Document:

exv10w2

 

GUARANTEE

     FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and in connection with
that certain funding agreement (the “Funding Agreement”), entered into by and between Principal
Life Insurance Company, an Iowa insurance company (“Principal Life”), and Principal Life Income
Fundings Trust 2006-43, a New York common law trust (the “Trust”), relating to the notes (the
“Notes”) issued by the Trust, Principal Financial Group, Inc., a Delaware corporation and the
indirect parent company of Principal Life (the “Guarantor”), hereby furnishes to the Trust its full
and unconditional guarantee of the Guaranteed Amounts (as hereinafter defined) as follows:

     1. Guarantee.

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

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

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

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

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

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

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

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

If to the Guarantor:

Principal Financial Group, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527

If to the Trust:

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

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c/o U.S. Bank Trust National Association

100 Wall Street, 16th Floor

New York, New York 10005

Attention: Thomas E. Tabor

Telephone: (212) 361-6184

Facsimile: (212) 809-5459

With a copy to:

Citibank, N.A.

Citibank Agency and Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

Attention: Nancy Forte

Telephone: (212) 816-5685

Facsimile: (212) 816-5527

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

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

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

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

	 	 	 
	PRINCIPAL FINANCIAL GROUP, INC.
	 
	 	 
	By:

	 	/s/ Elizabeth D. Swanson
	 

	 	 
	
Name:

	 	Elizabeth D. Swanson
	 

	 	 
	
Title:

	 	Counsel
	 

	 	 
	
Date:

	 	
The Effective Date (as defined in the Funding

Agreement)

Acknowledged and Agreed:

	 	 	 	 	 
	THE PRINCIPAL LIFE INCOME FUNDINGS

TRUST DESIGNATED IN THIS GUARANTEE	 	 
	 
	 	 	 	 
	By:	 	U.S. Bank Trust National Association,

not in its individual capacity, but solely in its

capacity as trustee
	 
	 	 	 	 
	By:	 	Bankers Trust Company, N.A.,

under Limited Power of Attorney, dated February 16, 2006
	 
	 	 	 	 
	By:

	 	/s/ Diana L. Cook	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Name:

	 	Diana L. Cook	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Title:

	 	Vice President	 	 
	 

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

4exv10w1

 

Exhibit 10.1

SEPARATION AGREEMENT

          This Separation Agreement is made as of June 30, 2006, by and among Richard Fritschi
(“Fritschi”), Zimmer Holdings, Inc. (“Zimmer Holdings”), and Zimmer GmbH (“Zimmer
GmbH”), a subsidiary of Zimmer Holdings. Zimmer Holdings and Zimmer GmbH, together with all of
their subsidiaries and affiliates worldwide, are sometimes collectively referred to herein as
“Zimmer”.

Recitals

          A. Fritschi has been an employee of Zimmer GmbH, most recently serving as President, Zimmer
Europe and Australasia. Zimmer GmbH and Fritschi are parties to the following agreements: (i)
Employment Contract, executed on or about September 10, 2004 (the “Employment Contract”),
and (ii) Confidentiality, Non-Competition and Non-Solicitation Employment Agreement, executed on or
about October 18, 2004 (the “Existing Non-Compete Agreement”). Additionally, Zimmer
Holdings and Fritschi are parties to three separate stock option award agreements, one of which was
executed in January 2004, and the other two of which were executed in January 2005 (collectively,
the “Stock Option Agreements”).

          B. On December 2, 2005, Zimmer GmbH notified Fritschi that it was exercising its right to
terminate his employment following the six-month notice period required by the Employment Contract.
Zimmer GmbH placed Fritschi on immediate garden leave (Freistellung) and notified him that the
effective date of the termination will be June 30, 2006 (the “Termination Effective Date”).
Zimmer GmbH and Fritschi executed a letter agreement on December 2, 2005 setting forth certain
mutual understandings concerning the notice of termination and garden leave arrangement.

          C. Solely in exchange for Fritschi’s agreement to enter into a new post-employment restrictive
covenant against competition, Zimmer is prepared to provide certain special compensation to
Fritschi. The parties mutually desire to enter into this Agreement to memorialize certain terms
and conditions that will be in effect for a period of time subsequent to the Termination Effective
Date.

Agreement

          In consideration of the foregoing and the following mutual undertakings, Fritschi and Zimmer
agree as follows:

     1. Recitals. The recitals set forth above are incorporated into and are a part of
this Agreement.

     2. Payments During the Garden Leave Period.

          (a) Throughout the balance of the current garden leave period concluding on the Termination
Effective Date, Zimmer GmbH will continue to pay to Fritschi his current monthly base salary,
monthly car allowance, and pro-rata target bonus amount for the 2006 calendar year pursuant to the
Zimmer Executive Performance Incentive Plan. In addition, during

 

 

the garden leave period, Fritschi is entitled to all contractual pension, insurance and
benefits contributions, and any other employment benefits required to be provided by Zimmer GmbH
under applicable Swiss law.

          (b) Fritschi acknowledges and agrees that Zimmer has fully satisfied (i) the incentive
compensation (i.e., bonus) payment obligations owed to Fritschi pursuant to the Zimmer Executive
Performance Incentive Plan for the 2005 fiscal year, and (ii) the year two bonus payment
obligations owed to Fritschi pursuant to the Zimmer Supplemental Performance Incentive Plan
relating to the Centerpulse integration. Fritschi acknowledges and agrees that, as a consequence
of his employment termination, he shall not be entitled to be considered for a year three (i.e.,
2006) payment under the Zimmer Supplemental Performance Incentive Plan.

     3. Vacation Pay. The parties agree that, during the six-month garden leave period
expiring on the Termination Effective Date, Fritschi has used (or shall use) a total of 35
previously accrued vacation days. After applying the 35 vacation days used during the garden leave
period, Zimmer GmbH shall make a cash payment to Fritschi in order to account for the balance of
accrued and unused vacation days, which payment shall be made on or about the Termination Effective
Date. Zimmer GmbH and Fritschi agree that, in accordance with the preceding sentence, Fritschi
shall receive cash compensation in the amount of CHF 224,587, which sum equals the base
compensation for 127 accrued and unused vacation days.

     4. Stock Options. All Zimmer Holdings stock options held by Fritschi shall vest and
become exercisable immediately, provided that Fritschi complies fully with the terms and conditions
of the Existing Non-Compete Agreement and New Non-Compete Agreement (as defined below). As of
March 7, 2006, pursuant to the Stock Option Agreements, Fritschi holds the following stock options
concerning Zimmer Holdings common stock:

	 	 	 	 	 	 	 	 	 	 	 
	Grant Date	 	Grant Type	 	Grant Price	 	 	Shares	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	1/14/2004

	 	2004 MSOP Grant
	 	$70.33 /share
	 	 	50,000	 	 	 
	1/18/2005

	 	2005 MSOP Grant
	 	$79.60 /share
	 	 	27,143	 	 	 
	1/18/2005

	 	2005 Performance Options
	 	$79.60 /share
	 	 	18,240	 	 	 

Fritschi may exercise any or all of the above-referenced stock options at any time between the
execution date of this Agreement and September 30, 2006. After September 30, 2006, any Zimmer
Holdings stock options that have not previously been exercised by Fritschi shall be canceled and
terminated.

     5. New Non-Compete Agreement and Additional Compensation Terms

          (a) On even date herewith, Fritschi, Zimmer Holdings and Zimmer GmbH have executed the new
Post-Employment Non-Disclosure, Non-Competition and Non-Solicitation Agreement attached hereto as
Attachment A, which is incorporated herein by reference and forms and integral part hereof
(the “New Non-Compete Agreement”). The parties acknowledge and agree that, effective as of
July 1, 2006, the New Non-Compete Agreement shall supersede and replace the Existing Non-Compete
Agreement in its entirety. Notwithstanding the foregoing, Zimmer may continue to enforce its
rights and remedies under

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and pursuant to the Existing Non-Compete Agreement for any violation which occurred on or
before June 30, 2006.

          (b) In consideration for Fritschi entering into the New Non-Compete Agreement, provided that
Fritschi complies fully with all of the covenants set forth in the New Non-Compete Agreement,
Zimmer will issue the following installment payments to Fritschi:

	 	 	 	 	 
	 	 	Payment Date	 	Payment Amount
	 
	 	 	 	 
	Installment 1

	 	January 1, 2007
	 	CHF 100,000.00
	Installment 2

	 	December 31, 2007
	 	CHF 150,000.00
	Installment 3

	 	June 30, 2008
	 	CHF 500,000.00

The foregoing sums shall be net payments to Fritschi and Zimmer shall be responsible for all
appropriate Swiss Social Security, pension and insurance payments relating to the foregoing three
installment payments. Except as expressly set forth in this Agreement, subsequent to the
Termination Effective Date, Zimmer shall have no further monetary obligations to or concerning
Fritschi. Income earned by Fritschi from other non-competitive activities during either the garden
leave period or the non-competition period set forth in the New Non-Compete Agreement will not
reduce the payment sums otherwise owing by Zimmer to Fritschi. In order for Zimmer to confirm that
Fritschi’s activities are non-competitive, Fritschi undertakes to notify Zimmer by e-mail
correspondence to Chad Phipps, Associate General Counsel & Secretary (or his successor), of the
sources of income and activities engaged in by Fritschi during the balance of the garden leave
period and the non-competition period. The foregoing sums shall also be due and owing in the event
of Fritschi’s death during the term of the New Non-Compete Agreement, provided that Fritschi was in
compliance with the terms of the New Non-Compete Agreement at the time of his death. In such
event, any remaining payments shall be delivered by Zimmer to Fritschi’s heirs in accordance with
the installment payment schedule set forth above.

     6. Release and Discharge and Covenant Not To Sue. By signing this Agreement, Fritschi
irrevocably and unconditionally releases and forever discharges Zimmer Holdings and Zimmer GmbH and
their respective successors, insurers, assigns, parent companies and subsidiaries, affiliated
entities, directors, officers, agents, employees and anyone acting for or on behalf of Zimmer
(collectively, the “Releasees”) from any and all actions, claims and liabilities, whether known or
unknown, arising out of or connected with any act, omission, or event occurring in whole or in part
on or before the date of this Agreement, including, but not limited to, any and all claims arising
from Fritschi’s employment with Zimmer or the termination of that employment, and including any
claims under Swiss employment laws. Fritschi also covenants not to sue any of the Releasees or
instigate or participate in any legal action against them. Fritschi agrees that he is not entitled
to, and waives any claim for, any payments, benefits or compensation of any kind, including, but
not limited to, under any Zimmer severance plan, except as expressly provided in this Agreement.
The parties acknowledge that they intend this release and covenant not to sue to be construed as
broadly as possible. Notwithstanding anything to the contrary stated herein, Fritschi does not
release any claims, nor does he covenant not to

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sue, on account of any violations by Zimmer of its obligations to Fritschi set forth in this
Agreement.

     7. Nondisparagement. Fritschi agrees that he will not make negative comments about or
otherwise disparage or try to injure the reputation of the Releasees. This obligation will include
refraining from negative statements about the Releasees, including their employees, directors,
officers, methods of doing business, management practices, the effectiveness of their policies, and
the quality of any of their services or products.

     8. Enforcement Remedies. In the event that a competent court of law has decided that
Fritschi has breached any provision of this Agreement or the terms of the Existing Non-Compete
Agreement on or before June 30, 2006 or the New Non-Compete Agreement from July 1, 2006 through
June 30, 2008, in addition to any other remedies set forth in the Existing Non-Compete Agreement
and the New Non-Compete Agreement and all other relief to which Zimmer may be entitled under law or
in equity, Fritschi and Zimmer agree that Fritschi shall forfeit the right to receive the payments
described under Section 5(b) above and Fritschi shall refund to Zimmer any sums previously paid by
Zimmer to Fritschi under said Section 5(b). In addition, Zimmer shall be entitled to recover from
Fritschi all litigation costs and attorneys’ fees incurred by Zimmer in any action or proceeding
relating to this Agreement, the Existing Non-Compete Agreement and/or the New Non-Compete
Agreement, in which Zimmer prevails.

     9. Knowledge and Voluntariness. Fritschi acknowledges that Zimmer provided him ample
time to review this Agreement and consult with an attorney of his choosing if he deems it advisable
to do so before signing this Agreement. He further agrees that he understands the meaning of this
Agreement, including the fact that he is releasing the Releasees from any and all claims that exist
as of the date of this Agreement, and that he voluntarily is entering into this Agreement.

     10. Non-Admission. Neither this Agreement nor any action pursuant to it constitutes
an admission by any of the Releasees of any liability to Fritschi arising under any employment or
other laws, and the Releasees specifically deny any such liability.

     11. Binding Agreement. This Agreement shall be binding upon Fritschi and Zimmer, and
upon Zimmer’s successors, and shall inure to the benefit of Fritschi and Zimmer, and to Zimmer’s
successors. For purposes of Section 5(b), this Agreement shall inure to the benefit of Fritschi’s
heirs.

     12. Language Construed as a Whole. The language of this Agreement shall in all cases
be construed as a whole, according to its fair meaning, and not strictly for or against either of
the parties.

     13. Governing Law and Jurisdiction. This Agreement, including the jurisdiction
clause, shall be governed by, interpreted and construed in accordance with the substantive laws of
Switzerland. Exclusive jurisdiction for all disputes arising out of or in connection with this
Agreement shall be with the ordinary courts of Zurich 1.

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     14. Entire Agreement. This Agreement, including the New Non-Compete Agreement
attached as Attachment A, sets forth the entire agreement between the parties with regard
to the subject matter hereof.

     15. Modification. This Agreement may not be amended, supplemented or modified except
by written instrument signed by Fritschi and a duly-authorized officer of Zimmer Holdings and
Zimmer GmbH. No waiver of any violation or non-performance of this Agreement in one instance shall
be deemed to be a waiver of any violation or non-performance in any other instance. All waivers
must be in writing.

     16. Severability. Should any clause, portion or paragraph of this Agreement be
declared by any court of competent jurisdiction to be unenforceable, invalid or illegal for any
reason, it shall not affect the enforceability, validity or legality of the remainder of this
Agreement so long as the economic or legal substance contemplated by this Agreement is not affected
in any manner materially adverse to any party.

     17. Publicity. The parties acknowledge and understand that Zimmer Holdings is
obligated to furnish this Agreement as an exhibit to a Form 8-K current report submitted to the
United States Securities and Exchange Commission.

     IN WITNESS WHEREOF, Fritschi, Zimmer Holdings and Zimmer GmbH each have executed this
Separation Agreement as of the date set forth below.

	 	 	 	 	 
	 	 	 
	 	/s/ RICHARD FRITSCHI
 	 
	 	RICHARD FRITSCHI 	 
	 	 	 
	 
	 	ZIMMER HOLDINGS, INC.

 	 
	 	By:  	/s/ J. RAYMOND ELLIOTT
 	 
	 	 	Name:  	J. Raymond Elliott 	 
	 	 	Title:  	Chairman, President & CEO 	 
	 
	 	ZIMMER GmbH

 	 
	 	By:  	/s/ ROLAND DIGGELMANN
 	 
	 	 	Name:  	Roland Diggelmann 	 
	 	 	Title:  	Sr. VP, Sales & Distribution, Europe & MEA 	 
	 

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