Document:

exv10w2

 

GUARANTEE

     FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and in connection with
that certain funding agreement (the “Funding Agreement”), entered into by and between Principal
Life Insurance Company, an Iowa insurance company (“Principal Life”), and Principal Life Income
Fundings Trust 2006-23, a New York common law trust (the “Trust”), relating to the notes (the
“Notes”) issued by the Trust, Principal Financial Group, Inc., a Delaware corporation and the
indirect parent company of Principal Life (the “Guarantor”), hereby furnishes to the Trust its full
and unconditional guarantee of the Guaranteed Amounts (as hereinafter defined) as follows:

     1. Guarantee.

          (a) The Guarantor hereby fully, irrevocably, absolutely and unconditionally guarantees, as a
guarantee of payment and not merely as a guarantee of collection, immediate payment when due to the
Trust any payments required to be made by Principal Life to the Trust under the Funding Agreement
which shall become due and payable regardless of whether such payment is due at maturity, on an
interest payment date or as a result of redemption or otherwise (the “Scheduled Payments”) but
shall be unpaid by Principal Life (the “Guaranteed Amounts”). Notwithstanding anything to the
contrary contained herein, in no event shall the Guaranteed Amounts exceed the Deposit (as defined
in the Funding Agreement) of the Funding Agreement, plus accrued but unpaid interest and any other
amounts due and owing under the Funding Agreement, less any amounts paid by Principal Life to the
Trust.

          (b) In the event that Principal Life fails to make a Scheduled Payment in full when due (the
“Payment Notice Date”), then the Trust or Citibank, N.A., as indenture trustee for the benefit of
the holders of the Notes (the “Indenture Trustee”), pursuant to the indenture (the “Indenture”)
between the Trust and the Indenture Trustee, may present the Guarantor with notice (each, a
“Payment Notice”) of such failure in writing on or after the Payment Notice Date. The Payment
Notice shall identify (1) the Funding Agreement, (2) the Trust, (3) the Payment Notice Date and (4)
the amount of the Scheduled Payments not paid by Principal Life to the Trust as of the Payment
Notice Date. Upon receipt of such Payment Notice, the Guarantor will immediately pay the
Guaranteed Amounts pursuant to Section 7.

          (c) In the event that, after receipt of a Payment Notice from the Trust, the Guarantor fails
to make immediate payment to the Trust or the Indenture Trustee of the Guaranteed Amounts, then
the Trust and the Indenture Trustee may enforce the obligations of the Guarantor under this
Guarantee, including by immediately bringing suit directly against the Guarantor (without first
bringing suit against Principal Life) for the Guaranteed Amounts not paid to the Trust as of the
Payment Notice Date.

          (d) This Guarantee is an unsecured, unsubordinated and contingent obligation of the Guarantor
and ranks equally with all other unsecured and unsubordinated obligations of the Guarantor.

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     2. Termination. This Guarantee is a continuing and irrevocable guarantee of the
Guaranteed Amounts now or hereafter existing and shall terminate and be of no further force and
effect with respect to the Funding Agreement and the Notes upon the full payment of the Scheduled
Payments or upon the earlier extinguishment of the obligations of Principal Life under the Funding
Agreement.

     3. Amendments. Subject to the trust agreement relating to the Trust and the Indenture, no
provision of this Guarantee may be waived, amended, supplemented or modified, except by a written
instrument executed by the Trust and the Guarantor.

     4. Assignment; Governing Law. This Guarantee shall inure to the benefit of the Trust and its
successors, assigns and pledgees. This Guarantee shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to conflict of law principles.

     5. Notices. All notices given pursuant to this Guarantee shall be in writing, and shall
either be delivered, mailed or telecopied to the locations listed below or at such other address or
to the attention of such other persons as such party shall have designated for such purpose in a
written notice complying as to delivery with the terms of this Section 5. Each such notice shall
be effective (i) if given by telecopy, when transmitted to the applicable number so specified in
this Section 5 (such notice shall also be sent by mail, with first class postage prepaid), (ii) if
given by mail, three days after deposit in the mails with first class postage prepaid, or (iii) if
given by any other means, when actually delivered at such address.

If to the Guarantor:

Principal Financial Group, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527

If to the Trust:

Principal Life Income Fundings Trust (followed by the number of the Trust specified in this Guarantee)

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c/o U.S. Bank Trust National Association

100 Wall Street, 16th Floor

New York, New York 10005

Attention: Thomas E. Tabor

Telephone: (212) 361-6184

Facsimile: (212) 809-5459

With a copy to:

Citibank, N.A.

Citibank Agency and Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

Attention: Nancy Forte

Telephone: (212) 816-5685

Facsimile: (212) 816-5527

     6. Representations and Warranties. The Guarantor represents and warrants that: (i) it is duly
organized and in good standing under the laws of the jurisdiction of its organization and has full
capacity and right to make and perform this Guarantee, and all necessary authority has been
obtained; (ii) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor
enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights and general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law; (iii) the making and performance of this
Guarantee does not and will not violate the provisions of any applicable law, regulation or order,
and does not and will not result in the breach of, or constitute a default under, any material
agreement, instrument or document to which it is a party or by which it or any of its property may
be bound or affected, except to the extent disclosed in the registration statement registering the
issuance of this Guarantee and the Funding Agreement, as amended, supplemented or modified from
time to time (the “Registration Statement”), and to the extent that any such violation, breach or
default does not result in a material adverse effect on the Guarantor; and (iv) all consents,
approvals, licenses and authorizations of, and filings and registrations with, any governmental
authority required under applicable law and regulations for the making and performance of this
Guarantee have been obtained or made and are in full force and effect, except to the extent
disclosed in the Registration Statement and to the extent that the failure to acquire any such
consent, approval, license, authorization, filing or registration does not result in a material
adverse effect on the Guarantor.

     7. Notice of, and Consent to, Security Interest. The Trust hereby notifies the Guarantor that
it has granted to the Indenture Trustee, on behalf of the holders of the Notes, a security interest
in the Collateral (as defined in the Indenture), including, but not limited to, any and all payment
to be made by the Guarantor to the Trust under this Guarantee. The Trust hereby notifies the
Guarantor that it has collaterally assigned to the Indenture Trustee, for the benefit of the
holders of the Notes, this Guarantee. The Guarantor, by executing this Guarantee, hereby (i)
affirms that it has made or simultaneously will make changes to its books and records to reflect
such security interest and collateral assignment, (ii) consents to the security interest

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granted, and collateral assignment made, by the Trust to the Indenture Trustee of this
Guarantee, (iii) agrees to make all payments due under this Guarantee to the Collection Account (as
defined in the Indenture) or any other account designated in writing to the Guarantor by the
Indenture Trustee and (iv) agrees to comply with all orders of the Indenture Trustee with respect
to this Guarantee without any further consent from the Trust.

     8. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY APPLICABLE LAW, THE
GUARANTOR WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON OR ARISING
OUT OF THIS GUARANTEE. THIS GUARANTEE REPRESENTS THE FINAL AGREEMENT BETWEEN THE GUARANTOR AND THE
TRUST AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS AMONG SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

	 	 	 	 	 	 	 
	 	 	PRINCIPAL FINANCIAL GROUP, INC.
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Elizabeth D. Swanson
	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Elizabeth D. Swanson	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:
	 	Counsel	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Date:	 	The Effective Date (as defined in the Funding
	 	 	 	 	Agreement)

Acknowledged and Agreed:

	 	 	 	 	 	 	 
	THE PRINCIPAL LIFE INCOME FUNDINGS	 	 
	TRUST DESIGNATED IN THIS GUARANTEE	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	By:

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

	 	Bankers Trust Company, N.A.,
under Limited Power of Attorney, dated February 16, 2006	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Diana L. Cook	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name:

	 	Diana L. Cook	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	Vice President	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date:	 	The Effective Date (as defined in the Funding

Agreement)	 	 

4<PAGE>

                                                                    EXHIBIT 10.1

                             TIME SHARING AGREEMENT

This Time Sharing Agreement ("Agreement") is effective as of January 30, 2006,
("Effective Date") by and between Oakley, Inc., a Washington corporation with
its principal offices located at One Icon, Foothill Ranch, California 92610
("Oakley") and Jim Jannard, an individual with a mailing address at PO Box 1389,
Eastsound, Washington 98245 ("Jannard") (each a "Party" and collectively the
"Parties").

A. Oakley and Jannard desire to enter into this Agreement to provide for the
lease by Oakley of an aircraft with flight crew, to Jannard on an as-needed,
as-available basis and on a time-sharing basis pursuant to Federal Aviation
Regulation Part 91.501(b)(6) and (c)(1); and

B. Oakley and Jannard desire that Jannard will not be charged for such flights
and that no amount will be collected by Oakley, other than the amounts permitted
in Federal Aviation Regulation Part 91.501(d), as more fully set forth in this
Agreement;

NOW THEREFORE, in consideration of the mutual provisions contained herein, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:

                                    ARTICLE 1
                                   DEFINITIONS

      1.1 AIRCRAFT. The term "Aircraft" means that certain 2005 Bombardier
BD-700-1A10 aircraft, with a serial number of 9162, registered as N2T and
operated by Oakley under its Operational Control, and all engines and equipment,
avionics, accessories and furnishings, documentation and other items which are
from time to time incorporated or installed in or attached thereto.

      1.2 FAR. The term "FAR" means the Federal Aviation Regulations.

      1.3 FLIGHT CHARGE. The term "Flight Charge" means the aggregate of (Y) up
to 200 percent of the cost of fuel, oil, lubricants, and other additives used
for a Time Sharing Flight based on the actual Flight Hours for such flight; and
(Z) the following actual expenses, if applicable to a Time Sharing Flight: (i)
travel expenses of the crew, including food, lodging, and ground transportation;
(ii) hangar and tie-down costs away from the Aircraft's base of operation; (iii)
insurance obtained for the specific Time Sharing Flight; (iv) landing fees,
airport taxes, and similar assessments, including, but not limited to, Internal
Revenue Code Section 4261 and related excise taxes; (v) customs, foreign permit,
and similar fees directly related to the Time Sharing Flight; (vi) in flight
food and beverages; (vii) passenger ground transportation; and (viii) flight
planning and weather contract services for the specific Time Sharing Flight.

      1.4 FLIGHT CREW. The term "Flight Crew" means employees of or other
persons under the control of Oakley which shall consist of a properly rated and
qualified captain and a properly rated and qualified first officer.

      1.5 FLIGHT HOURS. The term "Flight Hours" means actual flight time as
depicted in the aircraft flight logs for actual time that the aircraft is aloft
(takeoff to landing) expressed in one-tenth of an hour increments.

                                     Page 1
<PAGE>

      1.6 HOME BASE. The term "Home Base" means John Wayne-Orange County
Airport, Santa Ana, California.

      1.7 LEASE AGREEMENT. The term "Lease Agreement" means that certain Lease
Agreement between Oakley and N2T dated December 18, 2003, as amended, with
respect to the Aircraft.

      1.8 N2T. The term "N2T" means N2T, Inc. a Washington corporation and
lessor of the Aircraft to Oakley.

      1.9 OPERATIONAL CONTROL. The term "Operational Control" means being the
legal operator, holding sole authority over initiating, conducting, or
terminating a flight, and having command and control of the Flight Crew.

      1.10 TIME SHARING FLIGHT. The term "Time Sharing Flight" means a specific
flight conducted by Oakley and involving the carriage of Jannard and his
employees or guests pursuant to this Agreement as permitted under FAR Part
91.501(b)(6) and (c)(1).

                                    ARTICLE 2
                                  TIME SHARING

      2.1 TIME SHARING ARRANGEMENT.

          2.1.1 Subject to Jannard's performance of all of his obligations
hereunder, including payment of all applicable Flight Charges, Oakley hereby
grants to Jannard a non-exclusive, non-assignable, non-transferable,
indivisible, terminable right to use the Aircraft, on an as-needed, as-available
basis only, for Time Sharing Flights scheduled with Oakley pursuant to this
Agreement.

          2.1.2 For each Time Sharing Flight where the Aircraft was available
and scheduled pursuant to this Agreement, provided that at such time (i) no
event of default shall have occurred and be continuing under the Lease
Agreement; and (ii) no event of default under the Lease Agreement shall occur or
result from any such Time Sharing Flight, then Oakley shall provide the Aircraft
to Jannard on a time-sharing basis under FAR Section 91.501(b)(6) and (c)(1) for
such Time Sharing Flight subject to Section 2.1.3 below. Accordingly, for each
such permitted Time Sharing Flight, Oakley shall lease to Jannard and Jannard
shall lease from Oakley, the Aircraft with Flight Crew pursuant to this
Agreement, at no charge; provided that Jannard shall pay to Oakley the
applicable Flight Charge for such Time Sharing Flight.

          2.1.3 Upon the request of Jannard, subject to the availability of the
Aircraft as determined by Oakley in accordance with ARTICLE 3, Oakley shall make
the Aircraft available to Jannard at the Home Base or at such other location as
acceptable to Oakley, in its sole discretion. The repositioning, ferry or dead
head flights of the Aircraft required in connection with Jannard's flights of
the Aircraft under this Agreement, including delivery and redelivery of the
Aircraft to the Home Base, or such other location as the Parties may agree,
shall be deemed to be use of the Aircraft by Jannard (as a Time Sharing Flight)
and at Jannard's expense subject to the Flight Charge.

                                     Page 2
<PAGE>

      2.2 RIGHTS RESERVED. Notwithstanding anything to the contrary herein, all
rights not specifically granted to Jannard shall be reserved and remain always
with Oakley. This Agreement shall not be construed to confer any rights upon
Jannard by implication, estoppel or otherwise as to the Aircraft.

      2.3 LEASE ONLY. At all times during the term of this Agreement, full legal
title to the Aircraft shall remain vested in Oakley to the exclusion of Jannard.
This Agreement and any related documents shall in no way assign or transfer any
right or interest in the Aircraft or any other property of Oakley.

      2.4 LEGAL RELATIONSHIPS

          2.4.1 With respect to the Aircraft, Oakley shall be deemed to have
Operational Control of the aircraft at all times during the term of this
Agreement, including but not limited to during all Time Sharing Flights.

          2.4.2 Oakley does not intend to enter into, and this Agreement is not
intended to create or constitute, a joint ownership agreement, as such term is
defined in FAR Section 91.501(c)(3), or a joint venture, partnership, business
organization, association, cooperative arrangement or other relationship by and
among Oakley and Jannard and through which any party may be held liable for the
omissions or commissions of any other party. This Agreement is intended to
create a time sharing agreement as such term is defined in FAR Section
91.501(c)(1).

      2.5 SUBORDINATE TO LEASE AGREEMENT.

          2.5.1 Oakley and Jannard hereby acknowledge that this Agreement (1)
does not convey any lien or other interest in or against the Aircraft to
Jannard; and (2) expressly (A) remains, subject and subordinate to the Lease
Agreement and the rights of N2T thereunder and in and to the Aircraft; and (B)
does not permit any further disposition of the Aircraft.

          2.5.2 Oakley and Jannard hereby acknowledge that to the extent any
provision in this Agreement is inconsistent with the provisions of the Lease
Agreement or cause Oakley to breach any of its representations, warranties or
agreements under the Lease Agreement, then the provisions in the Lease Agreement
shall control.

                                    ARTICLE 3
                            SCHEDULING AND LOGISTICS

      3.1 SCHEDULING

          3.1.1 Jannard shall advise Oakley of his request for flight time and
use of the Aircraft under this Agreement by giving Oakley advance notice by
telephone and/or facsimile. Time Sharing Flight requests must be made at least
two (2) hours prior to the scheduled take-off time of the first leg. Each Time
Sharing Flight request shall include the information that is reasonably required
by Oakley. If the Aircraft is not available, Oakley shall attempt to advise
Jannard as soon as practicable. All requests for Time Sharing Flights, unless
accepted by Oakley, shall be deemed rejected.

                                     Page 3
<PAGE>

          3.1.2 In addition to the proposed schedules and flight times, Jannard
shall provide at least the following information for each proposed Time Sharing
Flight prior to the scheduled departure, as may be required by Oakley or the
Flight Crew: (a) the number of anticipated passengers; (b) the nature and extent
of luggage and/or cargo to be carried; and (c) the date and time of return
flight, if any.

          3.1.3 Oakley shall have final authority over the scheduling of the
Aircraft, provided, however, that Oakley will try to accommodate Jannard's needs
and avoid conflicts in scheduling. Oakley may cancel any scheduled Time Sharing
Flight, with no liability to Jannard, should the Aircraft be no longer available
for the Time Sharing Flight or otherwise unable to conduct the scheduled Time
Sharing Flight. In the event of such cancellation, Oakley shall to advise
Jannard as soon as practicable following the Aircraft becoming unavailable of
unable to conduct the scheduled Time Sharing Flight.

      3.2 MAINTENANCE

          3.2.1 Oakley shall be responsible for arranging and paying for all
maintenance, preventive maintenance and required or recommended inspections.
Jannard shall have no rights or involvement with respect to any maintenance or
other operational matters concerning the Aircraft.

          3.2.2 Aircraft maintenance and inspections take precedence over
Aircraft scheduling unless such maintenance or inspections can be safely
deferred in accordance with applicable laws and regulations and within the sound
discretion of Oakley and/or the Flight Crew, as the case may be. The pilot in
command shall have final and complete authority to cancel or reschedule any Time
Sharing Flight for any reason or condition which in his or her judgment would
compromise the safety of the flight.

      3.3 FLIGHT CREW

          3.3.1 With respect to each Time Sharing Flight, Oakley shall have and
retain Operational Control of the Aircraft as provided in the applicable FAR;
and, for federal tax purposes, shall have and retain "possession, command and
control" of the Aircraft. Oakley shall employ, pay for and provide to Jannard a
qualified Flight Crew for each flight undertaken under this Agreement.

          3.3.2 During all Time Sharing Flights, the Flight Crew alone shall be
empowered to take all steps necessary in the interest of the safety of any
aircraft under its Operational Control, including those that affect its
passengers, crew, cargo and the operation of the flight.

          3.3.3 In accordance with applicable FARs, the Flight Crew will
exercise all of its duties and responsibilities in regard to the safety of each
flight conducted hereunder. The Flight Crew shall have final authority regarding
whether or not to initiate or terminate each Time Sharing Flight, select the
routing, determine the load to be carried, and otherwise decide all matters
relating to the safety of such flight.

                                     Page 4
<PAGE>

                                    ARTICLE 4
                             FINANCIAL ARRANGEMENTS

      4.1 FLIGHT CHARGES. Oakley will pay all expenses related to the operation
of the Aircraft on Time Sharing Flights when incurred, and will provide an
invoice and bill Jannard as provided below. Within fifteen (15) business days
following each calendar quarter in which any Time Sharing Flights occur, Oakley
shall submit Jannard, in writing a statement detailing the Flight Charge for the
Time Sharing Flights in the preceding quarter, broken down by permissible
category as provided under FAR Section 91.501(d), with payment due within thirty
(30) calendar days of the statement date.

      4.2 PAYMENTS. Jannard shall pay Oakley the Flight Charge for such Time
Sharing Flight within thirty (30) calendar days of the date of Oakley's
statement detailing the Flight Charges. Except as Oakley may otherwise direct in
writing, each payment of Flight Charges shall be made by Jannard to Oakley by
Jannard's personal check on or before the applicable due date.

      4.3 TAXES

          4.3.1 Excise Taxes. All Flight Charges are subject to a 7.5 percent
Federal excise taxes as imposed under Internal Revenue Code Section 4261.
Oakley's statement shall include a calculation of the excise taxes due and
Jannard shall pay Oakley such taxes as required as part of his payment of the
applicable Flight Charges. Oakley shall pay the applicable Federal excise tax to
the Internal Revenue Service.

          4.3.2 State Taxes. Some states may apply state sales and use taxes to
Flight Charges received by Oakley. Should a Time Sharing Flight be subject to a
state sales and use tax, then Oakley's statement shall include a calculation of
such taxes due and Jannard shall pay Oakley such state sales and use taxes along
with his payment of the applicable Flight Charges. Should Oakley's statement not
include applicable state sales and use taxes, Oakley may separately at a later
date provide Jannard with a statement for such taxes and in each instance,
Jannard shall within thirty (30) calendar days of receipt of Oakley's statement,
pay Oakley such state sales and use taxes.

                                    ARTICLE 5
                            WARRANTIES AND COVENANTS

      5.1 DISCLAIMER. OAKLEY PROVIDES THE AIRCRAFT "AS-IS, WHERE-IS," ON AN "AS
AVAILABLE BASIS" ONLY PURSUANT TO THIS AGREEMENT. OAKLEY HAS NOT MADE NOR SHALL
BE DEEMED TO HAVE MADE, AND HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION, VALUE,
DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR ANY PARTICULAR PURPOSE
OF THE AIRCRAFT OR ANY PART THEREOF, AND ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART
THEREOF.

      5.2 JANNARD COVENANTS

                                     Page 5
<PAGE>

          5.2.1 Jannard will use the Aircraft only for and on account of, as
permitted under FAR Section 91.501(b)(6), the carriage of himself and his
employees or guests;

          5.2.2 Jannard will not use the Aircraft for the purposes of
transporting passengers or cargo in air commerce for compensation or hire, for
any illegal purposes, or for any use prohibited by any insurance maintained on
the Aircraft, or which may impair existing insurance coverage in any way; and

          5.2.3 Jannard will only use the Aircraft (i) in accordance with any
requirement of any insurance issued with respect to the Aircraft; and (ii) in
accordance with all requirements of any governmental authorities relating to the
conduct of his business, the Aircraft, and to his properties or assets,
including, but not limited to, applicable laws and regulations regarding
required security procedures, passenger screening, and any other security and
safety requirements applicable to Jannard.

                                    ARTICLE 6
                            ALLOCATION OF LIABILITIES

      6.1 INURANCE.

                (a) Oakley maintains or has maintained on its behalf
comprehensive aircraft and general liability insurance against aircraft bodily
injury, property damage liability, including passenger liability, with limits of
not less than Two Hundred Million Dollars ($200,000,000.00) for each occurrence.

                (b) The policies of insurance carried in accordance with
subsection 6.1(a) above and any policies taken out in substitution or
replacement of any such policies (i) shall be endorsed to name Jannard as
additional insured (but without responsibility for premiums, except as permitted
in Section 1.3 above); (ii) shall provide for thirty (30) days written notice by
such insurer of cancellation, material change, or non-renewal; (iii) shall
include a severability of interest clause providing that such policy shall
operate in the same manner as if there were a separate policy covering each
insured; (iv) shall waive any right of set-off against Jannard, and any rights
of subrogation against Jannard; and (v) shall be primary, not subject to any
co-insurance clause and shall be without right of contribution from any other
insurance. Oakley shall provide Jannard with certificates of insurance
demonstrating compliance with the above provisions prior to the first Time
Sharing Flight under this Agreement.

                (c) Oakley will make its best efforts to provide such additional
insurance coverage as Jannard shall request or require, provided, however, that
the cost of such additional insurance shall be borne by Jannard as set forth in
Section 1.3 above.

      6.2 LIMITATION OF LIABILITY

          6.2.1 NEITHER PARTY SHALL BE LIABLE TO THE OTHER OR ANY THIRD PARTY
FOR ANY DAMAGES IN CONNECTION WITH THE USE OR FAILURE TO USE THE AIRCRAFT OR FOR
DELAYS OR CANCELLATIONS OF TIME SHARING FLIGHTS, WHETHER ARISING IN CONTRACT,
TORT, STRICT LIABILITY OR OTHERWISE.

                                     Page 6
<PAGE>

          6.2.2 NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, EXCEPT AS
OTHERWISE COVERED BY THE POLICIES OF INSURANCE REQUIRED TO BE MAINTAINED UNDER
THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, WHETHER FORESEEABLE OR NOT, THAT
ARE IN ANY WAY RELATED TO THIS AGREEMENT OR THE BREACH THEREOF, THE USE OR
INABILITY TO USE THE AIRCRAFT, DELAYS OR CANCELLATIONS OF TIME SHARING FLIGHTS,
AND/OR FROM ANY OTHER CAUSE WHATSOEVER IN REGARD TO THE AIRCRAFT.

          6.2.3 THESE LIMITATIONS ARE NOT INTENDED TO AND SHALL NOT BE DEEMED TO
LIMIT OR OTHERWISE AFFECT THE COVERAGES PROVIDED UNDER AND THE RECOVERIES THAT
ARE OTHERWISE AVAILABLE UNDER ANY OF THE POLICIES MAINTAINED AS REQUIRED IN THIS
AGREEMENT.

                                    ARTICLE 7
                              TERM AND TERMINATION

      7.1 TERM. This Agreement entered into to as of the Effective Date and will
continue for a period of one (1) year, unless terminated earlier as provided
herein. The term of this Agreement may be renewed by the Parties in writing, in
each case, for successive additional one (1) year periods, unless terminated
earlier as provided herein.

      7.2 TERMINATION. This Agreement may be terminated: (a) By either Oakley or
Jannard upon at least fifteen (15) days' prior written notice to the other Party
for any reason, with our without cause; or (b) By either Party upon written
notice if the other Party becomes insolvent or bankrupt, or is unable to meet
its obligations when they become due; or (c) Immediately and without notice (i)
if a receiver or other liquidating officer is appointed for substantially all of
the assets or business of a Party, or (ii) if a Party makes an assignment for
the benefit of creditors, or (iii) if the rights or interest of any Party under
this Agreement become an asset under any bankruptcy, insolvency or
reorganization proceeding, or (iv) upon the occurrence of an Event of Default
under the Lease Agreement, as defined therein.

      7.3 SURVIVAL. The provisions of Sections 2.2, 4.2, 4.3, 5.1 and 7.3 and
all Sections under ARTICLE 1, ARTICLE 6 and ARTICLE 8 shall survive the
termination or expiration of this Agreement.

      7.4 CESSATION OF USE. Upon termination or expiration of this Agreement:
(a) Jannard shall thereafter immediately have no rights to use the Aircraft; and
(b) Both Parties shall remain liable for all of their respective obligations
hereunder that accrued prior to the date of termination.

      7.5 CUMULATIVE REMEDIES. All rights and remedies conferred herein shall be
cumulative and in addition to all of the rights and remedies available to each
Party at law, equity or otherwise.

                                     Page 7
<PAGE>

                                    ARTICLE 8
                               GENERAL PROVISIONS

      8.1 RELATIONSHIP OF PARTIES. The relationship between the Parties is only
that of independent contractors notwithstanding any joint activities set forth
in this Agreement. Neither Oakley on the one hand or Jannard on the other hand
is the agent or legal representative of the other Party with respect to the
subject matter of this Agreement, and neither Party has the right or authority
to bind the other Party in any way with respect to the subject matter of this
Agreement. This Agreement creates no relationship as partners or a joint
venture, and creates no pooling arrangement.

      8.2 GOVERNING LAW AND VENUE. This Agreement shall be interpreted and
enforced under the laws of the State of California, without application of its
conflicts or choice of law rules.

      8.3 ASSIGNMENT. Neither party shall have the right to assign, delegate,
transfer or otherwise encumber this Agreement or any portion thereof without the
other's prior written consent, which consent may not be unreasonably withheld.

      8.4 WAIVER. The failure of a Party to enforce any of its rights hereunder
or at law shall not be deemed a waiver or a continuing waiver of any of its
rights or remedies against the other Party, unless such waiver is in writing and
signed by the Party to be charged.

      8.5 SEVERABILITY. If any provision of this Agreement, or part thereof, is
declared by a court of competent jurisdiction to be invalid, void or
unenforceable, each and every other provision, or part thereof, shall
nevertheless continue in full force and effect.

      8.6 ATTORNEYS' FEES. In the event a dispute arises regarding this
Agreement, the prevailing Party shall be entitled to its reasonable attorneys'
fees and expenses incurred in addition to any other relief to which it is
entitled.

      8.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Parties regarding the subject matter hereof, and supersedes all
prior or contemporaneous understandings or agreements, whether oral or written.
This Agreement shall be modified or amended only by a writing signed by each of
Jannard and Oakley.

      8.8 FORCE MAJEURE. Neither Party shall be liable to the other for its
failure to perform any of its obligations hereunder during any period in which
such performance is delayed by circumstances beyond its reasonable control
including, but not limited to earthquake, fire, flood, viruses, bugs, war, acts
of terror, embargo, export controls, strike, riot, inability to secure materials
and transportation facilities, or the intervention of any governmental
authority.

      8.9 FURTHER ASSURANCES. Both Parties agree to execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement. Each Party shall provide the cooperation, assistance, information,
decisions and approvals required or reasonably required from time to time in
order to perform its obligations under this Agreement and will do so on a timely
basis.

                                     Page 8
<PAGE>

      8.10 NOTICES. All notices, requests or other communications under this
Agreement shall be in writing, and shall be sent to the Parties at their
addresses listed on page 1 above, and shall be deemed to have been duly given on
the date of service if sent by facsimile (provided a hard copy is sent in one of
the manners specified below), or on the day following service if sent by
overnight air courier service with next day delivery with written confirmation
of delivery, or five (5) days after mailing if sent by first class, registered
or certified mail, return receipt requested. Each Party is required to notify
the other Party in the above manner of any change of address.

      8.11 COUNTERPARTS. This Agreement may be executed in several counterparts
that together shall be originals and constitute one and the same instrument.

      8.12 TRUTH IN LEASING STATEMENT UNDER FAR 91.23 WITH RESPECT TO THE
OPERATION OF THE AIRCRAFT.

                (a) THE AIRCRAFT, WITHIN THE TWELVE (12) MONTH PERIOD PRECEDING
THE DATE OF THIS AGREEMENT, EXCEPT TO THE EXTENT THE AIRCRAFT IS LESS THAN
TWELVE (12) MONTHS OLD, HAS BEEN, AND SHALL BE DURING THE TERM OF THIS
AGREEMENT, INSPECTED AND MAINTAINED IN ACCORDANCE WITH FAR 91.409, AND ALL
APPLICABLE REQUIREMENTS FOR MAINTENANCE AND INSPECTION THEREUNDER HAVE BEEN
COMPLIED WITH;

                (b) OAKLEY CERTIFIES AND KNOWINGLY ACKNOWLEDGES THAT WHEN IT
OPERATES ANY AIRCRAFT UNDER THIS AGREEMENT, OAKLEY SHALL BE KNOWN AS, CONSIDERED
AND IN FACT WILL BE, THE OPERATOR OF SUCH AIRCRAFT;

                (c) AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND
PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA
FLIGHT STANDARDS DISTRICT OFFICE; AND

                (d) THE PARTIES HERETO CERTIFY THAT A TRUE COPY OF THIS
AGREEMENT SHALL BE CARRIED ON THE AIRCRAFT AT ALL TIMES DURING ANY TIME SHARING
FLIGHT, AND SHALL BE MADE AVAILABLE FOR INSPECTION UPON REQUEST BY ANY
REPRESENTATIVE OF THE FAA.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

OAKLEY, INC.

By:    /s/ Cos Lykos                                    /s/  Jim Jannard
   ---------------------------                     ----------------------------
                                                   JIM JANNARD
  Cos Lykos
------------------------------
Name

  Vice President
------------------------------
Title

                                     Page 9

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