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                                                                    EXHIBIT 10.4

                         EXPENSE AND INDEMNITY AGREEMENT

         This Expense and Indemnity Agreement (this "Agreement") is entered into
as of [ o ], 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.
333-129763 and 333-129763-01) filed with the Securities and Exchange Commission
by Principal Life and Principal Financial Group, Inc. on November 17, 2005, 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.

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         "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.

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         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.

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                                   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.
         665 Locust Street
         Des Moines, Iowa 50309-3702
         Attention:  Angela C. Brick
         Telephone:  515-245-2820
         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

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         Principal Life Insurance Company
         711 High Street
         Des Moines, IA 50392
         Attention:   Jim Fifield
         Telephone:   (515) 248-9196
         Facsimile:    (515) 235-9353

             [The remainder of this page left intentionally blank.]

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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: Angela C. Brick
                                                Title: Vice President

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                                                                       EXHIBIT A

                                      FEES

The Custodian shall be entitled to receive the following fees at the times set
forth below:

                  [TO COME.]