Document:

EXECUTION COPY
                                 AMENDMENT NO. 2

                  AMENDMENT NO. 2, dated as of August 1, 2004 (this
"Amendment"), to the Credit Agreement, dated as of February 4, 2003 (as amended
by that certain Amendment No. 1, Consent and Waiver dated as of November 12,
2003 and as otherwise amended, supplemented or modified to the date hereof, the
"Credit Agreement"), among WARNACO INC., a Delaware corporation (the
"Borrower"), THE WARNACO GROUP, INC. ("Group"), the financial institutions from
time to time party thereto as lenders (the "Lenders"), the financial
institutions from time to time party thereto as issuers (the "Issuers"),
CITICORP NORTH AMERICA, INC. ("CNAI"), as administrative agent and collateral
agent for the Lenders and the Issuers (in such capacity, the "Administrative
Agent"), JPMORGAN CHASE BANK, as syndication agent for the Lenders and the
Issuers and BANK OF AMERICA, NA, THE CIT GROUP/COMMERCIAL SERVICES, INC., and
CONGRESS FINANCIAL CORPORATION (CENTRAL), each as a co-documentation agent for
the Lenders and Issuers. Capitalized terms used herein but not defined herein
are used as defined in the Credit Agreement.

                              W I T N E S S E T H:

                  WHEREAS, the Borrower, Group, the Lenders, the Issuers and the
Administrative Agent are party to the Credit Agreement and the undersigned
Lenders constitute the Requisite Lenders;

                  WHEREAS, the Borrower has requested that the Administrative
Agent and the Lenders agree to reduce the Commitments of the Lenders ratably by
$100,000,000 to $175,000,000 and to concurrently increase the amount of Facility
Increase available under Section 2.18 of the Credit Agreement from $50,000,000
to $150,000,000;

                  WHEREAS, the Borrower has also requested that the
Administrative Agent and the Lenders constituting the Requisite Lenders agree to
amend the Credit Agreement (i) to increase the amount of permitted other
Indebtedness and permitted other Liens to $10,000,000, in each case; (ii) to
increase certain permitted Investments by a Loan Party in Warnaco Entities that
are not Loan Parties to $10,000,000, subject to the receipt by the
Administrative Agent, for the benefit of the Secured Parties, of a perfected
pledge of 100% of the Stock (or, in the case of a Foreign Subsidiary, no more
than 65% of the Voting Stock) of any such Warnaco Entity; (iii) to permit the
Borrower to make investments in investment grade debt securities; (iv) to permit
the Borrower to pay dividends and repurchase debt and equity, up to an aggregate
amount of $50,000,000 if, after giving effect to such payment, Cash on Hand is
greater than or equal to $50,000,000; and (v) to permit an Asset Sale for 50%
cash and 50% notes receivable in certain circumstances (which notes shall be in
form and substance reasonably satisfactory to the Administrative Agent and
pledged to the Administrative Agent, for the benefit of the Lenders); and

                  WHEREAS, pursuant to Section 11.1 (Amendments, Waiver, Etc.)
of the Credit Agreement, the consent of the Requisite Lenders is required to
amend the provisions of the Credit Agreement as set forth herein;

                  NOW, THEREFORE, in consideration of the premises and the
covenants and obligations contained herein the parties hereto agree as follows:

       SECTION 1.        REDUCTION OF COMMITMENTS; INCREASE IN AMOUNT OF
FACILITY INCREASE

                   Effective as of the Amendment Effective Date the Commitments
shall be reduced to $175,000,000 ratably with respect to each Lender.

       SECTION 2.        AMENDMENTS TO CREDIT AGREEMENT

                  The Credit Agreement is, effective as of the Amendment
Effective Date and subject to the satisfaction (or due waiver) of the conditions
set forth in Section 3 (Conditions Precedent to the Effectiveness of this
Amendment) hereof, hereby amended as follows:

                  (a)  INSERTION OF THE DEFINITION OF "INVESTMENT  GRADE DEBT
SECURITIES" IN ARTICLE I (DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS). The
following  definition of "Investment Grade Debt Securities" shall be inserted in
the correct alphabetical order as follows:

                  "Investment Grade Debt Securities" means any bond, debenture,
                  note or other evidence of indebtedness which is rated at least
                  BBB- by Standard & Poor's Rating Services and Baa3 by Moody's
                  Investors Services, Inc.

                  (b)  AMENDMENTS TO SECTION 2.18 (FACILITY  INCREASE).  Section
2.18(a) of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:

                  (a) The Borrower may (no more frequently than three times (in
                  minimum increments of $50,000,000) during the term of the
                  Facility) request the Lenders or other Eligible Assignees to
                  provide additional Commitments up to an aggregate amount not
                  in excess of $150,000,000 (a "Facility Increase"); provided,
                  however, that (i) the Borrower shall have given the
                  Administrative Agent at least 60 days notice of its intention
                  to effect the Facility Increase and the desired amount of such
                  Facility Increase, (ii) the conditions precedent to a
                  Borrowing set forth in Section 3.2 are satisfied as of the
                  Facility Increase Effective Date (as defined below), (iii) an
                  opinion of counsel to the Loan Parties in form and substance
                  and from counsel satisfactory to the Administrative Agent and
                  addressed to the Administrative Agent, the Issuers and the
                  Lenders dated the Facility Increase Effective Date and
                  addressing such matters as the Administrative Agent may
                  reasonably request shall be delivered to the Administrative
                  Agent and (iv) the Borrower shall have paid to the Agents a
                  fee to be determined (but in any event reasonably acceptable
                  to Group) and to the Lenders providing the Facility Increase
                  fees required in order to clear the market in an amount to be
                  determined.

                  (c) AMENDMENTS TO SECTION 8.1 (INDEBTEDNESS).

                  (i) Section 8.1(n) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:

                  (n) other Indebtedness the aggregate Dollar Equivalent of the
                  principal amount of which shall not exceed $10,000,000 at any
                  time.

                  (d) AMENDMENTS TO SECTION 8.2 (LIENS, ETC.). Section 8.2(l) of
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:

                  (l) other Liens not otherwise permitted under this Section
                  8.2, securing obligations in an amount not to exceed
                  $10,000,000 in an aggregate amount outstanding at any time.

                  (e) AMENDMENTS TO SECTION 8.3 (INVESTMENTS).

                  (i) Section 8.3(a) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:

                  (a) Investments (i) by any  Warnaco Entity in any Warnaco
                  Entity in an amount not exceeding the amount outstanding on
                  the date hereof and as set forth on Schedule 8.3,

                                       2

                  and (ii) additional Investments by (A) any Warnaco Entity in a
                  Loan Party, (B) any Warnaco Entity that is not a Loan Party in
                  any other Warnaco Entity, and (C) any Loan Party in a Warnaco
                  Entity that is not a Loan Party (1) to the extent required by
                  applicable law to fulfill statutory capital requirements in a
                  maximum aggregate amount up to $10,000,000, and (2) solely for
                  the purposes of funding (x) the operations of such Foreign
                  Subsidiary (including Standby Letters of Credit Issued for the
                  benefit of such Foreign Subsidiaries), not to exceed in the
                  aggregate $25,000,000 at any time outstanding under this
                  subclause (a)(ii)(C)(2)(x), (y) up to $15,000,000 of
                  investments in Lejaby SAS to fund costs associated with the
                  reorganization of its European operations and (z) operating
                  expenses of Foreign Subsidiaries in Hong Kong, Central America
                  and Mexico and (3) to the extent necessary for such entity to
                  pay taxes that are due and payable; provided, that in each
                  case (other than investments made as capital contributions
                  pursuant to subclause (ii)(C)(1)) such Investment shall be
                  evidenced by a promissory note in form and substance
                  satisfactory to the Administrative Agent, the Administrative
                  Agent shall have a perfected security interest in such
                  promissory note and no Event of Default shall have occurred
                  and be continuing at the time such Investment is made or would
                  result therefrom; provided, further, that in the case of
                  investments made as capital contributions pursuant to
                  subclause (ii)(C)(1) such Investment shall be permitted only
                  to the extent that substantially concurrently with such
                  Investment the Borrower shall have complied with the
                  requirements of Section 7.11(b) (Additional Personal Property
                  Collateral and Guaranties);

                  (ii) Section 8.3(b) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:

                  (b) Investments in (i) cash and Cash Equivalents; provided
                  that such cash and Cash Equivalents held by a Loan Party are
                  held in a Blocked Account, a Restricted Account, a Control
                  Account, or otherwise in compliance with Section 4.7 of the
                  Pledge and Security Agreement, and (ii) Investment Grade Debt
                  Securities; provided that Investment Grade Debt Securities
                  held by a Loan Party are held in a Securities Account, or
                  otherwise in compliance with Section 4.4 of the Pledge and
                  Security Agreement;

                  (iii) Section 8.3(d) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:

                  (d) Investments in payment intangibles, chattel paper (each as
                  defined in the UCC) and Accounts, notes receivable (including
                  but not limited to those notes receivable held by the Borrower
                  or its Subsidiaries pursuant to clause (b) of Section 8.4) and
                  similar items arising or acquired in the ordinary course of
                  business consistent with the past practice of the Borrower and
                  its Subsidiaries;

                  (f) AMENDMENTS TO SECTION 8.4 (SALE OF ASSETS). Section 8.4(b)
of the Credit Agreement is hereby amended and restated in its entirety as
follows:

                  (b) the sale of any asset or assets by a Warnaco Entity as
                  long as (i) the purchase price paid to such Warnaco Entity for
                  such asset shall be no less than the Fair Market Value of such
                  asset at the time of such sale, (ii) not less than 100% of the
                  purchase price for such asset shall be paid in cash (provided
                  that (A) in the case of an Asset Sale consummated when no Loan
                  or Loans or unreimbursed amounts in respect of drawn Letters
                  of Credit are outstanding, 50% of the purchase price for such
                  asset may be paid in cash and the remaining amount paid in
                  notes receivable (which notes receivable shall be in form and
                  substance reasonably satisfactory to the Administrative Agent
                  and, if held by a Loan Party, pledged to the Administrative
                  Agent, for the benefit of the Lenders), and

                                       3

                  (B) in the case of an Asset Sale of all or substantially all
                  the assets described on Schedule 8.4 (Permitted Asset Sales),
                  the portion of the purchase price paid in cash shall be the
                  greater of (x) 75% and (y) the value of the Borrowing Base
                  relating to such assets plus any current liabilities relating
                  to such assets which are not assumed by the purchaser thereof)
                  to such Warnaco Entity, (iii) neither the seller of such
                  assets nor any of its Affiliates shall have any subsequent
                  payment obligations in respect of such sale, other than
                  customary and standard indemnity obligations and as set forth
                  in subclause (ii) above, (iv) no Default or Event of Default
                  has occurred and is continuing at the time of such sale or
                  would result from such sale, and (v) the aggregate purchase
                  price paid to all Warnaco Entities for all assets sold
                  pursuant to this clause (b) shall not exceed $20,000,000 in
                  the aggregate;

                  (g) AMENDMENTS TO SECTION 8.5 (RESTRICTED PAYMENTS).  Section
8.5 (Restricted Payments) of the Credit Agreement is hereby amended by (i)
deleting "and" at the end of clause (b), (ii) inserting "and" at the end of
subclause (c)(iii) and (iii) inserting a new clause (d) immediately after
subclause (c)(iii) thereof to read in its entirety as follows:

                  (d) Restricted Payments by any Warnaco Entity up to an
                  aggregate amount, together with any payment made under Section
                  8.6(b)(vi), of $50,000,000, if after giving effect to such
                  Restricted Payment, Cash on Hand is at least equal to
                  $50,000,000;

                  (h) AMENDMENTS TO SECTION 8.6 (PREPAYMENT AND  CANCELLATION OF
INDEBTEDNESS). Section 8.6(b) of the Credit Agreement is hereby amended and
restated in its entirety as follows:

                  (b) Neither Group nor the Borrower shall, nor shall they
                  permit any of their respective Subsidiaries to, prepay,
                  redeem, purchase, defease or otherwise satisfy prior to the
                  scheduled maturity thereof in any manner, or make any payment
                  in violation of any subordination terms of, any Indebtedness;
                  provided, however, that any Warnaco Entity may: (i) prepay the
                  Obligations in accordance with the terms of this Agreement,
                  (ii) make regularly scheduled or otherwise required repayments
                  or redemptions of Indebtedness (other than the Second Lien
                  Notes in respect of which payments may only be made subject to
                  clause (c) and clause (d) below), (iii) prepay any
                  intercompany Indebtedness payable to the Borrower or any of
                  its Subsidiaries by the Borrower or any of its Subsidiaries,
                  (iv) beginning on June 30, 2004 repurchase the Take-Out
                  Securities in the open market using then available Cash On
                  Hand in an aggregate amount not to exceed $10,000,000, (v)
                  renew, extend, refinance and refund Indebtedness, as long as
                  such renewal, extension, refinancing or refunding is permitted
                  under Section 8.1(g) and (vi) prepay, redeem, purchase,
                  defease or otherwise satisfy prior to the scheduled maturity
                  thereof any Indebtedness of any Warnaco Entity up to an
                  aggregate amount, together with any payment made under Section
                  8.5(d) (but not including any payments on Indebtedness
                  permitted in clauses (i) through (v) above), of $50,000,000,
                  if after giving effect to such payment, Cash on Hand is at
                  least equal to $50,000,000.

                  SECTION 3. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS
AMENDMENT

                  This Amendment shall become effective as of the date first
written above when, and only when, each of the following conditions precedent
shall have been satisfied (the "Amendment Effective Date") or duly waived by the
Administrative Agent:

                  (a) CERTAIN DOCUMENTS

                  The Administrative Agent shall have received each of the
following, each dated the Amendment Effective Date (unless otherwise agreed by
the Administrative Agent), in form and substance satisfactory to the
Administrative Agent and in sufficient copies for each Lender:

                                       4

                  (i) this Amendment, duly executed by the Borrower, Group, the
Administrative Agent and Lenders constituting Requisite Lenders;

                  (ii) the Consent, Agreement and Affirmation of Guaranty in
form attached hereto as Exhibit A, duly executed by each of the Subsidiary
Guarantors; and

                  (iii) such additional documentation as the Administrative
Agent may reasonably require.

                  (b) REPRESENTATIONS AND WARRANTIES

                  Each of the representations and warranties contained in
Article IV (Representations and Warranties) of the Credit Agreement, the other
Loan Documents or in any certificate, document or financial or other statement
furnished at any time under or in connection therewith are true and correct in
all material respects on and as of the date hereof and the Amendment Effective
Date, in each case as if made on and as of such date and except to the extent
that such representations and warranties specifically relate to a specific date,
in which case such representations and warranties shall be true and correct in
all material respects as of such specific date; provided, however, that
references therein to the "Credit Agreement" shall be deemed to refer to the
Credit Agreement as amended by this Amendment and after giving effect to the
amendments set forth herein.

                  (c) NO DEFAULT OR EVENT OF DEFAULT

                  After giving effect to this Amendment, no Default or Event of
Default (except for those that may have been duly waived) shall have occurred
and be continuing, either on the date hereof or on the Amendment Effective Date.

                  (d) FEES AND EXPENSES PAID

                  The Borrower shall have paid all Obligations due, after giving
effect to this Amendment, on or before the later of the date hereof and the
Amendment Effective Date and all costs and expenses of the Administrative Agent
in connection with the preparation, reproduction, execution and delivery of this
Amendment and all other Loan Documents entered into in connection herewith
(including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Administrative Agent with respect thereto and all other Loan
Documents) and all other costs, expenses and fees due under any Loan Document.

                  SECTION 4. REPRESENTATIONS AND WARRANTIES

                  On and as of the date hereof and as of the Amendment Effective
Date, after giving effect to this Amendment, the Borrower hereby represents and
warrants to the Administrative Agent and each Lender as follows:

                  (a) this Amendment has been duly authorized, executed and
delivered by the Borrower and Group and constitutes a legal, valid and binding
obligation of the Borrower and Group, enforceable against the Borrower and Group
in accordance with its terms and the Credit Agreement as amended by this
Amendment and constitutes the legal, valid and binding obligation of the
Borrower and Group, enforceable against the Borrower and Group in accordance
with its terms;

                  (b) each of the representations and warranties contained in
Article IV (Representations and Warranties) of the Credit Agreement, the other
Loan Documents or in any certificate, document or financial or other statement
furnished at any time under or in connection therewith are true and correct in
all material respects on and as of the date hereof and the Amendment Effective
Date, in each case as if made on and as of such date and except to the extent
that such

                                       5

representations and warranties specifically relate to a specific date, in which
case such representations and warranties shall be true and correct in all
material respects as of such specific date; provided, however, that references
therein to the "Credit Agreement" shall be deemed to refer to the Credit
Agreement as amended hereby and after giving effect to the amendments set forth
herein;

                  (c) no Default or Event of Default has occurred and is
continuing (except for those that are duly waived); and

                  (d) no litigation has been commenced against any Loan Party or
any of its Subsidiaries seeking to restraint or enjoin (whether temporarily,
preliminarily or permanently) the performance of any action by any Loan Party
required or contemplated by this Amendment, the Credit Agreement or any Loan
Document, in each case as amended hereby (if applicable).

                  SECTION 5. REFERENCE TO THE EFFECT ON THE LOAN DOCUMENTS

                  (a) As of the Amendment  Effective Date, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof," "herein," or words
of like import, and each reference in the other Loan Documents to the Credit
Agreement (including, without limitation, by means of words like "thereunder,"
"thereof" and words of like import), shall mean and be a reference to the Credit
Agreement as amended hereby, and this Amendment and the Credit Agreement shall
be read together and construed as a single instrument. Each of the table of
contents and lists of Exhibits and Schedules of the Credit Agreement shall be
amended to reflect the changes made in this Amendment as of the Amendment
Effective Date.

                  (b) Except as expressly amended hereby or specifically  waived
above, all of the terms and provisions of the Credit Agreement and all other
Loan Documents are and shall remain in full force and effect and are hereby
ratified and confirmed.

                  (c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Lenders, Issuers, Arranger or the
Administrative Agent under any of the Loan Documents, nor constitute a waiver or
amendment of any other provision of any of the Loan Documents or for any purpose
except as expressly set forth herein.

                  (d) This Amendment is a Loan Document.

                  SECTION 6. EXECUTION IN COUNTERPARTS

                  This Amendment may be executed in any number of counterparts
and by different parties in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are attached to the same document. Delivery of an executed
counterpart by telecopy shall be effective as delivery of a manually executed
counterpart of this Amendment.

                  SECTION 7. GOVERNING LAW

                  This Amendment shall be governed by and construed in
accordance with the law of the State of New York.

                                       6

                  SECTION 8. SECTION TITLES

                  The section titles contained in this Amendment are and shall
be without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto, except when used to reference
a section.

                  SECTION 9. NOTICES

                  All communications and notices hereunder shall be given as
provided in the Credit Agreement or, as the case may be, the Guaranty.

                  SECTION 10. SEVERABILITY

                  The fact that any term or provision of this Amendment is held
invalid, illegal or unenforceable as to any person in any situation in any
jurisdiction shall not affect the validity, enforceability or legality of the
remaining terms or provisions hereof or the validity, enforceability or legality
of such offending term or provision in any other situation or jurisdiction or as
applied to any person

                  SECTION 11. SUCCESSORS

                  The terms of this Amendment shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.

                  SECTION 12. WAIVER OF JURY TRIAL

                  EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES TRIAL BY JURY IN
ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AMENDMENT OR ANY OTHER LOAN
DOCUMENT.

                                       7

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

                            WARNACO INC.,
                             as Borrower

                            By: /s/ Jay A. Galluzzo
                               --------------------
                               Name: Jay A. Galluzzo
                               Title: Vice President, General Counsel
                                      and Secretary

                            THE WARNACO GROUP, INC.,
                             as Group

                            By: /s/ Jay A. Galluzzo
                               --------------------
                              Name: Jay A. Galluzzo
                              Title: Vice President, General Counsel
                                     and Secretary

                            CITICORP NORTH AMERICA INC.,
                             as Administrative Agent and a Lender

                            By: /s/ Keith R. Gerding
                               ---------------------
                               Name: Keith R. Gerding
                               Title: Vice President

                            JPMORGAN CHASE BANK,
                             as Syndication Agent and a Lender

                            By: /s/ Illegible
                               ---------------------
                               Name: Illegible
                               Title: Vice President

                            BANK OF AMERICA, NA,
                             as a Co-Documentation Agent, an Issuer and a Lender

                            By: /s/ Kevin W. Corcoran
                               ----------------------
                             Name: Kevin W. Corcoran
                             Title: Vice President

                            THE CIT GROUP/COMMERCIAL SERVICES, INC.,
                             as a Co-Documentation Agent and a Lender

                            By: /s/ Charles M. Carbone
                                ----------------------
                                Name: Charles M. Carbone
                                Title: Vice President

                            CONGRESS FINANCIAL CORPORATION (CENTRAL)
                             as a Co-Documentation Agent and a Lender

                            By: /s/ Anthony Vizgirda
                               ---------------------
                                Name: Anthony Vizgirda
                                Title: First Vice President

                            THE BANK OF NOVA SCOTIA,
                             as an Issuer and a Lender

                            By: /s/ Todd S. Meller
                                ------------------
                                Name: Todd S. Meller
                                Title: Managing Director

                            AMSOUTH BANK,
                             as a Lender

                            By:
                               -------------------
                               Name:
                               Title:

                            FLEET RETAIL FINANCE INC.,
                             as a Lender

                            By: /s/ Sally A. Sheehan
                                --------------------
                                Name: Sally A. Sheehan
                                Title: Managing Director

                            WELLS FARGO FOOTHILL (formerly, Foothill Capital
                             Corporation),
                             as a Lender

                            By: /s/ Patrick McCormack
                               ----------------------
                               Name: Patrick McCormack
                               Title: Assistant Vice President

                            GMAC COMMERCIAL FINANCE LLC,
                             as a Lender

                            By: /s/ Marline Alexander-Thomas
                                ----------------------------
                                Name: Marline Alexander-Thomas
                                Title: Vice President

                            MERRILL LYNCH CAPITAL, A DIVISION OF MERRILL
                             LYNCH BUSINESS FINANCIAL SERVICES INC.,
                             as a Lender

                            By:
                               ------------------------------
                               Name:
                               Title:

                            NATIONAL CITY BUSINESS CREDIT, INC.,
                             as a Lender

                            By: /s/ Michael Fine
                                -----------------------------
                                Name: Michael Fine
                                Title: Director

                           LASALLE BUSINESS CREDIT, LLC,
                            as a Lender

                            By: /s/ Karoline Moxham
                               ------------------------------
                               Name: Karoline Moxham
                               Title: Vice President

                            ORIX FINANCIAL SERVICES, INC.,
                             as a Lender

                            By: /s/ Christopher L. Smith
                                ------------------------
                               Name: Christopher L. Smith
                               Title: Authorized Representative

                            PNC BANK, NATIONAL ASSOCIATION,
                             as a Lender

                            By:
                                -------------------------
                                Name:
                                Title:

                            SIEMENS FINANCIAL SERVICES, INC.,
                             as a Lender

                            By: /s/ Frank Amodio
                                -------------------------
                                Name: Frank Amodio
                                Title: Vice President - Credit

                            WHITEHALL BUSINESS CREDIT CORPORATION,
                             as a Lender

                            By:
                                --------------------------
                                Name:
                                Title:

                            UPS CAPITAL CORPORATION,
                             as a Lender

                            By:
                                --------------------------
                                Name:
                                Title:

                                                                      EXHIBIT A

                 CONSENT, AGREEMENT AND AFFIRMATION OF GUARANTY

                  Each of the undersigned Guarantors hereby consents to the
terms of the foregoing Amendment No. 2 in its capacity as a Guarantor under the
Credit Agreement and agrees that the terms thereof shall not affect in any way
its obligations and liabilities under the Loan Documents (as amended and
otherwise expressly modified thereby), all of which obligations and liabilities
shall remain in full force and effect and each of which is hereby reaffirmed (as
amended and otherwise expressly modified thereby).

                                         184 BENTON STREET, INC.
                                         A.B.S. CLOTHING COLLECTION, INC.
                                         ABBEVILLE MANUFACTURING COMPANY
                                         WARNACO SWIMWEAR INC.
                                         AUTHENTIC FITNESS ON-LINE, INC.
                                         WARNACO SWIMWEAR PRODUCTS, INC.
                                         AUTHENTIC FITNESS RETAIL INC.
                                         CALVIN KLEIN JEANSWEAR COMPANY
                                         CCC ACQUISITION CORP.
                                         C.F. HATHAWAY COMPANY
                                         CKJ HOLDINGS, INC.
                                         DESIGNER HOLDINGS LTD.
                                         GREGORY STREET, INC.
                                         JEANSWEAR HOLDINGS, INC.
                                         KAI JAY MANUFACTURING COMPANY
                                         MYRTLE AVENUE, INC.
                                         OUTLET HOLDINGS, INC.
                                         OUTLET STORES, INC.
                                         RIO SPORTSWEAR, INC.
                                         UBERTECH PRODUCTS, INC.
                                         WARNACO MEN'S SPORTSWEAR, INC.
                                         WARNACO PUERTO RICO, INC.
                                         WARNACO SOURCING INC.
                                         WARNACO U.S. INC.
                                         WARNER'S DE COSTA RICA INC.,
                                         as Guarantors

                                         By: /s/ Jay A. Galluzzo
                                            --------------------
                                             Name: Jay A. Galluzzo
                                             Title: Vice President

                                         PENHALIGON'S BY REQUEST, INC.,
                                          as Guarantor

                                         By: /s/ Jay A. Galluzzo
                                             -------------------
                                             Name: Jay A. Galluzzo
                                             Title: Vice President

                                         THE WARNACO GROUP, INC.,
                                          as Guarantor

                                         By: /s/ Jay A. Galluzzo
                                             -------------------
                                             Name: Jay A. Galluzzo
                                             Title: Vice President

                                         WARNACO INTERNATIONAL, LLC,
                                          as Guarantor

                                         By: /s/ Jay A. Galluzzo
                                            --------------------
                                         Name: Jay A. Galluzzo
                                         Title: Vice Presidentexv4w1

 

Exhibit 4.1

OMNIBUS INSTRUMENT

     WHEREAS, the parties named herein desire to enter into certain Program
Documents contained herein, each such document dated as of this 3rd day of
November, 2004, relating to the issuance by Principal Life Income Fundings Trust 7
(the “Trust”) of Notes to investors under Principal Life’s secured notes
program;

     WHEREAS, the Trust is a trust and will be organized under and its
activities will be governed by the provisions of the Trust Agreement (set forth
in Section A of this Omnibus Instrument), dated as of the date of the Pricing
Supplement (attached to this Omnibus Instrument as Exhibit D) (the “Pricing
Supplement”), by and between the parties thereto indicated in Section F herein;

     WHEREAS, certain expense and indemnification arrangements between
Principal Life and the Trustee, on behalf of itself and on behalf of the Trust,
are governed pursuant to the provisions of the Expense and Indemnity Agreement
dated as of March 5, 2004, by and between Principal Life and the Trustee;

     WHEREAS, certain licensing arrangements between the Trust and Principal
Financial Services, Inc. will be governed pursuant to the provisions of the
License Agreement (set forth in Section B of this Omnibus Instrument), dated as
of the date of the Pricing Supplement, by and between the parties thereto
indicated in Section F herein;

     WHEREAS, certain custodial arrangements of the Funding Agreement and the
Guarantee will be governed pursuant to the provisions of the Custodial
Agreement (the “Custodial Agreement”) dated as of March 5, 2004 by and among
Bankers Trust Company, N.A., acting as custodian (the “Custodian”), the
Indenture Trustee and the Trustee, on behalf of the Trust;

     WHEREAS, the Notes will be issued pursuant to the Indenture (set forth in
Section C of this Omnibus Instrument), dated as of the Original Issue Date, by
and between the parties thereto indicated in Section F herein;

     WHEREAS, the sale of the Notes will be governed by the Terms Agreement
(set forth in Section D of this Omnibus Instrument), dated the date of the
Pricing Supplement, by and among the parties thereto indicated in Section F
herein; and

     WHEREAS, certain agreements relating to the Notes, the Funding Agreement
and the Guarantee are set forth in the Coordination Agreement (set forth in
Section E of this Omnibus Instrument), dated as of the date of the Pricing
Supplement, by and among the parties thereto indicated in Section F herein.

     All capitalized terms used herein and not otherwise defined will have the
meanings set forth in the Indenture.

[Remainder of Page Left Intentionally Blank.]

 

 

SECTION A

TRUST AGREEMENT

     This TRUST AGREEMENT (this “Trust Agreement”), dated as of the date of the
Pricing Supplement, is entered into by and between GSS Holdings II, Inc., a
Delaware corporation, as trust beneficial owner (the “Trust Beneficial Owner”),
and U.S. Bank Trust National Association, a national banking association, as
Trustee (the “Trustee”).

W I T N E S S E T H:

     WHEREAS, the Trust Beneficial Owner and the Trustee desire to authorize
the issuance of a Trust Beneficial Interest and a series of Notes in connection
with the entry into this Trust Agreement;

     WHEREAS, all things necessary to make this Trust Agreement a valid and
legally binding agreement of the Trustee and the Trust Beneficial Owner,
enforceable in accordance with its terms, have been done;

     WHEREAS, the parties intend to provide for, among other things, (i) the
issuance and sale of the Notes (pursuant to the Indenture, the Distribution
Agreement and the related Terms Agreement) and the Trust Beneficial Interest,
(ii) the use of the proceeds of the sale of the Notes and Trust Beneficial
Interest to acquire the Funding Agreement, the payment obligations of which
will be fully and unconditionally guaranteed by the Guarantee, and (iii) all
other actions deemed necessary or desirable in connection with the transactions
contemplated by this Trust Agreement; and

     WHEREAS, the parties hereto desire to incorporate by reference those
certain Standard Trust Terms, dated as of March 5, 2004, and attached to the
Omnibus Instrument as Exhibit A (the “Standard Trust Terms”) and all
capitalized terms not otherwise defined herein (including the recitals hereof)
shall have the meanings set forth in the Standard Trust Terms (the Standard
Trust Terms and this Trust Agreement, collectively, the “Trust Agreement”).

     NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which are hereby acknowledged, each party hereby agrees as follows:

ARTICLE 1

     Section 1.01 Incorporation by Reference. All terms, provisions and
agreements set forth in the Standard Trust Terms (except to the extent
expressly modified herein) are hereby incorporated herein by reference with the
same force and effect as though fully set forth herein. To the extent that the
terms set forth in Article 2 of this Trust Agreement are inconsistent with the
terms of the Standard Trust Terms, the terms set forth in Article 2 herein
shall apply.

A-1

 

ARTICLE 2

     Section 2.01 Name. The Trust created and governed by the Trust Agreement
shall be the trust specified in the Omnibus Instrument. The name of the Trust
shall be the name specified in the first paragraph of the Omnibus Instrument,
as such name may be modified from time to time by the Trustee following written
notice to the Trust Beneficial Owner.

     Section 2.02 Jurisdiction. The Trust is hereby organized in, and formed
under and pursuant to, the laws of the State of New York.

     Section 2.03 Initial Capital Contribution and Ownership. The Trust
Beneficial Owner has paid or has caused to be paid to, or to an account at the
direction of, the Trustee, on the date hereof, the sum of $15 (or, in the case
of Notes issued with original issue discount, such amount multiplied by the
issue price of the Notes). The Trustee hereby acknowledges receipt in trust
from the Trust Beneficial Owner, as of the date hereof, of the foregoing
contribution, which shall be used along with the proceeds from the sale of the
series of Notes to purchase the Funding Agreement. Upon the creation of the
Trust and the registration of the Trust Beneficial Interest in the Securities
Register (as defined in the Trust Agreement) by the Registrar in the name of
the Trust Beneficial Owner, the Trust Beneficial Owner shall be the sole
beneficial owner of the Trust.

     Section 2.04 Acknowledgment. The Trustee, on behalf of the Trust,
expressly acknowledges its duties and obligations set forth in the Standard
Trust Terms incorporated herein.

     Section 2.05 Additional Terms.

     None

     Section 2.06 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to the Trust Agreement will enter into the Trust Agreement by
executing the Omnibus Instrument.

     By executing the Omnibus Instrument, the Trustee and the Trust Beneficial
Owner hereby agree that the Trust Agreement will constitute a legal, valid and
binding agreement between the Trustee and the Trust Beneficial Owner.

     All terms relating to the Trust or the series of Notes not otherwise
included in the Trust Agreement will be as specified in the Omnibus Instrument
or Pricing Supplement, as indicated herein.

A-2

 

     Section 2.07 Governing Law. The Trust Agreement will be governed by, and
construed in accordance with, the laws of the State of New York.

     Section 2.08 Counterparts. The Trust Agreement, through the Omnibus
Instrument, may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

[Remainder of Page Left Intentionally Blank.]

A-3

 

SECTION B

LICENSE AGREEMENT

     This LICENSE AGREEMENT (this “License Agreement”), dated as of the date of
the Pricing Supplement, is entered into by and between Principal Financial
Services, Inc., an Iowa corporation with its principal place of business at 711
High Street, Des Moines, Iowa 50392 (the “Licensor”), and the Principal Life
Income Fundings Trust specified in the Omnibus Instrument (the “Licensee”).

W I T N E S S E T H:

     WHEREAS, the Licensor is the owner of certain trademarks and service marks
and registrations and pending applications therefor, and may acquire additional
trademarks and service marks in the future, all as described more fully below;

     WHEREAS, the Licensee desires to use certain of the Licensor’s trademarks
and service marks in connection with the Licensee’s activities, as described
more fully below;

     WHEREAS, the Licensor and the Licensee wish to formalize the agreement
between them regarding the Licensee’s use of the Licensor’s marks; and

     WHEREAS, the parties hereto desire to incorporate by reference those
certain Standard License Agreement Terms, dated March 5, 2004, and attached to
the Omnibus Instrument as Exhibit B (the “Standard License Agreement Terms”)
and all capitalized terms not otherwise defined herein (including the recitals
hereof) shall have the meanings set forth in the Standard License Agreement
Terms (the Standard License Agreement Terms and this License Agreement,
collectively, the “License Agreement”).

     NOW, THEREFORE, in consideration of the mutual promises set forth herein
and for other good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, each party hereby agrees as follows:

ARTICLE 1

     Section 1.01 Incorporation by Reference. All terms, provisions and
agreements set forth in the Standard License Agreement Terms (except to the
extent expressly modified herein) are hereby incorporated herein by reference
with the same force and effect as though fully set forth herein. To the extent
that the terms set forth in Article 2 of this License Agreement are
inconsistent with the terms of the Standard License Agreement Terms, the terms
set forth in Article 2 herein shall apply.

ARTICLE 2

     Section 2.01 Additional Terms.

     None

B-1

 

     Section 2.02 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to the License Agreement will enter into the License Agreement
by executing the Omnibus Instrument.

     By executing the Omnibus Instrument, the Licensor and the Licensee hereby
agree that the License Agreement will constitute a legal, valid and binding
agreement between the Licensor and the Licensee.

     All terms relating to the Trust or the Notes not otherwise included in the
License Agreement will be as specified in the Omnibus Instrument or Pricing
Supplement, as indicated herein.

     Section 2.03 Counterparts. The License Agreement, through the Omnibus
Instrument, may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

[Remainder of Page Left Intentionally Blank.]

B-2

 

SECTION C

INDENTURE

     This INDENTURE (this “Indenture”) is entered into as of the Original Issue
Date by and between the Principal Life Income Fundings Trust specified in the
Omnibus Instrument (the “Trust”) and Citibank, N.A., as indenture trustee (the
“Indenture Trustee”).

     Citibank, N.A., in its capacity as indenture trustee, hereby accepts its
role as Registrar, Paying Agent, Transfer Agent and Calculation Agent
hereunder.

     References herein to “Indenture Trustee,” “Registrar,” “Transfer Agent,”
“Paying Agent” or “Calculation Agent” shall include the permitted successors
and assigns of any such entity from time to time.

W I T N E S S E T H:

     WHEREAS, the Trust has duly authorized the execution and delivery of this
Indenture to provide for the issuance of Notes;

     WHEREAS, all things necessary to make this Indenture a valid and legally
binding agreement of the Trust and the other parties to this Indenture,
enforceable in accordance with its terms, have been done, and the Trust
proposes to do all things necessary to make the Notes, when executed by the
Trust and authenticated and delivered pursuant hereto, valid and legally
binding obligations of the Trust as hereinafter provided; and

     WHEREAS, the parties hereto desire to incorporate by reference those
certain Standard Indenture Terms, dated as of March 5, 2004, and attached to
the Omnibus Instrument as Exhibit C (the “Standard Indenture Terms”) and all
capitalized terms not otherwise defined herein (including the recitals hereof)
shall have the meanings set forth in the Standard Indenture Terms (the Standard
Indenture Terms and this Indenture, collectively, the “Indenture”).

     NOW, THEREFORE, for and in consideration of the premises and the purchase
of the Notes by the Holders thereof, it is mutually covenanted and agreed by
each of the parties hereto as follows:

ARTICLE 1

     Section 1.01 Incorporation by Reference. All terms, provisions and
agreements set forth in the Standard Indenture Terms (except to the extent
expressly modified herein) are hereby incorporated herein by reference (with
the same force and effect as though fully set forth herein). To the extent
that the terms set forth in Article 2 of this Indenture are inconsistent with
the terms of the Standard Indenture Terms, the terms set forth in Article 2
herein shall apply.

C-1

 

ARTICLE 2

     Section 2.01 Agreement to be Bound. Each of the Trust, the Indenture
Trustee, the Registrar, the Transfer Agent, the Paying Agent and the
Calculation Agent hereby agrees to be bound by all of the terms, provisions and
agreements set forth in the Indenture, with respect to all matters contemplated
in the Indenture, including, without limitation, those relating to the issuance
of the below-referenced Notes.

     Section 2.02 Designation of the Trust, the Notes, the Funding Agreement
and the Guarantee. The Trust created by the Trust Agreement and referred to in
the Indenture is the Principal Life Income Fundings Trust specified in the
Omnibus Instrument. The Notes issued by the Trust and governed by the
Indenture shall be the Notes specified in the Pricing Supplement. The Funding
Agreement designated hereby is the Funding Agreement designated in the Pricing
Supplement dated as of the Original Issue Date between the Trust and Principal
Life. The Guarantee designated hereby is the Guarantee dated as of the Original
Issue Date of PFG.

     Section 2.03 Additional Terms.

     None

     Section 2.04 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to the Indenture will enter into the Indenture by executing
the Omnibus Instrument.

     By executing the Omnibus Instrument, the Indenture Trustee, the Registrar,
the Transfer Agent, the Paying Agent, the Calculation Agent and the Trust
hereby agree that the Indenture will constitute a legal, valid and binding
agreement between the Indenture Trustee, the Registrar, the Transfer Agent, the
Paying Agent, the Calculation Agent and the Trust.

     All terms relating to the Trust or the Notes not otherwise included in the
Indenture will be as specified in the Omnibus Instrument or Pricing Supplement,
as indicated herein.

     Section 2.05 Counterparts. The Indenture, through the Omnibus Instrument,
may be executed in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute one
and the same instrument.

[Remainder of Page Left Intentionally Blank.]

C-2

 

SECTION D

TERMS AGREEMENT

     This TERMS AGREEMENT (this “Terms Agreement”) is entered into as of the
date of the Pricing Supplement by and among Principal Life Insurance Company
(“Principal Life”), Principal Financial Group, Inc. (“PFG”), the Principal
Life Income Fundings Trust specified in the Omnibus Instrument (the “Trust”)
and the Purchasing Agents specified in the Pricing Supplement (the “Purchasing
Agents”).

W I T N E S S E T H:

     WHEREAS, Principal Life, PFG and the agents named therein, including the
Purchasing Agents, have entered into that certain Distribution Agreement dated
March 5, 2004 (the “Distribution Agreement”).

     NOW, THEREFORE, in consideration of the mutual promises set forth herein
and other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, each of the parties hereby agrees as follows:

ARTICLE 1

     Section 1.01 Incorporation by Reference. The provisions of the
Distribution Agreement and the related definitions (unless otherwise specified
herein) are incorporated by reference herein and shall be deemed to have the
same force and effect as if set forth in full herein.

ARTICLE 2

     Section 2.01 Addition of Trust as Party to Distribution Agreement.

     Pursuant to Section 1 of the Distribution Agreement, each of the
undersigned parties hereby acknowledges and agrees that the Trust, upon
execution hereof by the Trust and the other parties to the Distribution
Agreement (other than any other trusts organized in connection with the
Registration Statement that are party thereto as of the date hereof), shall
become a Trust for purposes of the Distribution Agreement in accordance with
the terms thereof, in respect of the Notes, with all the authority, rights,
powers, duties and obligations of a Trust under the Distribution Agreement.
The Trust confirms that any agreement, covenant, acknowledgment, representation
or warranty under the Distribution Agreement applicable to the Trust is made by
the Trust at the date hereof, unless another time or times are specified in the
Distribution Agreement, in which case such agreement, covenant, acknowledgment,
representation or warranty shall be deemed to be confirmed by the Trust at such
specified time or times.

     Section 2.02 Purchase of Notes as Principal.

     (a) Subject in all respects to the terms and conditions of the
Distribution Agreement, the Trust hereby agrees to sell to each Purchasing
Agent and each Purchasing Agent hereby agrees to purchase, severally and not
jointly, the Notes having the terms specified in the Pricing Supplement
relating to such Notes.

D-1

 

     (b) In connection with any purchase of Notes from the Trust by the
Purchasing Agent(s) as principal, the parties agrees that the items specified
on Schedule I of the Omnibus Instrument will be delivered as of the Settlement
Date.

     Section 2.03 Termination. Upon the termination of this Terms Agreement
pursuant to Section 13(b) of the Distribution Agreement, the undersigned
parties hereby agree that the expenses reasonably incurred prior to or in
connection with such termination will be borne by Principal Life and PFG.

     Section 2.04 Governing Law. This Terms Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard
to the principles of conflicts of laws thereof.

     Section 2.05 Notices. For purposes of Section 14 of the Distribution
Agreement, the Trust’s communications details are as set forth in Section E of
the Omnibus Instrument.

     Section 2.06 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to this Terms Agreement will enter into this Terms Agreement
by executing the Omnibus Instrument.

     By executing the Omnibus Instrument, each party hereto agrees that this
Terms Agreement will constitute a legal, valid and binding agreement by and
among such parties.

     All terms relating to the Trust or the Notes not otherwise included in
this Terms Agreement will be as specified in the Omnibus Instrument or Pricing
Supplement, as indicated herein.

     Section 2.07 Counterparts. This Terms Agreement, through the Omnibus
Instrument, may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

[Remainder of Page Left Intentionally Blank.]

D-2

 

SECTION E

COORDINATION AGREEMENT

     This COORDINATION AGREEMENT (this “Coordination Agreement”), dated as of
the date of the Pricing Supplement, is entered into by and among Principal Life
Insurance Company (“Principal Life”), Principal Financial Group, Inc. (“PFG”),
the Principal Life Income Fundings Trust specified in the Omnibus Instrument
(the “Trust”), Principal Financial Services, Inc. (“PFSI”), Bankers Trust
Company, N.A. and Citibank, N.A., as indenture trustee (the “Indenture
Trustee”).

W I T N E S S E T H

     WHEREAS, the Trust will enter into the Funding Agreement with Principal
Life dated as of the Original Issue Date specified in the Pricing Supplement;

     WHEREAS, PFG will issue a Guarantee to the Trust as of the Original Issue
Date specified in the Pricing Supplement, which will fully and unconditionally
guarantee the payment obligations of Principal Life under the Funding
Agreement;

     WHEREAS, the Purchasing Agents (as defined in the Distribution Agreement)
have agreed to sell the Notes in accordance with the Registration Statement;

     WHEREAS, the Trust intends to issue the Notes in accordance with the
Indenture, to collaterally assign to, and grant a security interest in, the
Funding Agreement and the Guarantee to and in favor of the Indenture Trustee in
accordance with the Indenture to secure payment of the Notes;

     WHEREAS, the Custodian will hold the Funding Agreement and the Guarantee
on behalf of the Indenture Trustee pursuant to the terms of the Custodial
Agreement; and

     WHEREAS, certain licensing arrangements between the Trust and PFSI will be
governed pursuant to the provisions of the License Agreement.

     NOW, THEREFORE, to give effect to the agreements and arrangements
established under the Terms Agreement included in the Omnibus Instrument, as
applicable, the Trust Agreement, the Indenture and the Notes, and in
consideration of the agreements and obligations set forth herein and for other
good and valuable consideration, the sufficiency of which are hereby
acknowledged, each party hereby agrees as follows:

ARTICLE 1

     Section 1.01 Delivery of the Funding Agreement and the Guarantee. The
Trust hereby authorizes the Custodian, on behalf of the Indenture Trustee, to
receive the Funding Agreement from Principal Life and the Guarantee from PFG
pursuant to the assignment of the Funding Agreement and Guarantee (the
“Assignment”), to be entered into on the Original Issue Date, included in the
closing instrument dated as of the Original Issue Date (the “Closing
Instrument”).

E-1

 

     Section 1.02 Issuance and Purchase of the Notes.

     (a) Delivery of the Funding Agreement and the Guarantee to the Custodian,
on behalf of the Indenture Trustee, pursuant to the Assignment or execution of
the cross receipt contained in the Closing Instrument shall be confirmation of
payment by the Trust for the Funding Agreement.

     (b) The Trust hereby directs the Indenture Trustee, upon receipt by the
Custodian, on behalf of the Indenture Trustee, of the Funding Agreement
pursuant to the Assignment and upon receipt by the Custodian, on behalf of the
Indenture Trustee, of the Guarantee, (i) to authenticate the certificates
representing the Notes (the “Notes Certificates”) in accordance with the
Indenture and (ii) to (A) deliver each relevant Notes Certificate to the
clearing system or systems identified in each such Notes Certificate, or to the
nominee of such clearing system, or the custodian thereof, for credit to such
accounts as the Purchasing Agent(s) may direct, or (B) deliver each relevant
Notes Certificate to the purchasers thereof as identified by the Purchasing
Agent(s).

ARTICLE 2

     Section 2.01 Directions Regarding Periodic Payments. As registered owner
of the Funding Agreement and the Guarantee as collateral securing payments on
the Notes, the Indenture Trustee will receive payments on the Funding Agreement
and the Guarantee on behalf of the Trust. The Trust hereby directs the
Indenture Trustee to use such funds to make payments on behalf of the Trust
pursuant to the Trust Agreement and the Indenture.

     Section 2.02 Maturity of the Funding Agreement. Upon the maturity of the
Funding Agreement and the return of funds thereunder, the Trust hereby directs
the Indenture Trustee to set aside from such funds an amount sufficient for the
repayment of the outstanding principal on the Notes and Trust Beneficial
Interest when due.

ARTICLE 3

     Section 3.01 Certificates. Principal Life hereby agrees to deliver an
Officer’s Certificate, a copy of which is attached hereto as Exhibit E, on a
quarterly basis to any rating agency currently rating the Program. The Trust
hereby agrees to deliver an Officer’s Certificate, a copy of which is attached
hereto as Exhibit F, on a quarterly basis to any rating agency currently rating
the Program.

     Section 3.02 Filings. Principal Life hereby covenants to file, or cause
to be filed, in a timely manner on behalf of the Trust all reports,
certifications or similar filings required under the Securities Exchange Act of
1934, as amended.

ARTICLE 4

     Section 4.01 No Additional Liability. Nothing in this Coordination
Agreement shall impose any liability or obligation on the part of any party to
this Coordination Agreement to make any payment or disbursement in addition to
any liability or obligation such party has under the Program Documents, except
to the extent that a party has actually received funds which it is obligated to
disburse pursuant to this Coordination Agreement.

E-2

 

Section 4.02 No Conflict. This Coordination Agreement is intended to be
in furtherance of the agreements reflected in the documents related to the
Program Documents, and not in conflict. To the extent that a provision of this
Coordination Agreement conflicts with the provisions of one or more Program
Documents, the provisions of such Program Documents shall govern.

     Section 4.03 Governing Law. This Coordination Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to the principles of conflicts of laws thereof.

     Section 4.04 Severability. If any provision in this Coordination
Agreement shall be invalid, illegal or unenforceable, such provision shall be
deemed severable from the remaining provisions of this Coordination Agreement
and shall in no way affect the validity or enforceability of such other
provisions of this Coordination Agreement.

     Section 4.05 Severability. If any provision in this Coordination
Agreement shall be invalid, illegal or unenforceable, such provision shall be
deemed severable from the remaining provisions of this Coordination Agreement
and shall in no way affect the validity or enforceability of such other
provisions of this Coordination Agreement.

     Section 4.06 Notices. All demands, notices and communications under this
Coordination Agreement shall be in writing and shall be deemed to have been
duly given upon receipt at the addresses set forth below:

     To the Trust:

Principal Life Income Fundings Trust (followed by the number set

    forth in the
Omnibus Instrument)

c/o U.S. Bank Trust National Association

100 Wall Street, 16th Floor

New York, New York 10005

Attention: Corporate Trust Administration

Telephone: (212) 361-6184

Facsimile: (212) 809-5459 and (212) 509-3384

     To the Indenture Trustee:

Citibank, N.A.

Citibank Agency & Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

Attention: Nancy Forte

Telephone: (212) 816-5685

Facsimile: (212) 816-5527

E-3

 

     To Principal Life:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (515) 235-9353

     To PFG:

Principal Financial Group, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (515) 235-9353

     To Principal Financial Services, Inc.:

Principal Financial Services, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

E-4

 

With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (515) 235-9353

     To Bankers Trust Company, N.A:

Bankers Trust Company, N.A.

665 Locust Street

Des Moines, Iowa 50309-3702

Attention: Angela Brick

Telephone: (515) 245-2820

Facsimile: (515) 247-2101

or at such other address as shall be designated by any such party in a written
notice to the other parties.

ARTICLE 5

     Section 5.01 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to this Coordination Agreement will enter into this
Coordination Agreement by executing the Omnibus Instrument.

     By executing the Omnibus Instrument, each party hereto agrees that this
Coordination Agreement will constitute a legal, valid and binding agreement by
and among the Trust, Principal Life, PFG, PFSI, the Custodian and the Indenture
Trustee.

     All terms relating to the Trust or the Notes not otherwise included in
this Coordination Agreement will be as specified in the Omnibus Instrument or
Pricing Supplement, as indicated herein.

     Section 5.02 Acknowledgment. Principal Life hereby acknowledges Section
2.10 of the Indenture and Section 6.1 of the Custodial Agreement. The Trust
hereby acknowledges and agrees to the terms of the Custodial Agreement.

     Section 5.03 Counterparts. This Coordination Agreement, through the
Omnibus Instrument, may be executed in any number of counterparts, each of
which counterparts shall be deemed to be an original, and all of which
counterparts shall constitute but one and the same instrument.

     Section 5.04 Capitalized Terms. All capitalized terms used herein and not
otherwise defined in this Coordination Agreement will have the meanings set
forth in the Indenture.

[Remainder of Page Left Intentionally Blank.]

E-5

 

SECTION F

MISCELLANEOUS AND EXECUTION PAGES

     This Omnibus Instrument may be executed by each of the parties hereto in
any number of counterparts, and by each of the parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.

     Each signatory, by its execution hereof, does hereby become a party to
each of the agreements or indenture identified for such party as of the date
specified in such agreements or indenture.

     IN WITNESS WHEREOF, the undersigned have executed this Omnibus Instrument
with respect to the Notes as of the date first written above.

	 	 	 	 	 
	 	PRINCIPAL LIFE INSURANCE COMPANY (in

executing below agrees and becomes a party

to (i) the Terms Agreement set forth in

Section D herein and (ii) the Coordination

Agreement set forth in Section E herein)

 	 
	 	By:  	/s/ JoEllen J. Watts
 	 
	 	 	Name:  	JoEllen J. Watts 	 
	 	 	Title:  	Counsel 	 
	 
	 	PRINCIPAL FINANCIAL GROUP, INC. (in

executing below agrees and becomes a party

to (i) the Terms Agreement set forth in

Section D herein and (ii) the Coordination

Agreement set forth in Section E herein)

 	 
	 	By:  	/s/ JoEllen J. Watts
 	 
	 	 	Name:  	JoEllen J. Watts 	 
	 	 	Title:  	Counsel 	 
	 
	 	PRINCIPAL FINANCIAL SERVICES, INC. (in

executing below agrees and becomes a party

to (i) the License Agreement set forth in

Section B herein and (ii) the Coordination

Agreement set forth in Section E herein)

 	 
	 	By:  	/s/ JoEllen J. Watts
 	 
	 	 	Name:  	JoEllen J. Watts 	 
	 	 	Title:  	Counsel 	 
	 

[Execution Page 1 to the Omnibus Instrument]

 

 

	 	 	 	 	 
	 	THE PRINCIPAL LIFE INCOME FUNDINGS TRUST

DESIGNATED IN THIS OMNIBUS INSTRUMENT (in

executing below agrees and becomes a party

to (i) the License Agreement set forth in

Section B herein, (ii) the Indenture set

forth in Section C herein, (iii) the Terms

Agreement set forth in Section D herein and

(iv) the Coordination Agreement set forth in

Section E herein)

 	 
	 	By: U.S. Bank Trust National Association,
not in its
 individual capacity but solely in
its capacity as trustee
 of the Trust

 	 
	 	By:  	/s/ Ward Spooner 	 
	 	 	Name:  	Ward Spooner	 
	 	 	Title:  	Assistant Vice President 	 
	 
	 	U.S. BANK TRUST NATIONAL ASSOCIATION (in

executing below agrees and becomes a party

to the Trust Agreement set forth in Section

A herein), as Trustee

 	 
	 	By:  	/s/ Ward Spooner
 	 
	 	 	Name:  	Ward Spooner	 
	 	 	Title:  	Assistant Vice President 	 
	 
	 	GSS HOLDINGS II, INC. (in executing below

agrees and becomes a party to the Trust

Agreement set forth in Section A herein), as

Trust Beneficial Owner

 	 
	 	By:  	/s/ Andrew L. Stidd
 	 
	 	 	Name:  	Andrew L. Stidd 	 
	 	 	Title:  	President 	 
	 
	 	CITIBANK, N.A. (in executing below agrees

and becomes a party to (i) the Indenture set

forth in Section C herein, as Indenture

Trustee, Registrar, Transfer Agent, Paying

Agent and Calculation Agent and (ii) the

Coordination Agreement set forth in Section

E herein), as Indenture Trustee, Registrar,

Transfer Agent, Paying Agent and Calculation

Agent

 	 
	 	By:  	/s/ Nancy Forte
 	 
	 	 	Name:  	Nancy Forte 	 
	 	 	Title:  	Assistant Vice President 	 
	 

[Execution Page 2 to the Omnibus Instrument]

 

 

	 	 	 	 	 
	 	BANKERS TRUST COMPANY, N.A. (in executing

below agrees and becomes a party to the

Coordination Agreement set forth in Section

E herein)

 	 
	 	By:  	/s/  Patty Ashbaugh 	 
	 	 	Name:  	Patty Ashbaugh 	 
	 	 	Title:  	Vice President 	 
	 
	 	CREDIT SUISSE FIRST BOSTON LLC (in executing below

agrees and becomes a party to the Terms

Agreement set forth in Section D herein)

 	 
	 	By:  	/s/  Helena Willner	 
	 	 	Name:  	Helena Willner	 
	 	 	Title:  	Director 	 
	 

[Execution Page 3 to the Omnibus Instrument]

 

 

INDEX OF EXHIBITS AND SCHEDULES

TO THE

OMNIBUS INSTRUMENT

	 	 	 
	EXHIBITS	 	 
	 	 	 
	Exhibit A

	 	Standard Trust Terms – Incorporated herein by reference to Exhibit
4.6 to Principal Life Insurance Company and Principal Financial
Group, Inc.’s Registration Statement on Form S-3 (Registration
Nos. 333-110499 and 333-110499-01.
	 
	 	 
	Exhibit B

	 	Standard License Agreement Terms – Incorporated herein by
reference to Exhibit 99.1 to Principal Life Insurance Company’s
Current Report on Form 8-K, filed on March 29, 2004, to which this
Omnibus Instrument is filed as Exhibit 4.1.
	 
	 	 
	Exhibit C

	 	Standard Indenture Terms – Incorporated herein by reference to
Exhibit 4.1 to Principal Life Insurance Company and Principal
Financial Group, Inc.’s Registration Statement on Form S-3
(Registration Nos. 333-110499 and 333-110499-01.
	 
	 	 
	Exhibit D

	 	Pricing Supplement – Incorporated herein by reference to the
Pricing Supplement with respect to Principal Life Income Fundings
Trust 7, filed on November 5, 2004, with the Securities and Exchange
Commission pursuant to Rule 424(b)(2) under the Securities Act of
1933, as amended.
	 
	 	 
	Exhibit E

	 	Principal Life Insurance Company Officer’s Certificate
	 
	 	 
	Exhibit F

	 	Principal Life Income Fundings Trusts Trustee Officer’s Certificate
	 
	 	 
	Schedule I

	 	Terms Agreement Specifications

 

 

EXHIBIT E

Principal Life Insurance Company

Officer’s Certificate

     The undersigned, an officer of Principal Life Insurance Company, an Iowa
stock life insurance company (“Principal Life”), does hereby certify to
Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
Inc., in such capacity and on behalf of Principal Life, to the knowledge of the
undersigned and after reasonable inquiry, that:

	 	1.	 	each of the representations and warranties of Principal Life
contained in each Expense and Indemnity Agreement entered into in
connection with the Registration Statement (defined below), and each
Funding Agreement issued in connection with the Program (the
“Specified Agreements”) (other than any representation or warranty
expressly made as of a date prior to the date hereof) are true and
correct on and as of the date hereof, with the same effect as though
such representation or warranty had been made on and as of the date
hereof;
	 
	 	2.	 	no default under any of the Specified Agreements and no event
or any condition which, with notice or lapse of time or both, would
become a default, has occurred and is continuing as of the date
hereof;
	 
	 	3.	 	Principal Life has performed and complied with, respectively,
in all material respects, all of the agreements, covenants,
obligations and conditions applicable to Principal Life required by
the Specified Agreements to be performed or complied with by
Principal Life on or before the date hereof;
	 
	 	4.	 	the Registration Statement filed on Form S-3 (File Nos.
333-110499 and 333-110499-01) (the “Registration Statement”) by
Principal Life and Principal Financial Group, Inc. has been declared
effective by the Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933, as amended (the
“Act”) and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been commenced by or are pending before or contemplated
by the Commission;
	 
	 	5.	 	all filings, if any, required by Rule 424 and Rule 430A under
the Act have been made in a timely manner;
	 
	 	6.	 	since    , the Trusts organized in connection with the
program contemplated by the Registration Statement have issued the
following series of Notes:
	 
	 	 	 	      [List each series of Notes.] [(collectively, the “Designated
Notes”)]; and
	 
	 	7.	 	the Funding Agreements issued in connection with the
Designated Notes have been executed and delivered by Principal Life
in accordance with the terms and conditions of the Program
Documents.

E-1

 

     Capitalized terms used herein and not otherwise defined herein shall have
the meanings set forth in the Standard Indenture Terms attached as Exhibit 4.1
to the Registration Statement.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as
of the • day of •, 200 •.

	 	 	 	 	 
	 	[Name], [in his/her] capacity as an

authorized officer of Principal Life

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

E-2

 

	 	 	 	 	 

EXHIBIT F

Principal Life Income Fundings Trusts

Trustee Officer’s Certificate

     U.S. Bank Trust National Association, not in its individual capacity but
solely in its capacity as trustee acting on behalf of each common law trust
organized under the laws of the State of New York (in such capacity, the
“Trustee,” and each such common law trust being referred to herein as, a
“Trust”) in connection with the program contemplated by Registration Statement
Nos. 333-110499 and 333-110499-01 filed on Form S-3 (the “Registration
Statement”) by Principal Life Insurance Company and Principal Financial Group,
Inc. with the Securities and Exchange Commission, does hereby certify to
Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
Inc., in such capacity and on behalf of each Trust, to the knowledge of the
Trustee, that:

	 	1.	 	each of the representations and warranties of each Trust
contained in the Notes issued in connection with the Program, each
Indenture entered into in connection with the Registration Statement
and the Expense and Indemnity Agreement concerning the Trusts (the
“Specified Agreements”) (other than any representation or warranty
expressly made as of a date prior to the date hereof) are true and
correct on and as of the date hereof, with the same effect as though
such representation or warranty had been made on and as of the date
hereof;
	 
	 	2.	 	no default under any of the Specified Agreements and no event
or any condition which, with notice or lapse of time or both, would
become a default, has occurred and is continuing as of the date
hereof;
	 
	 	3.	 	each Trust has performed and complied with, respectively, in
all material respects, all of the agreements, covenants, obligations
and conditions applicable to such Trust required by the Specified
Agreements to be performed or complied with by such Trust on or
before the date hereof;
	 
	 	4.	 	the Notes issued in connection with the Program, have been
issued, in all material respects, in accordance with the terms and
conditions of the Program Documents; and
	 
	 	5.	 	each Funding Agreement has been executed and delivered by the
related Trust in accordance with the terms and conditions of the
Program Documents.

     Capitalized terms used herein and not otherwise defined herein shall have
the meanings set forth in the Standard Indenture Terms attached as Exhibit 4.1
to the Registration Statement. In no event shall U.S. Bank Trust National
Association in its personal corporate capacity have any liability for any of
the certifications or statements contained in this Trustee Officer’s
Certificate, such liability being solely that of each Trust.

F-1

 

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
the • day of •, 200•.

	 	 	 	 	 
	 	U.S. Bank Trust National Association, not

in its capacity but solely in its capacity

as Trustee acting on behalf of each Trust

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

F-2

 

	 	 	 	 	 

SCHEDULE I

Terms Agreement Specifications

In connection with Section 3(a)(iv) of the Distribution Agreement, the Program
under which the Notes are issued is rated Aa3 by Moody’s Investors Service,
Inc. (“Moody’s”) and AA by Standard & Poor’s Rating Services, a division of The
McGraw-Hill Companies, Inc. (“S&P”). Principal Life and PFG expect that the
Notes will be rated Aa3 by Moody’s. The Company’s financial strength rating is
Aa3 by Moody’s and AA by S&P.

In accordance with Section 2.02(b) of the Terms Agreement and in connection
with the purchase of Notes from the Trust by the Purchasing Agent(s) as
principal, the following items will be delivered on the Settlement Date:

	 	•	 	Opinion of Sidley Austin Brown & Wood LLP regarding the
enforceability of the Guarantee and the Notes pursuant to Section
8(f) of the Distribution Agreement.
	 

     All capitalized terms used herein and not otherwise defined herein will
have the meanings set forth in the Distribution Agreement.

I-1

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