Document:

exv10w3

 

Exhibit 10.3

ESCROW AGREEMENT

     ESCROW AGREEMENT (“Agreement”) dated [Closing Date] by and among ITHAKA ACQUISITION
CORP., a Delaware corporation (“Parent”), KURT WHEELER and WENDE HUTTON, being the joint
representative of the former shareholders and noteholders of ALSIUS CORPORATION, a California
corporation (the “Representative”), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as
escrow agent (the “Escrow Agent”).

     Parent, Alsius Corporation (the “Company”), certain of the shareholders and
noteholders of the Company, and Ithaka Sub Acquisition Corp., a California corporation and
wholly-owned subsidiary of Parent (“Merger Subsidiary”), are the parties to an Agreement
and Plan of Merger and Reorganization dated as of October 3, 2006 (the “Merger Agreement”)
pursuant to which the Merger Subsidiary has merged with and into the Company so that the Company
has become a wholly-owned subsidiary of Parent. Pursuant to the Merger Agreement, Parent is to be
indemnified in certain respects and also may be entitled to the return of shares of Parent Common
Stock in the event of claims made with respect to Dissenting Shares. The parties desire to
establish escrow funds (i) to serve as collateral security for the indemnification obligations
under the Merger Agreement and (ii) for the reimbursement to Parent and the Company for payments
made by them with respect to Dissenting Shares pursuant to Section 1.17(c) of the Merger Agreement.
The Representative has been designated pursuant to the Merger Agreement to represent those former
shareholders and noteholders of the Company (the “Securityholders”) who are depositing
shares of Parent Common Stock in escrow pursuant to this Agreement and each Permitted Transferee
(as hereinafter defined) of the Securityholders (the Securityholders and all such Permitted
Transferees are hereinafter referred to collectively as the “Owners”), and to act on their
behalf for purposes of this Agreement. Capitalized terms used herein that are not otherwise defined
herein shall have the meanings ascribed to them in the Merger Agreement.

     The parties agree as follows:

          1. (a) Concurrently with the execution hereof, each of the Securityholders is delivering to
the Escrow Agent, to be held in escrow pursuant to the terms of this Agreement, stock certificates
issued in the name of such Securityholder representing (i) ten
percent (10%) of the Merger Shares
received by such Securityholder, to be held in escrow pursuant to the terms of this Agreement and
Section 1.11(a) of the Merger Agreement (the “Indemnity Escrow Fund”), and (ii) a further
ten percent (10%) of the Merger Shares, to be held in escrow pursuant to the terms of this Agreement
and Section 1.11(b) of the Merger Agreement (the “Reimbursement Escrow Fund” and, together
with the Indemnity Escrow Fund, each an “Escrow Fund” and collectively the “Escrow
Funds”), together with ten (10) assignments separate from certificate, executed in blank by
such Securityholder, with medallion signature guaranties. The Escrow Agent shall maintain a
separate account for each Securityholder’s, and subsequent to any transfer permitted pursuant to
Paragraph 1(e) hereof, each Owner’s, portion of the Escrow Fund.

 

 

               (b) The Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard and disburse
the Escrow Funds pursuant to the terms and conditions hereof. It shall treat each Escrow Fund as a
trust fund in accordance with the terms of this Agreement and not as the property of Parent. The
Escrow Agent’s duties hereunder shall terminate upon its distribution of the entire number of
shares in each Escrow Fund in accordance with this Agreement.

               (c) Except as herein provided, the Owners shall retain all of their rights as stockholders of
Parent, including, without limitation, the right to vote their shares of Parent Common Stock
included in each Escrow Fund, with respect to shares of Parent Common Stock constituting (i) the
Indemnity Escrow Fund during the period beginning on the date hereof and ending on the thirtieth
day after the date that Parent files its Annual Report on Form 10-K for the year ended December 31,
2007 (the “Indemnity Escrow Period”), or such longer period as such shares may be held in
escrow hereunder pursuant to the terms hereof, and (ii) the Adjustment Escrow Fund until they are
paid to Parent as reimbursement or returned to the Owners in accordance with Section 4 of this
Agreement (the “Reimbursement Escrow Period” and, together with the Indemnity Escrow
Period, each an “Escrow Period”).

               (d) During each Escrow Period, all dividends payable in cash with respect to the shares of
Parent Common Stock included in the Escrow Funds shall be paid to the Owners, but all dividends
payable in stock or other non-cash property (“Non-Cash Dividends”) shall be delivered to
the Escrow Agent to hold in accordance with the terms hereof. As used herein, the term “Escrow
Fund” shall be deemed to include the Non-Cash Dividends distributed thereon, if any.

               (e) During each Escrow Period, no sale, transfer or other disposition may be made of any or
all of the shares of Parent Common Stock in the Escrow Funds except (i) to a “Permitted Transferee”
(as hereinafter defined), (ii) by virtue of the laws of descent and distribution upon death of any
Owner, or (iii) pursuant to a qualified domestic relations order; provided, however, that such
permissive transfers may be implemented only upon the respective transferee’s written agreement to
be bound by the terms and conditions of this Agreement. As used in this Agreement, the term
“Permitted Transferee” shall include: (x) members of a Securityholder’s “Immediate Family”
(as hereinafter defined); (y) an entity in which (A) a Securityholder and/or members of a
Securityholder’s Immediate Family beneficially own 100% of such entity’s voting and non-voting
equity securities, or (B) a Securityholder and/or a member of such Securityholder’s Immediate
Family is a general partner and in which such Securityholder and/or members of such
Securityholder’s Immediate Family beneficially own 100% of all capital accounts of such entity; and
(z) a revocable trust established by a Securityholder during his lifetime for the benefit of such
Securityholder or for the exclusive benefit of all or any of such Securityholder’s Immediate
Family. As used in this Agreement, the term “Immediate Family” means, with respect to any
Securityholder, a spouse, parents, lineal descendants, the spouse of any lineal descendant, and
brothers and sisters (or a trust, all of whose current beneficiaries are members of an Immediate
Family of the Securityholder). In connection with and as a condition to each permitted transfer,
the Permitted Transferee shall deliver to the Escrow Agent an assignment separate from certificate
executed by the transferring Securityholder with medallion signature guaranty, or where applicable,
an

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order of a court of competent jurisdiction, evidencing the transfer of shares to the Permitted
Transferee, together with ten (10) assignments separate from certificate executed in blank by the
Permitted Transferee with respect to the shares transferred to the Permitted Transferee, with
medallion signature guaranties. Upon receipt of such documents, the Escrow Agent shall deliver to
Parent the original stock certificate out of which the assigned shares are to be transferred,
together with the executed assignment separate from certificate executed by the transferring
Securityholder, or a copy of the applicable court order, and shall request that Parent issue new
certificates representing (m) the number of shares, if any, that continue to be owned by the
transferring Securityholder, and (n) the number of shares owned by the Permitted Transferee as the
result of such transfer. Parent, the transferring Securityholder and the Permitted Transferee
shall cooperate in all respects with the Escrow Agent in documenting each such transfer and in
effectuating the result intended to be accomplished thereby. During each Escrow Period, no Owner
shall pledge or grant a security interest in such Owner’s shares of Parent Common Stock included in
the respective Escrow Fund or grant a security interest in such Owner’s rights under this
Agreement.

          2. (a) Parent, acting through the current or former member or members of Parent’s Board of
Directors who has or have been appointed by Parent to take all necessary actions and make all
decisions on behalf of Parent with respect to its and the Company’s rights to indemnification under
Article VII of the Merger Agreement (the “Committee”), may make a claim for indemnification
pursuant to the Merger Agreement (“Indemnity Claim”) against the Indemnity Escrow Fund by
giving notice (an “Indemnity Notice”) to the Representative (with a copy to the Escrow
Agent) specifying (i) the covenant, representation, warranty, agreement, undertaking or obligation
contained in the Merger Agreement which it asserts has been breached or otherwise entitles Parent
or the Company to indemnification, (ii) in reasonable detail, the nature and dollar amount of any
Indemnity Claim, and (iii) whether the Indemnity Claim results from a Third Party Claim against
Parent or the Company. The Committee also shall deliver to the Escrow Agent (with a copy to the
Representative), concurrently with its delivery to the Escrow Agent of the Indemnity Notice, a
certification as to the date on which the Indemnity Notice was delivered to the Representative.

               (b) If the Representative shall give a notice to the Committee (with a copy to the Escrow
Agent) (an “Indemnity Counter Notice”), within 30 days following the date of receipt (as
specified in the Committee’s certification) by the Representative of a copy of the Indemnity
Notice, disputing whether the Indemnity Claim is indemnifiable under the Merger Agreement, the
Committee and the Representative shall attempt to resolve such dispute by voluntary settlement as
provided in Section 2(c). If no Indemnity Counter Notice with respect to an Indemnity Claim is
received by the Escrow Agent from the Representative within such 30-day period, the Indemnity Claim
shall be deemed to be an Established Claim (as hereinafter defined) for purposes of this Agreement.

               (c) If the Representative delivers an Indemnity Counter Notice to the Escrow Agent, the
Committee and the Representative shall, during the period of 60 days following the delivery of such
Indemnity Counter Notice or such greater period of

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time as the parties may agree to in writing (with a copy to the Escrow Agent), attempt to
resolve the dispute with respect to which the Indemnity Counter Notice was given. If the Committee
and the Representative shall reach a settlement with respect to any such dispute, they shall
jointly deliver written notice of such settlement to the Escrow Agent specifying the terms thereof.
If the Committee and the Representative shall be unable to reach a settlement with respect to a
dispute, such dispute shall be resolved by arbitration pursuant to Section 2(d).

               (d) If the Committee and the Representative cannot resolve a dispute prior to expiration of
the 60-day period referred to in Section 2(c) (or such longer period as the parties may have agreed
to in writing), then such dispute shall be submitted (and either party may submit such dispute) for
arbitration before a single arbitrator in New York City, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect and the provisions of
Section 10.12 of the Merger Agreement to the extent that such provisions do not conflict with the
provisions of this Section 2(d). The Committee and the Representative shall attempt to agree upon
an arbitrator; if they shall be unable to agree upon an arbitrator within 10 days after the dispute
is submitted for arbitration, then either the Committee or the Representative, upon written notice
to the other, may apply for appointment of such arbitrator by the American Arbitration Association.
Each party shall pay the fees and expenses of counsel used by it and 50% of the fees and expenses
of the arbitrator and of other expenses of the arbitration. The arbitrator shall render his
decision within 90 days after his appointment and may award costs to either the Committee or the
Representative if, in his sole opinion reasonably exercised, the claims made by any other party had
no reasonable basis and were arbitrary and capricious. Such decision and award shall be in writing
and shall be final and conclusive on the parties, and counterpart copies thereof shall be delivered
to each of the parties. Judgment may be obtained on the decision of the arbitrator so rendered in
any New York state court sitting in New York County, or any federal court sitting in New York
County having jurisdiction, and may be enforced in accordance with the law of the State of New
York. If the arbitrator shall fail to render his decision or award within such 90-day period,
either the Committee or the Representative may apply to any New York state court sitting in New
York County, or any federal court sitting in New York County then having jurisdiction, by action,
proceeding or otherwise, as may be proper to determine the matter in dispute consistently with the
provisions of this Agreement. The parties consent to the exclusive jurisdiction of the New York
state courts sitting in New York County, New York, or any federal court having jurisdiction and
sitting in New York County, New York, for this purpose. The prevailing party (or either party, in
the case of a decision or award rendered in part for each party) shall send a copy of the
arbitration decision or of any judgment of the court to the Escrow Agent.

               (e) As used in this Agreement, “Established Claim” means any (i) Indemnification Claim
deemed established pursuant to the last sentence of Section 2(b), (ii) Indemnification Claim
resolved in favor of Parent or the Company by settlement pursuant to Section 2(c), resulting in a
dollar award to Parent or the Company, (iii) Indemnification Claim established by the decision of
an arbitrator pursuant to Section 2(d), resulting in a dollar award to Parent, (iv) Third Party
Claim that has been sustained by a final determination (after exhaustion of any appeals) of a court
of competent

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jurisdiction, or (v) Third Party Claim that the Committee and the Representative have jointly
notified the Escrow Agent has been settled in accordance with the provisions of the Merger
Agreement.

               (f) (i) Promptly after an Indemnity Claim becomes an Established Claim, the Committee and the
Representative shall jointly deliver a notice to the Escrow Agent (a “Joint Notice”)
directing the Escrow Agent to pay to Parent, and the Escrow Agent promptly shall pay to Parent,
shares of Parent Common Stock in the Indemnity Escrow Fund having a Fair Market Value (as
hereinafter defined) in an amount equal to the aggregate dollar amount of the Established Claim
(or, if at such time there remains in the Indemnity Escrow Fund shares of Parent Common Stock
having a Fair Market Value less than the full amount so payable, the full number of shares of
Parent Common Stock remaining in the Indemnity Escrow Fund).

                    (ii) Payment of an Established Claim shall be made in shares of Parent Common Stock, pro rata
from the account in the Indemnity Escrow Fund maintained on behalf of each Owner. For the purposes
of each payment, such shares shall be valued at the Fair Market Value (as hereinafter defined)
thereof. In no event shall the Escrow Agent be required to calculate Fair Market Value or make a
determination of the number of shares to be delivered to Parent in satisfaction of any Established
Claim; rather, such calculation shall be included in and made part of the Joint Notice. The Escrow
Agent shall transfer to Parent out of the Indemnity Escrow Fund that number of shares of Parent
Common Stock necessary to satisfy each Established Claim, as set out in the Joint Notice. Any
dispute between the Committee and the Representative concerning the calculation of Fair Market
Value or the number of shares necessary to satisfy any Established Claim, or any other dispute
regarding a Joint Notice, shall be resolved between the Committee and the Representative in
accordance with the procedures specified in Section 2(d), and shall not involve the Escrow Agent.
Each transfer of shares in satisfaction of an Established Claim shall be made by the Escrow Agent
delivering to Parent one or more stock certificates held in each Owner’s account evidencing not
less than such Owner’s pro rata portion of the aggregate number of shares specified in the Joint
Notice, together with assignments separate from certificate executed in blank by such Owner and
completed by the Escrow Agent in accordance with instructions included in the Joint Notice. Upon
receipt of the stock certificates and assignments, Parent shall deliver to the Escrow Agent new
certificates representing the number of shares owned by each Owner after such payment. The parties
hereto (other than the Escrow Agent) agree that the foregoing right to make payments of Established
Claims in shares of Parent Common Stock may be made notwithstanding any other agreements
restricting or limiting the ability of any Owner to sell any shares of Parent stock or otherwise.
The Committee and the Representative shall be required to exercise utmost good faith in all matters
relating to the preparation and delivery of each Joint Notice. As used herein, “Fair Market
Value” means the average reported closing price for the Parent Common Stock for the ten trading
days ending on the last trading day prior to (x) with respect to an Established Claim, the day the
Established Claim is paid, (y) with respect to the Pending Claims Reserve (as hereinafter defined),
the day following the expiration of the Escrow Period, and (z) with respect to a request for
reimbursement

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pursuant to Section 4(a) for payment to a Dissenter with respect to such Dissenter’s
Dissenting Shares, the day such payment is made to the Dissenter by Parent or the Company.

                    (iii) Notwithstanding anything herein to the contrary, at such time as an Indemnification
Claim has become an Established Claim, the Representative shall have the right to substitute for
the Indemnity Escrow Shares that otherwise would be paid in satisfaction of such claim (the
“Indemnity Claim Shares”), cash in an amount equal to the Fair Market Value of the Claim
Shares (“Substituted Cash”). In such event (i) the Joint Notice shall include a statement
describing the substitution of Substituted Cash for the Indemnity Claim Shares, and (ii)
substantially contemporaneously with the delivery of such Joint Notice, the Representative shall
cause currently available funds to be delivered to the Escrow Agent in an amount equal to the
Substituted Cash. Upon receipt of such Joint Notice and Substituted Cash, the Escrow Agent shall
(y) in payment of the Established Claim described in the Joint Notice, deliver the Substituted Cash
to Parent in lieu of the Indemnity Claim Shares, and (z) cause the Indemnity Claim Shares to be
returned to the Representative.

          3. On the first Business Day after the expiration of the Indemnity Escrow Period, upon receipt
of a Joint Notice, the Escrow Agent shall distribute and deliver to each Owner certificates
representing the shares of Parent Common Stock then in such Owner’s account in the Indemnity Escrow
Fund, unless, at such time, there are any Indemnity Claims with respect to which Indemnity Notices
have been received but which have not been resolved pursuant to Section 2 hereof or in respect of
which the Escrow Agent has not been notified of, and received a copy of, a final determination
(after exhaustion of any appeals) by a court of competent jurisdiction, as the case may be (in
either case, “Pending Claims”), and which, if resolved or finally determined in favor of
Parent, would result in a payment to Parent, in which case such Joint Notice shall instruct the
Escrow Agent to retain, and the Escrow Agent shall retain, and the total amount of such
distributions to such Owner shall be reduced by, the Pending Claims Reserve (as hereinafter
defined). The Committee shall certify to the Escrow Agent the Fair Market Value to be used in
calculating the Pending Claims Reserve and the number of shares of Parent Common Stock to be
retained therefor. Thereafter, if any Pending Claim becomes an Established Claim, the Committee
and the Representative shall deliver to the Escrow Agent a Joint Notice directing the Escrow Agent
to pay to Parent an amount in respect thereof determined in accordance with Section 2(f), and to
deliver to each Owner shares of Parent Common Stock then in such owner’s account in the Indemnity
Escrow Fund having a Fair Market Value equal to the amount by which the remaining portion of his
account in the Indemnity Escrow Fund exceeds the then Pending Claims Reserve (determined as set
forth below), all as specified in a Joint Notice. If any Pending Claim is resolved against Parent,
the Committee and the Representative shall deliver to the Escrow Agent a Joint Notice directing the
Escrow Agent to pay to each Owner the amount by which the remaining portion of his account in the
Indemnity Escrow Fund exceeds the then Pending Claims Reserve. Upon resolution of all Pending
Claims, the Committee and the Representative shall deliver to the Escrow Agent a Joint Notice
directing the Escrow Agent shall pay to such Owner the remaining portion of his or her account in
the Indemnity Escrow Fund.

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          As used herein, the “Pending Claims Reserve” shall mean, at the time any such
determination is made, that number of shares of Parent Common Stock in the Indemnity Escrow Fund
having a Fair Market Value equal to the sum of the aggregate dollar amounts claimed to be due with
respect to all Pending Claims (as shown in the Indemnity Notices of such Claims).

          4. (a) Upon payment by Parent or the Company of a claim by a Dissenter with respect to such
Dissenter’s Dissenting Shares, the Committee shall give a notice (“Reimbursement Notice”)
to the Escrow Agent stating the amount of such payment and the date thereof and requesting that it
be reimbursed from the Reimbursement Escrow Fund. Upon receipt of the Reimbursement Notice, the
Escrow Agent shall pay to Parent, from the Reimbursement Escrow Fund, that number of shares of
Parent Common Stock having a Fair Market Value equal to the amount of the payment made to the
Dissenter.

               (b) Upon final determination of all claims by Dissenters with respect to their Dissenting
Shares and reimbursement to Parent with respect thereto pursuant to Section 4(a), the Escrow Agent,
upon receipt of a Joint Notice to such effect, shall distribute and deliver to each Owner
certificates representing the shares of Parent Common Stock then in such Owner’s account in the
Reimbursement Escrow Fund.

          5. The Escrow Agent, the Committee and the Representative shall cooperate in all respects with
one another in the calculation of any amounts determined to be payable to Parent and the Owners in
accordance with this Agreement and in implementing the procedures necessary to effect such
payments.

          6. (a) The Escrow Agent undertakes to perform only such duties as are expressly set forth
herein. It is understood that the Escrow Agent is not a trustee or fiduciary and is acting
hereunder merely in a ministerial capacity.

               (b) The Escrow Agent shall not be liable for any action taken or omitted by it in good faith
and in the exercise of its own best judgment, and may rely conclusively and shall be protected in
acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel
chosen by the Escrow Agent), statement, instrument, report or other paper or document (not only as
to its due execution and the validity and effectiveness of its provisions, but also as to the truth
and acceptability of any information therein contained) which is believed by the Escrow Agent to be
genuine and to be signed or presented by the proper person or persons. The Escrow Agent shall not
be bound by any notice or demand, or any waiver, modification, termination or rescission of this
Agreement unless evidenced by a writing delivered to the Escrow Agent signed by the proper party or
parties and, if the duties or rights of the Escrow Agent are affected, unless it shall have given
its prior written consent thereto.

               (c) The Escrow Agent’s sole responsibility upon receipt of any notice requiring any payment to
Parent pursuant to the terms of this Agreement or, if such notice is disputed by the Committee or
the Representative, the settlement with respect to any such dispute, whether by virtue of joint
resolution, arbitration or determination of a

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court of competent jurisdiction, is to pay to Parent the amount specified in such notice, and
the Escrow Agent shall have no duty to determine the validity, authenticity or enforceability of
any specification or certification made in such notice.

               (d) The Escrow Agent shall not be liable for any action taken by it in good faith and believed
by it to be authorized or within the rights or powers conferred upon it by this Agreement, and may
consult with counsel of its own choice and shall have full and complete authorization and
indemnification under Section 5(g) for any action taken or suffered by it hereunder in good faith
and in accordance with the opinion of such counsel.

               (e) The Escrow Agent may resign at any time and be discharged from its duties as escrow agent
hereunder by its giving the other parties hereto written notice and such resignation shall become
effective as hereinafter provided. Such resignation shall become effective at such time that the
Escrow Agent shall turn over the Escrow Funds to a successor escrow agent appointed jointly by the
Committee and the Representative. If no new escrow agent is so appointed within the 60 day period
following the giving of such notice of resignation, the Escrow Agent may deposit the Escrow Funds
with any court it reasonably deems appropriate.

               (f) In the event of a dispute between the parties as to the proper disposition of an Escrow
Fund, the Escrow Agent shall be entitled (but not required) to deliver such Escrow Fund into the
United States District Court for the Southern District of New York and, upon giving notice to the
Committee and the Representative of such action, shall thereupon be relieved of all further
responsibility and liability with respect to such Escrow Fund.

               (g) The Escrow Agent shall be indemnified and held harmless by Parent from and against any
expenses, including counsel fees and disbursements, or loss suffered by the Escrow Agent in
connection with any action, suit or other proceeding involving any claim which in any way, directly
or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent
hereunder, or the Escrow Funds held by it hereunder, other than expenses or losses arising from the
gross negligence or willful misconduct of the Escrow Agent. Promptly after the receipt by the
Escrow Agent of notice of any demand or claim or the commencement of any action, suit or
proceeding, the Escrow Agent shall notify the other parties hereto in writing. In the event of the
receipt of such notice, the Escrow Agent, in its sole discretion, may commence an action in the
nature of interpleader in an appropriate court to determine ownership or disposition of the Escrow
Funds or it may deposit the Escrow Funds with the clerk of any appropriate court and be relieved of
any liability with respect thereto or it may retain the Escrow Funds pending receipt of a final,
non-appealable order of a court having jurisdiction over all of the parties hereto directing to
whom and under what circumstances the Escrow Funds are to be disbursed and delivered.

               (h) The Escrow Agent shall be entitled to reasonable compensation from Parent for all services
rendered by it hereunder. The Escrow Agent shall also be entitled to reimbursement from Parent for
all expenses paid or incurred by it in

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the administration of its duties hereunder including, but not limited to, all counsel,
advisors’ and agents’ fees and disbursements and all taxes or other governmental charges.

               (i) From time to time on and after the date hereof, the Committee and the Representative shall
deliver or cause to be delivered to the Escrow Agent such further documents and instruments and
shall do or cause to be done such further acts as the Escrow Agent shall reasonably request to
carry out more effectively the provisions and purposes of this Agreement, to evidence compliance
herewith or to assure itself that it is protected in acting hereunder.

               (j) Notwithstanding anything herein to the contrary, the Escrow Agent shall not be relieved
from liability hereunder for its own gross negligence or its own willful misconduct.

          7. This Agreement expressly sets forth all the duties of the Escrow Agent with respect to any
and all matters pertinent hereto. No implied duties or obligations shall be read into this
Agreement against the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the parties hereto except this Agreement and shall have no duty to inquire into the
terms and conditions of any agreement made or entered into in connection with this Agreement,
including, without limitation, the Merger Agreement.

          8. This Agreement shall inure to the benefit of and be binding upon the parties and their
respective heirs, successors, assigns and legal representatives, shall be governed by and construed
in accordance with the law of Delaware applicable to contracts made and to be performed therein
except that issues relating to the rights and obligations of the Escrow Agent shall be governed by
and construed in accordance with the law of New York applicable to contracts made and to be
performed therein. This Agreement cannot be changed or terminated except by a writing signed by
the Committee, the Representative and the Escrow Agent.

          9. The Committee and the Representative each hereby consents to the exclusive jurisdiction of
the New York state courts sitting in New York County and federal courts sitting in New York County
with respect to any claim or controversy arising out of this Agreement. Service of process in any
action or proceeding brought against the Committee or the Representative in respect of any such
claim or controversy may be made upon it by registered mail, postage prepaid, return receipt
requested, at the address specified in Section 9, with a copy delivered by nationally recognized
overnight carrier to Graubard Miller, The Chrysler Building, 405 Lexington Avenue, New York, N.Y.
10174-1901, Attention: David Alan Miller, Esq.

          10. All notices and other communications under this Agreement shall be in writing and shall be
deemed given if given by hand or delivered by nationally recognized overnight carrier, or if given
by telecopier and confirmed by mail (registered or certified mail, postage prepaid, return receipt
requested), to the respective parties as follows:

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A.

If to the Committee, to it at:

c/o Ithaka Acquisition Corp.

100 South Pointe Drive, Suite 2305

Miami Beach, Florida 33130

Attention: Eric M. Hecht, President and CFO

Telephone: 305-532-3800

Facsimile: 646-453-1400

with a copy to:

David Alan Miller, Esq.

Graubard Miller

The Chrysler Building

405 Lexington Avenue

New York, New York 10174-1901

Telephone: 212-818-8661

Facsimile: 212-818-8881

B.

If to the Representative, to them at:

Kurt Wheeler

[                                        ]

Wende Hutton

[                                        ]

with a copy to:

Sheppard, Mullin, Richter & Hampton LLP

650 Town Center Drive, 4th Floor

Costa Mesa, California 92626

Attention: Ethan Feffer, Esq.

Telephone: 714-513-5100

Facsimile: 714-513-5130

C.

If to the Escrow Agent, to it at:

Continental Stock Transfer & Trust Company

2 Broadway

New York, New York 10004

Attention: Steven G. Nelson

Telecopier No.: 212-509-5150

or to such other person or address as any of the parties hereto shall specify by notice in writing
to all the other parties hereto.

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          11. (a) If this Agreement requires a party to deliver any notice or other document, and such
party refuses to do so, the matter shall be submitted to arbitration pursuant to Section 2(d) of
this Agreement.

               (b) All notices delivered to the Escrow Agent shall refer to the provision of this Agreement
under which such notice is being delivered and, if applicable, shall clearly specify the aggregate
dollar amount due and payable to Parent and the number of shares of Parent Common Stock to be
returned to Parent.

               (c) This Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original instrument and all of which together shall constitute a single agreement.

     IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on the date
first above written.

	 	 	 	 	 
	 	ITHAKA ACQUISITION CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE REPRESENTATIVE

 	 
	 	 	 
	 	Kurt Wheeler 	 
	 	 	 
	 
	 	 	 
	 	 	 
	 	Wende Hutton 	 
	 	 	 
	 
	 	ESCROW AGENT

CONTINENTAL STOCK TRANSFER & TRUST COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	Steven G. Nelson 	 
	 	 	Title:  	Chairman 	 
	 

11exv4w1

 

OMNIBUS INSTRUMENT

     WHEREAS, the parties named herein desire to enter into certain Program Documents contained
herein, each such document dated as of this 29th day of September, 2006, relating to the issuance
by Principal Life Income Fundings Trust 2006-67 (the “Trust”) of Notes with a principal amount of
$6,462,000.00 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 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 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 agent named therein, including the Purchasing Agent have
entered into that certain Distribution Agreement dated February 16, 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 10:00 am Central Standard Time on September 29, 2006.

     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 Agents (as defined in the Terms 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 Greenwich 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:  	Vice 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 2006-67, filed on September 25, 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.

     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 as principal, the following items will be delivered
on the Settlement Date:

	•	 	Opinion of Sidley Austin LLP regarding the enforceability of the Guarantee and the
Notes.

     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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