Document:

exv10w4

 

EXHIBIT 10.4

AMENDMENT TO AGREEMENT

      This
Amendment to Agreement is made and entered into this 1st day of
March, 2000 by and between First Business Bancshares, Inc., a Wisconsin
corporation (the “Corporation”), and its wholly owned subsidiary, First
Business Bank, a Wisconsin-chartered state bank (the “Bank”)(herein
collectively referred to as the “Companies”) and Jerome J. Smith, Director of
the Bank and President and Chief Executive Officer and Director of the
Corporation (hereinafter referred to as “Executive”).

WITNESSETH

      WHEREAS, the Companies and Executive entered into an Agreement dated June
23, 1995 relating to Smith’s services to the Companies (the “1995 Agreement”);
and

      WHEREAS, the parties wish to amend certain of the provisions of 1995
Agreement with respect to the repurchase of “Shares” (as such term is defined
in the 1995 Agreement) of the Corporation from the Executive.

      NOW, THEREFORE, the parties amend the 1995 Agreement, effective as of the
original effective date of the 1995 Agreement, as follows.

AGREEMENT

      1. Article 6 of the 1995 Agreement is amended in its entirety
to read as follows:

      “Article 6. STOCK AND OPTION PURCHASE AGREEMENT

      6.1 Agreement. The Corporation agrees that for a period of eighteen (18)
months after the Date of Termination, it will purchase each Share owned by
Executive as provided in this Article 6.

      6.2 Share Purchase Price. One hundred twenty-five (125%) percent of the
per share book value of the Corporation on the last day of the month immediately
preceding the month in which the Date of Termination occurs (or, if later, the last day of the
month immediately preceding the month which is the 6th month after the Executive acquires
the Share through the exercise of an Option), as determined by the Board of the Corporation
using Generally Accepted Accounting Principles (GAAP).

      6.3 Adjustments for Capital Changes. The Share Purchase Price determined
under Section 6.2, and the exercise price under each Option shall be
proportionately adjusted for cash
dividends as defined below and any increase or decrease in the total
number of outstanding
shares of the Corporation’s Common Stock issued subsequent to the
Effective Date of this
Agreement resulting from a split, subdivision or consolidation of the
Corporation’s Common
Stock, the payment of a stock dividend, or any other capital adjustment.
Such adjustment shall
be made only if Executive did not receive the benefit of such capital
changes with respect to such
shares. The adjustment for cash dividend (“Dividend Adjustment”) as used
in this section means

 

 

the amount of any cash dividends paid by the Corporation in excess of the
greater of twenty-five (25%) percent of the consolidated net income of the
Corporation and its subsidiaries for the fiscal year in which the dividend is
paid, or the cash dividend paid by the Corporation in the preceding fiscal
year. The amount of the Dividend Adjustment shall be added back to the balance
sheet of the Corporation in determining the per share book value under Section
6.2 above. Determination of the Dividend Adjustment made other than at the end
of a fiscal year shall be based upon consolidated net income through the last
day of the month in which the Date of Termination occurs, or the prorated cash
dividend for the preceding fiscal year, whichever is greater.

      6.4 Notice. If the Executive desires to cause the Corporation to purchase
his Shares
under this Article 6, he shall give written notice of intent to have the
Corporation purchase
Shares owned. Such notice shall be given within eighteen (18) months of
the Date of
Termination. Failure to give such notice within such period of time shall
relieve the Corporation
of all its obligations under this Article 6. The Corporation shall
execute the purchase within
thirty (30) days of receipt of notice.

      6.5 Title to Shares. All Shares repurchased by the Corporation under this
Article 6
shall have good and marketable title, free and clear of all pledges,
warrants, calls, commitments,
subscriptions, agreements, voting trusts of agreements, proxies, unpaid
taxes, claims rights,
including, without limitation, any marital or community property rights,
and options of whatever
nature.

      6.6 Transfer of Rights. The rights under this Article 6 shall inure to the
benefit of and
be enforceable by the Companies, the Executive, the
Executive’s personal or legal
representatives, executors, administrators, successors, heirs,
beneficiaries, distributees, devisees,
and legatees.

      6.7 Forfeiture of Rights. If Executive violates any provision of Article 4 of this
Agreement, all rights under this Article 6 shall be immediately
forfeited.”

      2. Section 7.1(g) is added to Section 7.1 of the 1995 Agreement to read
as follows:

      “(g) Notwithstanding anything to the contrary in this Agreement, Shares
acquired by the Executive through the exercise of an Option must be held for a
period of at least 6 months before they may be transferred, pledged,
encumbered or resold to the Corporation (or its subsidiaries).”

      3. All of the remaining provisions of the 1995 Agreement shall remain in
full force and effect.

2

 

      IN WITNESS WHEREOF the parties have executed this Amendment to the 1995
Agreement as of the date and year first above written and agree that this
Amendment to the 1995 Agreement shall be effective as of June 23, 1995.

	 	 	 	 	 
	 	FIRST BUSINESS BANCSHARES, INC.

 	 
	 	BY: /s/
Kenneth P. Urso

Kenneth P. Urso, Chairman of the Board
	 

	 	 	 	 	 
	 	FIRST BUSINESS BANK

 	 
	 	BY: /s/ Corey Chambas

Corey Chambas, President 
	 

	 	 	 	 	 
	 	BY: /s/ Jarome J. Smith

Jarome J. Smith, Executive
	 

3

 

	 	 	 	 	 

SECOND AMENDMENT TO AGREEMENT

THIS SECOND AMENDMENT TO AGREEMENT is made and entered into among First
Business Financial Services, Inc. (formerly known as First Business Bancshares,
Inc.) and its wholly owned subsidiary First Business Bank, (sometimes referred
to collectively as “The Companies”), and Jerome J. Smith (hereinafter sometimes
referred to as “Executive”).

WHEREAS, The Companies
and Smith are parties to an AGREEMENT dated June 23rd
1995, and an AMENDMENT TO AGREEMENT dated March 1st 2000; and

WHEREAS, parties wish to enter into this SECOND AMENDMENT TO AGREEMENT;

NOW THEREFORE, The parties agree as follows, effective June 9, 2003.

      1. Subject to paragraph 3 of this SECOND AMENDMENT TO
AGREEMENT, the definition of Salary (as defined by Section 1.1 (v.)
of the AGREEMENT is changed to read:

      “Salary” means the greater of (a) the average annual monetary compensation
including bonuses but not including employee benefits paid to the Executive,
for each of the three calendar years immediately preceding the year of
termination; or (b) 100% of the monetary compensation including bonuses but not
including employee benefits, paid to the Executive in calendar year 1994,
increased by the average increase in salary for the officer group within either
of the Companies between 1994 and the year preceding the year of termination.

      2. In consideration of paragraph 1 of this SECOND AMENDMENT TO
AGREEMENT, Executive agrees:

           A. Executive will continue his present employment duties for the
benefit of The Companies until at least July 1, 2005.

           B. In addition, if Executive wishes to cease his present employment
duties for the benefit of The Companies, Executive will give notice in
writing to First Business Financial Services, Inc. at least one year before he ceases such
employment.
Such notice shall be effective only on July 1, 2005, or a subsequent
anniversary of July 1,
2005, except that Executive may designate an effective date more than one
year following the notice date, which effective date may be other than July 1.

      3. If Executive breaches the promise made in paragraph 2 A or 2 B of this
SECOND AMENDMENT TO AGREEMENT, the definition of “Salary” shall revert to
the definition contained in the 1995 AGREEMENT, and there shall be no
other remedy or compensation to The Companies or either of them on account of such
breach.

 

 

      4. Executive is excused from the promises made in paragraphs 2 A and 2 B
of this SECOND AMENDMENT TO AGREEMENT in the event his employment is terminated
by The Companies, by his death while employed by The Companies, or by his
medically verifiable incapacity: if Executive’s termination of employment is
for one of the foregoing three reasons, the definition of “Salary” shall be the
definition stated in paragraph 1 of this SECOND AMENDMENT TO AGREEMENT.

IN WITNESS WHEREOF, the parties have executed this Agreement this 9th day of
June, 2003.

	 
	First Business Financial Services, Inc.

	 

	By:
/s/ Chuck Thompson

Chuck Thompson, Chairman of the Board

	 

	First Business Bank

	 

	By:
/s/ Corey Chambas

Corey Chambas, President

	 

	/s/ Jerome J. Smith

Jerome J. Smith, Executive

 

 

THIRD AMENDMENT TO AGREEMENT

THIS THIRD AMENDMENT TO AGREEMENT is made and entered into among First Business
Financial Services, Inc. (formerly known as First Business Bancshares, Inc.)
and its wholly owned subsidiary First Business Bank, (sometimes referred to
collectively as “The Companies”), and Jerome J. Smith (hereinafter sometimes
referred to as “Executive”).

WHEREAS, The Companies and Smith are parties to an AGREEMENT dated June 23rd
1995, and an AMENDMENT TO AGREEMENT dated March 1st 2000; and a SECOND
AMENDMENT TO AGREEMENT dated June 9, 2003;

WHEREAS, parties wish to enter into this THIRD AMENDMENT TO AGREEMENT;

NOW
THEREFORE, The parties agree as follows, effective October 20, 2003:

      In consideration of one dollar, and of Executive’s continued employment
by the Companies, Executive’s past superior performance, and Executive’s
morale towards his employment by The Companies and for other good and valuable
consideration, Article 7 entitled, “RESTRICTIONS ON DISPOSITION OF SHARES AND
OPTIONS OWNED BY EXECUTIVE” of the AGREEMENT is of no force or effect, except
that Section 7.1(g) as added by the AMENDMENT TO AGREEMENT dated March 1st
2000 remains in effect as a separate Article 7, and is agreed to be entitled,
“RESTRICTION ON SALE TO COMPANIES OF SHARES ACQUIRED BY OPTION.” All other
provisions of the AGREEMENT, the AMENDMENT TO AGREEMENT, and the SECOND
AMENDMENT TO AGREEMENT remain in effect.

IN WITNESS WHEREOF, the parties have executed this Agreement this 3rd day of
November, 2003.

	 
	First Business Financial Services, Inc.

	 

	By:
/s/ Chuck Thompson

Chuck Thompson, Chairman of the Board

	 

	First Business Bank

	 

	By:
/s/ Corey Chambas

Corey Chambas, President

	 

	/s/ Jerome J. Smith

Jerome J. Smith, Executive

 

 

	 	 	 	 	 
	JACK
D. WALKER

JAMES K. PEASE, JR.

	 	MELLI, WALKER, PEASE &
RUHLY, S.C.

A SERVICE CORPORATION
	 	JOSEPH A MELLI

OF COUNSEL
	JAMES K. RUHLY

	 	ATTORNEYS AT LAW	 	 
	THOMAS R. CRONE
	 	TEN EAST DOTY, SUITE 900
	 	JOHN H. SHIELS
	PHILIP J. BRADBURY

	 	P.O. BOX 1664	 	( 10 10- 1995)
	JOANN
M. HART

	 	MADISON, WISCONSIN 53701-1664
	 	 
	SUSAN
C.’ SHEERAN

	 	 	 	TELEPHONE (608) 257-4812
	DOUGLAS
E. WITTE

	 	SENDER’S E-MAIL ADDRESS:
jackwalker@melliwalker.com	 	TELEFAX (608) 258-7470
	DANA J. ERLANDSEN
	 	 	 	 
	DEVON R. BAUMBACH

	 	 	 	 
	DANIEL D. BARKER

	 	 	 	 
	JENIFER L. KRAEMER
	 	 	 	 
	ANGELA BLACK

	 	 	 	 
	CHARITY
A. MCCARTHY
	 	 	 	 

January 14, 2004

PERSONAL AND CONFIDENTIAL

Jodi Chandler, VP - Human Resources

First Business Financial
Services, Inc.

P.O. Box 44961

Madison, WI 53744-4961

Re: Jerry Smith Agreement

Dear Jodi:

      You asked for my opinion whether “Salary” includes bonus payments
attributable to one calendar year, but paid in the next calendar year,
under the Second Amendment to Agreement between Jerome J. Smith and First
Business Financial Services, Inc. dated June 9, 2003.

      My opinion is that the Agreement means that bonuses paid in a
calendar year which are attributable to performance in a prior calendar
year are to be included as compensation for such prior calendar year,
when determining “Salary.” I base my opinion on what I believe to be the
parties’ intent, on the purpose of the Agreement, and on the logic of the
definition and the requirements for payment. I also base the opinion on
the use of the word “for” in the phrase “for each of the three calendar
years.” This use of the word “for” stands in contrast with “in” or
“during”.

      I understand that bonuses for a year are ordinarily paid in February
of the following year. If that is a reliable practice, then the parties
could confirm my opinion by agreeing to the terms of this letter.

      In that case, the parties would be agreeing that bonuses paid in
January or February of any year are to be included as compensation for
the prior calendar year, for the purpose of the Smith Agreement,
including the Second Amendment described above. All other monetary
compensation, including bonuses, is to be included as compensation for
the year during which it is paid to Smith (whether or not Smith actually
receives the payment).

 

 

Jodi Chandler, VP - Human
Resources 
January 14, 2004

Page 2

      Confirmation of this letter would be easier to accomplish, and perhaps
later change, than another formal amendment.

	 	 	 	 	 
	 	Very truly yours,

 	 
	 	

 	 
	 	Jack D. Walker  	 
	 	 	 
	 

JDW/sma

Contents of the above letter Agreed to by Jerome J. Smith this 26th day of
January, 2004.

	 
	/s/
Jerome J. Smith

Jerome J. Smith

Contents of the above letter Agreed to by First Business Financial Services,
Inc. this 26th day of January, 2004, pursuant to resolution of the Board of
Directors.

	 
	First Business Financial Services, Inc.

	 

	By:
/s/ Charles H. Thompson

Charles H. Thompson

 

 

FOURTH AMENDMENT TO AGREEMENT

THIS FOURTH AMENDMENT TO AGREEMENT is made and entered into among First
Business Financial Services, Inc. (formerly known as First Business Bancshares,
Inc.) and its wholly owned subsidiary First Business Bank, (sometimes referred
to collectively as “The Companies”), and Jerome J. Smith (hereinafter sometimes
referred to as “Executive”).

WHEREAS, the Companies and Smith are parties to an AGREEMENT dated June 23rd
1995, and an AMENDMENT TO AGREEMENT dated March 1st 2000; a SECOND AMENDMENT
TO AGREEMENT dated June 9, 2003; and a THIRD AMENDMENT TO AGREEMENT dated
November 3, 2003;

WHEREAS, the parties wish to enter into this FOURTH AMENDMENT TO AGREEMENT;

NOW THEREFORE, the parties agree as follows, effective June 25, 2004:

      1. Subject to paragraph 2 of this FOURTH AMENDMENT TO AGREEMENT,
the definition of Salary (as defined by Section 1.1 (v.) of the AGREEMENT
is changed to
read as follows, if Smith complies with paragraphs 2, 3, and 4 of this
FOURTH

AMENDMENT TO AGREEMENT:

“Salary”
means the greater of (a) or (b).

(a) The average annual monetary compensation including
bonuses but
not including employee benefits paid to the Executive for
three of the
five calendar years immediately preceding the year of
termination.
The three calendar years used to determine the average shall
be the last
calendar year preceding the year of termination, and the
Executive’s
choice of two of the remaining four calendar years
immediately
preceding the year of termination.

(b) 100% of the monetary compensation including bonuses but
not
including employee benefits, paid to the Executive in
calendar year
1994, increased by the average increase in monetary
compensation for
the officer group within either of the Companies between
1994 and the
year preceding the year of termination.

      2. In consideration of paragraph 1 of this FOURTH AMENDMENT TO
AGREEMENT, Executive Agrees:

            A. Executive will continue his present employment duties for the benefit
of The Companies until at least July 1, 2006.

            B. In addition, if Executive wishes to cease his present employment
duties for the benefit of The Companies, Executive will give notice in
writing to First
Business Financial Services, Inc. at least one year before he ceases such
employment. Such
notice shall be effective only on July 1, 2006, or a subsequent
anniversary of July 1, 2006,

 

 

except that Executive may designate an effective date more than one year
following the notice date, which effective date may be other than July 1.

            C. If Executive breaches the promise made in paragraph 2 A or 2 B of
this FOURTH AMENDMENT TO AGREEMENT, the definition of “Salary” shall
revert to
the definition contained in the 1995 AGREEMENT, or as applicable the
definition contained
in the SECOND AMENDMENT TO AGREEMENT and there shall be no other remedy or
compensation to The Companies or either of them on account of such breach.

            D. Executive is excused from the promises made in paragraphs 2 A and 2
B of this FOURTH AMENDMENT TO AGREEMENT in the event his employment is
terminated by The Companies, by his death while employed by The Companies,
or by his
medically verifiable incapacity: if Executive’s termination of employment
is for one of the
foregoing three reasons, the definition of “Salary” shall be the
definition stated in paragraph
1 of this FOURTH AMENDMENT TO AGREEMENT.

            E. The parties agree that the definition of “Salary” will be at least as
favorable to Executive as the definition contained in paragraph 1 of
the SECOND
AMENDMENT TO AGREEMENT, if Executive remains employed through July 1,
2005, even if Executive does not remain employed through July 1, 2006, and even
if Executive
does not give the notice required by paragraph 2 B of the SECOND or the
FOURTH AMENDMENT TO AGREEMENT.

      3. The definition clarifications contained in the letter from Attorney
Jack D. Walker to Vice-President Jodi Chandler dated January 14, 2004 (copy
attached) apply also to the definition of “Salary” in this FOURTH AMENDMENT TO
AGREEMENT.

IN WITNESS WHEREOF, the parties have executed this Agreement this 25th day of
June, 2004.

	 
	First Business Financial Services, Inc.

	 

	By:
/s/ Chuck Thompson

Chuck Thompson, Chairman of the Board

	 

	First Business Bank

	 

	By:
/s/ Corey Chambas

Corey Chambas, President

	 

	/s/ Jerome J. Smith

Jerome J. Smith, Executive

 

 

	 	 	 	 	 
	JACK D. WALKER

	 	MELLI, WALKER, PEASE &
RUHLY, S.C.
	 	JOSEPH A. MELLI
	JAMES K. PEASE, JR.

	 	 	 	OF COUNSEL
	JAMES K. RUHLY

	 	A SERVICE CORPORATION	 	 
	THOMAS R. CRONE

	 	 	 	JOHN H. SHIELS
	PHILIP J. BRADBURY

	 	ATTORNEYS AT LAW
	 	(10 10-1995)
	JOANN M. HART

	 	 	 	 
	SUSAN C. SHEERAN

	 	TEN EAST DOTY, SUITE 900	 	 
	DOUOLAS E. WITTE
	 	 	 	 
	DANA J. ERLANDSEN

	 	P.O. BOX 1664
	 	TELEPHONE (608) 257-4812
	DEVON R. BAUMBACH

	 	 	 	TELEFAX (608) 258-7470
	DANIEL D. BARKER

	 	MADISON, WISCONSIN 53701-1664	 	 
	JENIFER L. KRAEMER
	 	 	 	 
	ANGELA BLACK

	 	SENDER’S E-MAIL ADDRESS:	 	 
	CHARITY A. MCCARTHY
	 	jackwalker@melliwalker.com	 	 

January 14, 2004

PERSONAL AND CONFIDENTIAL

Jodi Chandler, VP - Human Resources

First Business Financial Services, Inc.

P. O. Box 44961

Madison, WI 53744-4961

Re:    Jerry Smith Agreement

Dear Jodi:

     You asked for my opinion whether “Salary” includes bonus payments attributable to one calendar year, but paid in the
next calendar year, under the Second Amendment to Agreement between Jerome J. Smith and First Business Financial
Services, Inc. dated June 9, 2003.

     My opinion is that the Agreement means that bonuses paid in a calendar year which are attributable to performance in
a prior calendar year are to be included as compensation for such prior calendar year, when determining “Salary.” I
base my opinion on what I believe to be the parties’ intent, on the purpose of the Agreement, and on the logic of the
definition and the requirements for payment. I also base the opinion on the use of the word “for” in the phrase “for
each of the three calendar years.” This use of the word “for” stands in contrast with “in” or “during”.

     I understand that bonuses for a year are ordinarily paid in February of the following year. If that is a reliable
practice, then the parties could confirm my opinion by agreeing to the terms of this letter.

     In that case, the parties would be agreeing that bonuses paid in January or February of any year are to be included
as compensation for the prior calendar year, for the purpose of the Smith Agreement, including the Second Amendment
described above. All other monetary compensation, including bonuses, is to be included as compensation for the year
during which it is paid to Smith (whether or not Smith actually receives the payment).

 

 

Jodi Chandler, VP - Human Resources

January 14, 2004

Page 2

     Confirmation of this letter would be easier to accomplish, and perhaps
later change, than another formal amendment.

	 	 	 
	

	 	Very truly yours,
	

	 	
	

	 	Jack D. Walker
	 
	 	 
	JDW/sma
	 	 

Contents of the above letter Agreed to by Jerome J. Smith this 26th day of January, 2004.

	 
	/s/ Jerome J. Smith

	

	Jerome J. Smith

Contents of the above letter Agreed to by First Business Financial Services, Inc. this
26th day of January, 2004, pursuant to resolution of the Board of Directors.

First Business Financial Services, Inc.

	 	 	 
	By:

	 	/s/ Charles H. Thompson
	

	 	

	

	 	Charles H. Thompson

 

 

Exhibit 10.4

AGREEMENT BY AND BETWEEN

FIRST BUSINESS BANK AND

COREY CHAMBAS

(AMENDED AND RESTATED SEPTEMBER 21, 2004)

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page

	Article 1. DEFINITIONS
	 	 	2	 
	1.1 Definitions
	 	 	2	 
	Article 2 . RETIREMENT BENEFIT
	 	 	4	 
	2.1 Normal Retirement Benefit
	 	 	4	 
	2.2 Early Retirement Benefit
	 	 	4	 
	2.3 Withholding of Taxes
	 	 	5	 
	Article 3. DEATH BENEFIT
	 	 	5	 
	3.1 Death Benefit
	 	 	5	 
	3.2 Alternative Death Benefit
	 	 	5	 
	3.3 Life Insurance
	 	 	5	 
	3.4 Withholding of Taxes
	 	 	5	 
	Article 4. DISABILITY
	 	 	5	 
	4.1 Treatment of Disability
	 	 	5	 
	4.2 Retirement Benefits
	 	 	5	 
	4.3 Inflation Protection
	 	 	6	 
	4.4 Death Benefits
	 	 	6	 
	Article 5. TERMINATION OF EMPLOYMENT BY THE COMPANY
	 	 	6	 
	5.1 Termination for Cause
	 	 	6	 
	5.2 Termination for Other Than Cause
	 	 	6	 
	Article 6. CHANGE IN CONTROL BENEFIT
	 	 	6	 
	6.1 Change in Control Benefit
	 	 	6	 
	6.2 Withholding of Taxes
	 	 	8	 
	Article 7. COVENANTS NOT TO COMPETE
	 	 	8	 
	7.1 Covenant Not to Compete
	 	 	8	 
	7.2 Solicitation
	 	 	8	 
	7.3 Receipt of Benefits
	 	 	9	 
	Article 8. TERM OF AGREEMENT
	 	 	9	 
	8.1 Term of Agreement
	 	 	9	 
	8.2 Survival of Obligation
	 	 	9	 
	Article 9. SUCCESSORS
	 	 	9	 
	9.1 Successors
	 	 	9	 
	9.2 Binding Effect
	 	 	9	 
	Article 10. MISCELLANEOUS
	 	 	9	 
	10.1 Employment Status
	 	 	9	 
	10.2 Beneficiaries
	 	 	10	 
	10.3 Entire Agreement
	 	 	10	 
	10.4 Gender and Number
	 	 	10	 
	10.5
Severability
	 	 	10	 
	10.6 Modification
	 	 	10	 
	10.7 Applicable Law
	 	 	10	 
	10.8 Full Time Employment
	 	 	10	 
	10.9 One Benefit Payable
	 	 	10	 
	10.10 Attorneys’ Fees
	 	 	10	 

i

 

AGREEMENT

     THIS AMENDED AND RESTATED AGREEMENT is made and entered into as of this
21st day of September, 2004, by and between First Business Bank, a Wisconsin
corporation (“the Company”) and Corey Chambas, President of First Business Bank
(“the Executive”). The parties agree that the agreement between them dated
December 16, 2003 is superseded by this Agreement and is no longer in effect.

WITNESSETH:

     WHEREAS, in exchange for the Executive’s agreement to remain an employee
of the Company, the Company agrees that it shall provide to the Executive
and/or his beneficiaries the death and retirement benefits set forth in this
Agreement, subject to the terms and conditions of this Agreement, and it
further agrees that said benefits shall be in addition to Executive’s regular
compensation, bonus and employee benefits; and

     WHEREAS, the Board of Directors of the Company has approved the Company
entering into this Agreement with the Executive; and

     WHEREAS, the Executive has discharged the duties as a Senior Executive in
a very capable and skillful manner, resulting in substantial benefits to the
Company; and

     WHEREAS, the Company desires the Executive to remain in its service and to
continue to use his knowledge and experience on behalf of the Company, and is
willing to offer the Executive an incentive to do so in the form of death and
retirement benefits; and

     WHEREAS, the Executive is willing to continue his efforts on behalf of the
Company in exchange for such an incentive; and

     WHEREAS, should the possibility of a Change in Control of the Company
arise, the Board believes it imperative that the Company and the Board should
be able to rely upon the Executive to continue in his position, and that the
Company should be able to receive and rely upon his advice, if it requests it,
as to the best interests of the Company and its shareholders without concern
that he might be distracted by the personal uncertainties and risks created by
the possibility of a Change in Control; and

     WHEREAS, should the possibility of a Change in Control arise, in addition
to the Executive’s regular duties, he may be called upon to assist in the
assessment of such possible Change in Control, advise management and the Board
as to whether such Change in Control would be in the best interests of the
Company and its shareholders, and to take such other actions as the Board might
determine to be appropriate.

     NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of his advice and counsel
notwithstanding the possibility, threat, or occurrence of a Change in Control
of the Company, and to induce the Executive to remain in the employ of the
Company, and for other good and valuable consideration, the receipt

1

 

and sufficiency of which is hereby acknowledged, the Company and the
Executive agree as follows.

ARTICLE 1 . DEFINITIONS

     1.1 Definitions. Whenever used in this Agreement, the following terms
shall have the meanings set forth below, and, when the meaning is intended, the
initial letter of the word is capitalized:

	 	(a)	 	“Agreement” means this document.
	 
	 	(b)	 	“Beneficiary” means the persons or entities designated or
deemed designated by the Executive pursuant to Section 10.2 herein.
	 
	 	(c)	 	“Board” means the Board of Directors of the Company or any
committee formed by or appointed by the Board to administer this
Agreement.
	 
	 	(d)	 	“Cause” shall be determined by the Board, in the exercise of
good faith and reasonable judgment, and shall mean any of the
following:

(1) The willful, intentional, and continued failure by the
Executive to substantially perform the Executive’s duties to the
best of Executive’s ability after a written demand for performance
is delivered by the Board to the Executive that identifies the
failure to perform such duties if such failure is not remedied
within ninety (90) calendar days after receipt of the written
demand by the Executive.

(2) The occurrence of the Executive’s conviction for committing an
act of fraud, embezzlement, theft, or other act constituting a
felony substantially related to the circumstances of the
Executive’s duties; or material breach by Executive of the banking
laws of Wisconsin or the United States or any regulation issued by
a state or federal regulatory authority having jurisdiction over
the banking affairs of First Business Bank, or any of its
subsidiary, parent, or affiliated organizations; or an act which
disqualifies Executive from serving as an officer or director of a
bank under Wisconsin or Federal banking Laws.

	 	(e)	 	“Change in Control” of the Company shall be deemed to have
occurred as of the first day that any one or more of the following
conditions shall have been satisfied including, but not limited to,
signing of documents by all parties and approval by all regulatory
agencies, if required:

	 	 	 	The stockholders of the Company approve: (A) a plan of
complete liquidation of the Company; or (B) an agreement for
the sale or disposition of all or substantially all the
Company’s assets; or (C) a merger, consolidation, or
reorganization of the Company with or involving any other
corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting securities of
the surviving

2

 

	 	 	 	entity), at least fifty percent (50%) of the
combined voting power of the voting securities of the Company
(or such surviving entity) outstanding immediately after or
within one (1) year following such merger, consolidation, or
reorganization.

	 	 	However, in no event shall a Change in Control be deemed to have
occurred, with respect to the Executive, if the Executive is part of a
purchasing group which consummates the Change-in-Control transaction.
The Executive shall be deemed “part of a purchasing group” for purposes
of the preceding sentence if the Executive is an equity participant in
the purchasing company or group (except for: (i) passive ownership of
less than three (3%) percent of the stock of the purchasing company; or
(ii) ownership of equity participation in the purchasing company or group
which is otherwise not significant, as determined prior to the Change in
Control by a majority of the non-employee continuing Directors).

	 	(f)	 	“Company” means First Business Bank, a Wisconsin corporation
(including any and all of its subsidiaries), or any successor
thereto as provided in Article 9 herein.
	 
	 	(g)	 	“Date of Termination” means the date on which the Executive
ceases to be employed by the Company.
	 
	 	(h)	 	“Effective Date” means the date written, December 16, 2003.
	 
	 	(i)	 	“Executive” means Corey Chambas, who is presently the
President of First Business Bank in Madison, Wisconsin.
	 
	 	(j)	 	“Normal Retirement Age” means the first day of the month
following the month in which the Executive reaches age sixty-five
(65).
	 
	 	(k)	 	“Parachute Payment” means a “parachute payment” as defined in
Section 280G of the Internal Revenue Code of 1986, as amended, and
any regulations thereunder.
	 
	 	(l)	 	“Salary” means the average annual monetary compensation
reportable in box 1 of the 2002 federal form W-2, and its equivalent
in subsequent years including monetary bonuses, but not including
employee benefits paid to the Executive, for the five calendar years
immediately preceding the year of termination. The Executive’s
Salary shall be calculated based on the date of actual termination
or retirement, even if the Executive is deemed to remain employed
after termination under Article 4, and even if the payment of the
retirement benefit does not begin for a year or years after Early
Retirement, as defined in Article 2 below; provided, however,
notwithstanding anything in this Subsection 1.1(l) to the contrary,
for purposes of Sections 6.1 A, B, C, and D, the Executive’s Salary
shall be calculated based on the five (5) calendar years immediately
preceding the year in which the Change in Control occurs.
	 
	 	(m)	 	“Total Disability” means the Executive must be unable to
engage in any Senior Executive financial services work activity,
including but not limited to consulting,

3

 

	 	 	 	because of a medically
verified physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. If, at any
time between the time the Executive’s employment is terminated due
to total disability and the time the Executive begins to receive
benefits under this Agreement, the Executive engages in any Senior
Executive financial services work activity, including by not limited
to consulting, the Executive shall cease to be treated as if he was
under a Total Disability, for the purposes of this Agreement.

ARTICLE 2 . RETIREMENT BENEFIT

     2.1 Normal Retirement Benefit. Upon Executive’s retirement at or after
Normal Retirement Age, the Company shall become obligated to pay to the
Executive a retirement benefit equal to sixty percent (60%) of Executive’s
Salary, payable yearly for 10 years, beginning on the 15th day following the
date of the Executive’s retirement, and on the next nine (9) anniversaries of
the first payment. In the event of the Executive’s death before the total
amount due under this Section has been paid, the Company shall pay to the
Executive’s designated Beneficiary, and if none, his estate, the remaining
annual payments on the schedule established at the Executive’s retirement.

     2.2 Early Retirement Benefit.

          A. Executive may retire at any time after Executive has been employed by
the Company for twenty (20) consecutive years. Executive’s date of initial
employment with the Company is December 1, 1993, and therefore if there is no
interruption in consecutive years of employment, Executive may retire at any
time after December 1, 2013. In that case, the Company shall become obligated
to pay to the Executive a retirement benefit equal to sixty percent (60%) of
Executive’s Salary, multiplied by a vesting percentage described below, payable
for ten (10) years, beginning on the 15th day following the date of the
Executive’s retirement, or the date Executive attains age 55, whichever is
later, and on the next nine (9) anniversaries of the first payment. In the
event of the Executive’s death before the total amount due under this Section
has been paid, the Company shall pay to the Executive’s designated Beneficiary,
and if none, his estate, the remaining annual payments on the schedule
established at the Executive’s retirement.

          B. When Executive has completed twenty (20) years of consecutive
employment with the Company, the vesting percentage shall be 20/34, or 58.83
percent (.5883). The numerator 20 (twenty) used to determine the vesting
percentage shall increase by 1 (one) for each subsequent year of consecutive
service above twenty (20), through thirty-four (34). Therefore, for example,
if Executive Retires after twenty-seven (27) years of consecutive service the
vesting percentage shall be 27/34, or 79.41 percent (.7941). For another
example, if Executive Retires after thirty-four (34) years of service, the
vesting percentage shall be 34/34 or one hundred percent (100%), and Executive
shall be entitled to the Normal Retirement benefit, rather than an Early
Retirement Benefit. In the event of the Executive’s death prior to receipt of
all early retirement benefits, the Company shall pay to the Executive’s
designated Beneficiary, and if none, his estate, the remaining annual payments
on the schedule established at the Executive’s early retirement.

4

 

     2.3 Withholding of Taxes. The Company shall withhold from any amounts
payable under this Article all federal, state, city, local, or other taxes as
may be required.

     2.4 Notice of Retirement. Executive shall give the Company at least one
year’s notice of his intent to retire, in writing. Executive cannot draw any
benefit under this Article 2 until the Bank has been given the notice required
by this Section 2.4, and the Executive has worked, or offered to work, for the
notice period of one year. Provided, no notice of intent to retire is required
if Executive chooses to retire as a result of a Change in Control and the
occurrence of an event described in Section 6.1 A, B, C, or D.

ARTICLE 3 . DEATH BENEFIT

     3.1 Death Benefit. In the event of the Executive’s death while in the
employ of the Company, the Company shall pay to Executive’s designated
Beneficiary, and if none, his estate, the sum of one million five hundred
thousand and 00/100 ($1,500,000.00) dollars. Such sum shall be paid over a
period of ten (10) years beginning with the fifteenth (15th) day of the first
calendar month following the date of the Executive’s death and on the next
following nine (9) anniversaries of the first payment.

     3.2 Alternative Death Benefit. If the Early or Normal Retirement Benefit
which Executive was entitled to exercise on the day preceding the date of
Executive’s death exceeds the Death Benefit payable under Section 3.1,
Executive shall be entitled to an amount equal to such Early or Normal
Retirement Benefit paid as a replacement for the Death Benefit.

     3.3 Life Insurance. If the Company purchases any life insurance policy on
Executive’s life and the Company is the beneficiary of such life insurance
policy, the Death Benefit payable under Section 3.1 will not be payable if the
circumstances of Executive’s death because of suicide within the applicable
contestable period are such that the Company is not entitled to the policy
benefit.

     3.4 Withholding of Taxes. The Company shall withhold from any amounts
payable under this Article all federal, state, city, local, or other taxes as
may be required.

ARTICLE 4 . DISABILITY

     4.1 Treatment of Disability. In the event the Executive’s employment with
the Company is terminated prior to his Normal Retirement Age due to Total
Disability, the Executive shall be considered, notwithstanding such termination
of employment, to continue to be employed by the Company for purposes of his
eligibility for benefits under this Agreement.

     4.2 Retirement Benefits. In the event the Executive reached Early
Retirement Age after termination of continuous employment due to Total
Disability, the Executive shall have the right to receive the Early Retirement
Benefit under Section 2.2. In the event the Executive reaches Normal
Retirement Age after termination of employment due to Total Disability, the
Executive shall receive the Normal Retirement Benefit described in Section 2.1,
provided Executive has not elected to receive or received the Early Retirement
Benefit under Section 2.2.

5

 

     4.3 Inflation Protection. If Executive receives a retirement benefit
under Article 2 as the result of reaching Early Retirement Age or Normal
Retirement Age after the termination of Executive’s employment due to Total
Disability, Executive’s Salary (for purposes of calculating a retirement
benefit) shall be increased by an amount equal to the average annual
performance increase approved for Company personnel Company-wide between the
date of Executive’s termination of employment due to total disability, and the
date of the first payment. For example, if Executive’s Salary is $200,000
(determined by averaging 2001, 2002, 2003, 2004, and 2005), and if Executive’s
employment terminates due to Total Disability on December 31, 2005, and if
Executive receives the first payment on December 15, 2010, and the average
Company-wide annual performance increases were 4% in 2006, zero percent in
2007, 3% in 2008, 3% in 2009, and 2% in 2010, Executive’s Salary shall be
deemed to be $225,080.54.

     4.4 Death Benefits. In the event of the Executive’s death while Totally
Disabled prior to reaching Normal Retirement Age and prior to commencement of
payment of benefits under Article 2 or Section 4.2, the Executive’s
Beneficiary, and if none, his estate, shall receive the benefit described in
Article 3.

ARTICLE 5 . TERMINATION OF EMPLOYMENT BY THE COMPANY

     5.1 Termination for Cause. If the Company terminates the Executive’s
employment with the Company for Cause, all benefits under this Agreement shall
immediately become null and void.

     5.2 Termination for Other Than Cause.

     If the Company terminates the Executive’s employment with the Company for
any reason other than Cause, the Company will pay the Executive as wages the
greater of an amount equal to two times the annual average of Executive’s
Earned Compensation or the amount to which executive would be entitled under
Article 2 of this agreement had the Executive given notice of retirement one
year before the date on which the Company terminated the Executive’s
employment. “Earned Compensation” means Salary plus the average of the
Executive’s deferred compensation designated under any Company deferred
compensation plan for the five calendar years immediately preceding the year of
termination. If the greater amount is two times the annual average of
Executive’s Earned Compensation, then payment shall be made on the 15th day
following the date of the Executive’s termination. If the greater amount is
defined in Article 2 of this Agreement, then payment shall be made according to
the terms stated in Article 2.

ARTICLE 6. CHANGE IN CONTROL BENEFIT

     6.1 Change in Control Benefit.

          A. In the event of a Change in Control of the Company followed by an
involuntary termination of the Executive’s employment without Cause within
three (3) years of the Change in Control, the Executive shall be entitled to a
payment of the aggregate of the following:

          (1) an amount equal to the fair value of the Executive’s
unvested stock options issued by the Company or by First Business
Financial Services, Inc.

6

 

calculated as of the date of the
Executive’s termination from employment and based upon an
independent appraisal, and

          (2) such additional amount as will, when added to (i) the
amount described in Section 6.1.A(1) and (ii) any other Parachute
Payment to the Executive contingent upon the Change in Control,
equal 2.99 times the Executive’s Salary.

Payment
shall be made on the 15th day following the date of the Executive’s
termination.

          B. In the event of a Change in Control of the Company followed by an
involuntary assignment of the Executive to a position of lesser responsibility
than that of President of the Company or an involuntary reduction of more than
ten percent (10%) in the amount of the Executive’s Salary as in effect
immediately prior to the Change in Control, within three (3) years of the
Change in Control, the Executive shall be entitled, if he resigns employment
within three (3) months after the involuntary assignment or salary reduction,
to a payment of the aggregate of the following:

          (1) an amount equal to the fair value of the Executive’s
unvested stock options issued by the Company or by First Business
Financial Services, Inc. calculated as of the date of the
Executive’s termination from employment and based upon an
independent appraisal, and

          (2) such additional amount as will, when added to (i) the
amount described in Section 6.1.B(1) and (ii) any other Parachute
Payment to the Executive contingent upon the Change in Control,
equal 2.99 times the Executive’s Salary.

Payment
shall be made on the 15th day following the date of the Executive’s
termination.

          C. In the event of a Change in Control of the Company followed by an
involuntary assignment of the Executive to a position not located within
Milwaukee, Ozaukee, Waukesha, or Dane counties within three (3) years of the
Change in Control, the Executive shall be entitled, if he resigns employment
within three (3) months after the involuntary assignment, to a payment of the
aggregate of the following:

          (1) an amount equal to the fair value of the Executive’s
unvested stock options issued by the Company or by First Business
Financial Services, Inc. calculated as of the date of the
Executive’s termination from employment and based upon an
independent appraisal, and

          (2) such additional amount as will, when added to (i) the
amount described in Section 6.1.C(1) and (ii) any other Parachute
Payment to the Executive contingent upon the Change in Control,
equal 2.99 times the Executive’s Salary.

Payment
shall be made on the 15th day following the date of the Executive’s
termination.

7

 

          D. 1) In the event of a Change in Control of the Company followed by a
voluntary termination of the Executive’s employment within three (3) months of
the Change in Control, and in consideration of the Executive’s agreement which
is hereby expressed, to the Covenants not to Compete under Article 7, Sections
7.1 and 7.2, the Executive shall be entitled to a payment of an amount equal to
two (2) times “Earned Compensation.” “Earned Compensation” means Salary plus
the average of the Executive’s deferred compensation designated under any
Company deferred compensation plan for the five calendar years immediately
preceding the year of termination. Payment shall be made in four installments,
the first installment six months after termination, the second installment
twelve (12) months after termination, the third installment eighteen (18)
months after termination, and the fourth installment twenty four (24) months
after termination.

               2) In the event of a Change in Control of the Company followed by a
voluntary termination of the Executive’s employment within three (3) months of
the Change in Control, under circumstances where the Executive elects in
writing not to be bound by the Covenants not to Compete under Sections 7.1 and
7.2, the Executive shall be entitled to a payment of an amount equal to one
half (1/2) times “Earned Compensation.” “Earned Compensation” means Salary
plus the average of the Executive’s deferred compensation designated under any
Company deferred compensation plan for the five calendar years immediately
preceding the year of termination. Payment under this subsection 2) shall be
made on the 15th day following the date of the Executive’s termination.

          E. Executive cannot be entitled to more than one benefit under this
Article 6. The benefit under this Article 6 will not exceed 2.99 times the
Executive’s Salary less any Parachute Payment made other than pursuant to this
Article 6, no matter what the value of the Executive’s unvested stock options
issued by the Company or by First Business Financial Services, Inc.

     6.2 Withholding of Taxes. The Company shall withhold from any amounts
payable under this Article all federal, state, city, local, or other taxes as
may be required.

ARTICLE 7 . COVENANTS NOT TO COMPETE

     7.1 Covenant Not to Compete. In the event the Executive’s employment with
the Company and any of its subsidiaries is terminated under the circumstances
described in section 6.1 D 1) of this Agreement then in such event and in
further consideration of this Agreement, the Executive agrees that he shall
not, either directly or indirectly (and whether or not in the employ of, or
action as an agent for, any other person or entity, or as an owner,
shareholder, partner, consultant, independent contractor or otherwise), engage
in the financial services business for a period of two (2) years after such
termination of employment within Milwaukee, Ozaukee, Waukesha, or Dane counties
in Wisconsin.

     7.2 Solicitation. In the event the Executive’s employment with the
Company and any of its subsidiaries is terminated under the circumstances
described in section 6.1 D 1) of this Agreement then as a separate promise and
in further consideration of this Agreement, Executive agrees not to solicit
employees of First Business Financial Services, Inc. or any of its subsidiary
entities, to compete with the Company within Milwaukee, Ozaukee, Waukesha, or
Dane counties

8

 

in Wisconsin during the period of Executive’s employment with
Company and for a period of two years after Executive’s termination of
employment.

     7.3 Receipt of Benefits. As a separate promise, and in further
consideration of this Agreement, Executive also agrees not to compete against
the Company in the financial services business at any time while receiving
benefits under this Agreement, whether as an employee, director, contractor or
consultant to any financial services institution within Milwaukee, Ozaukee,
Waukesha, or Dane counties in Wisconsin. This agreement not to compete is
independent of the Covenants not to Compete in Sections 7.1 and 7.2.

     Any applicable obligations of Executive under Article 7 also survive the
expiration of this Agreement.

ARTICLE 8. TERM OF AGREEMENT

     8.1 Term of Agreement. This Agreement will commence on the Effective Date
and shall continue until the earlier of the Executive’s death, the termination
of employment for reasons other than Normal or Early Retirement or mutual
agreement of the parties.

     8.2 Survival of Obligation. The expiration of this Agreement shall in no
way relieve the Company of its obligations under this Agreement, until all
obligations of the Company hereunder have been fulfilled, and until all
benefits required hereunder have been paid to the Executive.

ARTICLE 9. SUCCESSORS

     9.1 Successors. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) of all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform the Company’s obligations under this Agreement in
the same manner and to the same extent that the Company would be required to
perform them if no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effective date of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation from the Company in the same amount and on the same terms as he
would be entitled to as if Article 6 applied here.

     9.2 Binding Effect. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises, and legatees. If the
Executive should die while any amount would still be payable to him hereunder
had he continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement, to the
Executive’s Beneficiary. If the Executive has not named a Beneficiary, then
such amounts shall be paid to the Executive’s devisee, legatee, or other
designee, or if there is no such designee, to the Executive’s estate.

ARTICLE 10. MISCELLANEOUS

     10.1 Employment Status. The Executive and the Company acknowledge that,
except as provided in this or any other agreement between the Executive and the
Company, the

9

 

employment of the Executive by the Company is “at will”, and, may
be terminated by either the Executive or the Company at any time, subject to
applicable law.

     10.2 Beneficiaries.
The Executive may designate one or more persons or entities as the primary
and/or contingent Beneficiaries of any Death Benefits or Retirement Benefits
owing to the Executive under this Agreement. Such designation must be signed
by the Executive, and in a form acceptable to the Board. The Executive may
make or change such designation at any time.

     10.3 Entire Agreement. This Agreement contains the entire understanding
of the Company and the Executive with respect to the subject matter hereof.

     10.4 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural
shall include the singular, and the singular shall include the plural.

     10.5
Severability. In the event any provision of this Agreement shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Agreement, and the Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included. Further, the captions of this Agreement are not part of the
provisions hereof and shall have no force and effect.

     10.6 Modification. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is agreed
to in writing and signed by the Executive and by an authorized member of the
Board, or by the respective parties’ legal representatives and successors.

     10.7 Applicable Law. To the extent not preempted by the laws of the
United States, the laws of the State of Wisconsin shall be the controlling law
in all matters relating to this Agreement.

     10.8 Full Time Employment. This Company’s obligations under this
Agreement are premised upon and conditioned upon the Executive being employed
full time in a senior executive management position, that is to say a work week
of at least 40 hours.

     10.9 One Benefit Payable. Only one benefit will be payable under this
Agreement. There may be a benefit on termination of employment without cause
under Section 5.2, there may be a Change in Control Benefit under Article 6,
there may be a Normal Retirement Benefit or an Early Retirement Benefit under
Article 2, or there may be a Death Benefit under Article 3, but there
will never be more than one benefit payable. If, as of the date of
Executive’s termination from employment, Executive is eligible to receive more
than one benefit under this Agreement, Executive may choose the benefit most
valuable to him by providing the Company with notice of that choice within ten
(10) days after the date of Executive’s termination.

     10.10 Attorneys’ Fees. If after a Change in Control, and as a result of a
position taken by the Company or its successors after a Change in Control, the
Executive takes nonfrivolous legal actions against the Company or its
successors to defend his rights under this Agreement, the Company or its
successors will reimburse Executive for reasonable attorneys’ fees actually
incurred in such legal actions.

10

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

	 	 	 	 	 
	 	 	FIRST BUSINESS BANK
	 
	 	 	 	 
	                                       , 2004

	 	By:
	 	                                                                                                      
	Date

	 	 	 	James T. Wiedenbeck
	 
	 	 	 	 
	                                       , 2004	 	                                                                                                                  
	Date

	 	Corey Chambas

11

 

Schedule A

CHANGE IN CONTROL BENEFITS

EXAMPLES

The following examples are intended to illustrate the operation of Sections
6.1.A, B, C and E of the Agreement dated September 21, 2004, between First
Business Bank and Corey Chambas (the “Agreement”) with respect to the
calculation of the amount of benefits, if any, payable to the Executive
following a Change in Control.

The capitalized terms in this Schedule A shall have the same meanings as such
terms have in the Agreement.

Example 1:

     Assumptions:

	 	•	 	There is a Change in Control, and the Executive terminates
his employment in accordance with Section 6.1.A, B or C of the
Agreement.
	 
	 	•	 	The aggregate fair market value of the Executive’s unvested
stock options is $50,000.
	 
	 	•	 	The Executive’s Salary is $200,000.
	 
	 	•	 	The Executive receives another Parachute Payment in the amount of $25,000.

     Calculations:

	 	•	 	First, pursuant to Section 6.1.A(1), B(1) or C(1), the
Executive will receive a payment of $50,000 for his unvested stock
options.
	 
	 	•	 	Second, pursuant to Section 6.1.A(2), B(2) or C(2), the
Executive will receive an additional payment of $523,000, which is
the amount which, when added to the option payment of $50,000 and
the other Parachute Payment of $25,000, will equal $598,000 (i.e.,
2.99 x $200,000).
	 
	 	•	 	Thus, the total payment to the Executive in connection with
the Change in Control will be $598,000 (i.e., $50,000 + $25,000 +
$523,000).

12

 

Example 2:

     Assumptions:

	 	•	 	There is a Change in Control, and the Executive terminates
his employment in accordance with Section 6.1.A, B or C of the
Agreement.
	 
	 	•	 	The aggregate fair market value of the Executive’s unvested
stock options is $600,000.
	 
	 	•	 	The Executive’s Salary is $200,000.
	 
	 	•	 	The Executive receives another Parachute Payment in the amount of $25,000.

     Calculations:

	 	•	 	Pursuant to Section 6.1.A(1), B(1) or C(1) and Section 6.1.E,
the Executive will receive a payment of $573,000 for his unvested
stock options.
	 
	 	•	 	The Executive will not receive any additional payments in
connection with the Change in Control due to the limit imposed by
Section 6.1.E (i.e., $598,000 — $25,000).

13exv4w1

 

OMNIBUS INSTRUMENT

     WHEREAS, the parties named herein desire to enter into certain Program
Documents contained herein, each such document dated as of this 12th day of
November, 2004, relating to the issuance by Principal Life Income Fundings
Trust 2004-67 (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/ Patty Ashbaugh
 	 
	 	 	Name:  	Patty Ashbaugh 	 
	 	 	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 2004-67, filed on November 15, 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 Aa2 by Moody’s Investors
Service, Inc. (“Moody’s”) and AA by Standard & Poor’s Rating Services, a
division of The McGraw-Hill Companies, Inc. (“S&P”). Principal Life and PFG
expect that the Notes will be rated Aa2 by Moody’s. The Company’s financial
strength rating is Aa2 by Moody’s and AA by S&P.

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

	 	•	 	Opinion of Sidley Austin 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

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