Exhibit 10.7.1


 


PRINCIPAL
FINANCIAL GROUP, INC. 

2005 DIRECTORS STOCK PLAN


 


ARTICLE I.

PURPOSE


 


The purposes of the “PRINCIPAL
FINANCIAL GROUP, INC. 2005 DIRECTORS STOCK PLAN” (the “Plan”) are to
enable the Company to attract, retain and motivate the best qualified
non-employee directors and to enhance a long-term aligning of interests between
the non-employee directors and shareholders of the Company by granting
equity-based awards as provided herein.


 


ARTICLE II.

DEFINITIONS


 


2.1                                 Definitions.    Whenever used herein,
the following terms shall have the respective meanings set forth below:


 


1)                                      “Award” means an Option, an award of
Restricted Stock, an award of Restricted Stock Units, or an Other Stock-Based Award.


 


2)                                      “Board” means the Board of Directors of the
Company.


 


3)                                      “Code” means the Internal Revenue Code of
1986, as amended.


 


4)                                      “Common Stock” means the common stock of the
Company, par value $0.01 per share.


 


5)                                      “Committee” means the Nominating and
Governance Committee of the Board or such other committee of the Board as the
Board shall designate from time to time.


 


6)                                      “Company” means Principal Financial Group, Inc.,
a Delaware corporation, and any successor thereto.


 


7)                                      “Domestic Partner” means any person qualifying
to be treated as a domestic partner of a Participant under the applicable
policies, if any, of the Company.


 


8)                                      “Fair Market Value” means, on any date, the
price of the last trade, regular way, in the Common Stock on such date on the
New York Stock Exchange or, if at the relevant time, the Common Stock is not
listed to trade on the New York Stock Exchange, on such other recognized
quotation system on which the trading prices of the Common Stock are then
quoted (the “applicable exchange”). In the event that (i) there are no Common Stock transactions
on the applicable exchange on any relevant date, Fair Market Value for such
date shall mean the closing price on the immediately preceding date on which
Common Stock transactions were so reported and (ii) the
applicable exchange adopts a trading policy permitting trades after 5 P.M.
Eastern Standard Time (“EST”), Fair Market Value shall mean the last trade,
regular way, reported on or before 5 P.M. EST (or such earlier or later
time as the Committee may establish from time to time).


 


9)                                      “Family Member” means, as to a Participant,
any (i) child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, mother-in-law,
father-in-law, son-in-law or daughter-in-law (including adoptive
relationships), or Domestic Partner of such Participant, (ii) trusts for the exclusive benefit
of one or more such persons and/or the Participant and (iii) other entity owned solely by
one or more such persons and/or the Participant.


 


10)                                “Net Exercised” shall mean the exercise of an
Option or any portion thereof by the delivery of the greatest number of whole
shares of Common Stock having a Fair Market Value on the date of exercise not
in excess of the difference between the aggregate Fair Market Value of the
shares of Common Stock subject to the Option (or the portion of such Option
then being exercised) and the aggregate exercise price for all such shares of
Common Stock under the Option (or the portion thereof then being exercised),
with any fractional share that would result from such equation to be payable in
cash.


 


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11)                                “Option” means the right to purchase one share
of Common Stock at a stated purchase price on the terms specified in Article V
of the Plan. The Options are nonstatutory stock options not intended to qualify
under Section 422 of the Code.


 


12)                                “Other Stock-Based Award” means an award of,
or related to, shares of Common Stock other than an Award of Options,
Restricted Stock or Restricted Stock Units, as granted by the Committee in
accordance with the provisions of Article VII hereof.


 


13)                                “Participant” means a member of the Board who
is not an officer or employee of the Company or any entity controlling,
controlled by, or under common control with the Company, and is not the
beneficial owner of a controlling interest in the voting stock of the Company
or of any entity that holds a controlling interest in the Company’s voting
stock.


 


14)                                “Period of Restriction” means the period
specified by the Committee or established pursuant to the Plan during which a
Restricted Stock or Restricted Stock Unit award is subject to forfeiture.


 


15)                                “Plan” means the Principal Financial Group, Inc.
2005 Directors Stock Plan, as set forth herein and as amended from time to
time.


 


16)                                “Prior Plan” means the Principal Financial
Group Inc. Directors Stock Plan.


 


17)                                “Restricted Stock” means an award of Common
Stock made pursuant to Article VI that is forfeitable by the Participant
until the completion of a specified period of future service as a member of the
Board or until otherwise determined by the Committee or in accordance with the
terms of the Plan.


 


18)                                “Restricted Stock Unit” means a contractual
right awarded pursuant to Article VI that entitles the holder to receive
shares of Common Stock (or the value thereof in cash) upon the completion of a
specified period of future service as a member of the Board or at such other
time or times determined by the Committee or in accordance with the terms of
the Plan.


 


ARTICLE III.

ADMINISTRATION


 


3.1                                 Rules, Interpretation and
Determinations.    The
Plan shall be administered by the Committee. The Committee shall have full
authority to interpret and administer the Plan, to establish, amend and rescind
rules for carrying out the Plan, to construe the respective option
agreements and to make all other determinations and to take all other actions
that it deems necessary or advisable for administering the Plan; provided that, no Committee member may
participate in any decision with respect to such member’s benefits or
entitlements under the Plan, unless such decision applies generally to all
non-employee directors. Each determination, interpretation or other action made
or taken by the Committee shall be final and binding for all purposes and upon
all persons.


 


3.2                                 Agents and Expenses.    The Committee may
appoint agents (who may be officers or employees of the Company) to assist in
the administration of the Plan and may grant authority to such persons to
execute agreements or other documents on its behalf. The Committee may employ
such legal counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion received from any such
counsel or consultant and any computation received from any such consultant or
agent. All expenses incurred in the administration of the Plan, including,
without limitation, for the engagement of any counsel, consultant or agent,
shall be paid by the Company.


 


ARTICLE IV.

SHARES ISSUABLE


 


4.1                                 Number of Shares.    Subject to Section 4.3
below, unless the shareholders of the Company approve an increase in such
number by a shareholder vote, the maximum number of shares of Common Stock that
may be made issuable or distributable under the Plan is 500,000. Shares of
Common Stock to be issued under the Plan may consist, in whole or in part, of
treasury shares or authorized but unissued shares not reserved for any other
purpose.


 


4.2                                 Canceled, Terminated, or Forfeited
Awards.    Any
shares of Common Stock subject to an Award (as determined under Section 4.1)
or any award made or granted under the Prior Plan which for any reason expires
without having been exercised, is canceled or terminated or otherwise is
settled without the issuance of any Common Stock shall again be available for
grant under the Plan. In applying the immediately preceding sentence, if (i) shares otherwise issuable or
issued in respect of, or as part of, any Award that are withheld to cover taxes
shall


 


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not be treated as having been issued under the Plan
and (ii) any Options are Net
Exercised, only the net number of shares of Common Stock issued in respect of
such Options shall be deemed issued under the Plan. In addition, shares of
Common Stock tendered to exercise outstanding Options or other Awards or to
cover taxes shall also be available for issuance under the Plan (and shall be
counted as one share for purposes of Section 4.1), except and unless such
shares are tendered more than ten years after the effective date of the Plan.


 


4.3                                 Adjustment Due to Change in
Capitalization.    In
the event of any Common Stock dividend or split, recapitalization (including,
but not limited, to the payment of an extraordinary dividend to the
shareholders of the Company), merger, consolidation, combination, spin-off,
distribution of assets to shareholders (other than ordinary cash dividends),
exchange of shares, or other similar corporate change, the aggregate number of
shares of Common Stock available for grant under Section 4.1 or subject to
outstanding Awards and the respective exercise prices, if any, applicable to
outstanding Awards may be appropriately adjusted by the Committee, in its
discretion, and the Committee’s determination shall be conclusive.


 


ARTICLE V.

AWARDS AND TERMS OF OPTIONS


 


5.1                                 Grants of Options.    The Committee shall
have the power to grant to any Participant or all Participants Options to
purchase such number of shares of Common Stock, and on such terms and
conditions, as it shall determine. The Committee may adopt different terms and
conditions of each Option, whether granted to different Participants or the
same Participant, and whether or not granted at the same time.


 


5.2                                 Exercise Price.    The exercise price
for any share of Common Stock subject to an Option shall be not less than the Fair
Market Value on the date such Option is granted. No Option granted hereunder
may have its exercise price reduced (other than pursuant to the provisions of Section 4.3)
unless such action is expressly authorized by shareholder action in accordance
with Article VIII.


 


5.3                                 Period of Exercisability.    The Committee shall
determine the date or dates at which Options become exercisable. Each Option
shall, if not previously exercised in accordance with the terms of the Plan, in
all events expire on the tenth (10th) anniversary of the date of the
grant thereof. If a Participant shall cease to provide services to the Company,
such Participant or, in the case of death, the Participant’s estate or
beneficiary, may exercise any Option exercisable by the Participant at the date
his or her service terminated until the earlier of (A) five (5) years
from the date the Participant ceased to provide services to the Company and (B) the
tenth (10th) anniversary of the date the Option was granted.


 


5.5                                 Procedure for Exercise.    The Committee shall
establish procedures governing the exercise of Options. No shares shall be
delivered pursuant to any exercise of any Options unless arrangements
satisfactory to the Committee have been made to assure full payment of the
exercise price therefor. Without limiting the generality of the foregoing,
payment of the exercise price may be made (i) in
cash or its equivalent; (ii) by
exchanging shares of Common Stock (which are not the subject of any pledge or
other security interest), subject to such terms and conditions as the Committee
shall establish; (iii) by
any combination of the foregoing; provided
that the combined value of all cash and cash equivalents paid and the Fair
Market Value of any such Common Stock tendered to the Company, valued as of the
date of such tender, is at least equal to such exercise price; or (iv) in accordance with any other
procedure or arrangement approved by the Committee, except that, in no event
shall the Company loan a Participant funds or otherwise extend credit to a
Participant to facilitate such Participant’s exercise of any of his or her
Options. Additionally, to the extent authorized by the Committee (whether at or
after grant), Options may be Net Exercised subject to such terms and conditions
as the Committee may from time to time impose.


 


ARTICLE VI.

RESTRICTED STOCK


 


6.1                                 Standard Grants of
Restricted Stock Units.    Unless
otherwise determined by the Committee, on the date of each annual meeting of
shareholders occurring during the term of the Plan (including, without
limitation, the meeting occurring in 2005), each director in office immediately
following such shareholders’ meeting shall be granted the greatest whole number
of Restricted Stock Units having a value (based on the 20-day average of the
Fair Market Value preceding such date) not in excess of $75,000 (or such
greater or lesser amount as the Committee shall determine from time to time).
If a person becomes a member of the Board after the effective date of the Plan
other than on the date of an annual meeting of shareholders, on or after the
date of such Participant’s election to the Board, such Participant shall be
granted a number of Restricted Stock Units as determined by the Committee in
its sole discretion.


 


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6.2                                 Discretionary Grants of
Restricted Stock or Restricted Stock Units.    Without limiting the generality of Section 6.1,
the Committee may also grant Restricted Stock or Restricted Stock Units to any
Participant or all Participants at such times, with respect to such number of
shares of Common Stock and on such terms and conditions (including, in the case
of any grant made in exchange for foregoing the receipt of fees otherwise
payable in cash, a discount in the value of the Common Stock subject to the
award to reflect the applicable restrictions on the Award) not inconsistent
with the Plan as the Committee shall determine.


 


6.3                                 Agreements; Restrictions on
Certificates.    The
terms and conditions of each grant of Restricted Stock or Restricted Stock
Units shall be evidenced in writing. If Restricted Stock is evidenced by the
issuance of stock certificates, the Committee shall require that such stock
certificates be held in the custody of the Secretary of the Company until the
Period of Restriction lapses, and that, as a condition of such Restricted Stock
award, the Participant shall have delivered a stock power, endorsed in blank,
relating to the Common Stock covered by such Award.


 


6.4                                 Restrictions on
Transferability.    Except
as provided in Section 9.2, no shares of Restricted Stock or Restricted
Stock Units may be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated until the lapse of the Period of Restriction. The Committee
shall establish the Period of Restriction and the date or dates at which such
Period of Restriction shall lapse, in whole or in part, with respect to any
award made pursuant to Section 6.2. Unless otherwise determined by the
Committee at the time of grant, the Period of Restriction with respect to any
award of Restricted Stock Units granted under Section 6.1 shall lapse on
the scheduled date of the first annual meeting of shareholders scheduled to
occur after the date such Restricted Stock Units are granted. Notwithstanding
the foregoing, unless otherwise determined by the Committee, the Period of
Restriction applicable to any Restricted Stock or Restricted Stock Units shall
not lapse, in whole or in part, at any time after the Participant has ceased to
provide services to the Company.


 


6.5                                 Distributions in Respect of Restricted
Stock Units.    Unless
the Committee shall otherwise determine at or prior to the time of grant, any
Restricted Stock Units awarded under Section 6.1 shall not be distributed
to a Participant (regardless of when such Restricted Stock Units become vested
and nonforfeitable) until after the date the Participant’s services as member
of the Board terminate. At the time the Committee makes any grant of Restricted
Stock Units pursuant to Section 6.2, the Committee shall specify when such
Restricted Stock Units shall be distributed.


 


6.6                                 Rights as a Shareholder.    Unless otherwise
determined by the Committee at the time of grant and subject to Section 6.7,
Participants holding shares of Restricted Stock may exercise full voting rights
and other rights as a shareholder with respect to those shares during the
Period of Restriction. A Participant receiving Restricted Stock Units shall not
have any rights as a shareholder prior to the actual issuance of Common Stock
in respect thereof in accordance with Section 6.5, except that the
Participant shall be entitled to payment of dividend equivalents on such rights
equal to the dividends that would have been payable (or accumulated, pursuant
to Section 6.6) had the corresponding equity rights been actual shares of
Restricted Stock.


 


6.7                                 Dividends and Dividends
Equivalents.    Unless
otherwise determined by the Committee at the time of grant, (i) any cash dividends paid on shares
of Restricted Stock will not be paid currently, but rather will be credited to
an account established for the Participant and invested in additional shares of
Common Stock based on the Fair Market Value on the distribution date for such
dividends, (ii) any
distributions paid on Restricted Stock in property other than Common Stock
shall be converted into cash, which will be treated in the same manner as any
cash dividends, (iii) any
dividends or distributions paid on Restricted Stock in shares of Common Stock
will be held for the benefit of the Participant and (iv) any additional shares credited to or held for a
Participant pursuant to this Section 6.7 in respect of any such dividends
or distributions on Restricted Stock shall become vested and nonforfeitable
upon the same terms and conditions as are applicable to the shares underlying
the Award in respect of which they were paid. With respect to any grant of
Restricted Stock Units, there will be credited to an account established for
the Participant dividend equivalents in respect of the dividends and
distributions paid on that number of outstanding shares of Common Stock
corresponding to the shares subject to such Award and such account will be
administered in substantially the same manner as the account established for a
Participant hereunder in respect of dividends and distributions paid on
Restricted Stock (including, without limitation, the condition pertaining to
vesting and forfeiture).


 


6.8                                 Termination of Service.    Unless otherwise
determined by the Committee at or after the time of grant, in the event the
service of the Participant as member of the Board shall terminate for any
reason, any Restricted Stock or Restricted Stock Units awarded to such
Participant as to which the Period of Restriction has not lapsed shall be
forfeited.


 


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ARTICLE VII

OTHER STOCK-BASED AWARDS


 


7.1                                 Other Stock Based Awards.    The Committee may
make Other Stock-Based Awards, including, but not limited to, the outright
grant of Common Stock in satisfaction of obligations of the Company under
another compensatory plan, program or arrangement, modified awards intended to
comply with or structured in accordance with the provisions of applicable
non-U.S. law or practice, or the sale of Common Stock, in such amounts and
subject to such terms and conditions as the Committee shall determine. Each
such Other Stock-Based Award shall be evidenced in writing and specify the
terms and conditions applicable thereto. Any such Other Stock-Based Award may
entail the transfer of actual shares of Common Stock or the payment of the
value of such Award in cash based upon the value of a specified number of
shares of Common Stock, or any combination of the foregoing, as determined by
the Committee. The terms of any Other Stock-Based Award need not be uniform in
application to all (or any class of) Participants, and each Other Stock-Based
Award granted to any Participant (whether or not at the same time) may have
different terms.


 


7.2                                 Termination of Employment
or Service.    In
addition to any other terms and conditions that may be specified by the
Committee, each Other Stock-Based Award shall specify the impact of termination
of services as a member of the Board upon the rights of a Participant in
respect of such Award.


 


ARTICLE VIII

TERMINATION, MODIFICATION AND AMENDMENT


 


                                                The Board may, at any time and from time to
time amend, modify, suspend, or terminate this Plan, in whole or in part,
without notice to or the consent of any Participant; provided, however,
that any amendment which would (i) increase the number of shares
available for issuance under the Plan, (ii) lower
the minimum exercise price at which an Option may be granted or otherwise
permit the repricing of any outstanding Options (other than in the context of a
transaction referenced in Section 4.3), (iii) extend
the maximum term for Options granted hereunder or (iv) otherwise amend the Plan in a material fashion
that would require the approval of shareholders under the applicable rules and
regulations of any exchange or automated quotation system on which the Common
Stock is listed to trade shall be subject to the approval of the Company’s
shareholders. No amendment, modification, or termination of the Plan shall in
any manner adversely affect any Award theretofore granted under the Plan,
without the consent of the Participant.


 


ARTICLE IX

GENERAL PROVISIONS


 


9.1                                 No Right to Remain as a
Director.    The
Plan shall not impose any obligations on the Company to retain any Participant
as a Director nor shall it impose any obligation on the part of any Participant
to remain in service to the Company.


 


9.2                                 Transferability.    No Awards granted
under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than in accordance with Section 9.3
below, by will or by the laws of descent and distribution; provided that the
Committee may, in the appropriate award agreement or otherwise, permit
transfers of Awards to Family Members (including, without limitation, transfers
effected by a domestic relations order) subject to such terms and conditions as
the Committee shall determine.


 


9.3                                 Beneficiary Designation.    Each Participant
under the Plan may from time to time name any beneficiary or beneficiaries (who
may be named contingently or successively) to whom any benefit under the Plan
is to be paid or by whom any right under the Plan is to be exercised in case of
the Participant’s death. Each designation will revoke all prior designations by
the same Participant with respect to all Awards previously granted, shall be in
a form prescribed by the Committee, and will be effective only when received by
the Committee in writing during the Participant’s lifetime. In the absence of
any such effective designation, benefits remaining unpaid at the Participant’s
death shall be paid to or exercised by the Participant’s surviving spouse, if
any, or otherwise to or by the Participant’s estate. Except as otherwise
expressly provided herein, nothing in this Plan is intended or may be construed
to give any person other than Participants any rights or remedies under this
Plan.


 


9.4                                 Rights as a Stockholder.    No Participant nor
any beneficiary thereof shall have any rights as a stockholder with respect to
any shares of Common Stock covered by any Award until such person shall have
become the holder of record of such shares.


 


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9.5                                 Requirements of Law.    The granting of
Awards and the issuance of shares of Common Stock shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.


 


9.6                                 Term of Plan.    The Plan shall be
effective upon the date, if any, on which it is approved by the Company’s
shareholders. The Plan shall continue in effect, unless sooner terminated
pursuant to Article VIII above, until the tenth anniversary of the date of
such shareholder approval.


 


9.7                                 Governing Law.    The Plan, and all
agreements hereunder, shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to principles of conflict of
laws.


 


9.8                                 No Constraint on Corporate
Action.    Except
as provided in Article VIII above, nothing contained in this Plan shall be
construed to prevent the Company, or any affiliate, from taking any corporate
action (including, but not limited to, the Company’s right or power to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, or to merge or consolidate, or dissolve, liquidate, sell,
or transfer all or any part of its business or assets) which is deemed by it to
be appropriate, or in its best interest, whether or not such action would have
an adverse effect on this Plan, or any awards made under this Plan. No
director, beneficiary, or other person shall have any claim against the
Company, or any of its affiliates, as a result of any such action.


 


9.9                                 Indemnification.    Each member of the
Board and the Committee shall be indemnified and held harmless by the Company
(or, if applicable, any affiliate of the Company) against and from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
such member of the Board or the Committee in connection with or resulting from
any claim, action, suit, or proceeding to which such member may be made a party
or in which such member may be involved by reason of any action taken or
failure to act under the Plan (in the absence of bad faith) and against and
from any and all amounts paid by such member in settlement thereof, with the Company’s
(or, if appropriate, an affiliate’s) approval, or paid by such member in
satisfaction of any judgment in any such action, suit, or proceeding against
such member, provided that such member shall give the Company (or, if
applicable, an affiliate) an opportunity, at its own expense, to handle and
defend the same before such member undertakes to handle and defend it
individually. The foregoing right of indemnification shall not be exclusive and
shall be independent of any other rights of indemnification to which any such
person may be entitled under the Company’s Certificate of Incorporation or
By-Laws, by contract, as a matter of law, or otherwise.


 


9.10                           Deferral of Payment.    At the time any
Award is granted (or such earlier time as the Committee may require), the
Committee may permit a Participant to elect, upon such terms and conditions as
the Committee may establish, to defer receipt of shares of Common Stock that
would otherwise be issued in connection with an Award.


 


9.11                           Headings and Captions.    The headings and
captions herein are provided for reference and convenience only, shall not be
considered part of the Plan, and shall not be employed in the construction of
the Plan.


 


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