Document:

exv4w1

 

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 March, 2006, relating to the issuance by
Principal Life Income Fundings Trust 2006-3 (the “Trust”) of Notes with a principal amount of
$1,040,000.00 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 February 16, 2006, 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 February 16, 2006 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 Intentionally Left 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 February 16, 2006, 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, the Pricing Supplement or the
Distribution Agreement 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 February 16, 2006, 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 Original Issue Date 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 Agent specified in the Pricing Supplement (the “Purchasing Agent”).

W I T N E S S E T H:

     WHEREAS, Principal Life, PFG and the agents named therein, including the Purchasing Agent have
entered into that certain Distribution Agreement dated l, 2006 (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 the Purchasing Agent and the Purchasing Agent hereby agrees to
purchase 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 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 to that the
expenses reasonably incurred prior to or in connection with such termination will be borne by
Principal Life and PFG.

     Section 2.04 Applicable Time. For purposes of the Distribution Agreement, the
Applicable Time shall be l.

     Section 2.05 Free Writing Prospectus. For purposes of the Distribution Agreement,
each free writing prospectus (attached to this Omnibus Instrument as Exhibit G) constitutes
a part of the Time of Sale Prospectus.

     Section 2.06 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 2.07 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 2.08 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, the Pricing Supplement or the Distribution
Agreement as indicated herein.

     Section 2.09 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 Agent (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 may direct, or (B) deliver each relevant Notes
Certificate to the purchasers thereof as identified by the Purchasing Agent.

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, as sponsor and depositor, 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) 361-2184

Facsimile: (212) 509-3384

     To the Indenture Trustee:

Citibank, N.A.

Citibank Agency & Trust

388 Greenwhich Street, 14th Floor

New York, New York 10013

Attention: Nancy Forte

Telephone: (212) 816-5685

Facsimile: (212) 657-3862

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: (866) 496-6527

     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: (866) 496-6527

     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: (866) 496-6527

     To Bankers Trust Company, N.A:

Bankers Trust Company, N.A.

453 7th Street

Des Moines, Iowa 50309-2728

Attention: Angela C. 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/ Christopher P. Freese
 	 
	 	 	Name:  	Christopher P. Freese 	 
	 	 	Title:  	Officer 	 
	 
	 	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/ Elizabeth D. Swanson
 	 
	 	 	Name:  	Elizabeth D. Swanson 	 
	 	 	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/ Elizabeth D. Swanson
 	 
	 	 	Name:  	Elizabeth D. Swanson 	 
	 	 	Title:  	Counsel 	 
	 

[Execution Page 1 of 3]

 

 

	 	 	 	 	 
	 	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/ Thomas E. Tabor
 	 
	 	 	Name:  	Thomas E. Tabor 	 
	 	 	Title:  	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/ Thomas E. Tabor
 	 
	 	 	Name:  	Thomas E. Tabor 	 
	 	 	Title:  	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 of 3]

 

 

	 	 	 	 	 
	 	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/ Diana L. Cook
 	 
	 	 	Name:  	Diana L. Cook 	 
	 	 	Title:  	Vice President 	 
	 
	 	MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (in
executing below agrees and becomes a party to the Terms
Agreement set forth in Section D herein)

 	 
	 	By:  	/s/ Diane Kenna
 	 
	 	 	Name:  	Diane Kenna 	 
	 	 	Title:  	Authorized Signatory 	 
	 

[Execution Page 3 of 3]

 

 

INDEX OF EXHIBITS AND SCHEDULES TO THE OMNIBUS INSTRUMENT

	 	 	 
	 
	 	 
	Exhibit A

	 	Standard Trust Terms — Incorporated herein by reference to Exhibit
99.2 to Principal Life Insurance Company’s Current Report on Form
8-K, filed on March 1, 2006.
	 
	 	 
	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.
	 
	 	 
	Exhibit C

	 	Standard Indenture Terms — Incorporated herein by reference to
Exhibit 99.1 to Principal Life Insurance Company’s Current Report
on Form 8-K, filed on March 1, 2006.
	 
	 	 
	Exhibit D

	 	Pricing Supplement — Incorporated herein by reference to the
Pricing Supplement with respect to Principal Life Income Fundings
Trust 2006-3, filed on March 7, 2006, 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
	 
	 	 
	Exhibit G

	 	Free Writing Prospectus(es)
	 
	 	 
	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. 333-129763 and
333-129763-01) (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 l day of
l, 200l.

	 	 	 	 	 
	 	[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.
333-129763 and 333-129763-01 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 l day of
l, 200l.

	 	 	 	 	 
	 	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

 

EXHIBIT G

Free Writing Prospectus(es)

None.

G-1

 

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 Aa2 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 Aa2 by Moody’s. The Company’s financial strength rating is
Aa2 by Moody’s and AA by S&P.

     All capitalized terms used herein and not otherwise defined herein will have the meanings set
forth in the Distribution Agreement.EX-10.39 AIG RISK MANAGEMENT, INC. BOUND PROPOSAL

 

Exhibit 10.39

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY ASTERISKS AND
BRACKETS, HAS BEEN OMITTED FROM EXHIBIT 10.39 TO GEVITY HR, INC.’S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2005, AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

AIG Risk Management, Inc

A Member Company of American International Group, Inc

Gevity HR, Inc.

1/1/06-07 

Workers Compensation/Employers Liability 

Final Bound Binder

 

 

80 PINE STREET, THIRD FLOOR

NEW YORK, NEW YORK 10005

(212) 770-3708/ Fax (212) 480-2239

The following item is a Binder prepared by AIG Risk Management, which describes the
coverages, terms and conditions that AIG Risk Management and Gevity HR intend to implement in
the context of Gevity HR’s Workers Compensation Risk Management Program effective 1/1/2006.
This Binder incorporates a Deductible Buy-Back Policy issued by a member company of AIG
covering a portion of Gevity’s expected deductible losses.

The Binder contemplates the following terms:

	 	1.	 	Based on unmodified manual premium of $150,032,865 with corresponding
estimated modified premium of $176,594,314. Rates outlined within this binder
will be applied to unmodified manual premium.

	 	•	 	With respects rate changes & potential impact to Gevity: Rate changes
made during the course of an in force policy would not apply until the renewal
of the subsequent policy term unless there is an anniversary rating date.

	 	2.	 	Receipt of first installment due prior to inception.
	 
	 	3.	 	Annual manual premium growth of no more than [*]% in the states of CA, GA, TX, or FL ([*]%
As respects FL) individually and no more than [*]% in the aggregate. If calculated at
monthly audit 20% or greater premiums are found for states other than FL (FL is
[*]%), we would retain the right to immediately increase and bill excess premium and
collateral by 1.25 times the relative exposure in the applicable states above the
trigger.
	 
	 	4.	 	If actual surcharges including NY second injury exceed the deposit indicated below, Gevity
will be responsible for the additional cost.
	 
	 	5.	 	Continued compliance with monthly voluntary audits.
	 
	 	6.	 	This Binder contemplates that there are no material changes between the date of this
Binder
and expiration. If a material change should occur, we reserve the right to
re-price account immediately and change our collateral requirements.
Material change is defined as inclusive but not limited to: changes in
management team, changes in manual rate profile of Gevity, deterioration in
either Gevity’s financials or projected losses under the current program,
acquisitions or transfer in whole or in part of another similar organization or
book of business, any breach of our current contract.
	 
	 	7.	 	This Binder is net of brokerage commission.
	 
	 	8.	 	Issuance of Deductible Buy-Back Policy, by a member Company of AIG,
covering
deductible losses up to an aggregate of $16,200,000. In addition to providing
coverage up
to the $16,200,000 aggregate, the deductible Buy-Back policy will provide
$20,000,000
of aggregate stop coverage above a $180,000,000 attachment point. The
$180,000,000 attachment point is a minimum and adjustable upwards only based
on audited unmodified premium.
	 
	 	 	 	We retain the right to re-price if any of the following occur:

	 	-	 	Florida Unmodified Premium grows by more than [*]%. The
projected 2006 Florida unmodified premium = $[*]. Countrywide projected
2006 unmodified premium = $[*].
	 
	 	-	 	Florida Unmodified Premium grows more than [*]% of the
countrywide Unmodified Premium (Projected at [*]%)
	 
	 	-	 	The 2006 Interstate Modification Increases to greater than
[*].

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.

2

 

Estimated Exposures

$4,770,229,137 estimated payroll excluding monopolistic states

Retained Amount

	 	 	 	 	 	 	 	 	 
	 

	 	Workers’ Compensation and Employers’
	 	 	*$2,000,000	 	 	Each accident or each
	 

	 	Liability under state Law
	 	 	 	 	 	person for Disease
	 
	 	 	 	 	 	 	 	 
	 

	 	Workers’ Compensation and Employers’
	 	$	2,000,000	 	 	Each Accident or each
	 

	 	Liability under Federal Law
	 	 	 	 	 	person for Disease

 

			
	*	 	Minnesota $1,520,000

Treatment of Allocated – “Pro- Rata” in accordance with the following definition:

“Allocated Loss Adjustment Expenses” or “ALAE” means all court costs and court expenses; pre- and
post-judgement interest; fees for service of process; attorneys’ fees; cost of undercover operative
and detective services, costs of employing experts; costs for legal transcripts; costs for copies
of any public records; costs of depositions and court-reported or recorded statements; costs and
expenses of subrogation; and any similar fee, cost or expense reasonably chargeable to the
investigation, negotiation, settlement or defense of a loss or a claim or suit against you, or to
the protection and perfection of your or our subrogation rights.

  “ALAE” shall not include:

	 	1.	 	Fees payable to the Claims Service Provider as set forth in its fee schedules
payable by us, nor;
	 
	 	2.	 	the salary, employee benefits, or overhead of any of our employees, nor
	 
	 	3.	 	the fees of any attorney who is our employee or under our permanent retainer;
nor
	 
	 	4.	 	the fees of any attorney we retain to provide counsel to us about our
obligations, if any, under any policy issued by us or our affiliated company(ies), with
respect to a claim or suit against you.

     “Allocated Loss Adjustment Expenses” Included as Reimbursable Amount or Subject Loss

     All or a part of ALAE calculated according to the following formula:

	 	a)	 	If we have NO obligation under the Policies to pay damages,
benefits or indemnity, all ALAE up to the applicable Deductible
or Loss Limit and 100% of all ALAE in excess thereof; or
	 
	 	b)	 	If our obligation to pay damages, benefits or indemnity under
the Policies exceeds zero ($0), all ALAE times the amount of our
obligation to pay damages, benefits or indemnity up to the
applicable Deductible or Loss Limit, divided by the total amount
of our obligation to pay damages, benefits or indemnity.

Program Components

	 	 	 
	Total Pay–In
	 	$115,363,394
	Pay-In Loss Provision
	 	$90,000,000 (Includes $16,200,000 loss
	 
	 	Provision for deductible Buy-Back policy)
	Pay-In Insurance Company Expenses(1)
	$25,363,394

	 	 	 	 	 
	 
	 	• Profit and Administration	 	$[*]
	 
	 
	 	•  Excess Premium	 	$[*] (Includes [*] in Terrorism Premium)
	 
	 
	 	•  Insurance Charge	 	$[*]
	 
	 
	 	•  Claims Administration	 	$[*]
	 
	 
	 	•  Florida Tax/RMLs/ Board & Bureaus	 	$[*]
	 
	 
	 	•  A/O States Tax/RMLs/ Board & Bureaus	 	$[*]
	 
	 
	 	•  Deductible Buy-Back Taxes	 	$[*]
	 
	 
	 	•  NY State Assessment Charge	 	$[*]

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

3

 

	 	 	 
	     Estimated Workers Compensation Surcharges
	 	$672,888 (In addition to Total Pay-In above)
	Adjustable based upon audited premium
	 	 
	 
	 	 
	Annual Unmodified Manual Premium
	 	$150,032,865
	Estimated Monthly Unmodified Manual Premium
	 	$12,502,780 (1st )
	 
	 	$12,502,735 (each of the next 11 months)

	(1)	 	Does not include potential premium taxes on deductible reimbursements except for those
states identified in the schedule to the Payment Agreement. If a determination is made by any
state regulatory authority that deductible reimbursements are taxable as premium or subject to
assessments, you will be charged for said taxes and assessments
	 
	(2)	 	Claims Administration Expense Payin = $[*]. Predicated on assumption of [*]% LCF off
Incurred Losses limited to $1,000,000 per occurrence ([*]). To be adjusted annually based on
calculation of ultimate loss using LDFs identified within the binder times applicable LCF.
	 
	 	 	Our Binder contemplates Gevity successful elimination of F.E.T. – Should F.E.T. be
assessed this charge will be passed along to Gevity.
	 
	(3)	 	The Tax Amount show above reflects our estimate of taxes, Risk Market Loads (RML’s) and
Board & Bureau
Charges in effect currently for all states.

Monthly/Quarterly Premium Adjustment

     We will require Monthly voluntary payroll audits, supplemented with quarterly physical
audits:

	 	•	 	On a Monthly basis we will calculate the premium based upon the voluntary
payrolls submitted and compare to the estimated premium. Any additional or return premium
will be due on a quarterly basis. If the resulting additional premium is 10 % or
greater ,including on a cumulative monthly basis, the associated additional allocation for
loss provision will be subject to an additional buffer of [*]%. The [*]% collateral buffer
will apply to the loss provision of all additional premium once the growth of that
additional premium reaches 10% or more. Such additional premium and collateral will be
collected on a quarterly basis.
	 
	 	•	 	On a Quarterly basis a physical audit will be performed and compared to the
estimated premium. If there is a difference of 15+% or greater than projection then future
monthly physical audits will be required.
	 
	 	•	 	Premium to be paid-in in accordance with installment schedule shown
below. The original calculation of the premium is subject to the following:

	 	•	 	Unmodified Standard Premium is within 20% of the original
estimated amount. If the variance is greater an entirely new analysis
will be performed.
	 
	 	•	 	P&A and Excess Premium are subject to a 90% minimum based on
the original calculation of program costs or $[*]. No further reduction
in these costs will be made.

	 	•	 	(New Monthly Unmodified Manual Premium less Est. Monthly Premium) x.7689 =
A/P or R/P is subject to the following:

	 	•	 	The change in pay-in premium from the resulting unmodified manual premium
will be allocated 59.99% to loss provision and 16.90% to insurance company
expenses.
	 
	 	•	 	The monthly adjustment is subject to a minimum loss provision of $6,375,000
( 85% of Anticipated Loss Provision) and minimum expenses as detailed
below. If cancelled prior to end of a full annual term either by GEVITY or AIG
– an interim adjustment will be conducted based on unmodified manual premium on
YTD basis (subject to expense minimum as outlined below).

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

4

 

	 	•	 	The additional/return unmodified premium will be calculated in accordance
with the monthly underwriting information provided by GEVITY. The
additional/return premium will be applied to the following monthly installment.
	 
	 	•	 	If the total amount of claims we shall have paid on your behalf exceeds the
loss provision funding collected for (3) consecutive billing periods within the
first twelve months, we may require you to pay us additional funds.

Insurance Company Expense Annual Adjustment

At premium audit, approximately 18 months from inception of the program, the following
expenses will be adjusted. Premiums shown below represent pay-in premiums as outlined on
page 3.

	 	•	 	Florida Taxes – $[*]. ($[*] adjustable at [*]% of FL Audited
Undiscounted Standard Premium prior to Deductible Discount ( est. $[*]) plus $[*]
adjustable at [*]% of FL Audited Deductible Premium
(est. $[]).
	 
	 	•	 	A/O State Taxes — $[*]. Adjustable off the Unmodified Manual Premium, excluding FL, at a rate of
[*]%. (est. $[*])
	 
	 	•	 	NY State Assessment Charge of $[*] will be subject to audit based on the final Standard WC Premium.
	 
	 	•	 	Claims Administration — $[*] pay-in

	 	•	 	LCF option selected multiplied by Ultimate Loss as calculated
annually using the LDFs contained within the Binder.

	 	•	 	Excess Premiums and Profit and Administration = $[*]

	 	 	 	Audited Unmodified Manual Premium times [*]%; subject to [*]% minimum.

	 	•	 	Surcharges and Assessments = $672,888

THE ABOVE PREMIUMS INCLUDE THE FLORIDA LOSS REIMBURSEMENT PREMIUM. THE FINAL FLORIDA PREMIUM
WILL BE CALCULATED BASED UPON THE FILED FLORIDA LOSS REIMBURSEMENT FILING.

Formula = Modified Standard Premium, less Loss Reimbursement Premium, less Premium Discount,
plus Tax Provision, plus Expense Constant, plus Terrorism Risk Insurance Act Premium) (as per
policy detail).

Estimate at Inception:

Modified Standard Premium — $[*]

Loss
Reimbursement Premium — ($[*])

Premium
Discount — ($[*])

Tax Provision — $[*]

Expense Constant — $[*]

Terrorism Risk Insurance Act Premium — $[*]

Total Estimated Premium — $[*]

     Surcharges and Assessments

The special surcharges and assessments will be adjusted based on the rates in effect
during the policy period.

Any references made in this binder to taxes or tax rates or assessments are subject to
change if such taxes or tax rates or assessments are changed or modified by the
respective taxing authority (ies) prior to inception or following inception. You shall be
obligated for any resulting increase that occurs.

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

5

 

Other Annual Adjustment:

At premium audit, approximately 18 months from inception of the program, the following
item will also be adjusted:

- Aggregate Stop Attachment Point: $180,000,000 minimum and adjusted at a
rate of 1.200 per $1 of audited unmodified premium.

- Insurance Charge: $[*] Flat

Loss Provision Annual Adjustment

The losses will be adjusted based on losses valued at eighteen months after inception and annually
thereafter. There is no Minimum or Maximum Loss Provision.

The Additional/Return Loss Provision will be:

The difference between (Ultimate Losses) and (Loss Provision amount collected
during the policy period)

The formula for the ultimate losses is as follows:

Ultimate Losses = Incurred Losses capped at the retention for the period of
1/1/06-1/1/07, valued as of 7/1/07 x loss development factor. The loss development
factors are as follows:

@ 18 months [*]

@ 30 months [*]

@ 42 months [*]

@ 54 months [*]

@ 66 months [*]

@ 78 months [*]

Determination of loss provision adjustment after 78 months will be addressed in the Payment
Agreement.

Installments

The premium and surcharges are due and payable according to the following schedule :

Due 1/1/06: $10,286,506 and 11 equal installments of $9,613,616 due 2/1/06 through 12/1/06.

If the first installment is not received prior to the inception date coverage will not
incept.

If the remaining payments are not received prior to the due date the policies will be
cancelled for nonpayment of premium.

Surcharges of $672,888 is included in the first installment.

Collateral Requirement

The current collateral requirement for 1/1/06-07 will be $90,000,000. This is our original
assessment of loss pick . The collateral requirement for 1/1/06-07 will be provided as
follows:

	Ø	 	$16,200,000 through a Deductible Liability Protection Policy
(“Deductible Buyback”) issued by a member company of American
International Group, Inc.
	 
	Ø	 	$73,800,000 through Hybrid RCAMP.

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

6

 

G.L. and A.L. pricing and collateral requirements are outlined on a separate binder. However
Gevity’s obligations under W.C. , G.L. and A.L. continue to be cross-collateralized.

The collateral will be reviewed on a annual basis.

Security will be on a depleting basis. Using the Deductible Buyback and the Hybrid RCAMP as
collateral, retained losses will first be paid out of the Deductible Buyback until $16,200,000 is
exhausted then Hybrid RCAMP will be responsible for the next $73,800,000. No monthly loss billings
will go to the insured.

The captive collateral pay-in during the 1/1/06 – 1/1/07 period will be adjusted on a quarterly
basis during the policy period based on the following formula:

Annual unmodified manual premium x.5999 = Total Captive Collateral Requirement

Please note the Total Captive Collateral requirement is subject to a minimum of $76,500,000
[approximately 85% of collateral amount above] until the first loss provision annual adjustment at
18 months after inception for 2006-07 program year. The minimum is not the minimum collateral
amount AIG must hold at any given time over the first eighteen months, but instead the amount that
must be paid in over the first year. In other words, if the unmodified manual premium after the
twelfth monthly adjustment is so low that it triggers the minimum of $76,500,000, AIG will compare
the minimum to what was submitted in collateral over the year, in lieu of to what was on hand after
depletion for paid losses.

If the program does not renew, then the collateral will be adjusted annually in accordance with the
terms outlined in the Payment Agreement and there will be no return of collateral until 30 months
from inception.

The Hybrid RCAMP portion of this deal will be structured as follows:

We will issue You Deductible Policies. Your captive, in turn, will issue You a Deductible
Reimbursement Policy providing coverage for the same liabilities referenced in the policies we
issue to you for the first $2,000,000 per occurrence.

Under the Hybrid RCAMP collateral option, You assign your rights under the captive issued
Deductible Reimbursement to Us. Furthermore, We will reinsure Your captive for liabilities it
assumes under the Deductible Reimbursement Policy.

This deal will be documented via an Assignment Agreement, Reinsurance Quota Share Agreement and the
Payment Agreement/Schedule of Policies & Payments. The Assignment Agreement and the cash premium
received via this reinsurance transaction will service to collateralize Your Deductible Obligations
to Us.

The Captive has two Investment Selection options at its disposal which are referenced below:

Investment Selection Options

	1.	 	One-Year rate

Under this option, We would guarantee a fixed rate of return on the Reinsurance Premium set at an
enhanced spread of [*] basis points over the 6-month U.S. Constant Maturity Treasury yield as it
reads the day we are in receipt of the first installment of the Reinsurance Premium. The interest
rate will reset annually based on then current market conditions. Should the Captive cancel the
Reinsurance Quota Share Agreement at any time prior to January 1, 2007, it is understood and agreed
that interest will be deemed to have accrued from the date the premium is delivered to us, to the
date of cancellation, at the 1-month U.S. Constant Maturity Treasury yield as it read the day we
were in receipt of the first installment of Reinsurance Premium.

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

7

 

	2.	 	Interest rate payable until all claims are closed

Under this option, We would guarantee a fixed rate of return on the Reinsurance Premium set an
enhanced spread of [*] basis points over the 3-year U.S. Constant Maturity Treasury yield as it
reads the day we are in receipt of the first installment of the Reinsurance Premium. Said rate
would be in effect until all claims were closed. Should the Captive cancel the Reinsurance Quota
Share Agreement at any time, it is understood and agreed that interest will be deemed to have
accrued from the date the premium is delivered to us, to the date of cancellation, at the
applicable interest rate as per the following Interest Rate Penalty Schedule.

The aforementioned [*] basis point spread over the 3-year U.S. Constant Maturity Treasury yield may
increase to a maximum spread of [*] basis points over the 3-year U.S. Constant Maturity Treasury
yield. We will make the final determination of the guaranteed spread at such time as the first
installment of the Reinsurance Premium is received.

Interest Rate Penalty Schedule

	 	 	 
	Cancellation Date	 	Interest Rate *
	Prior to January 1, 2007

	 	1-Month CMT
	January 1, 2007 — January 1, 2008

	 	6-Month CMT
	January 1, 2008 — January 1, 2009

	 	1-Year CMT
	January 1, 2009 — January 1, 2010

	 	(1-Year CMT + 2-Year CMT) / 2
	January 1, 2010 — January 1, 2011

	 	2- Year CMT
	January 1, 2011 — January 1, 2012

	 	2- Year CMT
	January 1, 2012 — January 1, 2013

	 	(2-Year CMT + 3-Year CMT) / 2
	January 1, 2013 — January 1, 2014

	 	(2-Year CMT + 3-Year CMT) / 2
	January 1, 2014 — January 1, 2015

	 	3- Year CMT
	January 1, 2015 — January 1, 2016

	 	3- Year CMT
	January 1, 2016 until All Claims Closed

	 	3- Year CMT + 30 basis points.

 

			
	*	 	as each read, the day the first installment of the Reinsurance Premium is received

For either Investment Selection Option referenced above, we will credit you additional
interest accrued monthly on the $73,800,000 in Reinsurance Premium on the daily cash balances of
the $16,200,000 referenced above, calculated at a rate dependent upon which option you select.

Under either Investment Selection Option, the Captive will receive a monthly accrued interest
statement, detailing the opening fund balance, less losses paid in each particular month, along
with interest earned on the average investable balance. This Binder contemplates that we will
not collect Escrow. Therefore, the monthly accrued interest statement will evidence losses being
paid at the mid-point of each month.

Should the Federal Reserve lower the targeted Federal Funds rate at any time prior to the receipt
of the first installment of the reinsurance premium, both investment selection options will become
null and void.

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

8

 

Underwriting Guidelines

At a minimum we will not provide coverage for the following

[*]

The following clients must be referred to AIG for approval

[*]

Referral Items

	 	•	 	Policy Issuance and Weekly reporting Information
	 
	 	•	 	4 years including current policy period currently valued hard copy loss information
	 
	 	•	 	Historical Payroll Information
	 
	 	•	 	Application

Policy Issuance and Weekly Reporting Information Guidelines

Client name

Mailing address

Schedule of working locations

Governing class or SIC code

Description of Operations

Payroll by classification Code by State

Current Experience modification

Bureau file number

Anniversary rating date

Federal Unemployment ID number

Head count by location / total leased, total by employer

Effective date of added/terminated client

Indiana Unemployment Id # (7 digit, numeric)

Minnesota Unemployment Id# (7 digit, numeric)

New Jersey Unemployment Id# (7 digit, numeric)

New York Unemployment Id# (7 digit, numeric)

Vermont Unemployment Id# (7 digit, numeric)

New Mexico Unemployment Id# (7 digit, numeric)

New Hampshire and New Mexico phone numbers per locations

New Hampshire and New Mexico Contact Name per Location

New York Contact Name per Location

Alaska Contact Named per Location

Department of Labor # for the state of Hawaii

Special Conditions

You must execute and return an original executed copy of both the Payment Agreement and the
Schedule, and any other documents we deem necessary to adequately document the terms of the
program, to us at our address shown above within 30 days after the Effective Date above.

If not so returned and delivered, we may void the Finance Plan summarized herein and set forth in
detail in the Payment Agreement. Upon our notice of our voiding of the Finance Plan to you at your
address shown above, the entire amount of the “Estimated Total Cost” specified under FINANCE PLAN
herein will become immediately due and payable to us in cash at our address shown above. Failure
to pay such amount within 10 days thereafter shall entitle us to cancel the insurance and any
reinsurance and to terminate all services under this Program by notice to you when not less than 10
days thereafter the cancellation and termination shall become effective.

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

9

 

Claims Administration

Claims will be handled by AIG Claims Services, Inc. The claims administration pricing is included
in the insurance company expenses. Rehabilitation and managed care services are billed separately
at prevailing rates. Claim Investigations conducted by the Investigative Services Division to
assist the claims adjusters are an allocated expense and charged to the file at Prevailing Time &
Expense. Fraud investigations conducted for the purpose of criminal prosecution are not billed to
the file and considered part of the overall claim fee.

The claims administration charges include four intellirisk setups and 12 monthly tape to tape
triangles to Marsh STARS system. If the program does not renew, AIG agrees to continue to provide
access to Intellirisk setups and monthly tapes as long as Gevity requires, at prevailing rates.
Also if the program does not renew, AIG will continue to grant access to data and tape to tape
triangles to Marsh at prevailing rates.

Allocated loss adjustment expenses, as defined above, are not included in the Insurance Company
expenses.

Loss Control Services

We understand that Gevity HR’s loss control professionals are providing ongoing loss control
services to your clients and that additional loss control services have not been requested as part
of the AIG program. Only those loss control surveys needed for underwriting purposes and those
services mandated by state regulatory requirements will be included in the AIG program. Of course,
additional loss control services can be provided on an unbundled basis at any point during the
policy year.

AIG Consultants will provide a Technical Services Manager – [*] — to manage the delivery of all
services. We maintain a nationwide network of loss control consultants to provide service at your
key clients’ facilities, which can serve as a cost effective complement to the work done by
Gevity’s field risk consultants. AIG Consultants, Inc. can provide personnel with experience and
expertise commensurate with the services needed. Ergonomic and/or industrial hygiene specialists
can be provided as appropriate. Consultant training and/or specialty training in industrial
hygiene/ergonomics can be provided to your field risk consultants. To ensure readily available
competent consultants near our clients various locations, we maintain a complement of approved
subcontractor consultants to supplement our internal loss control professionals. These
subcontractors are subject to our Quality Management System approval process as a requirement of
AIG Consultant’s Inc. ISO 9000 certification.

Coverages

A specimen policy will be prepared for the MCP states with all appropriate forms attached and this
will serve as the master sample for each of those states where multiple policies are required.
All endorsements may not be approved for use in all states and we can only include those
endorsements where they are approved.

Named insured will include all Gevity HR, Inc. affiliated or subsidiary entities for which payroll
is reported to AIG Risk Management shown as follows:

Gevity HR, Inc. and it’s wholly-owned subsidiaries:

Gevity HR, L.P.

Gevity
HR II, L.P.

Gevity
HR, III, L.P.

Gevity HR IV, L.P.

Gevity HR V, L.P.

Gevity HR VI, L.P.

 

			
	*	 	THIS CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

10

 

Gevity HR VII, L.P.

Gevity HR VIII, L.P.

Gevity HR IX, L.P.

Gevity HR X, L.P.

Gevity HR XI, LLC

Gevity HR XII Corp.

Gevity HR XIV, LLC

Gevity Insurance Agency, Inc.

Staff Leasing, LLC

Concorda Insurance Company Limited

	 	 	 	 	 
	A.

	 	Workers’ Compensation
	 	Statutory
	 
	 	 	 	 
	B.

	 	Employers Liability Limits:
	 	$2,000,000 per Occurrence/Accident
	 

	 	 	 	$2,000,000 Policy Limit Disease
	 

	 	 	 	$2,000,000 each Employee Disease
	 
	 	 	 	 
	C.

	 	Stop Gap Employers Liability applies	 	 
	 

	 	in Monopolistic States, Canada &	 	 
	 

	 	Puerto Rico
	 	$2,000,000 per Occurrence/Accident
	 

	 	 	 	$2,000,000 Policy Limit Disease
	 

	 	 	 	$2,000,000 each Employee Disease
	 
	 	 	 	 
	D.

	 	Other States Coverage All States,	 	 
	 

	 	excluding Ohio, West Virginia, North	 	 
	 

	 	Dakota, and Washington (for
WC 000000A form delete Part three, A.4).	 	 
	 
	 	 	 	 
	E.

	 	USL&H	 	$2,000,000 per Occurrence/Accident

Extensions of Coverage — in addition to all State required endorsements

	 	1)	 	-Voluntary Compensation: Applies All States except Monopolistic States
	 
	 	 	 	Designated Law: State of Hire

	 	-	 	Foreign Voluntary Compensation: (This coverage applies to U.S. citizens and
non-US citizen and residents of the U.S. injured outside the U.S.)

	 	 	 	 
	 	Limit:
	 	(Annual Reinstatement)
	 	Any One Employee:
	 	$2,000,000
	 	Policy Limit:
	 	$2,000,000
	 	Designated Law:
	 	State of Hire
	 	Covers B.I. from Endemic Disease
	 	 
	 	Includes Repatriation Expenses
	 	$25,000 each employee

	2)	 	Alternate Employer Endorsement – blanket basis using the following wording: All employee
leasing clients of Gevity HR and as respects the “State” – any state listed in item 3.A. of
the information Page” and “Contract” – All agreements between Gevity HR and their employee
leasing clients.
	 
	3)	 	Waiver of Subrogation -against third parties where clients required it (on approval basis).
It is understood and agreed that notwithstanding anything to the contrary contained in the
policy, the company waives the right of subrogation as respects the insured’s right of
recovery against any person to which the insured has agreed to waive subrogation.
	 
	4)	 	United States Longshoremen and Harbor Workers Act -(WC 00 01 06 A)-re: work in all
jurisdictions subject to the act including monopolistic states
	 
	5)	 	Notice of Occurrence

11

 

	6)	 	Knowledge of Occurrence
	 
	7)	 	Maritime Coverage (Jones Act) is included in Employers Liability Limits
	 
	8)	 	Voluntary Compensation Maritime Coverage
	 
	9)	 	Outer Continental Shelf Lands Act Coverage
	 
	10)	 	Sole Proprietors, Partners, Officers and Other Coverages
	 
	11)	 	Cancellation and Non-renewal Notice – cancellation for non-payment 10 days and for
cancellation other than non-payment and non-renewal 120 days.
	 
	12)	 	Federal Employers Liability Act Coverage — $2,000,000 each occurrence/$2,000,000 aggregate
	 
	13)	 	Unintentional Non-Disclosure of Hazards
	 
	14)	 	Florida Employment and Wage information and Release Endorsement
	 
	15)	 	Designated Workplace Endorsements where required
	 
	16)	 	New York, Missouri and Massachusetts limit of Liability endorsements
	 
	17)	 	Ohio Employers Liability Coverage Endorsement
	 
	18)	 	All State required Employers Liability Coverage endorsements
	 
	19)	 	Amendatory Endorsement — Insurance applies to B.I. to “corporate employees” of the named
insured (not ‘clients employees’, i.e. work site employees leased to clients) participating in
any recreation activities sponsored by or with the permission of the Named Insured.
	 
	20)	 	Texas employee provider/client company endorsement (if needed)
	 
	21)	 	Texas exempt employees coverage endorsement
	 
	22)	 	Texas employee leasing client endorsement
	 
	23)	 	New Hampshire Sole Representative endorsement
	 
	24)	 	Rhode Island Direct Liability Statute & Safety Inspection endorsements.
	 
	25)	 	S. Dakota Direct Action Statute endorsement.
	 
	26)	 	New Mexico Safety Device Coverage endorsement.
	 
	27)	 	Massachusetts, Missouri and Oklahoma Construction Classified Adjustment endorsements.
	 
	28)	 	Oklahoma Fraud Warning endorsement.
	 
	29)	 	State Safety Workplace endorsements.
	 
	30)	 	S. Dakota Managed Care endorsement.
	 
	31)	 	Wisconsin – Guaranteed Cost policy subject to $2,000,000 retention.
	 
	32)	 	Maine inspection Immunity Endorsement
	 
	33)	 	Missouri Property and Casualty Guaranty Association Endorsement
	 
	34)	 	Terrorism Risk Insurance Act Endorsement (pending US government decision)
	 
	35)	 	Employee Leasing Client Endorsement (where approved)
	 
	36)	 	Labor Contractor Endorsement (where approved)
	 
	37)	 	Migrant and Seasonal Agricultural Workers Protection Act Coverage Endorsement –WC 00 01 11
(where approved)

All State required / mandatory endorsements

Note Defense Base Act Coverage will be provided by AIG WorldSource on a separate policy at no
additional charge if the exposure is incidental or “if any” basis. However if it is determined that
there is significant exposure to Defense Base Act Coverage, we will advise you of the additional
charge.

This Binder contains a broad outline of coverage and does not include all the terms, conditions and
exclusions of the policy (or policies) that may be issued to you. The policy (or policies) contain
the full and complete agreement with regard to coverage. Please review the policy (or policies)
thoroughly upon receipt and notify us promptly in writing if you have any questions. In the event
of any inconsistency between the final bound binder and the policy, the policy language shall
control unless the parties agree to an amendment.

12

 

This Binder is intended to be a statement of the mutual interest of the parties with respect to the
Workers Compensation Risk Management program described above and is subject to execution and
delivery of a mutually satisfactory Payment Agreement, RCAMP Agreement, and Collateral Trust
Agreement. The parties will become legally obligated with respect to the Workers Compensation Risk
Management program described above only in accordance with the terms contained in the Payment
Agreement, RCAMP Agreement and Collateral Trust Agreement relating thereto if, as and when such
document has been executed and delivered by the parties.

SIGNATURES

	 	 	 	 	 	 	 	 	 
	Acknowledged on behalf of AIG Risk Management, Inc.	 	 	 	Acknowledged on behalf of Gevity HR, Inc.
	 
	 	 	 	 	 	 	 	 
	Signed by

	 	 	 	 	 	Signed by	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Thomas Agnello	 	 	 	Arthur Singleton
	Regional Manager, National Accounts	 	 	 	Vice President, Finance
	 
	 	 	 	 	 	 	 	 
	Dated

	 	 	 	 	 	Dated:	 	 
	 

	 	 
	 	 	 	 	 	 

13

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