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 2006-85, 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:
(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 Citibank, N.A., 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.
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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
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