EXHIBIT 10.2


 


Note:  This
exhibit reflects an amendment to Section 14 of this long-term performance plan
to provide that certain adjustments shall be mandatory.


 


IBM PWCC Acquisition Long-Term Performance Plan


 


1. Objectives.


 


The IBM PWCC Acquisition Long-Term Performance Plan
(the “Plan”) is designed to attract, motivate and retain selected employees of,
and other individuals providing services to, the Company in connection with the
Company’s acquisition of certain businesses and assets of PricewaterhouseCoopers.
These objectives are accomplished by making long-term incentive and other
awards under the Plan, thereby providing Participants with a proprietary
interest in the growth and performance of the Company.


 


2. Definitions.


 


(a) “Awards”—The grant of any form of stock option,
stock appreciation right, stock or cash award, whether granted singly, in
combination or in tandem, to a Participant pursuant to such terms, conditions,
performance requirements, limitations and restrictions as the Committee may establish
in order to fulfill the objectives of the Plan.


 


(b) “Award Agreement”—An agreement between the Company
and a Participant that sets forth the terms, conditions, performance
requirements, limitations and restrictions applicable to an Award.


 


(c) “Board”—The Board of Directors of International
Business Machines Corporation (“IBM”).


 


(d) “Capital Stock” or “stock”—Authorized and issued
or unissued Capital Stock of IBM, at such par value as may be established from
time to time.


 


(e) “Code”—The Internal Revenue Code of 1986, as
amended from time to time.


 


(f) “Committee”—The committee designated by the Board
to administer the Plan.


 


(g) “Company”—IBM and its affiliates and subsidiaries
including subsidiaries of subsidiaries and partnerships and other business
ventures in which IBM has an equity interest.


 


(h) “Fair Market Value”—The average of the high and
low prices of Capital Stock on the New York Stock Exchange for the date in
question, provided that, if no sales of Capital Stock were made on said exchange
on that date, the average of the high and low prices of Capital Stock as
reported for the most recent preceding day on which sales of Capital Stock were
made on said exchange.


 


(i) “Participant”— An individual to whom an Award has
been made under the Plan. Awards may be made to any employee of, or any other
individual providing services to, the Company in connection with the Company’s
acquisition of certain businesses and assets of PricewaterhouseCoopers.


 

















 


(j) “Performance Period” — A multi-year period of no
more than five consecutive calendar years over which one or more of the
performance criteria listed in Section 6 shall be measured pursuant to the
grant of Long-Term Performance Incentive Awards (whether such Awards take the
form of stock, stock units or equivalents or cash). Performance Periods may
overlap one another, but no two Performance Periods may consist solely of the
same calendar years.


 


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3. Capital Stock Available for Awards.


 


The number of shares that may be issued under the Plan
for Awards granted wholly or partly in stock during the term of the Plan is
41,000,000. Shares of Capital Stock may be made available from the authorized
but unissued shares of the Company or from shares held in the Company’s
treasury and not reserved for some other purpose. For purposes of determining
the number of shares of Capital Stock issued under the Plan, no shares shall be
deemed issued until they are actually delivered to a Participant, or such other
person in accordance with Section 10. Shares covered by Awards that either
wholly or in part are not earned, or that expire or are forfeited, terminated,
canceled, settled in cash, payable solely in cash or exchanged for other
awards, shall be available for future issuance under Awards. Further, shares
tendered to or withheld by the Company in connection with the exercise of stock
options, or the payment of tax withholding on any Award, shall also be
available for future issuance under Awards.


 


4. Administration.


 


The Plan shall be administered by the Committee, which
shall have full power to select Participants, to interpret the Plan, to grant
waivers of Award restrictions, to continue, accelerate or suspend
exercisability, vesting or payment of an Award and to adopt such rules,
regulations and guidelines for carrying out the Plan as it may deem necessary
or proper. These powers include, but are not limited to, the adoption of
modifications, amendments, procedures, subplans and the like as necessary to
comply with provisions of the laws and regulations of the countries in which
the Company operates in order to assure the viability of Awards granted under
the Plan and to enable Participants regardless of where employed to receive
advantages and benefits under the Plan and such laws and regulations.


 


5. Delegation of Authority.


 


The Committee may delegate to officers of the Company
its duties, power and authority under the Plan pursuant to such conditions or
limitations as the Committee may establish.


 


6. Awards.


 


The Committee shall determine the type or types of
Award(s) to be made to each Participant and shall set forth in the related
Award Agreement the terms, conditions, performance requirements, and
limitations applicable to each Award. Awards may include but are not limited to
those listed in this Section 6. Awards may be granted singly, in combination or
in tandem. Awards may also be made in combination or in tandem with, in
replacement or payment of, or as alternatives to, grants, rights or
compensation earned under any other plan of the Company, including the plan of
any acquired entity.


 


(a) Stock Option—A grant of a right to purchase a
specified number of shares of Capital Stock the exercise price of which shall
be as determined by the Committee, provided that, in the case of a stock option
granted retroactively in tandem with or as substitution for another award
granted under any plan of the Company, the exercise price may be the same as
the purchase or designated price of such other award.


 


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(b) Stock Appreciation Right—A right to receive a
payment, in cash and/or Capital Stock, equal in value to the excess of the Fair
Market Value of a specified number of shares of Capital Stock on the date the
stock appreciation right (SAR) is exercised over the grant price of the SAR,
which shall not be less than 100% of the Fair Market Value on the date of grant
of such SAR, as determined by the Committee, provided that, in the case of a
SAR granted retroactively in tandem with or as substitution for another award
granted under any plan of the Company, the grant price may be the same as the
exercise or designated price of such other award.


 


(c) Stock Award—An Award made in stock and denominated
in units of stock. All or part of any stock award may be subject to conditions
established by the Committee, and set forth in the Award Agreement, which may
include, but are not limited to, continuous service with Company, achievement
of specific business objectives, increases in specified indices, attaining
growth rates, and other comparable measurements of Company performance. An
Award made in stock or denominated in units of stock that is subject to
restrictions on transfer and/or forfeiture provisions may be referred to as an
Award of “Restricted Stock,” “Restricted Stock Units” or “Long-Term Incentive
Program” units.


 


(d) Cash Award—An Award denominated in cash with the
eventual payment amount subject to future service and such other restrictions
and conditions as may be established by the Committee, and as set forth in the
Award Agreement, including, but not limited to, continuous service with the
Company, achievement of specific business objectives, increases in specified
indices, attaining growth rates, and other comparable measurements of Company
performance.


 


7. Payment of Awards.


 


Payment of Awards may be made in the form of cash,
stock or combinations thereof and may include such restrictions as the
Committee shall determine. Further, with Committee approval, payments may be
deferred, either in the form of installments or as a future lump-sum payment,
in accordance with such procedures as may be established from time to time by
the Committee. Any deferred payment, whether elected by the Participant or
specified by the Award Agreement or the Committee, may require the payment to
be forfeited in accordance with the provisions of Section 13. Dividends or
dividend equivalent rights may be extended to and made part of any Award
denominated in stock or units of stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also establish
rules and procedures for the crediting of interest on deferred cash payments
and dividend equivalents for deferred payments denominated in stock or units of
stock. At the discretion of the Committee, a Participant may be offered an
election to substitute an Award for another Award or Awards of the same or
different type.


 


8. Stock Option Exercise.


 


The price at which shares of Capital Stock may be
purchased under a stock option shall be paid in full in cash at the time of the
exercise or, if permitted by the Committee, by means of tendering Capital Stock
or surrendering another Award or any combination thereof. The Committee shall
determine acceptable methods of tendering Capital Stock or other Awards and may
impose such conditions on the use of Capital Stock or other Awards to exercise
a stock option as it deems appropriate.


 


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9. Tax Withholding.


 


Prior to the payment or settlement of any Award, the
Participant must pay, or make arrangements acceptable to the Company for the
payment of, any and all federal, state and local tax withholding that in the
opinion of the Company is required by law. The Company shall have the right to
deduct applicable taxes from any Award payment and withhold, at the time of
delivery or vesting of shares under the Plan, an appropriate number of shares
for payment of taxes required by law or to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for withholding of
such taxes.


 


10. Transferability.


 


No Award shall be transferable or assignable, or
payable to or exercisable by, anyone other than the Participant to whom it was
granted, except (i) by law, will or the laws of descent and distribution, (ii)
as a result of the disability of a Participant or (iii) that the Committee (in
the form of an Award Agreement or otherwise) may permit transfers of Awards by
gift or otherwise to a member of a Participant’s immediate family and/or trusts
whose beneficiaries are members of the Participant’s immediate family, or to
such other persons or entities as may be approved by the Committee.


 


11. Amendment, Modification, Suspension or
Discontinuance of the Plan.


 


The Board may amend, modify, suspend or terminate the
Plan for the purpose of meeting or addressing any changes in legal requirements
or for any other purpose permitted by law.


 


12. Termination of Employment.


 


If the employment of a Participant terminates, other
than as a result of the death or disability of a Participant, all unexercised,
deferred and unpaid Awards shall be canceled immediately, unless the Award
Agreement provides otherwise. In the event of the death of a Participant or in
the event a Participant is deemed by the Company to be disabled and eligible
for benefits under the terms of the IBM Long-Term Disability Plan (or any
successor plan or similar plan of another employer), the Participant’s estate,
beneficiaries or representative, as the case may be, shall have the rights and
duties of the Participant under the applicable Award Agreement.


 


13. Cancellation and Rescission of Awards.


 


(a) Unless the Award Agreement specifies otherwise,
the Committee may cancel, rescind, suspend, withhold or otherwise limit or
restrict any unexpired, unpaid, or deferred Awards at any time if the
Participant is not in compliance with all applicable provisions of the Award
Agreement and the Plan, or if the Participant engages in any “Detrimental
Activity.” For purposes of this Section 13, “Detrimental Activity” shall
include: (i) the rendering of services for any organization or engaging
directly or indirectly in any business which is or becomes competitive with the
Company, or which organization or business, or the rendering of services to
such organization or business, is or becomes otherwise prejudicial to or in
conflict with the interests of the Company; (ii) the disclosure to anyone
outside the Company, or the use in other than the Company’s business, without
prior written authorization from the Company, of any confidential information
or material, as defined in the Company’s Agreement Regarding Confidential
Information and Intellectual Property, relating to the business of the Company,



 


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acquired by the Participant either during or after
employment with the Company; (iii) the failure or refusal to disclose promptly
and to assign to the Company, pursuant to the Company’s Agreement Regarding
Confidential Information and Intellectual Property, all right, title and
interest in any invention or idea, patentable or not, made or conceived by the
Participant during employment by the Company, relating in any manner to the
actual or anticipated business, research or development work of the Company or
the failure or refusal to do anything reasonably necessary to enable the
Company to secure a patent where appropriate in the United States and in other
countries; (iv) activity that results in termination of the Participant’s
employment for cause; (v) a violation of any rules, policies, procedures or
guidelines of the Company, including but not limited to the Company’s Business
Conduct Guidelines; (vi) any attempt directly or indirectly to induce any
employee of the Company to be employed or perform services elsewhere or any
attempt directly or indirectly to solicit the trade or business of any current
or prospective customer, supplier or partner of the Company; (vii) the
Participant being convicted of, or entering a guilty plea with respect to, a
crime, whether or not connected with the Company; or (viii) any other conduct
or act determined to be injurious, detrimental or prejudicial to any interest
of the Company.


 


(b) Upon exercise, payment or delivery pursuant to an
Award, the Participant shall certify in a manner acceptable to the Company that
he or she is in compliance with the terms and conditions of the Plan. In the
event a Participant fails to comply with the provisions of paragraphs
(a)(i)-(viii) of this Section 13 prior to, or during the Rescission Period,
then any exercise, payment or delivery may be rescinded within two years after
such exercise, payment or delivery. In the event of any such rescission, the
Participant shall pay to the Company the amount of any gain realized or payment
received as a result of the rescinded exercise, payment or delivery, in such
manner and on such terms and conditions as may be required, and the Company
shall be entitled to set-off against the amount of any such gain any amount
owed to the Participant by the Company. As used herein, Rescission Period shall
mean that period of time established by the Committee which shall not be less
than 6 months after any exercise, payment or delivery pursuant to an Award.


 


14. Adjustments.


 


In the event of any change in the outstanding Capital
Stock of the Company by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger, or similar event, the
Committee may adjust proportionately: (a) the number of shares of Capital Stock
(i) available for issuance under the Plan, (ii) for which Awards may be granted
to an individual Participant set forth in Section 6, and (iii) covered by
outstanding Awards denominated in stock or units of stock; (b) the exercise and
grant prices related to outstanding Awards; and (c) the appropriate Fair Market
Value and other price determinations for such Awards. Notwithstanding the
foregoing, in the event of any change in the outstanding Capital Stock of the
Company by reason of a stock split or a reverse stock split, the
above-referenced proportionate adjustments, if applicable, shall be mandatory.


 


In the event of any other change affecting the Capital
Stock or any distribution (other than normal cash dividends) to holders of
Capital Stock, such adjustments in the number and kind of shares and the
exercise, grant and conversion prices of the affected Awards as may be deemed
equitable by the Committee, including adjustments to avoid fractional shares,
shall be made to give proper effect to such event. In the event of a corporate
merger, consolidation, acquisition of 


 


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property or stock, separation, reorganization or
liquidation, the Committee shall be authorized to cause IBM to issue or assume
stock options, whether or not in a transaction to which section 424(a) of the
Code applies, by means of substitution of new stock options for previously
issued stock options or an assumption of previously issued stock options. In
such event, the aggregate number of shares of Capital Stock available for
issuance under Awards under Section 3, including the individual Participant
maximums set forth in Section 6 will be increased to reflect such substitution
or assumption.


 


15. Miscellaneous.


 


(a) Any notice to the Company required by any of the
provisions of the Plan shall be addressed to the chief human resources officer
of IBM in writing, and shall become effective when it is received.


 


(b) The Plan shall be unfunded and the Company shall not
be required to establish any special account or fund or to otherwise segregate
or encumber assets to ensure payment of any Award.


 


(c) Nothing contained in the Plan shall prevent the
Company from adopting other or additional compensation arrangements or plans,
subject to shareholder approval if such approval is required, and such
arrangements or plans may be either generally applicable or applicable only in
specific cases.


 


(d) No Participant shall have any claim or right to be
granted an Award under the Plan and nothing contained in the Plan shall be
deemed or be construed to give any Participant the right to be retained in the
employ of the Company or to interfere with the right of the Company to
discharge any Participant at any time without regard to the effect such
discharge may have upon the Participant under the Plan. Except to the extent
otherwise provided in any plan or in an Award Agreement, no Award under the
Plan shall be deemed compensation for purposes of computing benefits or
contributions under any other plan of the Company.


 


(e) The Plan and each Award Agreement shall be
governed by the laws of the State of New York, excluding any conflicts or
choice of law rule or principle that might otherwise refer construction or
interpretation of the Plan to the substantive law of another jurisdiction.
Unless otherwise provided in the Award Agreement, recipients of an Award under
the Plan are deemed to submit to the exclusive jurisdiction and venue of the
federal or state courts of New York, County of Westchester, to resolve any and
all issues that may arise out of or relate to the Plan or any related Award
Agreement.


 


(f) In the event that a Participant or the Company
brings an action to enforce the terms of the Plan or any Award Agreement and
the Company prevails, the Participant shall pay all costs and expenses incurred
by the Company in connection with that action, including reasonable attorneys’
fees, and all further costs and fees, including reasonable attorneys’ fees
incurred by the Company in connection with collection.


 


(g) The Committee and any officers to whom it may
delegate authority under Section 5 shall have full power and authority to
interpret the Plan and to make any determinations thereunder, including
determinations under Section 13, and the Committee’s or such officer’s
determinations shall be binding and conclusive. Determinations made by the


 


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Committee or any such officer under the Plan need not
be uniform and may be made selectively among individuals, whether or not such
individuals are similarly situated.


 


(h) If any provision of the Plan is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended or limited in
scope to conform to applicable laws or, in the discretion of the Committee, it
shall be stricken and the remainder of the Plan shall remain in full force and
effect.


 


(i) The Plan is effective as of July 30, 2002, which
is the date of Board approval of the Plan.


 


Federal Income Tax Consequences


 


The Company has been advised by counsel that, in
general, under the Internal Revenue Code, as presently in effect, a Participant
will not be deemed to recognize any income for federal income tax purposes at
the time an option or SAR is granted or a restricted stock award is made, nor
will the Company be entitled to a tax deduction at that time. However, when any
part of an option or SAR is exercised, when restrictions on restricted stock
lapse, or when an unrestricted stock award is made, the federal income tax
consequences may be summarized as follows:


 


1. In the case of an exercise of a stock option, the
optionee will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the shares on the exercise date over the
option price.


 


2. In the case of an exercise of a SAR, the
Participant will generally recognize ordinary income on the exercise date in an
amount equal to any cash and the fair market value of any unrestricted shares
received.


 


3. In the case of an exercise of an option or SAR
payable in restricted stock, or in the case of an award of restricted stock,
the immediate federal income tax effect for the recipient will depend on the
nature of the restrictions. Generally, the fair market value of the stock will
not be taxable to the recipient as ordinary income until the year in which his
or her interest in the stock is freely transferable or is no longer subject to
a substantial risk of forfeiture. However, the recipient may elect to recognize
income when the stock is received, rather than when his or her interest in the
stock is freely transferable or is no longer subject to a substantial risk of
forfeiture. If the recipient makes this election, the amount taxed to the
recipient as ordinary income is determined as of the date of receipt of the
restricted stock.


 


4. Upon the exercise of a stock option, the exercise
of a SAR, the award of stock, or the recognition of income on restricted stock,
the Company will generally be allowed an income tax deduction equal to the
ordinary income recognized by a Participant. When a cash payment is made
pursuant to the Award, the recipient will recognize the amount of the cash
payment as ordinary income, and the Company will generally be entitled to a
deduction in the same amount.


 


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