Document:

exv10w2

 

Exhibit 10.2

GUARANTEE

     FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and in connection with
that certain funding agreement (the “Funding Agreement”), entered into by and between Principal
Life Insurance Company, an Iowa insurance company (“Principal Life”), and Principal Life Income
Fundings Trust 21, a New York common law trust (the “Trust”), relating to the notes (the “Notes”)
issued by the Trust, Principal Financial Group, Inc., a Delaware corporation and the indirect
parent company of Principal Life (the “Guarantor”), hereby furnishes to the Trust its full and
unconditional guarantee of the Guaranteed Amounts (as hereinafter defined) as follows:

     1. Guarantee.

               (a) The Guarantor hereby fully, irrevocably, absolutely and unconditionally guarantees, as a
guarantee of payment and not merely as a guarantee of collection, immediate payment when due to the
Trust any payments required to be made by Principal Life to the Trust under the Funding Agreement
which shall become due and payable regardless of whether such payment is due at maturity, on an
interest payment date or as a result of redemption or otherwise (the “Scheduled Payments”) but
shall be unpaid by Principal Life (the “Guaranteed Amounts”). Notwithstanding anything to the
contrary contained herein, in no event shall the Guaranteed Amounts exceed the Deposit (as defined
in the Funding Agreement) of the Funding Agreement, plus accrued but unpaid interest and any other
amounts due and owing under the Funding Agreement, less any amounts paid by Principal Life to the
Trust.

               (b) In the event that Principal Life fails to make a Scheduled Payment in full when due (the
“Payment Notice Date”), then the Trust or Law Debenture Trust Company of New York, as indenture trustee for the benefit of
the holders of the Notes (the “Indenture Trustee”), pursuant to the indenture (the “Indenture”)
between the Trust and the Indenture Trustee, may present the Guarantor with notice (each, a
“Payment Notice”) of such failure in writing on or after the Payment Notice Date. The Payment
Notice shall identify (1) the Funding Agreement, (2) the Trust, (3) the Payment Notice Date and (4)
the amount of the Scheduled Payments not paid by Principal Life to the Trust as of the Payment
Notice Date. Upon receipt of such Payment Notice, the Guarantor will immediately pay the
Guaranteed Amounts pursuant to Section 7.

               (c) In the event that, after receipt of a Payment Notice from the Trust, the Guarantor fails
to make immediate payment to the Trust or the Indenture Trustee of the Guaranteed Amounts, then
the Trust and the Indenture Trustee may enforce the obligations of the Guarantor under this
Guarantee, including by immediately bringing suit directly against the Guarantor (without first
bringing suit against Principal Life) for the Guaranteed Amounts not paid to the Trust as of the
Payment Notice Date.

               (d) This Guarantee is an unsecured, unsubordinated and contingent obligation of the Guarantor
and ranks equally with all other unsecured and unsubordinated obligations of the Guarantor.

1

 

               2. Termination. This Guarantee is a continuing and irrevocable guarantee of the
Guaranteed Amounts now or hereafter existing and shall terminate and be of no further force and
effect with respect to the Funding Agreement and the Notes upon the full payment of the Scheduled
Payments or upon the earlier extinguishment of the obligations of Principal Life under the Funding
Agreement.

               3. Amendments. Subject to the trust agreement relating to the Trust and the Indenture, no
provision of this Guarantee may be waived, amended, supplemented or modified, except by a written
instrument executed by the Trust and the Guarantor.

               4. Assignment; Governing Law. This Guarantee shall inure to the benefit of the Trust and its
successors, assigns and pledgees. This Guarantee shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to conflict of law principles.

               5. Notices. All notices given pursuant to this Guarantee shall be in writing, and shall
either be delivered, mailed or telecopied to the locations listed below or at such other address or
to the attention of such other persons as such party shall have designated for such purpose in a
written notice complying as to delivery with the terms of this Section 5. Each such notice shall
be effective (i) if given by telecopy, when transmitted to the applicable number so specified in
this Section 5 (such notice shall also be sent by mail, with first class postage prepaid), (ii) if
given by mail, three days after deposit in the mails with first class postage prepaid, or (iii) if
given by any other means, when actually delivered at such address.

If to the Guarantor:

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

If to the Trust:

Principal Life Income Fundings Trust (followed by the number of the Trust specified in this Guarantee)

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c/o U.S. Bank Trust National Association

100 Wall Street, 16th Floor

New York, New York 10005

Attention: Thomas E. Tabor

Telephone: (212) 361-6184

Facsimile: (212) 809-5459

With a copy to Law Debenture Trust Company of New York, at:

Law Debenture Trust Company of New York

767 Third Avenue, 31st Floor

New York, NY 10017

Attention: Boris Treyger

Telephone: (212) 750-6474

Facsimile: (212) 750-1361

and Citibank, N.A., at:

Citibank, N.A.

Citibank Agency and Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

Attention: Nancy Forte

Telephone: (212) 816-5685

Facsimile: (212) 816-5527

               6. Representations and Warranties. The Guarantor represents and warrants that: (i) it is duly
organized and in good standing under the laws of the jurisdiction of its organization and has full
capacity and right to make and perform this Guarantee, and all necessary authority has been
obtained; (ii) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor
enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights and general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law; (iii) the making and performance of this
Guarantee does not and will not violate the provisions of any applicable law, regulation or order,
and does not and will not result in the breach of, or constitute a default under, any material
agreement, instrument or document to which it is a party or by which it or any of its property may
be bound or affected, except to the extent disclosed in the registration statement registering the
issuance of this Guarantee and the Funding Agreement, as amended, supplemented or modified from
time to time (the “Registration Statement”), and to the extent that any such violation, breach or
default does not result in a material adverse effect on the Guarantor; and (iv) all consents,
approvals, licenses and authorizations of, and filings and registrations with, any governmental
authority required under applicable law and regulations for the making and performance of this
Guarantee have been obtained or made and are in full force and effect, except to the extent
disclosed in the Registration Statement and to the extent that the failure to acquire any such
consent, approval, license, authorization, filing or registration does not result in a material
adverse effect on the Guarantor.

               7. Notice of, and Consent to, Security Interest. The Trust hereby notifies the Guarantor that
it has granted to the Indenture Trustee, on behalf of the holders of the Notes, a security interest
in the Collateral (as defined in the Indenture), including, but not limited to, any and all payment
to be made by the Guarantor to the Trust under this Guarantee. The Trust hereby notifies the
Guarantor that it has collaterally assigned to the Indenture Trustee, for the benefit of the
holders of the Notes, this Guarantee. The Guarantor, by executing this Guarantee, hereby (i)
affirms that it has made or simultaneously will make changes to its books and records to reflect
such security interest and collateral assignment, (ii) consents to the security interest

3

 

granted, and collateral assignment made, by the Trust to the Indenture Trustee of this
Guarantee, (iii) agrees to make all payments due under this Guarantee to the Collection Account (as
defined in the Indenture) or any other account designated in writing to the Guarantor by the
Indenture Trustee and (iv) agrees to comply with all orders of the Indenture Trustee with respect
to this Guarantee without any further consent from the Trust.

               8. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY APPLICABLE LAW, THE
GUARANTOR WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON OR ARISING
OUT OF THIS GUARANTEE. THIS GUARANTEE REPRESENTS THE FINAL AGREEMENT BETWEEN THE GUARANTOR AND THE
TRUST AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS AMONG SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

[Remainder of page intentionally left blank. Signature page follows.]

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	 	 	PRINCIPAL FINANCIAL GROUP, INC.
	 
	 	 
	 

	 	By:	 	/s/ JoEllen J. Watts 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	JoEllen J. Watts 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Counsel 	 	 
	 

	 	 	 	 	 	 
	 

	 	Date:
	 	The Effective Date (as defined in the Funding Agreement)	 	 

Acknowledged and Agreed:

THE PRINCIPAL LIFE INCOME FUNDINGS

TRUST DESIGNATED IN THIS GUARANTEE

	 	 	 	 
	By:

	 	U.S. Bank Trust National Association,
not in its individual capacity, but solely in its
capacity as trustee	 
	 
	 	 
	By:

	 	Bankers Trust Company, N.A.,
under Limited Power of Attorney, dated February 16, 2006
	 
	 	 
	By:
	 	/s/ Diana L. Cook
	 

	 	 
	 
	 	 
	Name:
	 	Diana L. Cook
	 

	 	 
	 
	 	 
	Title:
	 	Vice President
	 

	 	 
	 
	 	 
	Date:

	 	The Effective Date (as defined in the Funding Agreement)exv10w3

 

Exhibit 10.3

EXPENSE AND INDEMNITY AGREEMENT

     This Expense and Indemnity Agreement (this “Agreement”) is entered into as of June 16, 2006,
by and between Principal Life Insurance Company, an Iowa life insurance company (“Principal Life”)
and Law Debenture Trust Company of New York, as indenture trustee (“Law Debenture”).

     WHEREAS, in consideration of Law Debenture providing services to Principal Life Income
Fundings Trust 21 (the “Trust”) created in connection with the Program and pursuant to the Program
Documents under which Law Debenture will have certain duties and obligations, Principal Life hereby
agrees to the following compensation arrangements and terms of indemnity.

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

ARTICLE I

DEFINITIONS

     Section 1.01. Definitions. All capitalized terms not otherwise defined herein will
have the meanings set forth in the Standard Indenture Terms attached as Exhibit 4.1 to
Registration Statement on Form S-3 (File Nos. 332-129763 and 332-129763-01) filed with the
Securities and Exchange Commission (the “Commission”) by Principal Life and Principal Financial
Group, Inc. on November 16, 2005, as amended by Amendment No. 1 filed with the Commission on
December 22, 2005, Amendment No. 2 filed with the Commission on January 25, 2006, Amendment No. 3
filed with the Commission on February 14, 2006 and Amendment No. 4 filed with the Commission on
February 14, 2006, as may be amended. The following terms, as used herein, have the following
meanings:

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

 

 

or negligence of Law Debenture, (v) any costs and expenses attributable solely to Law
Debenture’s administrative overhead unrelated to the Program, (vi) any tax imposed on fees paid to
Law Debenture, (vii) any withholding taxes imposed on or with respect of payments made under the
applicable Funding Agreement, the applicable Indenture or the Trust’s Note and (viii) any
Additional Amounts paid to any Holder.

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

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

ARTICLE II

SERVICES AND FEES

     Section 2.01 Fees. Principal Life hereby agrees to pay Law Debenture its Fees. Such
Fees may be subject to amendment upon the written agreement of Principal Life and Law Debenture in
the event of a substantive change in the nature of Law Debenture’s duties under the Program, as
agreed to by Law Debenture and Principal Life.

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

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

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

ARTICLE III

INDEMNIFICATION

     Section 3.01 Subject to the remaining sections of this Article III, Principal Life covenants
to fully indemnify and defend Law Debenture or any predecessor Indenture Trustee

 

 

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

     Section 3.02 Except as otherwise set forth in Section 6.07 of the Indenture, an Indemnified
Person shall give prompt written notice to Principal Life of any action, suit or proceeding
commenced or threatened against the Indemnified Person. Failure by an Indemnified Person to so
notify Principal Life shall not relieve Principal Life of its obligations hereunder. In case any
such action, suit or proceeding shall be brought involving an Indemnified Person, Principal Life
may, in its sole discretion, elect to assume the defense of the Indemnified Person, and if it so
elects, Principal Life shall, in consultation with such Indemnified Person, select counsel,
reasonably acceptable to the Indemnified Person, to represent the Indemnified Person and pay the
reasonable fees and expenses of such counsel. In any such action, investigation or proceeding, the
Indemnified Person shall have the right to retain its own counsel but Principal Life shall not be
obligated to pay the fees and disbursements of such counsel unless (i) Principal Life and the
Indemnified Person shall have mutually agreed in writing to the retention of such counsel, (ii) the
named parties to any such action, investigation or proceeding (including any impleaded parties)
include both Principal Life and the Indemnified Person and the Indemnified Person shall have
reasonably and in good faith concluded that representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between them, or (iii)
Principal Life fails, within ten (10) days prior to the date the first response or appearance is
required to be made in any such proceeding, to assume the defense of such proceeding with counsel
reasonably satisfactory to the Indemnified Person. It is understood that Principal Life shall not,
in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local counsel) for all
Indemnified Persons.

     Section 3.03 Solely to the extent, if any, that the indemnification provided for herein is
finally determined by a court of competent jurisdiction to be invalid or unenforceable, in whole or
in part, in accordance with its terms, then Principal Life shall contribute to the amount paid or
payable by an Indemnified Person as a result of such invalidity or unenforceability in such
proportion as is appropriate to reflect the relative benefits received by Principal Life, on one
hand, and Law Debenture on the other hand, from the transactions contemplated by the Program
Documents. For this purpose, the benefits received by Principal Life shall be the aggregate value
of the relevant Collateral, and the benefits received by Law Debenture shall be the Fees it has
been paid up to that point, less costs and unreimbursed expenses incurred by it, as Indenture
Trustee, in relation to such Collateral. If, however, the allocation provided by the immediately

 

 

preceding two sentences is not permitted by applicable law, then Principal Life shall
contribute to such amount paid or payable by the Indemnified Person in such proportion as is
appropriate to reflect not only such relative benefits but also the relative fault of Principal
Life, on the one hand, and Law Debenture (but solely to the extent such fault results from or is
attributable to Law Debenture’s bad faith, willful misconduct or negligence) on the other hand, in
connection with the actions or omissions which resulted in such liability.

     Section 3.04 Principal Life shall be subrogated to any right of the Indemnified Person in
respect of the matter as to which and to the extent that any indemnity was paid hereunder.

     Section 3.05 The Indemnified Person may not settle any action, investigation or proceeding
without the consent of Principal Life, not to be unreasonably withheld.

     Section 3.06 Notwithstanding any provision contained herein to the contrary, the obligations
of Principal Life under this Article III to any Indemnified Person shall survive the termination of
this Agreement pursuant to Section 4.03.

ARTICLE IV

MISCELLANEOUS

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

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

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

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

     To Law Debenture:

Law Debenture Trust Company of New York

767 Third Avenue, 31st Floor

 

 

New York, NY 10017

Attention: Boris Treyger

Telephone: (212) 750-6474

Facsimile: (212) 750-1361

To Principal Life:

Principal Life Insurance Company

711 High Street

Des Moines, IA 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

Principal Life Insurance Company

711 High Street

Des Moines, IA 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527

     Section 4.05 Law Debenture shall (i) provide to Principal Life, as an exhibit to the Trust’s
Annual Reports on Form 10-K (each a “10-K”) filed on behalf of the Trust by Principal Life under
the Securities Exchange Act of 1934, as amended, a compliance certificate (the “Compliance
Certificate”), prepared by Law Debenture and complying with Items 1122(a) and 1123 of Regulation AB
(17 CFR 229.1100-1123 (“Regulation AB”)), and (ii) at Principal Life’s expense, cause a firm of
independent public accountants selected by Principal Life that is a member of the American
Institute of Certified Public Accountants to furnish to the management of Principal Life and to the
Trustee a report (the “Auditor’s Report”), complying with Item 1122(b) of Regulation AB. Principal
Life shall cause the Compliance Certificate and the Auditor’s Report to be filed as exhibits to
each Trust’s 10-K(s).

[The remainder of this page left intentionally blank.]

 

 

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

	 	 	 	 	 
	 	PRINCIPAL LIFE INSURANCE COMPANY

 	 
	 	By:  	/s/
JoEllen J. Watts	 
	 	Name:  JoEllen J. Watts	 
	 	Title:  Counsel	 
	 
	 	By:  	/s/
Christopher J.
Henderson	 
	 	Name:  Christopher J.
Henderson	 
	 	Title:  Investment Counsel	 
	 
	 	THE LAW DEBENTURE TRUST COMPANY OF NEW YORK

 	 
	 	By:  	/s/
Boris Treyger	 
	 	Name:  Boris Treyger	 
	 	Title:  Assistant Vice
President	 
	 

 

 

EXHIBIT A

FEES

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