Document:

Exhibit 10.18 to RC2 December 2006 Form 10-K

    
       

      Exhibit
        10.18

       

      

        EMPLOYMENT
          AGREEMENT

         

        THIS
          EMPLOYMENT AGREEMENT is made as of July 31, 2006, by and between RC2
          Corporation, a Delaware corporation (the "Company"), and Gregory J. Kilrea
          (the "Employee"). Certain capitalized terms used herein are defined in
          section 10 below.

         

        RECITALS

         

        A.    The
          Company and the Employee desire to terminate any and all prior agreements,
          whether oral or written, between the parties and between the Employee and
          the
          Company relating to the Employee's employment.

         

        B.    The
          Company desires to employ the Employee and the Employee is willing to make
          his
          services available to the Company on the terms and conditions set forth
          below.

         

        AGREEMENTS

         

        In
          consideration of the premises and the mutual agreements which follow, the
          parties agree as follows:

         

        1.    Employment.
          The
          Company hereby employs the Employee and the Employee hereby accepts employment
          with the Company on the terms and subject to the conditions set forth in
          this
          Agreement.

         

        2.    Term.
          The
          term of the Employee's employment hereunder shall commence on the date
          hereof
          and shall continue until terminated as provided in section 6
          below.

         

        3.    Duties.
          The
          Employee shall serve as the Chief Operations Officer of the Company and
          will,
          under the direction of the Company's Chief Executive Officer, President
          and the
          Board of Directors, faithfully and to the best of his ability, perform
          the
          duties of such position. The Employee shall be one of the principal executive
          officers and Senior Management of the Company and shall, subject to the
          control
          of the Chief Executive Officer, President and the Company's Board of Directors,
          have the normal duties, responsibilities and authority associated with
          such
          position. The Employee shall also perform such additional duties and
          responsibilities which may from time to time be reasonably assigned or
          delegated
          by the Chief Executive Officer, President or Board of Directors of the
          Company.
          The Employee agrees to devote his entire business time, effort, skill and
          attention to the proper discharge of such duties while employed by the
          Company.

         

        
          
            
            

          

          
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        4.    Compensation.
          The
          Employee shall receive a base salary of $210,000 per year, payable in regular
          and equal
          monthly installments (the "Base Salary"), or such greater amount as may
          be
          agreed to by the parties.

         

        5.    Fringe
          Benefits.

         

        (a)    Vacation.
          The
          Employee shall be entitled to four weeks of paid vacation annually. The
          Employee
          and the Company shall mutually determine the time and intervals of such
          vacation.

         

        (b)    Medical,
          Health, Dental, Disability and Life Coverage.
          The
          Employee shall be eligible to participate in any medical, health, dental,
          disability and life insurance policy in effect for the Senior Management
          of the
          Company.

         

        (c)    Incentive
          Bonus and Stock Ownership Plans.
          The
          Employee shall be entitled to participate in any
          incentive bonus plan, incentive stock option or other stock ownership plan
          or
          other incentive compensation plan developed generally for the Senior Management
          of the Company, on a basis consistent with his position and level of
          compensation with the Company. Without limiting the foregoing, Employee
          shall be
          entitled to participate on a basis consistent with past practice and his
          position and level of compensation with the Company in the annual Incentive
          Bonus Plan and Top Management Additional Bonus Plan, together with all
          successor
          or other bonus plans (collectively, the "Bonus Plans"). In addition, Employee
          shall be entitled to receive annual stock option grants as provided on
          Schedule 5(c) attached hereto. The options will be granted pursuant to a
          Non-Statutory Stock Option Grant Agreement substantially in the form of
          Exhibit A attached hereto.

         

        (d)    Automobile.
          The
          Company agrees to reimburse the Employee up to $600 per month, as such
          amount
          may be increased from time to time consistent with the Company's reimbursement
          policy for the Senior Management of the Company to cover Employee's expenses
          in
          connection with his leasing of an automobile. Additionally, the Company
          will pay
          for the gas used for business purposes. All maintenance and insurance expense
          for the automobile is the responsibility of the Employee.

         

        (e)    Reimbursement
          for Reasonable Business Expenses.
          The
          Company shall pay or reimburse the Employee for reasonable expenses incurred
          by
          him in connection with the performance of his duties pursuant to this Agreement
          including, but not limited to, travel expenses, expenses in connection
          with
          seminars, professional conventions or similar professional functions and
          other
          reasonable business expenses.

         

        
          
            
            

          

          
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        (f)    Key
          Man
          Insurance.
          The
          parties agree that the Company has the option to purchase one or more key
          man
          life insurance policies upon the life of the Employee. The Company shall
          own and
          shall have the absolute right to name the beneficiary or beneficiaries
          of said
          policy. The Employee agrees to cooperate fully with the Company in securing
          said
          policy, including, but not limited to submitting himself to any physical
          examination which may be required at such reasonable times and places as
          Company
          shall specify.

         

        (g)    Life
          and Disability Insurance.
          During
          the Employment Period, the Company shall provide coverage of at least
          $2.0 million of life insurance and 75% of Base Salary of disability
          insurance. Such insurance policies to be owned by any one or more members
          of
          Employee's immediate family or by a trust for the primary benefit of Employee's
          immediate family. The owner of the policy shall have the power to designate
          the
          beneficiary and to assign any rights under the policy. The Company shall
          pay
          100% of the premiums required under these policies; provided, however,
          that the
          Company shall not be obligated to pay greater than $20,000 for such premiums
          during any fiscal year. In the event that the premiums for such policies
          would
          exceed this limitation, the Company shall consult with the Employee to
          determine
          the allocation of such amount to the premiums for each type of policy to
          obtain
          such insurance as may be available for an aggregate of $20,000 per fiscal
          year.

         

        6.    Termination.

         

        (a)    Termination
          of the Employment Period.
          The
          Employment Period shall continue until the earlier of: (i) March 31, 2008
          unless the parties mutually agree in writing to extend the term of this
          Agreement (such date hereof or such extended date being referred to herein
          as
          the "Expected Completion Date"), (ii) the Employee's death or Disability,
          (iii) the Employee resigns or (iv)
          the
          Board of Directors determines that termination of Employee's employment
          is in
          the best interests of the Company (the "Employment Period"). The last day
          of the
          Employment Period shall be referred to herein as the "Termination
          Date."

         

        (b)    Definitions.

         

        (i)    For
          purposes of this Agreement, "Disability" shall mean a physical or mental
          sickness or any injury which renders the Employee incapable of performing
          the
          services required of his as an employee of the Company and which does or
          may be
          expected to continue for more than six months during any 12-month period.
          In the
          event Employee shall be able to perform his usual and customary duties
          on behalf
          of the Company following a period of disability, and does so perform such
          duties
          or such other duties as are prescribed by the Board of Directors for a
          period of
          three continuous months, any subsequent period of disability shall be regarded
          as a new period of disability for purposes of this Agreement. The Company
          and
          the Employee shall determine the existence of a Disability and the date
          upon
          which it occurred. In the event of a dispute regarding whether or when
          a
          Disability occurred, the matter shall be referred to a medical doctor selected
          by the Company and the Employee. In the
          event
          of their failure to agree upon such a medical doctor, the Company and the
          Employee shall each select a medical doctor who together shall select a
          third
          medical doctor who shall make the determination. Such determination shall
          be
          conclusive and binding upon the parties hereto.

         

        
          
            
            

          

          
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        (ii)    For
          purposes
          of this Agreement, "Cause" shall be deemed to exist if the Employee shall
          have
          [a] intentionally violated the terms of section 7 or section 8 of this
          Agreement in any material respect; [b] committed a felony or a crime involving
          moral turpitude; [c] engaged in serious misconduct which is demonstrably
          and
          materially injurious to the Company's business, taken as whole [d] engaged
          in
          fraud or dishonesty with respect to the Company or any of its Subsidiaries
          or
          made a material misrepresentation to the stockholders or directors of the
          Company with respect to an item, transaction or amount in excess of $10,000;
          or
          [e] committed acts of negligence in the
          performance of his duties which are demonstrably and materially injurious
          to the
          Company's business, taken as a whole.
          In
          all cases,
          termination for Cause shall be determined solely by the Board of Directors
          and
          require a two-thirds majority vote.

         

        (iii)    For
          purposes of this Agreement, "Good Reason" shall mean (1) the material diminution
          of the Employee's duties set forth in section 3
          above or (2) the relocation of the offices at which the Employee is principally
          employed to a location which is more than 50 miles from the offices at
          which the
          Employee is principally employed as of the date hereof; provided, that
          travel
          necessary for the performance of the Employee's duties set forth in
          section 3 above shall not determine the location where the Employee is
          "principally employed" or (3) Company's non-performance of its material
          obligations hereunder.

         

        (c)    Termination
          for Disability or Death.
          In the
          event of termination for Disability, payments of the Employee's Base Salary
          shall be made to the Employee for a period of six months after the Termination
          Date in accordance with the normal payroll practices of the Company. In
          addition, for a period of three years after the Termination Date, the Company
          shall reimburse the Employee for amounts paid, if any, to continue medical,
          dental and health coverage pursuant to the provisions of the Consolidated
          Omnibus Budget Reconciliation Act, continue Employee's life insurance and
          disability coverage, to the extent limited by section 5(g) and to the
          extent permitted under applicable policies, and pay to the Employee a pro
          rata
          portion of any bonus payable for the year in which termination takes place
          (if
          any) based on the portion of the year occurring prior to the Termination
          Date.
          In the event of termination as a result of the death of Employee, Employee's
          designated beneficiary or his estate shall be entitled to receive the Base
          Salary accrued prior to the Termination Date together with the proceeds
          of any
          life insurance obtained pursuant to section 5(g), plus a lump sum payment
          when determinable equaling Employee's pro rata portion of any bonus payable
          under the Bonus Plans for the year in which termination takes place (if
          any)
          based on the portion of the year occurring prior to the Termination
          Date.

        
        

        
          
            
            

          

          
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          (d)    Termination
            by the Company without Cause or by the Employee
            for Good Reason.
            If (i)
            the Employment Period is terminated by the Company for any reason other
            than for
            Cause, Disability or death, (ii) the Employment Period is terminated
            by the
            Company for what the Company believes is Cause or Disability, and it
            is
            ultimately determined that the Employment Period was terminated without
            Cause or
            Disability (iii) the Employee resigns for Good Reason, (iv) this Agreement
            is
            not renewed or otherwise extended by the Company after the Expected Completion
            Date, and the reason for such non-renewal or extension is not related
            to a
            termination for Cause, Disability or death of the Employee, the Employee
            shall
            be entitled to receive, as damages for such a termination, resignation
            or
            non-renewal, his Base Salary from the Termination Date to the second
            anniversary
            of the Termination Date to be paid in accordance with the normal payroll
            practices of the Company plus a lump sum payment equaling 100% of the
            average
            annual payments under the Bonus Plans over the preceding three years
            (or if in
            the case of less than three years participation in the Bonus Plans, then
            the
            average shall be determined based on the actual number of years of participation
            in the Bonus Plans), provided, however, that if such a termination or
            resignation described in (i), (ii), (iii) or (iv) above occurs at any
            time after
            the occurrence of or in contemplation
            of a Change of Control, then Employee shall be entitled to receive a
            lump sum
            payment of his Base Salary from the Termination Date to the third anniversary
            of
            the Termination Date plus 200% of the average annual payments under the
            Bonus
            Plans over the preceding three years (or if in the
            case
            of less than three years participation in the Bonus Plans, then the average
            shall be determined based on the actual number of years of participation
            in the
            Bonus Plans). If the Employee's employment is terminated in the manner
            described
            in this section 6(d) (i)-(iv), for a period of three years from the
            Termination Date, the Company shall reimburse the Employee for amounts
            paid, if
            any, to continue medical, dental and health coverage pursuant to the
            provisions
            of the Consolidated Omnibus Budget Reconciliation Act, continue Employee's
            life
            insurance and disability coverage to the extent limited by section 5(g) and
            to the extent permitted under the applicable policies, and pay to the
            Employee
            the fringe benefits pursuant to section 5 which have accrued prior to the
            Termination Date.

        

         

        (e)    Termination
          by the Company for Cause or by the Employee Without
          Good Reason.
          If the
          Employment Period is terminated by the Company with Cause or as a result
          of the
          Employee's resignation without Good Reason, the Employee shall not be entitled
          to receive his Base Salary or any fringe benefits or bonuses for periods
          after
          the Termination Date.

         

        (f)    Effect
          of Termination.
          The
          termination of the Employment Period pursuant to section 6(a) shall not
          affect the Employee's obligations as described in sections 7
          and 8.

         

        
          
            
            

          

          
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        (g)    Acceleration
          of
          Option Vesting.
          Upon
          completion of a Change of Control, all options to purchase stock of the
          Company
          held by the Employee shall immediately vest and become exercisable by the
          Employee in accordance with their remaining terms. The Company agrees to
          take
          any and all actions necessary or appropriate to effectuate the acceleration
          of
          these options and to permit the Employee to exercise the options in accordance
          with their terms from and after this accelerated vesting date.

         

        7.    Noncompetition
          and Nonsolicitation.
          The
          Employee acknowledges and agrees that the contacts and relationships of
          the
          Company and its Affiliates with its customers, suppliers, licensors and
          other
          business relations are, and have been, established and maintained at great
          expense and provide the Company and its Affiliates with a substantial
          competitive advantage in conducting their business. The Employee acknowledges
          and agrees that by virtue of the Employee's employment with the Company,
          the
          Employee will have unique and extensive exposure to and personal contact
          with
          the Company's customers and licensors, and that he will be able to establish
          a
          unique relationship with those Persons that will enable his, both during
          and
          after employment, to unfairly compete with the Company and its Affiliates.
          Furthermore, the parties agree that the terms and conditions of the following
          restrictive covenants are reasonable and necessary for the protection of
          the
          business, trade secrets and Confidential Information (as defined in
          section 8 below) of the Company and its Affiliates and to prevent great
          damage or loss to the Company and its Affiliates as a result of action
          taken by
          the Employee. The Employee acknowledges and agrees that the noncompete
          restrictions and nondisclosure of Confidential Information restrictions
          contained in this Agreement are reasonable and the consideration provided
          for
          herein is sufficient to fully and adequately compensate the Employee for
          agreeing to such restrictions. The Employee acknowledges that he could
          continue
          to actively pursue his career and earn sufficient compensation in the same
          or
          similar business without breaching any of the restrictions contained in
          this
          Agreement.

         

        (a)    Noncompetition.
          The
          Employee hereby covenants and agrees that during the Employment Period
          and for
          two years thereafter (the "Noncompete Period"), except if employment is
          terminated by the Company or its successor after a Change in Control or
          this
          Agreement is not renewed or extended by the Company or its successor after
          the
          Expected Completion Date then the Noncompete Period shall be six months,
          he
          shall not, directly or indirectly, either individually or as an employee,
          principal, agent, partner, shareholder, owner, trustee, beneficiary, co-venturer
          distributor, consultant, representative or in any other capacity, participate
          in, become associated with, provide assistance to, engage in or have a
          financial
          or other interest in any business, activity or enterprise which is competitive
          with the Company or any of its Affiliates
          or any successor or assign of the Company or any of its Affiliates. The
          ownership of less than a one percent 

         

        
          
            
            

          

          
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        interest
          in a corporation whose shares are traded in a
          recognized stock exchange or traded in the over-the-counter market, even
          though
          that corporation may be a competitor of the Company, shall not be deemed
          financial participation in a competitor. If the final judgment of a court
          of
          competent jurisdiction declares that any term or provision of this
          section is invalid or unenforceable, the parties agree that the court
          making the determination of invalidity or unenforceability shall have the
          power
          to reduce the scope, duration, or area of the term or provision, to delete
          specific words or phrases, or to replace any invalid or unenforceable term
          or
          provision with a term or provision that is valid and enforceable and that
          comes
          closest to expressing the intention of the invalid or unenforceable term
          or
          provision, and this Agreement shall be enforceable as so modified. The
          term
"indirectly"
          as used
          in this section and section 8 below is intended to include any acts
          authorized or directed by or on behalf of the Employee or any Affiliate
          of the
          Employee.

         

        (b)    Nonsolicitation.
          The
          Employee hereby covenants and agrees that during the Noncompete Period,
          he shall
          not, directly or indirectly, either individually or as an employee, agent,
          partner, shareholder, owner, trustee, beneficiary, co-venturer, distributor,
          consultant or in any other capacity:

         

        (i)    canvass,
          solicit or accept from any Person who is a customer or licensor of the
          Company
          or any of its Affiliates (any such Person is hereinafter referred to
          individually as a "Customer," and collectively as the "Customers") any
          business
          which in competition with the business of the Company or any of its Affiliates
          or the successors or assigns of the Company or any of its Affiliates, including,
          without limitation, the canvassing, soliciting or accepting of business
          from any
          Person which is or was a Customer of the Company or any of its Affiliates
          within
          two years preceding the date of this Agreement, during the Employment Period
          or
          during the Noncompete Period;

         

        (ii)    advise,
          request, induce or attempt to induce any of the Customers, suppliers, or
          other
          business contacts of the Company or any of its Affiliates who currently
          have or
          have had business relationships with the Company or any of its Affiliates
          within
          two years preceding the date of this Agreement, during the Employment Period
          or
          during the Noncompete Period, to withdraw, curtail or cancel any of its
          business
          or relations with the Company or any of its Affiliates;
          and

         

        (iii)    hire
          or
          induce or attempt to induce any officer of the Company or any of its Affiliates
          to terminate his or his relationship or breach any agreement with the Company
          or
          any of its Affiliates unless such person has previously been terminated
          by the
          Company; or

         

         

         

        
          
            
            

          

          
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        8.    Confidential
          Information.
          The
          Employee acknowledges and agrees that the customers, business connections,
          customer lists, procedures, operations, techniques, and other aspects of
          and
          information about the business of the Company and its Affiliates (the
          "Confidential Information") are established at great expense and protected
          as
          confidential information and provide the Company and its Affiliates with
          a
          substantial competitive advantage in conducting their business. The Employee
          further acknowledges and agrees that by virtue of his past employment with
          the
          Company, and by virtue of his employment with the Company, he has had access
          to
          and will have access to, and has been entrusted with and will be entrusted
          with,
          Confidential Information, and that the Company would suffer great loss
          and
          injury if the Employee would disclose this information or use in a manner
          not
          specifically authorized by the Company. Therefore, the Employee agrees
          that
          during the Employment Period and for five years thereafter, he will not,
          directly or indirectly, either individually or as an employee, agent, partner,
          shareholder, owner trustee, beneficiary, co-venturer distributor, consultant
          or
          in any other capacity, use or disclose or cause to be used or disclosed
          any
          Confidential Information, unless and to the extent that any such information
          become generally known to and available for use by the public other than
          as a
          result of the Employee's acts or omissions. The Employee shall deliver
          to the
          Company at the termination of the Employment Period, or at any other time
          the
          Company may request, all memoranda, notes, plans, records, reports, computer
          tapes, printouts and software and other documents and data (and copies
          thereof)
          relating to the Confidential Information, Work Product (as defined below)
          or the
          business of the Company or any of its Affiliates which he may then possess
          or
          have under his control. The Employee acknowledges and agrees that all
          inventions, innovations, improvements, developments, methods, designs,
          analyses,
          drawings, reports and all similar or related information (whether or not
          patentable) which relate to the Company's or any of its Affiliate'
          actual or anticipated business research and development or existing or
          future
          products or services and which are conceived, developed or made by the
          Employee
          while employed by the Company and its Affiliates ("Work Product") belong
          to the
          Company or such Affiliate, as the case may be.

         

        9.    Common
          Law of Torts and Trade Secrets.
          The
          parties agree that nothing in this Agreement shall be construed to limit
          or
          negate the common law of torts or trade secrets where it provides the Company
          and its Affiliates with broader protection than that provided
          herein.

         

        10.       
          Definitions. 
          

         

              
          "Affiliate" means, with respect to any Person, any other Person controlling,
          controlled by or under common control with such Person and any partner
          of a
          Person which is a partnership.

         

         

         

        
          
            
            

          

          
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        "Change
          of Control" means:

         

        (a)    the
          acquisition by any individual, entity or group (within the meaning of
          Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
          amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
          the
          meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more
          of
          either (i) the then outstanding shares of common stock of The Company (the
          "Outstanding Common Stock") or (ii) the combined voting power of the then
          outstanding voting securities of the Company entitled to vote generally
          in the
          election of directors (the "Outstanding Voting Securities"); provided,
          however,
          that the following acquisitions shall not constitute a Change of Control:
          (i) any acquisition directly from the Company, (ii) any acquisition by
          the Company, (iii) any acquisition by any employee benefit plan (or related
          trust) sponsored or maintained by the Company or any corporation controlled
          by
          the Company or (iv) any acquisition by any corporation pursuant to a
          transaction which complies with clauses (i), (ii) and (iii) of
          subsection (c) of this definition; or

         

        (b)    individuals
          who, as of the date hereof, constitute the Board of Directors of the Company
          (the "Incumbent Board") cease for any reason to constitute at least a majority
          of the Board of Directors of the Company; provided, however, that any individual
          becoming a director subsequent to the date hereof whose election, or nomination
          for election by the Company's stockholders, was approved by a vote of at
          least a
          majority of the directors then comprising the Incumbent Board shall be
          considered as though such individual were a member of the Incumbent Board,
          but
          excluding, for this purpose, any such individual whose initial assumption
          of
          office occurs as a result of an actual or threatened election contest with
          respect to the election or removal of directors or other actual or threatened
          solicitation of proxies or consents by or on behalf of a Person other than
          the
          Board of Directors of the Company; or

         

        (c)    approval
          by the stockholders of the Company of a reorganization, merger or consolidation
          (a "Business Combination"), in each case, unless, following such Business
          Combination, (i) all or substantially all of the individuals and entities
          who
          were the beneficial owners, respectively, of the Outstanding Common Stock
          and
          Outstanding Voting Securities immediately prior to such Business Combination
          beneficially own, directly or indirectly, more than 60% of, respectively,
          the
          then outstanding shares of common stock and the combined voting power of
          the
          then outstanding voting securities entitled to vote generally in the election
          of
          directors, as the case may be, of the corporation resulting from such Business
          Combination (including, without limitation, a corporation which as a result
          of
          such transaction owns the Company through one or more Subsidiaries) in
          substantially the same proportions as their ownership, immediately prior
          to such
          Business Combination of the Outstanding Common Stock and Outstanding Voting
          Securities, as the case may be, (ii) no Person 

         

        
          
            
            

          

          
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        (excluding
          any employee benefit plan (or related trust) of the Company or such corporation
          resulting from such Business Combination) beneficially owns, directly or
          indirectly, 30% or more of, respectively, the then outstanding shares of
          common
          stock of the corporation resulting from such Business Combination or the
          combined voting power of the then outstanding voting securities of such
          corporation except to the extent that such ownership existed prior to the
          Business Combination and (iii) at least a majority of the members of the
          board of directors of the corporation resulting from such Business Combination
          were members of the Incumbent Board at the time of the execution of the
          initial
          agreement, or of the action of the Board of Directors of the Company, providing
          for such Business Combination; or

         

                (d)    approval
          by the
          stockholders of the Company of (i) a complete liquidation or dissolution of
          the Company or (ii) the sale or other disposition of all or substantially
          all of the assets of the Company, other than to a corporation, with respect
          to
          which following such sale or other disposition, [a] more than 60% of,
          respectively, the then outstanding shares of common stock of such corporation
          and the combined voting power of the then outstanding voting securities
          of such
          corporation entitled to vote generally in the election of directors is
          then
          beneficially owned, directly or indirectly, by all or substantially all
          of the
          individuals and entities who were the beneficial owners, respectively,
          of the
          Outstanding Common Stock and Outstanding Voting Securities immediately
          prior to
          such sale or other disposition in substantially the same proportion as
          their
          ownership, immediately prior to such sale or other disposition, of the
          Outstanding Common Stock and Outstanding Voting Securities, as the case
          may be,
          [b] less than 30% of, respectively, the then outstanding shares of common
          stock
          of such corporation and the combined voting power of the then outstanding
          voting
          securities of such corporation entitled to vote generally in the election
          of
          directors is then beneficially owned, directly or indirectly, by any Person
          (excluding any employee benefit plan (or related trust) of the Company
          or such
          corporation), except to the extent that such Person owned 30% or more of
          the
          Outstanding Common Stock or Outstanding Voting Securities prior to the
          sale or
          disposition, and [c] at least a majority of the members of the board of
          directors of such corporation were members of the Incumbent Board at the
          time of
          the execution of the initial agreement, or of the action of the Board of
          Directors of the Company, providing for such sale or other disposition of
          assets of the Company or were elected, appointed or nominated by the Board
          of
          Directors of the Company.

         

        
                                  
            "Person" means any individual, partnership, corporation, limited
            liability company, association, joint stock company, trust, joint venture,
            unincorporated organization and any governmental entity or any department,
            agency or political subdivision
            thereof.
    

         

                 

        
          
            
              
              

            

            
              10

              
                

              

            

            
              
              

            

          

        

        
           

            "Senior
            Management" at any time means the senior executive officers of the Company
            which will include, without limitation, the Chief Executive Officer,
            President,
            Chief Operations Officer, Chief Financial Officer and such other officers
            of the
            Company as the Board of Directors shall determine from time to
            time.

           

                                   
            "Subsidiary" means, with respect to any Person, any corporation,
            partnership, association or other business entity of which (i) if a corporation,
            a majority of the total voting power of shares of stock entitled (without
            regard
            to the occurrence of any contingency) to vote in the election of directors,
            managers or trustees thereof is at the time owned or controlled, directly
            or
            indirectly, by that Person or one or more of the other Subsidiaries of
            that
            Person or a combination thereof, or (ii) if a partnership, association
            or other
            business entity, a majority of the partnership or other similar ownership
            interest thereof is at the time owned or controlled, directly or indirectly,
            by
            any Person or one or more Subsidiaries of that Person or a combination
            thereof.
            For purposes hereof, a Person or Persons shall be deemed to have a majority
            ownership interest in a partnership, association or other business entity
            if
            such Person or Persons shall be allocated a majority of partnership,
            association
            or other business entity gains or losses or shall be or control any managing
            director or general partner of such partnership, association or other
            business
            entity.

           
11.    Specific
          Performance.
          The
          Employee acknowledges and agrees that irreparable injury to the Company
          may
          result in the event the Employee breaches any covenant or agreement contained
          in
          sections 7 and 8 and that the remedy at law for the breach of any such
          covenant will be inadequate. Therefore, if the Employee engages in any
          act in
          violation of the provisions of sections 7 and 8, the Employee agrees
          that the Company shall be entitled, in addition to such other remedies
          and
          damages as may be available to it by law or under this Agreement, to injunctive
          relief to enforce the provisions of sections 7 and 8.

         

        12.    Waiver.
          The
          failure of either party to insist in any one or more instances, upon performance
          of the terms or conditions of this Agreement shall not be construed as
          a waiver
          or a relinquishment of any right granted hereunder or of the future performance
          of any such term, covenant or condition.

         

        13.    Notices.
          Any
          notice to be given hereunder shall be deemed sufficient if addressed in
          writing
          and delivered by registered or certified mail or delivered personally,
          in the
          case of the Company, to its principal business office, and in the case
          of the
          Employee, to his address appearing on the records of the Company, or to
          such
          other address as he may designate in writing to the Company.

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

        14.    Severability.
          In the
          event that any provision shall be held to be invalid or unenforceable for
          any
          reason whatsoever, it is agreed such invalidity or unenforceability shall
          not
          affect any other provision of this Agreement and the remaining covenants,
          restrictions and provisions hereof shall remain in full force and effect
          and any
          court of competent jurisdiction may so modify the objectionable provision
          as to
          make it valid, reasonable and enforceable. Furthermore, the parties specifically
          acknowledge the above covenant not to compete and covenant not to disclose
          confidential information are separate and independent agreements.

         

        15.    Complete
          Agreement.
          Except
          as otherwise expressly set forth herein, this document embodies the complete
          agreement and understanding among the parties hereto with respect to the
          subject
          matter hereof and supersedes and preempts any prior understandings, agreements
          or representations by or among the parties, written or oral, which may
          have
          related to the subject matter hereof in any way. Without limiting the generality
          of the foregoing, this Agreement supersedes the Employment Agreement, dated
          as
          of July 29, 2002, between the Company and the Employee (together with all
          amendments thereto, the "Prior Agreement"). The Prior Agreement is hereby
          terminated and shall cease to be of any further force or effect.

         

        16.    Amendment.
          This
          Agreement may only be amended by an agreement in writing signed by each
          of the
          parties hereto.

         

        17.    Governing
          Law.
          This
          Agreement shall be governed by and construed exclusively in accordance
          with the
          laws of the State of Illinois, regardless of choice of law
          requirements.

         

        18.    Benefit.
          This
          Agreement shall be binding upon and inure to the benefit of and shall be
          enforceable by and against the Company, its successors and assigns and
          the
          Employee, his heirs, beneficiaries and legal representatives. It is agreed
          that
          the rights and obligations of the Employee may not be delegated or
          assigned.

         

        [Remainder
          of page intentionally left blank. Signature page to
          follow.]

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

            IN
          WITNESS
          WHEREOF, the parties have executed or caused this Employment Agreement
          to be
          executed as of the date first above written.

        
 

        
          
            	 	
                    RC2 CORPORATION-

                    COMPENSATION
                      COMMITTEE

                  
	 	
                     

                    /s/
                      John S. Bakalar 

                  
	 	John S. Bakalar, Director
                    and
                    Compensation Committee Chairman
	 	 
	 	
                    
                      /s/
                        Robert E. Dods 

                    

                  
	 	
                    Robert E.
                      Dods, Director and Compensation Committee Member

                  
	 	 
	 	
                    /s/
                      Daniel M. Wright 

                  
	 	
                    Daniel M.
                      Wright, Director and Compensation Committee Member

                  
	 	 
	 	
                    /s/
                      Gregory J. Kilrea 

                  
	 	
                    Gregory J.
                      Kilrea

                  

          

        

        

          
            
              
              

            

            
              13

              
                

              

            

            
              
              

            

          

        SCHEDULE 5(c)

         

        INCENTIVE
          STOCK OPTIONS

         

        If
          Employee is employed by the Company on February 1 of any year during the
          Employment Period, he shall receive options to acquire not less than 15,000
          shares as determined by the Board of Directors of the Company. The grant
          of the
          options shall be made on the earlier of (l) the quarterly meeting of the
          Board
          of Directors held in February of the applicable year or (2) February 28 of
          the applicable year. Additionally, as of the date of each grant above,
          Employee
          shall also be granted options to purchase 1,000 additional shares for every
          full
          percentage point that the three-year compounded annual EPS growth rate
          as of
          December 31 of the prior year exceeds 25%. The total number of options
          granted in any fiscal year shall not exceed 100,000. The options to be
          granted
          pursuant to this Employment Agreement shall be granted using a Non-Statutory
          Stock Option Grant Agreement substantially in the form of Exhibit A to the
          Employment Agreement.

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

        EXHIBIT A

         

        NON-STATUTORY
          STOCK OPTION GRANT AGREEMENT

         

        UNDER
          THE
          RC2 CORPORATION

        2005
          STOCK INCENTIVE PLAN

         

        THIS
          AGREEMENT, dated as_______________ (the date of grant), is between
          __________________ ("Employee") and RC2 CORPORATION, a Delaware corporation
          (the
          "Company").

         

        RECITALS

         

        A.    The
          Company adopted the RC2 Corporation 2005 Stock Incentive Plan (the "Plan"),
          which was approved by its Board of Directors (the "Board") and
          stockholders.

         

        B.    The
          Board
          has designated Employee as a participant in the Plan.

         

        C.    Pursuant
          to the Plan, Employee and the Company desire to enter into this Agreement
          setting forth the terms and conditions of the options granted to Employee
          under
          the Plan.

         

        AGREEMENTS

         

        The
          Employee and the Company agree as follows:

         

        1.    Grant
          of Stock Option.
          The
          Company grants to Employee the right and option (hereinafter referred to
          as the
          "Option") to purchase all or any part of up to ______________ shares of
          the
          Company's Common Stock (the "Option Shares") on the terms and conditions
          set
          forth below and in the Plan.

         

        2.    Option
          Price.
          The
          purchase price of the Option Shares shall be $________ per share.

         

        3.    Period
          of Exercise.
          Except
          as provided under the Plan, unless the Option is terminated, Employee may
          exercise this Option for up to, but not in excess of, the percent of shares
          of
          Common Stock subject to the Option during the periods specified
          below:

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

         

        
          	
                  Percentage
                    of Shares

                  of
                    Common Stock

                   

                	
                  On
                    or After

                   

                
	
                  20%

                	
                  February
                    __, 2006

                
	
                  40%

                	
                  February
                    __, 2007

                
	
                  60%

                	
                  February
                    __, 2008

                
	
                  80%

                	
                  February
                    __,2009 

                
	
                  100%

                	
                  February
                    __, 2010

                

        

        

        Employee's
          right to exercise the Option expires ten years from the date of grant (the
          "Option Period").

         

        4.    Definitions.
          Unless
          provided to the contrary in this Agreement, the definitions of the Plan
          and any
          Amendments to the Plan shall apply to this Agreement.

         

        5.    Option
          Designation.
          The
          option granted is a Non-Statutory Stock Option in accordance with
          Article VII of the Plan.

         

        6.    Change
          in Capital Structure.
          The
          Option rights and exercise price of such Option rights will be adjusted
          in the
          event of a stock dividend, stock split, reverse stock split, recapitalization,
          reorganization, merger, consolidation, acquisition or other change in the
          capital structure of the Company as determined by the Board of Directors
          in
          accordance with the Plan.

         

        In
          the
          event of a Change in Control of the Company, as defined in the Plan, the
          Option
          will remain exercisable (subject to the expiration date of the Option)
          as
          provided in the Plan.

         

        7.    Nontransferability
          of Option.
          Options
          shall not be transferable other than by will or the laws of descent and
          distribution and shall be exercisable, during the Employee's lifetime,
          only by
          him.

         

        8.    Delivery
          by the Company.
          As soon
          as practicable after receipt of all items referred to in Article VII of the
          Plan and any payment required by Article VII of the Plan, the Company shall
          deliver to the Employee certificate(s) issued in Employee's name for the
          number
          of Option Shares purchased by exercise of the Option. If delivery is by
          mail,
          delivery of Option Shares shall be deemed effected when the stock transfer
          agent
          of the Company shall have deposited the certificates in the United States
          mail,
          addressed to the Employee.

         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

        9.    Addresses.
          All
          notices or statements required to be given to either party hereto shall
          be in
          writing and shall be personally delivered or sent, in the case of the Company,
          to its principal business office and, in the case of Employee, to his address
          as
          shown on the records of the Company or to such address as Employee designates
          in
          writing. Notice of any change of address shall be sent to the other party
          by
          registered or certified mail. It shall be conclusively presumed that any
          notice
          or statement properly addressed and mailed bearing the required postage
          stamps
          has been delivered to the party to which it is addressed.

         

        10.       
          Restrictions
          Imposed by Law.
          Notwithstanding any other provision of this Agreement, Employee agrees
          that he
          shall not exercise the Option and that the Company will not be obligated
          to
          deliver any shares of Common Stock or make any cash payment if counsel
          to the
          Company determines that such exercise, delivery or payment would violate
          any law
          or regulation of any governmental authority or any agreement between the
          Company
          and any national securities exchange upon which the Common Stock is listed.
          The
          Company shall in no event be obliged to take any affirmative action in
          order to
          cause the exercise of the Option or the resulting delivery of shares of
          Common
          Stock or other payment
          to
          comply with any law or regulation of any governmental authority.

         

        11.       
          Employment.
          Nothing
          in this Agreement or the Plan shall limit the right of the Company or any
          parent
          or Subsidiary to terminate the Employee's employment or otherwise impose
          any
          obligation to employ the Employee.

         

        12.       
          Governing
          Law.
          This
          Agreement shall be construed. administered and governed in all respects
          under
          and by the laws of the State of Delaware.

         

        13.       
          Provisions
          Consistent with Plan.
          This
          Agreement is intended to be construed to be consistent with, and is subject
          to,
          all applicable provisions of the Plan, which is incorporated herein by
          reference. In the event of a conflict between the provisions of this Agreement
          and the Plan, the provisions of the Plan shall prevail.

         

            EMPLOYEE:

        

            _____________________________________

        

            RC2
          CORPORATION

        

            BY__________________________________

        
 

         

        
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Exhibit 10.16  

 
 

EMPLOYMENT AGREEMENT    
    

        This EMPLOYMENT AGREEMENT (the "Agreement") dated as of June 1, 2006 ("Agreement
Date") by and between Principal Financial Group, Inc., a Delaware corporation, (together with all successors thereto
"PFGI"), Principal Financial Services, Inc., an Iowa corporation, and Principal Life Insurance Company, an Iowa corporation (together with all
successors thereto, "Life") (each of the foregoing referred to individually as a "Company" or
collectively as "Companies", and Larry D. Zimpleman ("Executive"), a resident of Iowa. The parties
desire to enter into this Agreement, which is intended to more fully embody the agreement among the parties as to Executive's employment. In consideration of the mutual agreements contained herein,
and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the Company and Executive agree as follows: 

 
 

Article I.
  
    DEFINITIONS    
    

        The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly
indicated): 

        1.1    "Accrued Annual Bonus" means the amount of any Annual Bonus earned but not yet paid with respect to any Fiscal Year ended
prior to the Date of Termination. 

        1.2    "Accrued Base Salary" means the amount of Executive's Base Salary, which is accrued but not yet paid as of the Date of
Termination. 

        1.3    "Affiliate" means any Person that directly or indirectly controls, is controlled by, is under common control with, a
Company. For the purposes of this definition, the term "control" when used with respect to any Person, means (a) the power to direct or cause the direction of management or policies of such
Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, or (b) for purposes of Section 1.11 and Article VII, the power
substantially to influence the direction of strategic management policies of such Person, and provided a Company has a direct or indirect commercial relationship with such Person, all as determined by
the Human Resources Committee of the Board or its successor. 

        1.4    "Agreement"—see the introductory paragraph of this Agreement. 

        1.5    "Agreement Date"—see the introductory paragraph in this Agreement. 

        1.6    "Anniversary Date"—means any annual anniversary of the Agreement Date. 

        1.7    "Annual Bonus"—see Section 4.2. 

        1.8    "Base Salary"—see Section 4.1. 

        1.9    "Beneficiary"—see Section 9.6. 

        1.10  "Board" means the Board of Directors of PFGI unless the context indicates otherwise. 

        1.11  "Cause" means any of the following: 

        (a)   Executive's
conviction of, plea of guilty to, or plea of nolo contendere to a felony or misdemeanor (other than a traffic-related felony or misdemeanor) that involves
fraud, dishonesty or moral turpitude, 

        (b)   any
willful action by Executive resulting in any criminal conviction or civil or internal Company sanction or judgment under (i) any Federal or State workplace
harassment or 

224

 

discrimination
laws or (ii) any internal Company workplace harassment, discrimination or other workplace policy under which such action could be and could reasonably be expected to be grounds
for immediate termination of a member of Senior Management (other than mere failure to meet performance goals, objectives, or measures), 

        (c)   Executive's
habitual abuse of or addiction to alcohol or controlled substances, which interferes with the performance of Executive's duties, 

        (d)   Executive's
willful and intentional material breach of this Agreement, including, but not limited to, the restrictive covenants contained in Article VII, 

        (e)   Executive's
habitual neglect of duties, (other than resulting from Executive's incapacity due to physical or mental illness) which results in substantial financial
detriment to any of the Companies or any Affiliate, 

        (f)    Executive's
personally engaging in such conduct as results or is likely to result in (i) substantial damage to the reputation of any of the Companies or any
Affiliate, as a respectable business, and (ii) substantial financial detriment (whether immediately or over time) to any of the Companies or Affiliates, 

        (g)   Executive's
willful and intentional material misconduct in the performance or gross negligence of his duties under this Agreement that results in substantial financial
detriment to a Company or any Affiliate, 

        (h)   Executive's
intentional failure (including a failure caused by gross negligence) to cause any of the Companies to comply with applicable law and regulations material to
the business of such Company which results in substantial financial detriment to any of the Companies or any Affiliate, or 

        (i)    Executive's
willful or intentional failure to comply in all material respects with a specific written direction of the Board that is consistent with normal business
practice and not inconsistent with this Agreement and Executive's responsibilities hereunder. 

For
purposes of clauses (d), (e), (f), (g) and (h) of the preceding sentence, Cause shall not mean the mere existence or occurrence of any one or more of the following, and for purposes
of clause (i) of the preceding sentence, Cause shall not mean the mere existence or occurrence of item (iv) below: 

          (i)  bad
judgment, 

         (ii)  negligence,
other than Executive's habitual neglect of duties or gross negligence, 

        (iii)  any
act or omission that Executive believed in good faith to have been in the interest of the Company (without intent of Executive to gain therefrom, directly or
indirectly, a profit to which he was not legally entitled), or 

        (iv)  failure
to meet performance goals, objectives or measures; 

provided,
that for purposes of clauses (c), (d), (e), (f), (g), (h) and (i), any act or omission that is curable shall not constitute Cause unless the Company gives Executive written notice of
such act or omission that specifically refers to this Section and, within 10 days after such notice is received by Executive, Executive fails to cure such act or omission. Notwithstanding
anything to the contrary herein, any act or omission of which any member of the Board who is not a party to such act or omission has had actual knowledge for at least six months shall not constitute
"Cause" under any clause of this Section. 

        1.12  "Code" means the Internal Revenue Code of 1986, as amended from time to time. 

        1.13  "Company"—see the introductory paragraph to this Agreement. 

225

 

        1.14  "Competitive Business" means as of any date any corporation or other Person (and any branch, office or operation
thereof) that engages in, or proposes to engage in: 

        (a)   the
underwriting, reinsurance, marketing or sale of (i) any form of insurance of any kind that any of the Companies as of such date does, or has under active
consideration a proposal to, underwrite, reinsure, market or sell (any such form of insurance, a "Company Insurance Product" or (ii) any other form of insurance that is marketed or sold in
competition with any Company Insurance Product, or 

        (b)   the
sale of financial services which involve (i) the management, for a fee or other remuneration, of an investment account or fund (or portions thereof or a group
of investment accounts or funds), (ii) the giving of advice, for a fee or other remuneration, with respect to the investment and/or reinvestment of assets or funds (or any group of assets or
funds), or (iii) financial planning services, or 

        (c)   the
design, implementation and administration of employee benefit plans, including plan documents, employee communications, reporting, disclosure, financial advice,
investment advice, and fiduciary services, or 

        (d)   any
other business that as of such date is a direct and material competitor of a Company and its Affiliates to the extent that prior to the Date of Termination any of
the Companies or its Affiliates engaged at any time within 12 months in or had under active consideration a proposal to engage in such competitive business; 

and
that is located anywhere in the Untied States or anywhere outside of the United States where such Company or its Affiliates is then engaged in, or has under active consideration a proposal to
engage in, any of such activities. 

        1.15  "Date of Termination" means the date of the receipt of the Notice of Termination by Executive (if such Notice is given
by or on behalf of PFGI) or by PFGI (if such Notice is given by Executive), or any later date, not more than 15 days after the giving of such Notice, specified in such notice, as of which
Executive's employment with the Companies shall be terminated; provided, however, that: 

	(i)
	if
Executive's employment is terminated by reason of death, the Date of Termination shall be the date of Executive's death; and

	(ii)
	if
Executive's employment is terminated by reason of Disability, the Date of Termination shall be the 30th day after Executive's receipt of the
physician's certification of Disability, unless, before such date, Executive shall have resumed the full-time performance of Executive's duties; and

	(iii)
	if
Executive terminates his employment without Good Reason, the Date of Termination shall be the 30th day after the giving of such Notice; and

	(iv)
	if
no Notice of Termination is given, the Date of Termination shall be the last date on which Executive is employed by the Companies. 

        1.16  "Disability" means a mental or physical condition which renders Executive unable or incompetent to carry out the
material job responsibilities which such Executive held or the material duties to which Executive was assigned at the time the disability was incurred, which has existed for at least six months and
which in the certified opinion of a physician mutually agreed upon by PFGI and Executive (which agreement neither party shall unreasonably withhold) is expected to be permanent or to last for an
additional duration in excess of six months. 

        1.17  "Employment Period"—see Section 3.1. 

226

 

        1.18  "Executive"—see the introductory paragraph of this Agreement. 

        1.19  "Fiscal Year" means the fiscal year used in connection with the preparation of the consolidated financial statements of
PFGI. 

        1.20  "Good Reason" means the occurrence of any one of the following events unless Executive specifically agrees in writing
that such event shall not be Good Reason: 

        (a)   any
material breach of the Agreement by any of the Companies, including any of the following, each of which shall be deemed material: 

          (i)  any
adverse change in the title, status, responsibilities, authorities or perquisites of Executive; 

         (ii)  any
failure of Executive to be nominated, appointed or elected and to continue to be nominated, re-elected, or re-appointed as President of PFGI
without Executive's prior written consent; 

        (iii)  any
failure of Executive to be nominated, appointed or elected and to continue to be nominated, re-elected, or re-appointed as a member of the
Board of Directors of PFGI or the Board of Directors of Life; 

        (iv)  causing
or requiring Executive to report to anyone other than the Chief Executive Officer of PFGI or the Boards of PFGI and Life; 

         (v)  assignment
to Executive of duties materially inconsistent with his position and duties described in this Agreement, including status, offices, or responsibilities as
contemplated under Section 2.1 or any other action by any of the Companies which results in an adverse change in such position, status, offices, titles or responsibilities; 

        (vi)  any
reduction or failure to pay Executive's Base Salary in violation of Section 4.1 or his Annual Bonus in violation of Section 4.2; 

       (vii)  any
failure to grant or pay an LTIP Award or LTIP Bonus required under Section 4.3; or 

      (viii)  any
reduction in bonus or incentive (including without limitation, the LTIP) opportunity; provided that no such reduction shall be deemed to occur merely because the
Company revises or modifies the structure of or performance factors taken into account (or the degree to which any such performance factors are taken into account) under any bonus or incentive
(including without limitation, the LTIP) plan or arrangement; provided further that the Executive shall not be treated less favorably than the other members of Senior Management; 

provided
that the creation, existence or appointment of a president or chief executive officer other than Executive of any subsidiary of PFGI shall not be deemed to be Good Reason if such other chief
Executive officer or president is the Chief Executive Officer if PFGI or reports, directly or indirectly, to Executive or the Chief Executive Officer of PFGI; and provided, further, that no act or
omission described in clauses (i) through (viii) of this Section shall constitute Good Reason unless Executive gives PFGI written notice of such act or omission and the Company fails to
cure such act or omission within 30-days after delivery of such notice (except that Executive shall not be required to provide such notice in case of intentional acts or omissions by a
Company or more than once in cases of repeated acts or omissions); or 

        (b)   the
failure of PFGI to assign this Agreement to its successor or the failure of a successor of PFGI, Life or the Company to expressly assume and agree to be bound by the
Agreement; or 

227

 

        (c)   relocation
of the Company's executive offices or Executive's own office location to a location that is outside the United States; 

In
the event of an occurrence or omission constituting Good Reason, Executive shall not be entitled to terminate his employment for Good Reason unless within 3 months after Executive first
obtains actual knowledge of such an event constituting Good Reason, he notifies PFGI of the events constituting such Good Reason and of his intention to terminate his employment for Good Reason by a
Notice of Termination. 

Notwithstanding
any provision in this Section to the contrary, no reduction in base salary, bonus or incentive (including without limitation the LTIP) that applies to all members of Senior Management
shall constitute Good reason pursuant to Clauses (a) (vii) or (viii) of this Section. 

        1.21  "including" means including without limitation. 

        1.22  "Life"—see introductory paragraph to this Agreement 

        1.23  "LTIP" means, the Principal Financial Group Stock Incentive Plan, the Principal Financial Group 2005 Stock Incentive
Plan and any other successor long-term incentive plan (other than the LTPP) established by any of the Companies or the Surviving Corporation. 

        1.24  "LTIP Award" means a grant under the LTIP. 

        1.25  "LTIP Bonus" means the amount paid or earned in respect of an LTIP Award. 

        1.26  "LTIP Performance Period" means any performance period applicable to an LTIP Award, as designated in accordance with the
LTIP. 

        1.27  "LTPP". means the 1999 Long-Term Performance Plan, as may be amended from time to time. 

        1.28  "PFGI"—see introductory paragraph to this Agreement. 

        1.29  "Notice of Termination" means a written notice of termination of Executive's employment given in accordance with
Section 9.12 by PFGI on behalf of the Companies, or by Executive, as the case may be, which sets forth (a) the specific termination provision in this Agreement relied upon by the party
giving such notice, (b) in reasonable detail the specific facts and circumstances claimed to provide a basis for such Termination of Employment, and (c) if the Date of Termination is
other than the date of receipt of such Notice of Termination, the Date of Termination. 

        1.30  "Person" means any individual, sole proprietorship, partnership, joint venture, limited liability company, trust,
unincorporated organization, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department. 

        1.31  "Prorata Annual Bonus" means the product of (i) the Target Annual Bonus (provided that no effect shall be given
to any reduction in such Target Annual Bonus that would qualify as Good Reason if Executive were to terminate his employment on account thereof) multiplied by (ii) a fraction of which the
numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 

        1.32  "Retirement" means any Termination of Employment after Executive reaches age 57, other than for Cause and other than for
Good Reason. 

        1.33  "Senior Management" means Executive Vice President or higher-level officers of PFGI in the United States. 

        1.34  "Target Annual Bonus"—see Section 4.2. 

        1.35  "Target Annual Goals"—see Section 4.2. 

228

 

        1.36  "Tax Gross-Up Payment" means an amount payable to Executive such that after payment of Taxes on such amount
there remains a balance sufficient to pay the Taxes being reimbursed. 

        1.37  "Taxes" means the incremental federal, state, local and foreign income, employment, excise and other taxes payable by
Executive with respect to any applicable item of income. 

        1.38  "Termination For Good Reason" means a Termination of Employment by Executive for a Good Reason. 

        1.39  "Termination of Employment" means a termination by the Companies or Executive of Executive's employment with the
Companies and their Affiliates. 

        1.40  "Termination Without Cause" means a Termination of Employment by the Companies for any reason other than Cause or
Executive's death or Disability. 

Article II.

DUTIES  

        2.1    Duties.    PFGI shall employ Executive during Employment Period as its President and Chief Operating Officer,
and Executive shall have the authority, duties, and responsibilities as are commensurate and consistent with such position and title, and as provided in, PFGI's by-laws. Executive shall
also serve as President and Chief Operating Officer of Life. It is contemplated that the stockholders of PFGI and of Life, respectively will elect Executive to their respective Boards. Executive shall
report solely to the Chief Executive Officer of PFGI. During the Employment Period, Executive shall follow the directives of the Chief Executive Officer of PFGI and the Board. During the Employment
Period, Executive shall perform the duties assigned to him hereunder, and, subject to Section 2.2, shall devote his full business time, attention and effort, excluding any periods of
disability, vacation, or sick leave to which Executive is entitled, to the affairs of the Companies and shall use his best efforts to promote the interests of the Companies. The Executive acknowledges
that his business time is not limited to a fixed number of hours per week. 

        2.2    Other Activities.    Executive may serve on corporate, civic or charitable boards or committees, deliver
lectures, fulfill speaking engagements or teach at educational institutions, and manage personal
investments; provided that such activities do not individually or in the aggregate significantly interfere with the performance of Executive's duties under this Agreement. 

Article III.

EMPLOYMENT PERIOD  

        3.1    Employment Period.    Subject to the termination provisions hereinafter provided, the term of Executive's
employment under this Agreement (the "Employment Period") shall begin on the Agreement Date and end on the Anniversary Date which is three years after such date or such later date to which the
Employment Period is extended pursuant to the following sentence. At the expiration of the initial term of this Agreement, as set forth in the immediately preceding sentence, or the term of this
Agreement as the same may previously have been extended in accordance with this sentence, the Employment Period shall be automatically extended for a period of one additional year unless PFGI or
Executive delivers written notice to the other party not later than 90 days prior to the date on which the Agreement is then scheduled to expire (an "Expiration Notice") that it or he is
electing not to extend the term of the Agreement. Notwithstanding the immediately preceding sentence, the Employment Period shall automatically end on Executive's 65th birthday unless
PFGI delivers, any time prior to one year before such date of expiration, written notice to Executive that it desires that the Agreement shall not so expire, in which case, subject to the prompt
consent of Executive, the 

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Agreement
shall expire (unless further extended by mutual consent) on the date specified in such notice. The employment of Executive by PFGI shall not be terminated other than in accordance with
Article VI. 

Article IV.

COMPENSATION  

        4.1    Salary.    Executive shall be paid in accordance with normal payroll practices (but not less frequently than
monthly) an annual salary at a rate of $600,000 per year ("Base Salary"). During the Employment Period, the Base Salary shall be reviewed periodically
and may be increased from time to time as shall be determined by the Board, in accordance with normal Company administrative practices for Senior Management. After any such increase, the term
"Base Salary" shall thereafter refer to the increased
amount. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement. Base Salary shall not be reduced at any time without the express
written consent of Executive; provided that the Board may, in its discretion restructure or alter the time of payment of Base Salary in order to enhance the deductibility thereof, provided there is no
economic detriment to the Executive and that the Board and Executive shall cooperate in good faith in such restructuring or alteration. 

        4.2    Annual Bonus.    

        (a)   Executive
shall be eligible to receive an annual bonus ("Annual Bonus") in accordance with the terms hereof for each
Fiscal Year that begins or ends during the Employment Period. Executive shall be eligible for an Annual Bonus based upon target performance goals (the "Target Annual
Goals"), which goals shall be determined by the Board on an annual basis, in accordance with normal Company administrative practices for Senior Management, and which provides
for a payment opportunity of 125% of Executive's Base Salary ("Target Annual Bonus") upon achievement of the Target Annual Goals. The parties agree that
the Annual Bonus shall be administered and shall be subject to the same terms and conditions as are generally applicable to other members of Senior Management in the applicable year. 

        (b)   The
entire Annual Bonus that is payable to Executive with respect to a Fiscal Year shall be paid in cash, or such other medium as is generally applicable to members of
Senior Management, as soon as practicable after the appropriate Board has determined whether and the degree to which Target Annual Goals have been achieved following the close of such Fiscal Year. In
any event, the entire Annual Bonus that is payable to Executive with respect to a Fiscal Year shall be paid at the same time as the Annual Bonus is paid to the other members of Senior Management, but
in any event no later than 75 days after the end of the Fiscal Year. 

        4.3    Long-Term Incentive Plan Bonus and Other Incentive Compensation.    Executive shall have the
opportunity to participate in the LTIP (if such plan exists) and any other incentive compensation plan or program available to Senior Management. The appropriate Board may restructure or alter the
time of payment of amounts under the LTIP or other incentive compensation plan or program in order to enhance the deductibility thereof, provided there is no economic detriment to the Executive and
that the Board and Executive shall cooperate in good faith in such restructuring or alteration. 

        4.4    Savings and Retirement Plans.    Executive shall be eligible to participate during the Employment Period in any
Company's savings and retirement plans, practices, policies and programs, in accordance with the terms thereof, if any, applicable from time to time to members of Senior Management, including any
supplemental executive retirement plan. 

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Article V.

OTHER BENEFITS  

        5.1    Welfare Benefits.    During the Employment Period, Executive and his family shall be eligible to participate
in, and shall receive all benefits under, any Company's welfare benefit plans, practices, policies and programs provided or made generally available by the Company to Senior Management (including
medical, dental, vision, short and long term disability, group-term life, accidental death and dismemberment (AD&D) insurance plans and programs), in accordance with their terms as in
effect from time to time. 

        5.2    Fringe Benefits.    During the Employment Period, Executive shall be entitled to fringe benefits generally
applicable to Senior Management in accordance with their terms as in effect from time to time. 

        5.3    Vacation.    During the Employment Period, Executive shall be entitled to paid time under the plans, practices,
policies and programs generally applicable to members of Senior Management in accordance with their terms as in effect from time to time. 

        5.4    Expenses.    Executive shall be promptly reimbursed for all actual and reasonable employment-related business
expenses he incurs during the Employment Period in accordance with any Company's practices, policies, and procedures generally applicable to members of Senior Management in accordance with their terms
as in effect from time to time, including the timely submission of required receipts and accountings. 

Article VI.

TERMINATION BENEFITS  

        6.1    Termination for Cause or Other than for Good Reason, etc.    

        (a)   If
PFGI terminates Executive's employment with the Companies for Cause or Executive terminates his employment other than for Good Reason, death or Disability, the
Executive shall be entitled to receive immediately after the Date of Termination a lump sum amount equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus, and Executive shall not
be entitled to receive any severance or other payment, other than compensation and benefits which relate to or derive from Executive's employment with the Companies on or prior to the Date of
Termination (including, without limitation, any deferrals under the LTIP) and which are otherwise payable in case of termination for Cause or other than for Good Reason, death or Disability, as
applicable 

        (b)   Executive's
employment may be terminated for Cause only if (i) PFGI provides Executive (before the Date of Termination) with written notice of the Board meeting
referred to in clause (ii) of this Section 6.1(b) at least twenty days prior to such meeting and specifies in detail in writing the basis of a claim of Cause and provides Executive, with
or without counsel, at Executive's election, an opportunity to be heard and present arguments and evidence on Executive's behalf at such meeting, (ii) the PFGI Board, by affirmative vote of not
less than 2/3 of the entire membership of the PFGI Board (excluding the Executive's vote from any such determination) that the acts or omissions constitute Cause which Executive failed
to cure after being given an opportunity to cure if required by Section 1.11, and to the effect that Executive's employment should be terminated for Cause and (iii) PFGI thereafter
provides Executive a Notice of Termination which specifies in detail the basis of such Termination of Employment for Cause. Nothing in this Section 6.1(b) shall preclude the Board, by majority
vote, from suspending Executive from his duties, with pay at any time. 

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        6.2    Termination for Retirement, Death or Disability.    If, before the end of the Employment Period, Executive's
employment terminates due to his Retirement, death or Disability, Executive or his Beneficiaries, as the case may be, shall be entitled to receive immediately after the Date of Termination, a lump sum
amount which is equal to the sum of Executive's Accrued Base Salary, Accrued Annual Bonus, and Prorata Annual Bonus. All of Executive's rights under any non-qualified retirement plan
(including any non-qualified defined contribution plan) shall become fully vested (to the extent not previously vested) on the Date of Termination. In calculating the amount payable under
any nonqualified defined benefit plan, Executive shall be treated as though he had attained age 57 on the Date of Termination and shall be credited under such plan with additional service in an amount
equal to that he would have completed had he continued to work until age 57. Any accrued benefit that is forfeited by Executive due to his death, Disability or Retirement under a qualified plan which
is supplemented by a nonqualified plan shall be paid from the applicable supplemental non-qualified plan. 

        6.3    Termination Without Cause or for Good Reason.    In the event of a Termination Without Cause or a Termination
for Good Reason (in either case occurring during the Employment Period), Executive shall be entitled to receive the following: 

        (a)   promptly
after the Date of Termination, (but in no event later than ten business days after the Date of Termination), a lump sum amount equal to the sum of Executive's
Accrued Base Salary, Accrued Annual Bonus and Prorata Annual Bonus; 

        (b)   ten
business days or, if the amount payable hereunder is not a short-term deferral for purposes of Section 409A of the Code, six months after the Date
of Termination a lump sum amount equal to the product of (i) the sum of Base Salary plus Target Annual Bonus for the Fiscal Year during which the Date of Termination occurs (provided that no
effect shall be given to any reduction in Target Annual Bonus that would qualify as Good Reason if Executive were to terminate his employment on account thereof), and multiplied by (ii) 1.5; 

        (c)   until
the earlier of (i) the 18 month anniversary of the Date of Termination or (ii) the date Executive becomes eligible to participate in any plan,
program or arrangement providing benefits of a similar nature by reason of his employment or other provision of services, the life insurance benefit specified in Section 5.1 to which Executive
is entitled as of Date of Termination, subject to the terms of applicable plans, programs or policies; provided that the Executive shall pay the same
amount for such benefits as covered members of Senior Management who are actively employed would pay; 

        (d)   if
the Date of Termination occurs prior to the Executive's 57th birthday, the benefits equivalent to those payable under the Principal Welfare Benefit Plan
for Employees calculated under the terms of such plan as if the Date of Termination occurred after Executive's 57th birthday, reduced by amounts actually payable under such plan, and if
either Executive or the Company reasonably believes it is likely that such benefits cannot be provided on a tax-favored basis, the Company shall pay the cost of the insurance premium for
such benefits; 

        (e)   if
the Date of Termination occurs prior to Executive's 57th birthday, for purposes of calculating the retirement benefits payable to Executive under the
Supplemental Executive Retirement Plan for Employees, Executive will be treated as though the Date of Termination occurred after Executive's 57th birthday; 

        (f)    key
executive level outplacement services, the provider of which shall be selected by Executive, up to a maximum of $10,000; provided that in no event shall any amount
be payable to Executive in lieu of his receipt of such services. 

Notwithstanding
anything herein to the contrary, the benefits provided in Section 6.3 shall be provided only upon Executive's execution of a release and waiver as described in
Section 6.5. For the avoidance of doubt, Executive's rights and entitlements with respect to any equity-based or other long-term 

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incentive
compensation awards (including any LTIP Award) outstanding as of the Date of Termination shall be determined in accordance with the terms of such awards and the governing plan documents and
shall not be enhanced or otherwise modified by the terms of this Agreement. 

        6.4    Other Rights.    This Agreement shall not prevent or limit Executive's continuing or future participation in
any benefit, bonus, incentive or other plan, program or policy provided by the Company and for which Executive may qualify, and shall not impair the Company's rights to amend or terminate any benefit,
bonus, incentive or other plan program or policy; provided however that no such amendment or termination shall treat Executive less favorably than other Senior Management and Executive's benefits,
bonus and incentives in the aggregate shall not be reduced. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, program or policy and any other
payment or benefit required by law at or after the Date of Termination shall be payable in accordance with such plan, program or policy or applicable law except as expressly modified by this
Agreement. 

        6.5    Waiver and Release.    Notwithstanding anything herein to the contrary, upon any Termination of Employment
(other than due to death) 

        (a)   the
Executive shall execute a release and waiver in form mutually agreed by Executive and the Board of PFGI (which agreement neither party shall unreasonably withhold)
which releases, waives, and forever discharges the Companies, their Affiliates, and their respective subsidiaries, affiliates, employees, officers, shareholders, members, partners, directors, agents,
attorneys, predecessors, successors and assigns, from and against any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys' fees, damages and obligations of every kind
and nature in law, equity, or otherwise, known and unknown suspected and unsuspected, disclosed and undisclosed, including but not limited to any and all such claims and demands directly or indirectly
arising out of or in any way connected with the Executive's employment with and services as a director of the Companies and their Affiliates; claims or demands related to compensation or other amounts
under any compensatory arrangement, stock, stock options, or any other ownership interests in any of the Companies or any Affiliate, vacation pay, fringe benefits, expense reimbursements, severance
benefits, or any other form of compensation or equity; claims pursuant to any federal, state, local law, statute of cause of action including, but not limited to, the federal Civil Rights Act of 1964,
as amended; the federal Age Discrimination in Employment Act of 1967, as amended; the federal Americans with Disabilities Act of 1990; tort law, contract law; wrongful discharge, discrimination;
defamation; harassment; or emotional distress; provided that Executive's waiver and release shall not relieve the Companies from any of the following obligations, to the extent they are to be
performed after the date of the release and waiver: (i) payment of amounts due under Sections 6.1, 6.2 or 6.3, as applicable, (ii) any obligations under the second sentence of
Section 6.4, and (iii) payment of any gross-up amount due under Article VIII; and provided further that (x) neither party shall release the other from his or
its obligations under Article IX of this agreement, to the extent such obligations are to be performed after the Date of
Termination, and (y) Executive shall not be precluded from defending against Cause Claims (as defined in Section 6.5(b)); and 

        (b)   the
Company shall execute a release and waiver in form mutually agreed by Executive and the Board of PFGI (which agreement neither party shall unreasonably withhold)
which releases, waives, and forever discharges the Executive and his executors, administrators, successors and assigns, from and against any and all claims, liabilities, demands, causes of action,
costs, expenses, attorneys' fees, damages and obligations of every kind and nature in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, including but
not limited to any and all such claims and demands directly or indirectly arising out of or in any way connected with the Executive's employment with and services as a director of the Companies and
their Affiliates, but excluding any such claims liabilities, demands, causes of action, 

233

 

costs,
expenses, attorneys' fees, damages or obligations arising out of or in any way connected with events, acts or conduct giving rise to or in any way connected with Executive's Termination of
Employment for Cause ("Cause Claims"), provided, however, that (i) neither party shall release the other from his or its obligations under Article IX of this agreement, to the extent
such obligations are to be preformed after the Date of Termination, (ii) the Company shall not release Executive from his obligation under Article VII and (iii) Executive shall
not be precluded from defending against Cause Claims. 

        (c)   Executive
hereby agrees that the execution of this Agreement is adequate consideration for the execution of such a release, and hereby acknowledges that the Companies
would not have executed this Agreement had Executive not agreed to execute such a release. 

Article VII.

RESTRICTIVE COVENTANTS  

        7.1    Non-Competition.    Executive shall not at any time during the period beginning on the Agreement
Date and ending 18 months following the Date of Termination (whether or not during the Term), regardless of the reasons for such termination, directly or indirectly, in any capacity: 

        (a)   engage
or participate in, become employed by, serve as a director of, or render advisory or consulting or other services in connection with, any Competitive Business;
provided, however, that after the Date of Termination this Section 7.1(a) shall not preclude Executive from being an employee of, or
consultant to, any business unit of a Competitive Business if (i) such business unit does not qualify as a Competitive Business in its own right and (ii) Executive does not have any
direct or indirect involvement in, or responsibility for, any operations of such Competitive Business that cause it to qualify as a Competitive Business; or 

        (b)   make
or retain any financial investment, whether in the form of equity or debt, or own any interest, in any Competitive Business; provided, however, that nothing in this
subsection shall restrict Executive from making an investment in any Competitive Business if such investment (i) represents no more than 1% of the aggregate market value of the outstanding
capital stock or debt (as applicable) of such Competitive Business, (ii) does not give Executive any right or ability, directly or indirectly, to control or influence the policy decisions or
management of such Competitive Business, and (iii) does not create a conflict of interest between Executive's duties under this Agreement and his interest in such investment. 

        7.2    Non-Solicitation.    Executive shall not at any time during the period beginning on the Agreement
Date and ending 18 months following the Date of Termination (whether or not during the Term), regardless of the reasons for such termination, directly or indirectly: 

        (a)   other
than in connection with the good-faith performance of his duties as an officer of any of the Companies, encourage any employee or agent of the
Companies or any Affiliate to terminate his relationship with any of the Companies or any Affiliate; 

        (b)   solicit
the employment of or the engagement as a consultant or advisor of, any employee or agent of any of the Companies or any Affiliate (other than by the Company or
an Affiliate), or cause or encourage any Person to do any of the foregoing; 

        (c)   establish
(or take preliminary steps to establish) a business with, or encourage others to establish (or take preliminary steps to establish) a business with, any
employee or agent of the Company or any Affiliate; or 

        (d)   interfere
with the relationship of any of the Companies with, or endeavor to entice away from any of the Companies, any Person who or which at any time during the period
commencing 

234

 

one
year prior to the Agreement Date was or is a material client or material supplier of, or maintained a material business relationship with, any of the Companies or an Affiliate. 

        7.3    Confidentiality.    The Executive acknowledges that in the course of performing services for the Companies and
Affiliates, he may create, develop, learn of, receive or contribute non-public information, ideas, processes, methods, designs, devices, inventions, data, models and other information
relating to the Companies and their Affiliates or their products, services, businesses, operations, employees or customers, whether in tangible or intangible form, and that the Companies or their
Affiliates desire to protect and keep secret and confidential, including trade secrets and information from third parties that the Companies or their Affiliates are obligated to keep confidential
("Confidential Information"). Confidential Information shall not include: (i) information that is or becomes generally known through no fault of
Executive; (ii) information received from a third party outside of the Company that was disclosed without a breach of any confidentiality obligation; or (iii) information approved for
release by written authorization of the Company. The Executive recognizes that all such Confidential Information is the sole and exclusive property of the Companies and their Affiliates, and that
disclosure of Confidential Information would cause damage to the Companies and their Affiliates. Except as required by the duties of his employment with any of the Companies or any of their and/or its
Affiliates; (ii)with the consent of PFGI, or (iii) in connection with enforcing the Executive's rights under this Agreement or if compelled by a court or governmental agency(provided that this
subclause (iii) shall not apply unless Executive has provided PFGI with reasonable prior written notice of any such proposed disclosure in connection with any enforcement action or compelled
testimony), the Executive agrees that he will not willfully disseminate or otherwise disclose, directly or indirectly, any Confidential Information obtained during his employment with any of the
Companies or their Affiliates, and will take all necessary precautions to prevent disclosure, to any unauthorized individual or entity inside or outside the Company, and will not use the Confidential
Information or permit its use for the benefit of Executive or any other person or entity other than the Companies or the Affiliates. These obligations shall continue during and after the termination
of Executive's employment (whether or not during the Employment Period). 

        7.4    Intellectual Property.    During the employment period, Executive shall disclose immediately to the Company all
ideas, inventions and business plans that he makes, conceives, discovers or develops alone or with others during the course of his employment with the Company, including any inventions, modifications,
discoveries, developments, improvements, computer programs, processes, products or procedures (whether or not protectable upon application by copyright, patent, trademark, trade secret or other
proprietary rights) ("Work Product") that: (i) relate to the business of the Company or any customer or supplier to the Company or any of the
products or services being developed, manufactured, sold or otherwise provided by the Company or that may be used in relation therewith; or (ii) result from tasks assigned to Executive by the
Company; or (iii) result from the use of the premises or personal property (whether tangible or intangible) owned, leased or contracted for by the Company. Executive agrees that any Work
Product shall be the property of the Company and, if subject to copyright, shall be considered a "work made for hire" within the meaning of the Copyright Act of 1976, as amended (the
"Act"). If an to the extent that any such Work Product is found as a matter of law not to be a "work made for hire" within the meaning of the Act,
Executive expressly assigns to the Company all right, title and interest in and to the Work Product, and all copies thereof, and the copyright, patent, trademark, trade secret and all their
proprietary rights in the Work Product, without further consideration, free from any claim, lien for balance due or rights of retention thereto on the part of Executive. 

        (a)   The
Company hereby notifies Executive that the preceding paragraph does not apply to any inventions for which no equipment, supplies, facility, or trade secret
information of the Company was used and which was developed entirely on the Executive's own time, unless: (i) the invention relates (a) to the Company's business, or (b) to the
Company's actual or demonstrably 

235

 

anticipated
research or development, or (ii) the invention results form any work performed by the Executive for the Company. 

        (b)   Executive
agrees that upon disclosure of Work Product to the Company, Executive will, during his employment and at any time thereafter, at the request and cost of the
Company, execute all such documents and perform all such acts as the Company or its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company
alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world, and when so obtained or vested to renew and restore the same;
and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or
other analogous protection. 

        (c)   In
the event that the Company is unable, after reasonable effort, to secure Executive's signature on any letters patents, copyright or other analogous protection
relating to Work Product, whether because of Executive's physical or mental incapacity or for any other reason whatsoever, Executive hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as his agent and attorney-in-fact, to act for and on his behalf to executive and file any such application or applications and to do all other
lawfully permitted acts to further the prosecution and issuance of letters patent, copyright and other analogous protection with the same legal force and effect as if personally executed by Executive. 

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        7.5    Reasonableness of Restrictive Covenants.    

        (a)   Executive
acknowledges that the covenants contained in Sections 7.1, 7.2, 7.3 and 7.4 are reasonable in the scope of the activities restricted, the geographic
area covered by the restrictions, and the duration of the restrictions, and that such covenants are reasonably necessary to protect the Companies' relationships with their employees, clients and
suppliers. Executive further acknowledges such covenants are essential elements of this Agreement and that, but for such covenants, the Companies would not have entered into this Agreement. 

        (b)   The
Companies and Executive have each consulted with their respective legal counsel and have been advised concerning the reasonableness and propriety of such covenants.
Executive acknowledges that his observance of the covenants contained in Sections 7.1, 7.2, 7.3 and 7.4 will not deprive him of the ability to earn a livelihood or to support his dependents. 

        7.6    Rights to Injunction; Survival of Undertakings.    

        (a)   In
recognition of the necessity of the limited restrictions imposed by Sections 7.1, 7.2, 7.3 and 7.4, the parties agree that it would be impossible to measure
solely in money the damages that any of the Companies would suffer if Executive were to breach any of his obligations under such Sections. Executive acknowledges that any breach of any provision of
such Sections would irreparably injure the Companies. Accordingly, Executive agrees that any of the Companies shall be entitled, in addition to any other remedies to which such Company may be entitled
under this Agreement or otherwise, to an injunction to be issued by a court of competent jurisdiction, to restrain any actual breach, or threatened breach, of such provisions, and Executive hereby
waives any right to assert any defense that any of the Companies has an adequate remedy at law for any such breach. 

        (b)   If
a court determines that any of the covenants included in this Article VII are unenforceable in whole or in part because of such covenant's duration or
geographical or other scope, such court may modify the duration or scope of such provision, as the case may be, so as to cause such covenant as so modified to be enforceable. 

        (c)   All
of the provisions of this Article VII shall survive any Termination of Employment without regard to (i) the reasons for such termination or
(ii) the expiration of the Employment Period. 

        (d)   No
Company shall have any further obligation to pay or provide severance or benefits under Section 6.3 if a court determines that the Executive has breached any
covenant in this Article VII. 

Article VIII.

CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY  

        8.1    Tax Gross-Up Payment.    If at any time or from time to time it shall be determined that any
payment to Executive pursuant to this Agreement or any other payment or benefit ("Potential Parachute Payment") hereunder or otherwise would be subject
to the excise tax imposed by Section 4999 of the Code or any similar tax payable under any United States federal, state, local, foreign or other law ("Excise
Tax"), then Executive shall receive and PFGI shall pay or cause to be paid a Tax Gross-Up Payment with respect to all such excise taxes and other Taxes; provided,
however, that this Article VIII shall be subject in its entirety to any Change of Control agreement with Executive entered after the Agreement Date by the Company. The Tax Gross-Up
Payment is intended to compensate Executive for all such excise taxes and any federal, state, local, foreign or other income, employment, or excise taxes or other taxes payable by Executive with
respect to the Tax Gross-Up Payment. For purposes of this Agreement, a "Tax Gross-Up Payment" shall mean an amount sufficient to enable the Executive to pay (a) any
Excise Tax imposed on the Executive by reason of receipt of the Potential Parachute Payments 

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and
(b) all incremental federal, state, local and foreign income, employment, excise and other taxes payable by Executive by reason of receipt of the Tax Gross-Up payment. 

        8.2    Limitations on Gross-Up Payments.    

        (a)   Notwithstanding
any other provision of this Article VIII, if the aggregate After-Tax Amount (as defined below) of the Potential Parachute Payments and
Tax Gross-Up Payment that, but for this Section 8.2, would be payable to Executive, does not exceed 110% of After-Tax Floor Amount (as defined below), then no Tax
Gross-Up Payment shall be made to Executive and the aggregate amount of Potential Parachute Payments payable to Executive shall be reduced (but not below the Floor Amount) to the largest
amount which would both (i) not cause any Excise Tax to be payable by Executive and (ii) not cause any Potential Parachute Payments to be come nondeductible by the Company by reason of
Section 280G of the Code (or any successor provision). For purposes of the preceding sentence, Executive shall be deemed to be subject to the highest effective after-tax marginal
rate of Taxes. 

        (b)   For
purposes of this Agreement: 

          (i)  "After-Tax Amount" means the portion of a specified amount that would remain after payment of all Taxes paid
or payable by Executive in respect of such specified amount; and 

         (ii)  "Floor Amount" means the greatest pre-tax amount of Potential Parachute Payments that could be paid to
Executive without causing Executive to become liable for any Excise Taxes in connection therewith; and 

        (iii)  "After-Tax Floor Amount" means the After-Tax Amount of the Floor Amount. 

Article IX.

MISCELLANEOUS  

        9.1    Approvals.    The Companies represent and warrant to Executive they have taken all corporate action necessary
to authorize this Agreement. 

        9.2    No Mitigation.    In no event shall Executive be obligated to seek other employment or take any other action to
mitigate the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned as a result of Executive's
employment by another employer, except that any continued welfare benefits provided for by Section 6.3(c). 

        The
Companies' obligation to make the payments provided for in this Agreement and otherwise perform the obligations hereunder shall not (unless Executive is terminated for Cause) be
affected by any circumstances, including set-off, counterclaim, recoupment, defense or other claim, right or action, which the Companies may have against Executive. 

        9.3    Enforcement.    

        (a)   The
Company shall promptly reimburse Executive for all attorneys' fees, costs and expenses incurred by Executive in connection with the negotiation, execution and
delivery of this agreement, up to a maximum of $10,000. If Executive incurs legal, accounting, expert witness or other fees, costs or expenses (including arbitration fees, costs or expenses) in an
effort to secure, preserve, establish entitlement to, or obtain compensation or benefits under this Agreement, the Company shall promptly reimburse Executive for such fees, costs and expenses whether
or not Executive is successful; provided, however, that no reimbursement shall be made of such expenses if Executive's assertion of rights was in bad faith and Executive does not prevail (after
exhaustion of all available judicial remedies). 

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        (b)   If
the Companies fail to pay any amount provided under any provision of this Agreement when due, the Executive shall be entitled to interest, compounded monthly, on such
amount at a rate equal to the lesser of (i) (A) the highest rate of interest charged by the relevant Company's principal lender on its revolving credit agreements, or (B) in the absence
of such a lender, the prime commercial lending rate announced The Wall Street Journal in effect from time to time during the period of such nonpayment,
or (ii) the highest legally-permissible interest rate allowed to be charged under applicable law. 

        9.4    Indemnification and Insurance.    The Executive shall be indemnified and held harmless by the Companies to the
greatest extent permitted under applicable Iowa law as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits a Company
to provide broader indemnification that was permitted prior to such amendment) and the Companies' respective by-laws as such exist on the Agreement Date if the Executive was, is, or is
threatened to be, made a party to any pending, completed or threatened action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding
whether civil, criminal, administrative or investigative, and whether formal or informal, by reason of the fact that the Executive is or was, or had agreed to become, a director, officer, employee,
agent, or fiduciary of a Company or any other entity which the Executive is or was serving at the request of a Company ("Proceeding"), against all
expenses (including all reasonable attorneys' fees) and all claims, damages, liabilities and losses incurred or suffered by the Executive or to which the Executive may become subject for any reason. A
Proceeding shall not include any proceeding to the extent it concerns or relates to a matter described in Section 9.3(a). Upon receipt from Executive of (i) a written request for an
advancement of expenses, which Executive reasonably believes will be subject to indemnification hereunder and (ii) a written undertaking by Executive to repay any such amounts if it shall
ultimately be determined that Executive is not entitled to indemnification under this Agreement or otherwise, the Companies shall advance such expenses to Executive or pay such expenses for Executive,
all in advance of the final disposition of any such matter. During Executive's employment and thereafter, Companies shall provide Executive with coverage under a director's and officer's liability
insurance policy in amounts no less than, and on terms no less favorable than, those provide to senior executive officers and directors of the Companies on the Agreement Date and in amounts no less
than, and on terms no less favorable than those, as provided to senior executive officers and directors of the Companies from time to time. 

        9.5    Cooperation With Regard to Litigation.    The Executive agrees to cooperate with the Companies during his
employment with any of the Companies (whether or not during the Employment Period) and thereafter (including following Executive's termination of employment for any reason, whether or not
pursuant to this Agreement) by making himself reasonably available to testify on behalf of the Companies or their Affiliates, in any action, suit or proceeding, whether civil, criminal,
administrative, or investigative and to assist each Company or any of its Affiliates in any such action, suit, or proceeding by providing information and meeting and consulting with the Board of such
Company or Affiliate or counsel or representatives or counsel to the Company or its Affiliates, as reasonably requested by the Board or such counsel. The Executive shall be entitled to reimbursement
for any expenses (including legal fees) reasonably incurred by the Executive in connection with his compliance with the foregoing covenant; provided, however, that during the Employment Period the
Executive shall not be reimbursed for his time spent in connection with his compliance with the foregoing covenant. The Companies agree to pay Executive a per diem of $3,500 per day for each day of
service (including travel days) performed by Executive in accordance with this Section after Executive is no longer employed by the Companies. 

        9.6    Beneficiary.    If Executive dies prior to receiving all of the amounts payable to him in accordance with the
terms and conditions of this Agreement, such amounts shall be paid to the beneficiary ("Beneficiary") designated by Executive in writing to the Company
during his lifetime, or if no such Beneficiary is designated, to Executive's estate. Such payments shall be made in a lump sum to 

239

 

the
extent so payable and, to the extent not payable in a lump sum, in accordance with the terms of this Agreement. Such payments shall not be less than the amount payable to Executive as if Executive
had lived to the date of payment and were the payee. Executive, without the consent of any prior Beneficiary, may change his designation of Beneficiary or Beneficiaries at any time or from time to
time by submitting to the Company a new designation in writing. 

        9.7    Assignment; Successors.    This Agreement is personal to Executive and he may not assign his duties or
obligations under it. No Company may assign its respective rights and obligations under this Agreement without the prior written consent of Executive, except to a successor to the Company's business,
which expressly assumes the Company's obligations hereunder in writing. This Agreement shall be binding upon and inure to the benefit of Executive, his estate and Beneficiaries, the Companies and
their successors and permitted assigns. Each Company shall require any successor to all or substantially all of the business and/or assets of such Company, whether direct or indirect, by purchase,
merger, consolidation, acquisition of stock, or otherwise, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as such Company would be required to
perform if no such succession had taken place. 

        9.8    Non-alienation.    Except as is otherwise expressly provided herein, benefits payable under this
Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or
involuntary, prior to actually being received by Executive, and any such attempt to dispose of any right to benefits payable hereunder shall be void. 

        9.9    Severability.    If all or any part of this Agreement is declared to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not declared to be
unlawful or invalid. Any provision so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision to the fullest extent
possible while remaining lawful and valid. 

        9.10    Amendment; Waiver.    This Agreement shall not be amended or modified except by written instrument executed by
PFGI and Executive. A waiver of any term, covenant or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant or condition, and any waiver of any default in any
such term, covenant or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant or condition. 

        9.11    Arbitration.    Any dispute, controversy or claim arising out of or in connection with or relating to this
Agreement or any breach or alleged breach thereof shall be submitted to and settled by binding arbitration in Des Moines, Iowa, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (or at any other place or under any other form of arbitration mutually acceptable to the parties so involved). Any dispute, controversy or claim submitted for resolution shall
be submitted to three (3) arbitrators, each of whom is a nationally recognized executive compensation specialist. The Company involved in the dispute, controversy or claim, or PFGI if more than
one Company is so involved, shall select one arbitrator, the Executive shall select one arbitrator and the third arbitrator shall be selected by the first two arbitrators. The arbitrators shall be
required to render their award in a written statement setting forth their findings of fact and the bases for their conclusions. Any award rendered shall be final and conclusive upon the parties and a
judgment thereon may be entered in the highest court of a forum, state or federal, having jurisdiction. The expenses of the arbitration shall be borne according to Section 9.3, except that in
the discretion of the arbitrators any award may include the fees and costs of a party's attorneys if the arbitrator expressly determines that the party against whom such award is entered has caused
the dispute, controversy or claim to be submitted to arbitration in bad faith or as a dilatory tactic. No arbitration shall be commenced after the date when institution of legal or equitable
proceedings based upon such subject matter would be barred by the applicable statute of limitations. Notwithstanding anything to the contrary contained in this Section 9.11 or elsewhere in this
Agreement, either party may bring an action in the Iowa District 

240

 

Court
for Polk County, or the United State District Court for the Southern District of Iowa, if jurisdiction there lies, in order to maintain the status quo ante of the parties. The "status quo ante"
is defined as the last peaceable, uncontested status between the parties. However, neither the party bringing the action nor the party defending the action thereby waives its right to arbitration of
any dispute, controversy or claim arising out of or in connection or relating to this Agreement. Notwithstanding anything to the contrary contained in this Section 9.11 or elsewhere in this
Agreement, either party may seek relief in the form of specific performance, injunctive or other equitable relief in order to enforce the decision of the arbitrator. The parties agree that in any
arbitration commenced pursuant to this Agreement, the parties shall be entitled to such discovery (including depositions, requests for the production of documents and interrogatories) as would be
available in a federal district court pursuant to Rules 26 through 37 of the Federal Rules of Civil Procedure. In the event that either party fails to comply with its discovery obligations
hereunder, the arbitrator(s) shall have full power and authority to compel disclosure or impose sanctions to the full extent of Rule 37, Fed. R. Civ. P. 

        9.12    Notices.    All notices hereunder shall be in writing and delivered by hand, by nationally-recognized delivery
service that guarantees overnight delivery, or by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows: 

	 
	 	 

	If to a Company, to:	 	Principal Financial Group, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: Karen E. Shaff

Executive Vice President and General Counsel

Facsimile No.: (515) 235-9852
	

If to Executive, to:	
 	

at his most recent home address or facsimile

number on file with the Company.

Either
party may from time to time designate a new address by notice given in accordance with this Section. Notice shall be effective when actually received by the addressee. 

        9.13    Counterparts.    This Agreement may be executed in multiple counterparts, each of which shall be deemed to be
an original, but all of which together will constitute one and the same instrument. 

        9.14    Captions.    The captions of this Agreement are not a part of the provisions hereof and shall have no force or
effect. 

        9.15    Entire Agreement.    This Agreement forms the entire agreement between the parties hereto with respect to the
subject matter contained in the Agreement and shall supersede all prior agreements, promises and representations regarding employment, compensation, severance or other payments contingent upon
termination of employment, whether in writing or otherwise. 

        9.16    Applicable Law.    This Agreement shall be interpreted and construed in accordance with the laws of the State
of Iowa, without regard to its choice of law principles. 

        9.17    Survival of Executive's Rights.    All of Executive's rights hereunder, including his rights to compensation
and benefits, and his obligations under Article VIII hereof, shall survive the termination of Executive's employment or the termination of this Agreement. 

        9.18    Joint and Several Liability.    The obligations of the Companies to Executive under this Agreement shall be
joint and several. 

241

 

        IN
WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. 

	 	 	EXECUTIVE
	

 	
 	

 	

/s/  LARRY D. ZIMPLEMAN      

	 	 	 	Larry D. Zimpleman
	

 	
 	

PRINCIPAL FINANCIAL GROUP, INC.
	

 	
 	

By:	

/s/  J. BARRY GRISWELL      
 J. Barry Griswell
	 	 	Its:	Chairman and Chief Executive Officer
	

 	
 	

PRINCIPAL LIFE INSURANCE COMPANY
	

 	
 	

By:	

/s/  J. BARRY GRISWELL      
 J. Barry Griswell
	 	 	Its:	Chairman and Chief Executive Officer
	

 	
 	

PRINCIPAL FINANCIAL SERVICES, INC.
	

 	
 	

By:	

/s/  J. BARRY GRISWELL      
 J. Barry Griswell
	 	 	Its:	Chairman and Chief Executive Officer

242

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EMPLOYMENT AGREEMENT

Article I. DEFINITIONS

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