EMPLOYMENT AGREEMENT

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Exhibit 10.16

EMPLOYMENT AGREEMENT

        This EMPLOYMENT AGREEMENT (the " Agreement ") dated as of June 1, 2006 (" Agreement Date ") by and between Principal Financial Group, Inc., a Delaware corporation, (together with all successors thereto " PFGI "), Principal Financial Services, Inc., an Iowa corporation, and Principal Life Insurance Company, an Iowa corporation (together with all successors thereto, " Life ") (each of the foregoing referred to individually as a " Company " or collectively as " Companies ", and Larry D. Zimpleman (" Executive "), a resident of Iowa. The parties desire to enter into this Agreement, which is intended to more fully embody the agreement among the parties as to Executive's employment. In consideration of the mutual agreements contained herein, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the Company and Executive agree as follows:

Article I.

DEFINITIONS

        The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated):

        1.1    " Accrued Annual Bonus " means the amount of any Annual Bonus earned but not yet paid with respect to any Fiscal Year ended prior to the Date of Termination.

        1.2    " Accrued Base Salary " means the amount of Executive's Base Salary, which is accrued but not yet paid as of the Date of Termination.

        1.3    " Affiliate " means any Person that directly or indirectly controls, is controlled by, is under common control with, a Company. For the purposes of this definition, the term "control" when used with respect to any Person, means (a) the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, or (b) for purposes of Section 1.11 and Article VII, the power substantially to influence the direction of strategic management policies of such Person, and provided a Company has a direct or indirect commercial relationship with such Person, all as determined by the Human Resources Committee of the Board or its successor.

        1.4    " Agreement "—see the introductory paragraph of this Agreement.

        1.5    " Agreement Date "—see the introductory paragraph in this Agreement.

        1.6    " Anniversary Date "—means any annual anniversary of the Agreement Date.

        1.7    " Annual Bonus "—see Section 4.2.

        1.8    " Base Salary "—see Section 4.1.

        1.9    " Beneficiary "—see Section 9.6.

        1.10  " Board " means the Board of Directors of PFGI unless the context indicates otherwise.

        1.11  " Cause " means any of the following:

        (a)   Executive's conviction of, plea of guilty to, or plea of nolo contendere to a felony or misdemeanor (other than a traffic-related felony or misdemeanor) that involves fraud, dishonesty or moral turpitude,

        (b)   any willful action by Executive resulting in any criminal conviction or civil or internal Company sanction or judgment under (i) any Federal or State workplace harassment or

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discrimination laws or (ii) any internal Company workplace harassment, discrimination or other workplace policy under which such action could be and could reasonably be expected to be grounds for immediate termination of a member of Senior Management (other than mere failure to meet performance goals, objectives, or measures),

        (c)   Executive's habitual abuse of or addiction to alcohol or controlled substances, which interferes with the performance of Executive's duties,

        (d)   Executive's willful and intentional material breach of this Agreement, including, but not limited to, the restrictive covenants contained in Article VII,

        (e)   Executive's habitual neglect of duties, (other than resulting from Executive's incapacity due to physical or mental illness) which results in substantial financial detriment to any of the Companies or any Affiliate,

        (f)    Executive's personally engaging in such conduct as results or is likely to result in (i) substantial damage to the reputation of any of the Companies or any Affiliate, as a respectable business, and (ii) substantial financial detriment (whether immediately or over time) to any of the Companies or Affiliates,

        (g)   Executive's willful and intentional material misconduct in the performance or gross negligence of his duties under this Agreement that results in substantial financial detriment to a Company or any Affiliate,

        (h)   Executive's intentional failure (including a failure caused by gross negligence) to cause any of the Companies to comply with applicable law and regulations material to the business of such Company which results in substantial financial detriment to any of the Companies or any Affiliate, or

        (i)    Executive's willful or intentional failure to comply in all material respects with a specific written direction of the Board that is consistent with normal business practice and not inconsistent with this Agreement and Executive's responsibilities hereunder.

For purposes of clauses (d), (e), (f), (g) and (h) of the preceding sentence, Cause shall not mean the mere existence or occurrence of any one or more of the following, and for purposes of clause (i) of the preceding sentence, Cause shall not mean the mere existence or occurrence of item (iv) below:

          (i)  bad judgment,

         (ii)  negligence, other than Executive's habitual neglect of duties or gross negligence,

        (iii)  any act or omission that Executive believed in good faith to have been in the interest of the Company (without intent of Executive to gain therefrom, directly or indirectly, a profit to which he was not legally entitled), or

        (iv)  failure to meet performance goals, objectives or measures;

provided, that for purposes of clauses (c), (d), (e), (f), (g), (h) and (i), any act or omission that is curable shall not constitute Cause unless the Company gives Executive written notice of such act or omission that specifically refers to this Section and, within 10 days after such notice is received by Executive, Executive fails to cure such act or omission. Notwithstanding anything to the contrary herein, any act or omission of which any member of the Board who is not a party to such act or omission has had actual knowledge for at least six months shall not constitute "Cause" under any clause of this Section.

        1.12  " Code " means the Internal Revenue Code of 1986, as amended from time to time.

        1.13  " Company "—see the introductory paragraph to this Agreement.

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        1.14  " Competitive Business " means as of any date any corporation or other Person (and any branch, office or operation thereof) that engages in, or proposes to engage in:

        (a)   the underwriting, reinsurance, marketing or sale of (i) any form of insurance of any kind that any of the Companies as of such date does, or has under active consideration a proposal to, underwrite, reinsure, market or sell (any such form of insurance, a "Company Insurance Product" or (ii) any other form of insurance that is marketed or sold in competition with any Company Insurance Product, or

        (b)   the sale of financial services which involve (i) the management, for a fee or other remuneration, of an investment account or fund (or portions thereof or a group of investment accounts or funds), (ii) the giving of advice, for a fee or other remuneration, with respect to the investment and/or reinvestment of assets or funds (or any group of assets or funds), or (iii) financial planning services, or

        (c)   the design, implementation and administration of employee benefit plans, including plan documents, employee communications, reporting, disclosure, financial advice, investment advice, and fiduciary services, or

        (d)   any other business that as of such date is a direct and material competitor of a Company and its Affiliates to the extent that prior to the Date of Termination any of the Companies or its Affiliates engaged at any time within 12 months in or had under active consideration a proposal to engage in such competitive business;

and that is located anywhere in the Untied States or anywhere outside of the United States where such Company or its Affiliates is then engaged in, or has under active consideration a proposal to engage in, any of such activities.

        1.15  " Date of Termination " means the date of the receipt of the Notice of Termination by Executive (if such Notice is given by or on behalf of PFGI) or by PFGI (if such Notice is given by Executive), or any later date, not more than 15 days after the giving of such Notice, specified in such notice, as of which Executive's employment with the Companies shall be terminated; provided, however, that:

(i)

if Executive's employment is terminated by reason of death, the Date of Termination shall be the date of Executive's death; and

(ii)

if Executive's employment is terminated by reason of Disability, the Date of Termination shall be the 30 ^th day after Executive's receipt of the physician's certification of Disability, unless, before such date, Executive shall have resumed the full-time performance of Executive's duties; and

(iii)

if Executive terminates his employment without Good Reason, the Date of Termination shall be the 30 ^th day after the giving of such Notice; and

(iv)

if no Notice of Termination is given, the Date of Termination shall be the last date on which Executive is employed by the Companies.

        1.16  " Disability " means a mental or physical condition which renders Executive unable or incompetent to carry out the material job responsibilities which such Executive held or the material duties to which Executive was assigned at the time the disability was incurred, which has existed for at least six months and which in the certified opinion of a physician mutually agreed upon by PFGI and Executive (which agreement neither party shall unreasonably withhold) is expected to be permanent or to last for an additional duration in excess of six months.

        1.17  " Employment Period "—see Section 3.1.

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        1.18  " Executive "—see the introductory paragraph of this Agreement.

        1.19  " Fiscal Year " means the fiscal year used in connection with the preparation of the consolidated financial statements of PFGI.

        1.20  " Good Reason " means the occurrence of any one of the following events unless Executive specifically agrees in writing that such event shall not be Good Reason:

        (a)   any material breach of the Agreement by any of the Companies, including any of the following, each of which shall be deemed material:

          (i)  any adverse change in the title, status, responsibilities, authorities or perquisites of Executive;

         (ii)  any failure of Executive to be nominated, appointed or elected and to continue to be nominated, re-elected, or re-appointed as President of PFGI without Executive's prior written consent;

        (iii)  any failure of Executive to be nominated, appointed or elected and to continue to be nominated, re-elected, or re-appointed as a member of the Board of Directors of PFGI or the Board of Directors of Life;

        (iv)  causing or requiring Executive to report to anyone other than the Chief Executive Officer of PFGI or the Boards of PFGI and Life;

         (v)  assignment to Executive of duties materially inconsistent with his position and duties described in this Agreement, including status, offices, or responsibilities as contemplated under Section 2.1 or any other action by any of the Companies which results in an adverse change in such position, status, offices, titles or responsibilities;

        (vi)  any reduction or failure to pay Executive's Base Salary in violation of Section 4.1 or his Annual Bonus in violation of Section 4.2;

       (vii)  any failure to grant or pay an LTIP Award or LTIP Bonus required under Section 4.3; or

      (viii)  any reduction in bonus or incentive (including without limitation, the LTIP) opportunity; provided that no such reduction shall be deemed to occur merely because the Company revises or modifies the structure of or performance factors taken into account (or the degree to which any such performance factors are taken into account) under any bonus or incentive (including without limitation, the LTIP) plan or arrangement; provided further that the Executive shall not be treated less favorably than the other members of Senior Management;

provided that the creation, existence or appointment of a president or chief executive officer other than Executive of any subsidiary of PFGI shall not be deemed to be Good Reason if such other chief Executive officer or president is the Chief Executive Officer if PFGI or reports, directly or indirectly, to Executive or the Chief Executive Officer of PFGI; and provided, further, that no act or omission described in clauses (i) through (viii) of this Section shall constitute Good Reason unless Executive gives PFGI written notice of such act or omission and the Company fails to cure such act or omission within 30-days after delivery of such notice (except that Executive shall not be required to provide such notice in case of intentional acts or omissions by a Company or more than once in cases of repeated acts or omissions); or

        (b)   the failure of PFGI to assign this Agreement to its successor or the failure of a successor of PFGI, Life or the Company to expressly assume and agree to be bound by the Agreement; or

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        (c)   relocation of the Company's executive offices or Executive's own office location to a location that is outside the United States;

In the event of an occurrence or omission constituting Good Reason, Executive shall not be entitled to terminate his employment for Good Reason unless within 3 months after Executive first obtains actual knowledge of such an event constituting Good Reason, he notifies PFGI of the events constituting such Good Reason and of his intention to terminate his employment for Good Reason by a Notice of Termination.

Notwithstanding any provision in this Section to the contrary, no reduction in base salary, bonus or incentive (including without limitation the LTIP) that applies to all members of Senior Management shall constitute Good reason pursuant to Clauses (a) (vii) or (viii) of this Section.

        1.21  " including " means including without limitation.

        1.22  " Life "—see introductory paragraph to this Agreement

        1.23  " LTIP " means, the Principal Financial Group Stock Incentive Plan, the Principal Financial Group 2005 Stock Incentive Plan and any other successor long-term incentive plan (other than the LTPP) established by any of the Companies or the Surviving Corporation.

        1.24  " LTIP Award " means a grant under the LTIP.

        1.25  " LTIP Bonus " means the amount paid or earned in respect of an LTIP Award.

        1.26  " LTIP Performance Period " means any performance period applicable to an LTIP Award, as designated in accordance with the LTIP.

        1.27  " LTPP ". means the 1999 Long-Term Performance Plan, as may be amended from time to time.

        1.28  " PFGI "—see introductory paragraph to this Agreement.

        1.29  " Notice of Termination " means a written notice of termination of Executive's employment given in accordance with Section 9.12 by PFGI on behalf of the Companies, or by Executive, as the case may be, which sets forth (a) the specific termination provision in this Agreement relied upon by the party giving such notice, (b) in reasonable detail the specific facts and circumstances claimed to provide a basis for such Termination of Employment, and (c) if the Date of Termination is other than the date of receipt of such Notice of Termination, the Date of Termination.

        1.30  " Person " means any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department.

        1.31  " Prorata Annual Bonus " means the product of (i) the Target Annual Bonus (provided that no effect shall be given to any reduction in such Target Annual Bonus that would qualify as Good Reason if Executive were to terminate his employment on account thereof) multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365.

        1.32  " Retirement " means any Termination of Employment after Executive reaches age 57, other than for Cause and other than for Good Reason.

        1.33  " Senior Management " means Executive Vice President or higher-level officers of PFGI in the United States.

        1.34  " Target Annual Bonus "—see Section 4.2.

        1.35  " Target Annual Goals "—see Section 4.2.

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        1.36  " Tax Gross-Up Payment " means an amount payable to Executive such that after payment of Taxes on such amount there remains a balance sufficient to pay the Taxes being reimbursed.

        1.37  " Taxes " means the incremental federal, state, local and foreign income, employment, excise and other taxes payable by Executive with respect to any applicable item of income.

        1.38  " Termination For Good Reason " means a Termination of Employment by Executive for a Good Reason.

        1.39  " Termination of Employment " means a termination by the Companies or Executive of Executive's employment with the Companies and their Affiliates.

        1.40  " Termination Without Cause " means a Termination of Employment by the Companies for any reason other than Cause or Executive's death or Disability.

Article II.
DUTIES

        2.1     Duties.     PFGI shall employ Executive during Employment Period as its President and Chief Operating Officer, and Executive shall have the authority, duties, and responsibilities as are commensurate and consistent with such position and title, and as provided in, PFGI's by-laws. Executive shall also serve as President and Chief Operating Officer of Life. It is contemplated that the stockholders of PFGI and of Life, respectively will elect Executive to their respective Boards. Executive shall report solely to the Chief Executive Officer of PFGI. During the Employment Period, Executive shall follow the directives of the Chief Executive Officer of PFGI and the Board. During the Employment Period, Executive shall perform the duties assigned to him hereunder, and, subject to Section 2.2, shall devote his full business time, attention and effort, excluding any periods of disability, vacation, or sick leave to which Executive is entitled, to the affairs of the Companies and shall use his best efforts to promote the interests of the Companies. The Executive acknowledges that his business time is not limited to a fixed number of hours per week.

        2.2     Other Activities.     Executive may serve on corporate, civic or charitable boards or committees, deliver lectures, fulfill speaking engagements or teach at educational institutions, and manage personal investments; provided that such activities do not individually or in the aggregate significantly interfere with the performance of Executive's duties under this Agreement.

Article III.
EMPLOYMENT PERIOD

        3.1     Employment Period.     Subject to the termination provisions hereinafter provided, the term of Executive's employment under this Agreement (the "Employment Period") shall begin on the Agreement Date and end on the Anniversary Date which is three years after such date or such later date to which the Employment Period is extended pursuant to the following sentence. At the expiration of the initial term of this Agreement, as set forth in the immediately preceding sentence, or the term of this Agreement as the same may previously have been extended in accordance with this sentence, the Employment Period shall be automatically extended for a period of one additional year unless PFGI or Executive delivers written notice to the other party not later than 90 days prior to the date on which the Agreement is then scheduled to expire (an "Expiration Notice") that it or he is electing not to extend the term of the Agreement. Notwithstanding the immediately preceding sentence, the Employment Period shall automatically end on Executive's 65 ^th birthday unless PFGI delivers, any time prior to one year before such date of expiration, written notice to Executive that it desires that the Agreement shall not so expire, in which case, subject to the prompt consent of Executive, the

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Agreement shall expire (unless further extended by mutual consent) on the date specified in such notice. The employment of Executive by PFGI shall not be terminated other than in accordance with Article VI.

Article IV.
COMPENSATION

        4.1     Salary.     Executive shall be paid in accordance with normal payroll practices (but not less frequently than monthly) an annual salary at a rate of $600,000 per year (" Base Salary "). During the Employment Period, the Base Salary shall be reviewed periodically and may be increased from time to time as shall be determined by the Board, in accordance with normal Company administrative practices for Senior Management. After any such increase, the term " Base Salary " shall thereafter refer to the increased amount. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement. Base Salary shall not be reduced at any time without the express written consent of Executive; provided that the Board may, in its discretion restructure or alter the time of payment of Base Salary in order to enhance the deductibility thereof, provided there is no economic detriment to the Executive and that the Board and Executive shall cooperate in good faith in such restructuring or alteration.

        4.2     Annual Bonus.     

        (a)   Executive shall be eligible to receive an annual bonus (" Annual Bonus ") in accordance with the terms hereof for each Fiscal Year that begins or ends during the Employment Period. Executive shall be eligible for an Annual Bonus based upon target performance goals (the " Target Annual Goals "), which goals shall be determined by the Board on an annual basis, in accordance with normal Company administrative practices for Senior Management, and which provides for a payment opportunity of 125% of Executive's Base Salary (" Target Annual Bonus ") upon achievement of the Target Annual Goals. The parties agree that the Annual Bonus shall be administered and shall be subject to the same terms and conditions as are generally applicable to other members of Senior Management in the applicable year.

        (b)   The entire Annual Bonus that is payable to Executive with respect to a Fiscal Year shall be paid in cash, or such other medium as is generally applicable to members of Senior Management, as soon as practicable after the appropriate Board has determined whether and the degree to which Target Annual Goals have been achieved following the close of such Fiscal Year. In any event, the entire Annual Bonus that is payable to Executive with respect to a Fiscal Year shall be paid at the same time as the Annual Bonus is paid to the other members of Senior Management, but in any event no later than 75 days after the end of the Fiscal Year.

        4.3     Long-Term Incentive Plan Bonus and Other Incentive Compensation.     Executive shall have the opportunity to participate in the LTIP (if such plan exists) and any other incentive compensation plan or program available to Senior Management. The appropriate Board may restructure or alter the time of payment of amounts under the LTIP or other incentive compensation plan or program in order to enhance the deductibility thereof, provided there is no economic detriment to the Executive and that the Board and Executive shall cooperate in good faith in such restructuring or alteration.

        4.4     Savings and Retirement Plans.     Executive shall be eligible to participate during the Employment Period in any Company's savings and retirement plans, practices, policies and programs, in accordance with the terms thereof, if any, applicable from time to time to members of Senior Management, including any supplemental executive retirement plan.

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Article V.
OTHER BENEFITS

        5.1     Welfare Benefits.     During the Employment Period, Executive and his family shall be eligible to participate in, and shall receive all benefits under, any Company's welfare benefit plans, practices, policies and programs provided or made generally available by the Company to Senior Management (including medical, dental, vision, short and long term disability, group-term life, accidental death and dismemberment (AD&D) insurance plans and programs), in accordance with their terms as in effect from time to time.

        5.2     Fringe Benefits.     During the Employment Period, Executive shall be entitled to fringe benefits generally applicable to Senior Management in accordance with their terms as in effect from time to time.

        5.3     Vacation.     During the Employment Period, Executive shall be entitled to paid time under the plans, practices, policies and programs generally applicable to members of Senior Management in accordance with their terms as in effect from time to time.

        5.4     Expenses.     Executive shall be promptly reimbursed for all actual and reasonable employment-related business expenses he incurs during the Employment Period in accordance with any Company's practices, policies, and procedures generally applicable to members of Senior Management in accordance with their terms as in effect from time to time, including the timely submission of required receipts and accountings.

Article VI.
TERMINATION BENEFITS

        6.1     Termination for Cause or Other than for Good Reason, etc.     

        (a)   If PFGI terminates Executive's employment with the Companies for Cause or Executive terminates his employment other than for Good Reason, death or Disability, the Executive shall be entitled to receive immediately after the Date of Termination a lump sum amount equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus, and Executive shall not be entitled to receive any severance or other payment, other than compensation and benefits which relate to or derive from Executive's employment with the Companies on or prior to the Date of Termination (including, without limitation, any deferrals under the LTIP) and which are otherwise payable in case of termination for Cause or other than for Good Reason, death or Disability, as applicable

        (b)   Executive's employment may be terminated for Cause only if (i) PFGI provides Executive (before the Date of Termination) with written notice of the Board meeting referred to in clause (ii) of this Section 6.1(b) at least twenty days prior to such meeting and specifies in detail in writing the basis of a claim of Cause and provides Executive, with or without counsel, at Executive's election, an opportunity to be heard and present arguments and evidence on Executive's behalf at such meeting, (ii) the PFGI Board, by affirmative vote of not less than ² / 3 of the entire membership of the PFGI Board (excluding the