STOCK INCENTIVE PLAN
LONG-TERM PERFORMANCE PLAN
 
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                                                                    EXHIBIT 10.1
 
                         PRINCIPAL FINANCIAL GROUP, INC.
                              STOCK INCENTIVE PLAN
 
                                   SECTION 1.
                                     PURPOSE
 
     The purpose of the "PRINCIPAL FINANCIAL GROUP, INC. STOCK INCENTIVE PLAN"
(the "Plan") is to foster and promote the long-term financial success of the
Company and its subsidiaries and materially increase shareholder value by (a)
motivating superior performance by means of performance-related incentives, (b)
encouraging and providing for the acquisition of an ownership interest in the
Company by the Company's and its Subsidiaries' employees and agents, and (c)
enabling the Company to attract and retain the services of outstanding employees
upon whose judgment, interest, and special effort the successful conduct of its
operations is largely dependent.
 
                                   SECTION 2.
                                   DEFINITIONS
 
     (a)  Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below:
 
          (1)  "Act" means the Securities Exchange Act of 1934, as amended.
 
          (2)  "Agent" means each insurance agent (whether or not a statutory
     employee) and each other individual providing personal service to the
     Company or any Subsidiary who, in either case, is not an Employee.
 
          (3)  "Agents Savings Plan" means The Principal Select Savings Plan
     for Individual Field.
 
          (4)  "Approved Retirement" means termination of a Participant's
     employment or service (i) on or after the normal retirement date or any
     early retirement date established under any defined benefit pension plan
     maintained by the Company or a Subsidiary and in which the Participant
     participates or (ii) with the approval of the Committee (which may be given
     at or after grant), on or after attaining age 50 and completing such period
     of service as the Committee shall determine from time to time.
 
          (5)  "Award" means an Option, SAR, award of Restricted Stock or an
     award of Restricted Stock Units.
 
          (6)  "Beneficial Owner" means such term as defined in Rule 13d-3
     under the Exchange Act.
 
          (7)  "Board" means the Board of Directors of the Company.
 
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          (8)  "Cause" means (i) dishonesty, fraud or misrepresentation, (ii)
     the Participant's engaging in conduct that is injurious to the Company or
     any Subsidiary in any way, including, but not limited to, by way of damage
     to its reputation or standing in the industry, (iii) the Participant's
     having been convicted of, or entered a plea of nolo contendere to, a crime
     that constitutes a felony; (iv) the breach by the Participant of any
     written covenant or agreement with the Company or any Subsidiary not to
     disclose or misuse any information pertaining to, or misuse any property
     of, the Company or any Subsidiary or not to compete or interfere with the
     Company or any Subsidiary or (v) a violation by the Participant of any
     policy of the Company or any Subsidiary.
 
          (9)  "Change of Control" means the occurrence of any one or more of
     the following:
 
               (i)  any SEC Person becomes the Beneficial Owner of 25% or more
          of the Common Stock or of Voting Securities representing 25% or more
          of the combined voting power of all Voting Securities of the Company
          (such an SEC Person, a "25% Owner"); or
 
               (ii) the Incumbent Directors cease for any reason to constitute
          at least a majority of the Board (other than in connection with a
          Merger of Equals); or
 
               (iii) consummation of a merger, reorganization, consolidation, or
          similar transaction (any of the foregoing, a "Reorganization
          Transaction") other than a Reorganization Transaction (x) following
          which the Continuity of Ownership is more than 60% or (y) which is
          (and continues to qualify as) a Merger of Equals; or
 
               (iv) approval by the stockholders of the Company of a plan or
          agreement for the sale or other disposition of all or substantially
          all of the consolidated assets of the Company or a plan of liquidation
          of the Company; or
 
               (v)  any other event or circumstance (or series of events or
          circumstances) that the Board shall determine to constitute a Change
          of Control.
 
     Notwithstanding the foregoing, a Change of Control shall not occur merely
     as a result of (i) the conversion of Mutual from a mutual insurance holding
     company to a stock company or (ii) an underwritten initial public offering
     of the Common Stock, unless, immediately following such conversion or such
     initial public offering, any SEC Person is a 25% Owner.
 
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          (10) "Change of Control Price" means the highest price per share of
     Common Stock offered in conjunction with any transaction resulting in a
     Change of Control (as determined in good faith by the Committee if any part
     of the offered price is payable other than in cash) or, in the case of a
     Change of Control occurring solely by reason of a change in the composition
     of the Board, the highest Fair Market Value of the Common Stock on any of
     the 30 trading days immediately preceding the date on which a Change of
     Control occurs.
 
          (11) "Code" means the Internal Revenue Code of 1986, as amended.
 
          (12) "Committee" means the Human Resources Committee of the Board or
     such other committee of the Board as the Board shall designate from time to
     time, which committee shall consist of two or more Non-Employee Directors
     (within the meaning of Rule 16b-3 as promulgated under the Exchange Act).
 
          (13) "Common Stock" means the common stock of the Company, par value
     $0.01 per share.
 
          (14) "Company" means Principal Financial Group, Inc., a Delaware
     corporation, and any successor thereto.
 
          (15) "Company Stock Plan" means any stock option plan, stock incentive
     plan, stock purchase plan and share ownership plans related to the Common
     Stock that are customary for publicly traded companies, and shall include
     the Directors Stock Plan, the Long-Term Plan, the Plan, the Savings Plans
     and the Stock Purchase Plan.
 
          (16) "Continuity of Ownership" of a stated percentage means that the
     SEC Persons who were the direct or indirect owners of the outstanding
     Common Stock and Voting Securities of the Company immediately before such
     Reorganization Transaction became, immediately after the consummation of
     such Reorganization Transaction, the direct or indirect owners of both the
     stated percentage of the then-outstanding common stock of the Surviving
     Corporation and Voting Securities representing the stated percentage of the
     combined voting power of the then-outstanding Voting Securities of the
     Surviving Corporation, in substantially the same respective proportions as
     such Persons' ownership of the Common Stock and Voting Securities of the
     Company immediately before such Reorganization Transaction.
 
          (17) "Directors Stock Plan" means the Principal Financial Group, Inc.
     Directors Stock Plan.
 
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          (18) "Disability" means, with respect to any Participant, long-term
     disability as defined under any long-term disability plan maintained by the
     Company or a Subsidiary in which the Participant participates. In the event
     of any question as to whether a Participant has a Disability, the plan
     administrator of the relevant long-term disability plan shall determine
     whether a disability exists, in accordance with such plan.
 
          (19) "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 or Subsidiary which employs the Participant.
 
          (20) "Employee" means any employee (including each officer) of the
     Company or any Subsidiary.
 
          (21) "Employees Savings Plan" means the Principal Select Savings
     Plan for Employees.
 
          (22) "Excess Plan" means the Principal Select Savings Excess Plan and
     the Non-Qualified Defined Contribution Plan for Designated Participants.
 
          (23) "Exchange Act" means the Securities Exchange Act of 1934, as
     amended.
 
          (24) "Executive Officer" means any officer of the Company or any
     Subsidiary who is subject to the reporting requirements under Section 16(b)
     of the Exchange Act.
 
          (25) "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"); provided, however, that the Fair Market Value of
     the Common Stock on the first date that the Common Stock is offered for
     sale to the public through an underwritten public offering shall be the
     price at which the Common Stock is sold in such offering. 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).
 
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          (26) "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.
 
          (27) "Imminent Control Change Period" means the period commencing on
     the date any one or more of the following events occurs (or the first of
     such events in a series of such events) and ending on the date on which a
     Change of Control or a Merger of Equals occurs:
 
               (i) The Company enters into an agreement the consummation of
          which would constitute a Change of Control;
 
               (ii) Any SEC Person attempts to become a 25% Owner, as evidenced
          by filing or other certification of notice of such intent with any
          state's governmental agency established to regulate the insurance
          industry, which, if consummated, would constitute a Change of Control;
 
               (iii) Any SEC Person commences a "tender offer" (as such term is
          used in Section 14(d) of the Exchange Act) or exchange offer, which,
          if consummated, would result in a Change of Control; or
 
               (iv) Any SEC Person files with the SEC a preliminary or
          definitive proxy solicitation or election contest to elect or remove
          one or more members of the Board, which, if consummated or effected,
          would result in a Change of Control;
 
     provided, however, that an Imminent Control Change Period will lapse upon
     the occurrence of any of the following:
 
               a) With respect to an event described in clause (i) of this
               definition, the date such agreement is terminated, cancelled or
               expires without a Change of Control or Merger of Equals
               occurring;
 
               b) With respect to an event described in clause (ii) of this
               definition, the date such filing or other certification is
               withdrawn, expires or is denied or otherwise rejected by the
               relevant state regulators without a Change of Control or Merger
               of Equals occurring;
 
               c) With respect to an event described in clause (iii) of this
               definition, the date such tender offer or exchange offer is
               withdrawn or terminates without a Change of Control or Merger of
               Equals occurring;
 
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               d) With respect to an event described in clause (iv) of this
               definition, (1) the date the validity of such proxy solicitation
               or election contest expires under relevant state corporate law,
               or (2) the date such proxy solicitation or election contest
               culminates in a stockholder vote, in either case without a Change
               of Control or Merger of Equals occurring; or
 
               e) The date a majority of the Incumbent Directors makes a good
               faith determination that any event or condition described in
               clause (i), (ii), (iii) or (iv) of this definition is no longer
               likely to result in a Change of Control, provided that such
               determination may not be made prior to the six (6) month
               anniversary of the occurrence of such event.
 
     Notwithstanding the foregoing, an Imminent Control Change Period shall not
     commence merely as a result of (A) planning, or filing or certifying an
     intent with any state's governmental agency established to regulate the
     insurance industry of a plan of reorganization of Mutual, or (B) the
     planned underwritten initial public offering of Common Stock, so long as
     such initial public offering is not expected to result in any SEC Person
     becoming a 25% Owner.
 
          (28) "Incentive Stock Option" (ISO) means an option within the meaning
     of Section 422 of the Code.
 
          (29) "Incumbent Directors" means, as of any date, the individuals then
     serving as members of the Board who were also members of the Board as of
     the date two years prior to the date of determination; provided that any
     member appointed or elected as a member of the Board after such prior date,
     but whose election, or nomination for election, was approved by a vote or
     written consent of at least a majority of the directors then comprising the
     Incumbent Directors shall also be considered an Incumbent Director unless
     such person's election, or nominated for election, to the Board was as a
     result of, or in connection with, a proxy contest or a Reorganization
     Transaction.
 
          (30) "Initial Public Offering" means the first underwritten offering
     of Common Stock to the public.
 
          (31) "Long-Term Plan" means the Principal Financial Group Long- Term
     Performance Plan.
 
          (32) "Merger of Equals" means the occurrence of a Reorganization
     Transaction that satisfies all of the following:
 
               (i) the consummation of such Reorganization Transaction results
          in Continuity of Ownership of at least 40%, but not more than 60%; and
 
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               (ii) an SEC Person does not become a 25% Owner as a result of
          such Reorganization Transaction; and
 
               (iii) throughout the period beginning on the effective date of
          the event and ending on the second anniversary of such effective date,
          the Incumbent Directors continue to constitute not less than
 
               a) a majority of the Board, if subclause (i) of this definition
               is satisfied because the Reorganization Transaction resulted in
               Continuity of Ownership of at least 50%, but not more than 60%;
               or
 
               b) one (1) member less than a majority of the Board, if subclause
               (i) of this definition is satisfied because the Reorganization
               Transaction resulted in Continuity of Ownership of at least 40%,
               but less than 50%; and
 
               (iv) the person who was the Chief Executive Officer of the
          Company immediately prior to the first to occur of (x) the day prior
          to the beginning of the Imminent Control Change Period or (y) the day
          prior to the effective date of the Reorganization Transaction shall
          serve as the Chief Executive Officer of the Surviving Corporation at
          all times during the period commencing on the effective date of the
          Reorganization Transaction and ending on the first anniversary
          thereof, provided that this condition shall not fail to be satisfied
          due to the death or Disability of the Chief Executive Officer;
 
     provided, however, that a Reorganization Transaction shall cease to be
     considered a Merger of Equals (and shall instead be treated as a Change of
     Control) from and after the first date:
 
               a) during the two year period following the date as of which such
               Reorganization Transaction occurs that any of the conditions of
               any of clause (b), (c) or (d) of this definition shall not be
               satisfied; or
 
               b) prior to the first anniversary of the effective date of the
               Reorganization Transaction, the Company shall make a filing with
               the Securities and Exchange Commission, issue a press release, or
               make a public announcement to the effect that the Surviving
               Corporation is seeking or intends to seek a replacement for its
               Chief Executive Officer (other than due to the death or
               Disability of such person), whether such replacement is to become
               effective before or after such first anniversary.
 
          (33) "Mutual" means Principal Mutual Holding Company, an Iowa mutual
     insurance holding company and any successor thereto.
 
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          (34) "Nonstatutory Stock Option" (NSO) means an option which is not an
     Incentive Stock Option within the meaning of Section 422 of the Code.
 
          (35) "Option" means the right to purchase Common Stock at a stated
     price for a specified period of time. For purposes of the Plan, an Option
     may be either (i) an "Incentive Stock Option" (ISO) within the meaning of
     Section 422 of the Code or (ii) an option which is not an Incentive Stock
     Option (a "Nonstatutory Stock Option" (NSO)).
 
          (36) "Participant" means any Employee or Agent designated by the
     affirmative action of the Committee (or its delegate) to participate in the
     Plan.
 
          (37) "Period of Restriction" means the period specified by the
     Committee or established pursuant to the Plan during which a Restricted
     Stock award is subject to forfeiture.
 
          (38) "Plan of Conversion" means the Plan of Conversion of Mutual.
 
          (39) "Reorganization Transaction" shall have the meaning ascribed
     thereto in the definition of Change of Control.
 
          (40) "Restricted Stock" means an award of Stock made pursuant to
     Section 6 that is forfeitable by the Participant until the completion of a
     specified period of future service, the achievement of pre-established
     performance objectives or until otherwise determined by the Committee or in
     accordance with the terms of the Plan.
 
          (41) "Restricted Stock Unit" means a contractual right awarded
     pursuant to Section 6 that entitled the holder to receive shares of Common
     Stock (or the value thereof in cash) upon the completion of a specified
     period of future service or the achievement of pre-established performance
     objectives or at such other time or times determined by the Committee or in
     accordance with the terms of the Plan.
 
          (42) "SAR" means a stock appreciation right granted under Section 7 of
     the Plan in respect of one or more shares of Common Stock that entitles the
     holder thereof to receive, in cash or Common Stock, at the discretion of
     the Committee (which discretion may be exercised at or after grant,
     including after exercise of the SAR), an amount per share of Common Stock
     equal to the excess, if any, of the Fair Market Value on the date the SAR
     is exercised over the Fair Market Value on the date the SAR is granted.
 
          (43) "Savings Plans" means the Employees Savings Plan, the Agents
     Savings Plan and the Excess Plan.
 
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          (44) "SEC Person" means any person (as such term is defined in
     Section 3(a)(9) of the Exchange Act) or group (as such term is used in Rule
     13d-5 under the Exchange Act), other than an affiliate or any employee
     benefit plan (or any related trust) of the Company or any of its
     affiliates.
 
          (45) "Stock Purchase Plan" means the Principal Financial Group, Inc.
     Employee Stock Purchase Plan.
 
          (46) "Subsidiary" means (i) any corporation in which the Company owns,
     directly or indirectly, at least 50% of the total combined voting power of
     all classes of stock of such corporation, (ii) any partnership or limited
     liability company in which the Company owns, directly or indirectly, at
     least 50% of the capital interests or profits interest of such partnership
     or limited liability company and (iii) any other business entity in which
     the Company owns at least 50% of the equity interests thereof, provided
     that, in any such case, the Company is in effective control of such
     corporation, partnership, limited liability company or other entity.
 
          (47) "Surviving Corporation" means the corporation resulting from a
     Reorganization Transaction or, if securities representing at least 50% of
     the aggregate voting power of such resulting corporation are directly or
     indirectly owned by another corporation, such other corporation.
 
          (48) "25% Owner" shall have the meaning ascribed thereto in the
     definition of Change of Control.
 
          (49) "Voting Securities" means, with respect to any corporation,
     securities of such corporation that are entitled to vote generally in the
     election of directors of such corporation.
 
                                   SECTION 3.
                           POWERS OF THE COMMITTEE
 
     (a) Power to Grant. The Committee shall determine those Employees and/or
Agents to whom an Award shall be granted and the terms and conditions of any and
all such Awards. The Committee may establish different terms and conditions for
different Awards and different Participants and for the same Participant for
each Award such Participant may receive, whether or not granted at different
times.
 
     (b) Administration.
 
          (1)  Rules, Interpretations 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
     and regulations relating to the Plan, to provide for conditions deemed
     necessary or advisable to protect the interests of the Company, to construe
     the respective Award agreements and to make all other determinations
     necessary or advisable for the administration and interpretation of the
     Plan in order to carry out its
 
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     provisions and purposes. Determinations, interpretations, or other actions
     made or taken by the Committee shall be final, binding, and conclusive for
     all purposes and upon all persons.
 
          (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. 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.
 
          (3) Delegation of Authority. The Committee may delegate to the
     Company's Chief Executive Officer the power and authority to make and/or
     administer Awards under the Plan with respect to individuals who are below
     the position of Senior Vice President (or any analogous title), pursuant to
     such conditions and limitations as the Committee may establish; provided
     that only the Committee or the Board may select, and grant Awards to,
     Executive Officers or exercise any other discretionary authority under the
     Plan in respect of Awards granted to such Executive Officers.
 
     (c)  Certain Rules Relating to Grants and Actions.
 
          (1)  Maximum Individual Grants. During any three year period, no
     individual Participant may be granted Awards in respect of more than 10% of
     the total shares available under the Plan; provided that, to the extent
     that SARs are granted in tandem with an Option, so that only one may be
     exercised with the other terminating upon such exercise, the number of
     shares of Common Stock subject to such tandem Option and SAR award shall
     only be taken into account once (and not as to both awards) for purposes of
     this limit.
 
          (2)  Broad Based Grants. Notwithstanding anything else to the contrary
     contained herein, the Committee may authorize the grant of Nonstatutory
     Stock Options to a broad based group of Employees and/or Agents, including
     all Employees and/or Agents or all Employees and/or Agents in one or more
     classes (any such broad based grant of Nonstatutory Stock Options, a "Broad
     Based Grant"). Unless the Committee shall otherwise determine, any such
     Broad Based Grant shall be made on terms and conditions that are
     substantially the same for all Employees and/or Agents (or all Employees or
     Agents in a specified classification of Employees or Agents) receiving such
     grant.
 
          (3) Limitations in Plan of Conversion. Notwithstanding anything else
     contained in the Plan to the contrary, no action shall be taken, and no
     Award or distribution shall be made, under the Plan which contains any term
     or condition that would violate any provision of the Plan of Conversion.
 
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                                   SECTION 4.
                        COMMON STOCK SUBJECT TO PLAN
 
     (a) Number. Subject to Section 4(c) below, during the five year period
immediately following the effective date of the Plan of Conversion (or such
longer period as the shares initially authorized for issuance hereunder remain
available for grants hereunder), 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 all Company
Stock Plans (including, without limitation, the Plan) other than the Employees
Savings Plan, the Agents Savings Plan and the Stock Purchase Plan is 6% of the
number of shares outstanding immediately following the effective date of the
Plan of Conversion. Without limiting the generality of the foregoing, the
maximum number of shares as to which Incentive Stock Options may be granted
shall not exceed 10 million shares. When a SAR is granted in tandem with an
Option, so that only one may be exercised with the other terminating upon such
exercise, the number of shares of Common Stock subject to the tandem Option and
SAR award shall only be taken into account once (and not as to both awards) for
purposes of this limit (and for purposes of the provisions of Section 4(b)
below). The shares to be delivered under the Plan may consist, in whole or in
part, of treasury Common Stock or authorized but unissued Common Stock, not
reserved for any other purpose.
 
     (b) Canceled or Terminated Awards. Any shares of Common Stock subject to an
Award which for any reason expires without having been exercised, is canceled or
terminated or otherwise is settled without the issuance of any Common Stock
(including, but not limited to, shares tendered to exercise outstanding Options
or shares tendered or withheld for taxes) shall again be available for grant
under the Plan. Notwithstanding the foregoing, in the event that any SARs are
paid out in shares of Common Stock, the number of shares of Common Stock as to
which such SARs have been exercised (and not just the number of shares actually
issued) shall be deemed issued for purposes of determining the limit under
Section 4(a) above and shall not again be available for issuance pursuant to
this Section 4(b).
 
     (c) Adjustment Due to Change in Capitalization. In the event of any Common
Stock dividend or Common Stock split, recapitalization (including, but not
limited, to the payment of an extraordinary dividend to the stockholders of the
Company), merger, consolidation, combination, spin-off, distribution of assets
to stockholders (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(a) or subject to outstanding Awards and the
respective exercise prices or base 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.
 
                                   SECTION 5.
                                  STOCK OPTIONS
 
     (a)  Grant of Options. Subject to the provisions of Section 3(c) and
Section 4 above, Options may be granted to Participants at such time or times as
shall be
 
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determined by the Committee. Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Nonstatutory Stock Options. Except as
otherwise provided herein, the Committee shall have complete discretion in
determining the number of Options, if any, to be granted to a Participant,
except that Incentive Stock Options may only be granted to Employees. Each
Option grant shall be evidenced by an Option agreement that shall specify the
type of Option granted, the exercise price, the duration of the Option, the
number of shares of Common Stock to which the Option pertains, and such other
terms and conditions as the Committee shall determine which are not inconsistent
with the provisions of the Plan.
 
     (b)  Exercise Price. Nonstatutory Stock Options and Incentive Stock Options
granted pursuant to the Plan shall have an exercise price no less than the Fair
Market Value of a share of Common Stock on the date on which the Option is
granted, except that the exercise price of any Option granted to take effect at
the time of an underwritten public offering of the Common Stock shall be the
price at which such shares are offered for sale thereunder.
 
     (c)  Exercise of Options. Unless the Committee shall impose a different
schedule requiring a longer or shorter period of service to exercise in full any
Option granted hereunder and subject to Section 3(c)(3) hereof, one-third of
each Nonstatutory Stock Option or Incentive Stock Option granted pursuant to the
Plan shall become exercisable on each of the first three (3) anniversaries of
the date such Option is granted; provided, however, that each Nonstatutory Stock
Option granted pursuant to the Plan in a Broad Based Grant shall become
exercisable on the third (3(rd)) anniversary of the date such Option is granted
and not before such time; and provided further that the Committee may establish
performance-based criteria for exercisability that can accelerate the
exercisability of all or any portion of any Option. Subject to the provisions of
this Section 5, once any portion of any Option has become exercisable it shall
remain exercisable for its full term. The Committee shall determine the term of
each Nonstatutory Stock Option or Incentive Stock Option granted, but, except as
expressly provided below, in no event shall any such Option be exercisable for
more than ten (10) years after the date on which it is granted.
 
     (d)  Payment. The Committee shall establish procedures governing the
exercise of Options. No shares shall be delivered pursuant to any exercise of an
Option 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) which have been owned by
the person exercising the Option for at least six (6) months at the time of
exercise, (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 so tendered to the Company, valued as of the date of such
tender, is at least equal to such exercise price or (iv) through an arrangement
with a broker approved by the Company whereby payment of the exercise price is
accomplished with the proceeds of the sale of Common Stock.
 
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     (e)  Incentive Stock Options. Notwithstanding anything in the Plan to the
contrary, no Option that is intended to be an Incentive Stock Option may be
granted after the tenth (10th) anniversary of the effective date of the Plan and
no term of this Plan relating to Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority granted under the Plan
be so exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of any Participant affected thereby, to disqualify any
Incentive Stock Option under such Section 422.
 
     (f)  Termination of Employment or Service.
 
          (1) Due to Death. In the event a Participant's employment or service
     terminates by reason of death, any Options granted to such Participant
     shall become immediately exercisable in full and may be exercised by the
     Participant's designated beneficiary or, if none is named, by the person
     determined in accordance with Section 10(b) below, at any time prior to the
     earlier to occur of (i) the expiration of the term of the Options or (ii)
     the third (3rd) anniversary (or such earlier date as the Committee shall
     determine at the time of grant) of the Participant's death.
 
          (2) Due to Disability. In the event a Participant's employment or
     service is terminated by reason of Disability, any Options granted to such
     Participant shall become immediately exercisable in full and may be
     exercised by the Participant (or, in the event of the Participant's death
     after termination of employment or service when the Option is exercisable
     pursuant to its terms, by the Participant's designated beneficiary or, if
     none is named, by the person determined in accordance with Section 10(b)
     below), at any time prior to the earlier to occur of (i) the expiration of
     the term of the Options or (ii) the third (3rd) anniversary (or such
     earlier date as the Committee shall determine at the time of grant) of the
     Participant's termination of employment or service.
 
          (3) Approved Retirement. In the event a Participant's employment or
     service terminates by reason of Approved Retirement, any Options granted to
     such Participant shall become immediately exercisable in full and may be
     exercised by the Participant (or, in the event of the Participant's death
     after termination of employment or service when the Option is exercisable
     pursuant to its terms, by the Participant's designated beneficiary or, if
     none is named, by the person determined in accordance with Section 10(b)
     below), at any time prior to the expiration date of the term of the Options
     or within three (3) years (or such shorter period as the Committee shall
     determine at the time of grant) following the Participant's Approved
     Retirement, whichever period is shorter.
 
          (4) Termination of Employment For Cause or Resignation. In the event a
     Participant's employment or service is terminated by the Company or any
     Subsidiary for Cause or by the Participant other than due to the
     Participant's death, Disability or Approved Retirement, any Options granted
     to such Participant that have not yet been exercised shall expire at the
     time of such termination and shall not be exercisable thereafter.
 
                                       13
<PAGE>   14
 
          (5) Termination of Employment for Any Other Reason. Unless otherwise
     determined by the Committee at or following the time of grant, in the event
     the employment or service of the Participant shall terminate for any reason
     other than one described in Section 5(f)(1), (2), (3), or (4) above, any
     Options granted to such Participant which are exercisable at the date of
     the Participant's termination of employment or service may be exercised by
     the Participant (or, in the event of the Participant's death after
     termination of employment or service when the Option is exercisable
     pursuant to its terms, by the Participant's designated beneficiary, or, if
     none is named, by the person determined in accordance with Section 10(b)),
     at any time prior to the expiration of the term of the Options or the
     ninetieth (90th) day following the Participant's termination of employment
     or service, whichever period is shorter, and any Options that are not
     exercisable at the time of termination of employment or service shall
     expire at the time of such termination and shall not be exercisable
     thereafter.
 
     (g) Restrictive Covenants and Other Conditions. Without limiting the
generality of the foregoing, the Committee may condition the grant of any Option
under the Plan upon the Employee or Agent to whom such Option would be granted
agreeing in writing to certain conditions in addition to the provisions
regarding exercisability of the Option (such as restrictions on the ability to
transfer the underlying shares of Common Stock) or covenants in favor of the
Company and/or one or more Subsidiaries (including, without limitation,
covenants not to compete, not to solicit employees and customers and not to
disclose confidential information, that may have effect following the
termination of the Employee's employment or the Agent's service with the Company
and its Subsidiaries and after the Option has been exercised, including, without
limitation, the requirement that the Employee or Agent disgorge any profit, gain
or other benefit received in respect of the exercise of the Option prior to any
breach of any such covenant by the Employee or Agent). Notwithstanding the
foregoing, no grant of any Options in a Broad Based Grant shall contain any such
restrictions or covenants.
 
                                   SECTION 6.
                                RESTRICTED STOCK
 
     (a) Grant of Restricted Stock. The Committee may grant Restricted Stock or
Restricted Stock Units to Participants at such times and in such amounts, and
subject to such other terms and conditions not inconsistent with the Plan
(including, without limitation, Section 3(c)(3)) as it shall determine. The
Committee shall require that the stock certificates evidencing any Restricted
Stock be held in the custody of the Secretary of the Company until the Period of
Restriction lapses, and that, as a condition of any Restricted Stock award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such award. Each grant of Restricted Stock or
Restricted Stock Units shall be evidenced by a written agreement setting forth
the terms of such Award.
 
     (b) Restrictions on Transferability. Except as provided in Section 10(a),
no Restricted Stock may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the lapse of the Period of Restriction. Unless
otherwise determined by
 
                                       14
<PAGE>   15
 
the Committee, the Period of Restriction shall last for four years in total, but
shall lapse as to one quarter of the related shares of Restricted Stock on each
of the first four anniversaries of the date of grant.
 
     (c) Rights as a Shareholder. Unless otherwise determined by the Committee
at the time of grant and subject to Section 6(d), 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.
 
     (d) Dividends and Other Distributions. Unless otherwise determined by the
Committee at the time of grant, Participants holding outstanding shares of
Restricted Stock shall be entitled to receive all dividends and other
distributions paid with respect to those shares, provided that if any such
dividends or distributions are paid in shares of Common Stock, such shares shall
be subject to the same forfeiture restrictions and restrictions on
transferability as apply to the Restricted Stock with respect to which they were
paid. Notwithstanding the foregoing, the Committee may specify at the date of
grant that any cash dividends on shares of Restricted Stock not be paid
currently, but rather be credited to an account established for the Participant
and invested in shares of Common Stock on the distribution date of such
dividend. Any additional shares credited in respect of dividends shall become
vested and nonforfeitable, if at all, on the same terms and conditions as are
applicable in respect of the Restricted Stock with respect to which such
dividends were payable.
 
     (e) Termination of Employment Due to Approved Retirement or Death. Unless
otherwise determined by the Committee at the time of grant or otherwise required
pursuant to Section 3(c)(3), in the event a Participant's employment or service
terminates by reason of Approved Retirement, Disability or death, a pro rata
portion of any shares related to Restricted Stock held by such Participant shall
become non-forfeitable, based upon that portion of the Period of Restriction
which expired prior to the Participant's Approved Retirement or death and, where
vesting of such an award is otherwise contingent on the achievement of
performance objectives, the extent to which such performance objectives are
achieved.
 
     (f) Termination of Employment for Any Other Reason. Unless otherwise
determined by the Committee at or after the time of grant, in the event the
employment or service of the Participant shall terminate for any reason other
than one described in Section 6(e), any Restricted Stock awarded to such
Participant as to which the Period of Restriction has not lapsed shall be
forfeited.
 
     (g) Restricted Stock Units. The Committee may elect to grant any
Participant a contractual right to receive shares of Common Stock (or, if so
elected by the Committee at the time of grant, the cash value of shares of
Common Stock) in the future, after the satisfaction of specified vesting
conditions. Any such contractual right shall be intended to be the economic
equivalent of an award of Restricted Stock. Any such award of contractual rights
shall be in substantially the same terms as an award of Restricted Stock, except
that a Participant receiving such award shall not have any rights as a
shareholder prior to the actual issuance of such Common Stock (although the
Committee
 
                                       15
<PAGE>   16
 
may authorize, in the applicable award agreement, the payment of dividend
equivalents on such rights equal to the dividends that would have been payable
(or accumulated, pursuant to Section 6(d)) had the corresponding equity rights
been actual shares of Restricted Stock).
 
                                   SECTION 7.
                          STOCK APPRECIATION RIGHTS
 
     (a) Grant of SARs. SARs may be granted to any Participants, all
Participants or any class of Participants at such time or times as shall be
determined by the Committee. SARs may be granted in tandem with an Option, or
may granted on a freestanding basis, not related to any Option. A grant of a SAR
shall be evidenced in writing, whether as part of the agreement governing the
terms of the Option, if any, to which such SARs relate or pursuant to a separate
written agreement with respect to freestanding SARs, in each case containing
such provisions not inconsistent with the Plan as the Committee shall approve.
 
     (b) Terms and Conditions of SARs. Unless the Committee shall otherwise
determine, the terms and conditions (including, without limitation, the exercise
period of the SAR, the vesting schedule applicable thereto and the impact of any
termination of service on the Participant's rights with respect to the SAR)
applicable with respect to (i) SARs granted in tandem with an Option shall be
substantially identical (to the extent possible taking into account the
differences related to the character of the SAR) to the terms and conditions
applicable to the tandem Options and (ii) freestanding SARs shall be
substantially identical (to the extent possible taking into account the
differences related to the character of the SAR) to the terms and conditions
that would have been applicable under Section 5 above were the grant of the SARs
a grant of an Option.
 
     (c) Exercise of Tandem SARs. SARs which are granted in tandem with an
Option may only be exercised upon the surrender of the right to exercise such
Option for an equivalent number of shares and may be exercised only with respect
to the shares of Common Stock for which the related Option is then exercisable.
 
     (d) Payment of SAR Amount. Upon exercise of a SAR, the holder shall be
entitled to receive payment, in cash, in shares of Common Stock or in a
combination thereof, as determined by the Committee, of an amount determined by
multiplying:
 
          (1) the excess, if any, of the Fair Market Value of a share of Common
     Stock at the date of exercise over the Fair Market Value of a share of
     Common Stock on the date of grant, by
 
          (2) the number of shares of Common Stock with respect to which the
     SARs are then being exercised.
 
                                       16
<PAGE>   17
 
                                   SECTION 8.
                                CHANGE OF CONTROL
 
     (a) Accelerated Vesting and Payment. Subject to Section 3(c)(3) herein and
the provisions of Section 8(b) below, in the event of a Change of Control each
Option and SAR then outstanding shall be fully exercisable regardless of the
exercise schedule otherwise applicable to such Option and/or SAR , the Period of
Restriction shall lapse as to each share of Restricted Stock then outstanding,
each outstanding Restricted Stock
 
     Unit shall become fully vested and payable and, in connection with such a
Change of Control, the Committee may, in its discretion, provide that each
Option and/or SAR shall, upon the occurrence of such Change of Control, be
canceled in exchange for a payment per share (the "Settlement Payment") in an
amount equal to the excess, if any, of the Change of Control Price over the
exercise price for such Option or the base price of such SAR. Such Settlement
Payment shall be in the form of cash, unless the transaction which constitutes
the Change of Control is intended to qualify for treatment as a "Pooling of
Interests" under APB No. 16 (or any successor thereto), in which case such
Settlement Payment shall be in registered stock of the same class as is
otherwise provided to the shareholders of the Company.
 
     (b) Alternative Awards. Notwithstanding Section 8(a), no cancellation,
acceleration of exercisability, vesting, cash settlement or other payment shall
occur with respect to any Award if the Committee reasonably determines in good
faith prior to the occurrence of a Change of Control that such Award shall be
honored or assumed, or new rights substituted therefor (such honored, assumed or
substituted award hereinafter called an "Alternative Award"), by a Participant's
employer (or the parent or an affiliate of such employer) immediately following
the Change of Control; provided that any such Alternative Award must:
 
          (1) be based on stock which is traded on an established securities
     market;
 
          (2) provide such Participant with rights and entitlements
     substantially equivalent to or better than the rights, terms and conditions
     applicable under such Award, including, but not limited to, an identical or
     better exercise or vesting schedule and identical or better timing and
     methods of payment;
 
          (3) have substantially equivalent economic value to such Award
     (determined at the time of the Change in Control); and
 
          (4) have terms and conditions which provide that in the event that the
     Participant's employment or service is involuntarily terminated for any
     reason (including, but not limited to a termination due to death,
     Disability or for Cause) or Constructively Terminated (as defined below),
     all of such Participant's Option and/or SARs shall be deemed immediately
     and fully exercisable, the Period of Restriction shall lapse as to each of
     the Participant's outstanding Restricted Stock awards, each of the
     Participant's outstanding Restricted Stock Unit awards shall
 
                                       17
<PAGE>   18
 
     be payable in full and each such Alternative Award shall be settled for a
     payment per each share of stock subject to the Alternative Award in cash,
     in immediately transferable, publicly traded securities or in a combination
     thereof, in an amount equal to, in the case of an Option or SAR, the excess
     of the Fair Market Value of such stock on the date of the Participant's
     termination over the corresponding exercise or base price per share and, in
     the case of any Restricted Stock or Restricted Stock Unit award, the Fair
     Market Value of the number of shares of Common Stock subject or related
     thereto.
 
For this purpose, participant's employment or service shall be deemed to have
been Constructively Terminated if, without the Participant's written consent,
the Participant terminates employment or service within 120 days following
either (x) a material reduction in the Participant's base salary or a
Participant's incentive compensation opportunity, or (y) the relocation of the
Participant's principal place of employment or service to a location more than
35 miles away from the Participant's prior principal place of employment or
service.
 
     (c) Accounting Issues. In applying the provisions of this Section 8 to a
Pooling of Interests, the provisions related to business combinations under FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an Interpretation of APB Opinion No. 25" (including any
interpretations and modifications thereof) shall be taken into account.
 
                                   SECTION 9.
         AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
 
     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, Employee or Agent; 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 (or the base price at
which a SAR) may be granted or (iii) extend the maximum term for Options or SARs
granted hereunder 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.
 
                                   SECTION 10.
                           MISCELLANEOUS PROVISIONS
 
     (a) Transferability. No Award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than in accordance with Section 10(b) 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 Nonstatutory Stock Options with or
without tandem SARs, freestanding SARs and Restricted Stock or Restricted Stock
Units to Family Members (including, without limitation, transfers effected by a
domestic relations order) subject to such terms and conditions as the Committee
shall determine.
 
                                       18
<PAGE>   19
 
     (b) 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;
provided that, if the Participant shall not have designated any beneficiary
under this Plan, the Participant's beneficiary shall be deemed to be the person
designated by the Participant under the group life insurance plan of the Company
or a Subsidiary in which such Participant participates (unless such designated
beneficiary is not a Family Member). Each designation made hereunder will revoke
all prior designations by the same Participant with respect to all Awards
previously granted (including, solely for purposes of this Plan, any deemed
designation), 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
(including a deemed 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.
 
     (c) Deferral of Payment. The Committee may, in the Award agreement or
otherwise, 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.
 
     (d) No Guarantee of Employment or Participation. The existence of this
Plan, as in effect at any time or from time to time, or any grant of Award under
the Plan shall not interfere with or limit in any way the rights of the Company
or any Subsidiary to terminate any Participant's employment or other service
provider relationship at any time, nor confer upon any Participant any rights to
continue in the employ or service of the Company or any Subsidiary or any other
affiliate of the Company. Except to the extent expressly selected by the
Committee to be a Participant, no person (whether or not an Employee, an Agent
or a Participant) shall at anytime have a right to be selected for participation
in the Plan or, having been selected as a Participant, to receive any additional
awards hereunder, despite having previously participated in an incentive or
bonus plan of the Company or an affiliate. The existence of the Plan shall not
be deemed to constitute a contract of employment between the Company or any
affiliate and any Employee, Agent or Participant, nor shall it constitute a
right to remain in the employ or service of the Company or any affiliate. Except
as may be provided in a separate written agreement, employment with or service
for the Company or any affiliate is at-will and either party may terminate the
participant's employment or other service provider relationship at any time, for
any reason, with or without cause or notice.
 
     (e) Tax Withholding. The Company or an affiliate shall have the right to
deduct from all payments or distributions hereunder any federal, state, foreign
or local taxes or other obligations required by law to be withheld with respect
thereto. The Company may defer issuance of Common Stock upon the exercise of an
Option or a SAR until such requirements are satisfied. The Committee may, in its
discretion, permit a
 
                                       19
<PAGE>   20
 
Participant to elect, subject to such conditions as the Committee shall impose,
(i) to have shares of Common Stock otherwise to be issued under the Plan
withheld by the Company or (ii) to deliver to the Company previously acquired
shares of Common Stock, in either case for the greatest number of whole shares
having a Fair Market Value on the date immediately preceding the date of
exercise not in excess of the minimum amount required to satisfy the statutory
withholding tax obligations upon the corresponding exercise of an Option or a
SAR settled in Common Stock.
 
     (f) No Limitation on Compensation; Scope of Liabilities. Nothing in the
Plan shall be construed to limit the right of the Company to establish other
plans if and to the extent permitted by applicable law. The liability of the
Company or any affiliate under this Plan is limited to the obligations expressly
set forth in the Plan, and no term or provision of this Plan may be construed to
impose any further or additional duties, obligations, or costs on the Company or
any affiliate thereof or the Committee not expressly set forth in the Plan.
 
     (g) 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.
 
     (h) Term of Plan. The Plan shall be effective upon its adoption by the
Board. The Plan shall continue in effect, unless sooner terminated pursuant to
Section 9 above, until no more shares are available for issuance under the Plan.
 
     (i) Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Iowa,
without regard to principles of conflict of laws.
 
     (j) No Impact On Benefits. Except as may otherwise be specifically stated
under any employee benefit plan, policy or program, Awards shall not be treated
as compensation for purposes of calculating an Employee's or Agent's right or
benefits under any such plan, policy or program.
 
     (k) No Constraint on Corporate Action. Except as provided in Section 9
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.
 
     (l) Indemnification. Each member of the Board and each member of the
Committee shall be indemnified and held harmless by the Company and each
Employer
 
                                       20
<PAGE>   21
 
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such member of the Board or 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 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 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.
 
     (m) Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares of Common Stock covered by any Award
until the Participant shall have become the holder of record of such shares.
 
     (n) Captions. The headings and captions appearing herein are inserted only
as a matter of convenience. They do not define, limit, construe, or describe the
scope or intent of the provisions of the Plan.
 
                                       21
<PAGE>   22
 
            GUIDELINES FOR THE OPERATION OF THE STOCK INCENTIVE PLAN
 
     Section 3(a). Notwithstanding anything in the Stock Incentive Plan to the
contrary, in no event shall the number of shares of Common Stock that may be
made issuable or distributable under all Company Stock Plans (including, without
limitation, the Stock Incentive Plan) other than the Employees Savings Plan, the
Agents Savings Plan and the Stock Purchase Plan within 18 months of the
effective date of the Plan of Conversion exceed 40% of the total number of
shares available for grant under Section 4(a).
 
     Section 3(b)(3). Notwithstanding anything in the Stock Incentive Plan to
the contrary, in no event shall the number of shares of Common Stock awarded by
the Chief Executive Officer pursuant to Section 3(b)(3) within 18 months of the
effective date of the Plan of Conversion exceed 5% of the total number of shares
available for grant under Section 4(a).
 
On behalf of the Board of Directors of the Company, this Stock Incentive Plan
has been executed this day of June, 2001.
 
 
 
By:
   ---------------------------------
C. Daniel Gelatt, Jr.
 
 
 
 
 
                                       22
 
 
 
 
<PAGE>   1
                                                                    EXHIBIT 10.2
 
                            PRINCIPAL FINANCIAL GROUP
                           LONG-TERM PERFORMANCE PLAN
 
                 (As Amended and Restated as of January 1, 2001)
 
                                    ARTICLE I
 
                                PURPOSE; HISTORY
 
1.1    Purpose. The purpose of the Plan is to provide incentives to key
employees of the Principal Financial Group(R) that would reward them for
increasing the success of the business over the long-term.
 
1.2    History. The Plan was originally adopted by Principal Life Insurance
Company of Des Moines, Iowa in November 1986, and has since been amended from
time to time. Prior to the date of this amendment and restatement, the Plan was
amended and restated in November, 1999 ("Prior Plan"). This amended and restated
version of the Plan is essentially the same as the Prior Plan, as in effect on
December 1, 1999, but has been adopted and assumed by the Company with respect
to Performance Periods commencing on or after January 1, 2001, and revised in
terms of its administration and presentation in light of the anticipated public
market for the Common Stock as a result of the proposed demutualization of the
Company. Awards made in respect of Performance Periods commencing prior to
January 1, 2001 shall be governed under the terms of the Prior Plan, unless
specifically provided otherwise in the Plan.
 
                                   ARTICLE II
 
                                   DEFINITIONS
 
       For the purposes of this Plan, the following terms shall have the
meanings indicated, unless the context clearly indicates otherwise:
 
       "Account" means the records that will be established to record amounts
deferred by a Participant under the Plan.
 
       "Adjusted Consolidated GAAP Equity" for any period means the equity of
the Company and its consolidated subsidiaries, taken as a whole, as determined
in accordance with GAAP, adjusted for accumulated other comprehensive income or
loss, as defined by GAAP, unless otherwise determined by the Committee.
 
       "Agents Savings Plan" means The Principal Select Savings Plan for
Individual Field.
 
 
<PAGE>   2
 
       "Three-Year Average ROE" means, with respect to any three-year period,
the sum of the ROE identified separately for each of the three years in the
period, divided by three.
 
       "Beneficiary" or "Beneficiaries" means the person, persons or entity
entitled under Article VI to receive any Plan benefits payable after a
Participant's death.
 
       "Board" means the Board of Directors of the Company, or the successor
thereto.
 
         "Cause" means any one or more of the following:
 
               (i)    a Participant's commission of a felony or other crime
                      involving fraud, dishonesty or moral turpitude;
 
               (ii)   a Participant's willful or reckless material misconduct in
                      the performance of the Participant's duties;
 
               (iii)  a Participant's habitual neglect of duties; or
 
               (iv)   a Participant's willful or intentional breach of
                      obligations to an Employer, provided that, if such breach
                      involved an act, or a failure to act, which was done, or
                      omitted to be done, by a Participant in good faith and
                      with a reasonable belief that a Participant's act, or
                      failure to act, was in the best interests of the Company
                      or was required by applicable law or administrative
                      regulation, such breach shall not constitute Cause, if,
                      within 30 days after a Participant is given written notice
                      of such breach that specifically refers to this
                      definition, a Participant cures such breach to the fullest
                      extent that it is curable;
 
       provided, however, that Cause shall not include any one or more of the
following:
 
               (1)    a Participant's negligence, other than a Participant's
                      habitual neglect of duties or gross negligence; or
 
               (2)    any act of omission believed by a Participant in good
                      faith to have been in or not opposed to the interest of
                      the Company (without intent of the Participant to gain,
                      directly or indirectly, a profit to which the Participant
                      was not legally entitled).
 
       "Committee" means the Human Resources Committee of the Board or such
other committee of the Board as the Board shall designate from time to time,
which committee shall be composed of two or more outside directors.
 
 
                                       2
<PAGE>   3
 
       "Common Stock" means the common stock, par value $0.01 per share. of
Principal Financial Group, Inc., a Delaware corporation, and any successor
thereto.
 
       "Company" means Principal Mutual Holding Company and its successors and
assigns and any company which shall acquire substantially all of its assets.
 
       "Company Stock Plan" means any stock option plan, stock incentive plan,
stock purchase plan and share ownership plans related to the Common Stock that
are customary for publicly traded companies, and shall include the Directors
Stock Plan, the Plan, the Savings Plans, the Stock Incentive Plan and the Stock
Purchase Plan.
 
       "Directors Stock Plan" means the Principal Financial Group, Inc.
Directors Stock Plan.
 
       "Disability" or "Disabled" means becoming eligible to receive long-term
disability benefits under a plan, policy or program sponsored or maintained by
the Company or a Subsidiary.
 
       "Employees Savings Plan" means the Principal Select Savings Plan for
Employees.
 
       "Employer" means the Company and any Subsidiary whose employees are
designated as Participants under the Plan.
 
       "End Imputed Value" will be determined by the average closing stock price
of the Common Stock for the last 20 trading days of a Performance Period, after
any Initial Public Offering. Prior to any Initial Public Offering, End Imputed
Value will be based on the following quotient:
 
         (i)    the product of
 
               (A)    10 times
 
               (B)    the Three-Year Average ROE for the three year period ended
                      on the last day of the calendar year ended coincident with
                      the end of the Performance Period times
 
               (C)    the Adjusted Consolidated GAAP Equity as of the last day
                      of the calendar year ended coincident with the end of the
                      Performance Period, divided by
 
         (ii)   the total number of Initial Performance Units established for
                the Performance Period (regardless of whether awarded to
                Participants).
 
 
                                        3
<PAGE>   4
 
Notwithstanding the foregoing, if an Initial Public Offering occurs during a
Performance Period under the Plan or a performance period under the Prior Plan,
the Committee may determine End Imputed Value based on the above quotient or the
stock price, as it deems advisable. Further, pursuant to Section 3.2(d), in
determining the number and value of Final Performance Units to be awarded with
respect to a Transition Period as defined therein, the Committee may make any
adjustment, change or conversion as it deems necessary or advisable to achieve
an appropriate assessment of, and compensation for, performance during such
Transition Period.
 
       "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
 
       "Excess Plan" means the Principal Select Savings Excess Plan and the Non-
Qualified Defined Contribution Plan for Designated Participants.
 
       "Final Performance Units" with respect to a Performance Period means the
number of Performance Units resulting following the adjustment to the number of
Initial Performance Units awarded for such Performance Period pursuant to
Section 3.2(b).
 
       "GAAP" means generally accepted accounting principles, consistently
applied.
 
       "Initial Performance Units" means the Performance Units initially
established by the Committee with respect to any given Performance Period.
 
       "Initial Public Offering" means the first underwritten offering of Common
Stock to the public.
 
       "Operating Earnings" means operating earnings of the Company and its
consolidated subsidiaries, consistent with GAAP principles, unless otherwise
determined by the Committee.
 
       "Participant" with respect to a Performance Period means an employee who
has been granted an award of Initial Performance Units for such Performance
Period. For the purposes of Article V, "Participant" shall include only an
employee who was employed by an Employer on or before the date of the applicable
Change of Control.
 
       "Performance Factor" means a multiplier, stated as a percentage,
determined based on the Performance Matrix established for the Performance
Period, that shall serve to increase or decrease the number of Initial
Performance Units based on the performance of the Company and its consolidated
subsidiaries during the Performance Period.
 
       "Performance Matrix" means a matrix established by the Committee not
later than March 15 of the relevant Performance Period that will establish the
multiplier which will apply to each Participant's Initial Performance Units
based on the actual performance of
 
 
                                        4
<PAGE>   5
 
the Company and its consolidated subsidiaries against the Performance Objectives
for the relevant Performance Period, subject to any actions by the Committee
pursuant to Section 3.2(c).
 
       "Performance Objectives" means one or more pre-established performance
measures established by the Committee with respect to a Performance Period. The
Committee may establish several levels of achievement for each Performance
Objective established, to reflect the level of recognition to be afforded to
partial achievement of, or to surpassing, the level of achievement targeted for
such objective for such Performance Period. The measures of performance shall be
selected by the Committee from such measures as the Committee shall deem
appropriate, including, without limitation, ROE, Operating Earnings, earnings
before interest, taxes, depreciation and amortization ("EBITDA"), and total
shareholder return.
 
       "Performance Period" means each three calendar year period beginning
during the term of the Plan.
 
       "Performance Units" means Initial Performance Units and Final Performance
Units.
 
       "Plan" means the Principal Financial Group Long-Term Performance Plan, as
currently in effect and as the same may be amended from time to time.
 
       "Plan of Conversion" means the Plan of Conversion of Principal Mutual
Holding Company.
 
       "Plan Administrator" means the Corporate Management Committee of the
Company, as provided in Section 7.1, or such other committee or persons approved
by the Board.
 
       "Retirement" means a termination of a Participant's employment for any
reason other than death, Disability or Cause and qualifying to retire under the
terms of any pension plan maintained by the Company or a Subsidiary.
 
       "ROE" means, with respect to any calendar year, Operating Earnings
divided by the average Adjusted Consolidated GAAP Equity for the year (prior
12-month period ending Adjusted Consolidated GAAP Equity plus end of 12-month
period Adjusted Consolidated GAAP Equity, divided by two) unless otherwise
determined by the Committee.
 
       "Savings Plans" means the Employees Savings Plan, the Agents Savings Plan
and the Excess Plan.
 
 
                                        5
<PAGE>   6
 
       "Start Imputed Value" will be determined by the average closing stock
price of the Common Stock for the last 20 trading days of the prior Performance
Period, after any Initial Public Offering. Prior to an Initial Public offering,
Start Imputed Value will be based on the following quotient:
 
         (i)    the product of
 
               (A)    10 times
 
               (B)    the Three-Year Average ROE for the three year period ended
                      on the last day of the last calendar year ended prior to
                      the commencement of the Performance Period times
 
               (C)    the Adjusted Consolidated GAAP Equity as of the last day
                      of the last calendar year ended prior to the commencement
                      of the Performance Period, divided by
 
         (ii)   the total number of Initial Performance Units established for
                the Performance Period (regardless of whether awarded to
                Participants).
 
       "Stock Incentive Plan" means the Principal Financial Group, Inc Stock
Incentive Plan.
 
       "Subsidiary" means (1) any entity in which the Company, directly or
indirectly, owns at least 50% of the outstanding equity interests and over which
the Company has effective control, or (2) any other entity or joint venture,
domestic or non-domestic, in which the Company, directly or indirectly, owns an
interest and that is designated a "Subsidiary" by the Plan Administrator for
purposes of this Plan.
 
       "Threshold Objectives" means one or more minimal performance objectives
established hereunder and communicated to Participants at the time an Initial
Performance Unit award is communicated that must be achieved in order for any
payment to be made in respect of Performance Units awarded for such Performance
Period. Such Threshold Objectives may be any measure of performance that the
Committee shall deem appropriate, provided that, for the Performance Period
commencing in 2001 and, unless otherwise specified by the Committee by March 15
of the relevant Performance Period, the Threshold Objectives shall be:
 
         (1)   Adjusted Consolidated GAAP Equity for the year ending
               simultaneously with the end of the Performance Period, stated as
               a percentage of the general account assets of Principal Life
               Insurance Company, must be at least 6%; and
 
 
                                        6
<PAGE>   7
 
         (2)   Principal Life Insurance Company must have a Risk Based Capital
               ratio (as defined by the National Association of Insurance
               Commissioners) of at least 150%; and
 
         (3)   ROE for the last calendar year in the Performance Period must
               exceed a minimum level established for such Performance Period in
               the Performance Matrix; and
 
         (4)   Operating Earnings for the Performance Period must exceed a
               minimum level established for such Performance Period in the
               Performance Matrix.
 
                                   ARTICLE III
 
       ELIGIBILITY, PARTICIPATION AND VESTING UNDER THE PLAN
 
3.1    Eligibility. Eligibility to participate in the Plan shall be limited to a
select group of management who are key contributors to the success of the
Company and the Subsidiaries and designated by the Committee or Chief Executive
Officer as Participants in the Plan.
 
3.2    Awards of Performance Units.
 
       (i)     Grants. The Committee shall establish the number of Initial
               Performance Units that shall be deemed outstanding with respect
               to any Performance Period. Each Participant in a Performance
               Period shall be awarded the number of Initial Performance Units
               as the Committee shall determine; provided that, the Committee
               may delegate to the Chief Executive Officer the authority to
               award Initial Performance Units to officers holding titles below
               Senior Vice President who are not reporting officers under
               Section 16(a) of the Securities Exchange Act of 1934. The
               Committee and the Chief Executive Officer shall not be required
               to award all of the Initial Performance Units to Participants in
               respect of any Performance Period. Each Initial Performance Unit
               shall have a Start Imputed Value. The Company shall communicate
               to each Participant the number of Initial Performance Units
               awarded, and the Start Imputed Value thereof, not later than
               March 31 in the relevant Performance Period unless the
               Participant first receives Initial Performance Units for such
               Performance Period at a later time.
 
       (ii)    Adjustment to Number of Initial Performance Units. The number of
               Performance Units allocated to each Participant for a Performance
               Period shall be adjusted at the end of such Performance Period by
               multiplying that number by the Performance Factor. The resulting
               number of Performance Units shall be referred to as the Final
               Performance Units.
 
 
                                        7
<PAGE>   8
 
       (iii)   Impact of Extraordinary Items. In comparing actual performance
               against the Performance Objectives, the Committee may exclude
               from such comparisons any extraordinary gains, losses, charges,
               or credits which appear on the Company's books and records as it
               deems appropriate. An extraordinary item may include, without
               limiting the generality of the foregoing, an item in the
               Company's financial statements reflecting an accounting rule, tax
               law, or major legislative change not taken into consideration in
               the establishment of the Performance Objectives. In addition, the
               impact of a material disruption in the U. S. economy or a
               substantive change in the Principal Financial Group's business
               plans also may be deemed to be such an extraordinary item.
 
       (d) Transition Period. In order to assure that the objectives of the Plan
are met for any Performance Period under the Plan or performance period under
the Prior Plan in which an Initial Public Offering occurs (a "Transition
Period"), the Committee may establish a formula for conversion of existing
Performance Units into Performance Units based on the value of the publicly
issued and outstanding Common Stock, including with respect to Final Performance
Units that have been deferred pursuant to Section 4.9 and under the Prior Plan,
and the Committee may make such other changes, adjustments and determinations
with respect to the Performance Factor, Performance Matrix and Performance
Objectives for such Transition Period as it shall deem necessary or advisable to
achieve an appropriate assessment of, and compensation for, performance during
such Transition Period.
 
3.3    Vesting. Except as otherwise provided in Article IV and Article V, a
Participant's right to receive a payment in respect of an award of any
Performance Units shall only become vested and shall cease to be subject to
forfeiture if the Participant has been continuously employed by the Company or a
Subsidiary throughout the entire Performance Period.
 
                                   ARTICLE IV
 
                                  DISTRIBUTIONS
 
4.1    Distributions in Respect of Performance Units. Except as otherwise
provided in this Article IV or Article V, payment shall be made as soon as
practical after the end of a Performance Period to each Participant who has been
continuously employed by the Company or a Subsidiary for the entire Performance
Period. The amount payable to each Participant shall be equal to the product of
the number of Final Performance Units held by the Participant and the End
Imputed Value. Unless the Committee shall otherwise determine, payment of such
amount may be made in (i) cash, if at the time of payment an Initial Public
Offering has not occurred or (ii) cash, shares of Common Stock, or any
combination of cash and shares of Common Stock, if at the time of payment an
Initial
 
 
                                        8
<PAGE>   9
 
Public Offering has occurred. Payment in Common Stock shall be based on the
average closing stock price of the Common Stock for the last 20 days of the
prior Performance Period.
 
4.2    Threshold Performance. Notwithstanding anything else contained in this
Plan to the contrary, no payment shall be made to any Participant in respect of
any Performance Period if the Threshold Objectives with respect to such
Performance Period are not satisfied. Moreover, in no event shall the sum of all
awards for a three-year award cycle, whether paid or deferred, under the Plan
for all of the Principal Financial Group exceed 5% of pre-tax GAAP operating
earnings for the third year of a performance cycle (disregarding awards deferred
from any prior three-year award cycle for payout in the year in question). If
the awards calculated for this year (disregarding awards deferred from prior
award cycles) would exceed such 5% pre-tax GAAP operating earnings, all
calculated awards, whether paid or deferred, under the plan shall be
proportionately reduced so that the awards in the aggregate equal 5% of pre-tax
GAAP operating earnings.
 
4.3    Distributions on the Participant's Death. If a Participant dies prior to
the end of any Performance Period that commenced at least one year prior to the
Participant's death, the Participant's Beneficiary (or, if none is named, the
Participant's estate) shall receive a distribution at the same time and in the
same amount as though the Participant remained employed through the end of the
Performance Period, unless payment at an earlier date is otherwise authorized by
the Plan Administrator. If a Participant dies prior to the end of a Performance
Period that commenced less than one year prior to the Participant's death, the
Participant's Beneficiary (or, if none is named, the Participant's estate) shall
receive a distribution at the same time as other Participants receive their
distributions under the Plan, unless payment at an earlier date is otherwise
authorized by the Plan Administrator, but the amount payable shall be equal to
the amount that would have been payable had the Participant been employed for
the entire Performance Period, multiplied by a fraction, the numerator of which
is the number of days in the Performance Period elapsed prior to the
Participant's death and the denominator of which is 365.
 
4.4    Distributions on the Participant's Disability. If a Participant becomes
Disabled, prior to the end of any Performance Period that commenced at least one
year prior to the Participant's date of Disability, the Participant shall
receive a distribution at the same time and in the same amount as though the
Participant remained actively employed through the end of the Performance
Period. If a Participant becomes Disabled prior to the end of a Performance
Period that commenced less than one year prior to the Participant's date of
Disability, the Participant shall receive a distribution at the same time as
other Participants receive their distributions under the Plan, but the amount
payable shall be equal to the amount that would have been payable had the
Participant been actively employed for the entire Performance Period, multiplied
by a fraction, the numerator of which is the number of days in the Performance
Period elapsed prior to the Participant's
 
 
                                        9
<PAGE>   10
 
Disability and the denominator of which is 365. Notwithstanding the foregoing,
if prior to the first anniversary of the date of the Participant's date of
Disability, the Participant accepts employment with any entity that is in the
financial services industry and is unrelated to the Company or a Subsidiary, the
Participant shall cease to be eligible to receive any further payments under the
Plan in respect of Performance Periods that had not ended prior to the date of
the Participant's Disability.
 
4.5    Distribution on the Participant's Retirement. If a Participant's
employment is terminated by reason of Retirement prior to the end of any
Performance Period that commenced at least one year prior to the Participant's
Retirement, the Participant shall receive a distribution at the same time and in
the same amount as though the Participant remained employed through the end of
the Performance Period. If a Participant's employment is terminated by reason of
Retirement prior to the end of a Performance Period that commenced less than one
year prior to the Participant's Retirement, the Participant shall receive a
distribution at the same time as other Participants receive their distributions
under the Plan, but the amount payable shall be equal to the amount that would
have been payable had the Participant been employed for the entire Performance
Period, multiplied by a fraction, the numerator of which is the number of days
in the Performance Period elapsed prior to the Participant's Retirement and the
denominator of which is 365. Notwithstanding the foregoing, if prior to the
first anniversary of the date of the Participant's termination of employment, a
Participant accepts employment with any entity that is in the financial services
industry and is unrelated to the Company or a Subsidiary, the Participant shall
cease to be eligible to receive any further payments under the Plan in respect
of any Performance Period that had not ended prior to the date of the
Participant's termination of employment.
 
4.6    Distributions on the Participant's Discharge for Cause. If a
Participant's employment is terminated for Cause, as determined by the Company,
the Participant shall not be entitled to receive any further payments under the
Plan with respect to any Performance Period (including any Performance Period
ended prior to such termination, but for which distributions have not yet been
made under Section 4.1), except such amounts as were deferred pursuant to
Section 4.9 or pursuant to the Prior Plan.
 
4.7    Distribution on Other Termination of Employment. If a Participant's
employment is terminated for any other reason other than those otherwise
outlined above, the Participant shall not be entitled to receive any payment in
respect of any Performance Period that had not ended prior to the date of the
Participant's termination of employment.
 
4.8    Distribution on the Participant's Transfer. Unless otherwise determined
by the Committee, if a Participant is transferred to a position which is not
eligible to participate in the Plan or to employment with a subsidiary which
does not participate in the Plan, service in the new position shall count as
continued employment for purposes of
 
 
                                       10
<PAGE>   11
 
determining the Participant's vested interest in any Performance Units awarded
for Performance Periods then in progress. In such circumstances, the Participant
will continue to participate in the Plan with respect to such Performance
Periods until the earlier of (i) the end of such Performance Period or (ii) the
termination of the Participant's employment with the Company and each Subsidiary
by which the Participant was employed, in which case, such Participant's rights
under the Plan shall be determined under this Article IV, based on the reason
for such termination of employment.
 
4.9    Deferral Election.
 
       (a) Voluntary Deferral. A Participant may elect to defer payment of all
or a portion of the amount otherwise payable to the Participant pursuant to the
terms of the Plan in respect of Final Performance Units. Such deferral may
permit payment to be delayed until the earlier to occur of (i) the end of any
calendar year ending not later than the fifth anniversary of the Performance
Period for which such amount is payable and (ii) the termination of the
Participant's employment for any reason, unless the Participant's employment
terminated due to Retirement or the Participant becomes Disabled. Any such
election shall be in writing, on a form prescribed for such purpose by the Plan
Administrator, and delivered to the Plan Administrator or its designee prior to
the first day of the final year of a Performance Period for which such amount is
payable. With respect to any Performance Periods under the Plan or performance
periods under the Prior Plan for which the Committee has not determined, prior
to the start of the last year of such period, whether the award will be paid in
cash, Common Stock, or a combination thereof, a Participant may make a deferral
election contingent on the form of payment. In addition, if the Committee so
allows, a Participant may specify in such deferral election the form of payment
to be deferred whether or not the Committee has determined, prior to the start
of the last year of such period, the form of award payment for such period.
 
       (b) Earnings on Deferrals. Any amount deferred by the Participant
pursuant to the preceding paragraph shall be credited to an Account established
for the Participant. The amount held in such Account shall be deemed to continue
to be invested in the same Final Performance Units that relate to such
Performance Period, but the value thereof shall be adjusted as provided in
Section 4.9(c) below.
 
       (c) Distribution of Deferral Account. Final Performance Units deferred
that were payable in Common Stock shall be distributed in Common Stock. The
number of shares distributed shall be equal to the number of shares that would
have originally been distributed in the absence of deferral, adjusted for stock
splits, stock dividends and reinvestment of cash dividends between the end of
the Performance Period for which the Final Performance Units were granted and
the date the deferred amounts are actually distributed. Final Performance Units
deferred that were payable in cash shall be distributed in cash. The amount
distributed shall be based on the End Imputed Value for
 
 
                                       11
<PAGE>   12
 
the last Performance Period ended prior to the distribution. If the End Imputed
Value is calculated based on the quotient set forth in Article II, then End
Imputed Value shall be adjusted, if necessary, to make the denominator equal to
the number of Initial Performance Units established for the Performance Period
for which the Final Performance Units were granted. If the End Imputed Value is
based on the price of Common Stock, adjustments set forth in Section 3.2(d)
shall be made, if necessary.
 
                                    ARTICLE V
 
                                CHANGE OF CONTROL
 
       Capitalized words used in this Article V have the meaning ascribed to
them under The Principal Severance Pay Plan for Senior Executives as amended
from time to time, unless the context clearly indicates otherwise.
Notwithstanding the foregoing, the following terms shall have the meanings
ascribed to them in Article II hereof: Board, Company, Disability, Employer,
Participant, Plan.
 
5.1    Change of Control Payments. Within ten (10) days following the later
of a Change of Control Date or Merger of Equals Cessation Date ("Trigger Date"),
the Company shall pay each Participant the sum of (a) the Pro-Rata LTIP Bonus
and (b) the amount of all LTIP Bonuses earned but either deferred or not yet
paid as of the date of the Trigger Date, in satisfaction of the Company's
obligations under the LTIP for periods prior to the Trigger Date.
 
5.2    Termination during the Post-Change Period. If, during the Post-Change
Period (other than during a Post-Merger of Equals Period) a Participant's
employment is terminated other than for Cause or Disability, or a Participant
terminates employment for Good Reason, the Company shall pay the Participant the
Participant's Pro-rata LTIP Bonus reduced (but not below zero) by the amount of
any LTIP Bonus previously paid to Participant with respect to any Performance
Period that had not ended prior to the date of the Participant's termination of
employment.
 
                                   ARTICLE VI
 
                             BENEFICIARY DESIGNATION
 
6.1    Beneficiary Designation. A Participant shall have the right, at any
time, to designate one (1) or more persons or an entity as the Participant's
Beneficiary (both primary as well as secondary) to whom benefits under this Plan
shall be paid in the event of Participant's death. Each Beneficiary designation
shall be in a written form and shall be filed with the Plan Administrator during
the Participant's lifetime. If a Participant fails to designate a Beneficiary or
if a Beneficiary does not survive the Participant, payment will be made to the
Participant's estate in the event of the Participant's death.
 
 
                                       12
<PAGE>   13
 
6.2    Beneficiary. A Participant may change his/her Beneficiary at any time
by completing a new beneficiary designation form. The change will take effect
only after it is received by the Plan Administrator and determined to be in good
order. Any previous Beneficiary's interest under the Plan will end as of the
date the request is received (so long as it is thereafter determined to be in
good order).
 
                                   ARTICLE VII
 
                                 ADMINISTRATION
 
7.1    Administration of the Plan. The Plan Administrator shall be the
Corporate Management Committee of the Company or such other committee, entity or
persons approved by the Board. The Plan Administrator shall maintain such
procedures and records as will enable the Plan Administrator to determine the
Participants and their Beneficiaries who are entitled to receive benefits under
the Plan and the amounts thereof.
 
7.2    General Powers of Administration. The Committee shall have the
exclusive right, power, and authority, in its sole, full and absolute
discretion, to interpret any and all of the provisions of the Plan, to supervise
the administration and operation of the Plan, and to consider and decide
conclusively any questions (whether of fact or otherwise) arising in connection
with the administration of the Plan or any claim for benefits arising under the
Plan. Any decision or action of the Committee or the Plan Administrator shall be
conclusive and binding on all parties, including the Participants. The Committee
and the Plan Administrator shall also have the discretion and authority to adopt
and revise rules and procedures relating to the Plan, to correct any defect or
omission or reconcile any inconsistency in this Plan or any payment hereunder,
and to make any other determinations that they believe necessary or advisable in
the administration of the Plan.
 
7.3    Limitations in Plan of Conversion. Notwithstanding anything else
contained in the Plan to the contrary, no portion of any Participant's Account
may be deemed invested in Common Stock until the six month anniversary of the
effective date of the Plan of Conversion. No action shall be taken, and no award
or distribution shall be made, under the Plan, which contains any term or
condition that would violate any provision of the Plan of Conversion. To the
extent that shares of Common Stock are made available for distribution
hereunder, the number of such shares distributed hereunder shall count against
(i) the limit of 6% of the number of shares of Common Stock outstanding
immediately following the effective date of the Plan of Conversion that may be
made issuable or distributable under all Company Stock Plans (including, without
limitation, the Plan) other than the Employees Savings Plan, the Agents Savings
Plan and the Stock Purchase Plan, and (ii) the operational guideline established
pursuant to the Stock Incentive Plan limiting the maximum number of shares of
Common Stock that may be awarded or issued within 18 months of the effective
date of the Plan of Conversion to 40% of the limit set forth in subclause (i).
 
 
                                       13
<PAGE>   14
 
                                  ARTICLE VIII
 
                   AMENDMENT AND TERMINATION OF PLAN
 
8.1    Amendment of the Plan. The Committee shall have the authority to
amend the Plan at any time and from time to time. Any such amendments must be
made by written instrument, and notice of such amendment shall be provided to
Participants as soon as practicable after adoption.
 
8.2    Termination of the Plan. The Company reserves the right to terminate
the Plan in any respect and at any time and may do so at any time pursuant to a
written resolution of the Committee.
 
8.3    Limitations on Amendment or Termination of the Plan. Notwithstanding
anything else to the contrary set forth in the Plan, any amendment or
termination of the Plan may not adversely affect the rights of any Participant
or Beneficiary in respect of Performance Units previously awarded.
 
                                   ARTICLE IX
 
                                  MISCELLANEOUS
 
9.1    Unfunded / Participant's Rights Unsecured and Unfunded. This Plan is
unfunded and therefore is exempt from the provisions of Parts 2, 3 and 4 of
Title I of ERISA. Accordingly, no assets of the Company or any Subsidiary shall
be segregated or earmarked to represent the liability for accrued benefits under
the Plan. The right of a Participant (or any Beneficiary) to receive a payment
hereunder shall be an unsecured claim against the general assets of the Company
or any Subsidiary. All payments under the Plan shall be made from the general
funds of the Company or the applicable Subsidiary. The Company and Subsidiaries
are not required to set aside money or any other property to fund obligations
under the Plan, and all amounts that may be set aside by the Company or
Subsidiary prior to the distribution thereof under the terms of the Plan remain
the property of the Company. The liability of the Company or any affiliate under
this Plan is limited to the obligations expressly set forth in the Plan, and no
term or provision of this Plan may be construed to impose any further or
additional duties, obligations, or costs on the Company, any Subsidiary or the
Committee not expressly set forth in the Plan.
 
9.2    No Right to Participate. No Participant or other employee shall at
any time have a right to be selected for participation in the Plan, despite
having previously participated in the Plan or any other incentive or bonus plan
of the Company or any affiliate.
 
9.3    Plan is Not a Contract of Employment. The existence of this Plan, as
in effect at any time or from time to time, or participation under the Plan,
shall not be deemed to
 
 
                                       14
<PAGE>   15
 
constitute a contract of employment between the Company or any affiliate and any
employee or Participant, nor shall it constitute a right to remain in the employ
of the Company or a Subsidiary.
 
9.4    Parachute Cap. Unless the Participant has an agreement with the Company
or a Subsidiary specifically providing otherwise:
 
       (a) If it is reasonably determined by the computation of the independent
auditors of the Company or a Subsidiary that any amount payable or deemed
payable to such Participant under this Plan or otherwise (collectively, the
"Payments") is or will become subject to any excise tax under Section 4999 of
the Internal Revenue Code of 1986, as amended, or any similar tax payable under
any United States federal, state, local or other law ("Excise Taxes") or will
fail to be deductible by the Company or a Subsidiary by reason of Section 280G
of the Internal Revenue Code of 1986, then the amount paid to such Participant
under the Plan shall be reduced to the largest amount that may be paid without
causing any portion of such payment to be subject to Excise Taxes or to not be
deductible by the Company or a Subsidiary.
 
       (9)     If, after the receipt by a Participant of any payment hereunder,
               such Payment (or any portion thereof) shall become subject to any
               Excise Taxes or shall become nondeductible by the Company or a
               Subsidiary, the Participant shall repay to the Company or
               Subsidiary the amount that exceeds the greatest amount that could
               be paid to the Participant hereunder without causing the
               Participant to become liable for any Excise Taxes or without
               causing any of the Payments to become nondeductible by the
               Company.
 
9.5    Notice. Any notice required or permitted under the Plan shall be
sufficient if in writing and hand delivered, sent by first class, registered or
certified mail, or by such other means as the Committee, in its sole discretion,
may deem appropriate. Such notice shall be deemed as given as of the date of
delivery or, if delivery is made by mail, as of the date shown on the postmark
or on the receipt for registration or certification. Mailed notice to the
Committee shall be directed to the Company's address, c/o the Corporate
Management Committee. Mailed notice to a Participant or Beneficiary shall be
directed to the individual's last known home address in the Participant's
Employer's records.
 
9.6    No Guarantee of Benefits or Participation. Nothing contained in the
Plan shall constitute a guaranty by any Employer or any other person or entity
that the assets of such entity will be sufficient to pay any benefit hereunder.
 
9.7    Non-Alienation Provision. Subject to the provisions of applicable law, no
interest of any person or entity in any Performance Unit (or, if applicable, any
Account), or any right to receive any distribution or other benefit under the
Plan, shall be subject in any
 
 
                                       15
<PAGE>   16
 
manner to sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind; nor may such interest in any Performance
Unit (or, if applicable, any Account), or right to receive any distribution or
any benefit under the Plan, be taken, either voluntarily or involuntarily, for
the satisfaction of the debts of, or other obligations or claims against, such
person or entity, including (but not limited to) claims for alimony, support,
separate maintenance and claims in bankruptcy proceedings.
 
9.8    Applicable Law. The Plan shall be construed and administered under the
laws of the State of Delaware, except to the extent that such laws are preempted
by ERISA.
 
9.9    Taxes. The Company or a Subsidiary shall have the right to deduct, from
amounts payable pursuant to the Plan or from other amounts payable to the
Participant (or payable to the Beneficiary of the Participant, if the
Participant is deceased), any taxes required by law to be withheld from such
awards.
 
9.10   No Impact on Other Benefits. Amounts accrued and awards paid under the
Plan will not be included in the definition of pay for the purposes of
calculating benefits under the Company's or any Subsidiary's employee benefit
plan nor considered base salary for the purpose of any incentive compensation
plan.
 
9.11   Usage of Headings. Any headings are included for ease of reference only,
and are not to be construed to alter the terms of the Plan.
 
9.12   No Limitation on Corporate Action. Nothing contained in this Plan shall
be construed to prevent the Company, or a Subsidiary, from taking any corporate
action 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 employee, beneficiary, or other person shall have any claim
against the Company, or any Subsidiary, as a result of any such action.
 
9.13   Parties. Nothing express or implied in this Plan is intended or may be
construed to give any person other than Participants and Beneficiaries any
rights or remedies under this Plan.
 
9.14   Missing Participants. A recipient of any payment under this Plan who is
not a current employee of the Company or a Subsidiary, shall have the obligation
to inform the Company of his or her current address, or other location to which
payments are to be sent. Neither the Company nor any Subsidiary shall have any
liability to such recipient, or any other person, for any failure of such
recipient, or person, to receive any payment if it sends such payment to the
address provided by such recipient by first class mail, postage paid, or other
comparable delivery method. Notwithstanding anything else in this Plan to the
contrary, if a recipient of any payment cannot be located within 120 days
following the date on which such payment is due after reasonable efforts by the
Company
 
 
                                       16
<PAGE>   17
 
or a Subsidiary, such payments and all future payments owing to such recipient
shall be forfeited without notice to such recipient. If, within two years (or
such longer period as management, in its sole discretion, may determine), after
the date as of which payment was forfeited (or, if later, is first due), the
recipient, by written notice to the Company, requests that such payment and all
future payments owing to such recipient be reinstated and provides satisfactory
proof of their identity, such payments shall be promptly reinstated. To the
extent the due date of any reinstated payment occurred prior to such
reinstatement, such payment shall be made to the recipient (without any interest
from its original due date) within 90 days after such reinstatement.
 
On behalf of the Human Resources Committee of the Board of Directors of the
Company, this Amended and Restated Long-Term Performance Plan has been executed
this      day of June, 2001.
    ------
By:
   -------------------------
C. Daniel Gelatt, Jr., Chair
 
                                       17
 
</TEXT>
</DOCUMENT>