Exhibit 10.2

 

2002

 

Prudential Long-Term

 

Performance Unit Plan

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Table of Contents

 

·  I.

  

Program Concept

·  II.

  

Eligibility

·  I.

  

Granting of Performance Units

·  IV.

  

Performance Measurement

·  V.

  

Final Valuation and Payment

·  VI.

  

Termination of Employment

·  VII.

  

Plan Funding

·  VIII.

  

Plan Administration

·  IX.

  

Revocation, Amendment, and Termination

·  X.

  

Limitation on Liability

·  XI.

  

No Contract of Employment

·  XII.

  

No Right to Participate

·  XIII.

  

No Limitations on Corporate Actions

·  XIV.

  

Facilitation of Payments

·  XV.

  

Addresses; Missing Recipients

·  XVI.

  

Taxes

·  XVII.

  

Successors

·  XVIII.

  

Captions

·  XIX.

  

Third Parties

·  XX.

  

Non-Alienation Provision

 

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I.    Program Concept

 

The 2002 Prudential Financial Long-Term Performance Unit Plan (“the Plan”) has
been developed to recognize and reward the contributions that Participants (as
hereafter defined) will make towards the Prudential Financial, Inc.’s
(“Prudential”, “PFI”, or “the Company”) long-term growth and success.

 

The Long-Term Performance Unit Plan is one of the four elements of Total
Compensation applicable to designated Executives in Prudential. The other
elements are: Base Salary, Annual Incentive Award, and Benefits/Perquisites. The
Long-Term Incentive Award is designed to focus attention on the importance of
sustained company performance over a period of years as well as to assist in the
retention of eligible employees.

 

The Plan is a “bonus program,” as described in U.S. Department of Labor
Regulations Section 2510.3-2(c). As such, the Plan is not an “employee pension
benefit plan,” and is thereby exempt from the substantive requirements of Title
I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

 

II.    Eligibility

 

Employees at the Vice President Grade 6P or equivalent level and above are
eligible to participate in this Plan (“Participants”). In addition, the
Compensation Committee of the Company retains the discretion to add certain
individuals below the rank of Vice President Grade 6P as Participants under the
Plan, provided the Committee determines (i) that such individuals are included
in a select group of management or highly compensated employees of the Company
and (ii) that making such individuals Participants under the Plan is in the best
interests of the Company.

 

III.    Granting of Performance Units

 

Participants will be eligible for an annual grant of Performance Units. The
decision to grant Performance Units and the number of Performance Units granted
to Plan Participants will be at the discretion of the Compensation Committee.
However, significant emphasis will be given to the individual’s performance,
market considerations, internal guidelines and the number of Performance Units
available for grant in arriving at the number to be granted, if any.

 

The 2002 Performance Unit grants will be valued based upon Company performance
from January 1, 2002 through December 31, 2004 (the “performance period”). The
2002 Performance Unit Plan’s aggregate award pool will be set at half of 2001’s
award pool in order to transition the executive population to stock option award
eligibility later in 2002.

 

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The aggregate award pool will be translated into a number of performance units
having an initial grant value of $555 per unit.

 

Performance Units may be awarded to new hires and promotions during the year as
well as other special circumstances. The number of Performance Units granted to
new hires and those receiving promotions during 2002 shall be at the discretion
of the Compensation Committee.

 

IV.    Performance Measurement

 

The value of the Performance Units is anticipated to increase to $780 per unit
over the three-year performance period based on an annual compounded
risk-adjusted rate of return of 12%. To calculate award payments, the unit
values will then be adjusted by 0.0 to 2.0 based on a relative performance
measure.

 

The performance measure will be PFI’s three-year Total Shareholder Return (TSR)
relative to a group of peer companies over the performance period. The peer
companies will be the companies listed in the following two sub-industries of
the S&P 500 Financials Sector (only peer companies remaining in the group at
year-end 2004 will count):

 

  —   Life & Health Insurance (40301020)

 

  —   Diversified Financial Services (40201020)

 

PFI’s three-year TSR performance will be evaluated as follows:

 

  —   Performance achievement equal to the 15th percentile or below of the peer
group will result in an earnout factor of zero

 

  —   Performance achievement equal to the 25th percentile of the peer group
will result in an earnout factor of 0.5

 

  —   Performance achievement equal to the median of the peer group will result
in an earnout factor of 1.0, or “target”

 

  —   Performance achievement equal to the 75th percentile of the peer group
will result in an earnout factor of 1.5

 

  —   Performance achievement equal to the 85th percentile of the peer group
will result in a maximum earnout factor of 2.0

 

  —   Earnout factors will be in a linear relationship with performance
achievement between these points as shown in the graph below

 

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LOGO [g18647g14v92.jpg]

 

 

  —   The TSR measurement will use average closing prices for the final 20
trading days of 2002, 2003 and 2004 and, as a base period, the average closing
prices from December 13, 2001, the PFI IPO date, through December 31, 2001. For
PFI, the average closing price for the base period was $31.03

 

The actual award values will be determined at the end of the three-year
performance period as follows:

 

  —   Step 1: Calculate the “Target Award Value” by multiplying the number of
performance units granted by $780;

 

Target Award Value = Number of Performance Units x $780

 

  —   Step 2: Calculate the “Weighted Average TSR” by calculating PFI’s TSR for
three periods (December 2001 through December 2002; December 2001through
December 2003; and December 2001 through December 2004, multiply each TSR
produced by 1/3, and add all three components together;

 

“Weighted Average TSR = 1/3(TSR 2001-2002) + 1/3(TSR 2001-2003) + 1/3(TSR
2001-2004)

 

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  —   Step 3: Multiply the Target Award Values by the Weighted Average TSR
performance factor to determine the “Performance Adjusted Target Award Values”

 

         “Performance Adjusted Target Award Values” = Target Award Value x
Weighted Average TSR

 

  —   Step 4: Multiply the Performance Adjusted Target Award Values by the
number of Performance Units granted to determine the actual PUP payment per
Participant.

 

Performance Adjusted Target Award Values x Number of Performance Units = PUP
Payment.

 

To ensure that other critical performance factors are also given consideration
and reflected in the final Plan allocation, the Compensation Committee may,
under normal circumstances, adjust the total amount allocated to the Plan by up
to plus or minus 15%. Among the factors that will be taken into consideration
will be net income and other financial results over the performance period, the
level of under or over performance relative to the peer group, changes in market
share, customer and employee satisfaction, extraordinary or unusual items, legal
liabilities and strategic development factors. In the event of circumstances
that the Compensation Committee deems extraordinary, the Compensation Committee
reserves the right to make any additional adjustment to the total amount
allocated.

 

V.    Final Valuation and Payment

 

At the close of the performance period, the award values will be calculated and
presented to the Compensation Committee for review and possible adjustment. When
the final award value per unit is determined, Corporate Compensation will
compute the individual payment for each Participant based on the number of
Performance Units granted to the Participant.

 

The final 2002 awards are anticipated to be paid solely in cash.

 

Any 2002 Performance Unit not granted or any Performance Unit canceled under the
circumstances described below, and not re-granted to other Participants, shall
not be paid to any Participant and shall revert to the Company.

 

Payments made under this Plan will not be taken into account in determining
benefits or contribution amounts under any employee benefit plan of the Company
or any of its affiliates unless such plan shall specifically provide for the
inclusion of such amounts in the computation of benefits or contribution
amounts.

 

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VI.    Termination of Employment

 

If employment is terminated prior to the payment of the Performance Units,
treatment of the Performance Units will be as follows.

 

A.   Discharge, Voluntary Termination, or Competing Business—If, prior to the
payment of the Performance Units, the Participant is separated from employment
for cause, as determined by the Compensation Committee, or the Participant
engages in any business that is directly or indirectly competitive with or
detrimental to the interests of Prudential as determined by the Compensation
Committee, or if, before the end of the performance period, the Participant
resigns or otherwise terminates employment under circumstances not described in
Section VI B-E below, the Participant’s Performance Units shall be canceled and
the Participant shall receive no payment under this Plan. Canceled Performance
Units may be granted to other Participants.

 

B.   Retirement—Subject to compliance with the conditions outlined below, if
during the performance period, a Participant separates from employment by reason
of retirement upon or after qualifying to retire (whether at early or normal
retirement) under the terms and conditions of any pension plan sponsored by the
Company or an affiliate in which the Participant participates, the number of
Performance Units granted will be reduced by multiplying the grant by a
fraction, the numerator of which is the number of full months in the performance
period during which the Participant was an active employee and the denominator
of which is the number of months in the performance period (36). A partial month
worked shall be counted as a full month if the Participant is an active employee
for 15 days or more in that month. The resulting reduced number of Performance
Units shall be considered vested and payment made to the Participant following
the final valuation of the Plan as described in Section V, provided that the
Company reserves the right to cancel such Performance Units if the Participant,
prior to the end of the applicable performance period, (i) performs any
services, whether as an employee, officer, director, agent, independent
contractor, partner or otherwise, for a competitor of the Company or any of its
affiliates without the consent of the Administrator, as defined below, or (ii)
takes any other action, including, but not limited to, interfering with the
relationship between the Company or any of its affiliates and any of its
employees, clients or agents, which is intended to damage or does damage to the
business or reputation of the Company.

 

The portion of any Performance Units reduced pursuant to the first sentence of
this section (and therefore not payable to a Participant under any
circumstances) shall be canceled and shall not be payable. In addition, if a
Participant fails to comply with the conditions of payment, the pro-rated
Performance Units shall also be canceled and shall not be payable.

 

C.   Death—If a Participant dies during the performance period, the
Participant’s estate or beneficiaries will receive a lump sum payment calculated
by (a) first reducing the number of Performance Units by multiplying the such
number by a fraction, the

 

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numerator of which is the number of full or partial months in the performance
period during which the Participant was an active employee and the denominator
of which is the number of months in the performance period (36), (b) multiplying
such Performance Units by the greater of (i) the most recent estimation of the
accrued value of such units as of the participant’s death or (ii) the unit value
for achievement of plan results and (c) making a lump sum payment of such
amounts to the participant’s estate as soon as practicable thereafter.

 

D.   Disability—If, prior to the payment of the Performance Units, a
Participant’s employment is terminated as a result of the Participant’s
inability to perform the basic requirement of his or her position due to
physical or mental incapacity and after the Participant’s short-term disability
benefits have expired under the terms of The Prudential Welfare Benefits plan,
the number of Performance Units granted to the Participant will be reduced by
multiplying the grant by a fraction, the numerator of which is the number of
full months in the performance period during which the Participant was an active
employee and the denominator of which is the number of months in the performance
period (36). The period of time that the employee was on Short Term Disability
shall be counted as active employment. A partial month worked shall be counted
as a full month if the Participant is an active employee for 15 days or more in
that month. The resulting reduced number of Performance Units shall be
considered vested and payment made to the Participant following the final
valuation of the Plan as described in Section V. If the Performance Units are
reduced pursuant to this paragraph, the portion of the Performance Units
eliminated shall be canceled and shall not be payable.

 

E.   Termination of Employment of Certain Participants After a Change of
Control—If, prior to the payment of the Performance Units, a Participant’s
employment is terminated after a “Change of Control” as defined under the
Prudential Executive Change of Control Severance Program, the Compensation
Committee shall award a partial payment to such Participant that is not paid
from Plan allocations. This payment will be based on the number of full months
in the performance period that the Participant was an active employee and the
most recent estimation of the accrued value as of the Participant’s termination
of employment.

 

F.   Involuntary Termination of Employment Other Than After a Change of
Control—If a Participant’s employment is terminated prior to the payment of the
Performance Units by reason of involuntary termination of employment for reasons
other than those described in Section VI A-E above, the Performance Units
granted will be canceled and the Participant shall receive no payment from the
Plan. The Compensation Committee may, in its discretion, award a partial payment
to such Participant which is not paid from Plan allocations. This payment will
be based on the number of full months in the performance period that the
Participant was an active employee and the most recent estimation of the accrued
value as of the Participant’s termination of

 

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employment. In no event is a Participant who terminates from employment for
reasons described in this paragraph to receive a payment greater than that
computed with a “target” performance factor of 1.0, even if the actual TSR
performance factor exceeds the “target” 1.0 factor.

 

VII.    Plan Funding

 

The Plan shall at all times be unfunded and no provision shall at any time be
made with respect to segregating any assets of the Company or an affiliate for
payment of any benefits under the Plan. The right of a Participant to receive
payment under the Plan shall be an unsecured claim against the general assets of
the Company or an affiliate, and neither the Participant nor any other person
shall have any rights in or against any specific assets of the Company or an
affiliate. The Company and any affiliate may establish a reserve of assets to
provide funds for payments under the Plan.

 

VIII.    Plan Administration

 

The Compensation Committee shall be the administrator of the Plan. With respect
to its authority to award or cancel payments under the Plan to Participants
whose employment is terminated, its authority to grant Performance Units to
eligible new or promoted employees below the Senior Vice President level, and
with regard to the participation in the Plan of persons who are below the level
of Senior Vice President, the Plan shall be administered by the Prudential
Executive Vice President, Human Resources or, to the extent that the Prudential
Executive Vice President, Human Resources deems appropriate, to the Vice
President, Total Compensation. The Compensation Committee, the Prudential
Executive Vice President, Human Resources or the Vice President, Total
Compensation, as applicable, shall be referred to as the Administrator. The
Administrator shall administer the Plan in accordance with its terms and shall
have the discretion and authority necessary in the administration of the Plan,
including the authority to interpret the Plan, to make factual determinations
under the Plan and to determine Plan payments and allocations. The Administrator
shall 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 it believes necessary or advisable in the administration of
the Plan. Determinations and decisions by the Administrator shall be final and
binding on all employees, Participants and all other persons.

 

IX.    Revocation, Amendment, and Termination

 

Other than as set forth below, the Compensation Committee may, in its sole
discretion, 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 or employee. This Plan may be amended or terminated by
resolution of the Compensation Committee and by execution of a written
instrument by a duly authorized officer of the Company.

 

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Notwithstanding the foregoing, if the Plan is terminated, modified or replaced
by the Compensation Committee, the Company or any successor in a manner that
materially adversely affects Participants of this Plan as a group in connection
with a “Change of Control” as defined under the Prudential Executive Change of
Control Program, payments of the full 2002 Performance Unit Award will be made
to Participants under the Program as of such date, using the target award value
($780 per unit), with no prorating of the award for the modified length of the
performance period. If the Plan is continued by the Company or any successor
after a Change of Control or is replaced by the Company or any successor to the
Company in a manner that does not materially adversely affect Participants of
this Plan as a group, no immediate payment of the benefits described in the
preceding sentence will be made unless and until such Participant’s employment
is terminated by the Company or any affiliate. If the Plan is so continued, the
amount and terms of payment at termination of a Participant’s employment shall
be in accordance with the provisions of the Plan or, if more favorable, any
successor or replacement plan.

 

X.    Limitation On Liability

 

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, an affiliate, or the Compensation Committee not
expressly set forth in the Plan.

 

XI.    No Contract of Employment

 

The existence of this Plan, as in effect at any time or from time to time, or
any grant of Performance Units under the Plan shall not be deemed to constitute
a contract of employment between Prudential, or an affiliate, and any employee
or Participant, nor shall it constitute a right to remain in the employ of
Prudential or an affiliate. Employment with Prudential or an affiliate is
employment-at-will and either party may terminate the Participant’s employment
at any time, for any reason, with or without cause or notice.

 

XII.    No Right to Participate

 

Except as provided in Sections II and III, 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 an incentive or bonus plan of the
Company or an affiliate.

 

XIII.    No Limitations on Corporate Actions

 

Except as may otherwise be provided for in Sections VI E. or IX of the Plan
(related to payments in the event of a Change of Control), nothing contained in
this Plan shall be construed to prevent the Company, or any affiliate, from
taking any corporate action which is deemed by it to be appropriate, or in its
best interest, whether or not such action

 

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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 of its affiliates, as a result of any such action.

 

XIV.    Facilitation of Payments

 

Notwithstanding anything else in this Plan to the contrary, in the event that a
payment is due to an employee, or former employee (or a beneficiary thereof),
under this Plan and the recipient is a minor, mentally incompetent, or otherwise
incapacitated, such payment shall be made to the recipient’s legal
representative, or guardian. If there is no such legal representative, or
guardian, Prudential, in its sole discretion, may direct that payment be made to
any person Prudential, in its sole discretion, believes, by reason of a family
relationship, or otherwise, will apply. Upon such payment, for the benefit of
the recipient, the Company and each of its affiliates shall be fully discharged
of all obligations therefor.

 

XV.    Addresses; Missing Recipients

 

A recipient of any payment under this Plan who is not a current employee of the
Company, or an affiliate, 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 affiliate 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 or an
affiliate, 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 Prudential, 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.

 

XVI.    Taxes

 

The Company or an affiliate shall have the right to deduct from all payments
under the Plan any federal, state, or local taxes required by law to be withheld
with respect to such payments.

 

XVII.    Successors

 

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All obligations of the Company and any affiliate under the Plan shall be binding
upon and inure to the benefit of any successor to the Company or such affiliate,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, demutualization or otherwise.

 

XVIII.    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.

 

XIX.    Third Parties

 

Nothing expressed or implied in this Plan is intended or may be construed to
give any person other than eligible Participants any rights or remedies under
this Plan.

 

XX.    Non-Alienation Provision

 

Subject to the provisions of applicable law, no interest of any person or entity
in any long term incentive award, or right to receive any long term incentive
award or any distribution or other benefit under the Plan shall be subject in
any manner to sale, transfer, assignment, pledge, attachment, garnishment, or
other alienation or encumbrance of any kind; nor may such interest in any long
term incentive award, or right to receive any long term incentive award or 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.

 

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