Document:

exv10w1

 

Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

by and between

COVANTA HOLDING CORPORATION

and

[                    ]

Dated
as of ______ ___, 200__

 

 

 

INDEMNIFICATION AGREEMENT

     INDEMNIFICATION
AGREEMENT (this “Agreement”), dated as of
____________ ___, 200__, by and between
Covanta Holding Corporation, a Delaware corporation (the “Company”), and [                    ], a
natural person (“Indemnitee”).

R E C I T A L S

     WHEREAS, highly competent individuals have become more reluctant to serve publicly-traded
corporations as directors, officers or in other capacities unless they are provided with adequate
protection through insurance or adequate indemnification against risks of claims and actions
against them arising out of their services to and activities on behalf of such corporations;

     WHEREAS, directors and officers are increasingly being subjected to expensive and
time-consuming litigation relating to, among other things, matters that traditionally would have
been brought only against the corporation itself;

     WHEREAS, the Board of Directors of the Company (the “Board”) recognizes the limitations on the
protection provided by liability insurance and the uncertainties as to the scope and level of such
coverage that may be available in the future;

     WHEREAS, the Board recognizes the limitations on the protection provided by existing
indemnification arrangements pursuant to the Company’s restated certificate of incorporation (the
“Charter”) and restated bylaws (the “Bylaws”) and the uncertainties as to its availability in any
particular situation;

     WHEREAS, the Board believes that, in light of the limitations and uncertainties in respect of
the protection provided by the Company’s liability insurance and existing indemnification
arrangements and the impact these uncertainties may have on the Company’s ability to attract and
retain qualified individuals to serve or continue to serve the Company as directors, officers or in
other capacities, the Company should act to assure such individuals that there will be increased
certainty with respect to such protection in the future;

     WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate
itself to indemnify, and to advance expenses on behalf of, such individuals to the fullest extent
permitted by applicable law so that they will serve or continue to serve the Company free from
undue concern that they may not be adequately protected;

     WHEREAS, Indemnitee is concerned that the protection provided under the Company’s liability
insurance and existing indemnification arrangements may not be adequate and may not be willing to
serve or continue to serve the Company as a director, an officer or in any other capacity without
greater certainty concerning such protection, and the Company desires Indemnitee to serve or
continue to serve the Company as a director, an officer or in another capacity and is willing to
provide such greater certainty; and

 

 

     WHEREAS, this Agreement is a supplement to, and in furtherance of, the Charter and the Bylaws
and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to
diminish or abrogate any rights of Indemnitee thereunder.

A G R E E M E N T S

     NOW, THEREFORE, in consideration of the premises, covenants and agreements contained herein,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the Company and Indemnitee covenant and
agree as follows:

ARTICLE I

DEFINITIONS

     1.1 For purposes of this Agreement:

          (a) The term “agent” shall mean any person who is or was a director, an officer or an employee
of the Company or a subsidiary of the Company or any other person authorized by the Company to act
for or on behalf of the Company, including any person serving in such capacity as a director,
officer, employee, fiduciary or other official of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise at the request of, for the convenience
of, or to represent the interests of the Company or a subsidiary of the Company.

          (b) “Agreement” shall have the meaning ascribed to such term in the Preamble.

          (c) “Beneficial Owner” and “Beneficial Ownership” shall have the meanings ascribed to such
terms in Rule 13d-3 promulgated under the Exchange Act as in effect on the date hereof.

          (d) “Board” shall have the meaning ascribed to such term in the Recitals.

          (e) “Bylaws” shall have the meaning ascribed to such term in the Recitals.

          (f) “Change in Control” shall mean the occurrence of any of the following events, each of
which shall be determined independently of the others:

          (i) any Person, other than a holder of at least 10% of the outstanding voting power of
the Company as of the date hereof, becomes the Beneficial Owner of a majority of the stock
of the Company entitled to vote in the election of directors of the Company;

          (ii) Continuing Directors cease to constitute a majority of the members of the Board;

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          (iii) the stockholders of the Company adopt and consummate a plan of complete or
substantial liquidation or an agreement providing for the distribution of all or
substantially all of the assets of the Company is entered into;

          (iv) the Company is a party to a merger, consolidation, other form of business
combination or a sale of all or substantially all of its assets, with an unaffiliated third
party, unless the business of the Company following consummation of such merger,
consolidation or other business combination is continued following any such transaction by a
resulting entity (which may be, but need not be, the Company) and the stockholders of the
Company immediately prior to such transaction hold, directly or indirectly, at least a
majority of the voting power of the resulting entity; provided, however,
that a merger or consolidation effected to implement a recapitalization or similar
transaction of the Company shall not constitute a Change in Control; or

          (v) there is a Change in Control of the Company of a nature that is reported in
response to item 5.01 of Current Report on Form 8-K or any similar item, schedule or form
under the Exchange Act, as in effect at the time of such change, whether or not the Company
is then subject to such reporting requirements;

          provided, however, that for purposes of this Agreement a Change in Control
shall not be deemed to occur if the Person or Persons deemed to have acquired control is or
are a holder of at least 10% of the outstanding voting power of the Company as of the date
hereof.

          (g) “Charter” shall have the meaning ascribed to such term in the Recitals.

          (h) “Company” shall have the meaning ascribed to such term in the Preamble.

          (i) “Continuing Directors” shall mean the members of the Board on the date hereof,
provided, that any individual becoming a member of the Board subsequent to the date hereof
whose election or nomination for election was supported by at least a majority of the directors who
then comprised the Continuing Directors shall be considered to be a Continuing Director.

          (j) “Corporate Status” describes the status of a person who is or was a director, officer,
trustee, general partner, managing member, fiduciary, employee or agent of the Company or of any
other Enterprise which such person is or was serving at the request of the Company.

          (k) “D&O Liability Insurance” shall have the meaning ascribed to such term in Section
15.1.

          (l) “Delaware Court” shall mean the Court of Chancery of the State of Delaware.

          (m) “DGCL” shall mean the General Corporation Law of the State of Delaware.

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          (n) “Disinterested Director” shall mean a director of the Company who is not and was not a
party to the Proceeding in respect of which indemnification or advancement of Expenses is sought by
Indemnitee.

          (o) “Enterprise” shall mean the Company and any other corporation, constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or merger to which the
Company is a party, limited liability company, partnership, joint venture, trust, employee benefit
plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a
director, officer, trustee, general partner, managing member, fiduciary, employee or agent.

          (p) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

          (q) “Expenses” means all costs and expenses (including, without limitation, fees and expenses
of counsel, retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges, postage and delivery
service fees and all other disbursements or expenses) incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in,
or otherwise participating in, a Proceeding. For avoidance of doubt, Expenses shall include
expenses incurred in connection with any appeal resulting from any Proceeding including, without
limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond
or other appeal bond or its equivalent; provided, however, that Expenses shall not
include amounts paid in settlement by Indemnitee or the amount of judgments or fines against
Indemnitee.

          (r) “Indemnification Arrangements” shall have the meaning ascribed to such term in Section
16.2.

          (s) “Indemnitee” shall have the meaning ascribed to such term in the Preamble.

          (t) “Independent Counsel” shall mean a law firm, or a member of a law firm, that is
experienced in matters of corporate law and neither currently is, nor in the three years preceding
its selection or appointment hereunder has been, retained to represent (i) the Company or
Indemnitee in any matter material to either such party (provided, that acting as an
Independent Counsel under this Agreement or in a similar capacity with respect to any other
indemnification arrangements between the Company and its present or former directors or officers
shall not be deemed a representation of the Company or Indemnitee) or (ii) any other party to the
Proceeding giving rise to a claim for indemnification or advancement of expenses hereunder.
Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who,
under the applicable standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s
rights under this Agreement.

          (u) The “Nominating and Governance Committee” shall mean the Nominating and Governance
committee of the Board.

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          (v) The term “Person” shall have the meaning ascribed to such term in Sections 13(d) and 14(d)
of the Exchange Act as in effect on the date hereof; provided, however, that the
term “Person” shall exclude: (i) the Company; (ii) any Subsidiaries of the Company; (iii) any
employment benefit plan of the Company or of a Subsidiary of the Company or of any corporation
owned, directly or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company; and (iv) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or of a Subsidiary of the Company
or of a corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

          (w) “Proceeding” shall include any threatened, pending or completed action, suit, arbitration,
alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other
actual, threatened or completed proceeding, whether brought in the right of the Company or
otherwise, and whether of a civil, criminal, administrative or investigative nature (including any
appeal therefrom), in which Indemnitee was, is or may be involved as a party or otherwise by reason
of the fact of his or her Corporate Status or by reason of any action (or failure to act) taken by
him or her or of any action (or failure to act) on his or her part while serving in any Corporate
Status (in each case, regardless of whether serving in such capacity at the time any liability or
expense is incurred for which indemnification, reimbursement or advancement of expenses can be
provided under this Agreement), or any inquiry or investigation that Indemnitee in good faith
believes might lead to the institution of any such action, suit or other proceeding.

          (x) References to “serving at the request of the Company” shall include any service as a
director, officer, employee, agent or fiduciary of the Company or any other Enterprise which
imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary
with respect to an employee benefit plan, its participants or beneficiaries; and if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of
the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner “not opposed to the best interests of the Company” as referred to in this
Agreement.

          (y) The term “Subsidiary”, with respect to any Person, shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.

          (z) The phrase “to the fullest extent permitted by law” shall mean (i) to the fullest extent
permitted by the DGCL as in effect on the date of this Agreement and (ii) to the fullest extent
authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of
this Agreement that increase the extent to which a corporation may indemnify its directors and
officers.

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ARTICLE II

SERVICES BY INDEMNITEE

     2.1 Indemnitee agrees to serve or continue to serve in his or her current capacity or
capacities as a director, officer, employee, agent or fiduciary of the Company. Indemnitee may
also serve, as the Company may reasonably request from time to time, as a director, officer,
employee, agent or fiduciary of any other corporation, partnership, limited liability company,
association, joint venture, trust, employee benefit plan or other Enterprise in which the Company
has an interest. Indemnitee and the Company each acknowledge that they have entered into this
Agreement as a means of inducing Indemnitee to serve or continue to serve the Company in such
capacities. Indemnitee may at any time and for any reason resign from such position or positions
(subject to any other contractual obligation or any obligation imposed by operation of law). The
Company shall have no obligation under this Agreement to continue Indemnitee in any such position
for any period of time and shall not be precluded by the provisions of this Agreement from removing
Indemnitee from any such position at any time.

ARTICLE III

THIRD-PARTY PROCEEDINGS

     3.1 The Company shall indemnify and hold Indemnitee harmless in accordance with the provisions
of this Section 3.1 if Indemnitee was, is, or is threatened to be made, a party to or a
participant (as a witness or otherwise) in any Proceeding, other than a Proceeding by or in the
right of the Company to procure a judgment in its favor. Pursuant to this Section 3.1,
Indemnitee shall be indemnified against all Expenses, judgments, liabilities, fines, penalties and
amounts paid in settlement (including all interest, assessments and other charges paid or payable
in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in
settlement) actually and reasonably incurred by Indemnitee or on his or her behalf in connection
with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and
in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company and, in the case of a criminal action or Proceeding, had no reasonable cause to believe
that his or her conduct was unlawful.

ARTICLE IV

INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY

     4.1 The Company shall indemnify and hold Indemnitee harmless in accordance with the provisions
of this Section 4.1 if Indemnitee was, is, or is threatened to be made, a party to or a
participant (as a witness or otherwise) in any Proceeding by or in the right of the Company to
procure a judgment in its favor. Pursuant to this Section 4.1, Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred by Indemnitee or on his or her
behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee
acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Company. No indemnification, hold harmless or exoneration for Expenses shall
be made under this Section 4.1 in respect of any Proceeding, claim, issue or matter as to
which

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Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and
only to the extent that the Delaware Court (or any court hearing appeals therefrom) shall determine
upon application that, despite the adjudication of liability but in view of all the circumstances
of the case, Indemnitee is fairly and reasonably entitled to indemnification, to be held harmless
or to exoneration.

ARTICLE V

INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL

     5.1 Any other provisions of this Agreement notwithstanding, to the extent that Indemnitee is a
party to (or a participant in) and is successful, on the merits or otherwise, in the defense of any
Proceeding or any claim, issue or matter therein, the Company shall indemnify and hold Indemnitee
harmless against all Expenses actually and reasonably incurred by him or her or on his or her
behalf in connection therewith. If Indemnitee is successful, on the merits or otherwise, as to one
or more but less than all claims, issues or matters in any Proceeding, the Company shall indemnify
and hold Indemnitee harmless against all Expenses actually and reasonably incurred by him or her or
on his or her behalf in connection with each successfully resolved claim, issue or matter and any
claim, issue or matter related to each such successfully resolved claim, issue or matter. For
purposes of this Section 5.1 and without limitation, the termination of any claim, issue or
matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.

ARTICLE VI

INDEMNIFICATION FOR EXPENSES OF A WITNESS

     6.1 Any other provision of this Agreement notwithstanding, to the extent that Indemnitee is,
by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a
party, he or she shall be indemnified and held harmless against all Expenses actually and
reasonably incurred by him or her or on his or her behalf in connection therewith.

ARTICLE VII

ADDITIONAL INDEMNIFICATION, HOLD HARMLESS AND EXONERATION RIGHTS

     7.1 In addition to, and without regard to any limitations on, the indemnification provided for
in Sections 3.1, 4.1 or 5.1, the Company shall indemnify and hold
Indemnitee harmless if Indemnitee is, or is threatened to be made, a party to or participant in any
Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its
favor) against all Expenses, judgments, fines, penalties and amounts paid in settlement (including
all interest, assessments and other charges paid or payable in connection with or in respect of
such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably
incurred by Indemnitee or on his or her behalf in connection with such Proceeding. The only
limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be

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that the Company shall not be obligated to make any payment to Indemnitee that is finally
determined (under the procedures, and subject to the presumptions, set forth in Articles
XII and XIII) to be unlawful.

ARTICLE VIII

CONTRIBUTION IN THE EVENT OF JOINT LIABILITY

     8.1 Whether or not the indemnification provided in Sections 3.1, 4.1,
5.1 and 7.1 hereof is available, if, for any reason, Indemnitee shall be required
to pay, in connection with any Proceeding in which the Company is jointly liable with Indemnitee,
all or any portion of any judgments, liabilities, fines, penalties, amounts to be paid in
settlement and/or for Expenses, the Company shall contribute to the amount actually and reasonably
incurred and paid or payable by Indemnitee, whether for judgments, liabilities, fines, penalties,
amounts paid or to be paid in settlement and/or for Expenses in proportion to the relative benefits
received by the Company and all agents of the Company, other than Indemnitee, who are jointly
liable with Indemnitee, on the one hand, and Indemnitee, on the other hand, from the transaction or
transactions from which such Proceeding arose; provided, however, that the
proportion determined on the basis of relative benefit may, to the extent necessary to conform to
law, be further adjusted by reference to the relative fault of the Company and all agents of the
Company other than Indemnitee who are jointly liable with Indemnitee, on the one hand, and
Indemnitee, on the other hand, in connection with the events that resulted in such judgments,
liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, as
well as any other equitable considerations which applicable law may require to be considered. The
relative fault of the Company and all agents of the Company, other than Indemnitee, who are jointly
liable with Indemnitee, on the one hand, and Indemnitee, on the other hand, shall be determined by
reference to, among other things, the degree to which their actions were motivated by intent to
gain personal profit or advantage, the degree to which their liability is primary or secondary and
the degree to which their conduct is active or passive. The Company shall not enter into any
settlement in respect of any Proceeding in which the Company is jointly liable with Indemnitee
unless such settlement provides for a full and final release of all claims asserted against
Indemnitee.

     8.2 The Company shall indemnify and hold Indemnitee harmless from any claims of contribution
which may be brought by agents of the Company, other than Indemnitee, who may be jointly liable
with Indemnitee in respect of any Proceeding.

     8.3 To the fullest extent permissible under applicable law, if the indemnification and hold
harmless rights provided for in this Agreement are unavailable to Indemnitee in whole or in part
for any reason whatsoever, the Company, in lieu of indemnifying and holding Indemnitee harmless,
shall contribute to the amount incurred by Indemnitee, whether for judgments, liabilities, fines,
penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any
Proceeding, claim, matter or issue relating to an indemnifiable event under this Agreement, in such
proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding
in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of
the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault
of the Company (and its agents, other than Indemnitee) and Indemnitee in connection with such
event(s) and/or transaction(s).

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ARTICLE IX

EXCLUSIONS

     9.1 Notwithstanding any provision in this Agreement, the Company shall not be obligated under
this Agreement to make any indemnification, contribution, hold harmless or exoneration payment in
connection with any claim made against Indemnitee:

          (a) for which payment has actually been received by or on behalf of Indemnitee under any
insurance policy, contract, agreement, indemnity provision or otherwise, except with respect to any
excess beyond the amount actually received under such insurance policy, contract, agreement or
indemnity provision or otherwise;

          (b) for an accounting of profits made from the purchase and sale (or sale and purchase) by
Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or
similar provisions of state statutory law or common law; or

          (c) except as otherwise provided in Section 14.5 hereof, in connection with any
Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or
any part of such Proceeding) initiated by Indemnitee against the Company or its directors,
officers, employees or other indemnitees, unless (i) the Board authorized such Proceeding (or any
part of such Proceeding) prior to its initiation or (ii) the Company provides the indemnification,
hold harmless or exoneration payment, in its sole discretion, pursuant to the powers vested in the
Company under applicable law.

ARTICLE X

ADVANCES OF EXPENSES; DEFENSE OF CLAIMS

     10.1 Notwithstanding any provision of this Agreement to the contrary, and to the fullest
extent permitted by applicable law, the Company shall advance any Expenses incurred by Indemnitee
or on his or her behalf in connection with a Proceeding within thirty (30) days after receipt by
the Company of a written statement requesting such advance, which statement may be delivered to the
Company at such time and from time to time as Indemnitee deems appropriate in his or her sole
discretion (whether prior to or after final disposition of any such Proceeding). Advances shall be
made without regard to Indemnitee’s ability to repay such amounts and without regard to
Indemnitee’s ultimate entitlement to be indemnified, held harmless or exonerated under this
Agreement or otherwise. Any such advances shall be made on an unsecured basis and be interest
free. Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to
enforce the right of advancement provided herein, including Expenses incurred preparing and
forwarding a statement or statements to the Company to support the advances requested. Indemnitee
shall qualify for advances, to the fullest extent permitted by applicable law, solely upon the
execution and delivery to the Company of an undertaking providing that Indemnitee shall repay any
and all advances to the extent that it is ultimately determined that Indemnitee is not entitled to
be indemnified by the Company under either of the provisions of this Agreement, the Charter, the
Bylaws, applicable law or otherwise.

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This Section 10.1 shall not apply to any claim made by Indemnitee for which an
indemnification, hold harmless or exoneration payment is excluded pursuant to Section 9.1.

     10.2 Indemnitee shall reimburse the Company for all amounts advanced by the Company pursuant
to Section 10.1 if it is ultimately determined that Indemnitee is not entitled to be
indemnified by the Company for such Expenses. Notwithstanding the foregoing, if Indemnitee seeks a
judicial adjudication pursuant to Section 14.1, Indemnitee shall not be required to
reimburse the Company pursuant to this Section 10.2 until a final determination (as to
which all rights of appeal have been exhausted or lapsed) has been made.

     10.3 The Company shall be entitled to participate in any Proceeding at its own expense.
Neither party shall settle a Proceeding (in whole or in part) which would impose any Expense,
liability or limitation on the other party hereto without such party’s prior written consent, which
consent shall not be unreasonably withheld.

ARTICLE XI

PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION

     11.1 Indemnitee shall notify the Company in writing as soon as reasonably practicable (a)
after being served with any summons, citation, subpoena, complaint, indictment, information or
other document relating to any Proceeding or (b) if the Company has not been previously notified,
after receipt of written notice of any other matter with respect to which Indemnitee intends to
seek indemnification under Sections 3.1, 4.1 or 6.1 or advancement of
expenses under Section 10.1. The omission by Indemnitee to so notify the Company shall not
relieve the Company from any liability which it may have to Indemnitee (i) under this Agreement
except and only to the extent the Company can establish that such omission to notify resulted in
actual material prejudice to the Company or (ii) otherwise than under this Agreement.

     11.2 Indemnitee may thereafter deliver to the Company a written request for indemnification
pursuant to this Agreement at such time and from time to time as Indemnitee deems appropriate in
his or her sole discretion, which request shall also be deemed a request for advancement of
expenses under Section 10.1. Following such a written request, Indemnitee’s entitlement to
indemnification shall be determined according to Section 12.1.

ARTICLE XII

PROCEDURE UPON APPLICATION FOR INDEMNIFICATION

     12.1 (a) Upon written request by Indemnitee for indemnification pursuant to the first
sentence of Section 11.2 hereof, a determination, if required by applicable law, with
respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the
following methods:

          (i) if Indemnitee is not a member of the Nominating and Governance Committee and the
members of such committee are all Disinterested Directors, then the Nominating and
Governance Committee shall promptly consider the request for indemnification and make a
recommendation to the Board action in respect of such

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request for indemnification (which may include granting such request, denying it or any
other action such committee deems to be appropriate and in the best interests of the
Company);

          (ii) If Indemnitee is a member of the Nominating and Governance Committee, then if
there are at least three members of the Board who are Disinterested Directors, such
Disinterested Directors will appoint a Board committee amongst themselves, which committee
may, but shall not be required to, include all Disinterested Directors, solely for the
purpose of considering the request for indemnification by Indemnitee and shall promptly
consider the request for indemnification and make the determination on behalf of the Board
and take such action in respect thereof (which may include granting such request, denying it
or any other action such committee deems to be appropriate and in the best interests of the
Company);

          (iii) If there are less than three Disinterested Directors, then such determination
with respect to Indemnitee’s request for indemnification shall be made by Independent
Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee.

     (b) The Company shall promptly advise Indemnitee in writing with respect to any determination
that Indemnitee is or is not entitled to indemnification, including a description of any reason or
basis for which indemnification has been denied. If it is determined that Indemnitee is entitled
to indemnification, payment to Indemnitee shall be made within ten business days after such
determination. Indemnitee shall reasonably cooperate with the person, persons or entity making
such determination with respect to Indemnitee’s entitlement to indemnification, which cooperation
shall include providing to such person, persons or entity, upon such person’s, persons’ or entity’s
reasonable advance request, any documentation or information which is (i) reasonably available to
Indemnitee and reasonably necessary to such determination and (ii) not privileged or otherwise
protected from disclosure. Any costs or Expenses (including reasonable attorneys’ fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making
such determination shall be borne by the Company (regardless of what the outcome of the
determination as to Indemnitee’s entitlement to indemnification is) and the Company shall indemnify
and hold Indemnitee harmless therefrom.

     12.2 If the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 12.1(a)(iii) hereof, the Independent Counsel shall be selected
by the Nominating and Governance Committee or, if all members thereof are not Disinterested
Directors, by an affirmative vote of a majority of the Board. The Company shall give written
notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected.
Indemnitee may, within ten (10) days of its receipt of such written notice of selection, deliver to
the Company a written objection to such selection; provided, however, that such
objection may be asserted only on the ground that the Independent Counsel so selected does not meet
the requirements of “Independent Counsel” as defined in Section 1.1(t), and the objection
shall set forth with particularity the factual basis of such assertion. Absent a proper and timely
objection, the person so selected shall act as Independent Counsel. If a written objection is made
and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless
and until such objection is withdrawn or a court of competent

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jurisdiction has determined that such objection is without merit. If, within twenty (20) days
after submission by Indemnitee of a written request for indemnification pursuant to Section
11.2 hereof, no Independent Counsel shall have been selected and not objected to, either the
Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall
have been made by Indemnitee to the Company’s selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the Delaware Court or by such other
person as the Delaware Court shall designate, and the person with respect to whom all objections
are so resolved or the person so appointed shall act as Independent Counsel under Section
12.1 hereof. Upon the due commencement of any judicial proceeding pursuant to Section
14.1, Independent Counsel shall be discharged and relieved of any further responsibility in
such capacity (subject to the applicable standards of professional conduct then prevailing).

     12.3 The Company shall pay any and all reasonable fees and expenses of Independent Counsel
incurred by such Independent Counsel in connection with acting pursuant to Section 12.1
hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of
Section 12.2, regardless of the manner in which such Independent Counsel was selected or
appointed.

ARTICLE XIII

PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS

     13.1 In making a determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 11.2 of this Agreement, and the Company shall have the burdens of
coming forward with evidence and of persuasion to overcome that presumption. Neither the failure
of the Company to have made a determination prior to the commencement of any action pursuant to
this Agreement as to whether indemnification is proper under the circumstances nor an actual
determination made pursuant to Section 12.1 hereof that Indemnitee has not met the
applicable standard of conduct shall be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct.

     13.2 If the person, persons or entity empowered or selected under Section 12.1 to
determine whether Indemnitee is entitled to indemnification shall not have made a determination
within sixty (60) days after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially
misleading, in connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such 60-day period
may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person,
persons or entity making the determination with respect to entitlement to indemnification in good
faith requires such additional time to obtain and evaluate documentation and/or information
relating thereto.

-12-

 

     13.3 The termination of any Proceeding or of any claim, issue or matter therein, by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not
(except as otherwise expressly provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and
in a manner which he or she reasonably believed to be in or not opposed to the best interests of
the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to
believe that his or her conduct was unlawful.

     13.4 Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on
the records or books of account of the Enterprise, including financial statements, or on
information supplied to Indemnitee by the officers of the Enterprise in the course of their duties,
or on the advice of legal counsel for the Enterprise or on information or records given or reports
made to the Enterprise by an independent certified public accountant or by an appraiser or other
expert selected by the Enterprise. The provisions of this Section 13.4 shall not be deemed
to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or
found to have met the applicable standard of conduct set forth in this Agreement. In addition, the
knowledge and/or actions, or failure to act, of any other director, other officer, trustee,
partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to
Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether
or not the foregoing provisions of this Section 13.4 are satisfied, it shall in any event
be presumed that Indemnitee has at all times acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking
to overcome this presumption shall have the burden of proof and the burden of persuasion by clear
and convincing evidence.

ARTICLE XIV

REMEDIES OF INDEMNITEE

     14.1 In the event that (i) a determination is made pursuant to Section 12.1 of this
Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement
of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to
Section 10.1 of this Agreement, (iii) no determination of entitlement to indemnification
shall have been made pursuant to Section 12.1 of this Agreement within sixty (60) days
after receipt by the Company of the request for indemnification (subject to any extension as
provided in Section 13.2), (iv) payment of indemnification is not made pursuant to this
Agreement within ten (10) business days after receipt by the Company of a written request therefor,
(v) a contribution payment is not made in a timely manner pursuant to Article VIII of this
Agreement, (vi) payment of indemnification pursuant to this Agreement is not made within ten (10)
business days after a determination has been made that Indemnitee is entitled to indemnification or
such determination is deemed to have been made pursuant to Section 13.2, or (vii) payment
to Indemnitee pursuant to any hold harmless or exoneration rights under this Agreement or otherwise
is not made within ten (10) business days after receipt by the Company of a written request
therefor, Indemnitee shall be entitled to an adjudication by the Delaware Court to such
indemnification, hold harmless, exoneration, contribution or advancement rights.

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     14.2 In the event that a determination shall have been made pursuant to Section 12.1
of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding
commenced pursuant to this Article XIV shall be conducted in all respects as a de novo
trial on the merits and Indemnitee shall not be prejudiced by reason of the adverse determination
under Section 12.1. In any judicial proceeding commenced pursuant to this Article
XIV, Indemnitee shall be presumed to be entitled to be indemnified, held harmless, exonerated
and to receive advances of Expenses under this Agreement and the Company shall have the burden of
proving Indemnitee is not entitled to be indemnified, held harmless, exonerated and to receive
advances of Expenses, as the case may be, and the Company may not refer to or introduce into
evidence any determination pursuant to Section 12.1 of this Agreement adverse to Indemnitee
for any purpose.

     14.3 If a determination shall have been made pursuant to Section 12.1 of this
Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding commenced pursuant to this Article XIV, absent (i)
a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee’s statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable law.

     14.4 The Company shall be precluded from asserting in any judicial proceeding commenced
pursuant to this Article XIV that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and shall stipulate in any such court that the Company is bound by
all the provisions of this Agreement.

     14.5 Unless and until a determination shall have been made pursuant to Section 12.1 of
this Agreement that Indemnitee is not entitled to indemnification, the Company shall indemnify and
hold Indemnitee harmless to the fullest extent permitted by law against all Expenses and, if
requested by Indemnitee, shall (within ten (10) business days after the Company’s receipt of such
written request) advance to Indemnitee, to the fullest extent permitted by applicable law, such
Expenses which are incurred by Indemnitee in connection with any judicial proceeding brought by
Indemnitee (i) to enforce his or her rights under, or to recover damages for breach of, this
Agreement or any other indemnification, hold harmless, exoneration, advancement or contribution
arrangement or provision of the Charter or the Bylaws now or hereafter in effect; or (ii) for
recovery or advances under any insurance policy maintained by any person for the benefit of
Indemnitee, regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance, contribution or insurance recovery, as the case may be.

ARTICLE XV

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

     15.1 The Company shall use commercially reasonable efforts to obtain and maintain a policy or
policies of insurance (the “D&O Liability Insurance”) at commercially reasonable rates with
reputable insurance companies providing liability insurance for directors and officers of the
Company in their capacities as such (and for any capacity in which any director or officer of the
Company serves any other Enterprise at the request of the Company), in respect of acts or omissions
occurring while serving in such capacity.

-14-

 

     15.2 To the extent D&O Liability Insurance is obtained and maintained by the Company,
Indemnitee shall be covered by the Company’s D&O Liability Insurance policy or policies as in
effect from time to time in accordance with the applicable terms to the maximum extent of the
coverage available under such policy or policies. The Company shall, promptly after receiving
notice of a Proceeding as to which Indemnitee is a party or a participant (as a witness or
otherwise), give notice of such Proceeding to the insurers under the Company’s D&O Liability
Insurance policies in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable actions to cause such insurers to pay, on
behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the
terms of such policies. The failure or refusal of any such insurer to pay any such amount shall
not affect or impair the obligations of the Company under this Agreement.

     15.3 Upon request by Indemnitee, the Company shall provide to Indemnitee copies of the D&O
Liability Insurance policies as in effect from time to time. The Company shall promptly notify
Indemnitee of any material changes in such insurance coverage.

ARTICLE XVI

NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION

     16.1 The rights of Indemnitee as provided by this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter,
the Bylaws, any agreement, a vote of stockholders, a resolution of directors or otherwise. No
amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by
Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. To the
extent that a change in applicable law, whether by statute or judicial decision, permits greater
indemnification, hold harmless or exoneration rights or advancement of Expenses than would be
afforded currently under the Charter, the Bylaws or this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such
change. No right or remedy herein conferred is intended to be exclusive of any other right or
remedy, and every other right and remedy shall be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other right or remedy.

     16.2 The DGCL permits the Company to purchase and maintain insurance or furnish similar
protection or make other arrangements including, but not limited to, providing a letter of credit
or surety bond (“Indemnification Arrangements”) on behalf of Indemnitee against any liability
asserted against him or her or incurred by or on his or her behalf or in such capacity as a
director, officer, employee or agent of the Company, or arising out of his or her status as such,
whether or not the Company would have the power to indemnify him against such liability under the
provisions of this Agreement or under the DGCL, as it may then be in effect. The purchase,
establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit
or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as
expressly provided herein, and the execution and delivery of this Agreement by the

-15-

 

Company and Indemnitee shall not in any way limit or affect the rights and obligations of the
Company or the other party or parties thereto under any such Indemnification Arrangement.

     16.3 In the event of any payment under this Agreement, the Company shall be subrogated to the
extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers
required and take all action necessary to secure such rights, including execution of such documents
as are necessary to enable the Company to bring suit to enforce such rights.

     16.4 The Company’s obligation to indemnify, hold harmless, exonerate or advance Expenses
hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer,
trustee, partner, managing member, fiduciary, employee or agent of any other Enterprise shall be
reduced by any amount Indemnitee has actually received as indemnification, hold harmless or
exoneration payments or advancement of expenses from such Enterprise.

ARTICLE XVII

DURATION OF AGREEMENT

     17.1 All agreements and obligations of the Company contained herein shall continue during the
period Indemnitee serves as a director or officer of the Company or as a director, officer,
trustee, partner, managing member, fiduciary, employee or agent of any other corporation,
partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee
serves at the request of the Company and shall continue thereafter so long as Indemnitee shall be
subject to any possible Proceeding (including any rights of appeal thereto and any Proceeding
commenced by Indemnitee pursuant to Article XIV of this Agreement) by reason of his or her
Corporate Status, whether or not he or she is acting in any such capacity at the time any liability
or expense is incurred for which indemnification can be provided under this Agreement.

ARTICLE XVIII

SEVERABILITY

     18.1 If any provision or provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including, without limitation, each portion of any Section,
paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law;
(b) such provision or provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the
fullest extent possible, the provisions of this Agreement (including, without limitation, each
portion of any Section, paragraph or sentence of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested thereby.

-16-

 

ARTICLE XIX

ENFORCEMENT AND BINDING EFFECT

     19.1 The Company expressly confirms and agrees that it has entered into this Agreement and
assumed the obligations imposed on it hereby in order to induce Indemnitee to serve or to continue
to serve as a director, officer or key employee of the Company, and the Company acknowledges that
Indemnitee is relying upon this Agreement in serving as a director, officer or key employee of the
Company.

     19.2 Without limiting any of the rights of Indemnitee under the Charter or Bylaws of the
Company, as they may be amended from time to time, this Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral, written and implied, between the parties hereto with respect
to the subject matter hereof.

     19.3 The indemnification, hold harmless, exoneration and advancement of expenses rights
provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the
parties hereto and their respective successors and assigns (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or substantially all of the
business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a
director, officer, employee or agent of the Company or of any other Enterprise at the Company’s
request, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs,
devisees, executors and administrators and other legal representatives.

     19.4 The Company shall require and cause any successor (whether direct or indirect by
purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of
the business and/or assets of the Company, by written agreement in form and substance satisfactory
to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such succession had taken
place.

     19.5 The Company and Indemnitee agree herein that a monetary remedy for breach of this
Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further
agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto
agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific
performance hereof, without any necessity of showing actual damage or irreparable harm and that by
seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from
seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee
further agree that Indemnitee shall be entitled to such specific performance and injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent injunctions, without
the necessity of posting bonds or other undertaking in connection therewith. The Company
acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee
by the Court, and the Company hereby waives any such requirement of such a bond or undertaking.

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ARTICLE XX

MODIFICATION AND WAIVER

     20.1 No supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall
any waiver constitute a continuing waiver.

ARTICLE XXI

NOTICES

     21.1 All notices, requests, demands and other communications hereunder shall be in writing and
shall be delivered (i) in person, (ii) by Federal Express or other nationally recognized overnight
carrier service which issues confirmation of delivery or (iii) by certified or registered mail with
postage prepaid. Any such notice shall be deemed to be duly given (i) when delivered, if delivered
personally or by Federal Express or other nationally recognized overnight carrier service or (ii)
on the third (3rd) business day after the date on which such notice is mailed by certified or
registered mail with postage prepaid:

          (a) if to Indemnitee, at the address indicated on the signature page of this Agreement, or
such other address as Indemnitee shall provide in writing to the Company in accordance with the
terms hereof.

          (b) if to the Company, to:

Covanta Holding Corporation

40 Lane Road

Fairfield, New Jersey 07004

Attention: General Counsel

     with a copy (which shall not constitute notice) to:

Neal, Gerber & Eisenberg LLP

2 North LaSalle, Suite 2200

Chicago, Illinois 60602

Attention: David S. Stone

     or to any other address as may have been furnished to Indemnitee in writing by the Company.

ARTICLE XXII

APPLICABLE LAW AND CONSENT TO JURISDICTION

     22.1 This Agreement and the legal relations among the parties hereto shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware, without

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regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and
unconditionally: (a) agree that any action or proceeding arising out of or in connection with this
Agreement shall be brought only in the Delaware Court and not in any other state or federal court
in the United States of America or any court in any other country; (b) consent to submit to the
exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out
of or in connection with this Agreement; (c) appoint irrevocably, to the extent such party is not a
resident of the State of Delaware, CT Corporation, as its agent in the State of Delaware or any
other such agent as designated by the Company and reasonably acceptable to Indemnitee as such
party’s agent for acceptance of legal process in connection with any such action or proceeding
against such party with the same legal force and validity as if served upon such party personally
within the State of Delaware; (d) waive any objection to the laying of venue of any such action or
proceeding in the Delaware Court; and (e) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Delaware Court has been brought in an improper or
inconvenient forum, or is subject (in whole or in part) to a jury trial.

ARTICLE XXIII

IDENTICAL COUNTERPARTS

     23.1 This Agreement may be executed in one or more counterparts, each of which shall for all
purposes be deemed to be an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom enforceability is sought
needs to be produced to evidence the existence of this Agreement.

ARTICLE XXIV

MISCELLANEOUS

     24.1 Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun
where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience
only and shall not be deemed to constitute part of this Agreement or to affect the construction
thereof.

[Remainder of Page Intentionally Left Blank – Signature Page Follows]

-19-

 

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the parties hereto
on the date and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	COVANTA HOLDING CORPORATION
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	INDEMNITEE
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

[SIGNATURE PAGE TO [_________] INDEMNIFICATION AGREEMENT]

-20-exv4w1

 

OMNIBUS INSTRUMENT

     WHEREAS, the parties named herein desire to enter into certain Program Documents, by executing
this Omnibus Instrument dated as of December 7, 2007, relating to the issuance by Principal Life
Income Fundings Trust 2007-121 (the “Trust”) of Notes with a principal amount of $3,118,000 to
investors under Principal Life’s secured notes program;

     WHEREAS, the Trust is a trust and will be organized under and its activities will be governed
by the provisions of the Trust Agreement (set forth in Section A of this Omnibus Instrument), dated
as of the date specified herein, by and between the parties thereto indicated in Section F herein;

     WHEREAS, certain expense and indemnification arrangements between Principal Life and the
Trustee, on behalf of itself and on behalf of the Trust, are governed pursuant to the provisions of
the Expense and Indemnity Agreement dated as of November 21, 2007, by and between Principal Life
and the Trustee;

     WHEREAS, certain licensing arrangements between the Trust and Principal Financial Services,
Inc. will be governed pursuant to the provisions of the License Agreement (set forth in Section B
of this Omnibus Instrument), dated as of the date specified herein, by and between the parties
thereto indicated in Section F herein;

     WHEREAS, certain custodial arrangements of the Funding Agreement and the Guarantee will be
governed pursuant to the provisions of the Custodial Agreement (the “Custodial Agreement”) dated as
of November 21, 2007 by and among Bankers Trust Company, N.A., acting as custodian (the
“Custodian”), the Indenture Trustee and the Trustee, on behalf of the Trust;

     WHEREAS, the Notes will be issued pursuant to the Indenture (set forth in Section C of this
Omnibus Instrument), dated as of the date specified herein, by and between the parties thereto
indicated in Section F herein;

     WHEREAS, the sale of the Notes will be governed by the Terms Agreement (set forth in Section D
of this Omnibus Instrument), dated as of the date specified herein, by and among the parties
thereto indicated in Section F herein; and

     WHEREAS, certain agreements relating to the Notes, the Funding Agreement and the Guarantee are
set forth in the Coordination Agreement (set forth in Section E of this Omnibus Instrument), dated
as of the date specified herein, by and among the parties thereto indicated in Section F herein.

     All capitalized terms used herein and not otherwise defined will have the meanings set forth
in the Indenture.

[Remainder of Page Left Intentionally Blank.]

 

 

SECTION A

TRUST AGREEMENT

     This TRUST AGREEMENT (this “Trust Agreement”), dated as of the date of the Pricing Supplement,
is entered into by and between GSS Holdings II, Inc., a Delaware corporation, as trust beneficial
owner (the “Trust Beneficial Owner”), and U.S. Bank Trust National Association, a national banking
association, as Trustee (the “Trustee”).

W I T N E S S E T H:

     WHEREAS, the Trust Beneficial Owner and the Trustee desire to authorize the issuance of a
Trust Beneficial Interest and a series of Notes in connection with the entry into this Trust
Agreement;

     WHEREAS, all things necessary to make this Trust Agreement a valid and legally binding
agreement of the Trustee and the Trust Beneficial Owner, enforceable in accordance with its terms,
have been done;

     WHEREAS, the parties intend to provide for, among other things, (i) the issuance and sale of
the Notes (pursuant to the Indenture, the Distribution Agreement and the related Terms Agreement)
and the Trust Beneficial Interest, (ii) the use of the proceeds of the sale of the Notes and Trust
Beneficial Interest to acquire the Funding Agreement, the payment obligations of which will be
fully and unconditionally guaranteed by the Guarantee, and (iii) all other actions deemed necessary
or desirable in connection with the transactions contemplated by this Trust Agreement; and

     WHEREAS, the parties hereto desire to incorporate by reference those certain Standard Trust
Terms, dated as of February 16, 2006, and attached to the Omnibus Instrument as Exhibit A
(the “Standard Trust Terms”) and all capitalized terms not otherwise defined herein (including the
recitals hereof) shall have the meanings set forth in the Standard Trust Terms (the Standard Trust
Terms and this Trust Agreement, collectively, the “Trust Agreement”).

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

ARTICLE 1

     Section 1.01 Incorporation by Reference. All terms, provisions and agreements set
forth in the Standard Trust Terms (except to the extent expressly modified herein) are hereby
incorporated herein by reference with the same force and effect as though fully set forth herein.
To the extent that the terms set forth in Article 2 of this Trust Agreement are inconsistent with
the terms of the Standard Trust Terms, the terms set forth in Article 2 herein shall apply.

A-1

 

ARTICLE 2

     Section 2.01 Name. The Trust created and governed by the Trust Agreement shall be the
trust specified in the Omnibus Instrument. The name of the Trust shall be the name specified in
the first paragraph of the Omnibus Instrument, as such name may be modified from time to time by
the Trustee following written notice to the Trust Beneficial Owner.

     Section 2.02 Jurisdiction. The Trust is hereby organized in, and formed under and
pursuant to, the laws of the State of New York.

     Section 2.03 Initial Capital Contribution and Ownership. The Trust Beneficial Owner
has paid or has caused to be paid to, or to an account at the direction of, the Trustee, on the
date hereof, the sum of $15 (or, in the case of Notes issued with original issue discount, such
amount multiplied by the issue price of the Notes). The Trustee hereby acknowledges receipt in
trust from the Trust Beneficial Owner, as of the date hereof, of the foregoing contribution, which
shall be used along with the proceeds from the sale of the series of Notes to purchase the Funding
Agreement. Upon the creation of the Trust and the registration of the Trust Beneficial Interest in
the Securities Register (as defined in the Trust Agreement) by the Registrar in the name of the
Trust Beneficial Owner, the Trust Beneficial Owner shall be the sole beneficial owner of the Trust.

     Section 2.04 Acknowledgment. The Trustee, on behalf of the Trust, expressly
acknowledges its duties and obligations set forth in the Standard Trust Terms incorporated herein.

     Section 2.05 Additional Terms.

     None

     Section 2.06 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to the Trust Agreement will enter into the Trust Agreement by executing the
Omnibus Instrument.

     By executing the Omnibus Instrument, the Trustee and the Trust Beneficial Owner hereby agree
that the Trust Agreement will constitute a legal, valid and binding agreement between the Trustee
and the Trust Beneficial Owner.

     All terms relating to the Trust or the series of Notes not otherwise included in the Trust
Agreement will be as specified in the Omnibus Instrument, the Pricing Supplement or the
Distribution Agreement as indicated herein.

A-2

 

     Section 2.07 Governing Law. The Trust Agreement will be governed by, and construed in
accordance with, the laws of the State of New York.

     Section 2.08 Counterparts. The Trust Agreement, through the Omnibus Instrument, may
be executed in any number of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute but one and the same instrument.

[Remainder of Page Left Intentionally Blank.]

A-3

 

SECTION B

LICENSE AGREEMENT

     This LICENSE AGREEMENT (this “License Agreement”), dated as of the date of the Pricing
Supplement, is entered into by and between Principal Financial Services, Inc., an Iowa corporation
with its principal place of business at 711 High Street, Des Moines, Iowa 50392 (the “Licensor”),
and the Principal Life Income Fundings Trust specified in the Omnibus Instrument (the “Licensee”).

W I T N E S S E T H:

     WHEREAS, the Licensor is the owner of certain trademarks and service marks and registrations
and pending applications therefor, and may acquire additional trademarks and service marks in the
future, all as described more fully below;

     WHEREAS, the Licensee desires to use certain of the Licensor’s trademarks and service marks in
connection with the Licensee’s activities, as described more fully below;

     WHEREAS, the Licensor and the Licensee wish to formalize the agreement between them regarding
the Licensee’s use of the Licensor’s marks; and

     WHEREAS, the parties hereto desire to incorporate by reference those certain Standard License
Agreement Terms, dated March 5, 2004, and attached to the Omnibus Instrument as Exhibit B
(the “Standard License Agreement Terms”) and all capitalized terms not otherwise defined herein
(including the recitals hereof) shall have the meanings set forth in the Standard License Agreement
Terms (the Standard License Agreement Terms and this License Agreement, collectively, the “License
Agreement”).

     NOW, THEREFORE, in consideration of the mutual promises set forth herein and for other good
and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, each
party hereby agrees as follows:

ARTICLE 1

     Section 1.01 Incorporation by Reference. All terms, provisions and agreements set
forth in the Standard License Agreement Terms (except to the extent expressly modified herein) are
hereby incorporated herein by reference with the same force and effect as though fully set forth
herein. To the extent that the terms set forth in Article 2 of this License Agreement are
inconsistent with the terms of the Standard License Agreement Terms, the terms set forth in Article
2 herein shall apply.

ARTICLE 2

     Section 2.01 Additional Terms.

     None

B-1

 

     Section 2.02 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to the License Agreement will enter into the License Agreement by executing the
Omnibus Instrument.

     By executing the Omnibus Instrument, the Licensor and the Licensee hereby agree that the
License Agreement will constitute a legal, valid and binding agreement between the Licensor and the
Licensee.

     All terms relating to the Trust or the Notes not otherwise included in the License Agreement
will be as specified in the Omnibus Instrument or Pricing Supplement, as indicated herein.

     Section 2.03 Counterparts. The License Agreement, through the Omnibus Instrument, may
be executed in any number of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute but one and the same instrument.

[Remainder of Page Left Intentionally Blank.]

B-2

 

SECTION C

INDENTURE

     This INDENTURE (this “Indenture”) is entered into as of the Original Issue Date by and between
the Principal Life Income Fundings Trust specified in the Omnibus Instrument (the “Trust”) and
Citibank, N.A., as indenture trustee (the “Indenture Trustee”).

     Citibank, N.A., in its capacity as indenture trustee, hereby accepts its role as Registrar,
Paying Agent, Transfer Agent and Calculation Agent hereunder.

     References herein to “Indenture Trustee,” “Registrar,” “Transfer Agent,” “Paying Agent” or
“Calculation Agent” shall include the permitted successors and assigns of any such entity from time
to time.

W I T N E S S E T H:

     WHEREAS, the Trust has duly authorized the execution and delivery of this Indenture to provide
for the issuance of Notes;

     WHEREAS, all things necessary to make this Indenture a valid and legally binding agreement of
the Trust and the other parties to this Indenture, enforceable in accordance with its terms, have
been done, and the Trust proposes to do all things necessary to make the Notes, when executed by
the Trust and authenticated and delivered pursuant hereto, valid and legally binding obligations of
the Trust as hereinafter provided; and

     WHEREAS, the parties hereto desire to incorporate by reference those certain Standard
Indenture Terms, dated as of February 16, 2006, and attached to the Omnibus Instrument as
Exhibit C (the “Standard Indenture Terms”) and all capitalized terms not otherwise defined
herein (including the recitals hereof) shall have the meanings set forth in the Standard Indenture
Terms (the Standard Indenture Terms and this Indenture, collectively, the “Indenture”).

     NOW, THEREFORE, for and in consideration of the premises and the purchase of the Notes by the
Holders thereof, it is mutually covenanted and agreed by each of the parties hereto as follows:

ARTICLE 1

     Section 1.01 Incorporation by Reference. All terms, provisions and agreements set
forth in the Standard Indenture Terms (except to the extent expressly modified herein) are hereby
incorporated herein by reference (with the same force and effect as though fully set forth herein).
To the extent that the terms set forth in Article 2 of this Indenture are inconsistent with the
terms of the Standard Indenture Terms, the terms set forth in Article 2 herein shall apply.

C-1

 

ARTICLE 2

     Section 2.01 Agreement to be Bound. Each of the Trust, the Indenture Trustee, the
Registrar, the Transfer Agent, the Paying Agent and the Calculation Agent hereby agrees to be bound
by all of the terms, provisions and agreements set forth in the Indenture, with respect to all
matters contemplated in the Indenture, including, without limitation, those relating to the
issuance of the below-referenced Notes.

     Section 2.02 Designation of the Trust, the Notes, the Funding Agreement and the
Guarantee. The Trust created by the Trust Agreement and referred to in the Indenture is the
Principal Life Income Fundings Trust specified in the Omnibus Instrument. The Notes issued by the
Trust and governed by the Indenture shall be the Notes specified in the Pricing Supplement. The
Funding Agreement designated hereby is the Funding Agreement designated in the Pricing Supplement
dated as of the Original Issue Date between the Trust and Principal Life. The Guarantee designated
hereby is the Guarantee dated as of the Original Issue Date of PFG.

     Section 2.03 Additional Terms.

     None

     Section 2.04 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to the Indenture will enter into the Indenture by executing the Omnibus
Instrument.

     By executing the Omnibus Instrument, the Indenture Trustee, the Registrar, the Transfer Agent,
the Paying Agent, the Calculation Agent and the Trust hereby agree that the Indenture will
constitute a legal, valid and binding agreement between the Indenture Trustee, the Registrar, the
Transfer Agent, the Paying Agent, the Calculation Agent and the Trust.

     All terms relating to the Trust or the Notes not otherwise included in the Indenture will be
as specified in the Omnibus Instrument or Pricing Supplement, as indicated herein.

     Section 2.05 Counterparts. The Indenture, through the Omnibus Instrument, may be
executed in any number of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute one and the same instrument.

[Remainder of Page Left Intentionally Blank.]

C-2

 

SECTION D

TERMS AGREEMENT

     This TERMS AGREEMENT (this “Terms Agreement”) is entered into as of the Original Issue Date by
and among Principal Life Insurance Company (“Principal Life”), Principal Financial Group, Inc.
(“PFG”), the Principal Life Income Fundings Trust specified in the Omnibus Instrument (the “Trust”)
and the Purchasing Agent specified in the Pricing Supplement (the “Purchasing Agent”).

W I T N E S S E T H:

     WHEREAS, Principal Life, PFG and the agent named therein, including the Purchasing Agent have
entered into that certain Distribution Agreement dated February 16, 2006 (the “Distribution
Agreement”).

     NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and
valuable consideration, the sufficiency and receipt of which are hereby acknowledged, each of the
parties hereby agrees as follows:

ARTICLE 1

     Section 1.01 Incorporation by Reference. The provisions of the Distribution Agreement
and the related definitions (unless otherwise specified herein) are incorporated by reference
herein and shall be deemed to have the same force and effect as if set forth in full herein.

ARTICLE 2

     Section 2.01 Addition of Trust as Party to Distribution Agreement.

     Pursuant to Section 1 of the Distribution Agreement, each of the undersigned parties hereby
acknowledges and agrees that the Trust, upon execution hereof by the Trust and the other parties to
the Distribution Agreement (other than any other trusts organized in connection with the
Registration Statement that are party thereto as of the date hereof), shall become a Trust for
purposes of the Distribution Agreement in accordance with the terms thereof, in respect of the
Notes, with all the authority, rights, powers, duties and obligations of a Trust under the
Distribution Agreement. The Trust confirms that any agreement, covenant, acknowledgment,
representation or warranty under the Distribution Agreement applicable to the Trust is made by the
Trust at the date hereof, unless another time or times are specified in the Distribution Agreement,
in which case such agreement, covenant, acknowledgment, representation or warranty shall be deemed
to be confirmed by the Trust at such specified time or times.

     Section 2.02 Purchase of Notes as Principal.

     (a) Subject in all respects to the terms and conditions of the Distribution Agreement, the
Trust hereby agrees to sell to the Purchasing Agent and the Purchasing Agent hereby agrees to
purchase the Notes having the terms specified in the Pricing Supplement relating to such Notes.

D-1

 

(b) In connection with any purchase of Notes from the Trust by the Purchasing Agent as
principal, the parties agree that the items specified on Schedule I of the Omnibus Instrument will
be delivered as of the Settlement Date.

     Section 2.03 Termination. Upon the termination of this Terms Agreement pursuant to
Section 13(b) of the Distribution Agreement the undersigned parties hereby agree to that the
expenses reasonably incurred prior to or in connection with such termination will be borne by
Principal Life and PFG.

     Section 2.04 Applicable Time. For purposes of the Distribution Agreement, the
Applicable Time shall be 10:00 am Central Standard Time on December 7, 2007.

     Section 2.05 Free Writing Prospectus. For purposes of the Distribution Agreement,
each free writing prospectus (attached to this Omnibus Instrument as Exhibit G) constitutes
a part of the Time of Sale Prospectus.

     Section 2.06 Governing Law. This Terms Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the principles of conflicts
of laws thereof.

     Section 2.07 Notices. For purposes of Section 14 of the Distribution Agreement, the
Trust’s communications details are as set forth in Section E of the Omnibus Instrument.

     Section 2.08 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to this Terms Agreement will enter into this Terms Agreement by executing the
Omnibus Instrument.

     By executing the Omnibus Instrument, each party hereto agrees that this Terms Agreement will
constitute a legal, valid and binding agreement by and among such parties.

     All terms relating to the Trust or the Notes not otherwise included in this Terms Agreement
will be as specified in the Omnibus Instrument, the Pricing Supplement or the Distribution
Agreement as indicated herein.

     Section 2.09 Counterparts. This Terms Agreement, through the Omnibus Instrument, may
be executed in any number of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute but one and the same instrument.

[Remainder of Page Left Intentionally Blank.]

D-2

 

SECTION E

COORDINATION AGREEMENT

     This COORDINATION AGREEMENT (this “Coordination Agreement”), dated as of the date of the
Pricing Supplement, is entered into by and among Principal Life Insurance Company (“Principal
Life”), Principal Financial Group, Inc. (“PFG”), the Principal Life Income Fundings Trust specified
in the Omnibus Instrument (the “Trust”), Principal Financial Services, Inc. (“PFSI”), Bankers Trust
Company, N.A. and Citibank, N.A., as indenture trustee (the “Indenture Trustee”).

W I T N E S S E T H

     WHEREAS, the Trust will enter into the Funding Agreement with Principal Life dated as of the
Original Issue Date specified in the Pricing Supplement;

     WHEREAS, PFG will issue a Guarantee to the Trust as of the Original Issue Date specified in
the Pricing Supplement, which will fully and unconditionally guarantee the payment obligations of
Principal Life under the Funding Agreement;

     WHEREAS, the Purchasing Agents (as defined in the Terms Agreement) have agreed to sell the
Notes in accordance with the Registration Statement;

     WHEREAS, the Trust intends to issue the Notes in accordance with the Indenture, to
collaterally assign to, and grant a security interest in, the Funding Agreement and the Guarantee
to and in favor of the Indenture Trustee in accordance with the Indenture to secure payment of the
Notes;

     WHEREAS, the Custodian will hold the Funding Agreement and the Guarantee on behalf of the
Indenture Trustee pursuant to the terms of the Custodial Agreement; and

     WHEREAS, certain licensing arrangements between the Trust and PFSI will be governed pursuant
to the provisions of the License Agreement.

     NOW, THEREFORE, to give effect to the agreements and arrangements established under the Terms
Agreement included in the Omnibus Instrument, as applicable, the Trust Agreement, the Indenture and
the Notes, and in consideration of the agreements and obligations set forth herein and for other
good and valuable consideration, the sufficiency of which are hereby acknowledged, each party
hereby agrees as follows:

ARTICLE 1

     Section 1.01 Delivery of the Funding Agreement and the Guarantee. The Trust hereby
authorizes the Custodian, on behalf of the Indenture Trustee, to receive the Funding Agreement from
Principal Life and the Guarantee from PFG pursuant to the assignment of the Funding Agreement and
Guarantee (the “Assignment”), to be entered into on the Original Issue Date, included in the
closing instrument dated as of the Original Issue Date (the “Closing Instrument”).

E-1

 

     Section 1.02 Issuance and Purchase of the Notes.

     (a) Delivery of the Funding Agreement and the Guarantee to the Custodian, on behalf of the
Indenture Trustee, pursuant to the Assignment or execution of the cross receipt contained in the
Closing Instrument shall be confirmation of payment by the Trust for the Funding Agreement.

     (b) The Trust hereby directs the Indenture Trustee, upon receipt by the Custodian, on behalf
of the Indenture Trustee, of the Funding Agreement pursuant to the Assignment and upon receipt by
the Custodian, on behalf of the Indenture Trustee, of the Guarantee, (i) to authenticate the
certificates representing the Notes (the “Notes Certificates”) in accordance with the Indenture and
(ii) to (A) deliver each relevant Notes Certificate to the clearing system or systems identified in
each such Notes Certificate, or to the nominee of such clearing system, or the custodian thereof,
for credit to such accounts as the Purchasing Agent may direct, or (B) deliver each relevant Notes
Certificate to the purchasers thereof as identified by the Purchasing Agent.

ARTICLE 2

     Section 2.01 Directions Regarding Periodic Payments. As registered owner of the
Funding Agreement and the Guarantee as collateral securing payments on the Notes, the Indenture
Trustee will receive payments on the Funding Agreement and the Guarantee on behalf of the Trust.
The Trust hereby directs the Indenture Trustee to use such funds to make payments on behalf of the
Trust pursuant to the Trust Agreement and the Indenture.

     Section 2.02 Maturity of the Funding Agreement. Upon the maturity of the Funding
Agreement and the return of funds thereunder, the Trust hereby directs the Indenture Trustee to set
aside from such funds an amount sufficient for the repayment of the outstanding principal on the
Notes and Trust Beneficial Interest when due.

ARTICLE 3

     Section 3.01 Certificates. Principal Life hereby agrees to deliver an Officer’s
Certificate, a copy of which is attached hereto as Exhibit E, on a quarterly basis to any
rating agency currently rating the Program. The Trust hereby agrees to deliver an Officer’s
Certificate, a copy of which is attached hereto as Exhibit F, on a quarterly basis to any
rating agency currently rating the Program.

     Section 3.02 Filings. Principal Life hereby covenants, as sponsor and depositor, to
file, or cause to be filed, in a timely manner on behalf of the Trust all reports, certifications
or similar filings required under the Securities Exchange Act of 1934, as amended.

ARTICLE 4

     Section 4.01 No Additional Liability. Nothing in this Coordination Agreement shall
impose any liability or obligation on the part of any party to this Coordination Agreement to make
any payment or disbursement in addition to any liability or obligation such party has under the
Program Documents, except to the extent that a party has actually received funds which it is
obligated to disburse pursuant to this Coordination Agreement.

E-2

 

     Section 4.02 No Conflict. This Coordination Agreement is intended to be in
furtherance of the agreements reflected in the documents related to the Program Documents, and not
in conflict. To the extent that a provision of this Coordination Agreement conflicts with the
provisions of one or more Program Documents, the provisions of such Program Documents shall govern.

     Section 4.03 Governing Law. This Coordination Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to the principles of
conflicts of laws thereof.

     Section 4.04 Severability. If any provision in this Coordination Agreement shall be
invalid, illegal or unenforceable, such provision shall be deemed severable from the remaining
provisions of this Coordination Agreement and shall in no way affect the validity or enforceability
of such other provisions of this Coordination Agreement.

     Section 4.05 Severability. If any provision in this Coordination Agreement shall be
invalid, illegal or unenforceable, such provision shall be deemed severable from the remaining
provisions of this Coordination Agreement and shall in no way affect the validity or enforceability
of such other provisions of this Coordination Agreement.

     Section 4.06 Notices. All demands, notices and communications under this Coordination
Agreement shall be in writing and shall be deemed to have been duly given upon receipt at the
addresses set forth below:

     To the Trust:

Principal Life Income Fundings Trust (followed by the number set forth in the

   Omnibus Instrument)

c/o U.S. Bank Trust National Association

100 Wall Street, 16th Floor

New York, New York 10005

Attention: Corporate Trust Administration

Telephone: (212) 361-2184

Facsimile: (212) 509-3384

     To the Indenture Trustee:

Citibank, N.A.

Citibank Agency & Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

Attention: Nancy Forte

Telephone: (212) 816-5685

Facsimile: (212) 657-3862

E-3

 

     To Principal Life:

Principal
Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

     With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527

     To PFG:

Principal Financial Group, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

     With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527

     To Principal Financial Services, Inc.:

Principal Financial Services, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

E-4

 

     With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527

     To Bankers Trust Company, N.A:

Bankers Trust Company, N.A.

453 7th Street

Des Moines, Iowa 50309-2728

Attention: Angela C. Brick

Telephone: (515) 245-2820

Facsimile: (515) 247-2101

or at such other address as shall be designated by any such party in a written notice to the other
parties.

ARTICLE 5

     Section 5.01 Omnibus Instrument; Execution and Incorporation of Terms.

     The parties to this Coordination Agreement will enter into this Coordination Agreement by
executing the Omnibus Instrument.

     By executing the Omnibus Instrument, each party hereto agrees that this Coordination Agreement
will constitute a legal, valid and binding agreement by and among the Trust, Principal Life, PFG,
PFSI, the Custodian and the Indenture Trustee.

     All terms relating to the Trust or the Notes not otherwise included in this Coordination
Agreement will be as specified in the Omnibus Instrument or Pricing Supplement, as indicated
herein.

     Section 5.02 Acknowledgment. Principal Life hereby acknowledges Section 2.10 of the
Indenture and Section 6.1 of the Custodial Agreement. The Trust hereby acknowledges and agrees to
the terms of the Custodial Agreement.

     Section 5.03 Counterparts. This Coordination Agreement, through the Omnibus
Instrument, may be executed in any number of counterparts, each of which counterparts shall be
deemed to be an original, and all of which counterparts shall constitute but one and the same
instrument.

     Section 5.04 Capitalized Terms. All capitalized terms used herein and not otherwise
defined in this Coordination Agreement will have the meanings set forth in the Indenture.

[Remainder of Page Left Intentionally Blank.]

E-5

 

SECTION F

MISCELLANEOUS AND EXECUTION PAGES

     This Omnibus Instrument may be executed by each of the parties hereto in any number of
counterparts, and by each of the parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

     Each signatory, by its execution hereof, does hereby become a party to each of the agreements
or indenture identified for such party as of the date specified in such agreements or indenture.

     IN WITNESS WHEREOF, the undersigned have executed this Omnibus Instrument with respect to the
Notes as of the date first specified above.

	 	 	 	 	 
	 	PRINCIPAL LIFE INSURANCE COMPANY (in 

executing below agrees and becomes a party to (i) the 

Terms Agreement set forth in Section D herein and 

(ii) the Coordination Agreement set forth in Section E 

herein)

 	 
	 	By:  	/s/ Michael Garvin
 	 
	 	 	Name:  	Michael Garvin 	 
	 	 	Title:  	Officer 	 
	 
	 	PRINCIPAL FINANCIAL GROUP, INC. (in 

executing below agrees and becomes a party to (i) 

the Terms Agreement set forth in Section D herein 

and (ii) the Coordination Agreement set forth in 

Section E herein)

 	 
	 	By:  	/s/ Elizabeth D. Swanson
 	 
	 	 	Name:  	Elizabeth D. Swanson 	 
	 	 	Title:  	Counsel 	 
	 
	 	PRINCIPAL FINANCIAL SERVICES, INC. (in 

executing below agrees and becomes a party to the 

License Agreement set forth in Section B herein)

 	 
	 	By:  	/s/ Elizabeth D. Swanson
 	 
	 	 	Name:  	Elizabeth D. Swanson 	 
	 	 	Title:  	Counsel 	 
	 

Execution Page 1 of 3

	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 

 

 

	 	 	 	 	 
	 	THE PRINCIPAL LIFE INCOME FUNDINGS 

TRUST DESIGNATED IN THIS OMNIBUS 

INSTRUMENT (in executing below agrees and

becomes a party to (i) the License Agreement set 

forth in Section B herein, (ii) the Indenture set forth in

Section C herein, (iii) the Terms Agreement set forth

in Section D herein and (iv) the Coordination 

Agreement set forth in Section E herein)

By: U.S. Bank Trust National Association, not in its

individual capacity but solely in its capacity as trustee 

of the Trust

 	 
	 	By:  	/s/ O’Hara
 	 
	 	 	Name:  	Janet P. O’Hara	 
	 	 	Title:  	Assistant Vice President 	 
	 
	 	U.S. BANK TRUST NATIONAL ASSOCIATION 

(in executing below agrees and becomes a party to the 

Trust Agreement set forth in Section A herein), as 

Trustee

 	 
	 	By:  	/s/ O’Hara
 	 
	 	 	Name:  	Janet P. O’Hara	 
	 	 	Title:  	Assistant Vice President 	 
	 
	 	GSS HOLDINGS II, INC. (in executing below agrees 

and becomes a party to the Trust Agreement set forth 

in Section A herein), as Trust Beneficial Owner

 	 
	 	By:  	/s/ Bernard J. Angelo
 	 
	 	 	Name:  	Bernard J. Angelo 	 
	 	 	Title:  	Vice President 	 
	 
	 	CITIBANK, N.A. (in executing below agrees and 

becomes a party to (i) the Indenture set forth in 

Section C herein, as Indenture Trustee, Registrar, 

Transfer Agent, Paying Agent and Calculation Agent 

and (ii) the Coordination Agreement set forth in 

Section E herein), as Indenture Trustee, Registrar, 

Transfer Agent, Paying Agent and Calculation Agent

 	 
	 	By:  	/s/ Jennifer McCourt
 	 
	 	 	Name:  	Jennifer McCourt 	 
	 	 	Title:  	Vice President 	 
	 

Execution Page 2 of 3

 

 

	 	 	 	 	 
	 	BANKERS TRUST COMPANY, N.A. (in executing 

below agrees and becomes a party to the Coordination 

Agreement set forth in Section E herein)

 	 
	 	By:  	/s/ Diana L. Cook
 	 
	 	 	Name:  	Diana L. Cook 	 
	 	 	Title:  	Vice President 	 
	 
	 	MERRILL LYNCH, PIERCE, FENNER & SMITH 

INCORPORATED (in executing below agrees and 

becomes a party to the Terms Agreement set forth in 

Section D herein)

 	 
	 	By:  	/s/ Diane Kenna
 	 
	 	 	Name:  	Diane Kenna 	 
	 	 	Title:  	Authorized Signatory 	 
	 

Execution Page 3 of 3

 

 

INDEX OF EXHIBITS AND SCHEDULES TO THE OMNIBUS INSTRUMENT

	 	 	 
	Exhibit A

	 	Standard Trust Terms — Incorporated herein by reference to
Exhibit 4.2 to Principal Life Insurance Company’s Current Report
on Form 8-K filed on December 5, 2007.
	 
	 	 
	Exhibit B

	 	Standard License Agreement Terms — Incorporated herein by
reference to Exhibit 99.1 to Principal Life Insurance Company’s
Current Report on Form 8-K, filed on March 29, 2004.
	 
	 	 
	Exhibit C

	 	Standard Indenture Terms — Incorporated herein by reference to
Exhibit 4.1 to Principal Life Insurance Company’s Current Report
	 

	 	on Form 8-K, filed on December 5, 2007.
	 
	 	 
	Exhibit D

	 	Pricing Supplement — Incorporated herein by reference to the
Pricing Supplement with respect to Principal Life Income Fundings
Trust 2007-121, filed on December 3, 2007, with the Securities and
Exchange Commission pursuant to Rule 424(b)(2) under the
Securities Act of 1933, as amended.
	 
	 	 
	Exhibit E

	 	Principal Life Insurance Company Officer’s Certificate
	 
	 	 
	Exhibit F

	 	Principal Life Income Fundings Trusts Trustee Officer’s Certificate
	 
	 	 
	Exhibit G

	 	Free Writing Prospectus(es)
	 
	 	 
	Schedule I

	 	Terms Agreement Specifications

 

EXHIBIT E

Principal Life Insurance Company

Officer’s Certificate

     The undersigned, an officer of Principal Life Insurance Company, an Iowa stock life insurance
company (“Principal Life”), does hereby certify to Standard & Poor’s Ratings Services, a division
of The McGraw-Hill Companies, Inc., in such capacity and on behalf of Principal Life, to the
knowledge of the undersigned and after reasonable inquiry, that:

	 	1.	 	each of the representations and warranties of Principal Life contained in each
Expense and Indemnity Agreement entered into in connection with the Registration
Statement (defined below), and each Funding Agreement issued in connection with the
Program (the “Specified Agreements”) (other than any representation or warranty
expressly made as of a date prior to the date hereof) are true and correct on and as of
the date hereof, with the same effect as though such representation or warranty had
been made on and as of the date hereof;
	 
	 	2.	 	no default under any of the Specified Agreements and no event or any condition
which, with notice or lapse of time or both, would become a default, has occurred and
is continuing as of the date hereof;
	 
	 	3.	 	Principal Life has performed and complied with, respectively, in all material
respects, all of the agreements, covenants, obligations and conditions applicable to
Principal Life required by the Specified Agreements to be performed or complied with by
Principal Life on or before the date hereof;
	 
	 	4.	 	the Registration Statement filed on Form S-3 (File Nos. 333-129763 and
333-129763-01) (the “Registration Statement”) by Principal Life and Principal Financial
Group, Inc. has been declared effective by the Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933, as amended (the “Act”) and no stop
order suspending the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been commenced by or are pending before or
contemplated by the Commission;
	 
	 	5.	 	all filings, if any, required by Rule 424 and Rule 430A under the Act have been
made in a timely manner;
	 
	 	6.	 	since ___, the Trusts organized in connection with the program contemplated
by the Registration Statement have issued the following series of Notes:
	 
	 	 	 	     [List each series of Notes.] [(collectively, the “Designated Notes”)]; and
	 
	 	7.	 	the Funding Agreements issued in connection with the Designated Notes have been
executed and delivered by Principal Life in accordance with the terms and conditions of the
Program Documents.

E-1

 

     Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Standard Indenture Terms
dated as of November 21, 2007.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the l day of
l, 200l.

	 	 	 	 	 
	 	[Name], [in his/her] capacity as an

authorized officer of Principal Life

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	

E-2

 

EXHIBIT F

Principal Life Income Fundings Trusts

Trustee Officer’s Certificate

     U.S. Bank Trust National Association, not in its individual capacity but solely in its
capacity as trustee acting on behalf of each common law trust organized under the laws of the State
of New York (in such capacity, the “Trustee,” and each such common law trust being referred to
herein as, a “Trust”) in connection with the program contemplated by Registration Statement Nos.
333-129763 and 333-129763-01 filed on Form S-3 (the “Registration Statement”) by Principal Life
Insurance Company and Principal Financial Group, Inc. with the Securities and Exchange Commission,
does hereby certify to Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
Inc., in such capacity and on behalf of each Trust, to the knowledge of the Trustee, that:

	 	1.	 	each of the representations and warranties of each Trust contained in the Notes
issued in connection with the Program, each Indenture entered into in connection with
the Registration Statement and the Expense and Indemnity Agreement concerning the
Trusts (the “Specified Agreements”) (other than any representation or warranty
expressly made as of a date prior to the date hereof) are true and correct on and as of
the date hereof, with the same effect as though such representation or warranty had
been made on and as of the date hereof;
	 
	 	2.	 	no default under any of the Specified Agreements and no event or any condition
which, with notice or lapse of time or both, would become a default, has occurred and
is continuing as of the date hereof;
	 
	 	3.	 	each Trust has performed and complied with, respectively, in all material
respects, all of the agreements, covenants, obligations and conditions applicable to
such Trust required by the Specified Agreements to be performed or complied with by
such Trust on or before the date hereof;
	 
	 	4.	 	the Notes issued in connection with the Program, have been issued, in all
material respects, in accordance with the terms and conditions of the Program
Documents; and
	 
	 	5.	 	each Funding Agreement has been executed and delivered by the related Trust in
accordance with the terms and conditions of the Program Documents.

     Capitalized terms used herein and not otherwise defined herein shall have the meanings set
forth in the Standard Indenture Terms attached as Exhibit 4.1 to the Registration Statement. In no
event shall U.S. Bank Trust National Association in its personal corporate capacity have any
liability for any of the certifications or statements contained in this Trustee Officer’s
Certificate, such liability being solely that of each Trust.

F-1

 

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the l day of
l, 200l.

	 	 	 	 	 
	 	U.S. Bank Trust National Association, not in its

capacity but solely in its capacity as Trustee acting

on behalf of each Trust

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

F-2

 

	 	 	 	 	 

EXHIBIT G

Free Writing Prospectus(es)

None.

G-1

 

SCHEDULE I

Terms Agreement Specifications

     In connection with Section 3(a)(iv) of the Distribution Agreement, the Program under which the
Notes are issued is rated Aa2 by Moody’s Investors Service, Inc. (“Moody’s”) and AA by Standard &
Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”). Principal Life and
PFG expect that the Notes will be rated Aa2 by Moody’s. The Company’s financial strength rating is
Aa2 by Moody’s and AA by S&P.

     In accordance with Section 2.02(b) of the Terms Agreement and in connection with the purchase
of Notes from the Trust by the Purchasing Agent as principal, the following items will be delivered
on the Settlement Date:

	•	 	Opinion of Sidley Austin LLP regarding the enforceability of the Guarantee and the
Notes.

     All capitalized terms used herein and not otherwise defined herein will have the meanings set
forth in the Distribution Agreement.

I-1

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