Document:

exv10w3

 

Exhibit 10.3

TARRAGON REALTY INVESTORS, INC.

OMNIBUS PLAN

SECTION 1. Purpose of the Plan

     1.1 Tarragon Realty Investors, Inc. (the “Company”) hereby adopts this
Omnibus Plan (the “Plan”), intended to promote the interests of the Company by
providing employees of the Company with appropriate incentives and rewards to
encourage them to enter into and continue in the employ of the Company and to
acquire a proprietary interest in the long-term success of the Company; and to
reward officers, other employees, consultants, and directors in fulfilling
their responsibilities for long-range achievements.

SECTION 2. Definitions

     2.1 As used in the Plan, the following definitions apply:

     a. “Affiliate” means an affiliate of the Company, as defined
in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

     b. “Agreement” shall mean the written agreement between the
Company and a Participant evidencing an Award.

     c. “Award” means any Option, Restricted Stock, Stock
Appreciation Right, or Other Stock-Based Award granted under the
Plan.

     d. “Beneficial Owner” shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.

     e. “Board” shall mean the Board of Directors of the Company.

     f. “Cause” shall mean:

     1. The willful and continued failure by the Participant
substantially to perform his or her duties and obligations
to the Company (other than any such failure resulting from
his or her incapacity due to physical or mental illness);

     2. The willful engaging by the Participant in
misconduct which is materially injurious to the Company;

     3. The commission by the Participant of a felony; or

1

 

     4. The commission by the Participant of a crime against
the Company that is materially injurious to the Company.

     For purposes of this Section 2(f), no act, or failure to act,
on a Participant’s part shall be considered “willful” unless done,
or omitted to be done, by the Participant in bad faith and without
reasonable belief that his or her action or omission was in the
best interest of the Company. Determination of Cause shall be
made by the Committee in its sole discretion.

     g. “Change in Control” shall be deemed to occur (i) upon the
approval by the Board (or if approval of the Board is not required
as a matter of law, the Shareholders of the Company) of (A) any
consolidation or merger of the Company in which the Company is not
the continuing or surviving entity or pursuant to which the Shares
would be converted into cash, securities or other property other
than a merger in which the holders of the Shares immediately prior
to the merger will have the same proportionate ownership of the
Shares of the surviving entity immediately after the merger, (B)
any sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all or substantially all
the assets of the Company, or (C) adoption of any plan or proposal
for the liquidation or dissolution of the Company, (ii) when any
“person” (as defined in Section 13(d) of the Exchange Act), other
than the Company or any Subsidiary or employee benefit plan or
trust maintained by the Company, shall become the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 20% of the Shares outstanding at the
time, without the prior approval of the Board, or (iii) at any
time during a period of two consecutive years, individuals who at
the beginning of such period constituted the Board shall cease for
any reason to constitute at least a majority thereof, unless the
election or the nomination for election by the Shareholders of
each new Director during such two-year period was approved by a
vote of at least two-thirds of the Directors then still in office
who were Directors at the beginning of such two-year period.

     h. “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated
thereunder.

     i. “Committee” means the committee established by the Board
to administer the Plan, the composition of which shall at all
times satisfy the provisions of Section 162(m) of the Code. Each
member of the Committee shall be a Non-Employee Director as
defined in Rule 16b-3 under the Exchange Act.

     j. “Company” means Tarragon Realty Investors, Inc., a
corporation organized under the laws of the State of Nevada or any
of its predecessors or successors.

     k. “Deferred Shares” shall be awards made pursuant to Section
10 of the Plan or the right to receive Common Stock in lieu of
cash thereof at the end of specified time period.

2

 

     l. “Director” shall mean a member of the Board.

     m. “Disability” shall mean:

     1. Any physical or mental condition that would qualify
a Participant for a disability benefit under the long-term
disability plan maintained by the Company and applicable to
him or her;

     2. When used in connection with the exercise of an
Incentive Stock Option following termination of employment,
disability within the meaning of Section 422(e)(3) of the
Code; or

     3. Such other condition as may be determined in the
sole discretion of the Committee to constitute Disability.

     n. “Effective Date” shall mean the date of the Plan’s
adoption by the Board of Directors subject to approval of the Plan
by shareholders.

     o. “Employee” shall mean any full-time employee of the
Company or its Subsidiaries (including Directors who are otherwise
employed on a full-time basis by the Company or its Subsidiaries)
and consultants to the Company.

     p. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended from time to time.

     q. “Executive Officer” shall have the meaning set forth in
Rule 3b-7 promulgated under the Exchange Act.

     r. “Fair Market Value” of the Common Stock on a given date
shall be based upon either:

     1. If the Common Stock is listed on a national
securities exchange or quoted in an interdealer quotation
system, the last sales price or, if unavailable, the average
of the closing bid and asked prices per share of the Common
Stock on such date (or, if there was no trading or quotation
in the Common Stock on such date, on the next preceding date
on which there was trading or quotation) as provided by one
of such organizations; or

     2. If the Common Stock is not listed on a national
securities exchange or quoted in an interdealer quotation
system, the price will be equal to the Company’s fair market
value, as determined by the Committee in good faith based
upon the best available facts and circumstances at the time.

     s. “Incentive Stock Option” shall mean an Option that is an
“incentive stock option” within the meaning of Section 422 of the
Code, or any

3

 

successor provision, and that is designated by the Committee
as an Incentive Stock Option.

     t. “Issue Date” shall mean the date established by the
Company on which certificates representing Restricted Stock shall
be issued by the Company pursuant to the terms of Section 8.6.

     u. “Non-Employee Director” shall mean a member of the Board
who is not and has never been an employee of the Company.

     v. “Non-Qualified Stock Option” shall mean an Option other
than
an Incentive Stock Option.

     w. “Option” shall mean an option to purchase a number of
shares of Stock granted pursuant to Section 7.

     x. “Other Stock-Based Award” shall mean an award granted
pursuant to Section 10 hereof.

     y. “Partial Exercise” shall mean an exercise of an Award for
less than the full extent permitted at the time of such exercise.

     z. “Participant” shall mean:

     1. an Employee of the Company to whom an Award is
granted pursuant to the Plan; and

     2. upon the death of an individual described in (1),
his or her successors, heirs, executors and administrators,
as the case may be.

     aa. “Performance Goals” means performance goals based on one
or more of the following criteria:

     1. Pre-tax income or after-tax income;

     2. Operating profit;

     3. Return on equity, assets, capital or investment;

     4. Earnings or book value per share;

     5. Sales or revenues;

     6. Operating expenses;

     7. Stock price appreciation; and

4

 

     8. Implementation or completion of critical projects or
processes.

     Where applicable, the Performance Goals may be expressed in
terms of attaining a specified level of the particular criteria or
the attainment of a percentage increase or decrease in the
particular criteria, and may be applied to one or more of the
Company, a Subsidiary or Affiliate, or a division or strategic
business unit of the Company, or may be applied to the performance
of the Company relative to a market index, a group of other
companies or a combination thereof, all as determined by the
Committee.

     The Performance Goals may include a threshold level of
performance below which no vesting will occur, levels of
performance at which specified vesting will occur, and a maximum
level of performance at which full vesting will occur.

     Each of the foregoing Performance Goals shall be determined
in accordance with generally accepted accounting principles and
shall be subject to certification by the Committee; provided that
the Committee shall have the authority to make equitable
adjustments to the Performance Goals in recognition of unusual or
non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any
Subsidiary or Affiliate, in response to changes in applicable laws
or regulations, or to account for items of gain, loss or expense
determined to be extraordinary or unusual in nature or infrequent
in occurrence or related to the disposal of a segment of a
business or related to a change in accounting principles.

     bb. “Person” shall have the meaning set forth in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include:

     1. The Company;

     2. A trustee or other fiduciary holding securities
under an employee benefit plan of the Company;

     3. An underwriter temporarily holding securities
pursuant to an offering of such securities; or

     4. A corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of shares of Stock of the
Company.

     cc. “Plan” means this Tarragon Omnibus Plan, as amended from
time to time.

     dd. “Reload Option” shall mean a Non-Qualified Stock Option
granted pursuant to Section 7.3(f).

5

 

     ee. “Restricted Stock” shall mean a share of Stock which is
granted pursuant to the terms of Section 8 hereof and which is
subject to the restrictions set forth in Section 8.4.

     ff. “Rule 16b-3” shall mean the Rule 16b-3 promulgated under
the Exchange Act, as amended from time to time.

     gg. “Securities Act” shall mean the Securities Act of 1933,
as amended from time to time.

     hh. “Stock” means shares of the common stock, par value $.01
per share, of the Company.

     ii. “Stock Appreciation Right” or “SAR” shall mean an Award
granted pursuant to the terms of Section 9 hereof, which confers
on the Participant a right to receive, upon exercise thereof, the
excess of (i) the Fair Market Value of one share of Stock on the
date of exercise over (ii) the grant price of the SAR, payable in
cash or shares of Stock.

     jj. “Subsidiary” shall mean an entity, in which the Company
owns, directly or indirectly, through subsidiaries, at least 50
percent of the total combined voting power of all classes of
equity, or any other entity (including, but not limited to,
partnerships and join ventures) in which the Company owns at least
50 percent of the combined equity thereof. In the event that
applicable law permits the ownership of less than 50 percent of
the total combined voting power of all classes of equity to
constitute a “Subsidiary,” then the requirement of 50 percent
ownership in this definition shall be lowered to the lowest level
permitted under applicable law; provided, however, in no event
shall “Subsidiary” mean any entity which is not a “subsidiary”
within in the meaning of Code 424(f).

     kk. “Vesting Date” shall mean the date established by the
Committee on which Restricted Stock may vest.

SECTION 3. Types of Awards Covered

     3.1 The Committee may grant Options, Restricted Stock, Stock Appreciation
Rights, and Other Stock-Based Awards, in such amounts and with such terms and
conditions as the Committee shall determine, subject to the provisions of the
Plan.

     3.2 Each Award granted under the Plan shall be evidenced by an Agreement
which shall contain such provisions as the Committee may in its sole discretion
deem necessary or desirable.

     3.3 By accepting an Award, a Participant thereby agrees that the award
shall be subject to all of the terms and provisions of the Plan and the
applicable Agreement.

6

 

SECTION 4. Administration

     4.1 The Committee shall administer the Plan. The Committee shall have the
authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to:

     a. Grant Awards;

     b. Determine the persons to whom and the time or times at
which Awards shall be granted;

     c. Determine the type and number of Awards to be granted, the
number of shares of Stock to which an Award may relate and the
terms, conditions, restrictions and/or Performance Goals relating
to any Award;

     d. Determine whether, to what extent, and under what
circumstances an Award may be settled, canceled, forfeited,
exchanged, or surrendered;

     e. Make adjustments in the Performance Goals in recognition
of unusual or non-recurring events affecting the Company or the
financial statements of the Company (to the extent not
inconsistent with Section 162[m] of the Code, if applicable), or
in response to changes in applicable laws, regulations, or
accounting principles;

     f. Construe and interpret the Plan and any Award;

     g. Prescribe, amend and rescind rules and regulations
relating to the Plan;

     h. Determine the terms and provisions of Agreements; and

     i. Make all other determinations deemed necessary or
advisable for the administration of the Plan.

     4.2 The Committee may, in its absolute discretion, without amendment to
the Plan,

     a. Accelerate the date on which any Option granted under the
plan becomes exercisable, waive or amend the operation of Plan
provisions respecting exercise after termination of employment or
otherwise adjust any of the terms of such Option;

     b. Accelerate the Vesting Date or waive any condition imposed
hereunder with respect to any Restricted Stock; and

     c. Otherwise adjust any of the terms applicable to any Award;
provided, however, in each case, that in the event of the
occurrence of a Change

7

 

in Control, the provisions of Section 12 hereof shall govern
the vesting and exercise schedule of any Award granted hereunder.

     4.3 No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under Nevada law) and hold harmless each member of the
Committee and each other Director or Employee of the Company to whom any duty
or power relating to the administration or interpretation of the Plan has been
delegated against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the
Committee) arising out of any action, omission or determination relating to the
Plan, unless, in either case, such action, omission or determination was taken
or made by such a member, Director or Employee in bad faith and without
reasonable belief that it was in the best interests of the Company.

     4.4 The Committee may employ such legal counsel and consultants as it may
deem desirable for the administration of the Plan and may rely upon any opinion
received from any such counsel or consultant and any computation received from
any such consultant. The Committee shall keep minutes of its actions under the
Plan.

SECTION 5. Eligibility

     5.1 Incentive Stock Options shall be granted only to employees (including
officers and directors who are also employees) of the Company, its parent or
any of its Subsidiaries. All other Awards may be granted to officers,
independent contractors, key employees and non-employee directors of the
Company or of any of its Subsidiaries and Affiliates.

     5.2 An Employee or Non-Employee Director who has been granted an Award in
one year shall not necessarily be entitled to be granted Awards in subsequent
years.

SECTION 6. Shares of Stock Subject to the Plan

     6.1 The maximum number of shares of Stock reserved for the grant or
settlement of Awards under the Plan shall be at least 2,000,000 and will
represent approximately 20% of the total shares outstanding. As the total
shares outstanding increase (which limit shall be determined without
considering as outstanding any shares that are the subject of any unexercised
options under the Plan or any other option plan of the Company or any Shares
owned by the Company or any of its subsidiaries) such shares available for
issuance under the plan shall automatically increase proportionately; provided,
however, that the maximum number of Shares for which Incentive Stock Options
may be granted under the Plan shall not exceed 1,000,000 Shares (which number
is subject to adjustment as provided in Section 6.3). The number of shares of
Common Stock reserved under the Plan shall not be less than the total number of
shares granted, whether exercised or unexercised for all Awards under the Plan.

     6.2 No more than 1,000,000 shares of Stock may be awarded in respect of
Options, no more than 300,000 shares of Stock may be awarded in respect of
Restricted Stock and no more than 100,000 shares of Stock may be awarded in
respect of Other Stock-Based Awards to a single individual in any given year
during the life of the Plan, which amounts shall be subject to

8

 

adjustment as provided herein. Determinations made in respect of the
limitation set forth in the preceding sentence shall be made in a manner
consistent with Section 162(m) of the Code.

     6.3 Such shares may, in whole or in part, be authorized but unissued
shares or shares that shall have been or may be reacquired by the Company in
the open market, in private transactions or otherwise. If any shares subject
to an Award are forfeited, cancelled, exchanged or surrendered or if an Award
otherwise terminates or expires without a distribution of shares to the holder
of such Award, the shares of Stock with respect to such Award shall, to the
extent of any such forfeiture, cancellation, exchange, surrender, termination
or expiration, again be available for Awards under the Plan.

     6.4 Except as provided in an Award Agreement, in the event that the
Committee shall determine that any dividend or other distribution (whether in
the form of cash, Stock, or other property), recapitalization, stock split,
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event,
affects the Stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of holders of Awards under the Plan, then
the Committee shall make such equitable changes or adjustments as it deems
necessary or appropriate to any or all of

     a. the number and kind of shares of Stock or other property
(including cash) that may thereafter be issued in connection with
Awards;

     b. the number and kind of shares of Stock or other property
(including cash) issued or issuable in respect of outstanding
Awards;

     c. the exercise price, grant price, or purchase price
relating to any Award; provided that, with respect to Incentive
Stock Options, such adjustment shall be made in accordance with
Section 424(h) of the Code;

     d. the Performance Goals; and

     e. the individual limitations applicable to Awards.

SECTION 7. Stock Options

     7.1 Each Option shall be clearly identified in the applicable Agreement as
either an Incentive Stock Option or a Non-Qualified Stock Option.

     7.2 Each Agreement with respect to an Option shall set forth the exercise
price per share of Stock payable by the grantee to the Company upon exercise of
the Option. The exercise price per share of Stock shall be determined by the
Committee; provided, however, that only in the case of Deferred Shares shall an
Option have an exercise price per share of Stock that is less than the Fair
Market Value of a share of Stock on the date the Option is granted.

     7.3 Term and Exercise of Options

     a. Unless the applicable Agreement provides otherwise, an
Option shall become cumulatively exercisable as to 20% percent of
the shares of Stock

9

 

covered thereby on each of the first, second, third, fourth
and fifth anniversaries of the date of grant. The Committee shall
determine the expiration date of each Option; provided, however,
that no Option shall be exercisable more than 10 years after the
date of grant. Unless the applicable Agreement provides otherwise
and except in the event of a Change in Control, no Option shall be
exercisable prior to the first anniversary of the date of grant.

     b. An Option may be exercised for all or any portion of the
Stock as to which it is exercisable, provided that no Partial
Exercise of an Option shall be for an aggregate exercise price of
less than $100.00. The Partial Exercise of an Option shall not
cause the expiration, termination or cancellation of the remaining
portion thereof.

     c. An Option shall be exercised by delivering notice to the
Company, directed to the attention of its Secretary. Such notice
shall be accompanied by a copy of the applicable Agreement, shall
specify the number of shares of Stock with respect to which the
Option is being exercised and the effective date of the proposed
exercise and shall be signed by the Participant or other person
then having the right to exercise the Option. Payment for Stock
purchased upon the exercise of an Option shall be made on the
effective date of such exercise by one or a combination of the
following means:

     i. In cash or by personal check, certified check, bank
cashier’s check or wire transfer.

     ii. Subject to the approval of the Committee, in Stock
owned by the Participant for at least six months prior to
the date of exercise and valued at their Fair Market Value
on the effective date of such exercise.

     iii. Subject to the approval of the Committee, by
delivery of an irrevocable direction to a licensed
securities broker acceptable to the Company to sell shares
of Stock and to deliver all or part of the sales proceeds to
the Company in payment of the Option Price and any
withholding taxes described in Section 12. Executive
Officers and Directors will not be permitted to use this
cashless method of exercise described in this paragraph
without the express prior consent of the Company, and only
to the extent permitted by law.

     iv. Subject to the approval of the Committee, by such
other provision as the Committee may from time to time
authorize.

     d. Under Section 421(b) of the Code, each Participant shall
notify the Company of any disposition of Stock issued pursuant to
the exercise of an Incentive Stock Option under the circumstances
described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.

10

 

     e. Certificates for Stock purchased upon the exercise of an
Option shall be issued in the name of the Participant or other
person entitled to receive such Stock, and delivered to the
Participant or such other person as soon as practicable following
the effective date on which the Option is exercised.

     f. The Committee shall have the authority to specify, at the
time of grant or, with respect to Non-Qualified Stock Options, at
or after the time of grant, that a Participant shall be granted a
new Non-Qualified Stock Option (a “Reload Option”) for a number of shares of Stock equal to the number of shares of Stock surrendered
by the Participant upon exercise of all or a part of an Option in
the manner described in Section 7.3(c)(ii) above, subject to the
availability of Stock under the Plan at the time of such exercise;
provided, however, that no Reload Option shall be granted to a
Non-Employee Director. Reload Options shall be subject to such
conditions as may be specified by the Committee in its discretion,
subject to the terms of the Plan.

     7.4 Limitations on Incentive Stock Options

     a. To the extent that the aggregate Fair Market Value of
Stock of the Company with respect to which Incentive Stock Options
are exercisable for the first time by a Participant during any
calendar year under the Plan and any other option plan of the
Company (or any Subsidiary) shall exceed $100,000, such Options
shall be treated as Non-Qualified Stock Options. Such Fair Market
Value shall be determined as of the date on which each such
Incentive Stock Option is granted.

     b. No Incentive Stock Option may be granted to an individual
if, at the time of the proposed grant: such individual owns (or
is attributed to own by virtue of the Code) Stock possessing more
than ten (10) percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary unless

     i. The exercise price of such Inventive Stock Option is
at least 110 percent of the Fair Market Value of a share of
Stock at the time such Incentive Stock Option is granted;
and

     ii. Such Incentive Stock Option is not exercisable
after the expiration of five years from the date such
Incentive Stock Option is granted.

     7.5 Effect of Termination of Employment

     a. Unless the applicable Agreement provides otherwise, in the
event that the employment, directorship or consultancy (together,
hereinafter referred to as “employment”) of a Participant with the
Company shall terminate for any reason other than Cause,
Disability or death,

     i. Options granted to such Participant, to the extent
that they are exercisable at the time of such termination,
shall remain exercisable

11

 

only until the date that is 90 calendar days after the
date of such termination, on which date they shall expire;
and

     ii. Options granted to such Participant, to the extent
not exercisable at the time of such termination, shall
expire at the close of business on the date of such
termination.

     iii. The 90-day period described in Section 7.5(a)(i)
shall be extended to one year from the date of such
termination, in the event of the Participant’s death during
such 90-day period. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its
term.

     b. Unless the applicable Agreement provides otherwise, in the
event that the employment of a Participant with the Company shall
terminate on account of the Disability or death of the
Participant,

     i. Options granted to such Participant, to the extent
that they were exercisable at the time of such termination,
shall remain exercisable until the first anniversary of such
termination, on which date they shall expire, and

     ii. Options granted to such Participant, to the extent
not exercisable at the time of such termination, shall
expire at the close of business on the date of such
termination; provided, however, that no Option shall be
exercisable after the expiration of its term.

     c. In the event of the termination of a Participant’s
employment for Cause, all then outstanding and unexercised Options
granted to such Participant shall expire as of the date of such
termination.

SECTION 8. Restricted Stock

     8.1 At the time of the grant of Restricted Stock, the Committee shall
establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with
respect to such shares of Restricted Stock. The Committee may divide such
shares of Restricted Stock into classes and assign a different Issue Date
and/or Vesting Date for each class. If the grantee is employed by the Company
on an Issue Date (which may be the date of grant), the specified number of
shares of Restricted Stock shall be issued in accordance with the provisions of
Section 8.6. Provided that all conditions to the vesting of Restricted Stock
imposed pursuant to Section 8.2 are satisfied, and except as provided in
Section 8.8, upon the occurrence of the Vesting Date with respect to Restricted
Stock, such Restricted Stock shall vest and the restrictions of Section 8.4
shall lapse.

     8.2 At the time of the grant of Restricted Stock, the Committee may impose
such restrictions or conditions to the vesting of such Restricted Stock as it,
in its absolute discretion, deems appropriate, including the attainment of
Performance Goals.

     8.3 If any Participant shall, in connection with the acquisition of Stock
under the Plan, make the election permitted under Section 83(b) of the Code
(i.e., an election to include in

12

 

gross income in the year of transfer the amounts specified in Section
83[b]), such Participant shall notify the Company of such election within 10
days of filing notice of the election with the Internal Revenue Service, in
addition to any filing and a notification required pursuant to regulation
issued under the authority of Section 83(b) of the Code.

     8.4 Prior to the vesting of any Restricted Stock, no transfer of a
Participant’s rights with respect to such Restricted Stock, whether voluntary
or involuntary, by operation of law or otherwise, shall be permitted.
Immediately upon any attempt to transfer such rights, the Participant shall
forfeit such Restricted Stock, and all of the rights related thereto.

     8.5 The Committee in its discretion may require that any dividends or
distributions paid on Restricted Stock be held in escrow until all restrictions
on such Restricted Stock have lapsed.

     8.6 Issuance of Certificates

     a. Reasonably promptly after the Issue Date with respect to
Restricted Stock, the Company shall cause to be issued a
certificate, registered in the name of the Participant to whom
such shares of Restricted Stock were granted, evidencing such shares of Restricted Stock; provided that the Company shall not
cause such a certificate to be issued unless it has received a
power of attorney duly endorsed in blank with respect to such shares of Restricted Stock. Each such certificate shall bear the
following legend:

The transferability of this certificate and the stock
represented hereby are subject to the restrictions,
terms and conditions (including forfeiture provisions
and restrictions against transfer) contained in the
Tarragon Realty Investors, Inc. omnibus plan and an
agreement entered into between the registered owner of
such stock and Tarragon Realty Investors, Inc. A copy
of the omnibus plan and agreement is on file with the
secretary of the company.

     Such legend shall not be removed until such Stock vests pursuant to
the terms hereof.

     b. The Company shall hold each certificate issued pursuant to
this Section 8.6, together with the powers relating to the
Restricted Stock evidenced by such certificate, unless the
Committee determines otherwise.

     8.7 Upon vesting of any Restricted Stock pursuant to the terms hereof, the
restrictions of Section 8.4 shall lapse with respect to such Restricted Stock.
Reasonably promptly after any Restricted Stock vests, the Company shall cause
to be delivered to the Participant to whom such shares of Restricted Stock were
granted a certificate evidencing such Stock, free of the legend set forth in
Section 8.6.

     8.8 Subject to such other provision as the Committee may set forth in the
applicable Agreement, and to the Committee’s amendment authority pursuant to
Section 4, upon the termination of a Participant’s employment for any reason
other than Cause, any and all Stock to which restrictions on transferability
apply shall be immediately forfeited by the Participant and

13

 

transferred to, and reacquired by, the Company; provided that if the
Committee, in its sole discretion, shall within thirty (30) days after such
termination of employment notify the Participant in writing of its decision not
to terminate the Participant’s rights in such shares of Stock, then the
Participant shall continue to be the owner of such shares of Stock subject to
such continuing restrictions as the Committee may prescribe in such notice.

     In the event of a forfeiture of Stock pursuant to this section, the
Company shall repay to the Participant (or the Participant’s estate) any amount
paid by the Participant for such shares of Stock. In the event that the
Company requires a return of Stock, it shall also have the right to require the
return of all dividends or distributions paid on such Stock, whether by
termination of any escrow arrangement under which such dividends or
distributions are held or otherwise.

     In the event of the termination of a Participant’s employment for Cause,
all shares of Restricted Stock granted to such Participant which have not
vested as of the date of such termination shall immediately be returned to the
Company, together with any dividends or distributions paid on such shares of
Stock, in return for which the Company shall repay to the Participant any
amount paid by the Participant for such shares of Stock.

     8.9 Restricted Stock granted pursuant to this Section 8 to Executive
Officers may be based on the attainment by the Company (or a Subsidiary or
division of the Company if applicable) of Performance Goals established by the
Committee.

SECTION 9. Stock Appreciation Rights

     9.1 The Agreement covering an Award of a Stock Appreciation Right, or SAR,
shall specify the grant price of the SAR, which may be fixed at the Fair Market
Value of a share of Stock on the date of grant or may vary in accordance with a
predetermined formula while the SAR is outstanding.

     9.2 Subject to the terms of the Plan, the Committee shall determine the
time or times at which and the circumstances under which an SAR may be
exercised in whole or in part (including based on the attainment of Performance
Goals established by the Committee and/or future service requirements approved
by the Committee) the time at which an SAR shall cease to be or become
exercisable following termination of employment or affiliation with the Company
or upon other conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock will be
delivered or deemed to be delivered to a Participant, whether or not an SAR
shall be in tandem or in combination with any other Award, and any other terms
and conditions determined by the Committee.

SECTION 10. Other Stock-Based Incentive Awards

     10.1 Other forms of Awards valued in whole or in part by reference to, or
otherwise based on, shares of Stock (“Other Stock-Based Awards”) may be granted
either alone or in addition to other Awards under the Plan. The Committee may
also grant Participants the right to receive Deferred Shares that are
stock-based incentive grants in lieu of a cash deferral of bonuses.

14

 

     10.2 Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the persons to whom and the time or times
at which such Other Stock-Based Awards shall be granted, the number of shares
of Stock to be granted pursuant to such Other Stock-Based Awards and all other
conditions of such Other Stock-Based Awards, including the attainment of
Performance Goals established by the Committee.

SECTION 11. Performance-based Compensation

     11.1 If and to the extent the Committee determines that an Award to be
granted to a Participant designated by the Committee as likely to be a Covered
Employee should qualify as “performance-based compensation” for purposes of
Code Section 162(m), the grant, exercise and/or settlement of such Award shall
be contingent upon the attainment of Performance Goals established by the
Committee and other terms set forth in this Section.

     11.2 Performance Goals shall be established not later than 90 days after
the beginning of any performance period applicable to such Award, or at such
other date as may be required or permitted for “performance-based compensation”
under Code Section 162(m). All determinations by the Committee as to the
establishment and attainment of Performance Goals shall be made in writing in
the case of any Award intended to qualify under Code Section 162(m). To the
extent required to comply with Code Section 162(m), the Committee may delegate
any responsibility relating to such Awards.

     11.3 Settlement of such Awards shall be in Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in
connection with such Awards. The Committee shall specify the circumstances in
which such Awards shall be paid or forfeited in the event of termination of
Service by the Participant prior to the end of a Performance Goal period or
settlement of such Awards.

     11.4 It is the intent of the Company that Awards granted to persons who
are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute “qualified performance-based
compensation” within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of this Section, including the definitions
of Covered Employee and other terms used herein, shall be interpreted in a
manner consistent with Code Section 162(m) and regulations thereunder. The
foregoing notwithstanding, because the Committee cannot determine with
certainty whether a given Participant will be a Covered Employee with respect
to a fiscal year that has not yet been completed, the term Covered Employee as
used herein shall mean only a person designated by the Committee, at the time
of grant of an Award, as likely to be a Covered Employee with respect to that
fiscal year. If any provision of the Plan or any agreement relating to such
Awards does not comply or is inconsistent with the requirements of Code Section
162(m) or regulations thereunder, such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements.

     11.5 Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Participant with the Company or any Affiliate, except an agreement, contract,
or understanding hereafter entered into by a

15

 

Participant with the Company or any Affiliate that expressly modifies or
excludes application of this paragraph (an “Other Agreement”), and
notwithstanding any formal or informal plan or other arrangement for the direct
or indirect provision of compensation to the Participant (including groups or
classes of Participants or beneficiaries of which the Participant is a member),
whether or not such compensation is deferred, is in cash, or is in the form of
a benefit to or for the Participant (a “Benefit Arrangement”), if the
Participant is a “disqualified individual,” as defined in Section 280G(c) of
the Code, any Option, Restricted Stock, SAR or other Stock-based Award held by
the Participant and any right to receive any payment or other benefit under
this Plan shall not become exercisable or vested (i) to the extent that such
right to exercise, vesting, payment, or benefit, taking into account all other
rights, payments or benefits to or for the Participant under this Plan, all
Other Agreements, and all Benefit Arrangements, would cause any payment or
benefit to the Participant under this Plan to be considered a “parachute
payment” within the meaning of Section 280G(b)(2) of the Code as then in effect
(a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Participant from the
Company under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by the
Participant without causing any such payment or benefit to be considered a
Parachute Payment. In the event that the receipt of any such right to
exercise, vesting, payment, or benefit under this Plan, in conjunction with all
other rights, payments, or benefits to or for the Participant under any Other
Agreement or any Benefit Arrangement would cause the Participant to be
considered to have received a Parachute Payment under this Plan that would have
the effect of decreasing the after-tax amount received by the Participant as
described in clause (ii) of the preceding sentence, then the Participant shall
have the right, in the Participant’s sole discretion, to designate those
rights, payments or benefits under this Plan, any Other Agreements, and any
Benefit Arrangements that should be reduced or eliminated so as to avoid having
the payment or benefit to the Participant under this Plan be deemed to be a
Parachute Payment.

SECTION 12. Rights in Event of Death or Disability

     12.1 Upon the death of a Participant, outstanding Awards granted to such
Participant may be exercised only by the executor or administrator of the
Participant’s estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution. No transfer of an
Award by will or the laws of descent and distribution shall be effective to
bind the Company unless the Committee shall have been furnished with written
notice thereof and with a copy of the will and/or such evidence as the
Committee may deem necessary to establish the validity of the transfer and an
agreement by the transferee to comply with all the terms and conditions of the
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Award.

     12.2 During a Participant’s lifetime, the Committee may permit the
transfer, assignment or other encumbrance of an outstanding Option unless (a)
such Option is an Incentive Stock Option and the Committee and the Participant
intend that it shall retain such status, or (b) such Option is meant to qualify
for the exemptions available under Rule 16b-3 (non-transferability is necessary
under Rule 16b-3 in order for the award to so qualify and the Committee and the
Participant intend that it shall continue to so qualify).

16

 

     12.3 Subject to any conditions as the Committee may prescribe, a
Participant may, upon providing written notice to the Secretary of the Company,
elect to transfer any or all Options granted to such Participant pursuant to
the Plan to members of his or her immediate family, including, but not limited
to, children, grandchildren and spouse or to trusts for the benefit of such
immediate family members or to partnerships in which such family members are
the only partners; provided, however, that no such transfer by any Participant
may be made in exchange for consideration.

     12.4 A Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant’s
estate shall be deemed to be the grantee’s beneficiary.

SECTION 13. Tax Withholding

     13.1 Whenever shares of Stock are to be delivered pursuant to an Award,
the Company shall have the right to require the participant to remit to the
Company in cash an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. The Company and/or its
Affiliate, as the case may be, shall have the right to deduct such amounts from
payments of any kind otherwise due to the participant by the Company and/or its
Affiliates.

     13.2 With the approval of the Committee, a participant may satisfy the
foregoing requirement by electing to have the Company withhold from delivery
shares of Stock having a value equal to the amount of tax to be withheld or by
delivering to the Company shares of Stock already owned by the participant.
Such shares of Stock shall be valued at their Fair Market Value as of the date
that the amount of tax to be withheld is determined. Fractional shares of
Stock shall be settled in cash. Such a withholding election may be made with
respect to all or any portion of the Stock to be delivered pursuant to an
Award.

SECTION 14. Change of Control

     14.1 Notwithstanding anything in this Plan to the contrary, upon the
occurrence of a Change in Control, any Award carrying a right to exercise that
was not previously exercisable and vested shall become fully exercisable and
vested, and the restrictions and forfeiture conditions applicable to any other
Award granted under the Plan shall lapse and such Award shall be deemed fully
vested. Notwithstanding anything in the Plan to the contrary, upon the
occurrence of a Change in Control, the purchaser(s) of the Company’s assets or
stock may, in his, her, or its discretion, deliver to the holder of an Award
the same kind of consideration that is delivered to the stockholders of the
Company as a result of such sale, conveyance or Change in Control, or the Board
may cancel all outstanding Options in exchange for consideration in cash or in
kind which consideration in both cases shall be equal in value to the higher of

     a. the Fair Market Value of those shares of Stock or other
securities the holder of such Option would have received had the
Option been exercised and no disposition of the shares acquired
upon such exercise been made prior to such sale, conveyance or
Change in Control, less the exercise price therefor; or

17

 

     b. the Fair Market Value of those shares of Stock or other
securities the holder of the Option would have received had the
Option been exercised and no disposition of the shares acquired
upon such exercise been made immediately following such sale,
conveyance or Change in Control, less the exercise price therefor.

     14.2 Upon dissolution or liquidation of the Company, all Options and other
Awards granted under this Plan shall terminate, but each holder of an Option
shall have the right, immediately prior to such dissolution or liquidation, to
exercise his or her Option to the extent then exercisable.

SECTION 15. Securities Matters

     15.1 The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or any Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing Stock
pursuant to the Plan unless and until the Company is advised by its counsel
that the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority and the requirements of
any securities exchange on which shares of Stock are traded. The Committee may
require, as a condition of the issuance and delivery of certificates evidencing
shares of Stock pursuant to the terms hereof, that the recipient of such shares
of Stock make such agreements and representations, and that such certificates
bear such legends, as the Committee, in its sole discretion, deems necessary or
desirable.

     15.2 The transfer of any shares of Stock hereunder shall be effective only
at such time as counsel to the Company shall have determined that the issuance
and delivery of such shares of Stock is in compliance with all applicable laws,
regulations of governmental authority, the requirements of any securities
exchange on which shares of Stock are traded. The Committee may, in its sole
discretion, defer the effectiveness of any transfer of Stock hereunder in order
to allow the issuance of such Stock to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. The Committee shall inform the Participant
in writing of its decision to defer the effectiveness of a transfer. During
the period of such deferral in connection with the exercise of an Option, the
Participant may, by written notice, withdraw such exercise and obtain the
refund of any amount paid with respect thereto.

     15.3 During any time that the Company has a class of equity security
registered under Section 12 of the Exchange Act, it is the intent of the
Company that Awards granted pursuant to the Plan and the exercise of Options
granted pursuant to the Plan will qualify for the exemption provided by Rule
16b-3 under the Exchange Act. To the extent that any provision of the Plan or
action by the Board does not comply with the requirements of Rule 16b-3, it
shall be deemed inoperative to the extent permitted by law or deemed advisable
by the Board, and shall not affect the validity of the Plan. In the event that
Rule 16b-3 is revised or replaced, the Board may exercise its discretion to
modify this Plan in any respect necessary to satisfy the requirements of, or to
take advantage of any features of, the revised exemption or its replacement.

18

 

SECTION 16. Amendment or Termination

     16.1 The Board may, at any time, suspend or terminate the Plan or revise
or amend it in any respect whatsoever; provided, however, that stockholder
approval shall be required if and to the extent the Board determines that such
approval is appropriate for purposes of satisfying Section 162(m) or 422 of the
Code or is otherwise required by law or applicable stock exchange requirements.

     16.2 Awards may be granted under the Plan prior to the receipt of such
approval, but each such grant shall be subject in its entirety to such approval
and no award may be exercised, vested or otherwise satisfied prior to the
receipt of such approval. Nothing herein shall restrict the Committee’s
ability to exercise its discretionary authority pursuant to Section 4, which
discretion may be exercised without amendment to the Plan. No action hereunder
may, without the consent of a Participant, reduce the Participant’s rights
under any outstanding Award.

SECTION 17. General Provisions

     17.1 No Awards may be exercised by a Grantee if such exercise, and the
receipt of cash or stock thereunder, would be, in the opinion of counsel
selected by the Company, contrary to law or the regulations of any duly
constituted authority having jurisdiction over the Plan.

     17.2 A bona fide leave of absence approved by a duly constituted officer
of the Company shall not be considered interruption or termination of service
of any Participant for any purposes of the Plan or Awards granted thereunder,
except that no Awards may be granted to an Employee while he or she is on a
bona fide leave of absence.

     17.3 No person shall have any rights as a stockholder with respect to any
shares of Stock covered by or relating to any Award until the date of issuance
of a certificate with respect to such shares of Stock. Except as otherwise
expressly provided in Section 6.4, no adjustment to any Award shall be made for
dividends or other rights prior to the date such certificate is issued.

     17.4 Nothing contained in the Plan or any Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant. No person shall have any claim or right to receive an Award
hereunder. The Committee’s granting of an Award to a participant at any time
shall neither require the Committee to grant any other Award to such
Participant or other person at any time or preclude the Committee from making
subsequent grants to such Participant or any other person.

     17.5 In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant (or beneficiary) to comply with any of the
terms and conditions of the Plan or the applicable Agreement, unless such
failure is remedied by such Participant (or beneficiary) within ten days after
notice of such failure by the Committee, shall be grounds for the cancellation
and forfeiture of such Award, in whole or in part, as the Committee, in its
absolute discretion, may determine.

19

 

     17.6 Any Award agreement may provide that stock issued upon exercise of
any Awards may be subject to such restrictions, including, without limitation,
restrictions as to transferability and restrictions constituting substantial
risks of forfeiture as the Committee may determine at the time such Award is
granted.

     17.7 The validity and construction of the Plan and any Awards granted
hereunder shall be governed by the laws of the State of Texas, other than any
conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Plan and any Award granted hereunder to
the substantive laws of any other jurisdiction.

SECTION 18. Plan Effective Date

     18.1 The Plan shall become effective on the date of its adoption by the
Board of Directors of the Company subject to approval of the Plan by the
holders of a majority of the outstanding voting shares of the Company within
twelve (12) months after the date of the Plan’s adoption by said Board of
Directors. In the event of the failure to obtain such shareholder approval,
the Plan and any Awards granted thereunder, shall be null and void and the
Company shall have no liability thereunder.

     18.2 No Award granted under the Plan shall be exercisable until such
shareholder approval has been obtained.

     18.3 Neither the adoption of this Plan nor the submission of this Plan to
the shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under this Plan.

SECTION 19. Plan Termination

     19.1 No Award may be granted under the Plan on or after the date which is
ten years following the effective date specified in Section 16, but Awards
previously granted may be exercised in accordance with their terms.

20exv4w1

 

Exhibit 4.1

OMNIBUS INSTRUMENT

     WHEREAS, the parties named herein desire to enter into certain Program
Documents contained herein, each such document dated as of this 18th day of
June, 2004, relating to the issuance by Principal Life Income Fundings Trust
2004-18 (the “Trust”) of Notes to investors under Principal Life’s secured
notes program;

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

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

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

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

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

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

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

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

[Remainder of Page Left Intentionally Blank.]

 

 

SECTION A

TRUST AGREEMENT

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

W I T N E S S E T H:

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

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

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

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

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

ARTICLE 1

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

A-1

 

ARTICLE 2

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

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

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

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

     Section 2.05 Additional Terms.

     None

     Section 2.06 Omnibus Instrument; Execution and Incorporation of Terms.

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

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

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

A-2

 

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

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

[Remainder of Page Left Intentionally Blank.]

A-3

 

SECTION B

LICENSE AGREEMENT

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

W I T N E S S E T H:

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

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

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

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

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

ARTICLE 1

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

ARTICLE 2

     Section 2.01 Additional Terms.

     None

B-1

 

     Section 2.02 Omnibus Instrument; Execution and Incorporation of Terms.

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

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

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

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

[Remainder of Page Left Intentionally Blank.]

B-2

 

SECTION C

INDENTURE

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

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

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

W I T N E S S E T H:

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

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

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

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

ARTICLE 1

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

C-1

 

ARTICLE 2

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

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

     Section 2.03 Additional Terms.

     None

     Section 2.04 Omnibus Instrument; Execution and Incorporation of Terms.

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

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

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

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

[Remainder of Page Left Intentionally Blank.]

C-2

 

SECTION D

TERMS AGREEMENT

     This TERMS AGREEMENT (this “Terms Agreement”) is entered into as of the
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
March 5, 2004 (the “Distribution Agreement”).

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

ARTICLE 1

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

ARTICLE 2

     Section 2.01 Addition of Trust as Party to Distribution Agreement.

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

     Section 2.02 Purchase of Notes as Principal.

     (a) Subject in all respects to the terms and conditions of the
Distribution Agreement, the Trust hereby agrees to sell to 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 Governing Law. This Terms Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard
to the principles of conflicts of laws thereof.

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

     Section 2.06 Omnibus Instrument; Execution and Incorporation of Terms.

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

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

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

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

[Remainder of Page Left Intentionally Blank.]

D-2

 

SECTION E

COORDINATION AGREEMENT

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

W I T N E S S E T H

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

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

     WHEREAS, the Purchasing 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 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) 361-2458
	

	 	Facsimile: (212) 809-5459 and (212) 509-3384
	 
	To the Indenture Trustee:
	 	 
	 
	

	 	Citibank, N.A.
	

	 	Citibank Agency & Trust
	

	 	111 Wall Street, 14th Floor, Zone 3
	

	 	New York, New York 10005
	

	 	Attention: Nancy Forte
	

	 	Telephone: (212) 657-4703
	

	 	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: (515) 235-9353
	 
	To PFG:

	 
	

	 	Principal Financial Group, Inc.
	

	 	711 High Street
	

	 	Des Moines, Iowa 50392
	

	 	Attention: General Counsel
	

	 	Telephone: (515) 247-5111
	

	 	Facsimile: (515) 248-3011
	 
	 	 	With a copy to:
	 	 
	 
	

	 	Principal Life Insurance Company
	

	 	711 High Street
	

	 	Des Moines, Iowa 50392
	

	 	Attention: Jim Fifield
	

	 	Telephone: (515) 248-9196
	

	 	Facsimile: (515) 235-9353
	 
	To Principal Financial
Services, Inc.:
	 	 
	 
	

	 	Principal Financial Services, Inc.
	

	 	711 High Street
	

	 	Des Moines, Iowa 50392
	

	 	Attention: General Counsel
	

	 	Telephone: (515) 247-5111
	

	 	Facsimile: (515) 248-3011

E-4

 

	 	 	 
	 	 	With a copy to:
	 	 
	 
	

	 	Principal Life Insurance Company
	

	 	711 High Street
	

	 	Des Moines, Iowa 50392
	

	 	Attention: Jim Fifield
	

	 	Telephone: (515) 248-9196
	

	 	Facsimile: (515) 235-9353
	 
	To Bankers Trust Company, N.A:
	 	 
	 
	

	 	Bankers Trust Company, N.A.
	

	 	665 Locust Street
	

	 	Des Moines, Iowa 50309-3702
	

	 	Attention: Angela 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/ Ward A. Spooner
 	 
	 	 	Name:  	Ward A. Spooner 	 
	 	 	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/ Ward A. Spooner
 	 
	 	 	Name:  	Ward A. Spooner 	 
	 	 	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/ Angela C. Brick
 	 
	 	 	Name:  	Angela C. Brick 	 
	 	 	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/ Sabina Ceddia
 	 
	 	 	Name:  	Sabina Ceddia 	 
	 	 	Title:  	Duly Authorized Attorney 	 
	 

[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
4.6 to Principal Life Insurance Company’s and Principal Financial
Group, Inc.’s Registration Statement on Form S-3 (Registration
Nos. 333-110499 and 333-110499-01.
	 
	 	 
	Exhibit B

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

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

	 	Pricing Supplement – Incorporated herein by reference to the
Pricing Supplement with respect to Principal Life Income Fundings
Trust 2004-18, filed on June 21, 2004, with the Securities and
Exchange Commission pursuant to Rule 424(b)(5) under the
Securities Act of 1933, as amended.
	 
	 	 
	Exhibit E

	 	Principal Life Insurance Company Officer’s Certificate
	 
	 	 
	Exhibit F

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

	 	Terms Agreement Specifications

 

 

EXHIBIT E

Principal Life Insurance Company

Officer’s Certificate

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

	 	 	 
	1.

	 	each of the representations and warranties of Principal Life
contained in each Expense and Indemnity Agreement entered into in
connection with the Registration Statement (defined below), and each
Funding Agreement issued in connection with the Program (the
“Specified Agreements”) (other than any representation or warranty
expressly made as of a date prior to the date hereof) are true and
correct on and as of the date hereof, with the same effect as though
such representation or warranty had been made on and as of the date
hereof;
	 
	2.

	 	no default under any of the Specified Agreements and no event
or any condition which, with notice or lapse of time or both, would
become a default, has occurred and is continuing as of the date
hereof;
	 
	3.

	 	Principal Life has performed and complied with, respectively,
in all material respects, all of the agreements, covenants,
obligations and conditions applicable to Principal Life required by
the Specified Agreements to be performed or complied with by
Principal Life on or before the date hereof;
	 
	4.

	 	the Registration Statement filed on Form S-3 (File Nos.
333-110499 and 333-110499-01) (the “Registration Statement”) by
Principal Life and Principal Financial Group, Inc. has been declared
effective by the Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933, as amended (the
“Act”) and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been commenced by or are pending before or contemplated
by the Commission;
	 
	5.

	 	all filings, if any, required by Rule 424 and Rule 430A under
the Act have been made in a timely manner;
	 
	6.

	 	since
     , the Trusts organized in connection with the
program contemplated by the Registration Statement have issued the
following series of Notes:
	 
	

	 	[List each series of Notes.] [(collectively, the “Designated Notes”)]; and
	 
	7.

	 	the Funding Agreements issued in connection with the Designated
Notes have been executed and delivered by Principal Life in accordance
with the terms and conditions of the Program Documents.

E-1

 

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

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

	 	 	 
	

	[Name], [in his/her] capacity as an
authorized officer of Principal Life
	 
	 	By:
	 
	 	 	

	

	 	Name:
	

	 	Title:

	 	 	 	 	 

E-2

 

EXHIBIT F

Principal Life Income Fundings Trusts

Trustee Officer’s Certificate

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

	 	 	 
	1.

	 	each of the representations and warranties of each Trust
contained in the Notes issued in connection with the Program, each
Indenture entered into in connection with the Registration Statement
and the Expense and Indemnity Agreement concerning the Trusts (the
“Specified Agreements”) (other than any representation or warranty
expressly made as of a date prior to the date hereof) are true and
correct on and as of the date hereof, with the same effect as though
such representation or warranty had been made on and as of the date
hereof;
	 
	2.

	 	no default under any of the Specified Agreements and no event
or any condition which, with notice or lapse of time or both, would
become a default, has occurred and is continuing as of the date
hereof;
	 
	3.

	 	each Trust has performed and complied with, respectively, in
all material respects, all of the agreements, covenants, obligations
and conditions applicable to such Trust required by the Specified
Agreements to be performed or complied with by such Trust on or
before the date hereof;
	 
	4.

	 	the Notes issued in connection with the Program, have been
issued, in all material respects, in accordance with the terms and
conditions of the Program Documents; and
	 
	5.

	 	each Funding Agreement has been executed and delivered by the
related Trust in accordance with the terms and conditions of the
Program Documents.

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

F-1

 

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

	 	 	 
	

	 	U.S. Bank Trust National Association, not
in its capacity but solely in its capacity
as Trustee acting on behalf of each Trust
	 
	 	By:
	 
	 	 	

	

	 	Name:
	

	 	Title:

F-2

 

SCHEDULE I

Terms Agreement Specifications

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

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

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

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

I-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00068-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00068-of-00352.parquet"}]]