Test Date" and "Preliminary Quarter End Test
Date" mean, with respect to a Dividend Payment Date in the relevant month
indicated under "Dividend Payment Date" in the table set forth below, the
related date indicated under "Final Quarter End Test Date" or "Preliminary
Quarter End Test Date" (as applicable) in such table:
Preliminary Final
Dividend Payment Date Quarter End Test Date Quarter End Test Date
--------------------- --------------------- ---------------------
In March The June 30 preceding such Dividend The December 31 preceding such
Payment Date Dividend Payment Date
In June The September 30 preceding such The March 31 preceding such
Dividend Payment Date Dividend Payment Date
In September The December 31 preceding such The June 30 preceding such Dividend
Dividend Payment Date Payment Date
In December The March 31 preceding such Dividend The September 30 preceding such
Payment Date Dividend Payment Date
"General Account Admitted Assets" means, as to an Insurance
Subsidiary as of any Year End, the total admitted assets of such Insurance
Subsidiary as reflected on the balance sheet included in its statutory financial
statements as of such Year End minus the separate account assets reflected on
such balance sheet.
"Insurance Subsidiary" means a subsidiary of the Corporation that is
organized under the laws of any state in the United States and is licensed as a
life insurance company in any state in the United States but does not include
any subsidiary of an Insurance Subsidiary.
"Model Act" means the Risk-Based Capital (RBC) for Insurers Model
Act as prepared by the NAIC and included in its Model Laws, Regulations and
Guidelines as of June 14, 2005 and as hereafter amended, modified or
supplemented.
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"NAIC" means the National Association of Insurance Commissioners.
"New Common Equity Amount" means, at any date, the net proceeds
(after underwriters' or placement agents' fees, commissions or discounts and
other expenses relating to the issuances) received by the Corporation from new
issuances of its Common Stock (whether in one or more public offerings
registered under the Securities Act or private placements or other transactions
exempt from registration under the Securities Act) during the period commencing
on the 90th day prior to such date, and which are designated by the Board of
Directors at or before the time of issuance as available to pay dividends on the
Series B Preferred Stock.
"Quarter End" means the last day of each fiscal quarter of the
Corporation (i.e., March 31, June 30, September 30 and December 31).
"Securities Act" means the Securities Act of 1933, as amended.
"Total Adjusted Capital" has the meaning specified in subsection M
of Section 1 (or the relevant successor section, if any) of the Model Act.
"Trailing Four Quarters Consolidated Net Income" means, for any
period ending on a Quarter End, the sum of the Consolidated Net Income Amounts
for the Corporation's four fiscal quarters ending on such Quarter End, with
losses being treated as negative numbers for such purpose.
"U.S. GAAP" means, at any date or for any period, U.S. generally
accepted accounting principles as in effect on such date or for such period.
"Year End" means the last day of each fiscal year of the
Corporation.
SECTION 6. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation,
holders of Series B Preferred Stock shall be entitled, before any
distribution or payment out of the assets of the Corporation may be made
to or set aside for the holders of any Junior Stock, to receive in full an
amount equal to $25 per share (the "Liquidation Preference"), together
with an amount equal to all accrued and unpaid dividends for the
then-current Dividend Period to the date of payment.
(b) Partial Payment. If the assets of the Corporation are not
sufficient to pay the Liquidation Preference in full to all holders of
Series B Preferred Stock and all holders of any Parity Stock, the amounts
paid to the holders of Series B Preferred Stock and to the holders of all
Parity Stock shall be paid pro rata in
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accordance with the respective aggregate liquidation preferences of Series
B Preferred Stock and all such Parity Stock.
(c) Residual Distributions. If the Liquidation Preference has been
paid in full to all holders of Series B Preferred Stock and the
liquidation preference of any Parity Stock has been paid in full to all
holders of such Parity Stock, the holders of Junior Stock shall be
entitled to receive all remaining assets of the Corporation according to
their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For
purposes of this Section 6, the merger or consolidation of the Corporation
with any other corporation, including a merger in which the holders of
Series B Preferred Stock receive cash or property for their shares, or the
sale of all or substantially all of the assets of the Corporation, shall
not constitute a liquidation, dissolution or winding up of the affairs of
the Corporation.
SECTION 7. Redemption.
(a) Redemption. So long as the full dividends on all outstanding
shares of Series B Preferred Stock for the then-current Dividend Period
have been paid or declared and a sum sufficient for the payment thereof
set aside, the Corporation, at the option of its Board of Directors, may,
upon notice given as provided in Section 7(b), redeem the shares of Series
B Preferred Stock at the time outstanding in whole or, subject to the next
succeeding sentence, in part (i) on any Dividend Payment Date during the
Initial Fixed Rate Period beginning on or after the Dividend Payment Date
in June 2015, (ii) on such dates with respect to any other Fixed Rate
Period as the Corporation may determine prior to the commencement of such
Fixed Rate Period or (iii) at any time during a Floating Rate Period. A
redemption of shares of Series B Preferred Stock in part may be made
pursuant to the foregoing sentence only if, after giving effect to such
redemption, not less than 2,000,000 shares of Series B Preferred Stock
will remain outstanding. Any such redemption shall be at the redemption
price of $25 per share, together, in each case, with accrued and unpaid
dividends for the then-current Dividend Period to the redemption date.
(b) Notice of Redemption. Notice of every redemption of shares of
Series B Preferred Stock shall be mailed by first class mail, postage
prepaid, addressed to the holders of record of the shares to be redeemed
at their respective last addresses appearing on the books of the
Corporation. Such mailing shall be at least 30 days and not more than 60
days before the date fixed for redemption. Any notice mailed as provided
in this Subsection shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice, but failure duly to give
such notice by mail, or any defect in such notice or in the mailing
thereof, to any holder of shares of Series B Preferred Stock designated
for redemption shall not affect the validity of the proceedings for the
redemption of
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any other shares of Series B Preferred Stock. Each notice shall state (i)
the redemption date; (ii) the number of shares of Series B Preferred Stock
to be redeemed; (iii) the redemption price; (iv) the place or places where
the shares of Series B Preferred Stock are to be redeemed; and (v) that
dividends on the shares of Series B Preferred Stock to be redeemed will
cease to accrue on the redemption date.
(c) Partial Redemption. In case of any redemption of only part of
the shares of Series B Preferred Stock at the time outstanding, the shares
to be redeemed shall be selected either pro rata or by lot or in such
other manner as the Board of Directors may determine to be fair and
equitable. Subject to the provisions hereof, the Board of Directors shall
have full power and authority to prescribe the terms and conditions upon
which shares of Series B Preferred Stock shall be redeemed from time to
time.
(d) Effectiveness of Redemption. If notice of redemption has been
duly given and if on or before the redemption date specified in the notice
all funds necessary for the redemption have been set aside by the
Corporation, separate and apart from its other funds, in trust for the pro
rata benefit of the holders of the shares called for redemption, so as to
be and continue to be available therefor, then, notwithstanding that any
certificate for any share so called for redemption has not been
surrendered for cancellation, on and after the redemption date all shares
so called for redemption shall cease to be outstanding and all rights with
respect to such shares shall forthwith on such redemption date cease and
terminate, except only the right of the holders thereof to receive the
amount payable on such redemption without interest. Any funds unclaimed at
the end of three years from the redemption date shall, to the extent
permitted by law, be released to the Corporation, after which time the
holders of the shares so called for redemption shall look only to the
Corporation for payment of the redemption price of such shares.
SECTION 8. Voting Rights.
(a) General. The holders of Series B Preferred Stock shall not have
any voting rights except as set forth in this Section 8 or as otherwise
required by law.
(b) Right to Elect Two Directors Upon Non-Payment of Dividends. If
and whenever dividends on Series B Preferred Stock and any other class or
series of stock of the Corporation ranking on a parity with Series B
Preferred Stock as to payment of dividends (any such class or series being
herein referred to as "Dividend Parity Stock") have not been paid in an
aggregate amount, as to any such class or series, equal to at least six
quarterly dividends (whether or not consecutive), the number of directors
then constituting the Board of Directors shall be increased by two and the
holders of Series B Preferred Stock, together
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with the holders of all other affected classes and series of Dividend
Parity Stock similarly entitled to vote for the election of a total of two
additional directors, voting separately as a single class, shall be
entitled to elect the two additional members of the Corporation's
directors at any annual meeting of stockholders or any special meeting of
the holders of Series B Preferred Stock and such Dividend Parity Stock for
which dividends have not been paid, called as hereinafter provided,
provided that the election of any such directors shall not cause the
Corporation to violate the corporate governance requirement of the New
York Stock Exchange (or any other exchange on which its securities may be
listed) that listed companies must have a majority of independent
directors. Whenever full dividends have been paid regularly on the Series
B Preferred Stock and Dividend Parity Stock then outstanding, if any, for
at least one year, then the right of the holders of Series B Preferred
Stock and such Dividend Parity Stock to elect such additional two
directors shall cease (but subject always to the same provisions for the
vesting of such voting rights in the case of any similar non-payment of
dividends in respect of future Dividend Periods), and the terms of office
of all persons elected as directors by the holders of Series B Preferred
Stock and such Dividend Parity Stock for which dividends have not been
paid shall forthwith terminate and the number of directors constituting
the Board of Directors shall be reduced accordingly. At any time after
such voting power shall have been so vested in the holders of Series B
Preferred Stock and such Dividend Parity Stock, the Secretary of the
Corporation may, and upon the written request of any holder of shares of
Series B Preferred Stock (addressed to the Secretary at the principal
office of the Corporation) shall, call a special meeting of the holders of
shares of Series B Preferred Stock and such Dividend Parity Stock for
which dividends have not been paid for the election of the two directors
to be elected by them as herein provided, such call to be made by notice
similar to that provided in the by-laws for a special meeting of the
stockholders or as required by law. If any such special meeting so
required to be called shall not be called by the Secretary within 20 days
after receipt of any such request, then any holder of shares of Series B
Preferred Stock may (at the Corporation's expense) call such meeting, upon
notice as herein provided, and for that purpose shall have access to the
stock books of the Corporation. The directors elected at any such special
meeting shall hold office until the next annual meeting of the
stockholders if such office shall not have previously terminated as above
provided. In case any vacancy shall occur among the directors elected by
the holders of Series B Preferred Stock and such Dividend Parity Stock for
which dividends have not been paid, a successor shall be elected by the
Board of Directors to serve until the next annual meeting of the
stockholders upon the nomination of the then remaining director elected by
the holders of Series B Preferred Stock and such Dividend Parity Stock for
which dividends have not been paid or the successor of such remaining
director.
(c) Other Voting Rights. So long as any shares of Series B Preferred
Stock are outstanding, in addition to any other vote or consent of
stockholders required by law or by the amended and restated certificate of
incorporation, the
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vote or consent of the holders of at least 66 2/3% of the shares of Series
B Preferred Stock at the time outstanding, voting separately as a single
class, given in person or by proxy, either in writing without a meeting or
by vote at any meeting called for the purpose, shall be necessary for
effecting or validating:
(i) any amendment, alteration or repeal of any provision of
the amended and restated certificate of incorporation or by-laws of
the Corporation that would alter or change the voting powers,
preferences or special rights of the Series B Preferred Stock so as
to affect them adversely; provided, however, that the amendment of
the amended and restated certificate of incorporation so as to
authorize or create, or to increase the authorized amount of, any
Junior Stock or any shares of any class or series or any securities
convertible into shares of any class or series of Parity Stock shall
not be deemed to affect adversely the voting powers, preferences or
special rights of the Series B Preferred Stock;
(ii) any amendment or alteration of the amended and restated
certificate of incorporation of the Corporation to authorize or
create, or increase the authorized amount of, any shares of any
class or series or any securities convertible into shares of any
class or series of capital stock of the Corporation ranking prior to
Series B Preferred Stock in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up
of the Corporation; or
(iii) consummation of a binding share exchange or
reclassification involving the Series B Preferred Stock or a merger
or consolidation of the Corporation with another entity, unless in
each case (i) the Series B Preferred Stock remain outstanding or, in
the case of any such merger or consolidation with respect to which
the Corporation is not the surviving or resulting entity, are
converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (ii) such
Series B Preferred Stock remaining outstanding or such preference
securities, as the case may be, have such rights, preferences,
privileges and voting powers, taken as a whole, as are not
materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers of the Series B Preferred
Stock, taken as a whole;
provided, however, that any increase in the amount of the authorized or issued
Series B Preferred Stock or authorized preferred stock or the creation and
issuance, or an increase in the authorized or issued amount, of other Parity
Stock and/or Junior Stock (whether such stock bears dividends on a cumulative or
non-cumulative basis) will not be deemed to adversely affect the special rights,
preferences, privileges or voting powers of the Series B Preferred Stock.
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If an amendment, alteration, repeal, share exchange,
reclassification, merger or consolidation described above would adversely affect
one or more but not all series of voting preferred stock (including the Series B
Preferred Stock for this purpose), then only the series affected and entitled to
vote shall vote as a class in lieu of all such series of preferred stock.
Without the consent of the holders of the Series B Preferred Stock,
so long as such action does not adversely affect the special rights,
preferences, privileges and voting powers of the Series B Preferred Stock, taken
as a whole, the Corporation may amend, alter, supplement or repeal any terms of
the Series B Preferred Stock:
(x) to cure any ambiguity, or to cure, correct or supplement any provision
contained in the certificate of designations for the Series B Preferred
Stock that may be defective or inconsistent; or
(y) to make any provision with respect to matters or questions arising
with respect to the Series B Preferred Stock that is not inconsistent with
the provisions of the certificate of designations.
The foregoing voting provisions will not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding Series B Preferred Stock shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been set aside by the Corporation for the benefit of the holders of
Series B Preferred Stock to effect such redemption.
SECTION 9. Other Rights. The shares of Series B Preferred Stock
shall not have any voting powers, preferences or relative, participating,
optional or other special rights, or qualifications, limitations or restrictions
thereof, other than as set forth herein or in the amended and restated
certificate of incorporation of the Corporation.
SECTION 10. Restatement of Certificate. Upon any restatement of the
amended and restated certificate of incorporation of the Corporation, Sections 1
through 9 of this certificate of designations shall be included in Article 2 of
the amended and restated certificate of incorporation under the heading "Series
B Non-Cumulative Perpetual Preferred Stock" and this Section 10 may be omitted.
If the Board of Directors so determines, the numbering of Sections 1 through 9
may be changed for convenience of reference or for any other proper purpose."
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IN WITNESS WHEREOF, Principal Financial Group, Inc. has caused this
certificate to be executed by the undersigned on this 16th day of June, 2005.
PRINCIPAL FINANCIAL GROUP, INC.
By /s/ C.L. Bassett
--------------------------------------------
Name: C.L. Bassett
Title: Vice President and Treasurer
By /s/ Joyce N. Hoffman
--------------------------------------------
Name: Joyce N. Hoffman
Title: Senior Vice President and
Corporate Secretary
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