Document:

EX-4.2

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE (HEREINAFTER DEFINED) AND IS
REGISTERED IN THE NAME OF A DEPOSITARY (AS DEFINED IN THE INDENTURE) OR A NOMINEE OF A DEPOSITARY.
THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO
TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE
OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), TO THE TRUST (HEREINAFTER DEFINED) OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND UNLESS ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

			
	CUSIP No.: 74254PYJ5
	 	Principal Amount: U.S. $2,430,000

PRINCIPAL LIFE INCOME FUNDINGS TRUST 2008-56

PRINCIPAL® LIFE CORENOTES®

Original Issue Date: July 2, 2008

Issue Price: 100%

Stated Maturity Date: July 15, 2016

Settlement Date: July 2, 2008

Securities Exchange Listing: o Yes þ No. If yes,
indicate name(s) of Securities Exchange(s):                                         .

Depositary: The Depository Trust Company

Authorized Denominations: $1,000

Collateral held in the Trust: Principal Life Insurance Company Funding Agreement No. 4-55547, the
related Principal Financial Group, Inc. Guarantee which fully and unconditionally guarantees
the payment obligations of Principal Life Insurance Company under the Funding Agreement, all
proceeds of the Funding Agreement and the related Guarantee and all rights and books and
records pertaining to the foregoing.

Interest Rate or Formula:

Fixed Rate Note: þ Yes o No. If yes,

     Interest Rate: 5.80%

     Interest Payment Frequency: Semi-annual

     Interest Payment Dates: The 15th day of every sixth month commencing on January 15, 2009

     Day Count Convention: 30/360

     Additional/Other Terms: Not Applicable

 

 

Discount Note: o Yes þ No. If yes,

     Total Amount of Discount:

     Initial Accrual Period of Discount:

     Interest Payment Dates:

     Additional/Other Terms:

Redemption
Provisions: þ Yes
o No. If yes,

     Initial Redemption Date: July 15, 2010
Additional/Other Terms: In whole only and not in part; any redemption date will be an Interest
Payment Date falling on or after the Initial Redemption Date.

Repayment Provisions: o Yes þ No. If yes,

     Repayment Date(s):

     Repayment Price:

     Additional/Other Terms:

Floating Rate Note: o Yes þ No. If yes,

     Regular Floating Rate Notes o

     Floating Rate/ Fixed Rate Notes: o

     Interest Rate:

     Interest Rate Basis(es):

     LIBOR o

          o LIBOR Reuters Page:

          LIBOR Currency:

     CMT Rate o

     Designated Reuters Page:

               If FEDCMT

               o Weekly Average

               o Monthly Average

          Designated CMT Maturity Index:

     CD Rate o

     Commercial Paper Rate o

     Constant Maturity Swap Rate o

     Federal Funds Open Rate o

     Federal Funds Rate o

     Prime Rate o

     Treasury Rate o

     Index Maturity:

     Spread and/or Spread Multiplier:

     Initial Interest Rate, if any:

     Initial Interest Reset Date:

     Interest Reset Dates:

     Interest Determination Date(s):

     Interest Payment Dates:

     Maximum Interest Rate, if any:

     Minimum Interest Rate, if any:

     Fixed Rate Commencement Date, if any:

     Floating Rate Commencement Date, if any:

     Fixed Interest Rate, if any:

     Day Count Convention:

     Additional/Other Terms:

Regular Record Date(s): 15 calendar days prior to the Interest Payment Date

Sinking Fund: Not Applicable

Calculation Agent: Citibank, N.A.

Additional/Other Terms:

Survivor’s Option: þ Yes o No.

     If yes, the attached Survivor’s Option Rider is incorporated into this Note.

Trust Put Limitation: 2.00%

     The Principal Life Income Fundings Trust designated above (the “Trust”), for value received,
hereby promises to pay to Cede & Co., or its registered assigns, the Principal Amount specified
above on the Stated Maturity Date specified above and, if so specified above, to pay interest
thereon from the Original Issue Date specified above or from the most recent Interest Payment Date
specified above to which interest has been paid or duly provided for at the rate per annum
determined in accordance with the provisions on the reverse hereof and as specified above, until
the principal hereof is paid or made available for payment. Payments of principal, premium, if any,
and interest hereon will be made in the lawful currency of the United States of America (“U.S.
Dollars” or “United States dollars”). The “Principal Amount” of this Note at any time means (1) if
this Note is a Discount Note (as hereinafter defined), the Amortized Face Amount (as hereinafter
defined) at such time (as defined in Section 3(c) on the reverse hereof) and (2) in

2

 

all other cases, the Principal Amount hereof. Capitalized terms not otherwise defined herein
shall have their meanings set forth in the Indenture, dated as of the date of the Pricing
Supplement (the “Indenture”), between Citibank, N.A., as the indenture trustee (the “Indenture
Trustee”), and the Trust, or on the face hereof.

     This Note will mature on the Stated Maturity Date, unless its principal (or any installment of
its principal) becomes due and payable prior to the Stated Maturity Date, whether, as applicable,
by the declaration of acceleration of maturity, notice of redemption by the Trust or otherwise (the
Stated Maturity Date or any date prior to the Stated Maturity Date on which this Note becomes due
and payable, as the case may be, is referred to as the “Maturity Date”).

     A “Discount Note” is any Note that has an Issue Price that is less than 100% of the Principal
Amount thereof by a percentage that is equal to or greater than 0.25% multiplied by the product of
the principal amount of the Notes and the number of full years to the Stated Maturity Date.

     Unless otherwise specified above, the interest payable on each Interest Payment Date or the
Maturity Date will be the amount of interest accrued from and including the Original Issue Date or
from and including the last Interest Payment Date to which interest has been paid or duly provided
for, as the case may be, to, but excluding, such Interest Payment Date or the Maturity Date, as the
case may be.

     Unless otherwise specified above, the interest payable on any Interest Payment Date will be
paid to the Holder on the Regular Record Date for such Interest Payment Date, which Regular Record
Date shall be the fifteenth (15th) calendar day, whether or not a Business Day, immediately
preceding the related Interest Payment Date; provided that, notwithstanding any provision of the
Indenture to the contrary, interest payable on any Maturity Date shall be payable to the Person to
whom principal shall be payable; and provided, further, that unless otherwise specified above, in
the case of a Note initially issued between a Regular Record Date and the Interest Payment Date
relating to such Regular Record Date, interest for the period beginning on the Original Issue Date
and ending on such Interest Payment Date shall be paid on the Interest Payment Date following the
next succeeding Regular Record Date to the Holder on such next succeeding Regular Record Date.

     Payments of principal of, and premium, if any, and interest and other amounts due and owing,
if any, will be made through the Indenture Trustee to the account of DTC or its nominee and will be
made in accordance with depositary arrangements with DTC.

     Unless otherwise specified on the face hereof, the Holder hereof will not be obligated to pay
any administrative costs imposed by banks in making payments in immediately available funds by the
Trust. Unless otherwise specified on the face hereof, any tax assessment or governmental charge
imposed upon payments hereunder, including, without limitation, any withholding tax, will be borne
by the Holder hereof.

     REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE
HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS
PLACE.

A-3

 

     Unless the certificate of authentication hereon shall have been executed by the Indenture
Trustee pursuant to the Indenture, this Note shall not be entitled to any benefit under such
Indenture or be valid or obligatory for any purpose.

     IN WITNESS WHEREOF, the Trust has caused this instrument to be duly executed, by manual or
facsimile signature.

	 	 	 	 	 
	 	THE PRINCIPAL LIFE INCOME FUNDINGS TRUST
SPECIFIED ON THE FACE OF THIS NOTE

 	 
	Dated: Original Issue Date 	By:  	U.S. Bank Trust National Association, not in its
individual capacity but solely as Trustee.
 	 
	 	 	 
	 	By:  	
/s/ Janet O’Hara
 	 
	 	 	Authorized Officer 	 

CERTIFICATE OF AUTHENTICATION

     This is one of the Notes of the Principal Life Income Fundings Trust specified on the face of
this Note referred to in the within-mentioned Indenture.

	 	 	 	 	 
	 	CITIBANK, N.A.

As Indenture Trustee

 	 

Dated: Original Issue Date

	 	 	 	 	 
	 	By:  	     /s/ Jennifer McCourt
 	 
	 	 	Authorized Signatory 	 
	 	 	 	 
	 

A-5

 

[REVERSE FORM OF NOTE]

Section 1. General. This Note is one of a duly authorized issue of Notes of the Trust. The
Notes are issued pursuant to the Indenture.

Section 2. Currency. This Note is denominated in, and payments of principal, premium, if
any, and/or interest, if any, will be made in U.S. Dollars.

Section 3. Determination of Interest Rate and Certain Other Terms.

	 	(a)	 	Fixed Rate Notes. If this Note is specified on the face hereof as a “Fixed
Rate Note”:

(i) This Note will bear interest at the rate per annum specified on the face hereof.
Interest on this Note will be computed on the basis of a 360-day year of twelve 30-day
months.

(ii) Unless otherwise specified on the face hereof, the Interest Payment Dates for this
Note will be as follows:

	 	 	 
	Interest Payment	 	 
	Frequency	 	Interest Payment Dates
	 
	 	 
	Monthly

	 	Fifteenth day of each calendar month,
beginning in the first calendar month
following the month this Note was issued.
	 
	 	 
	Quarterly

	 	Fifteenth day of every third calendar
month, beginning in the third calendar
month following the month this Note was
issued.
	 
	 	 
	Semi-annual

	 	Fifteenth day of every sixth calendar
month, beginning in the sixth calendar
month following the month this Note was
issued.
	 
	 	 
	Annual

	 	Fifteenth day of every twelfth calendar
month, beginning in the twelfth calendar
month following the month this Note was
issued.

(iii) If any Interest Payment Date or the Maturity Date of this Note falls on a day that is
not a Business Day, the Trust will make the required payment of principal, premium, if any,
and/or interest or other amounts on the next succeeding Business Day, and no additional
interest will accrue in respect of the payment made on that next succeeding Business Day.

	 	(b)	 	Floating Rate Notes. If this Note is specified on the face hereof as a
“Floating Rate Note”:

(i) Interest Rate Basis. Interest on this Note will be determined by reference to
the applicable Interest Rate Basis or Interest Rate Bases, which may, as described below,
include the CD Rate, the CMT Rate, the Commercial Paper Rate, the Constant Maturity Swap
Rate, the Federal Funds Open Rate, the Federal Funds Rate, LIBOR, the Prime Rate or the
Treasury Rate (each as defined below).

5

 

(ii) Effective Rate. The rate derived from the applicable Interest Rate Basis or
Interest Rate Bases will be determined in accordance with the related provisions below. The
interest rate in effect on each day will be based on: (1) if that day is an Interest Reset
Date, the rate determined as of the Interest Determination Date immediately preceding that
Interest Reset Date; or (2) if that day is not an Interest Reset Date, the rate determined
as of the Interest Determination Date immediately preceding the most recent Interest Reset
Date.

(iii) Spread; Spread Multiplier; Index Maturity. The “Spread” is the number of
basis points (one one-hundredth of a percentage point) specified on the face hereof to be
added to or subtracted from the related Interest Rate Basis or Interest Rate Bases
applicable to this Note. The “Spread Multiplier” is the percentage specified on the face
hereof of the related Interest Rate Basis or Interest Rate Bases applicable to this Note by
which the Interest Rate Basis or Interest Rate Bases will be multiplied to determine the
applicable interest rate. The “Index Maturity” is the period to maturity of the instrument
or obligation with respect to which the related Interest Rate Basis or Interest Rate Bases
will be calculated.

(iv) Regular Floating Rate Note. Unless this Note is specified on the face hereof
as a Floating Rate/Fixed Rate Note, this Note (a “Regular Floating Rate Note”) will bear
interest at the rate determined by reference to the applicable Interest Rate Basis or
Interest Rate Bases:(1) plus or minus the applicable Spread, if any; and/or (2) multiplied
by the applicable Spread Multiplier, if any. Commencing on the first Interest Reset Date,
the rate at which interest on this Regular Floating Rate Note is payable will be reset as
of each Interest Reset Date; provided, however, that the interest rate in effect for the
period, if any, from the Original Issue Date to the first Interest Reset Date will be the
Initial Interest Rate.

(v) Floating Rate/Fixed Rate Notes. If this Note is specified on the face hereof as
a “Floating Rate/Fixed Rate Note”, this Note will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Interest Rate Bases: (1) plus or minus
the applicable Spread, if any; and/or (2) multiplied by the applicable Spread Multiplier,
if any. Commencing on the first Interest Reset Date, the rate at which this Floating
Rate/Fixed Rate Note is payable will be reset as of each Interest Reset Date; provided,
however, that: (A) the interest rate in effect for the period, if any, from the Original
Issue Date to the first Interest Reset Date will be the Initial Interest Rate specified on
the face hereof; and (B) the interest rate in effect commencing on the Fixed Rate
Commencement Date will be the Fixed Interest Rate, if specified on the face hereof, or, if
not so specified, the interest rate in effect on the day immediately preceding the Fixed
Rate Commencement Date.

(vi) Interest Reset Dates. The period between Interest Reset Dates will be the
“Interest Reset Period.” Unless otherwise specified on the face hereof, the Interest Reset
Dates will be, in the case of this Floating Rate Note if by its terms it resets: (1)
daily—each business day; (2) weekly—the Wednesday of each week, with the exception of any
weekly reset Floating Rate Note as to which the Treasury Rate is an applicable Interest

6

 

Rate Basis, which will reset the Tuesday of each week; (3) monthly—the fifteenth day of
each calendar month; (4) quarterly—the fifteenth day of March, June, September and
December of each year; (5) semi-annually—the fifteenth day of the two months of each year
specified on the face hereof; and (6) annually—the fifteenth day of the month of each year
specified on the face hereof; provided, however, that, with respect to a Floating
Rate/Fixed Rate Note, the rate of interest thereon will not reset after the particular
Fixed Rate Commencement Date. If any Interest Reset Date for this Floating Rate Note would
otherwise be a day that is not a Business Day, the particular Interest Reset Date will be
postponed to the next succeeding Business Day, except that in the case of a Floating Rate
Note as to which LIBOR is an applicable Interest Rate Basis and that Business Day falls in
the next succeeding calendar month, the particular Interest Reset Date will be the
immediately preceding Business Day.

(vii) Interest Determination Dates. The interest rate applicable to a Floating Rate
Note for an Interest Reset Period commencing on the related Interest Reset Date will be
determined by reference to the applicable Interest Rate Basis as of the particular
“Interest Determination Date”, which will be: (1) with respect to the Federal Funds Open
Rate—the related Interest Reset Date; (2) with respect to the Federal Funds Rate and the
Prime Rate—the Business Day immediately preceding the related Interest Reset Date; (3)
with respect to the CD Rate, the Commercial Paper Rate and the CMT Rate—the second
Business Day preceding the related Interest Reset Date; (4) with respect to the Constant
Maturity Swap Rate—the second U.S. Government Securities business day preceding the
related Interest Reset Date, provided, however, that if after attempting to determine the
Constant Maturity Swap Rate, such rate is not determinable for a particular Interest
Determination Date, then such Interest Determination Date shall be the first U.S.
Government Securities business day preceding the original interest determination date for
which the Constant Maturity Swap Rate can be determined; (5) with respect to LIBOR—the
second London Banking Day (as defined below) preceding the related Interest Reset Date; and
(6) with respect to the Treasury Rate—the day of the week in which the related Interest
Reset Date falls on which day Treasury Bills (as defined below) are normally auctioned
(i.e., Treasury Bills are normally sold at auction on Monday of each week, unless that day
is a legal holiday, in which case the auction is normally held on the following Tuesday,
except that the auction may be held on the preceding Friday); provided, however, that if an
auction is held on the Friday of the week preceding the related Interest Reset Date, the
Interest Determination Date will be the preceding Friday. The Interest Determination Date
pertaining to a Floating Rate Note, the interest rate of which is determined with reference
to two or more Interest Rate Bases, will be the latest Business Day which is at least two
Business Days before the related Interest Reset Date for the applicable Floating Rate Note
on which each Interest Reset Basis is determinable. “London Banking Day” means a day on
which commercial banks are open for business (including dealings in the LIBOR Currency) in
London.

(viii) Calculation Dates. The interest rate applicable to each Interest Reset
Period will be determined by the Calculation Agent on or prior to the Calculation Date (as
defined below), except with respect to LIBOR, which will be determined on the particular
Interest Determination Date. Upon request of the Holder of a Floating Rate Note, the

7

 

Calculation Agent will disclose the interest rate then in effect and, if determined, the
interest rate that will become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to such Floating Rate Note. The “Calculation
Date”, if applicable, pertaining to any Interest Determination Date will be the earlier of:
(1) the tenth calendar day after the particular Interest Determination Date or, if such day
is not a Business Day, the next succeeding Business Day; or (2) the Business Day
immediately preceding the applicable Interest Payment Date or the Maturity Date, as the
case may be.

(ix) Maximum or Minimum Interest Rate. If specified on the face hereof, this Note
may have either or both of a Maximum Interest Rate or a Minimum Interest Rate. If a Maximum
Interest Rate is so designated, the interest rate for a Floating Rate Note cannot ever
exceed such Maximum Interest Rate and in the event that the interest rate on any Interest
Reset Date would exceed such Maximum Interest Rate (as if no Maximum Interest Rate were in
effect) then the interest rate on such Interest Reset Date shall be the Maximum Interest
Rate. If a Minimum Interest Rate is so designated, the interest rate for a Floating Rate
Note cannot ever be less than such Minimum Interest Rate and in the event that the interest
rate on any Interest Reset Date would be less than such Minimum Interest Rate (as if no
Minimum Interest Rate were in effect) then the interest rate on such Interest Reset Date
shall be the Minimum Interest Rate. Notwithstanding anything to the contrary contained
herein, the interest rate on a Floating Rate Note shall not exceed the maximum interest
rate permitted by applicable law.

(x) Interest Payments. Unless otherwise specified on the face hereof, the Interest
Payment Dates will be, in the case of a Floating Rate Note which resets: (1) daily, weekly
or monthly—the fifteenth day of each calendar month or on the fifteenth day of March,
June, September and December of each year, as specified on the face hereof; (2)
quarterly—the fifteenth day of March, June, September and December of each year; (3)
semi-annually—the fifteenth day of the two months of each year specified on the face
hereof; and (4) annually—the fifteenth day of the month of each year as specified on the
face hereof. In addition, the Maturity Date will also be an Interest Payment Date. If any
Interest Payment Date other than the Maturity Date for this Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Payment Date will be postponed
to the next succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and that Business Day falls in the next
succeeding calendar month, the particular Interest Payment Date will be the immediately
preceding Business Day. If the Maturity Date of a Floating Rate Note falls on a day that is
not a Business Day, the Trust will make the required payment of principal, premium, if any,
and interest or other amounts on the next succeeding Business Day, and no additional
interest will accrue in respect of the payment made on that next succeeding Business Day.

(xi) Rounding. Unless otherwise specified on the face hereof, all percentages
resulting from any calculation on this Floating Rate Note will be rounded to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a percentage
point

8

 

rounded upwards. All dollar amounts used in or resulting from any calculation on this
Floating Rate Note will be rounded to the nearest cent.

(xii) Interest Factor. With respect to this Floating Rate Note, accrued interest is
calculated by multiplying the principal amount of such Note by an accrued interest factor.
The accrued interest factor is computed by adding the interest factor calculated for each
day in the particular Interest Reset Period. The interest factor for each day will be
computed by dividing the interest rate applicable to such day by 360, in the case of a
Floating Rate Note as to which the CD Rate, the Commercial Paper Rate, the Federal Funds
Open Rate, the Federal Funds Rate, LIBOR or the Prime Rate is an applicable Interest Rate
Basis, or by the actual number of days in the year, in the case of a Floating Rate Note as
to which the CMT Rate or the Treasury Rate is an applicable Interest Rate Basis. In the
case of a series of Notes that bear interest at floating rates as to which the Constant
Maturity Swap Rate is the Interest Rate Basis, the interest factor for each day will be
computed by dividing the number of days in the interest period by 360 (the number of days
to be calculated on the base is of a year of 360 days with twelve 30-day months (unless (i)
the last day of the interest period is the 31st day of a month but the first day of the
interest period is a day other than the 30th or 31st day of a month, in which case the
month that includes that last day shall not be considered to be shortened to a 30-day
month, or (ii) the last day of the interest period is the last day of the month of
February, in which case the month of February shall not be considered to be lengthened to a
30-day month)). The interest factor for a Floating Rate Note as to which the interest rate
is calculated with reference to two or more Interest Rate Bases will be calculated in each
period in the same manner as if only the applicable Interest Rate Basis specified above
applied.

(xiii) Determination of Interest Rate Basis. The Calculation Agent shall determine
the rate derived from each Interest Rate Basis in accordance with the following provisions.

(A) CD Rate Notes. If the Interest Rate Basis is the CD Rate, this Note shall be
deemed a “CD Rate Note.” Unless otherwise specified on the face hereof, “CD Rate” means:
(1) the rate on the particular Interest Determination Date for negotiable United States
dollar certificates of deposit having the Index Maturity specified on the face hereof as
published in H.15(519) (as defined below) under the caption “CDs (secondary market)”; or
(2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York
City time, on the related Calculation Date, the rate on the particular Interest
Determination Date for negotiable United States dollar certificates of deposit of the
particular Index Maturity as published in H.15 Daily Update (as defined below), or other
recognized electronic source used for the purpose of displaying the applicable rate,
under the caption “CDs (secondary market)”; or (3) if the rate referred to in clause (2)
is not so published by 3:00 P.M., New York City time, on the related Calculation Date,
the rate on the particular Interest Determination Date calculated by the Calculation
Agent as the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New
York City time, on that Interest Determination Date, of three leading non-bank dealers
in negotiable United States dollar certificates of deposit in The City of New York
(which may include the

9

 

purchasing agent or its affiliates) selected by the Calculation Agent for negotiable
United States dollar certificates of deposit of major United States money market banks
for negotiable United States certificates of deposit with a remaining maturity closest
to the particular Index Maturity in an amount that is representative for a single
transaction in that market at that time; or (4) if the dealers so selected by the
Calculation Agent are not quoting as mentioned in clause (3), the CD Rate in effect on
the particular Interest Determination Date. “H.15(519)” means the weekly statistical
release designated as H.15(519), or any successor publication, published by the Board of
Governors of the Federal Reserve System. “H.15 Daily Update” means the daily update of
H.15(519), available through the world-wide-web site of the Board of Governors of the
Federal Reserve System at http://www.federalreserve.gov/releases/H15/ update, or any
successor site or publication.

(B) CMT Rate Notes. If the Interest Rate Basis is the CMT Rate, this Note shall
be deemed a “CMT Rate Note.” Unless otherwise specified on the face hereof, “CMT Rate”
means:

	 	(1)	 	if Reuters Page FRBCMT is specified on the face hereof:

	 	i.	 	the percentage equal to the yield for United States
Treasury securities at “constant maturity” having the Index Maturity
specified on the face hereof as published in H.15(519) under the caption
“Treasury Constant Maturities”, as the yield is displayed on Reuters
Service (or any successor service) on page FRBCMT (or any other page as may
replace the specified page on that service) (“Reuters Page FRBCMT”), for
the particular Interest Determination Date; or
	 
	 	ii.	 	if the rate referred to in clause (i) does not so
appear on Reuters Page FRBCMT, the percentage equal to the yield for United
States Treasury securities at “constant maturity” having the particular
Index Maturity and for the particular Interest Determination Date as
published in H.15(519) under the caption “Treasury Constant Maturities”; or
	 
	 	iii.	 	if the rate referred to in clause (ii) does not so
appear in H.15(519), the rate on the particular Interest Determination Date
for the period of the particular Index Maturity as may then be published by
either the Federal Reserve System Board of Governors or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate which would otherwise have been published in
H.15(519); or
	 
	 	iv.	 	if the rate referred to in clause (iii) is not so
published, the rate on the particular Interest Determination Date
calculated by the Calculation Agent as a yield to maturity based on the
arithmetic mean of the secondary market bid prices at approximately 3:30
P.M., New York City time, on that Interest Determination Date of three
leading primary United States

10

 

	 	 	 	government securities dealers in The City of New York (which may include the
purchasing agent or its affiliates) (each, a “Reference Dealer”) selected by
the Calculation Agent from five Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation, or, in the event of
equality, one of the highest, and the lowest quotation or, in the event of
equality, one of the lowest, for United States Treasury securities with an
original maturity equal to the particular Index Maturity, a remaining term
to maturity no more than one year shorter than that Index Maturity and in a
principal amount that is representative for a single transaction in the
securities in that market at that time; or
	 
	 	v.	 	if fewer than five but more than two of the prices
referred to in clause (iv) are provided as requested, the rate on the
particular Interest Determination Date calculated by the Calculation Agent
based on the arithmetic mean of the bid prices obtained and neither the
highest nor the lowest of the quotations shall be eliminated; or
	 
	 	vi.	 	if fewer than three prices referred to in clause (iv)
are provided as requested, the rate on the particular Interest
Determination Date calculated by the Calculation Agent as a yield to
maturity based on the arithmetic mean of the secondary market bid prices as
of approximately 3:30 P.M., New York City time, on that Interest
Determination Date of three Reference Dealers selected by the Calculation
Agent from five Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation or, in the event of equality, one of the
highest and the lowest quotation or, in the event of equality, one of the
lowest, for United States Treasury securities with an original maturity
greater than the particular Index Maturity, a remaining term to maturity
closest to that Index Maturity and in a principal amount that is
representative for a single transaction in the securities in that market at
that time; or
	 
	 	vii.	 	if fewer than five but more than two prices referred to
in clause (vi) are provided as requested, the rate on the particular
Interest Determination Date calculated by the Calculation Agent based on
the arithmetic mean of the bid prices obtained and neither the highest nor
the lowest of the quotations will be eliminated; or
	 
	 	viii.	 	if fewer than three prices referred to in clause (vi)
are provided as requested, the CMT Rate in effect on the particular
Interest Determination Date; or

	 	(2)	 	if Reuters Page FEDCMT is specified on the face hereof:

	 	i.	 	the percentage equal to the one-week or one-month, as
specified on the face hereof, average yield for United States Treasury
securities at “constant maturity” having the Index Maturity specified on
the face hereof

11

 

	 	 	 	as published in H.15(519) opposite the caption “Treasury Constant
Maturities”, as the yield is displayed on Reuters Service (or any successor
service) (on page FEDCMT or any other page as may replace the specified page
on that service) (“Reuters Page FEDCMT”), for the week or month, as
applicable, ended immediately preceding the week or month, as applicable, in
which the particular Interest Determination Date falls; or
	 
	 	ii.	 	if the rate referred to in clause (i) does not so
appear on Reuters Page FEDCMT, the percentage equal to the one-week or
one-month, as specified on the face hereof, average yield for United States
Treasury securities at “constant maturity” having the particular Index
Maturity and for the week or month, as applicable, preceding the particular
Interest Determination Date as published in H.15(519) opposite the caption
“Treasury Constant Maturities”; or
	 
	 	iii.	 	if the rate referred to in clause (ii) does not so
appear in H.15(519), the one-week or one-month, as specified on the face
hereof, average yield for United States Treasury securities at “constant
maturity” having the particular Index Maturity as otherwise announced by
the Federal Reserve Bank of New York for the week or month, as applicable,
ended immediately preceding the week or month, as applicable, in which the
particular Interest Determination Date falls; or
	 
	 	iv.	 	if the rate referred to in clause (iii) is not so
published, the rate on the particular Interest Determination Date
calculated by the Calculation Agent as a yield to maturity based on the
arithmetic mean of the secondary market bid prices at approximately 3:30
P.M., New York City time, on that Interest Determination Date of three
Reference Dealers selected by the Calculation Agent from five Reference
Dealers selected by the Calculation Agent and eliminating the highest
quotation, or, in the event of equality, one of the highest, and the lowest
quotation or, in the event of equality, one of the lowest, for United
States Treasury securities with an original maturity equal to the
particular Index Maturity, a remaining term to maturity no more than one
year shorter than that Index Maturity and in a principal amount that is
representative for a single transaction in the securities in that market at
that time; or
	 
	 	v.	 	if fewer than five but more than two of the prices
referred to in clause (iv) are provided as requested, the rate on the
particular Interest Determination Date calculated by the Calculation Agent
based on the arithmetic mean of the bid prices obtained and neither the
highest nor the lowest of the quotations shall be eliminated; or
	 
	 	vi.	 	if fewer than three prices referred to in clause (iv)
are provided as requested, the rate on the particular Interest
Determination Date calculated by the Calculation Agent as a yield to
maturity based on the arithmetic

12

 

	 	 	 	mean of the secondary market bid prices as of approximately 3:30 P.M., New
York City time, on that Interest Determination Date of three Reference
Dealers selected by the Calculation Agent from five Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation or,
in the event of equality, one of the highest and the lowest quotation or, in
the event of equality, one of the lowest, for United States Treasury
securities with an original maturity greater than the particular Index
Maturity, a remaining term to maturity closest to that Index Maturity and in
a principal amount that is representative for a single transaction in the
securities in that market at the time; or
	 
	 	vii.	 	if fewer than five but more than two prices referred to
in clause (vi) are provided as requested, the rate on the particular
Interest Determination Date calculated by the Calculation Agent based on
the arithmetic mean of the bid prices obtained and neither the highest nor
the lowest of the quotations will be eliminated; or
	 
	 	viii.	 	if fewer than three prices referred to in clause (vi)
are provided as requested, the CMT Rate in effect on that Interest
Determination Date.

	 	 	 	If two United States Treasury securities with an original maturity greater than the
Index Maturity specified on the face hereof have remaining terms to maturity equally
close to the particular Index Maturity, the quotes for the United States Treasury
security with the shorter original remaining term to maturity will be used.

(C) Commercial Paper Rate Notes. If the Interest Rate Basis is the Commercial Paper
Rate, this Note shall be deemed a “Commercial Paper Rate Note.” Unless otherwise specified on
the face hereof, “Commercial Paper Rate” means: (1) the Money Market Yield (as defined below) on
the particular Interest Determination Date of the rate for commercial paper having the Index
Maturity specified on the face hereof as published in H.15(519) under the caption “Commercial
Paper—Nonfinancial”; or (2) if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the Money Market Yield of the rate on
the particular Interest Determination Date for commercial paper having the particular Index
Maturity as published in H.15 Daily Update, or such other recognized electronic source used for
the purpose of displaying the applicable rate, under the caption “Commercial
Paper—Nonfinancial”; or (3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on the particular Interest
Determination Date calculated by the Calculation Agent as the Money Market Yield of the
arithmetic mean of the offered rates at approximately 11:00 A.M., New York City time, on that
Interest Determination Date of three leading dealers of United States dollar commercial paper in
The City of New York (which may include the purchasing agent or its affiliates) selected by the
Calculation Agent for commercial paper having the particular Index Maturity placed for
industrial issuers whose bond rating is “Aa”, or the equivalent, from a nationally recognized
statistical rating organization; or (4) if the dealers so selected by the Calculation Agent are
not quoting as mentioned in clause (3), the Commercial Paper Rate

13

 

in effect on the particular Interest Determination Date. “Money Market Yield” means a yield
(expressed as a percentage) calculated in accordance with the following formula:

	 	 	 	 	 	 	 
	 

	 	Money Market Yield =
	 	D x 360
	 	x 100
	 

	 	 	 	360 – (D x M)	 	 

where “D” refers to the applicable per annum rate for commercial paper quoted on a bank discount
basis and expressed as a decimal, and “M” refers to the actual number of days in the applicable
Interest Reset Period.

(D) Constant Maturity Swap Rate Notes. If the Interest Rate Basis is the Constant
Maturity Swap Rate, this Note shall be deemed a “Constant Maturity Swap Rate Note.” Unless
otherwise specified on the face hereof, “Constant Maturity Swap Rate” means: (1) the rate for
U.S. dollar swaps with the designated maturity specified in the applicable pricing supplement,
expressed as a percentage, which appears on the Reuters Screen (or any successor service)
TGM42276 Page as of 11:00 A.M., New York City time, on the particular Interest Determination
Date; or (2) if the rate referred to in clause (1) does not appear on the Reuters Screen (or any
successor service) TGM42276 Page by 2:00 P.M., New York City time, on such Interest
Determination Date, a percentage determined on the basis of the mid-market semiannual swap rate
quotations provided by the reference banks (as defined below) as of approximately 11:00 A.M.,
New York City time, on such Interest Determination Date, and, for this purpose, the semi-annual
swap rate means the mean of the bid and offered rates for the semi-annual fixed leg, calculated
on a 30/360 day count basis, of a fixed-for-floating U.S. dollar interest rate swap transaction
with a term equal to the designated maturity specified in the applicable pricing supplement
commencing on the Interest Reset Date and in a representative amount (as defined below) with an
acknowledged dealer of good credit in the swap market, where the floating leg, calculated on an
actual/360 day count basis, is equivalent to USD-LIBOR-BBA with a designated maturity specified
in the applicable pricing supplement. The Calculation Agent will request the principal New York
City office of each of the reference banks to provide a quotation of its rate. If at least three
quotations are provided, the rate for that Interest Determination Date will be the arithmetic
mean of the quotations, eliminating the highest quotation (or, in the event of equality, one of
the highest) and the lowest quotation (or, in the event of equality, one of the lowest); or (3)
if at least three quotations are not received by the Calculation Agent as mentioned in clause
(2), the Constant Maturity Swap Rate in effect on the particular Interest Determination Date.
“U.S. Government Securities business day” means any day except for Saturday, Sunday, or a day on
which The Bond Market Association recommends that the fixed income departments of its members be
closed for the entire day for purposes of trading in U.S. government securities. “Representative
amount” means an amount that is representative for a single transaction in the relevant market
at the relevant time. “Reference banks” mean five leading swap dealers in the New York City
interbank market, selected by the Calculation Agent, after consultation with us.

(E) Federal Funds Open Rate Notes. If the Interest Rate Basis is the Federal Funds Open
Rate, this Note shall be deemed a “Federal Funds Open Rate Note.” Unless otherwise specified on
the face hereof, “Federal Funds Open Rate” means the rate set forth on Reuters Service (or

14

 

any successor service) on page 5 (or any other page as may replace the specified page on that
service) for an Interest Determination Date underneath the caption “FEDERAL FUNDS” in the row
titled “OPEN”. If the rate is not available for an Interest Determination Date, the rate for
that Interest Determination Date shall be the Federal Funds Rate as determined below.

(F) Federal Funds Rate Notes. If the Interest Rate Basis is the Federal Funds Rate, this
Note shall be deemed a “Federal Funds Rate Note.” Unless otherwise specified on the face hereof,
“Federal Funds Rate” means: (1) the rate as of the particular Interest Determination Date for
United States dollar federal funds as published in H.15(519) under the caption “Federal Funds
(Effective)” and displayed on Reuters Service (or any successor service) on page FEDFUNDS1 (or
any other page as may replace the specified page on that service) (“Reuters Page FEDFUNDS1”); or
(2) if the rate referred to in clause (1) does not so appear on Reuters Page FEDFUNDS1 or is not
so published by 5:00 P.M., New York City time, on the related Calculation Date, the rate on the
particular Interest Determination Date for United States dollar federal funds as published in
H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying
the applicable rate, under the caption “Federal Funds (Effective)”; or (3) if such rate does not
appear on Reuters Page FEDFUNDS1 or is not so published by 5:00 P.M., New York City time, on the
related Calculation Date, the rate will be the rate for the first preceding day for which such
rate is set forth in H.15(519) under the caption “Federal Funds (Effective)”, as such rate is
displayed on the Reuters Page FEDFUNDS1.

(G) LIBOR Notes. If the Interest Rate Basis is LIBOR, this Note shall be deemed a “LIBOR
Note.” Unless otherwise specified on the face hereof, “LIBOR” means: (1) whether “LIBOR Reuters”
is or is not specified on the face hereof as the method for calculating LIBOR, the rate for
deposits in the LIBOR Currency (as defined below) having the Index Maturity specified on the
face hereof, commencing on the related Interest Reset Date, that appears on the LIBOR Page (as
defined below) as of 11:00 A.M., London time, on the particular Interest Determination Date; or
(2) if no rate appears on the particular Interest Determination Date on the LIBOR Page as
specified in clause (1), the rate calculated by the Calculation Agent as the arithmetic mean of
at least two offered quotations obtained by the Calculation Agent after requesting the principal
London offices of each of four major reference banks (which may include affiliates of the
Agents), in the London interbank market selected by the Calculation Agent to provide the
Calculation Agent with its offered quotation for deposits in the LIBOR Currency for the period
of the particular Index Maturity, commencing on the related Interest Reset Date, to prime banks
in the London interbank market at approximately 11:00 A.M., London time, on that Interest
Determination Date and in a principal amount that is representative for a single transaction in
the LIBOR Currency in that market at that time; or (3) if fewer than two offered quotations
referred to in clause (2) are provided as requested, the rate calculated by the Calculation
Agent as the arithmetic mean of the rates quoted at approximately 11:00 A.M., in the applicable
Principal Financial Center, on the particular Interest Determination Date by three major banks
(which may include affiliates of the Agents), in that principal financial center selected by the
Calculation Agent for loans in the LIBOR Currency to leading European banks, having the
particular Index Maturity and in a principal amount that is representative for a single
transaction in the LIBOR Currency in that market at that time; or (4) if the banks so selected
by the Calculation Agent are not quoting as

15

 

mentioned in clause (3), LIBOR in effect on the particular Interest Determination Date. “LIBOR
Currency” means the currency specified on the face hereof as to which LIBOR shall be calculated
or, if no currency is specified on the face hereof, United States dollars. “LIBOR Page” means
the display on Reuters Service (or any successor service) on the page specified on the face
hereof (or any other page as may replace that page on that service) for the purpose of
displaying the London interbank rates of major banks for the LIBOR Currency.

(H) Prime Rate Notes. If the Interest Rate Basis is the Prime Rate, this Note shall be
deemed a “Prime Rate Note.” Unless otherwise specified on the face hereof, “Prime Rate” means:
(1) the rate on the particular Interest Determination Date as published in H.15(519) under the
caption “Bank Prime Loan”; or (2) if the rate referred to in clause (1) is not so published by
3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular
Interest Determination Date as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying the applicable rate, under the caption
“Bank Prime Loan”, or (3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on the particular Interest
Determination Date calculated by the Calculation Agent as the arithmetic mean of the rates of
interest publicly announced by each bank that appears on the Reuters Screen US PRIME 1 Page (as
defined below) as the applicable bank’s prime rate or base lending rate as of 11:00 A.M., New
York City time, on that Interest Determination Date; or (4) if fewer than four rates referred to
in clause (3) are so published by 3:00 p.m., New York City time, on the related Calculation
Date, the rate calculated by the Calculation Agent as the particular Interest Determination Date
calculated by the Calculation Agent as the arithmetic mean of the prime rates or base lending
rates quoted on the basis of the actual number of days in the year divided by a 360-day year as
of the close of business on that Interest Determination Date by three major banks (which may
include affiliates of the purchasing agent) in The City of New York selected by the Calculation
Agent; or (5) if the banks so selected by the Calculation Agent are not quoting as mentioned in
clause (4), the Prime Rate in effect on the particular Interest Determination Date. “Reuters
Screen US PRIME 1 Page” means the display on the Reuter Monitor Money Rates Service (or any
successor service) on the “US PRIME 1” page (or any other page as may replace that page on that
service) for the purpose of displaying prime rates or base lending rates of major United States
banks.

(I) Treasury Rate Notes. If the Interest Rate Basis is the Treasury Rate, this Note
shall be deemed a “Treasury Rate Note.” Unless otherwise specified on the face hereof, “Treasury
Rate” means: (1) the rate from the auction held on the Interest Determination Date (the
“Auction”) of direct obligations of the United States (“Treasury Bills”) having the Index
Maturity specified on the face hereof under the caption “INVESTMENT RATE” on the display on
Reuters Service (or any successor service) on page USAUCTION 10 (or any other page as may
replace that page on that service) (“Reuters USAUCTION 10”) or page USAUCTION 11 (or any other
page as may replace that page on that service) (“Reuters USAUCTION 11”); or (2) if the rate
referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related
Calculation Date, the Bond Equivalent Yield (as defined below) of the rate for the applicable
Treasury Bills as published in H.15 Daily Update, or another recognized electronic source used
for the purpose of displaying the applicable rate, under the caption “U.S. Government
Securities/Treasury Bills/Auction High”; or (3) if the

16

 

rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the
related Calculation Date, the Bond Equivalent Yield of the auction rate of the applicable
Treasury Bills as announced by the United States Department of the Treasury; or (4) if the rate
referred to in clause (3) is not so announced by the United States Department of the Treasury,
or if the Auction is not held, the Bond Equivalent Yield of the rate on the particular Interest
Determination Date of the applicable Treasury Bills as published in H.15(519) under the caption
“U.S. Government Securities/Treasury Bills/Secondary Market”; or (5) if the rate referred to in
clause (4) is not so published by 3:00 P.M., New York City time, on the related Calculation
Date, the rate on the particular Interest Determination Date of the applicable Treasury Bills as
published in H.15 Daily Update, or another recognized electronic source used for the purpose of
displaying the applicable rate, under the caption “U.S. Government Securities/Treasury
Bills/Secondary Market”; or (6) if the rate referred to in clause (5) is not so published by
3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular
Interest Determination Date calculated by the Calculation Agent as the Bond Equivalent Yield of
the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York
City time, on that Interest Determination Date, of three primary United States government
securities dealers (which may include the purchasing agent or its affiliates) selected by the
Calculation Agent, for the issue of Treasury Bills with a remaining maturity closest to the
Index Maturity specified on the face hereof; or (7) if the dealers so selected by the
Calculation Agent are not quoting as mentioned in clause (6), the Treasury Rate in effect on the
particular Interest Determination Date. “Bond Equivalent Yield” means a yield (expressed as a
percentage) calculated in accordance with the following formula:

	 	 	 	 	 	 	 
	 

	 	Bond Equivalent Yield =
	 	D x N
	 	x 100
	 

	 	 	 	360 – (D x M)	 	 

where “D” refers to the applicable per annum rate for Treasury Bills quoted on a bank discount
basis and expressed as a decimal, “N” refers to 365 or 366, as the case may be, and “M” refers to
the actual number of days in the applicable Interest Reset Period.

(c) Discount Notes. If this Note is specified on the face hereof as a “Discount Note”:

(i) Principal and Interest. This Note will bear interest in the same manner as set
forth in Section 3(a) above, and payments of principal and interest shall be made as set
forth on the face hereof. Discount Notes may not bear any interest currently or may bear
interest at a rate that is below market rates at the time of issuance. The difference between
the Issue Price of a Discount Note and par is referred to as the “Discount”.

(ii) Redemption; Repayment; Acceleration. In the event a Discount Note is redeemed,
repaid or accelerated, the amount payable to the Holder of such Discount Note will be equal
to the sum of: (A) the Issue Price (increased by any accruals of Discount); and (B) any
unpaid interest accrued on such Discount Note to the Maturity Date (“Amortized Face Amount”).
Unless otherwise specified on the face hereof, for purposes of determining the amount of
Discount that has accrued as of any date on which a redemption, repayment or acceleration of
maturity occurs for a Discount Note, a Discount will be accrued using a

17

 

constant yield method. The constant yield will be calculated using a 30-day month, 360-day
year convention, a compounding period that, except for the Initial Period (as defined below),
corresponds to the shortest period between Interest Payment Dates for the applicable Discount
Note (with ratable accruals within a compounding period), a coupon rate equal to the initial
coupon rate applicable to the applicable Discount Note and an assumption that the maturity of
such Discount Note will not be accelerated. If the period from the date of issue to the first
Interest Payment Date for a Discount Note (the “Initial Period”) is shorter than the
compounding period for such Discount Note, a proportionate amount of the yield for an entire
compounding period will be accrued. If the Initial Period is longer than the compounding
period, then the period will be divided into a regular compounding period and a short period
with the short period being treated as provided above.

Section 4. Redemption. If no redemption right is set forth on the face hereof, this Note
may not be redeemed prior to the Stated Maturity Date, except as set forth in the Indenture or in
Section 10 hereof. In the case of a Note that is not a Discount Note, if a redemption right is set
forth on the face of this Note, the Trust shall elect to redeem this Note on the Interest Payment
Date after the Initial Redemption Date set forth on the face hereof on which the Funding Agreement
is to be redeemed in whole or in part by Principal Life Insurance Company (“Principal Life”) (each,
a “Redemption Date”), in which case this Note must be redeemed on such Redemption Date in whole or
in part, as applicable, prior to the Stated Maturity Date, in increments of $1,000 at the
applicable Redemption Price (as defined below), together with unpaid interest, if any, accrued
thereon to, but excluding, the applicable Redemption Date. “Redemption Price” shall mean the unpaid
Principal Amount of this Note to be redeemed. The unpaid Principal Amount of this Note to be
redeemed shall be determined by multiplying (1) the Outstanding Principal Amount of this Note by
(2) the quotient derived by dividing (A) the outstanding principal amount of the Funding Agreement
to be redeemed by Principal Life by (B) the outstanding principal amount of the Funding Agreement.
Notice must be given not more than sixty (60) nor less than thirty (30) calendar days prior to the
proposed Redemption Date. In the event of redemption of this Note in part only, a new Note for the
unredeemed portion hereof shall be issued in the name of the Holder hereof upon the surrender
hereof. If less than all of this Note is redeemed, the Indenture Trustee will select by lot or, in
its discretion, on a pro rata basis, the amount of the interest of each direct participant in the
Trust to be redeemed.

Section 5. Sinking Funds. Unless specified on the face hereof, this Note will not be
subject to, or entitled to the benefit of, any sinking fund.

Section 6. Repayment. If no repayment right is set forth on the face hereof, this Note may
not be repaid at the option of the Holder hereof prior to the Stated Maturity Date. If a repayment
right is granted on the face of this Note, this Note may be subject to repayment at the option of
the Holder on any Interest Payment Date on and after the date, if any, indicated on the face hereof
(each, a “Repayment Date”). On any Repayment Date, unless otherwise specified on the face hereof,
this Note shall be repayable in whole or in part in increments of $1,000 at the option of the
Holder hereof at a repayment price equal to 100% of the Principal Amount to be repaid, together
with interest thereon payable to the Repayment Date. For this Note to be repaid in whole or in part
at the option of the Holder hereof, this Note must be received by the Indenture

18

 

Trustee, with the form entitled “Option to Elect Repayment”, below, duly completed by the Indenture
Trustee. Exercise of such repayment option by the Holder hereof shall be irrevocable. In the event
of a repayment of this Note in part only, a new Note for the portion hereof not repaid shall be
issued in the name of the Holder hereof upon the surrender hereof.

Section 7. Modifications and Waivers. The Indenture contains provisions permitting the
Trust and the Indenture Trustee (1) at any time and from time to time without notice to, or the
consent of, the Holders of any Notes issued under the Indenture to enter into one or more
supplemental indentures for certain enumerated purposes and (2) with the consent of the Holders of
a majority in aggregate principal amount of the Outstanding Notes affected thereby, to enter into
one or more supplemental indentures for the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, the Indenture or of modifying in any manner the
rights of Holders of Notes under the Indenture; provided, that, with respect to certain enumerated
provisions, no such supplemental indenture shall be entered into without the consent of the Holder
of each Note affected thereby. Any such consent or waiver by the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or
not notation of such consent or waiver is made upon this Note or such other Notes.

Section 8. Obligations Unconditional. No reference herein to the Indenture and no
provisions of this Note or of the Indenture shall impair the right of each Holder of any Note,
which is absolute and unconditional, to receive payment of the principal of, and any interest on,
and premium, if any, on, such Note on the respective Stated Maturity Date or redemption date
thereof and to institute suit for the enforcement of any such payment, and such rights shall not be
impaired without the consent of such Holder.

Section 9. Events of Default. If an Event of Default with respect to this Note shall occur
and be continuing, the principal of, and all other amounts payable on, the Notes may be declared
due and payable, or may be automatically accelerated, as the case may be, in the manner and with
the effect provided in the Indenture. In the event that this Note is a Discount Note, the amount of
principal of this Note that becomes due and payable upon such acceleration shall be equal to the
amount calculated as set forth in Section 3(c) hereof.

Section 10. Withholding; No Additional Amounts; Tax Event and Redemption. All amounts due
on this Note will be made without any applicable withholding or deduction for or on account of any
present or future taxes, duties, levies, assessments or other governmental charges of whatever
nature imposed or levied by or on behalf of any governmental authority, unless such withholding or
deduction is required by law. Unless otherwise specified on the face hereof, the Trust will not pay
any additional amounts to the Holder of this Note in respect of such withholding or deduction, any
such withholding or deduction will not give rise to an event of default or any independent right or
obligation to redeem this Note and the Holder will be deemed for all purposes to have received cash
in an amount equal to the portion of such withholding or deduction that is attributable to such
Holder’s interest in this Note as equitably determined by the Trust.

     If (1) a Tax Event (defined below) as to the Funding Agreement occurs and (2) Principal Life
redeems the Funding Agreement in whole or in part, the Trust will redeem the Notes, subject to

19

 

the terms and conditions of Section 2.04 of the Standard Indenture Terms, at the Tax
Event Redemption Price (defined below) together with unpaid interest accrued thereon to the
applicable redemption date. “Tax Event” means that Principal Life shall have received an opinion of
independent legal counsel stating in effect that as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or therein or (b) any
amendment to, or change in, an interpretation or application of any such laws or regulations by any
governmental authority in the United States, which amendment or change is enacted, promulgated,
issued or announced on or after the effective date of the Funding Agreement, there is more than an
insubstantial risk that (i) the Trust is, or will be within ninety (90) days of the date thereof,
subject to U.S. federal income tax with respect to interest accrued or received on the Funding
Agreement or (ii) the Trust is, or will be within ninety (90) days of the date thereof, subject to
more than a de minimis amount of taxes, duties or other governmental charges. “Tax Event Redemption
Price” means an amount equal to the unpaid principal amount of this Note to be redeemed, which
shall be determined by multiplying (1) the Outstanding Principal Amount of this Note by (2) the
quotient derived by dividing (A) the outstanding principal amount to be redeemed by Principal Life
of the Funding Agreement by (B) the outstanding principal amount of the Funding Agreement.

Section 11. Listing. Unless otherwise specified on the face hereof, this Note will not be
listed on any securities exchange.

Section 12. Collateral. The Collateral for this Note includes the Funding Agreement and the
Guarantee specified on the face hereof.

Section 13. No Recourse Against Certain Persons. No recourse shall be had for the payment
of any principal, interest or any other sums at any time owing under the terms of this Note, or for
any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture
or any indenture supplemental thereto, against the Nonrecourse Parties, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such personal liability being, by the acceptance hereof and as part of the
consideration for issue hereof, expressly waived and released.

Section 14. Miscellaneous.

     (a) This Note is issuable only as a registered Note without coupons in denominations of $1,000
and any integral multiple in excess thereof unless otherwise specified on the face of this Note.

     (b) Prior to due presentment for registration of transfer of this Note, the Trust, the
Indenture Trustee, the Registrar, the Paying Agent, any Agent, and any other agent of the Trust or
the Indenture Trustee may treat the Person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment as herein provided and for all other purposes, whether
or not this Note shall be overdue, and none of the Trust, the Indenture Trustee, the Registrar, the
Paying Agent, any Agent, or any other agent of the Trust or the Indenture Trustee shall be affected
by notice to the contrary.

20

 

     (c) The Notes are being issued by means of a book-entry-only system with no physical
distribution of certificates to be made except as provided in the Indenture. The book-entry system
maintained by DTC will evidence ownership of the Notes, with transfers of ownership effected on the
records of DTC and its participants pursuant to rules and procedures established by DTC and its
participants. The Trust and the Indenture Trustee will recognize Cede & Co., as nominee of DTC, as
the registered owner of the Notes, as the Holder of the Notes for all purposes, including payment
of principal, premium (if any) and interest, notices and voting. Transfer of principal, premium (if
any) and interest to participants of DTC will be the responsibility of DTC, and transfer of
principal, premium (if any) and interest to beneficial holders of the Notes by participants of DTC
will be the responsibility of such participants and other nominees of such beneficial holders. So
long as the book-entry system is in effect, the selection of any Notes to be redeemed or repaid
will be determined by DTC pursuant to rules and procedures established by DTC and its participants.
Neither the Trust nor the Indenture Trustee shall be responsible or liable for such transfers or
payments or for maintaining, supervising or reviewing the records maintained by DTC, its
participants or persons acting through such participants.

     (d) This Note or portion hereof may not be exchanged for Definitive Notes, except in the
limited circumstances provided for in the Indenture. The transfer or exchange of Definitive Notes
shall be subject to the terms of the Indenture. No service charge will be made for any registration
of transfer or exchange, but the Trust may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

Section 15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

21

 

OPTION TO ELECT REPAYMENT

     The undersigned hereby irrevocably request(s) and instruct(s) the Trust to repay this Note (or
portion hereof specified below) pursuant to its terms at a price equal to the Principal Amount
hereof together with interest to the repayment date, to the undersigned, at:

 

 

(Please print or typewrite name and address of the undersigned).

     For this Note to be repaid, the Indenture Trustee (or the Paying Agent on behalf of the
Indenture Trustee) must receive at its Corporate Trust Office, or at such other place or places of
which the Trust shall from time to time notify the Holder of this Note, not more than sixty (60)
nor less than thirty (30) days prior to a Repayment Date, if any, shown on the face of this Note,
this Note with this “Option to Elect Repayment” form duly completed.

     If less than the entire Principal Amount of this Note is to be repaid, specify the portion
hereof (which shall be in increments of $1,000) which the Holder elects to have repaid and specify
the denomination or denominations (which shall be $___or an integral multiple of $1,000 in excess
of $___) of the Notes to be issued to the Holder for the portion of this Note not being repaid (in
the absence of any such specification, one such Note will be issued for the portion not being
repaid).

	 	 	 	 	 	 	 
	$
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	DATE:	 	 	 	NOTICE: The signature on this Option
to Elect Repayment must
	 

	 	 	 	 	 	 
	 
(Principal Amount to be repaid, if
amount to be repaid is less than the
Principal Amount of this Note
(Principal Amount remaining must be
an authorized denomination)	 	correspond
with the name as written upon the
face of this Note in every
particular, without alteration or
enlargement or any change whatever.
Fill in for registration of Notes if
to be issued otherwise than to the
registered Holder:
	 
	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	 	 	 
	$

	 	 	 	Address:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	(Please print name and address
including zip code)

SOCIAL SECURITY OR OTHER TAXPAYER ID NUMBER:

22

 

SURVIVOR’S OPTION RIDER

     (a) Unless this Note, on its face, has been declared due and payable prior to the Maturity
Date by reason of any Event of Default under the Indenture, or has been previously redeemed or
otherwise repaid, the authorized Representative (as defined below) of a deceased Beneficial Owner
(as defined below) of this Note shall have the option to elect repayment by the Trust in whole or
in part prior to the Maturity Date following the death of the Beneficial Owner (a “Survivor’s
Option”). The Survivor’s Option may not be exercised unless the deceased Beneficial Owner purchased
the Notes either within ninety (90) days of their issuance or acquired the Notes at least six (6)
months before the date of death of such deceased Beneficial Owner. “Beneficial Owner” as used in
this Survivor’s Option Rider means, with respect to this Note, the person who has the right,
immediately prior to such person’s death, to receive the proceeds from the disposition of this
Note, as well as the right to receive payments on this Note.

     (b) Upon (1) the valid exercise of the Survivor’s Option and the proper tender of this Note by
or on behalf of a person that has authority to act on behalf of the deceased Beneficial Owner of
this Note under the laws of the appropriate jurisdiction (including, without limitation, the
personal representative or executor of the deceased Beneficial Owner or the surviving joint owner
of the deceased Beneficial Owner) (the “Representative”) and (2) the tender and acceptance of that
portion of the Funding Agreement equal to the amount of the portion of this Note to be redeemed,
the Trust shall repay this Note (or portion thereof) at a price equal to 100% of the unpaid
Principal Amount of the deceased Beneficial Owner’s beneficial interest in this Note plus accrued
and unpaid interest to, but excluding, the date of such repayment. However, the Trust shall not be
obligated to repay:

(i) beneficial ownership interests in Notes exceeding the greater of $2,000,000 or 2% (or such
other amounts, as specified in the Pricing Supplement) in aggregate principal amount for all
notes then outstanding under the Principal® Life CoreNotes® Program and the Secured Medium-Term
Notes Retail Program as of the end of the most recent calendar year (the “Annual Put
Limitation”);

(ii) on behalf of an individual deceased Beneficial Owner, any beneficial ownership interest in
all notes issued under the Principal® Life CoreNotes® Program and the Secured Medium-Term Notes
Retail Program that exceeds $250,000 (or such other amounts, as specified in the Pricing
Supplement) in any calendar year (the “Individual Put Limitation”); or

(iii) beneficial ownership interests in Notes exceeding the amount specified on the face hereof
and in the Pricing Supplement (the “Trust Put Limitation”), as of the later of the end of the
most recent calendar year or the issuance date of the Notes.

     (c) The Trust shall not make principal repayments pursuant to exercise of the Survivor’s
Option in amounts that are less than $1,000, and, in the event that the limitations described in
the preceding sentence would result in the partial repayment of this Note, the Principal Amount
remaining Outstanding after repayment must be at least $1,000 (the minimum authorized denomination
of the Notes).

23

 

     (d) An otherwise valid election to exercise the Survivor’s Option may not be withdrawn.

     (e) Election to exercise the Survivor’s Option will be accepted in the order that elections
are received by the Trustee, except for any Notes (or portion thereof) the acceptance of which
would contravene (1) the Annual Put Limitation, (2) the Individual Put Limitation or (3) the Trust
Put Limitation. Any Note (or portion thereof) accepted for repayment pursuant to exercise of the
Survivor’s Option shall be repaid on the first Interest Payment Date that occurs 20 or more
calendar days after the date of such acceptance. If, as of the end of any calendar year, the
aggregate principal amount of all notes (or portions thereof) issued under the Principal® Life
CoreNotes® Program and the Secured Medium-Term Notes Retail Program that have been tendered
pursuant to the valid exercise of the Survivor’s Option during such year has exceeded the Annual
Put Limitation or the Individual Put Limitation, for such year, any exercise(s) of the Survivor’s
Option with respect to Notes (or portions thereof) not accepted during such calendar year, because
such acceptance would have contravened any such limitation, shall be deemed to be tendered on the
first day of the following calendar year in the order all such Notes (or portions thereof) were
originally tendered. If, as of the end of any calendar year, the aggregate principal amount of all
Notes (or portions thereof) that have been tendered pursuant to the valid exercise of the
Survivor’s Option during such year has exceeded the Trust Put Limitation, for such year, any
exercise(s) of the Survivor’s Option with respect to Notes (or portions thereof) not accepted
during such calendar year, because such acceptance would have contravened any such limitation,
shall be deemed to be tendered on the first day of the following calendar year in the order all
such Notes (or portions thereof) were originally tendered. In the event that this Note (or any
portion hereof) tendered for repayment pursuant to valid exercise of the Survivor’s Option is not
accepted or is to be delayed, the Trustee shall deliver a notice by first-class mail to the
Depositary that states the reason such Note (or portion thereof) has not been accepted for payment
or is to be delayed.

     (f) In order to obtain repayment through exercise of the Survivor’s Option with respect to
this Note (or portion hereof), the Representative must provide the following items to the broker or
other entity through which the beneficial interest in this Note is held by the deceased Beneficial
Owner: (1) a written instruction to such broker or other entity in the form of Annex A attached
hereto to notify the Depositary of the Representative’s desire to obtain repayment through the
exercise of the Survivor’s Option; (2) appropriate evidence satisfactory to the Trustee that (i)
the deceased Beneficial Owner purchased the Notes either within ninety (90) days of their issuance
or acquired the Notes at least six (6) months before the date of death of such deceased Beneficial
Owner, (ii) the death of such Beneficial Owner has occurred, and the date of such death, and (iii)
the Representative has authority to act on behalf of the deceased Beneficial Owner; (3) if the
interest in this Note is held by a nominee of the deceased Beneficial Owner, a certificate
satisfactory to the Trustee from such nominee attesting to the deceased’s beneficial ownership of
this Note; (4) a written request for repayment signed by the Representative, with the signature
guaranteed by a member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States; (5) if applicable, a properly executed assignment or
endorsement; (6) tax waivers and such other instruments or documents that the Trustee reasonably
requires in order to establish the validity of the beneficial ownership of this Note and the
claimant’s entitlement to payment; and (7) any additional information the Trustee reasonably

24

 

requires to evidence satisfaction of any conditions to the exercise of such Survivor’s Option
or to document beneficial ownership or authority to make the election and to cause the repayment of
this Note. Such broker or other entity shall then deliver each of these items to the direct
participant of the Depositary, such direct participant being the entity that holds the beneficial
interest in this Note on behalf of the deceased Beneficial Owner, together with evidence
satisfactory to the Indenture Trustee from the broker or other entity stating that it represents
the deceased Beneficial Owner. Such direct participant shall then deliver such items to the
Indenture Trustee. The Indenture Trustee will then deliver these items to the Trustee and will
provide the Trustee with any additional information (after receipt from such direct participant)
the Trustee may request in connection with such exercise. Such direct participant shall be
responsible for disbursing any payments it receives from the Depositary pursuant to exercise of the
Survivor’s Option to the appropriate Representative. All questions, other than with respect to the
right to limit the aggregate Principal Amount of Notes as to which exercises of the Survivor’s
Option shall be accepted in any one calendar year or as to the Notes, regarding the eligibility or
validity of any exercise of the Survivor’s Option will be determined by the Trustee, in its sole
discretion, which determination shall be final and binding on all parties.

     (g) The death of a person holding a beneficial interest in this Note as a joint tenant or
tenant by the entirety with another person, or as a tenant in common with the deceased owner’s
spouse, will be deemed the death of the Beneficial Owner of this Note, and the entire Principal
Amount of this Note so held shall be subject to repayment by the Trust upon request in accordance
with the terms and provisions hereof. However, the death of a person holding a beneficial interest
in this Note as tenant in common with a person other than such deceased owner’s spouse will be
deemed the death of a Beneficial Owner only with respect to such deceased person’s ownership
interest in this Note.

     (h) The death of a person who was a lifetime beneficiary of a trust holding a beneficial
interest in this Note will be treated as the death of the Beneficial Owner of this Note to the
extent of that person’s interest in the trust. The death of a person who was a tenant by the
entirety or joint tenant in a tenancy which is the beneficiary of a trust holding a beneficial
interest in this Note will be treated as the death of the Beneficial Owner of this Note. The death
of an individual who was a tenant in common in a tenancy which is the beneficiary of a trust
holding a beneficial interest in this Note will be treated as the death of the Beneficial Owner of
this Note only with respect to the deceased person’s beneficial interest in this Note, unless a
husband and wife are the tenants in common, in which case the death of either will be treated as
the death of the owner of this Note.

     (i) The death of a person who, during his or her lifetime, was entitled to substantially all
of the beneficial ownership interests in this Note will be deemed the death of the Beneficial Owner
of this Note for purposes of the Survivor’s Option, regardless of whether that Beneficial Owner was
the registered holder of this Note, if such beneficial ownership interest can be established to the
satisfaction of the Trustee. A beneficial ownership interest will be deemed to exist in typical
cases of nominee ownership, such as ownership under the Uniform Transfers of Gifts to Minors Act,
community property or other joint ownership arrangements between a husband and wife and lifetime
custodial and trust arrangements.

25

 

ANNEX A

REPAYMENT ELECTION FORM

Principal Life Insurance Company

Principal® Life CoreNotes®

Cusip Number ________

To: [Name of Issuing Trust] (the “TRUST”)

The undersigned financial institution (the “FINANCIAL INSTITUTION’’) represents the following:

	 	•	 	The Financial Institution has received a request for repayment from the executor or other
authorized representative (the “AUTHORIZED REPRESENTATIVE’’) of the deceased beneficial
owner listed below (the “DECEASED BENEFICIAL OWNER’’) of Principal® Life CoreNotes® (CUSIP
No. ___) (the “NOTES’’).
	 
	 	•	 	At the time of his or her death, the Deceased Beneficial Owner owned Notes in the
principal amount listed below.
	 
	 	•	 	The Deceased Beneficial Owner purchased the Notes either within ninety (90) days of their
issuance or acquired the Notes at least six (6) months before the date of death of such
Deceased Beneficial Owner.
	 
	 	•	 	The Financial Institution currently holds such notes as a direct or indirect participant
in The Depository Trust Company (the “DEPOSITARY’’).
	 
	 	•	 	The Financial Institution agrees to the following terms:
	 
	 	•	 	The Financial Institution shall follow the instructions (the “INSTRUCTIONS’’)
accompanying this Repayment Election Form (this “FORM’’).
	 
	 	•	 	The Financial Institution shall make all records specified in the Instructions supporting
the above representations available to U.S. Bank Trust National Association (the “TRUSTEE’’)
or the [Name of Issuing Trust] (the “TRUST’’) for inspection and review within five business
days of the Trustee’s or the Trust’s request.
	 
	 	•	 	If the Financial Institution, the Trustee or the Trust, in any such party’s reasonable
discretion, deems any of the records specified in the Instructions supporting the above
representations unsatisfactory to substantiate a claim for repayment, the Financial
Institution shall not be obligated to submit this Form, and the Trustee or Trust may deny
repayment. If the Financial Institution cannot substantiate a claim for repayment, it shall
notify the Trustee immediately.
	 
	 	•	 	Repayment elections may not be withdrawn.
	 
	 	•	 	The Financial Institution agrees to indemnify and hold harmless the Trustee and the Trust
against and from any and all claims, liabilities, costs, losses, expenses, suits and damages
resulting from the Financial Institution’s above representations and request for repayment
on behalf of the Authorized Representative.

A-1

 

	 	•	 	The Notes will be repaid on the first Interest Payment Date to occur at least 20 calendar
days after the date of acceptance of the notes for repayment, unless such date is not a
business day, in which case the date of repayment shall be the next succeeding business day.
	 
	 	•	 	Subject to the Trust’s rights to limit the aggregate principal amount of Notes as to
which exercises of the Survivor’s Option shall be accepted in any one calendar year, all
questions as to the eligibility or validity of any exercise of the Survivor’s Option will be
determined by the Trustee, in its sole discretion, which determination shall be final and
binding on all parties.

 

“Principal®” is a registered service mark of Principal Financial Services, Inc. and is used under
license.

“CoreNotes®” is a registered service mark of Merrill Lynch & Co.

A-2

 

REPAYMENT ELECTION FORM

	(1)	 	 

 

Name of Deceased Beneficial Owner

	(2)	 	 

 

Date of Death

	(3)	 	 

 

Name of Authorized Representative Requesting Repayment

	(4)	 	 

 

Name of Financial Institution Requesting Repayment

	(5)	 	 

 

Signature of Authorized Representative of Financial Institution Requesting Repayment

	(6)	 	 

 

Principal Amount of Requested Repayment

	(7)	 	 

 

Date of Election

	 	 	 	 	 	 	 	 	 
	(8)

	 	Financial Institution
	 	 	(9	)	 	Wire instructions for payment:
	 

	 	Representative Name:
	 	 	 	 	 	Bank Name:
	 

	 	Phone Number:
	 	 	 	 	 	ABA Number:
	 

	 	Fax Number:
	 	 	 	 	 	Account Name:
	 

	 	Mailing Address (no P.O. Boxes):
	 	 	 	 	 	Account Number:
	 

	 	 	 	 	 	 	 	Reference (optional):

TO BE COMPLETED BY THE TRUSTEE:

	(A)	 	Election Number*:
	 
	(B)	 	Delivery and Payment Date:
	 
	(C)	 	Principal Amount:
	 
	(D)	 	Accrued Interest:
	 
	(E)	 	Date of Receipt of Form by the Trustee:
	 
	(F)	 	Date of Acknowledgment by the Trustee:

 

			
	*	 	To be assigned by the Trustee upon receipt of this Form. An acknowledgement, in the form of a
copy of this document with the assigned Election Number, will be returned to the party and
location designated in item (8) above.

A-3

 

INSTRUCTIONS FOR COMPLETING REPAYMENT ELECTION FORM AND EXERCISING

REPAYMENT OPTION

     Capitalized terms used and not defined herein have the meanings defined in the accompanying
Repayment Election Form.

	1.	 	Collect and retain for a period of at least three years (1) satisfactory evidence of the
authority of the Authorized Representative, (2) satisfactory evidence of death of the Deceased
Beneficial Owner, (3) satisfactory evidence that the Deceased Beneficial Owner beneficially
owned, at the time of his or her death, the notes being submitted for repayment, (4)
satisfactory evidence that the notes being submitted for repayment either were purchased
within ninety (90) days of their issuance or were acquired by the Deceased Beneficial Owner at
least six (6) months before the date of the death of such Deceased Beneficial Owner, and (5)
any necessary tax waivers. For purposes of determining whether the notes will be deemed
beneficially owned by an individual at any given time, the following rules shall apply:

	 	•	 	If a note (or a portion thereof) is beneficially owned by tenants by the entirety or
joint tenants, the note (or relevant portion thereof) will be regarded as beneficially owned
by a single owner. Accordingly, the death of a tenant by the entirety or joint tenant will
be deemed the death of the beneficial owner and the entire principal amount so owned will
become eligible for repayment.
	 
	 	•	 	The death of a person beneficially owning a note (or a portion thereof) by tenancy in
common will be deemed the death of the beneficial owner only with respect to the deceased
owner’s interest in the note (or relevant portion thereof) so owned, unless a husband and
wife are the tenants in common, in which case the death of either will be deemed the death
of the beneficial owner and the entire principal amount so owned will be eligible for
repayment.
	 
	 	•	 	A note (or a portion thereof) beneficially owned by a trust will be regarded as
beneficially owned by each beneficiary of the trust to the extent of that beneficiary’s
interest in the trust (however, a trust’s beneficiaries collectively cannot be beneficial
owners of more notes than are owned by the trust). The death of a beneficiary of a trust
will be deemed the death of the beneficial owner of the notes (or relevant portion thereof)
beneficially owned by the trust to the extent of that beneficiary’s interest in the trust.
The death of an individual who was a tenant by the entirety or joint tenant in a tenancy
which is the beneficiary of a trust will be deemed the death of the beneficiary of the
trust. The death of an individual who was a tenant in common in a tenancy which is the
beneficiary of a trust will be deemed the death of the beneficiary of the trust only with
respect to the deceased holder’s beneficial interest in the note, unless a husband and wife
are the tenants in common, in which case the death of either will be deemed the death of the
beneficiary of the trust.
	 
	 	•	 	The death of a person who, during his or her lifetime, was entitled to substantially all
of the beneficial interest in a note (or a portion thereof) will be deemed the death of the
beneficial owner of that note (or relevant portion thereof), regardless of the registration
of ownership, if such beneficial interest can be established to the satisfaction of the
Trustee. Such beneficial interest will exist in many cases of street name or nominee
ownership, custodial arrangements, ownership by a trustee, ownership under the Uniform
Transfers of Gifts to Minors Act and community property or other joint ownership
arrangements between spouses. Beneficial interest will be evidenced by such factors as the
power to sell or otherwise dispose of a note, the right to receive the proceeds of sale or
disposition and the right to receive interest and principal payments on a note.

	2.	 	Indicate the name of the Deceased Beneficial Owner on line (1).
	 
	3.	 	Indicate the date of death of the Deceased Beneficial Owner on line (2).

A-4

 

	4.	 	Indicate the name of the Authorized Representative requesting repayment on line (3).
	 
	5.	 	Indicate the name of the Financial Institution requesting repayment on line (4).
	 
	6.	 	Affix the authorized signature of the Financial Institution’s representative on line (5). THE
SIGNATURE MUST BE MEDALLION SIGNATURE GUARANTEED.
	 
	7.	 	Indicate the principal amount of notes to be repaid on line (6).
	 
	8.	 	Indicate the date this Form was completed on line (7).
	 
	9.	 	Indicate the name, mailing address (no P.O. boxes, please), telephone number and
facsimile-transmission number of the party to whom the acknowledgment of this election may be
sent in item (8).
	 
	10.	 	Indicate the wire instruction for payment on line (9).
	 
	11.	 	Leave lines (A), (B), (C), (D), (E) and (F) blank.
	 
	12.	 	Mail or otherwise deliver an original copy of the completed Form to:

Citibank, N.A.

Citibank Agency & Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

	13.	 	FACSIMILE TRANSMISSIONS OF THE REPAYMENT ELECTION FORM WILL NOT BE ACCEPTED.
	 
	14.	 	If the acknowledgement of the Trustee’s receipt of this Form, including the assigned Election
Number, is not received within ten days of the date such information is sent to Citibank,
N.A., contact the Trustee at 100 Wall Street, 16th Floor, New York, New York 10005, attention:
Corporate Trust Administration, telephone number: (212) 361-2458.
	 
	15.	 	For assistance with this Form or any questions relating thereto, please contact U.S. Bank
Trust National Association at 100 Wall Street, 16th Floor, New York, New York 10005,
attention: Corporate Trust Administration, telephone number: (212) 361-2458.

A-5EX-10.1

MTN GLOBAL FUNDING AGREEMENT

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392-0001

(515) 247-5111

In consideration of the payment made by, or at the direction of,

Principal Life Income Fundings Trust 2008-56

(the “Agreement Holder”)

of the Net Deposit, as described below, Principal Life Insurance Company (“Principal Life”) agrees
to make payments to the person or persons entitled to them, subject to the provisions of this
funding agreement (this “Agreement”).

This Agreement is delivered in and subject to the laws of the State of Iowa.

This Agreement is issued and accepted subject to all the terms set out in it.

This Agreement is executed by Principal Life at its Corporate Center to take effect as of the 2nd
day of July, 2008, which is referred to as the Effective Date, subject to the receipt by Principal
Life or its designee of the Net Deposit (as set forth in Section 1).

	 	 	 	 	 	 	 
	

	 	 	 	
	 	 
	Senior Vice President and

Corporate Secretary

	 	 	 	President and

Chief Operating Officer	 	 

	 	 	 	 	 
	 	 	 
	 	/s/ Bret Taber
 	 
	 	Registrar 	 
	 	
June 30, 2008
Date 	 
	 

FUNDING AGREEMENT NO. 4-55547

RESTRICTIONS REGARDING THE TRANSFER OR SALE OF

THIS FUNDING AGREEMENT OR ANY INTEREST HEREIN ARE SET FORTH HEREIN

 

 

			
	 	 	 
	FUNDING AGREEMENT
	 	No. 4-55547

     This Agreement is issued in connection with the issuance by the Trust (specified in the Annex)
of secured medium-term notes (the “Notes”) which comprise a Series of Notes which are identified in
the annex hereto (the “Annex”) and which are being issued by the Trust pursuant to the Prospectus
dated November 21, 2007, the Prospectus Supplement dated November 21, 2007, as from time to time
amended or supplemented, and the Pricing Supplement applicable to such Notes (the “Pricing
Supplement”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to
them in the Notes. Where used in this Agreement, the term “Notes” and “Series of Notes” shall mean
the Notes and the Series of Notes secured by this Agreement as the same exist on the Effective
Date, without giving effect to any amendments or modifications to said Notes or Series of Notes
effected or made after any such Effective Date unless such amendments or modifications to said
Notes or Series of Notes have been consented to in writing by Principal Life.

	1.	 	Deposit
	 
	 	 	Principal Life agrees to accept, and the Agreement Holder agrees to pay or cause to be paid
to Principal Life, for value on the Effective Date, the Net Deposit (as specified in the
Annex). All funds received by Principal Life under this Agreement shall become the exclusive
property of Principal Life and remain a part of Principal Life’s general account without any
duty or requirement of segregation or separate investment.
	 
	 	 	This Agreement shall become effective only upon the receipt by Principal Life or its
designee of the Net Deposit.
	 
	2.	 	Fund
	 
	 	 	Upon receipt of the Net Deposit, Principal Life will establish, under this Agreement, a
bookkeeping account in the name of the Agreement Holder, which will evidence Principal
Life’s obligations under this Agreement.
	 
	 	 	The Deposit deemed received (as specified in the Annex), (i) less any withdrawals to make
payments hereunder (other than Additional Amounts (as defined in the Annex), if applicable)
and (ii) plus any interest accrued and premium, if any, pursuant to Section 7, will be
referred to as the “Fund”.
	 
	 	 	Principal Life is neither a trustee nor a fiduciary with respect to the Fund.
	 
	3.	 	Purchase of Notes By Principal Life
	 
	 	 	Principal Life may purchase some or all of the Notes in the open market or otherwise at any
time, and from time to time. Simultaneously, upon such purchase, (1) the purchased Notes
shall, by their terms become mandatorily redeemable by the Trust as specified in the related
Pricing Supplement, Prospectus Supplement and/or Prospectus and (2) the Fund under this
Agreement shall be permanently reduced by the same percentage as the principal amount of the
Notes so redeemed bears to the sum of (i) the aggregate principal amount of all Notes issued
and outstanding immediately prior to such redemption and

 

 

	 	 	the principal amount of the Trust Beneficial Interest related to such series of Notes. If
Principal Life, in its sole discretion, engages in such open market or other purchases, then
the Trust, the Indenture Trustee in respect of such Notes, and Principal Life shall take
such actions (including, in the case of Principal Life, making the payment(s) necessary to
effect the Trust’s redemption of such Notes) as may be necessary or desirable to effect the
cancellation of such Notes by the Trust.
	 
	4.	 	Entire Agreement
	 
	 	 	This Agreement and the Annex attached hereto constitute the entire Agreement.
	 
	5.	 	Representations

	 	(a)	 	Each party hereto represents and warrants to the other that as of the date
hereof:

	 	(i)	 	it has the power to enter into this Agreement and to consummate
the transactions contemplated hereby;
	 
	 	(ii)	 	this Agreement has been duly authorized, executed and
delivered, this Agreement constitutes a legal, valid and binding obligation of
each party hereto, and this Agreement is enforceable in accordance with the
terms hereof, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights, and subject as to enforceability to general
principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law; and
	 
	 	(iii)	 	the execution and delivery of this Agreement and the
performance of obligations hereunder do not and will not constitute or result
in a default, breach or violation of the terms or provisions of its
certificate, articles or charter of incorporation, declaration of trust,
by-laws or any agreement, instrument, mortgage, judgment, injunction or order
applicable to it or any of its property.

	 	(b)	 	The Trust further represents and warrants to Principal Life that:

	 	(i)	 	it is a person other than a natural person and is purchasing
this Agreement for the purpose of providing collateral security for securities
registered with the United States Securities and Exchange Commission;
	 
	 	(ii)	 	it has been informed and understands that transfer is
restricted by the terms of this Agreement; and
	 
	 	(iii)	 	it (a) is solely responsible for determining whether this
Agreement is suitable for the purpose intended; (b) has carefully read this
Agreement (including the Annex) before signing this Agreement; (c) has had a
reasonable opportunity to make such inquiries as it deemed necessary prior to
signing this Agreement; and (d) has received or had access to such

3

 

	 	 	 	additional information as it deemed necessary in connection with its
decision to sign this Agreement.

	 	 	In performing its obligations hereunder Principal Life is not acting as a fiduciary, agent
or other representative for the Agreement Holder or anyone else. All representations and
warranties made by the Agreement Holder and Principal Life in this Agreement shall be
considered to have been relied upon by the other in connection with the execution hereof.
	 
	6.	 	Assignment of Agreement
	 
	 	 	The following conditions must be satisfied in order to effectuate any assignment of this
Agreement:

	 	(i)	 	This Agreement may only be transferred through a book entry system maintained
by Principal Life, or an agent designated by it, within the meaning of Temporary
Treasury Regulations Section 5f.103-1(c) and Treasury Regulations Section
1.871-14(c)(1)(i).
	 
	 	(ii)	 	The Agreement Holder, and any assignee, must comply with applicable securities
laws.
	 
	 	(iii)	 	Principal Life has consented in writing to the proposed assignment, such
consent not to be unreasonably withheld.
	 
	 	(iv)	 	Principal Life shall have received from the proposed assignee a duly executed
certificate containing, in substance, the information, representations, warranties,
acknowledgments and agreements set forth in this Agreement.

	 	 	Any attempted sale, transfer, anticipation, assignment, hypothecation, or alienation not in
accordance with this Section 6 shall be void and of no effect. Until such time, if any, as
Principal Life has consented in writing to a proposed assignment, Principal Life shall not
be obligated to make any payments to or at the direction of anyone other than the person
shown on Principal Life’s books and records as the Agreement Holder. Once the foregoing
conditions have been satisfied with respect to an assignment, the assignee or its successor
shall be deemed to be the sole Agreement Holder for all purposes of this Agreement and
Principal Life shall promptly amend its records to reflect the assignee’s status as
Agreement Holder.
	 
	7.	 	Payments to the Agreement Holder
	 
	 	 	Principal Life shall pay to, or at the direction of, the Agreement Holder by the date (the
“Due Date”) on which any payment becomes due in respect of the Notes secured by this
Agreement (and in any event such period of time prior to the Due Date as shall be necessary
to ensure that the Trust can fulfill its obligation to make payment in full of all amounts
due and payable under such Notes on the Due Date), an amount in the currency or currencies
in which the Notes are denominated as specified in the Notes equal to the sum of (i) the
amount of principal and/or (as the case may be) interest and/or (as the case may be) premium
falling due in respect of such Notes on such Due Date (the “Notes

4

 

	 	 	Component”) and (ii) the amount of any payments owed by the Trust in respect of the Trust
Beneficial Interest (issued in connection with the Series of Notes secured by this
Agreement) falling due on such date (the “Beneficial Component”). In the event that
Principal Life fails to make payment of any such amount on or prior to the Due Date,
Principal Life shall pay to or at the direction of the Agreement Holder, on demand by the
Agreement Holder, (i) if the failure relates to the Notes Component, an amount in the
currency specified in the Notes equal to the amount of default interest (or other amount)
which becomes due and payable by the Trust in accordance with the Notes as a consequence of
any delay in the Trust making the relevant payment of principal, interest or premium (as the
case may be) to the holders of such Notes and (ii) if the failure relates to the Beneficial
Component, such amount of default interest, if any, determined in the same manner as default
interest on the Notes Component.
	 
	 	 	Interest shall accrue on the Fund in the same amount and pursuant to the same terms as
interest accrues on the Notes secured by this Agreement and on the Trust Beneficial Interest
related to the Notes.
	 
	 	 	If any amount is withdrawn from the Fund in order to make a payment under this Section 7,
interest will cease to be credited with regard to such amount as of the end of the day
immediately preceding the date on which such withdrawal is made.
	 
	 	 	All payments made by Principal Life to the Agreement Holder hereunder shall be paid in
same-day, freely transferable funds to such account as has been specified for such purpose
by the Agreement Holder.
	 
	 	 	Notwithstanding anything to the contrary in this Section 7, if Principal Life shall, with
respect to any scheduled amount due and payable under any of the Notes, comply in all
respects with the requirements of this Section 7, but an event of default has occurred with
respect to the Notes and as a result payments with respect to the Notes have been
accelerated, otherwise than by reason of any default under this Agreement by Principal Life,
no Event of Default (as defined below) under this Funding Agreement shall be deemed to have
occurred, no payments with respect to this Agreement shall be accelerated and Principal Life
will remain obligated to make payments under this Agreement as if no event of default had
occurred with respect to the Notes.
	 
	8.	 	Termination of Agreement
	 
	 	 	Subject to the provisions of the following paragraph and the Annex, this Agreement shall
terminate and cease to be of any further force or effect on the day and at the time upon
which all amounts have been withdrawn from the Fund pursuant to this Agreement.
	 
	 	 	Upon the occurrence of any of the following events (each, an “Event of Default”) and
following a written demand by the Agreement Holder, Principal Life shall pay to, or at the
direction of, the Agreement Holder all amounts that the Trust is required to pay in such
event under the Notes and the Trust Beneficial Interest:

	 	(i)	 	Principal Life’s failure to make any payment of interest, premium (if
applicable), installment payments (if applicable) or Additional Amounts (if and as
specified in

5

 

	 	 	 	the Annex) in accordance with this Agreement, if such failure to pay is not
corrected within seven (7) Business Days after such payment becomes due and payable;
or
	 
	 	(ii)	 	Principal Life’s failure to make any payment of principal (other than any
installment payment) in accordance with this Agreement, if such failure to pay is not
corrected within one (1) Business Day after such payment becomes due and payable; or
	 
	 	(iii)	 	if Principal Life (a) is dissolved (other than pursuant to a consolidation,
amalgamation or merger in which the resulting entity assumes its obligations); (b)
becomes insolvent or is unable to pay its debts or fails or admits in writing its
inability generally to pay its debts as they become due; (c) makes a general
assignment, arrangement or composition with or for the benefit of its creditors; (d)
institutes or has instituted against it an administrative or legal proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any supervision,
rehabilitation, liquidation, bankruptcy or insolvency law or other similar law
affecting creditors’ rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (1) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or the making of an order
for its rehabilitation, winding-up or liquidation or (2) is not dismissed, discharged,
stayed or restrained in each case within 60 days of the institution or presentation
thereof; (e) has a resolution passed for its rehabilitation, winding-up, official
management or liquidation (other than pursuant to a consolidation, amalgamation or
merger in which the resulting entity assumes the obligations of Principal Life); (f)
seeks or becomes subject to the appointment of an administrator, supervisor,
rehabilitator, provisional liquidator, conservator, receiver, trustee, custodian or
other similar official for it or for all or substantially all its assets; (g) has a
secured party take possession of all or substantially all its assets or has a distress,
execution, attachment, sequestration or other legal process levied, enforced or sued on
or against all or substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed or restrained, in
each case within 60 days thereafter; (h) causes or is subject to any event with respect
to it which, under the applicable laws of any jurisdiction, has an analogous effect to
any of the events specified in clauses (a) to (g) (inclusive); or (i) takes any action
in furtherance of, or indicating its consent to, approval of, or acquiescence in, any
of the foregoing acts.

	 	 	Notwithstanding anything to the contrary in this Section 8, if an event described in clause
(iii) above occurs, this Agreement will automatically terminate and the amount of the Fund
will be immediately due and payable by Principal Life to the Agreement Holder, or the
account specified by the Agreement Holder.
	 
	 	 	Principal Life will promptly notify the Agreement Holder and the Rating Agencies in writing
of the occurrence of any of (i) through (iii) above.

6

 

	9.	 	Withholding; Additional Amounts
	 
	 	 	All amounts due in respect of this Agreement will be made without withholding or deduction
for or on account of any present or future taxes, duties, levies, assessments or other
governmental charges of whatever nature imposed or levied by or on behalf of any
governmental authority in the United States unless the withholding or deduction is required
by law. Unless otherwise specified in the Annex, Principal Life will not pay any additional
amounts to the Agreement Holder in the event that any withholding or deduction is so
required by law, regulation or official interpretation thereof, and the imposition of a
requirement to make any such withholding or deduction will not give rise to an Event of
Default or any independent right or obligation to redeem this Agreement.
	 
	10.	 	Currency
	 
	 	 	Except as may be specifically noted in the Annex, the Net Deposit and all payments under
Section 7 of this Agreement shall be made using the currency or currencies as specified in
the Notes.
	 
	11.	 	Tax Treatment
	 
	 	 	Principal Life and the Agreement Holder agree that this Agreement shall be disregarded for
U.S. Federal income tax purposes. Principal Life and the Agreement Holder further agree
that if this Agreement is not so disregarded, it will and is intended to be treated as a
debt obligation of Principal Life issued in registered form within the meaning of Treasury
Regulations Section 1.871-14(c)(1)(i), except to the extent provided in Treasury Regulations
Section 1.163-5T (or any subsequent similar regulation).
	 
	12.	 	Amendment and Modification
	 
	 	 	This Agreement may be amended or modified in whole or in part, at any time and from time to
time, for any period or periods (a) by mutual written agreement by such officers of
Principal Life, the Agreement Holder and, where such Agreement Holder is the Indenture
Trustee upon an assignment by way of security of this Agreement by the Trust, the Trust and
(b) without the consent of any other person affected thereby.
	 
	13.	 	Notice
	 
	 	 	Except as otherwise provided herein, all notices given pursuant to this Agreement shall be
in writing, and shall either be delivered, mailed or telecopied to the locations listed
below or at such other address or to the attention of such other persons as such party shall
have designated for such purpose in a written notice complying as to delivery with the terms
of this Section 13. Each such notice shall be effective (i) if given by telecopy, when
transmitted to the applicable number so specified in this Section 13 (if required herein,
such notice shall also be sent by mail, with first class postage prepaid), (ii) if given by
mail, three days after deposit in the mails with first class postage prepaid, or (iii) if
given by any other means, when actually delivered at such address.

7

 

     If to Principal Life:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392-0001

Attention: General Counsel

Telephone: (515) 247-5111

Telecopy: (515) 248-3011

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392-0001

Attention: Jim Fifield, Counsel

Telephone: (515) 248-9196

Telecopy: (866) 496-6527

     If to the Agreement Holder:

Principal Life Income Fundings Trust 2008-56

c/o U.S. Bank Trust National Association

100 Wall Street, 16th Floor

New York, NY 10005

Attention: Janet P. O’Hara

Telephone: (212) 361-2527

Facsimile: (212) 809-5459

     with a copy to:

Citibank, N.A.

Corporate and Investment Banking

388 Greenwich Street, 14th Floor

New York, NY 10013

Attention: Jennifer H. McCourt

Telephone: (212) 816-5680

Telecopy: (212) 816-5527

	14.	 	Business Day
	 
	 	 	For purposes of this Agreement, “Business Day” means any day that is a Business Day as
specified in the Notes or the Indenture.
	 
	15.	 	Business Day Convention
	 
	 	 	If the date on which any payment is due to be made under this Agreement shall occur on a day
on which is not a Business Day, such payment shall be made in accordance with the Business
Day Convention as specified in the Notes.

 

 

	15.	 	Business Day Convention
	 
	 	 	If the date on which any payment is due to be made under this Agreement shall occur on a day
on which is not a Business Day, such payment shall be made in accordance with the Business
Day Convention as specified in the Notes.
	 
	16.	 	Jurisdiction
	 
	 	 	The parties to this Agreement hereby consent to the non-exclusive jurisdiction of any State
or Federal Court of competent jurisdiction located within the State of New York, in the
Borough of Manhattan, in connection with any actions or proceedings arising directly or
indirectly from this Agreement.
	 
	17.	 	Waiver
	 
	 	 	The obligations of Principal Life or the Agreement Holder under this Agreement may be waived
only in writing by the party to this Agreement whose interests are adversely affected by
such waiver. No failure or delay, on the part of the party adversely affected, in
exercising any right or remedy hereunder shall operate as a waiver thereof.
	 
	18.	 	Tax Redemption.
	 
	 	 	If a Tax Event (defined below) occurs, Principal Life will have the right to redeem this
Agreement by giving not less than 30 and no more than 60 days prior written notice to the
Agreement Holder and by paying to the Agreement Holder an amount equal to the Fund. The
term “Tax Event” means that Principal Life shall have received an opinion of independent
legal counsel stating in effect that as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or therein or (b)
any amendment to, or change in, an interpretation or application of any such laws or
regulations by any governmental authority in the United States, which amendment or change is
enacted, promulgated, issued or announced on or after the Effective Date of this Agreement,
there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of
the date thereof, subject to U.S. federal income tax with respect to interest accrued or
received on this Agreement or (ii) the Trust is, or will be within 90 days of the date
thereof, subject to more than a de minimis amount of taxes, duties or other governmental
charges.

9

 

ANNEX

This Annex will become effective as of the Effective Date, subject to the requirements of Section
1.

	 	 	 
	Trust:

	 	Principal Life Income Fundings Trust 2008-56
	 
	 	 
	Net Deposit:

	 	The Net Deposit is $2,398,410.
	 
	 	 
	Deposit:

	 	Regardless of the amount of the Net Deposit, the
Deposit is deemed to be $2,430,015.
	 
	 	 
	Bank and Account:

	 	Wells Fargo Bank Iowa, N.A.

ABA No.: XXXXXXXXX

For credit to Principal Life Insurance Company

Account #XXXXXXXXXX
	 
	 	 
	Series of Notes:

	 	Principal Life Income Fundings Trust 2008-56 5.80%
Principal® Life CoreNotes® Due
2016
	 
	 	 
	Survivor’s Option:

	 	Unless this Agreement has been declared due and payable
prior to the Maturity Date of the related Notes by
reason of any Event of Default, or has been previously
redeemed or otherwise repaid, the Agreement Holder may
request repayment of this Agreement upon the valid
exercise of the Survivor’s Option in the Notes by the
Representative (defined in the Notes) of the deceased
Beneficial Owner of such Notes (a “Survivor’s Option”).
	 
	 	 
	 

	 	Except as provided below, upon the tender to and
acceptance by Principal Life of this Agreement (or
portion thereof) securing the Notes as to which the
Survivor’s Option has been exercised, Principal Life
shall repay to the Agreement Holder the amount of the
Fund equal to (i) 100% of the principal amount of the
Notes as to which the Survivor’s Option has been
validly exercised and accepted, plus accrued and unpaid
interest on such amount to the date of repayment, or
(ii) in the case of Discount Notes, the Issue Price of
the Notes as to which the Survivor’s Option has been
validly exercised and accepted, plus accrued discount
and any accrued and unpaid interest on such amount to
the date of repayment. However, Principal Life shall
not be obligated to repay in any calendar year:
	 
	 	 
	 

	 	•   more than the greater of $2,000,000 or 2% of
the aggregate deposit for all funding agreement
contracts securing all outstanding notes issued under
the Principal® Life CoreNotes®
Program and Secured Medium-Term Notes Retail Program as
of the end of the most recent calendar year;

 

 

	 	 	 	Program and Secured Medium-Term Notes Retail Program as
of the end of the most recent calendar year;
	 
	 	•	 	more than $250,000 in aggregate deposit of
funding agreement contracts securing outstanding notes
issued under the Principal® Life
CoreNotes® Program and Secured Medium-Term
Notes Retail Program as to which the Survivor’s Option
has been exercised on behalf of any single beneficial
owner in any calendar year; or
	 
	 	•	 	more than 2% of the Deposit under this
Agreement which secures the related Notes, as of the
later of the end of the most recent calendar year or
the issuance date of such Series of Notes.

	 	 	 	Principal Life shall not make repayments pursuant to
the Agreement Holder’s request for repayment upon
exercise of the Survivor’s Option in amounts that are
less than $1,000, and, in the event that the
limitations described in the preceding sentence would
result in the partial repayment of this Agreement, the
principal amount of this Agreement remaining
outstanding after repayment must be at least $1,000
(the minimum authorized denomination of this
Agreement). A request for repayment by the Agreement
Holder upon an otherwise valid election to exercise the
Survivor’s Option may not be withdrawn.
	 
	 	 	 	This Agreement (or portion thereof) accepted for
repayment shall be repaid on the first Interest Payment
Date for the related Series of Notes that occurs 20 or
more calendar days after the date of such acceptance.
	 
	 	 	 	In order to obtain repayment of this Agreement (or
portion thereof) upon exercise of the Survivor’s
Option, the Agreement Holder must provide to Principal
Life (i) a written request for repayment signed by the
Agreement Holder, and (ii) any additional information
Principal Life requires to evidence satisfaction of any
conditions to the repayment of this Agreement (or
portion thereof).

A-2

 

	 	 	 	 	 
	PRINCIPAL LIFE INSURANCE COMPANY

 	 	 
	By:  	/s/ Michael Garvin
 	 	 
	 	Name:  	Michael Garvin 	 	 
	 	Title:  	Associate Actuary 	 	 
	 
	PRINCIPAL LIFE INCOME FUNDINGS TRUST 2008-56

 	 	 
	By:  	U.S. Bank Trust National Association,

not in its individual capacity, but solely in its capacity as trustee
 	 	 
	 
	By:  	Bankers Trust Company, N.A.,

under Limited Power of Attorney, dated November 21, 2007.
 	 	 
	 
	By:  	/s/ Diana L. Cook
 	 	 
	 	Name:  	Diana L. Cook                  	 	 
	 	Title:  	Vice President

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