<PAGE>
                                                                     EXHIBIT 4.6

                              STANDARD TRUST TERMS

                                 WITH RESPECT TO

                      PRINCIPAL LIFE INCOME FUNDINGS TRUSTS

                               DATED AS OF o, 2003





<PAGE>


                                TABLE OF CONTENTS


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                                                 ARTICLE 1
                                                DEFINITIONS

Section 1.01.  Definitions...............................................................................1
Section 1.02.  Usage of Terms............................................................................3
Section 1.03.  Section References........................................................................3

                                                 ARTICLE 2
                                             CREATION OF TRUST

Section 2.01.  Name of the Trust.........................................................................3
Section 2.02.  Office of the Trustee; Principal Place of Business........................................3
Section 2.03.  Appointment of Trustee....................................................................3
Section 2.04.  Trust Beneficial Interest.................................................................4
Section 2.05.  Issuance of the Notes.....................................................................4
Section 2.06.  Acquisition of Funding Agreement and Guarantee............................................4
Section 2.07.  Security Interest in the Collateral.......................................................4
Section 2.08.  Purposes of the Trust.....................................................................4
Section 2.09.  Title to Collateral.......................................................................5
Section 2.10.  Allocation of Trust Expenses..............................................................5
Section 2.11.  Liability.................................................................................5
Section 2.12.  Income Tax Treatment; Tax Returns and Reports.............................................5
Section 2.13.  Situs of Trust............................................................................5

                                                 ARTICLE 3
                                              PAYMENT ACCOUNT

Section 3.01.  Payment Account...........................................................................6

                                                 ARTICLE 4
                                             TRUST SECURITIES

Section 4.01.  Initial Ownership.........................................................................7
Section 4.02.  Notes.....................................................................................7
Section 4.03.  Registration of Transfer of Trust Beneficial Interest.....................................7
Section 4.04.  Persons Deemed Holders of Trust Securities................................................7
Section 4.05.  Maintenance of Office.....................................................................7
Section 4.06.  Ownership of the Trust Beneficial Interest................................................7
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                                        i
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                                TABLE OF CONTENTS
                                   (Continued)

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                                                 ARTICLE 5
                                      REPRESENTATIONS AND WARRANTIES

Section 5.01.  Trustee...................................................................................8
Section 5.02.  Trust Beneficial Owner....................................................................9

                                                 ARTICLE 6
                                                  TRUSTEE

Section 6.01.  General Authority.........................................................................9
Section 6.02.  General Duties...........................................................................14
Section 6.03.  Specific Duties..........................................................................14
Section 6.04.  Acceptance of Trust and Duties; Limitation on Liability..................................14
Section 6.05.  Reliance; Advice of Counsel..............................................................18
Section 6.06.  Delegation of Authorities and Duties.....................................................18

                                                 ARTICLE 7
                                        LIQUIDATION AND TERMINATION

Section 7.01.  Termination Upon the Trust Expiration Date...............................................18
Section 7.02.  Termination of Agreement.................................................................18
Section 7.03.  Liquidation..............................................................................19

                                                 ARTICLE 8
                                     SUCCESSOR AND ADDITIONAL TRUSTEES

Section 8.01.  Eligibility Requirements for the Trustee.................................................19
Section 8.02.  Resignation or Removal of the Trustee....................................................20
Section 8.03.  Successor Trustee........................................................................20
Section 8.04.  Merger or Consolidation of Trustee.......................................................21
Section 8.05.  Appointment of Co-Trustee or Separate Trustee............................................21
Section 8.06.  Trustee May Own Notes....................................................................22

                                                 ARTICLE 9
                                 VOTING; ACTS OF SECURITYHOLDERS; MEETINGS

Section 9.01.  Limitations on Voting Rights.............................................................23
Section 9.02.  Meetings of the Trust Beneficial Owner...................................................23

                                                ARTICLE 10
                                         MISCELLANEOUS PROVISIONS

Section 10.01.  Limitation on Rights of Securityholders.................................................23
Section 10.02.  Amendment...............................................................................24
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                                       ii
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                                TABLE OF CONTENTS
                                   (Continued)

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Section 10.03.  Notice..................................................................................25
Section 10.04.  No Recourse.............................................................................26
Section 10.05.  No Petition.............................................................................26
Section 10.06.  Governing Law...........................................................................26
Section 10.07.  Severability............................................................................26
Section 10.08.  Trust Securities Nonassessable and Fully Paid...........................................26
Section 10.09   Third-Party Beneficiaries...............................................................26
</Table>



                                       iii
<PAGE>

                              STANDARD TRUST TERMS

         This document constitutes the Standard Trust Terms, dated as of o,
2003, which will be incorporated by reference in the Trust Agreement (specified
in Section A of the Omnibus Instrument, as defined in the Indenture (as defined
below)) between U.S. Bank Trust National Association, a national banking
association, as trustee, (the "Trustee"), and GSS Holdings II, Inc., a Delaware
corporation, as trust beneficial owner (the "Trust Beneficial Owner").

         These Standard Trust Terms shall be of no force and effect unless and
until incorporated by reference in, and then only to the extent not modified by,
such Trust Agreement.

         The following terms and provisions shall govern the activities of the
Trust (as defined in the Indenture) subject to contrary terms and provisions
expressly adopted in such Trust Agreement, which contrary terms shall be
controlling.

                                   WITNESSETH:

         WHEREAS, the Trustee and the Trust Beneficial Owner desire to establish
a trust for the purpose of issuing Notes (as defined in the Indenture) to
investors which will be secured, and payments with respect to which will be
funded, solely by the assets held in the Trust, and the proceeds of which will
be used to purchase the Funding Agreement (as defined in the Indenture), issued
by Principal Life (as defined in the Indenture), the payment obligations of
which will be fully and unconditionally guaranteed by the Guarantee (as defined
in the Indenture).

         NOW, THEREFORE, it being the intention of the parties hereto that the
Trust Agreement (as defined below) constitutes the governing instrument of the
Trust, the Trustee and the Trust Beneficial Owner agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         Section 1.01 Definitions. All capitalized terms not otherwise defined
herein will have the meanings set forth in the Indenture. The following terms
have the meanings set forth below:

         "Corporate Trust Office" means the office of the Trustee located at 100
Wall Street, 16th Floor, New York, New York 10005.

         "Funding Agreement Event of Default" means an "Event of Default" as
defined in the Funding Agreement.



                                       1
<PAGE>

         "Indenture" means that certain Indenture dated as of the date specified
in the Omnibus Instrument, by and among the Trust and the Indenture Trustee,
Registrar, Transfer Agent, Paying Agent and Calculation Agent, as may be
amended, modified or supplemented from time to time.

         "Payment Account" means each segregated non-interest-bearing corporate
trust account for the Trust maintained by the Trustee in its trust department in
which all amounts paid to the Trustee in respect of the Collateral will be held
and from which the Trustee shall make payments pursuant to Section 3.01(b) and
Article 7, to the extent such amounts are paid to the Trustee and deposited in
the Payment Account.

         "Registrar" has the meaning specified in Section 4.03.

         "Securities Register" has the meaning specified in Section 4.03.

         "Securityholder" means each Person in whose name any Trust Security is
registered in the Securities Register or Register.

         "Standard Trust Terms" means these Standard Trust Terms, dated as of
__, 2003.

         "Standing Order" has the meaning set forth in Section 3.01(d).

         "Trust Agreement" means that certain Trust Agreement dated as of the
date specified in the Omnibus Instrument, by and between the Trustee and the
Trust Beneficial Owner, as may be amended, modified or supplemented from time to
time, which incorporates by reference these Standard Trust Terms.

         "Trust Beneficial Interest" means the undivided beneficial interest in
the assets held in the Trust, having such rights as provided for in the Trust
Agreement.

         "Trust Beneficial Owner" means the Person identified as the "Trust
Beneficial Owner" in the preamble to the Trust Agreement, in its capacity as the
sole beneficial owner of the Trust.

         "Trust Expenses" means any liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to the Trust.

         "Trust Expiration Date" means the date specified in the Pricing
Supplement or such earlier date as all of the outstanding Notes are redeemed or
repaid in full by the Trust.

         "Trust Security" means a Note or the Trust Beneficial Interest.



                                       2
<PAGE>

         "Trustee" means the party named as such in the preamble to the Trust
Agreement and shall also include its permitted successors and assigns, or any
successor Trustee appointed, acting not in its individual capacity but solely as
Trustee under the Trust Agreement. If there shall be at any time more than one
Trustee hereunder, "Trustee" shall mean each such Trustee.

         Section 1.02 Usage of Terms. With respect to all terms used in these
Standard Trust Terms, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
"writing" include printing, typing, lithography, facsimile, electronic
transmissions and other means of reproducing words in a visible form; references
to agreements and other contractual instruments include all subsequent
amendments hereto or changes herein entered into in accordance with their
respective terms and not prohibited by the Trust Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."

         Section 1.03 Section References. All references to Articles, sections,
paragraphs, subsections, exhibits and schedules shall be to such portions of
these Standard Trust Terms unless otherwise expressly provided.

                                    ARTICLE 2
                                CREATION OF TRUST

         Section 2.01 Name of the Trust. The Trust created under the Trust
Agreement shall have the name specified in the Omnibus Instrument. The Trust's
activities shall be conducted under the name of the Trust.

         Section 2.02 Office of the Trustee; Principal Place of Business. The
principal office of the Trust shall be in care of the Trustee at the Corporate
Trust Office, or such other address in the State of New York as the Trustee may
designate by written notice to the Trust Beneficial Owner, the Indenture Trustee
and the Ratings Agencies.

         Section 2.03 Appointment of Trustee. The parties to the Trust Agreement
hereby appoint the Trustee as trustee of the Trust, to have all rights, powers
and duties set forth in the Trust Agreement and in accordance with the
applicable law with respect to accomplishing the purposes of the Trust.



                                       3
<PAGE>

         Section 2.04 Trust Beneficial Interest. Contemporaneously with the
execution and delivery of the Trust Agreement, the Trustee, on behalf of the
Trust, shall cause the Trust Beneficial Owner to be recorded as the registered
owner of the Trust Beneficial Interest on the Securities Register, against
payment of $15 (multiplied by the issue price of the Notes in the case of Notes
that are discount notes) by the Trust Beneficial Owner to, or to an account at
the direction of, the Trustee.

         Section 2.05 Issuance of the Notes. Promptly following the execution
and delivery of the Trust Agreement, the Trust shall, in accordance with the
Indenture, issue and deliver or cause to be issued and delivered the aggregate
principal amount of the Notes specified in the Pricing Supplement or supplement
to the Indenture against payment therefor. The Holders of the Notes shall only
have a right to receive payments from the Collateral as described in the
Indenture and shall have no right to receive payments under the assets held in
any other trust organized under the Program.

         Section 2.06 Acquisition of Funding Agreement and Guarantee.
Contemporaneously with the issuance and delivery of the Notes, the Trust shall
acquire the Funding Agreement and the Guarantee.

         Section 2.07 Security Interest in the Collateral. Contemporaneously
with the issuance and delivery of the Notes, pursuant to the Indenture, the
Trust shall collaterally assign the Funding Agreement and Guarantee to the
Indenture Trustee, for the benefit of the Holders of the Notes, and grant to the
Indenture Trustee, for the benefit of the Holders of the Notes, a first priority
perfected security interest in and to the Collateral, including, without
limitation, the Funding Agreement purchased by the Trust and the Guarantee.

         Section 2.08 Purposes of the Trust. The exclusive purposes and
functions of the Trust are (a) to issue and sell the Notes and the Trust
Beneficial Interest, (b) to use the proceeds of the sale of the Notes and the
Trust Beneficial Interest to acquire the Funding Agreement, (c) to collaterally
assign and grant a security interest in the Funding Agreement in favor of the
Indenture Trustee, (d) to acquire the Guarantee and to collaterally assign and
grant a security interest in the Guarantee in favor of the Indenture Trustee,
(e) to pay amounts due in respect of the Notes and the Trust Beneficial
Interest, (f) to enter into the agreements and to take such actions as the
Trustee has the power and authority to take pursuant to Section 6.01, as
applicable, and (g) to engage in those activities necessary, advisable or
incidental thereto (such as registering the transfer of the Trust Securities).



                                       4
<PAGE>

         Section 2.09 Title to Collateral. Legal title to the Collateral shall
be vested at all times in the Trust as a separate legal entity and shall be held
and administered by the Trustee for the benefit of the Trust and each
Securityholder, except that with respect to the Funding Agreement and the
Guarantee collaterally assigned to the Indenture Trustee, legal title to the
Funding Agreement and the Guarantee shall be recorded at all times in the books
and records of Principal Life and PFG, respectively, in the name of the
Indenture Trustee, for the benefit of the Holders.

         Section 2.10 Allocation of Trust Expenses. Any costs and expenses of
the Trust shall be paid by Principal Life pursuant to the applicable Expense and
Indemnity Agreement to the extent provided therein.

         Section 2.11 Liability. None of the Trustee or the Securityholders
shall have any personal liability for any liability or obligation of the Trust.

         Section 2.12 Income Tax Treatment; Tax Returns and Reports.

         (a) The Trust and the Trust Beneficial Interest Owner agree, and by
acceptance of a beneficial interest in a Note each holder of a beneficial
interest in a Note agrees, for U.S. federal, state and local income and
franchise tax purposes, to treat (i) the Trust as a separate grantor trust, (ii)
such Note as an ownership interest in such grantor trust and (iii) the Funding
Agreement as debt of Principal Life.

         (b) The Trustee shall prepare, file and sign or cause to be prepared,
filed and signed, consistent with the treatment of the Trust as a grantor trust,
all federal, state and local income tax and information returns and reports
required to be filed with respect to the Trust and the Notes under any
applicable federal, state or local tax statute or any rule or regulation under
any of them. The Trustee shall keep copies or cause copies to be kept of the tax
and information returns (including Internal Revenue Service Form 1041).

         Section 2.13 Situs of Trust. The Trust shall be located in the
jurisdiction set forth in the Trust Agreement. All bank accounts maintained by
the Trustee on behalf of the Trust shall be located in such jurisdiction except
that those accounts established under the Indenture shall be maintained with the
Indenture Trustee in accordance with the Indenture. The Trust shall not have any
employees in any jurisdiction other than in such jurisdiction. Except as set
forth in the Program Documents, payments will be received by the Trust only in
such jurisdiction and payments will be made by the Trust only from such
jurisdiction.



                                       5
<PAGE>
                                    ARTICLE 3
                                 PAYMENT ACCOUNT

         Section 3.01 Payment Account.

         (a) On the Original Issue Date, the Trustee shall establish a Payment
Account. The Trustee and any agent of the Trustee shall have exclusive control
and sole right of withdrawal with respect to the Payment Account for the purpose
of making deposits in and withdrawals from the Payment Account in accordance
with the Trust Agreement and the Indenture. Subject to the Indenture, all monies
or other property received by the Trustee on behalf of the Trust in respect of
the Collateral will be deposited in the Payment Account. All monies and other
property deposited or held from time to time in the Payment Account shall be
held by the Trustee in the Payment Account for the exclusive benefit of the
Trust Beneficial Owner, subject to the security interest in the Collateral in
favor of the Indenture Trustee on behalf of the Holders of the Notes, and for
distribution by the Trustee as provided in the Trust Agreement, including (and
subject to) any priority of payments provided for in the Trust Agreement.

         (b) Except for payments made on the Trust Expiration Date or otherwise
pursuant to Section 7.03 and subject to Section 3.01(a), all monies and other
property deposited into the Payment Account shall be distributed by the Trust as
follows:

         first, to the Indenture Trustee for the payment of all amounts then due
and unpaid upon the Notes, if any, in accordance with the Indenture; and

         second, to the Trust Beneficial Owner all of the amounts that would be
payable under clause first of Section 5.02 of the Indenture to the Trust
Beneficial Owner if the Trust Beneficial Owner held a Note with an original
principal amount of $15 (multiplied by the issue price of the Notes in the case
of Notes that are discount notes).

         Any remaining monies and other property deposited into the Payment
Account shall be distributed ratably in proportion to their original principal
amounts to the Holders last noted in the Register as the Holders of the Notes
and the Trust Beneficial Owner (as if the Trust Beneficial Owner held a Note
with an original principal amount of $15 (multiplied by the issue price of the
Notes in the case of Notes that are discount notes)).

         (c) The Trustee shall deposit in the Payment Account, promptly upon
receipt, any payments received with respect to the Collateral. Amounts held in
the Payment Account shall not be invested by the Trustee pending the
distribution of such amounts to cover the Trust's obligations on the Notes or
the Trust Beneficial Interest.

         (d) Notwithstanding anything herein to the contrary, the Trustee, on
behalf of the Trust, shall issue a standing order (the "Standing Order") to the
Indenture Trustee pursuant to which the Indenture Trustee shall distribute all
amounts due and unpaid under



                                       6
<PAGE>
Section 3.01(b). For so long as (i) the Trustee, on behalf of the Trust, has not
rescinded the Standing Order and (ii) the Indenture Trustee is able to, and
does, comply with the Standing Order, the Trustee will not be required to
establish a Payment Account in accordance with Section 3.01.

                                    ARTICLE 4
                                TRUST SECURITIES

         Section 4.01 Initial Ownership. Upon the creation of the Trust, the
Trust Beneficial Owner shall be the sole beneficial owner of such Trust.

         Section 4.02 Notes.

         The Notes will be issued pursuant to and be governed by the Indenture.

         Section 4.03 Registration of Transfer of Trust Beneficial Interest.

         (a) The Trustee or its agent (in this capacity, the "Registrar") shall
maintain a register or registers for the Trust for the purpose, subject to
Section 4.06, of registering the transfer of the Trust Beneficial Interest and
Notes (a "Securities Register").

         (b) The Registrar shall not be required to register the transfer of the
Trust Beneficial Interest in any manner inconsistent with the terms of the Trust
Agreement or the Indenture.

         Section 4.04 Persons Deemed Holders of Trust Securities. The Trustee
and the Registrar shall treat the Person in whose name any Trust Beneficial
Interest is registered as the owner of such Trust Beneficial Interest for all
purposes whatsoever, and none of the Trustee and the Registrar shall be bound by
any notice to the contrary. The Trustee shall treat the Person determined in
accordance with Section 2.11 of the Indenture as the owner of the applicable
Note(s) for all purposes whatsoever, and the Trustee shall not be bound by any
notice to the contrary.

         Section 4.05 Maintenance of Office. Subject to the provisions of the
Indenture, the Trustee shall maintain an office or offices where notices and
demands to or upon the Trustee in respect of the Trust Securities may be served.
The Trustee initially designates its Corporate Trust Office as the office for
such purposes. The Trustee shall give prompt written notice to the Trust
Beneficial Owner and the Indenture Trustee of any change in the location of the
register or any office or agency.

         Section 4.06 Ownership of the Trust Beneficial Interest. On the
Original Issue Date, the Trust Beneficial Owner shall acquire and, thereafter,
retain beneficial and record ownership of the Trust Beneficial Interest. The
Trust Beneficial Interest shall not be certificated. To the fullest extent
permitted by law, any attempted transfer of the Trust Beneficial Interest shall
be void.



                                       7
<PAGE>

                                    ARTICLE 5
                         REPRESENTATIONS AND WARRANTIES

         Section 5.01 Trustee. The Trustee represents and warrants for the
benefit of the Securityholders as follows:

         (a) it is a national banking association duly organized, validly
existing and in good standing under the laws of the United States and it is a
"bank" within the meaning of Section 581 of the Code;

         (b) it is a "United States person" within the meaning of Section
7701(a)(30) of the Code;

         (c) it has full corporate or other power, authority and legal right to
execute, deliver and perform its obligations under the Trust Agreement and has
taken all necessary action to authorize the execution, delivery and performance
by it of the Trust Agreement;

         (d) the Trust Agreement has been duly authorized, executed and
delivered by it and constitutes the valid and legally binding agreement of it
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity;

         (e) neither the execution or delivery by it of the Trust Agreement, nor
the performance by it of its obligations under the Trust Agreement, will (i)
violate its organizational documents, (ii) violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of any Lien on any properties or assets held in
the Trust pursuant to the provisions of, any indenture, mortgage, credit
agreement, license or other agreement or instrument to which it is a party or by
which it is bound which would materially and adversely affect the Trust, or
(iii) violate any law, governmental rule or regulation of the United States
governing the banking, trust or general powers of it or any order, judgment or
decree applicable to it;

         (f) the authorization, execution or delivery by it of the Trust
Agreement and the consummation of any of the transactions by it contemplated by
the Trust Agreement do not require the consent or approval of, the giving of
notice to, the registration with or the taking of any other action with respect
to any governmental authority or agency; and

         (g) there are no proceedings pending or, to the best of its knowledge,
threatened against or affecting it in any court or before any governmental
authority, agency or arbitration board or tribunal which, individually or in the
aggregate, would materially and adversely affect the Trust or would question the
right, power and authority of it to enter into or perform its obligations under
the Trust Agreement.



                                       8
<PAGE>

         Section 5.02 Trust Beneficial Owner. The Trust Beneficial Owner hereby
represents and warrants that, to the fullest extent permitted by law, it has
irrevocably waived any right or interest it may have under the Trust Agreement,
by operation of law or equity, to direct or otherwise require the Trustee to
initiate or consent to any bankruptcy, insolvency or receivership proceedings,
it being expressly understood that any such action by the Trustee shall be
undertaken or refrained from, in the Trustee's sole and absolute discretion,
without regard to any rights or interests of the Trust Beneficial Owner.

                                    ARTICLE 6
                                     TRUSTEE

         Section 6.01 General Authority.

         (a) The Trustee shall conduct the affairs of the Trust in accordance
with the terms of the Trust Agreement. Subject to the limitations set forth in
Section 6.01(b), the Trustee shall have the power and authority to act on behalf
of the Trust, with respect to the following matters:

                  (i) to execute and deliver the Notes and the Trust Beneficial
         Interest in accordance with the Trust Agreement and the Indenture;

                  (ii) to cause the Trust to perform the Trust Agreement and to
         enter into, and to execute, deliver and perform on behalf of itself,
         the Program Documents to which it is a party and such other
         certificates, other documents or agreements as may be necessary,
         contemplated by or desirable in connection with the purposes and
         function of the Trust or any of such Program Documents;

                  (iii) subject to the Indenture, to purchase, receive and
         maintain custody of the Funding Agreement and to exercise all of the
         rights, powers and privileges of an owner or policyholder of the
         Funding Agreement;

                  (iv) subject to the Indenture and the Guarantee, to receive
         and maintain custody of the Guarantee and to exercise all of the
         rights, powers and privileges of a beneficiary under the Guarantee;

                  (v) to grant to the Indenture Trustee a first priority
         perfected security interest in the Collateral and to collaterally
         assign the rights, title and interest of the Trust in such Collateral
         to the Indenture Trustee for the benefit of the Holders and to seek
         release of such security interest upon payment in full of all amounts
         required to be paid with respect to the Notes pursuant to the terms and
         conditions of the Notes or the Indenture;



                                       9
<PAGE>

                  (vi) to establish the Payment Account;

                  (vii) subject to Section 4.06, to cause any transfer of the
         Trust Beneficial Interest to be registered in accordance with the Trust
         Agreement;

                  (viii) to send notices regarding the Trust Securities, the
         Funding Agreement and the Guarantee to Principal Life, PFG, the
         Indenture Trustee, the Ratings Agencies, the Trust Beneficial Owner and
         the Relevant Agents in accordance with the Funding Agreement, the
         Guarantee, the Distribution Agreement and the Trust Agreement;

                  (ix) to take all actions necessary or appropriate to enable
         the Trust to comply with Section 2.12 regarding income tax treatment,
         tax returns and information reporting;

                  (x) after the occurrence of a Funding Agreement Event of
         Default actually known to a Responsible Officer of the Trustee, subject
         to the Indenture, to take any action as it may from time to time
         determine (based solely upon the advice of counsel) is necessary or
         advisable to give effect to the terms of the Trust Agreement and to
         protect and conserve the Collateral for the benefit of each
         Securityholder (without consideration of the effect of any such action
         on any particular Securityholder) and, within five Business Days after
         the occurrence of a Funding Agreement Event of Default actually known
         to a Responsible Officer of the Trustee, to give notice thereof to the
         Trust Beneficial Owner and the Indenture Trustee;

                  (xi) to the extent permitted by the Trust Agreement, to
         participate in the winding up of the affairs of and liquidation of the
         Trust; and

                  (xii) subject to the Indenture, to take any action and to
         execute any documents on behalf of the Trust, incidental to the
         foregoing as the Trustee may from time to time determine (based on the
         advice of counsel) is necessary or advisable to give effect to the
         terms of the Trust Agreement for the benefit of each Securityholder
         (without consideration of the effect of any such action on any
         particular Securityholder).

         It is expressly understood and agreed that the Trustee shall be
entitled to engage outside counsel, independent accountants and other experts
appointed with due care to assist the Trustee in connection with the performance
of its duties and powers set forth in this Section 6.01(a), including, without
limitation, the preparation of all tax reports and returns, securities law
filings, certificates, reports, opinions, notices or any other documents. The
Trustee shall be entitled to rely conclusively on the advice of such counsel,
accountants and other experts in the performance of all its duties under the
Trust



                                       10
<PAGE>

Agreement and shall have no liability for any documents prepared by such
counsel, accountants or experts or any action or inaction taken pursuant to the
advice of such counsel, accountants or experts. Any expenses of such counsel,
accountants and experts shall be paid by Principal Life in accordance with the
applicable Expense and Indemnity Agreement to the extent provided therein.

         (b) So long as the Trust Agreement remains in effect, the Trust (and
the Trustee acting on behalf of the Trust) shall not undertake any business,
activity or transaction except as expressly provided for or contemplated by the
Trust Agreement or the Indenture. In particular, the Trust shall not, except as
otherwise contemplated by the Indenture:

                  (i) sell, transfer, exchange, assign, lease, convey or
         otherwise dispose of any assets held by the Trust (owned as of the date
         of the Trust Agreement or thereafter acquired), including, without
         limitation, any portion of the Collateral, except as expressly
         permitted under the Indenture;

                  (ii) incur or otherwise become liable, directly or indirectly,
         for any Indebtedness or Contingent Obligation except for the Notes
         issued pursuant to the Indenture and the transactions contemplated
         under the Indenture;

                  (iii) engage in any business or activity other than in
         connection with, or relating to, (a) the performance of the Trust
         Agreement and the execution, delivery and performance of any documents
         (other than the Trust Agreement), including the Program Documents,
         relating to the Notes issued under the Indenture and the transactions
         contemplated thereby, and (b) the issuance of the Notes pursuant to the
         Indenture;

                  (iv) (a) permit the validity or effectiveness of the Indenture
         or any grant of security interest in or assignment for collateral
         purposes of the Collateral to be impaired, or permit a Lien created
         under the Indenture to be amended, hypothecated, subordinated,
         terminated or discharged, or permit any Person to be released from any
         covenants or obligations under any document or agreement assigned to
         the Indenture Trustee, except as may be expressly permitted under the
         Indenture, (b) create, incur, assume or permit any Lien or other
         encumbrance (other than a Lien created under the Indenture) on any of
         its properties or assets owned or thereafter acquired, or any interest
         therein or the proceeds thereof, or (c) permit a Lien created under the
         Indenture not to constitute a valid first priority perfected security
         interest in the Collateral;

                  (v) amend, modify or fail to comply with any material
         provision of the Trust Agreement except for any amendment or
         modification of the Trust Agreement expressly permitted thereunder;



                                       11
<PAGE>

                  (vi) own any subsidiary or lend or advance any funds to, or
         make any investment in, any Person, except for an investment in the
         Funding Agreement or the investment of any funds held by the Indenture
         Trustee, the Paying Agent, or the Trustee as provided in the Indenture
         or the Trust Agreement;

                  (vii) directly or indirectly declare or make any distribution
         or other payment to, or redeem or otherwise acquire or retire for value
         the interests of, the Trust Beneficial Owner if any amount under the
         Notes is due and unpaid, or directly or indirectly redeem or otherwise
         acquire or retire for value any Indebtedness or Contingent Obligation
         other than the Notes;

                  (viii) exercise any rights with respect to the Collateral
         except at the written direction of, or with the prior written approval
         of, the Indenture Trustee;

                  (ix) cause or, to the fullest extent permitted by law, permit
         the sale or other transfer of all or a portion of the Trust Beneficial
         Interest, or cause or, to the fullest extent permitted by law, permit
         the creation, incurrence, assumption or existence of any Lien on, all
         or a portion of the Trust Beneficial Interest;

                  (x) become an "investment company" or come under the "control"
         of an "investment company," as such terms are defined in the Investment
         Company Act;

                  (xi) enter into any transaction of merger or consolidation or
         liquidate or dissolve itself (or, to the fullest extent permitted by
         law, suffer any liquidation or dissolution), or acquire by purchase or
         otherwise all or substantially all the business or assets of, or any
         stock or other evidence of beneficial ownership of, any other Person;

                  (xii) take any action that would cause it not to be treated as
         a disregarded entity or as a grantor trust (assuming it was not a
         disregarded entity) for United States federal income tax purposes;

                  (xiii) have any subsidiaries, employees or agents other than
         the Trustee and other persons necessary to conduct its business and
         enter into transactions contemplated under the Program Documents;

                  (xiv) have an interest in any bank account other than (a)
         those accounts required under the Program Documents, and (b) those
         accounts expressly permitted by the Indenture Trustee; provided that
         any interest therein shall be charged or otherwise secured in favor of
         the Indenture Trustee;



                                       12
<PAGE>

                  (xv) permit any Affiliate, employee or officer of Principal
         Life or PFG or any agent appointed under the Distribution Agreement to
         be a trustee of the Trust;

                  (xvi) issue Notes under the Indenture unless (a) the Trust has
         purchased or will simultaneously purchase the Funding Agreement from
         Principal Life to secure such Notes, (b) Principal Life has affirmed in
         writing to the Trust that it has made or simultaneously will make
         changes to its books and records to reflect the granting of a security
         interest in, and the making of an assignment for collateral purposes
         of, the Funding Agreement by the Trust, to the Indenture Trustee, (c)
         PFG has issued the Guarantee to the Trust, which the Trust has
         collaterally assigned to the Indenture Trustee on behalf of the Holder
         of Notes and in which the Trust has granted a security interest or will
         simultaneously grant a security interest to the Indenture Trustee on
         behalf of the Holders of Notes (and PFG has affirmed in writing to the
         Trust that it has made or simultaneously will make changes to its books
         and records to reflect such collateral assignment and security
         interest) and (d) the Trust has taken such other steps as may be
         necessary to cause the grant of security interest in, and assignment
         for collateral purposes of, the Collateral to the Indenture Trustee to
         be perfected for purposes of the UCC or effective against the Trust's
         creditors and subsequent purchasers of the Collateral pursuant to
         insurance or other applicable law;

                  (xvii) commingle the assets of the Trust with assets of any
         Affiliates (including any other trust organized under the Program), or
         guarantee any obligation of any Affiliates (including any other trust
         organized under the Program); or

                  (xviii) maintain any joint account with any Person, become a
         party, whether as co-obligor or otherwise, to any agreement to which
         any Person is a party (other than in respect of the Program Documents),
         or become liable as a guarantor or otherwise with respect to any
         Indebtedness or contractual obligation of any Person.

         (c) The Trust and the Trustee acting on behalf of the Trust shall not,
notwithstanding any other provision of the Trust Agreement, take any action that
would cause the Trust not to be treated as a disregarded or treated as a grantor
trust (assuming it was not a disregarded entity) for U.S. federal income tax
purposes.

         (d) The Trustee shall, based on the advice of counsel, defend against
all claims and demands of all Persons at any time claiming any Lien on any of
the assets of the Trust adverse to the interest of the Trust or any
Securityholder, other than the security interests in the Collateral granted in
favor of the Indenture Trustee for the benefit of each Holder of the Notes
pursuant to the Indenture.



                                       13
<PAGE>

         (e) If and for so long as the Funding Agreement and the Guarantee are
held by the Trustee for the benefit of the Trust, the Trustee shall not (i)
waive any default under the Funding Agreement or Guarantee or (ii) consent to
any amendment, modification or termination of the Funding Agreement or the
Guarantee, without, in each case, obtaining the prior approval of the Indenture
Trustee in accordance with the Indenture and an opinion of counsel experienced
in such matters to the effect that any such action shall not cause the Trust not
to be treated as a grantor trust for U.S. federal income tax purposes.

         (f) The Trustee is authorized and directed to conduct the affairs of
the Trust and to operate the Trust (i) so that the Trust will not become
required to register as an "investment company" under the Investment Company
Act, and (ii) so that the Trust will not fail to be treated as a disregarded
entity or as a grantor trust (assuming it was not a disregarded entity) for U.S.
federal income tax purposes. In connection with the preceding sentence, the
Trustee shall have no duty to determine whether any action it takes complies
with the preceding sentence and shall be entitled to rely conclusively on an
opinion of counsel with respect to any such matters.

         Section 6.02 General Duties. It shall be the duty of the Trustee to
discharge, or cause to be discharged, all of its responsibilities pursuant to
the terms of the Trust Agreement, or any other documents or instruments to which
it is a party, and to administer the Trust, in accordance with the provisions of
the Trust Agreement and the other Program Documents and any other documents or
instruments to which the Trust is a party.

         Section 6.03 Specific Duties.

         (a) The Trustee undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and as it may be directed from
time to time by the Trust Beneficial Owner and the Indenture Trustee in
accordance with the terms of the Trust Agreement and the Indenture.

         (b) The Trustee agrees that it will not manage, control, use, sell,
dispose of or otherwise deal with the Collateral except as expressly required or
permitted by the terms of the Trust Agreement and the Indenture.

         Section 6.04 Acceptance of Trust and Duties; Limitation on Liability.
The Trustee accepts the trust created by the Trust Agreement and agrees to
perform its duties under the Trust Agreement with respect to the same, but only
upon the terms of the Trust Agreement. No implied covenants or obligations shall
be read into the Trust Agreement. The Trustee shall not be liable under the
Trust Agreement under any circumstances or for any action or failure to act,
except for (i) its own willful misconduct, bad faith or negligence or (ii) the
inaccuracy of any representation or warranty contained in the Trust Agreement
expressly made by it. In particular (but without limitation), subject to the
exceptions set forth in the preceding sentence:



                                       14
<PAGE>

         (a) the Trustee shall not be liable for any error of judgment made in
good faith by any of its responsible officers, unless such error of judgment
constitutes negligence;

         (b) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the written
instructions of the Trust Beneficial Owner or the Indenture Trustee or pursuant
to the advice of counsel, accountants or other experts selected by it in good
faith, so long as such action or omission is consistent with the terms of the
Trust Agreement and the Indenture;

         (c) no provision of the Trust Agreement shall require the Trustee to
expend or risk personal funds or otherwise incur any financial liability in the
performance of any of its rights or powers hereunder if the Trustee has
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or provided
to it;

         (d) under no circumstances shall the Trustee be liable for indebtedness
or other obligations evidenced by or arising under the Trust Agreement, the
Funding Agreement, the Guarantee or any related document, including the
principal of and interest on the Notes and payments on the Trust Beneficial
Interest;

         (e) the Trustee shall not be responsible for, or in respect of, the
validity or sufficiency of the Trust Agreement or any related document or for
the due execution of the Trust Agreement by any party (except by the Trustee
itself) or for the form, character, genuineness, sufficiency, value or validity
of any of the Collateral, other than, in the case of the Trustee, the execution
of any certificate;

         (f) the Trustee shall not be liable for any action, inaction, default
or misconduct of the Indenture Trustee or any Paying Agent under the Indenture,
the Notes or any related documents or otherwise, and the Trustee shall not have
any obligation or liability to perform the obligations of the Trust under the
Trust Agreement or any related document or under any federal, state, foreign or
local tax or securities law, in each case, that are required to be performed by
other Persons, including the Indenture Trustee under the Indenture;

         (g) the Trustee shall not be liable for any action, inaction, default
or misconduct of Principal Life or PFG, and the Trustee shall not have any
obligation or liability to perform the obligations of Principal Life under the
Funding Agreement or PFG under the Guarantee or any related documents;

         (h) the Trustee shall not be under any obligation to exercise any of
the rights or powers vested in it by the Trust Agreement, or to institute,
conduct or defend any litigation under the Trust Agreement or otherwise or in
relation to the Trust Agreement or



                                       15
<PAGE>

any related document, at the request, order or direction of any Person unless
such Person has offered to the Trustee security or indemnity satisfactory to it
against the costs, expenses and liabilities that may be incurred by the Trustee.
The right of the Trustee to perform any discretionary act enumerated in the
Trust Agreement or in any related document shall not be construed as a duty, and
the Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of any such act;

         (i) except as expressly provided in the Trust Agreement in accepting
the trusts created by the Trust Agreement the Trustee acts solely as trustee
under the Trust Agreement and not in its individual capacity, and all persons
having any claim against the Trustee by reason of the transactions contemplated
by the Trust Agreement shall look only to the Trust's property for payment or
satisfaction thereof;

         (j) the Trustee shall not have any responsibility or liability for or
with respect to the genuineness, value, sufficiency or validity of any
Collateral, and the Trustee shall in no event assume or incur any liability,
duty or obligation to the Trust Beneficial Owner or any other Person other than
as expressly provided for in the Trust Agreement;

         (k) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note or other paper or document;

         (l) every provision of the Trust Agreement relating to the Trustee
shall be subject to the provisions of this Article 6;

         (m) except in accordance with the written instructions furnished by the
Trust Beneficial Owner or as provided in the Trust Agreement, the Trustee shall
have no duty (i) to see to any recording or filing of any document, (ii) to
confirm or verify any financial statements of the Trust Beneficial Owner or the
Indenture Trustee, (iii) to inspect the Trust Beneficial Owner's or the
Indenture Trustee's books and records at any time or (iv) to see to the payment
or discharge of any tax, assessment or other governmental charge or any lien or
encumbrance of any kind owing with respect to, assessed or levied against any
part of the Trust, except to the extent the Trustee has received funds, on
behalf of the Trust, pursuant to the applicable Expense and Indemnity Agreement
from Principal Life in satisfaction of any such tax, assessment or other
governmental charge or any lien or encumbrance of any kind and in accordance
with payment or transfer instructions provided by Principal Life;

         (n) the Trustee shall have no duty or obligation to manage, control,
use, sell, dispose of or otherwise deal with the Trust or to otherwise take or
refrain from taking any action under the Trust Agreement, except as expressly
required by the terms of the Trust Agreement, or as expressly provided in
written instructions from the Trust Beneficial Owner, and in no event shall the
Trustee have any implied duties or obligations under the



                                       16
<PAGE>

Trust Agreement; the Trustee nevertheless agrees that it will, at its own cost
and expense, promptly take all action as may be necessary to discharge any liens
on any part of the property of the Trust which result from claims against the
Trustee personally that are not related to the ownership or the administration
of the property of the Trust or the transactions contemplated by the Program
Documents;

         (o) the Trustee shall not be required to take any action under the
Trust Agreement if the Trustee shall reasonably determine or shall have been
advised by counsel that such action is contrary to the terms of the Trust
Agreement or is otherwise contrary to law;

         (p) the Trustee may fully rely upon and shall have no liability in
connection with calculations or instructions forwarded to the Trustee by the
Trust Beneficial Owner or the Indenture Trustee, nor shall the Trustee have any
obligation to furnish information to any Trust Beneficial Owner or other Person
if it has not received such information as it may need from the Trust Beneficial
Owner, or the Indenture Trustee or any other Person;

         (q) the Trustee shall not be liable with respect to any act or omission
in good faith in accordance with the advice or direction of the Trust Beneficial
Owner or the Indenture Trustee. Whenever the Trustee is unable to decide between
alternative courses of action permitted or required by the terms of the Trust
Agreement, or is unsure as to the application, intent, interpretation or meaning
of any provision hereof, the Trustee may give notice (in such form as shall be
appropriate under the circumstances) to the Trust Beneficial Owner requesting
instructions as to the course of action to be adopted, and, to the extent the
Trustee acts in good faith in accordance with any such instruction received, the
Trustee shall not be liable on account of such action to any Person. If the
Trustee shall not have received appropriate instructions within ten days of such
notice (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances), it may, but shall be
under no duty to, take or refrain from taking such action which is consistent,
in its view, with the Trust Agreement and as it shall deem to be in the best
interest of the relevant Trust Beneficial Owner, and the Trustee shall have no
liability to any Person for such action or inaction;

         (r) in no event whatsoever shall the Trustee be personally liable for
any representation, warranty, covenant, agreement, indebtedness or other
obligation of the Trust; and

         (s) the Trustee shall incur no liability if, by reason of any provision
of any present or future law or regulation thereunder, or by any force majeure
event, including but not limited to natural disaster, war or other circumstances
beyond its control, the Trustee shall be prevented or forbidden from doing or
performing any act or thing which the terms of the Trust Agreement provide shall
or may be done or performed.



                                       17
<PAGE>

         Section 6.05 Reliance; Advice of Counsel.

         (a) The Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper reasonably believed by it in
good faith to be genuine and signed by the proper party or parties. The Trustee
may accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the manner of ascertainment of which is not
specifically prescribed in the Trust Agreement, the Trustee may for all purposes
of the Trust Agreement rely on a certificate, signed by the president or any
vice president or by the treasurer or any assistant treasurer or the secretary
or any assistant secretary of the relevant party, as to such fact or matter, and
such certificate shall constitute full protection to the Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon.

         (b) In the exercise or administration of the Trust, the Trustee (i) may
act directly or, at the expense of the Trust, through agents or attorneys
pursuant to agreements entered into with any of them, and the Trustee shall not
be liable for the action, inaction, default or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Trustee in
good faith and with reasonable care, and (ii) may consult with counsel,
accountants and other skilled persons to be selected in good faith and with
reasonable care and employed by it, and it shall not be liable for anything
done, suffered or omitted to be done in good faith by it in accordance with the
written opinion or advice of any such counsel, accountants or other skilled
persons.

         Section 6.06 Delegation of Authorities and Duties. The Trustee
delegates to the Indenture Trustee all duties required to be performed by the
Indenture Trustee pursuant to the terms of the Trust Agreement and the
Indenture. The Trustee undertakes no responsibility for the performance, or
non-performance, of any duties delegated to the Indenture Trustee under the
Trust Agreement.

                                    ARTICLE 7
                           LIQUIDATION AND TERMINATION

         Section 7.01 Termination Upon the Trust Expiration Date. Unless earlier
terminated, the Trust shall terminate on the Trust Expiration Date.

         Section 7.02 Termination of Agreement. The Trust Agreement and the
Trust created and continued thereby shall terminate upon the latest to occur of
the following: (a) a distribution by the Trustee to Securityholders upon the
liquidation of the Trust pursuant to Section 7.03 of all amounts required to be
distributed under the Trust Agreement upon the final payment of the Trust
Securities; (b) the payment of, or



                                       18
<PAGE>

reasonable provision for payment of, all expenses and other liabilities owed by
the Trust; and (c) the discharge of all administrative duties of the Trustee
including the performance of any tax reporting obligations with respect to the
Trust or the Securityholders.

         Section 7.03 Liquidation. On the Trust Expiration Date, the remaining
Collateral and any other assets held in the Trust shall be liquidated and
distributed as follows: (i) the Trust shall first pay all amounts due and unpaid
on the Notes, if any, in accordance with the Indenture, (ii) the Trust shall
then pay any other claims, including expenses relating to such liquidation to
the extent not paid, or reasonably provided for, pursuant to the applicable
Expense and Indemnity Agreement, and (iii) the Trust shall then pay to the Trust
Beneficial Owner all of the amounts that would be payable under clause first of
Section 5.02 of the Indenture to the Trust Beneficial Owner if the Trust
Beneficial Owner held a Note with an original principal amount of $15
(multiplied by the issue price of the Notes in the case of Notes that are
discount notes). Any remaining monies and other property shall be paid ratably
in proportion to their original principal amounts to the Holders last noted in
the Register as the Holders of the Notes and the Trust Beneficial Owner (as if
the Trust Beneficial Owner held a Note with an original principal amount of $15
(multiplied by the issue price of the Notes in the case of Notes that are
discount notes) and as if each such Holder continued to hold its Notes after all
amounts due on such Notes under the Indenture have been paid).

                                    ARTICLE 8
                        SUCCESSOR AND ADDITIONAL TRUSTEES

         Section 8.01 Eligibility Requirements for the Trustee. The Trustee
shall at all times (a) be a Person organized and doing business under the laws
of the United States or the State of New York, (b) be authorized to exercise
corporate trust powers, (c) have a combined capital and surplus of at least
$50,000,000 and be subject to supervision or examination by Federal or State
authorities, (d) have (or have a parent which has) a rating of at least Baa3 by
Moody's Investors Service, Inc. or BBB- by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., (e) be a "bank" within the meaning
of Section 581 of the Code and (f) be a "United States person" within the
meaning of Section 7701(a)(30) of the Code. In addition, the Trustee shall be an
entity with its Corporate Trust Office in the State of New York. If the Trustee
shall publish reports of condition at least annually, pursuant to applicable law
or to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section 8.01, the combined capital and surplus of the
Trustee shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
8.01, the Trustee shall resign immediately in the manner and with the effect
specified in Section 8.02.



                                       19
<PAGE>

         Section 8.02 Resignation or Removal of the Trustee. The Trustee may at
any time resign and be discharged from its duties under the Trust Agreement and
the Trust created by the Trust Agreement by giving written notice thereof to the
Trust Beneficial Owner and the Indenture Trustee at least 60 days before the
date specified in such instrument. Upon receiving such notice of resignation,
the Trust Beneficial Owner shall promptly appoint a successor Trustee meeting
the qualifications set forth in Section 8.01 by written instrument, in
duplicate, one copy of which instrument shall be delivered to each of the
resigning Trustee, the successor Trustee, any remaining Trustees, the Indenture
Trustee and Principal Life. If no successor Trustee shall have been so appointed
and have accepted appointment within 90 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

         If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.01 and shall fail to resign after written
request therefor by the Trust Beneficial Owner and the Indenture Trustee, or if
at any time the Trustee shall be legally unable to act or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Trust Beneficial Owner and the Indenture Trustee may
remove such Trustee. If the Trust Beneficial Owner and the Indenture Trustee
shall remove the Trustee under the authority of the immediately preceding
sentence, the Trust Beneficial Owner shall promptly appoint a successor Trustee
meeting the qualification requirements of Section 8.01 by (i) the execution of a
written instrument, one copy of which instrument shall be delivered to each of
the outgoing Trustee so removed, the successor Trustee, the Indenture Trustee
and Principal Life and (ii) the payment of all fees and expenses owed to the
outgoing Trustee.

         Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 8.02 shall
not become effective until all fees and expenses, including any indemnity
payments, due to the outgoing Trustee have been paid and until acceptance of
appointment by the successor Trustee pursuant to Section 8.03.

         Section 8.03 Successor Trustee. Any successor Trustee appointed
pursuant to Section 8.02 shall execute, acknowledge and deliver to the Trust
Beneficial Owner, the Indenture Trustee and the predecessor Trustee an
instrument accepting such appointment under the Trust Agreement, and thereupon
the resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties, and obligations of its
predecessor under the Trust Agreement, with like effect as if originally named
as Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements and monies held by it under the Trust Agreement; and
the



                                       20
<PAGE>

predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations.

         No successor Trustee shall accept appointment as provided in this
Section 8.03 unless at the time of such acceptance such successor Trustee shall
be eligible pursuant to Section 8.01.

         Section 8.04 Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Trustee, shall, without the execution or
filing of any instrument or any further act on the part of any of the parties to
the Trust Agreement, anything in the Trust Agreement to the contrary
notwithstanding, be the successor of the Trustee under the Trust Agreement;
provided, such Person shall be eligible pursuant to Section 8.01.

         Section 8.05 Appointment of Co-Trustee or Separate Trustee.

         (a) Notwithstanding any other provisions of the Trust Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of any Collateral may at the time be located, the Trustee shall
have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Trustee to act as co-trustee, jointly with it, or
as separate trustee or separate trustees, of all or any part of any Collateral,
and subject to Section 2.08 to vest in such Person, in such capacity, such title
to any Collateral, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary or desirable. No co-trustee or separate trustee under the
Trust Agreement shall be required to meet the terms of eligibility as a
successor Trustee pursuant to Section 8.03 and no notice of the appointment of
any co-trustee or separate trustee shall be required; provided, however, that
any co-trustee or separate trustee must be a "United States person" within the
meaning of Section 7701(a)(30) of the Code and a "bank" within the meaning of
Section 581 of the Code.

         (b) Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:

                  (i) all rights, powers, duties, and obligations conferred or
         imposed upon the Trustee shall be conferred upon and exercised or
         performed by the Trustee and such separate trustee or co-trustee
         jointly (it being understood that such separate trustee or co-trustee
         is not authorized to act separately without the Trustee joining in such
         act), except to the extent that under any law of any jurisdiction in
         which any particular act or acts are to be performed, the Trustee



                                       21
<PAGE>

         shall be incompetent or unqualified to perform such act or acts, in
         which event such rights, powers, duties and obligations (including the
         holding of title to the Trust or any portion thereof in any such
         jurisdiction) shall be exercised and performed singly by such separate
         trustee or co-trustee, but solely at the discretion of the trustee;

                  (ii) the Trustee may at any time accept the resignation of or
         remove any separate trustee or co-trustee; and

                  (iii) no trustee shall be personally liable by reason of the
         act or omission of any other trustee under the Trust Agreement.

         (c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustee and co-trustee,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Section 8.05 and the
conditions of this Article 8. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instruments of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of the
Trust Agreement, specifically including every provision of the Trust Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Each such instrument shall be filed with the Trustee.

         (d) Any separate trustee or co-trustee may at any time appoint the
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of the
Trust Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.

         Section 8.06 Trustee May Own Notes. Except to the extent prohibited
under the terms of the Notes, the Trustee, in its individual or any other
capacity, may become the beneficial owner or pledgee of Notes, to the extent
that such ownership does not inhibit the Trust from relying on Rule 3a-7
promulgated under the Investment Company Act, with the same rights as it would
have if it were not the Trustee; provided, that any Notes so owned or pledged
shall not be entitled to participate in any decisions made or instructions given
to the Trustee or the Indenture Trustee by the Holders as a group. The Trustee
may deal with the Trust and the Trust Beneficial Owner in banking and trustee
transactions with the same rights as it would have if it were not the Trustee.



                                       22
<PAGE>

                                    ARTICLE 9
                    VOTING; ACTS OF SECURITYHOLDERS; MEETINGS

         Section 9.01 Limitations on Voting Rights. Except as provided in the
Trust Agreement or in the Indenture or as otherwise required by law, no Holder
of Trust Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties to the Trust Agreement, nor shall anything in the
Trust Agreement set forth, or contained in the terms of the Trust Securities, be
construed so as to constitute the Securityholders from time to time as partners
or members of an association.

         Section 9.02 Meetings of the Trust Beneficial Owner. No annual or other
meeting of the Trust Beneficial Owner is required to be held.

                                   ARTICLE 10
                            MISCELLANEOUS PROVISIONS

         Section 10.01 Limitation on Rights of Securityholders.

         (a) The death, bankruptcy, termination, dissolution or incapacity of
any Person having an interest, beneficial or otherwise, in Trust Securities or
the Trust shall not operate to terminate the Trust Agreement, nor to annul,
dissolve or terminate the Trust, nor to entitle the legal successors,
representatives or heirs of such Person or any Securityholder for such Person,
to claim an accounting, take any action or bring any proceeding in any court for
a partition or winding up of the arrangements contemplated by the Trust
Agreement, nor otherwise affect the rights, obligations and liabilities of the
parties to the Trust Agreement or any of them.

         (b) Except as provided in the Indenture, no Securityholder shall have
any right by virtue of any provision of the Trust Agreement to institute any
suit, action or proceeding in equity or at law with respect to the Trust
Agreement, unless (i) the Securityholders shall have made written request upon
the Trustee to institute such suit, action or proceeding in the name of the
Trust and shall have offered to the Trustee and the Trust such reasonable
indemnity as they may require against the costs, expenses and liabilities to be
incurred thereby and (ii) the Trustee, for 30 days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused to
institute any such suit, action or proceeding. It is expressly understood and
covenanted by each Securityholder with every other Securityholder, the Trust and
the Trustee, that no one or more Securityholder shall have any right in any
manner whatever by availing itself or themselves of any provision of the Trust
Agreement to affect, disturb or prejudice the rights of any other
Securityholder, or to obtain or seek to obtain priority over or preference to
any other such Securityholder, or to enforce any right under the Trust
Agreement, except in the manner provided in the Trust Agreement.



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<PAGE>

         Section 10.02 Amendment.

         (a) The Trust Agreement may be amended from time to time by the Trustee
and the Trust Beneficial Owner, by, and only by, a written instrument executed
by the Trustee and the Trust Beneficial Owner, in any way that is not
inconsistent with the intent of the Trust Agreement, including, without
limitation, (i) to cure any ambiguity, (ii) to correct, supplement or modify any
provision in the Trust Agreement that is inconsistent with another provision in
the Trust Agreement or (iii) to modify, eliminate or add to any provisions of
the Trust Agreement to the extent necessary to ensure that the Trust will be
classified for U.S. federal income tax purposes as disregarded or treated as a
grantor trust (assuming that the Trust was not a disregarded entity) at all
times or to ensure that the Trust will not be required to register as an
investment company under the Investment Company Act and no such amendment shall
require the consent of any other Securityholder, except to the extent specified
in Sections 10.02(b) and 10.02(c).

         (b) For so long as any Trust Securities remain outstanding, except as
provided in Section 10.02(c), any amendment to the Trust Agreement that would
adversely affect, in any material respect, the terms of any Notes, other then
any amendment of the type contemplated by clause (iii) of Section 10.02(a),
shall require the prior consent of the Holders of a majority of the outstanding
principal amount of the Notes.

         (c) For so long as any Trust Securities remain outstanding, the Trust
Agreement may not be amended to (i) change the amount or timing of any payment
of any Trust Securities or (ii) impair the right of any Securityholder to
institute suit for the enforcement of any right for principal and interest or
other distribution without the consent of each affected Securityholder.

         (d) The Trustee shall not be required to enter into any amendment to
the Trust Agreement which affects its own rights, duties or immunities under the
Trust Agreement.

         (e) Prior to execution of any amendment to the Trust Agreement, the
Trustee shall be entitled to an opinion of counsel as to whether such amendment
is permitted by the terms of the Trust Agreement and whether all conditions
precedent to such amendment have been met.

         (f) Promptly after the execution of any such amendment or consent, the
Trustee shall furnish a copy of such amendment or consent (including those
obtained or effected hereby) to the Indenture Trustee, the Trust Beneficial
Owner, the agents under the Distribution Agreement and the Rating Agencies.

         (g) Notwithstanding any other provision of the Trust Agreement, (i) no
amendment to the Trust Agreement may be made if such amendment would cause the
Trust not to be treated as disregarded or treated as a grantor trust (assuming
that the Trust



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<PAGE>

was not disregarded) for U.S. federal income tax purposes and (ii) no amendment
to the Trust Agreement may be made without the prior consent of Principal Life.

         Section 10.03 Notice. All demands, notices, instructions and other
communications shall be in writing (including telecopied or telegraphic
communications) and shall be personally delivered, mailed or transmitted by
telecopy or telegraph, respectively, addressed as set forth below:

         If to the Trustee:

         U.S. Bank Trust National Association
         100 Wall Street, 16th Floor
         New York, New York 10005
         Attention: Adam Berman
         Facsimile: (212) 509-3384

         If to the Trust Beneficial Owner:

         GSS Holdings II, Inc.
         445 Broad Hollow Road, Suite 239
         Melville, New York 11747
         Attention: Andy Stidd
         Facsimile: (212) 302-8767

         If to the Indenture Trustee, at

         Citibank, N.A.
         Citibank Agency & Trust
         111 Wall Street, 14th Floor, Zone 3
         New York, NY 10005
         Attention: Nancy Forte
         Facsimile: (212) 657-3862

or at such other address as shall be designated by any such party in a written
notice to the other parties. Notwithstanding the foregoing, any notice required
or permitted to be mailed to the Trust Beneficial Owner shall be given by first
class mail, postage prepaid, at the address of the Trust Beneficial Owner as
shown in the Securities Register, and any notices mailed within the time
prescribed in the Trust Agreement shall be conclusively presumed to have been
duly given, whether or not the Trust Beneficial Owner received such notice. Any
notice required or permitted to be mailed to any Holder of a Note shall be given
as specified in the Indenture.



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<PAGE>

         Section 10.04 No Recourse. The Trust Beneficial Owner acknowledges that
the Trust Beneficial Interest represents a beneficial interest in the Trust only
and does not represent an obligation of Principal Life, the Trustee, the
Indenture Trustee or any Affiliate of any of the foregoing and no recourse may
be had against such parties or their assets, except as may be expressly set
forth or contemplated in the Trust Agreement or the Indenture.

         Section 10.05 No Petition. To the extent permitted by applicable law,
each of the Trustee and the Trust Beneficial Owner covenants and agrees that it
will not institute against, or join with any other Person in instituting
against, the Trust any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under the laws of any
jurisdiction. This Section 10.05 shall survive termination of the Trust
Agreement.

         Section 10.06 Governing Law. The Trust Agreement shall be governed by
and construed in accordance with the laws of the jurisdiction specified in the
Trust Agreement without regard to the principles of conflicts of laws thereof
and the obligations, rights and remedies of the parties under the Trust
Agreement shall be determined in accordance with such laws.

         Section 10.07 Severability. If any provision in the Trust Agreement
shall be invalid, illegal or unenforceable, such provisions shall be deemed
severable from the remaining provisions of the Trust Agreement and shall in no
way affect the validity or enforceability of such other provisions of the Trust
Agreement.

         Section 10.08 Trust Securities Nonassessable and Fully Paid.
Securityholders shall not be personally liable for the obligations of the Trust.
The fractional undivided beneficial interest in the assets held in the Trust
represented by the Trust Beneficial Interest shall be nonassessable for any
losses or expenses related to the Trust or for any reason whatsoever. The Notes,
upon execution thereof by the Trustee pursuant to the Indenture and upon receipt
of payment therefore, are and shall be deemed fully paid.

         Section 10.09 Third-Party Beneficiaries. The Trust Agreement shall
inure to the benefit of and be binding upon the parties thereto and their
respective successors and permitted assigns. Except as otherwise provided in the
Trust Agreement, no other Person shall have any right or obligation thereunder.


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