exv10w4



 





Exhibit 10.4




EXPENSE AND INDEMNITY AGREEMENT




     This Expense and Indemnity Agreement (this “Agreement”) is entered into as of                     ,
2007, by and between Principal Life Insurance Company, an Iowa life insurance company (“Principal
Life”), and Bankers Trust Company, N.A., as custodian (the “Custodian”).



     WHEREAS, in consideration of the Custodian providing services to each Trust created in
connection with the Program and pursuant to the Program Documents, Principal Life hereby agrees to
the following compensation arrangements and terms of indemnity.



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



ARTICLE I

DEFINITIONS




          Section 1.01. Definitions. All capitalized terms not otherwise defined herein will
have the meanings set forth in the Standard Indenture Terms attached as Exhibit 4.1 to
Registration Statement on Form S-3 (File Nos.                      and 333-                    ) filed with the Securities
and Exchange Commission by Principal Life and Principal Financial Group, Inc. on                     , 2007,
as may be amended. The following terms, as used herein, have the following meanings:




     “Excluded Amounts” means (i) any obligation of any Trust to make any payment to any
Holder in accordance with the terms of the applicable Indenture or such Trust’s Notes, (ii) any
obligation or expense of any Trust to the extent that such obligation or expense has actually been
paid utilizing funds available to such Trust from payments under the applicable Funding Agreement
or the Guarantee, (iii) any cost, loss, damage, claim, action, suit, expense, disbursement, tax,
penalty or liability of any kind or nature whatsoever resulting from or relating to any insurance
regulatory or other governmental authority asserting that: (a) any Trust’s Notes are, or are deemed
to be, (1) participations in the applicable Funding Agreement or (2) contracts of insurance, or (b)
the offer, purchase, sale and/or transfer of any Trust’s Notes and/or the pledge and collateral
assignment of the applicable Funding Agreement by any Trust to the Indenture Trustee on behalf of
the Holders of such Trust’s Notes (1) constitutes the conduct of the business of insurance or
reinsurance in any jurisdiction or (2) requires such Trust or any Holder of such Trust’s Notes to
be licensed as an insurer, insurance agent or broker in any jurisdiction, (iv) any cost, loss,
damage, claim, action, suit, expense, disbursement, tax, penalty or liability of any kind or nature
whatsoever imposed on the Custodian that results from the bad faith, misconduct or negligence of
the Custodian, (v) any costs and expenses attributable solely to the Custodian’s administrative
overhead unrelated to the Program, (vi) any tax imposed on fees paid to the Custodian, (vii) any
withholding taxes imposed on or with respect of payments made under the applicable Funding
Agreement, the applicable Indenture or a Trust’s Note and (viii) any Additional Amounts paid to any
Holder.



     “Fees” means the fees agreed to between Principal Life and the Custodian as set forth
in the fee schedule attached as Exhibit A to this Agreement.



 









 





     “Obligation” means any and all (i) costs and expenses reasonably incurred (including
the reasonable fees and expenses of counsel), relating to the offering, sale and issuance of the
Notes by each Trust under the Program and (ii) costs, expenses and taxes of each Trust; provided,
however, that Obligations do not include Excluded Amounts.



ARTICLE II

SERVICES AND FEES




     Section 2.01 Fees. Principal Life hereby agrees to pay the Custodian its Fees.



     Section 2.02 Payment of Obligations. (a) In the event that the Custodian delivers
written notice and evidence, reasonably satisfactory to Principal Life, of any Obligation of the
Custodian, Principal Life shall, upon receipt of such notice, promptly pay such Obligation. Notice
of any Obligation (including any invoices) should be sent to Principal Life at its address set
forth in Section 4.04, or at such other address as such party shall hereafter furnish in writing.



     (b) The Custodian will (i) from time to time execute all such instruments and other agreements
and take all such other actions as may be necessary or desirable, or that Principal Life may
reasonably request, to protect any interest of Principal Life with respect to any Obligation or to
enable Principal Life to exercise or enforce any right, interest or remedy it may have with respect
to any such Obligation, and (ii) release to Principal Life any amount received from Principal Life
relating to any Obligation or any portion of any Obligation, immediately after any such amount
relating to such Obligation, or any portion of any such Obligation, is otherwise received by the
Custodian from a party other than Principal Life.



     (c) Principal Life and the Custodian hereby agree that all payments due under this Agreement
in respect of any Obligation shall be effected, and any responsibility of Principal Life to pay
such Obligation pursuant to this Agreement shall be discharged, by the payment by Principal Life to
the account of the person to whom such Obligation is owed.



ARTICLE III

INDEMNIFICATION




     Section 3.01 Subject to the remaining sections of this Article III, Principal Life covenants
to fully indemnify and defend the Custodian and its officers, directors and employees (each, an
“Indemnified Person”) for, and to hold them harmless against, any and all loss, liability, claim,
damage or reasonable expense (including the reasonable compensation, expenses and disbursements of
its counsel) arising out of the acceptance by the Custodian, in its capacity as Custodian, of the
performance of its duties and/or the exercise of its respective rights under the applicable Trust
Agreement, including the costs and expenses of defending itself against or investigating any claim
of liability in the premises, except to the extent such loss, liability, claim, damage or expense
arises out of or is related to the bad faith, misconduct or negligence of the Custodian.
Notwithstanding anything to the contrary, Principal Life shall have no obligation to indemnify or
defend the Custodian for any loss, liability, claim, damage or expense relating to (i) any costs
and expenses attributable solely to the Custodian’s administrative overhead unrelated to the
Program or (ii) any tax imposed on the Fees paid to the Custodian.



 









 





     Section 3.02 The indemnification provided for herein supersedes in all respects any
indemnification provision contained in any other Program Document or any other agreement relating
to the Program to which the Custodian is or becomes a party.



     Section 3.03 An Indemnified Person shall give prompt written notice to Principal Life of any
action, suit or proceeding commenced or threatened against the Indemnified Person. In case any
such action, suit or proceeding shall be brought involving an Indemnified Person, Principal Life
may, in its sole discretion, elect to assume the defense of the Indemnified Person, and if it so
elects, Principal Life shall, in consultation with such Indemnified Person, select counsel,
reasonably acceptable to the Indemnified Person, to represent the Indemnified Person and pay the
reasonable fees and expenses of such counsel. In any such action, investigation or proceeding, the
Indemnified Person shall have the right to retain its own counsel but Principal Life shall not be
obligated to pay the fees and disbursements of such counsel unless (i) Principal Life and the
Indemnified Person shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such action, investigation or proceeding (including any impleaded parties) include
both Principal Life and the Indemnified Person and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests between them. It is
understood that Principal Life shall not, in connection with any proceeding or related proceeding
in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Indemnified Persons.



     Section 3.04 If the indemnification provided for herein is invalid or unenforceable in
accordance with its terms, then Principal Life shall contribute to the amount paid or payable by an
Indemnified Person as a result of such liability in such proportion as is appropriate to reflect
the relative benefits received by Principal Life, on one hand, and the Custodian, on the other
hand, from the transactions contemplated by the Program Documents. For this purpose, the benefits
received by Principal Life shall be the aggregate value of the relevant Collateral, and the
benefits received by the Custodian shall be the Fees it has been paid up to that point, as the
Custodian, less costs and unreimbursed expenses incurred by it, as Custodian, in relation to such
Collateral. If, however, the allocation provided by the immediately preceding two sentences is not
permitted by applicable law, then Principal Life shall contribute to such amount paid or payable by
the Indemnified Person in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of Principal Life, on the one hand, and the Custodian, on the
other hand, in connection with the actions or omissions which resulted in such liability, as well
as any other relevant equitable considerations.



     Section 3.05 Principal Life shall be subrogated to any right of the Indemnified Person in
respect of the matter as to which any indemnity was paid hereunder.



     Section 3.06 The Indemnified Person may not settle any action, investigation or proceeding
without the consent of Principal Life, not to be unreasonably withheld.



     Section 3.07 Notwithstanding any provision contained herein to the contrary, the obligations
of Principal Life under this Article III to any Indemnified Person shall survive the termination of
this Agreement pursuant to Section 4.03.



 









 





ARTICLE IV

MISCELLANEOUS




     Section 4.01 No waiver, modification or amendment of this Agreement shall be valid unless
executed in writing by the parties hereto.



     Section 4.02 This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without regard to conflicts of laws principles.



     Section 4.03 This Agreement shall terminate and be of no further force and effect upon the
date on which (i) there is no Obligation due and payable under this Agreement and (ii) each Program
Document has terminated; provided, however, that this Agreement shall continue to be effective or
shall be reinstated, as the case may be, if at any time the Custodian must restore payment of any
sums paid under any Obligation or under this Agreement for any reason whatsoever. This Agreement
is continuing, irrevocable, unconditional and absolute.



     Section 4.04 All notices, demands, instructions and other communications required or permitted
to be given to or made upon either party hereto shall be in writing (including by facsimile
transmission) and shall be personally delivered or sent by guaranteed overnight delivery or by
facsimile transmission (to be followed by personal or guaranteed overnight delivery) and shall be
deemed to be given for purposes of this Agreement on the day that such writing is received by the
intended recipient thereof in accordance with the provisions of this Section. Unless otherwise
specified in a notice sent or delivered in accordance with the foregoing provisions of this
Section, notices, demands, instructions and other communications in writing shall be given to or
made upon the respective parties thereto at their respective addresses (or their respective
facsimile numbers) indicated below:


To the Custodian:



Bankers Trust Company, N.A.

453 7th Street

Des Moines, Iowa  50309-2728

Attention: Diana L. Cook

Telephone: (515) 245-2418

Facsimile: (515) 247-2101



To Principal Life:



Principal Life Insurance Company

711 High Street

Des Moines, IA 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011




 









 







Principal Life Insurance Company

711 High Street

Des Moines, IA 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527




     Section 4.05 On or before March 1 of each calendar year, the Custodian shall provide to
Principal Life, as exhibits to each Trust’s Annual Report on Form 10-K, for the period ending
December 31 of the prior year, (each a “10-K”) filed on behalf of each such Trust by Principal Life
under the Securities Exchange Act of 1934, as amended, (i) a report regarding its assessment of
compliance (the “Assessment of Compliance”) with the servicing criteria set forth in Item
1122(d)(4)(ii) of Regulation AB (17 CFR 229.1100-1123 (“Regulation AB”) (the “Applicable Servicing
Criteria”), complying with Item 1122(a) of Regulation AB and (ii) at Principal Life’s expense, an
attestation report issued by a registered public accounting firm (the “Attestation Report”) on the
Custodian’s assessment of compliance with the Applicable Servicing Criteria, complying with Item
1122(b) of Regulation AB. Principal Life shall cause the Assessment of Compliance and the
Attestation Report to be filed as exhibits to each Trust’s 10-K.



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     IN WITNESS WHEREOF, the parties have executed this Expense and Indemnity Agreement by their
duly authorized officers as of the date hereof.



	 	 	 	 	 	 	 
	 	 	PRINCIPAL LIFE INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	BANKERS TRUST COMPANY, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 






 









 





EXHIBIT A




FEES