EXHIBIT 10.3

 

IBM 401(k) PLUS PLAN

 

 

(As Amended and Restated effective as of January 1, 2008 )

 

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IBM 401(k) PLUS PLAN

 

TABLE OF CONTENTS

 

 

Page

 

 

IBM 401(k) PLUS PLAN

1

PREAMBLE

1

ARTICLE 1. DEFINITIONS

4

ARTICLE 2. PARTICIPATING EMPLOYERS

30

2.01

Participation of IBM

30

2.02

Participation by Domestic Subsidiaries

30

ARTICLE 3. ELIGIBILITY AND PARTICIPATION

31

3.01

Eligibility

31

3.02

Participation by Election for Employees other than 401(k) Pension Program
Participants

32

3.02A

Participation by 401(k) Pension Program Participants after December 31, 2004

32

3.03

Reemployment of Certain Former Employees and Former Participants

35

3.04

Effect of Status Change on Participation

36

3.05

Termination of Participation

37

ARTICLE 4. CONTRIBUTIONS

38

4.01

Deferred Cash Contributions, Catch-Up Contributions, and After-Tax Contributions

38

4.02

Employer Matching Contributions

50

4.02A

Non-Matching Employer Contributions

57

4.03

Rollover Contributions, Roth Rollover Contributions, and After-Tax Rollover
Contributions

60

4.04

Changes in Contribution Rates

63

4.05

Suspension and Resumption of Contributions

65

4.06

Actual Deferral Percentage Test

66

4.07

Actual Contribution Percentage Test

69

4.08

Aggregate Contribution Limitation

72

4.09

Additional Discrimination Testing Provisions

73

4.10

Maximum Annual Additions

74

4.11

Contributions for Periods of Military Leave

79

4.12

Return of Contributions

81

ARTICLE 5.

INVESTMENT OF CONTRIBUTIONS AND ELECTIVE DISTRIBUTION OF DIVIDENDS PAYABLE ON
STOCK HELD IN IBM STOCK FUND

83

5.01

Investment Funds

83

5.01A

Mutual Fund Window Program

85

5.02

Investment of Contributions to Participants’ Accounts

91

5.03

Change of Investment Election

93

5.04

Reallocation of Accounts Among the Funds

94

 

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5.05

Limitations on Investment Elections and Investment Reallocations
Imposed by Contract or by Plan Administrator

96

5.06

Responsibility for Investments

97

5.07

Voting of IBM Shares

98

5.08

ERISA Section 404(c) Compliance

98

5.09

Elective Distribution of Dividends Payable on Stock Held in IBM Stock Fund

98

Article 5A. Disability Protection Program

101

5A.01

Eligibility

101

5A.02

Levels of Coverage under Disability Protection Program

101

5A.03

Enrollment Procedures

102

5A.04

Requirements for Commencement of Coverage under Disability Protection Program

103

5A.05

Investment in Premiums under Disability Insurance Policy and Assessment of
Administrative Fee

103

5A.06

Benefits Payable under Disability Protection Program

106

5A.07

Termination of Coverage under Disability Protection Program

107

5A.08

Claims Procedure and Incorporation of Disability Insurance Policy

107

ARTICLE 6. VALUATION OF UNITS AND CREDITS TO ACCOUNTS

109

6.01

Units of Participation

109

6.02

Valuation of Units

109

6.03

Crediting the Accounts

110

6.04

Statements of Participant Accounts

112

ARTICLE 7. VESTED STATUS OF ACCOUNTS

113

7.01

Nonforfeitability Accounts

113

ARTICLE 8. IN-SERVICE WITHDRAWALS

114

8.01

Withdrawal After Age 59½

114

8.01A

Withdrawal from After-Tax Account

114

8.02

Hardship Withdrawal

115

8.03

Procedures and Restrictions

119

8.04

Distributions at Age 70½

120

ARTICLE 9. LOANS TO PARTICIPANTS

121

9.01

Loan Amounts Available and Interest Rate

122

9.02

Terms

124

ARTICLE 10.       DISTRIBUTION OF ACCOUNTS UPON TERMINATION OF
EMPLOYMENT, DISABILITY, OR DEATH

128

10.01

Applicability

128

10.02

Forms of Distribution

128

10.03

Mandatory Distribution of Small Accounts

129

10.04

Withdrawals From Account After Termination of Employment

130

10.05

Commencement of Payments

131

10.06

Required Distributions at Age 70½

131

10.07

Effect of Reemployment

133

10.08

Distribution of Account Upon Death

134

10.09

Designation of Beneficiary

135

10.10

Proof of Death and Right of Beneficiary or Other Person

137

10.11

Status of Accounts Pending Distribution

138

10.12

Procedures and Form of Payment

138

10.13

Distribution Limitation

139

10.14

Direct Rollover of Certain Distributions

140

 

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10.15

Waiver of Notice Period

142

10.16

Distribution of Accounts Upon a Sale of Assets or a Sale of a Subsidiary prior
to December 31, 2001

143

ARTICLE 11. ADMINISTRATION OF PLAN

144

11.01

Named Fiduciaries

144

11.02

Authority of the Board of Directors

145

11.03

Responsibilities of Committee

145

11.04

Appointment of Plan Administrator

146

11.05

Responsibilities of Plan Administrator and Effect of Decisions of Plan
Administrator

146

11.06

Retention of Professional Advisors

147

11.07

[Reserved]

148

11.08

Service in More Than One Fiduciary Capacity

148

11.09

Compensation and Bonding

148

11.10

Limitation of Liability

149

11.11

Individual Accounts

149

ARTICLE 12. MANAGEMENT OF FUNDS

150

12.01

Trust Agreement

150

12.02

Exclusive Benefit Rule

150

12.03

Expenses

150

ARTICLE 13. AMENDMENT, MERGER, TRANSFERS, AND TERMINATION

152

13.01

Amendment of Plan

152

13.02

Merger, Consolidation or Transfer of Assets and Liabilities

154

13.03

Termination by Participating Employers

158

13.04

Termination of Plan

158

ARTICLE 14. GENERAL PROVISIONS

160

14.01

Nonalienation and Payment Pursuant to Qualified Domestic Relations Orders

160

14.02

Facility of Payment

161

14.03

Tax Withholding

162

14.04

Prevention of Escheat

162

14.05

Elections and Notifications

163

14.06

Information

164

14.07

Conditions of Employment Not Affected by Plan

164

14.08

Construction

165

14.09

Limitation of Time for Filing Claims in Court

165

14.10

Class Action Forum

167

APPENDIX A. SPECIAL PROVISIONS FOR MiCRUS

169

APPENDIX B. SPECIAL PROVISIONS FOR TECHNOLOGY SERVICE SOLUTIONS (“TSS”)

172

APPENDIX C. SPECIAL RULES APPLICABLE TO PUERTO RICO EMPLOYEES

173

4.03

Rollover Contributions, Roth Rollover Contributions, and After-Tax Rollover
Contributions

175

 

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APPENDIX D. TOP-HEAVY PROVISIONS

178

APPENDIX E. SPECIAL PROVISIONS APPLICABLE TO PARTICIPANTS IN
UNISON, INC. 401(k) SAVINGS AND INVESTMENT PLAN

181

APPENDIX F: SPECIAL PROVISIONS APPLICABLE TO FORMER EMPLOYEES OF
PRICEWATERHOUSE COOPERS, LLP

182

APPENDIX G. SPECIAL PROVISIONS APPLICABLE TO FORMER EMPLOYEES OF
VF CORPORATION

184

APPENDIX H. SPECIAL RULES APPLICABLE TO PARTICIPANTS IN

185

NONQUALIFIED DEFERRED COMPENSATION PLANS

185

APPENDIX I. SPECIAL PROVISIONS FOR

186

QUALIFIED HURRICANE KATRINA DISTRIBUTIONS

186

 

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PREAMBLE

 

International Business Machines Corporation (“IBM”) has established the IBM Tax
Deferred Savings Plan (the “Plan”) to assist eligible employees in saving for
retirement.  The Plan was initially effective as of July 1, 1983 and has since
been amended from time to time.  Effective as of July 1, 1999, the name of the
Plan was changed to the IBM TDSP 401(k) Plan.  The Plan was renamed the IBM
Savings Plan, effective October 1, 2002.  The Plan was renamed the IBM
401(k) Plus Plan, effective January 1, 2008.

 

The Plan is intended to be a qualified plan under Section 401(a) of the Internal
Revenue Code (the “Code”) that includes a qualified cash or deferred arrangement
pursuant to Section 401(k) of the Code.  Effective as of January 1, 2002, the
Plan is intended to comprise two constituent plans: a qualified plan under
Section 401(a) of the Code that includes a qualified cash or deferred
arrangement pursuant to Section 401(k) of the Code, and an employee stock
ownership plan, within the meaning of Section 4975(e)(7) of the Code (“the
ESOP”).  Except as otherwise explicitly provided, the provisions set forth
herein shall apply to each such constituent plan.

 

The Plan is also intended to be a qualified plan under Section 1165(a) of Puerto
Rico Internal Revenue Code (the “Puerto Rico Code”), including a qualified cash
or deferred contributions arrangement under Section 1165(e) of the Puerto Rico
Code, in furtherance of which intention,

 

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special provisions applicable to employees employed in Puerto Rico are
incorporated in the Plan in Appendix C.  The Plan shall, at all times, be
construed and administered in a manner consistent with such intentions.

 

From time to time, the Plan has included and may include, as participating
employers, and has covered or may cover eligible employees of, certain entities
in which IBM had or has an ownership interest, but which were or are not members
of any controlled group of corporations, within the meaning of Section 414(b) of
the Code, that included or includes IBM, and were or are not trades or business
under common control, within the meaning of Section 414(c) of the Code, with
IBM.  Accordingly, at such times, the Plan shall be deemed a plan maintained by
more than one employer, within the meaning of Section 413(c) of the Code.  The
Plan shall, at such times, be construed and administered in a manner consistent
with its status as a multiple employer plan.  All provisions of the Plan shall
be applicable to all participating employers and to the employees of all
participating employers, except to the extent that any such provision is
modified by an Appendix to the Plan that is specifically made applicable to a
named participating employer and its employees.

 

The Plan was amended and restated as of January 1, 2002 (“the January 1, 2002
Restatement”) and was submitted to the Internal Revenue Service for a favorable
determination letter.  The Plan was further amended, restated, and recodified as
of January 1, 2005 (“the January 1, 2005 Recodification”) in order to
incorporate amendments theretofore made to the Plan, including amendments
adopted pursuant to Section 401(b) of the Code in connection with and pursuant
to the issuance of a favorable determination letter by the Internal Revenue
Service on September 10, 2004, and to make additional amendments to the Plan. 
The January 1, 2005 Recodification was generally effective as of January 1,
2005, provided, however, that

 

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the amendments made to the January 1, 2002 Restatement were effective as
specified in the instruments by which such amendments were adopted, and provided
further, however, that the effective date of any provision or provisions of the
Plan shall, to the extent required by specific provisions of the Plan, the
Uruguay Round Agreements Act, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer
Relief Act of 1997, the Internal Revenue Service Restructuring and Reform Act of
1998, the Community Renewal Tax Relief Act of 2000, the Economic Growth and Tax
Relief Reconciliation Act of 2001, or other law, be any such earlier or other
effective date required by the Plan, such acts, or such law.

 

The Plan is hereby amended and restated as of January 1, 2008 (“the 2008
Restatement”), in order to  incorporate amendments that have been made to the
Plan after the adoption of the January 1, 2005 Recodification and to make
additional amendments to the Plan, including certain changes required or
permitted by the Pension Protection Act of 2006.  This 2008 Restatement is
generally effective as of January 1, 2008, provided, however, that amendments
made to the January 1, 2005 Recodification prior to the adoption of this 2008
Restatement were effective as specified in the instruments by which such
amendments were adopted.  This 2008 Restatement includes all provisions of the
Plan that are applicable as of its effective date.

 

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ARTICLE 1.  DEFINITIONS

 

1.01                           “Account” means, with respect to each
Participant, the total of his Before-Tax Deferral Account, Roth Contributions
Account, After-Tax Account, Employer Account, Rollover Account, Roth Rollover
Account, Catch-Up Account, Roth Catch-Up Account, After-Tax Rollover Account and
any other sub-account established by the Plan Administrator pursuant to
Section 13.02(d).  That portion of his Account, if any, that is invested in the
IBM Stock Fund pursuant to the provisions of Article 5, and any separate
sub-account established in accordance with Section 5.09(d) shall be deemed to be
his ESOP Account.

 

1.02                           “Actual Contribution Percentage” means, with
respect to a specified group of Employees, the average of the ratios, calculated
separately for each Employee in that group, of (a) the sum of (i) the Employee’s
Matching Contributions for that Plan Year, excluding any Matching Contributions
forfeited under the provisions of Sections 4.01(f) and 4.06(c)(iii) plus
(ii) the Employee’s After-Tax Contributions for that Plan Year, to (b) his
Statutory Compensation for that Plan Year.  The Actual Contribution Percentage
for each group and the ratio determined for each Employee in the group shall be
calculated to the nearest one one-hundredth of 1% (0.0001).  Any Matching
Contributions that are taken into account in determining the Actual Deferral
Percentage for any group of Employees for a Plan Year shall not be taken into
account in determining the Actual Contribution Percentage for such group of
Employees for such Plan Year.  At the election of the Plan Administrator, which
election may be made or changed each Plan Year, all or any portion of
Non-Matching Employer Contributions made pursuant to

 

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Section 4.02A with respect to such Plan Year may be taken into account in
determining the Average Contribution Percentage of any group or groups of
Employees, in accordance with and to the extent permitted by
Section 1.401(m)-2(a)(6) of the Regulations.

 

1.03                           “Actual Contribution Ratio” means the ratio taken
into account with respect to an Employee in the determination of the Actual
Contribution Percentage for a group of Employees in which he is included.

 

1.04                           “Actual Deferral Percentage” means, with respect
to a specified group of Employees, the average of the ratios, calculated
separately for each Employee in that group, of (a)  the amount of Deferred Cash
Contributions made pursuant to Section 4.01 for a Plan Year, including Deferred
Cash Contributions returned to a Highly Compensated Employee under
Section 4.01(d) and Deferred Cash Contributions returned to any Employee
pursuant to Section 4.01(e), to (b) the Employees’ Statutory Compensation for
that Plan Year.  The Actual Deferral Percentage for each group and the ratio
determined for each Employee in the group shall be calculated to the nearest one
one-hundredth of 1% (0.0001).  For purposes of determining the Actual Deferral
Percentage for a Plan Year, Deferred Cash Contributions may be taken into
account for a Plan Year only if they:

 

(i)                                     relate to compensation that either would
have been received by the Employee in the Plan Year but for his deferral
election, or are attributable to services performed by the Employee in the Plan
Year and would have been received by the Employee within 2½ months after the
close of the Plan Year but for his deferral election,

 

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(ii)           are allocated to the Employee as of a date within that Plan Year
and are not contingent on the participation or performance of service after such
date, and

 

(iii)                               are actually paid to the Trustee no later
than 12 months after the end of the Plan Year to which the contributions relate.

 

At the election of the Plan Administrator, which election may be made or changed
each Plan Year, all or any portion of Matching Contributions made pursuant to
Section 4.02 or Non-Matching Employer Contributions made pursuant to
Section 4.02A with respect to such Plan Year may be taken into account in
determining the Average Deferral Percentage of any group or groups of Employees,
in accordance with and to the extent permitted by Section 1.401(k)-2(a)(6) of
the Regulations.

 

1.05                           “Actual Deferral Ratio” means the ratio taken
into account with respect to an Employee in the determination of the Actual
Deferral Percentage.

 

1.06                           “Affiliate” means, with respect to any Employer,
any company that is a member of a controlled group of corporations, as defined
in Section 414(b) of the Code, which also includes such Employer as a member;
any trade or business under common control, as defined in Section 414(c) of the
Code, with such Employer; any organization, whether or not incorporated, which
is a member of an affiliated service group, as defined in Section 414(m) of the
Code, which includes such Employer; and any other entity required to be
aggregated with such Employer pursuant to Regulations under Section 414(o) of
the Code.  Solely for the purpose of determining whether an individual is a
Leased Employee and for purposes of Section 4.10, the definitions in
Sections 414(b) and (c) of the Code shall be modified by substituting the phrase
“more

 

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than 50 percent” for the phrase “at least 80 percent” in each place it appears
in Section 1563(a)(1) of the Code.

 

1.06A                 “After-Tax Account” means the account credited with the
After-Tax Contributions made by a Participant and earnings on those
contributions.

 

1.06B                   “After-Tax Contributions” means amounts contributed to
the Plan in accordance with Section 4.01(h).

 

1.06C                   “After-Tax Rollover Account” means the account credited
with After-Tax Rollover Contributions and earnings on those contributions.

 

1.06D                  “After-Tax Rollover Contributions” means amounts
contributed pursuant to Section 4.03(g).

 

1.07                           “Annual Dollar Limit” means, for Plan Years
commencing after December 31, 1993 and prior to January 1, 2002, $150,000, as
adjusted from time to time in accordance with Section 401(a)(17)(B) of the Code,
as in effect for Plan Years commencing prior to January 1, 2002; and, effective
January 1, 2002, $200,000, as adjusted from time to time in accordance with
Section 401(a)(17)(B) of the Code as in effect for Plan Years commencing after
December 31, 2001.

 

1.08                           “Attributed Earnings” means the amount of
investment income attributed to Excess Contributions or Excess Deferrals or to
any Deferred Cash Contributions in excess of the limit described in
Section 4.10(a), that are required to be returned to the Participant

 

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in accordance with Sections 4.01(f), 4.06(c), or 4.10(d)(i) or (ii), as
applicable, and the amount of investment income attributed to Excess Aggregate
Contributions or any Matching Contributions or any Non-Matching Employer
Contributions in excess of the limit described in Section 4.10(a), that are
required to be forfeited in accordance with Section 4.07(c) or 4.10(d)(ii). 
Attributed Earnings on Excess Deferrals, Excess Contributions, or Deferred Cash
Contributions required to be returned shall be determined (i) by multiplying the
income earned on the Deferred Account for the Plan Year by a fraction, the
numerator of which is the Excess Deferrals, Excess Contributions, or Deferred
Cash Contributions that are required to be returned for the Plan Year and the
denominator of which is the Deferred Account balance at the end of the Plan
Year, disregarding any income or loss occurring during the Plan Year and (ii),
effective January 1, 2006, by adding to the amount determined under clause
(i) the product of (A) the income earned on the Deferred Account from the end of
the Plan Year to the date such Excess Deferrals, Excess Contributions or
Deferred Cash Contributions that are required to be returned for the Plan Year
are returned to the Participant (the “gap period”), and the denominator of which
is the Deferred Account balance on the date distribution, disregarding any
income or loss occurring during the gap period; provided, however, that
(X) effective January 1, 2008, the sum of the Participant’s Before-Tax Deferral
Account and his Roth Contributions Account shall be taken into account in clause
(i), in lieu of his Deferred Account; (Y) effective January 1, 2008, clause
(ii) shall be disregarded in determining the Attributed Earnings on Excess
Contributions; and (Z) clause (ii) shall be disregarded in determining the
Attributed Earnings on Excess Deferrals for any Plan Year beginning before
January 1, 2008.  Attributed Earnings on Excess Aggregate Contributions,
Matching Contributions, or Non-Matching Employer Contributions that are required
to be forfeited shall be

 

8

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determined in a similar manner by substituting the Employer Account for the
Deferred Account (or, effective January 1, 2008, the sum of the Before-Tax
Deferral Account and the Roth Contributions Account), and the Excess Aggregate
Contributions or Matching Contributions or Non-Matching Employer Contributions,
required to be forfeited for the Excess Deferrals, Excess Contributions, or
Deferred Cash Contributions required to be returned in the preceding sentence;
provided, however, that effective January 1, 2008, clause (ii) of the preceding
sentence shall be disregarded in determining Attributed Earnings on Excess
Aggregate Contributions.

 

1.08A                 “Automatic Contributions” means contributions made to a
Participant’s Employer Account in accordance with Section 4.02A(a).

 

1.08B “Before-Tax Contributions” means, effective January 1, 2008, Deferred Cash
Contributions made on behalf of a Participant, excluding any amount designated
as Roth Contributions, in accordance with Section 4.01(a)(x).

 

1.08C                   “Before-Tax Deferral Account” means, effective
January 1, 2008, the account credited with the Deferred Cash Contributions made
on a Participant’s behalf prior to January 1, 2008 and the Before-Tax
Contributions made on a Participant’s behalf after December 31, 2007, and
earnings on those contributions.  Prior to January 1, 2008, a Participant’s
Before-Tax Deferral Account was known as his Deferred Account.

 

1.09                           “Beneficiary” means any person, persons or entity
designated, or deemed to have been designated, by a Participant to receive any
benefits payable in the event of the Participant’s death in accordance with the
provisions of Section 10.09.

 

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1.10         “Board of Directors” or “Board” means the Board of Directors of
IBM.

 

1.11                           “Catch-Up Account” means the account credited
with the Catch-Up Contributions made on a Participant’s behalf and earnings on
those contributions.

 

1.12                           “Catch-Up Contributions” means amounts
contributed to the Plan that satisfy the requirements of Section 4.01(g) and,
effective January 1, 2008, excluding any amount designated as Roth Catch-Up
Contributions, in accordance with Section 4.01(g)(viii).

 

1.12A                 “Certificate of Disability Insurance” means the
certificate issued in accordance with the terms of the Disability Insurance
Policy by the Disability Insurer and furnished to a Participant who has elected,
in accordance with Section 5A.03(a), to invest a portion of his Account in the
payment of premiums under the Disability Insurance Policy.

 

1.13                           “Code” means the Internal Revenue Code of 1986,
as amended from time to time.  References to specific sections of the Code shall
be deemed to refer to such sections as they may be amended or redesignated.

 

1.14                             “Committee” means the Retirement Plans
Committee of IBM, which shall consist of the individuals with the following
positions (or successor positions) at IBM: Senior Vice President and Chief
Financial Officer; Senior Vice President, Human Resources; Vice President &
Treasurer; and Senior Vice President & General Counsel.

 

1.15                           “Compensation” means the cash remuneration paid
to an Employee for services rendered to the Employer, including salary,
commission payments, and recurring

 

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payments under any form of variable compensation plan and additional
compensation paid for nonscheduled workdays, overtime, and shift premium,
determined after any reduction pursuant to deferrals made under the IBM Excess
401(k) Plus Plan, or any predecessor or successor plan, and then determined
before any reduction pursuant to Section 4.01 or pursuant to a cafeteria plan
under Section 125 of the Code, or pursuant to a qualified transportation fringe
under Section 132(f) of the Code, but excluding special awards, other
nonrecurring payments, expenses or relocation reimbursements, sign-on bonuses,
separation pay, termination incentive payments, payments for accrued or deferred
vacations, and payments made to Executives during the first quarter of 2008
under the Employer’s Annual Incentive Plan or other sales and services
incentives programs.  Amounts other than Variable Pay paid after the first
regularly scheduled payroll date coincident with or next following the date of
an Employee’s termination of employment shall not be taken into account as
Compensation.  Any amount of Variable Pay shall not be taken into account if the
payroll processing for an Employee’s termination of employment preceded the
payroll processing date for such Variable Pay. Compensation shall not include
any amount earned during, or payable on the basis of, employment with any entity
at a time when such entity was not an Employer, regardless of when or by what
entity such amount may be paid.  Compensation shall not include any amount
payable as a retention bonus or retention incentive to any person who becomes an
Employee in connection with the acquisition of any entity, or of the assets of
any entity, by an Employer.  The Plan Administrator, in its discretion, shall
determine whether any form of remuneration not described in this Section shall
be treated as Compensation for purposes of the Plan.  Compensation taken into
account for a Plan Year shall not exceed the Annual Dollar Limit.

 

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1.16                           “Deferred Account” means the account credited
with the Deferred Cash Contributions made on a Participant’s behalf prior to
January 1, 2008 and Before-Tax Contributions made on a Participant’s behalf
after December 31, 2007, and earnings on those contributions.  Effective
January 1, 2008, a Participant’s Deferred Account shall be known as his
Before-Tax Deferral Account.

 

1.17                           “Deferred Cash Contributions” means amounts
contributed pursuant to Section 4.01(a).  For Plan Years beginning after
December 31, 2007, the term Deferred Cash Contributions shall be deemed to
include both Before-Tax Contributions and Roth Contributions.

 

1.17A                 “Designated Mutual Fund” means a mutual fund that is
established and maintained in accordance with the requirements of Investment
Company Act of 1940, that offers shares for purchase by the general public, and
that is designated by the Committee, in accordance with Section 5.01A(a), to be
available to Participants for investment under the terms of the Mutual Fund
Window Program, as in effect from time to time.  A Designated Mutual Fund shall
not be deemed an Investment Fund for purposes of Section 5.01.

 

1.17B                   “Disability Insurance Policy” means the insurance policy
underwritten by the Disability Insurer under which premiums are paid through
investments made in accordance with the Disability Protection Program and
benefits are payable in accordance with the Disability Protection Program.

 

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1.17C                   “Disability Insurer” means the insurance company
selected by the Plan Administrator that underwrites the Disability Insurance
Policy.

 

1.17D                  “Disability Protection Program” means the program
provided in Article 5A, effective as of January 1, 2005, under which a
Participant who satisfies specified eligibility requirements is permitted to
elect to invest a portion of his Account in the payment of premiums under the
Disability Insurance Policy and pursuant to which benefit payments made from the
Disability Insurance Policy and in accordance with the Certificate of Disability
Insurance are allocated to the Accounts of Participants who suffer a Total and
Permanent Disability while enrolled thereunder.

 

1.17E                    “Domestic Partner” means a person who is named as the
Participant’s domestic partner on a form that is acceptable to the Plan
Administrator, and who is unable to legally marry the Participant under
applicable state law.  For purposes of Section 10.09, Domestic Partner means a
person who is the legal spouse of the Participant under applicable state law.

 

1.18                           “Domestic Subsidiary” means a Subsidiary
organized and existing under the laws of the United States, or any state,
territory, or possession thereof.

 

1.19                           “Effective Date” means July 1, 1983.  The
Effective Date of this amendment and restatement of the Plan shall be January 1,
2008, except as otherwise specified herein, and subject to the Preamble hereto.

 

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1.20                           “Employee” means an employee of any Employer who
receives stated compensation other than a pension, severance pay, retainer, or
fee under contract.  The term “Employee” excludes any Leased Employee and any
person who is included in a unit of employees covered by a collective bargaining
agreement that does not provide for his membership in the Plan.  Any person
deemed to be an independent contractor by any Employer and paid by the Employer
in accordance with its practices for the payment of independent contractors,
including the provision of tax reporting on Internal Revenue Service Form 1099,
shall be excluded from the definition of Employee for all purposes under the
Plan, notwithstanding any subsequent reclassification of such person for any
purpose under the Code, whether agreed to by the Employer or adjudicated under
applicable law.

 

1.21                           “Employer” means IBM or any successor by merger,
purchase or otherwise, with respect to its employees, or any other entity
participating in the Plan as provided in Article 2, with respect to its
employees.  All entities that are members of a controlled group of corporations,
within the meaning of Section 414(b) of the Code, or a group of trades or
businesses under common control, within the meaning of Section 414(c) of the
Code, and that are participating in the Plan in accordance with Article 2, shall
be deemed to be a single Employer for all purposes under the Plan.

 

1.22                           “Employer Account” means the account credited
with Matching Contributions, Automatic Contributions, Transition Credit
Contributions, and Special Savings Award Contributions, and earnings on those
contributions. The Plan Administrator shall establish rules for the maintenance
of sub-accounts within a Participant’s Employer Account.

 

14

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1.22A                 “Employer Contributions” mean any contributions made by
the Employer that are either Matching Contributions, Automatic Contributions,
Transition Credit Contributions or Special Savings Awards.

 

1.23                           “Enrollment Date” means the date on which a
Participant makes the election described in Section 4.01.

 

1.24                           “Excess Aggregate Contributions” means the amount
of Matching Contributions and, effective as of January 1, 2004, After-Tax
Contributions on behalf of Highly Compensated Employees in excess of the
limitation described in Section 4.07(a) for a Plan Year, as determined in
accordance with Section 4.07(c)(i).

 

1.25                           “Excess Contributions” means the amount of
Deferred Cash Contributions on behalf of Highly Compensated Employees in excess
of the limitation described in Section 4.06(a) for a Plan Year, as determined in
accordance with Section 4.06(c)(i).

 

1.26                           “Excess Deferrals” means the amount of Deferred
Cash Contributions on behalf of a Participant that, taken together with similar
contributions on his behalf to any other plan described in Section 401(a)(30) of
the Code, exceed the dollar limitation described in Section 4.01(c) for a
calendar year.

 

1.27                           “ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time.  References to sections of
ERISA shall be deemed to refer to such sections as they may be amended or
redesignated.

 

15

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1.27A                 “Executive” means an Employee who is classified as an
executive, based on the compensation band to which he is assigned, in accordance
with the personnel policies and practices of his Employer.

 

1.28                           “Five Percent Owner” means with respect to a
corporation, any person who owns or is considered as owning within the meaning
of Section 318 of the Code more than 5% of the outstanding stock of the
corporation, or stock possessing more than 5% of the total voting power of the
corporation.

 

1.29                           “Foreign Branch” means a branch, division, or
other unit of IBM or a Domestic Subsidiary that operates principally outside the
United States, its territories, or possessions.

 

1.29A                 “401(k) Pension Program Participant” means a Participant
who becomes a participant in the Plan in accordance with Section 3.02A.

 

1.30                             “Fund” or “Investment Fund” means the IBM Stock
Fund and the other separate funds authorized by the Committee in accordance with
Section 5.01(c) in which Plan assets are invested.  Amounts invested under the
Mutual Fund Window Program, effective as of January 1, 2005, shall not be deemed
to be invested in any of the Investment Funds.

 

1.31                           “Highly Compensated Employee” means for a Plan
Year commencing on or after January 1, 1997, any employee of the Employer or an
Affiliate, whether or not eligible to participate in the Plan, who

 

(i)            was a Five Percent Owner for such Plan Year or the prior Plan
Year, or

 

16

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(ii)                                  for the preceding Plan Year received
Statutory Compensation in excess of the dollar amount specified in
Section 414(q)(1)(B)(i) of the Code, which amount, as in effect for 1997 was
$80,000 and has been adjusted to $105,000 for 2008, and, effective with respect
to Plan Years commencing on or after January 1, 2002, was among the highest 20%
of employees for the preceding Plan Year when ranked by Statutory Compensation
paid for that year.  No employee shall be excluded under Section 414(q)(5) of
the Code for purposes of determining the number of such employees.  The dollar
amount in this paragraph (ii) shall be further adjusted from time to time in
accordance with Section 414(q)(1) of the Code.

 

Notwithstanding the foregoing, employees who are nonresident aliens and who
receive no earned income from the Employer or an Affiliate which constitutes
income from sources within the United States shall be disregarded for all
purposes of this Section. The provisions of this Section shall be further
subject to such additional requirements as shall be described in
Section 414(q) of the Code and Regulations thereunder, which shall override any
provisions of this Section inconsistent therewith.

 

1.32                           “Hour of Service” means each hour for which an
employee is paid or entitled to payment for the performance of duties for the
Employer or an Affiliate.

 

1.33                           “IBM” means International Business Machines
Corporation, a corporation organized and existing under the laws of the State of
New York.

 

17

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1.34                           “IBM Staff Investment Manager” means one or more
IBM employees who have been appointed by the Committee to direct, either jointly
or severally, the management of the acquisition and disposition of all or any
portion of the assets of the Trust Fund.

 

1.35                             “IBM Stock Fund” means the Investment Fund of
the Plan that is invested in the common stock of IBM, in accordance with
Section 5.01(b) and which shall be included within the ESOP.

 

1.36                           “Independent Investment Manager” means any person
or entity that satisfies the requirements of Section 3(38)(B) of ERISA, which
has been appointed by the Committee to manager, acquire, and dispose of all or
any portion of the assets of the Trust Fund and which has acknowledged in
writing that it is a fiduciary with respect to the Plan.

 

1.37                           “Investment Manager” means any Independent
Investment Manager or any IBM Staff Investment Manager.

 

1.38                           “Leased Employee” means any person (other than a
common law employee of the Employer) who, pursuant to an agreement between the
Employer and any other person (“leasing organization”), has performed services
for the Employer or any related persons determined in accordance with
Section 414(n) of the Code on a substantially full-time basis for a period of at
least one year and such services are performed under the primary direction of or
control by the Employer.  In the case of any person who is a Leased Employee
before or after a period of service as an Employee, the entire period during
which he has performed services as a Leased Employee shall be counted as

 

18

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service as an Employee for all purposes of the Plan, except that he shall not,
by reason of that status, become a participant in the Plan.

 

1.38A                 “Long-Term Supplemental Employee” means, effective as of
January 1, 2004, a Supplemental Employee so designated by his Employer as a
Long-Term Supplemental Employee, in accordance with its established personnel
practices.  A Supplemental Employee who has not been explicitly designated as a
Long-Term Supplemental Employee by his Employer shall not be a Long-Term
Supplemental Employee.

 

1.39                           “Matching Contributions” means amounts
contributed pursuant to Section 4.02.  For purposes of
Section 1.401(k)-1(b)(5) of the Regulations, Matching Contributions made under
the Plan shall be deemed “Qualified Matching Contributions,” provided, however,
that, for the period commencing on January 1, 2002 and ending on December 31,
2004, Matching Contributions that are determined on the basis of Catch-Up
Contributions made on a Participant’s behalf shall not be deemed “Qualified
Matching Contributions”.

 

1.39A                 “Mutual Fund Window Program” means the program provided in
Section 5.01A, as in effect from time to time, pursuant to which a Participant
is permitted to elect to invest a portion of his Account in one or more
Designated Mutual Funds.

 

1.39B                   “Non-Executive” means an Employee who is not an
Executive.

 

1.39C                   “Non-Exempt Employee” means an Employee whose terms and
conditions of employment are not exempt from the requirements of the Fair Labor
Standards Act.

 

19

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1.40                           “Non-Highly Compensated Employee” means for any
Plan Year an employee of the Employer or an Affiliate who is not a Highly
Compensated Employee for that Plan Year.

 

1.40A                 “Non-Matching Employer Contributions” means the Automatic
Contributions, Transition Credit Contributions, and Special Savings Award
Contributions made to a Participant’s Employer Account in accordance with
Section 4.02A.

 

1.41                           “Notice” means a specification by the Employee of
his designation, election, or intention under any provision of the Plan, through
written, electronic, or telephonic means, as provided for the particular purpose
by the Plan Administrator, pursuant to Section 14.05.

 

1.41A                 “One-Year Period of Service” means with respect to any
employee, effective as of January 1, 2005, a 12-month period of employment with
the Employer or any Affiliate, whether or not as an Employee, beginning on the
date he first completes an Hour of Service. For the purpose of determining
whether an employee has completed a One-Year Period of Service, the following
rules shall apply:

 

(a)                                  If an employee’s employment is terminated
and he is later reemployed within one year of the date that is the earlier of
(i) his date of termination of service or (ii) the first day of an absence from
service immediately preceding his date of termination, the period between such
date and his date of reemployment shall be included as a period of employment in
determining whether he has completed a One-Year Period of Service, provided,
however, that, effective as of January 1, 2007, this subsection shall apply only
if the employee was a Regular Employee as of the date of his termination of
service.

 

20

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(b)                                 If an employee’s employment is terminated
and he is later reemployed more than one year after the date that is the earlier
of (i) his date of termination of service or (ii) the first day of an absence
from service immediately preceding his date of termination, his period of
employment prior to such date shall be aggregated with his period of employment
after his reemployment in determining whether he has completed a One-Year Period
of Service, provided, however, that, effective as of January 1, 2007, this
subsection shall apply only if the employee was a Regular Employee as of the
date of his termination of service.

 

(c)                                  If an employee’s employment with a Foreign
Branch is terminated and he is later reemployed by an Employer within one year
after the date that is the earlier of (i) his date of termination of service or
(ii) the first day of an absence from service immediately preceding his date of
termination, the period between such date and his date of reemployment shall be
included as a period of employment in determining whether he has completed a
One-Year Period of Service.

 

(d)                                 If an employee’s employment with a Foreign
Branch is terminated and is later reemployed by an Employer one or more years
after the date that is the earlier of (i) his date of termination of service, or
(ii) the first date of an absence from service immediately preceding his date of
termination, but less than five years after such termination, the Participant’s
period of employment prior to such termination date shall be aggregated with his
period of employment after his reemployment in determining whether he has
completed a One-Year Period of Service.

 

(e)                                  If an employee’s employment with a Foreign
Branch is terminated and is later reemployed by an Employer more than five years
after the date that is the earlier

 

21

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of (i) his date of termination of service, or (ii) the first date of an absence
from service immediately preceding his date of termination, and the
Participant’s prior service was less than the break in service, the
Participant’s prior service will not be counted in determining whether he has
completed a One-Year Period of Service.

 

(f)                                    If an employee’s employment with a
Foreign Branch is terminated and is later reemployed by an Employer more than
five years after the date that is the earlier of (i) his date of termination of
service, or (ii) the first date of an absence from service immediately preceding
his date of termination, and the Participant’s prior service was greater than or
equal to the break in service, the Participant’s prior service will be counted
in determining whether he has completed a One-Year Period of Service.

 

(g)                                 For the purpose of determining whether an
employee has completed a One-Year Period of Service, his Recognized Predecessor
Employment shall be taken into account as if it were employment with an
Employer.

 

1.41B                   “PCF Participant” means an Employee who was a
participant in the IBM Personal Pension Plan on December 31, 2007 and was
employed as a Regular Employee on such date, whose benefit on December 31, 2007
was determined, in whole or in part, on the basis of the Pension Credit Formula
of the IBM Personal Pension Plan who remains continuously employed as a Regular
Employee after December 31, 2007.   For purposes of the foregoing sentence, a
Participant who was on a leave of absence due to long term disability on
December 31, 2007, and who returned to employment on or after January 1, 2008
will be deemed to have been in employment as a Regular Employee on

 

22

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December 31, 2007 until the date of his return to employment.  A PCF Participant
who terminates employment and is later rehired as an Employee shall not be a PCF
Participant after his reemployment, and shall be subject to the provisions
applicable to 401(k) Pension Program Participants.

 

1.41C                   “PPA Participant” means a Participant who was a
participant in the IBM Personal Pension Plan on December 31, 2007 and was
employed as a Regular Employee on such date, whose benefit on December 31, 2007,
was determined, on the basis of the Personal Pension Account provisions of the
IBM Personal Pension Plan, and who remains continuously employed as a Regular
Employee after December 31, 2007. For purposes of the foregoing sentence, a
Participant who was on a leave of absence due to long term disability on
December 31, 2007, and who returned to employment on or after January 1, 2008
will be deemed to have been employed as a Regular Employee on December 31, 2007
until the date of his return to employment.  A PPA Participant who terminates
employment and is later rehired as an Employee shall not be a PPA Participant
after his reemployment, and shall be subject to the provisions applicable to
401(k) Pension Program Participants.

 

1.42                           “Participant” means any person who has been
admitted to participation in the Plan in accordance with Section 3.02,
Section 3.02A, or Section 3.02B and has not ceased to be a Participant in
accordance with Section 3.05.  Except to the extent otherwise specified,
references to a Participant shall be deemed also to refer to a 401(k) Pension
Program Participant and provisions of the Plan that apply to Participants shall
apply equally to 401(k) Pension Program Participants.

 

23

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1.43                           “Plan” means the IBM 401(k) Plus Plan, as set
forth in this document or as amended from time to time.  Effective as of
January 1, 2002, the IBM Stock Fund maintained pursuant to Section 5.01,
together with any separate sub-account established pursuant to
Section 5.09(d) shall be designated as an ESOP, within the meaning of
Section 4975(e)(7) of the Code and shall be a separate constituent plan.

 

1.44                           “Plan Year” means the 12-month period beginning
on any January 1, on or after the Effective Date.

 

1.44A                 “Predecessor Employment” means employment with any entity
prior to the date that (a) such entity becomes a member of a controlled group of
corporations that also includes any Employer as a member, (b) substantially all
of the assets of such entity are acquired by a member of a controlled group of
corporations that includes any Employer as a member, or (c) such entity enters
into a contractual relationship with an Employer pursuant to which employees of
such entity become Employees.  For purposes of this Section, the term
“controlled group of corporations” shall have the meaning specified in
Section 414(b) of the Code.

 

1.45                           “Profits” means both (a) the accumulated earnings
and profits of an Employer and (b) an Employer’s current net taxable income,
before deduction of Federal, state, or local income taxes and before any
contributions made by the Employer to this Plan or any other employee benefit
plan, as determined by its independent public accountants in accordance with
generally accepted accounting principles.

 

24

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1.45A                 “Program Eligibility Date” means, with respect to a
401(k) Pension Program Participant, the earliest day during his employment or
reemployment as a Regular Employee that is coincident with or next following the
date as of which he completes or is deemed to have completed a One-Year Period
of Service.

 

1.45B                   “Recognized Predecessor Employment” means Predecessor
Employment that is taken into account under the Plan pursuant to
rules established by the Plan Administrator, which rules shall apply uniformly
to all individuals who become Employees as the result of the same transaction.

 

1.46                           “Regular Employee” means an Employee as so
defined by the rules and regulations of his Employer, who is (i) compensated by
salary or by commission, or partly by salary and partly by commission,
(ii) subject to the Employer’s performance evaluation program, and
(iii) employed for an indefinite period.

 

1.47                           “Regulations” means the Income Tax Regulations
Code codified at Title 26 of the Code of Federal Regulations, as amended from
time to time.  References to specific sections of the Regulations shall be
deemed to refer to such sections as they may be amended or redesignated.

 

1.48                           “Rollover Account” means the account credited
with the Rollover Contributions made by a Participant and earnings on those
contributions.

 

1.49         “Rollover Contributions” means amounts contributed pursuant to
Section 4.03.

 

25

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1.49A

 

“Roth Catch-Up Account” means, effective January 1, 2008 the account credited
with the Roth Catch-Up Contributions made on a Participant’s behalf and earnings
on those contributions.

 

 

 

1.49B

 

“Roth Catch-Up Contributions” means, effective January 1, 2008, amounts
contributed to the Plan that satisfy the requirements of Section 4.01(g) and,
with respect to which a designation is made in accordance with
Section 4.01(g)(viii), and pursuant to Section 402A(c)(1)(B) of the Code, that
such amount should not be excluded from his gross income.

 

 

 

1.49C

 

“Roth Contributions” means, effective January 1, 2008, any amount of Deferred
Cash Contributions made on behalf of a Participant with respect to which a
designation is made in accordance with Section 4.01(a), and pursuant to
Section 402A(c)(1)(B) of the Code, that such amount should not be excluded from
his gross income.

 

 

 

1.49D

 

“Roth Contributions Account” means the account credited with Roth Contributions
and earnings on those contributions.

 

 

 

1.49E

 

“Roth Rollover Account” means the account credited with the Roth Rollover
Contributions made by a Participant and earnings on those contributions.

 

 

 

1.49F

 

“Roth Rollover Contributions” means, effective January 1, 2008, amounts
contributed pursuant to Section 4.03(f).

 

26

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1.50

 

“Severance Date” means the earlier of (a) the date an employee quits, retires,
is discharged or dies, or (b) the first anniversary of the date on which an
employee is first absent from service, with or without pay, but without
interruption, for any reason such as vacation, sickness, disability, layoff or
leave of absence.

 

 

 

1.50X

 

“Special Savings Award Contributions” means contributions made to the Employer
Accounts of PCF Participants who are Non-Exempt Employees, in accordance with
Section 4.02A(c).

 

 

 

1.50A

 

“Stable Value Fund” means an Investment Fund that is invested in contractual
instruments, including, without limitation, a fund of guaranteed investment
contracts or a fund that includes benefit-responsive contracts that are
determined by the Investment Manager of such fund to be “synthetic guaranteed
investment contracts.

 

 

 

1.51

 

“Statutory Compensation” means the wages, salaries, and other amounts paid in
respect of an employee for services actually rendered to an Employer or an
Affiliate, including, by way of example, overtime, bonuses and commissions, but
excluding deferred compensation, stock options and other distributions which
receive special tax benefits under the Code. For purposes of determining Highly
Compensated Employees and key employees under Appendix D, Statutory Compensation
shall include amounts contributed by the Employer pursuant to a salary reduction
agreement which are not includible in the gross income of the employee under
Sections 125, 132(f)(4) (with respect to Plan Years commencing after
December 31, 2000), 402(e)(3) (with respect to Plan Years commencing prior to
January 1, 1998), 402(g)(3) (with respect to Plan Years beginning after
December 31, 1997), 402(h) or 403(b), or 457 of the Code. For all other

 

27

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purposes, Statutory Compensation shall also include the amounts referred to in
the preceding sentence, unless the Plan Administrator directs otherwise for a
particular Plan Year. For Plan Years beginning after 1988, Statutory
Compensation shall not exceed the Annual Dollar Limit, provided that such Annual
Dollar Limit shall not be applied in the determination of Highly Compensated
Employees.

 

 

 

 

 

In determining the compensation of a Participant for purposes of the application
of the Annual Dollar Limit, for Plan Years commencing prior to January 1, 1997,
the rules of Section 414(q)(6) (as in effect on the day before the date of
enactment of Public Law 104-188) shall apply, except that in applying such
rules, the term “family” shall include only the Spouse of the Participant and
any lineal descendants of the Participant who have not attained age 19 before
the close of the Plan Year. If, as a result of the application of such rules,
the Annual Dollar Limit is exceeded, then the limitation shall be prorated among
the affected individuals in proportion to each such individual’s compensation as
determined prior to the application of this limitation.

 

 

 

1.52

 

“Subsidiary” means a corporation or other form of business organization, the
majority interest of which is owned directly or indirectly by IBM.

 

 

 

1.53

 

“Supplemental Employee” means an Employee so designated by his Employer in
accordance with its established personnel practices who is not classified as a
Regular Employee.

 

 

 

1.53A

 

“Total and Permanent Disability” means a condition that provides a predicate for
the payment of benefits from the Disability Insurance Policy, and shall be
determined in

 

28

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accordance with the terms of Disability Insurance Policy and the Certificate of
Disability Insurance.

 

 

 

1.54B

 

“Transition Credit Contributions” means contributions made to the Employer
Accounts of PPA Participants, in accordance with Section 4.02A(b).

 

 

 

1.54

 

“Trust” or “Trust Fund” means the fund established as part of the Plan into
which contributions are to be made and from which benefits are to be paid in
accordance with the terms of the Plan.

 

 

 

1.55

 

“Trustee” means the trustee holding the funds of the Plan as provided in
Article 12.

 

 

 

1.56

 

“Valuation Date” means each trading day of the New York Stock Exchange, except
as may be determined by the Plan Administrator in accordance with
Section 6.02(b).

 

 

 

1.57

 

“Variable Pay” means that portion of a Participant’s Compensation which is
determined and paid in accordance with the provisions of the Employer’s annual
performance-based compensation program, including, but not limited to, any
payments made to Executives under the Employer’s annual incentive compensation
plan or sales and services incentive plans after March 31, 2008.

 

29

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ARTICLE 2.  PARTICIPATING EMPLOYERS

 

2.01

 

PARTICIPATION OF IBM

 

 

 

 

 

IBM shall be a participating Employer under the Plan, provided, however, that no
Foreign Branch of IBM shall be included as an Employer and IBM shall not be a
participating Employer with respect to the employees of any Foreign Branch.

 

 

 

2.02

 

PARTICIPATION BY DOMESTIC SUBSIDIARIES

 

 

 

(a)

 

Domestic Subsidiaries of IBM that were acquired or established prior to July 1,
1983 shall be participating Employers under the Plan, and shall be subject to
subsection (c).

 

 

 

(b)

 

Any entity that becomes, is established as, or is acquired as a Domestic
Subsidiary on or after July 1, 1983 shall become a participating Employer under
the Plan if and only if the Committee authorizes its participation by resolution
and such entity takes such actions as may be necessary for it to adopt the Plan.
With the consent of the Plan Administrator, a Domestic Subsidiary that adopts
the Plan may also adopt special provisions that shall be applicable to its
employees, which special provisions shall be set forth in an Appendix to the
Plan. A Domestic Subsidiary that becomes a participating Employer shall be
subject to the provisions of subsection (c).

 

 

 

(c)

 

No Foreign Branch of a Domestic Subsidiary shall be included as an Employer
under the Plan and no Domestic Subsidiary shall be a participating Employer
under the Plan with respect to the employees of a Foreign Branch.

 

30

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ARTICLE 3.  ELIGIBILITY AND PARTICIPATION

 

3.01

 

ELIGIBILITY

 

 

 

(a)

 

Except as provided in subsection (c), each Employee of an Employer shall be
eligible to become a Participant at any time during service as a Regular
Employee.

 

 

 

(b)

 

Effective as of January 1, 2004, each Employee of an Employer shall be eligible
to become a Participant at any time during service as a Long-Term Supplemental
Employee.

 

 

 

(c)

 

Effective as of January 1, 2005, subsection (a) shall be applicable only to an
Employee who, (i) as of December 31, 2004, was (A) actively employed as a
Regular Employee, or (B) on authorized leave of absence from employment as a
Regular Employee and (ii) has remained in employment as a Regular Employee from
December 31, 2004 through the date as of which he files a Notice described in
Section 3.02(a) or (b). An Employee for whom subsection (a) is made inapplicable
by this subsection shall be eligible to become a Participant only in accordance
with subsection (b), or Section 3.02A.

 

 

 

3.02

 

PARTICIPATION BY ELECTION FOR EMPLOYEES OTHER THAN 401(K) PENSION PROGRAM
PARTICIPANTS

 

 

 

 

 

An eligible Employee who is eligible to become a Participant in accordance with
Section 3.01(a) or 3.01(b) shall become a Participant as of:

 

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(a)           the first day of the first payroll period beginning after the date
he files with the Plan Administrator the Notice prescribed by the Plan
Administrator in which he:

 

(i)            makes the election described in Section 4.01(a), and

 

(ii)           authorizes the Employer to reduce his Compensation by the
percentage or the amount specified in his election; or, if earlier,

 

(b)          the first day of the first payroll period beginning after July 1,
2004 after the date he files with the Plan Administrator the Notice prescribed
by the Plan Administrator in which he

 

(i)            makes the election described in Section 4.01(h), and

 

(ii)           authorizes the Employer to withhold from his Compensation, on an
after-tax basis, the percentage specified in his election and to pay the amount
so withheld to the Plan on his behalf.

 

3.02A      PARTICIPATION BY 401(K) PENSION PROGRAM PARTICIPANTS AFTER
DECEMBER 31, 2004

 

(a)           The provisions of this Section shall be applicable to any Employee
who becomes a Regular Employee after December 31, 2004.

 

(b)           An Employee described in subsection (a) shall be become a
401(k) Pension Program Participant as of:

 

(i)            the first day of the first payroll period beginning after the
date he files with the Plan Administrator the Notice prescribed by the Plan
Administrator in which he:

 

(A)          makes the election described in Section 4.01(a), and

 

(B)          authorizes the Employer to reduce his Compensation by the
percentage or the amount specified in his election; or, if earlier,

 

32

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(ii)           the first day of the first payroll period beginning after the
date he files with the Plan Administrator the Notice prescribed by the Plan
Administrator in which he

 

(A)          makes the election described in Section 4.01(h), and

 

(B)          authorizes the Employer to withhold from his Compensation, on an
after-tax basis, the percentage specified in his election and to pay the amount
so withheld to the Plan on his behalf.

 

(c)           (i)            An Employee described in subsection (a) who becomes
a Regular Employee prior to November 17, 2007 and who has not become a
401(k) Pension Program Participant in accordance with subsection (b) shall be
deemed to have made an election in accordance with Section 4.01(a), effective as
of the first payroll processing date that occurs on or after the 30th day
following his date of hire, to reduce his Compensation by 3% and to have that
amount contributed to the Plan by his Employer as a Deferred Cash Contribution,
and shall become a 401(k) Pension Program Participant as of such date, unless he
revokes such deemed election in advance of the effective date thereof, by
electing, in accordance with Section 4.04(f), not to reduce his Compensation.

 

(ii)           An Employee described in subsection (a) who was hired on or after
January 1, 2008 who has not become a 401(k) Pension Program Participant in
accordance with subsection (b) shall be deemed to have made an election in
accordance with Section 4.01(a), effective as of the first payroll processing
date that occurs on or after the 30th day following his date of hire, to reduce
his Compensation by 5% and to have that amount contributed to the Plan by his
Employer as a Deferred Cash Contribution, and shall become a 401(k) Pension
Program Participant as of such date, unless he revokes such deemed election in
advance of the effective date thereof, by electing, in accordance with
Section 4.04(f), not to reduce his Compensation.  Notwithstanding the

 

33

--------------------------------------------------------------------------------

 

foregoing, the date on which an Employee described in subsection (a) who was
hired after November 16, 2007, and prior to January 1, 2008, who has not become
a 401(k) Pension Program Participant in accordance with subsection (b) shall be
deemed to have made an election in accordance with Section 4.01(a), shall be
February 27, 2008, and not the payroll processing date that is on or after the
30th day following the Participant’s date of hire.

 

(iii)          A 401(k) Program Participant who became a Participant in
accordance with subsection (c)(i) and who has not made any election in
accordance with Section 4.04(a) or 4.04(f) to change the election he was deemed
to have made pursuant to subsection (c)(1) shall be deemed to have made an
election effective as of the first payroll processing date that occurs on or
after January 1, 2008 to increase the percentage by which his Compensation is
reduced from 3% to 5%, unless he revokes such deemed election in advance of the
effective date thereof, in accordance with Section 4.04(f).

 

(iv)          For purposes of this Section 3.02A (c), for Participants who are
hired on and after January 1, 2005 but before November 16, 2007, and for
Participants who are hired on and after January 1, 2009, Compensation shall
include Variable Pay.  For Participants who are hired on and after November 16,
2007 but before January 1, 2009, Compensation shall exclude Variable Pay.

 

(d)           An Employee who is eligible to become a 401(k) Pension Program
Participant in accordance with subsection (b) but who does not become a
Participant in accordance with subsection (c), because he made an election in
accordance with Section 4.04(f) not to reduce his Compensation, shall remain
eligible to become a Participant and shall become a Participant in accordance
with the procedures set forth in Section 3.02.  An

 

34

--------------------------------------------------------------------------------

 

 

 

Employee who becomes a Participant in accordance with this subsection shall be a
401(k) Pension Program Participant.

 

 

 

(e)

 

For purposes of this Section, if an Employee described in subsection (a) became
a Participant prior to January 1, 2005, but becomes a Regular Employee after
December 31, 2004, and whose participation had not terminated in accordance with
Section 3.05, such Employee shall not be deemed to be a Participant in
accordance with this Section 3,02A. The provisions of this subsection shall not
have any effect on the Employee’s rights under the Plan with respect to that
portion of his Account attributable to contributions made prior to January 1,
2005.

 

 

 

3.03

 

REEMPLOYMENT OF CERTAIN FORMER EMPLOYEES AND FORMER PARTICIPANTS

 

 

 

(a)

 

Any person who is reemployed by an Employer after December 31, 2003 as a
Long-Term Supplemental Employee and who had not become a Participant prior to
the date of his reemployment, shall become a Participant upon the filing of
Notice in accordance with Section 3.02.

 

 

 

(b)

 

Any person who is reemployed by an Employer after December 31, 2003 as a
Long-Term Supplemental Employee, who had become a Participant prior to the date
of his reemployment, but who had subsequently ceased to be a Participant in
accordance with Section 3.05, shall again become a Participant upon the filing
of Notice in accordance with Section 3.02.

 

 

 

(c)

 

Any person who is reemployed by an Employer after December 31, 2003 as a
Long-Term Supplemental Employee, who had become a Participant prior to the date
of his

 

35

--------------------------------------------------------------------------------

 

reemployment, and who has not ceased to be a Participant in accordance with
Section 3.05, shall be permitted to make an election under Section 4.01
immediately upon reemployment by an as a Long-Term Supplemental Employee.

 

3.04         Effect of Status Change on Participation

 

(a)           Except as provided in subsection (b), a Participant who

 

(i)            had been employed by the Employer or an Affiliate as a Regular
Employee, then

 

(ii)           ceases to be a Regular Employee, but

 

(iii)          remains in the employ of an Employer or an Affiliate

 

shall continue to be a Participant in the Plan, but shall not be eligible to
receive allocations of Deferred Cash Contributions or any Employer
Contributions, as applicable, and shall not be eligible to make After-Tax
Contributions, while his employment status is other than as a Regular Employee.

 

(b)           Notwithstanding the provisions of subsection (a), a Participant
who

 

(i)            had been employed by the Employer or an Affiliate as a Regular
Employee, then

 

(ii)           ceases to be a Regular Employee, but

 

(iii)          remains in the employ of an Employer or an Affiliate as a
Long-Term Supplemental Employee after December 31, 2003

 

shall, effective as of January 1, 2004, be eligible to receive allocations of
Deferred Cash Contributions, and shall. effective July 1, 2004, be eligible to
make After-Tax Contributions, but ineligible to receive allocations of any
Employer Contributions, as applicable, while his employment status remains that
of a Long-Term Supplemental Employee.

 

36

--------------------------------------------------------------------------------

 

(c)           A Participant who

 

(i)            had been employed by the Employer or an Affiliate as a Long-Term
Supplemental Employee after December 31, 2003, then

 

(ii)           ceases to be a Long-Term Supplemental Employee, but

 

(iii)          remains in the employ of the Employer or an Affiliate (other than
as a Regular Employee)

 

shall continue to be a Participant in the Plan, but shall not be eligible to
receive allocations of Deferred Cash Contributions and shall not be eligible to
make After-Tax Contributions.

 

(d)           A Participant who

 

(i)            had been employed by the Employer or an Affiliate as a Long-Term
Supplemental Employee after December 31, 2003, then

 

(ii)           ceased to be a Long-Term Supplemental Employee prior to
January 1, 2005, but

 

(iii)          upon ceasing to be a Long-Term Supplemental Employee remained in
the employ of the Employer as a Regular Employee, which status became effective
for the Participant prior to January 1, 2005,

 

shall continue to be a Participant in the Plan, shall continue to be eligible to
receive allocations of Deferred Cash Contributions, shall be eligible to receive
allocations of Employer Contributions, as applicable, and shall be eligible to
make After-Tax Contributions.

 

3.05         TERMINATION OF PARTICIPATION

 

Participation shall terminate on the latest of (a) the date a Participant is no
longer employed by an Employer or any Affiliate, (b) the date that a Participant
receives a distribution that reduces the balance of his Account to zero, or
(c) the date of the Participant’s death.

 

37

--------------------------------------------------------------------------------

 

ARTICLE 4.  CONTRIBUTIONS

 

4.01                           DEFERRED CASH CONTRIBUTIONS, CATCH-UP
CONTRIBUTIONS, AND AFTER-TAX CONTRIBUTIONS

 

(a)                                  A Participant may elect in the Notice filed
under Section 3.02(a), Section 3.02A(b), Section 4.04(c), or Section 4.05(b), as
applicable, to reduce his Compensation payable while a Participant and have the
amount by which his Compensation is so reduced contributed to the Plan by his
Employer as Deferred Cash Contributions. A Participant’s election under this
subsection shall be subject to the following conditions:

 

(i)                                     Except as provided in paragraph (xi),
the minimum reduction shall be 1%, the maximum shall be 15%, and the
Participant’s election shall be in multiples of 1%. Effective as of January 1,
2002, the 15% maximum specified in the foregoing sentence shall be increased to
80%.

 

(ii)                                  The amount of the reduction may, in the
discretion of the Plan Administrator, be rounded to the next higher or lower
multiple of $1.00 per pay period.

 

(iii)                               Deferred Cash Contributions shall be further
limited as provided in subsections (c), (d), and (e) and in Sections 4.06, 4.09
and 4.10.

 

(iv)                              A Participant’s election pursuant to this
subsection shall become effective as soon as administratively practicable after
his provision of Notice, but shall in any event be effective as of the first day
of a payroll period.

 

38

--------------------------------------------------------------------------------

 

(v)                                 Any Deferred Cash Contributions shall be
paid to the Trustee as soon as practicable.  Deferred Cash Contributions
attributable elections applicable to Compensation payable prior to January 1,
2008 shall be allocated to the Participant’s Deferred Account.  Deferred Cash
Contributions attributable to elections applicable to Compensation payable after
December 31, 2007 shall be allocated to the Participant’s Before-Tax Deferral
Account, except that, to the extent that such Deferred Cash Contributions have
been designated as Roth Contributions pursuant to paragraph (x), the amount so
designated shall be allocated to the Participant’s Roth Contributions Account.

 

(vi)                              An election made by a Participant in
accordance with this subsection, including for this purpose any separate
Deferred Cash Contribution election with respect to Variable Pay in accordance
with paragraph (vii), shall remain in effect until it is changed in accordance
with Section 4.04 or suspended in accordance with Sections 4.05, 8.02(c)(iii),
or 9.02(c)(i), provided however, that any election shall cease to be effective
upon a Participant’s termination of employment.

 

(vii)                           Effective for the period beginning on January 1,
2002 and ending on December 31, 2004, and effective on and after January 1,
2008, a Participant may make separate Deferred Cash Contribution elections with
respect to that portion of his Compensation that is not Variable Pay and with
respect to that portion of his Compensation that is Variable Pay.  Effective for
the period commencing January 1, 2005 and ending on December 31, 2007, a
Participant may make separate Deferred Cash Contribution Elections with respect
to that portion of his Compensation that is not Variable Pay and with respect to
(I) any portion of his

 

39

--------------------------------------------------------------------------------

 

Compensation that is Variable Pay paid under a program maintained by an Employer
for Non-Executives or (II) any portion of his Compensation that is Variable Pay
paid under a program maintained by an Employer for Executives and attributable
to any period of employment in which the Participant was a Non-Executive,
provided, however, that:

 

(A)      if a Participant fails to make a separate Deferred Cash Contribution
election with respect to any portion of his Compensation that is Variable Pay
that is payable to him after December 31, 2005 and before January 1, 2007, he
shall be deemed to have made a 0% Deferred Cash Contribution election with
respect to such Variable Pay;

 

(B)        if a Participant fails to make a separate Deferred Cash Contribution
election with respect to any portion of his Compensation that is Variable Pay
that is payable to him after December 31, 2006, he shall be deemed to have made
a Deferred Cash Contribution election with respect to such Variable Pay of the
same percentage that is then in effect with respect to that portion of his
Compensation that is not Variable Pay; and

 

(C)        effective January 1, 2008, a Participant who makes a Deferral
Maximizer Election pursuant to paragraph (xi) shall be deemed to have made a 0%
Deferred Cash Contribution Election with respect to such Variable Pay.

 

(viii)        Effective for the period beginning January 1, 2005 and ending
December 31, 2007, a Participant’s Deferred Cash Contribution Election shall
apply only to his Compensation as determined without regard to any Variable Pay
paid under any program maintained by an Employer for Executives and shall not be
effective with respect to any portion of his Compensation that is Variable Pay

 

40

--------------------------------------------------------------------------------

 

paid under any program maintained by an Employer for Executives, except as
provided in paragraph (vii) with respect to amounts attributable to any period
of employment in which the Participant was a Non-Executive.   Effective
January 1, 2008, a Participant who makes a Deferral Maximizer Election pursuant
to paragraph (xi) shall be deemed to have made a 0% Deferred Cash Contribution
Election with respect to his Variable Pay.

 

(ix)           Effective January 1, 2002, Deferred Cash Contributions that are
allocated to the IBM Stock Fund in accordance with the provisions of
Section 5.02 shall be deemed to be contributions to the ESOP.

 

(x)            Effective January 1, 2008, a Participant who has made, or is
deemed to have made, an election to reduce his Compensation may elect, in
accordance with procedures prescribed by the Plan Administrator, that all or a
portion of the Deferred Cash Contributions that otherwise would be contributed
to his Before-Tax Deferral Account as Before-Tax Contributions shall instead be
designated as Roth Contributions and included in his gross income at the time of
deferral.  The Deferred Cash Contributions so designated shall be contributed to
his Roth Contributions Account.  An election pursuant to this paragraph may be
revoked only with respect to Deferred Cash Contributions to be contributed after
the effective date of the revocation election.

 

(xi)           Effective January 1, 2008, in accordance with procedures
established by the Plan Administrator, a Participant may elect that his
Compensation be reduced by a dollar amount per payroll period that will cause
his total Deferred Cash Contributions for the Plan Year to equal the amount
permitted to be deferred

 

41

--------------------------------------------------------------------------------

 

under Code Section 402(g) and Code Section 414(v), as applicable, for such Plan
Year in accordance with subsection (c) (“Deferral Maxizimer Election”).  No
Deferral Maximizer Election with respect to a Plan Year may be made under this
paragraph after June 30 of such Plan Year, or such later date as determined by
the Plan Administrator.  In the event that a Participant has made a Deferral
Maximizer Election under this paragraph and later terminates employment with the
Employer, no reduction will be applied to Compensation payable to him for the
payroll period that includes his final day of employment or any subsequent
payroll period.  A Participant who makes a  Deferral Maximizer Election may not
make an election pursuant to paragraph (x), except for an election to designate
all of his Deferred Cash Contributions as Roth Contributions for the period
during which his Deferral Maximizer Election is in effect.  A Participant who
makes a Deferral Maximizer Election may revoke such election at any time during
the Plan Year and, coincident with or subsequent to such revocation, may make a
percentage election in accordance with paragraph (i), provided, however, that
(A) no such percentage election shall be permitted if the Participant’s
Compensation for the Plan Year prior to the effective date of the percentage
election has exceeded the Annual Dollar Limit, and (B) a Participant who revoked
the Deferral Maximizer Election and who is prevented from making a percentage
election by clause (A) shall not be permitted to make another Deferral Maximizer
Election for such Plan Year.  If a Participant makes a Deferral Maximizer
Election, and thereafter goes on a leave of absence from employment, the
Deferral Maximizer Election will not be automatically restarted upon returning
from such leave of absence.  For purposes of this subsection (xi) Compensation
shall exclude any

 

42

--------------------------------------------------------------------------------

 

Compensation that is not paid on a bi-monthly basis (including amount paid on a
weekly basis or amounts that are paid for overtime).

 

(b)                                 Notwithstanding any other provision of this
Section, the Plan Administrator, in its sole discretion, may restrict the
percentage of Compensation reduction that may be elected by any Highly
Compensated Employee, in order to achieve or maintain compliance with the
limitations described in Sections 4.06, 4.07, and 4.08.

 

(c)                                  In no event shall the Participant’s
Deferred Cash Contributions and similar contributions made on his behalf by an
Employer or an Affiliate to all plans, contracts or arrangements subject to the
provisions of Section 401(a)(30) of the Code, in any calendar year commencing
prior to January 1, 2002, exceed $7,000, as adjusted from time to time pursuant
to Section 402(g)(4) of the Code (as in effect on the day before the date of
enactment of Public Law 107-16).  The Participant’s Deferred Cash Contributions
and similar contributions made on his behalf by an Employer or an Affiliate to
all plans contracts or arrangements subject to the provisions of
Section 401(a)(30) in calendar years beginning after December 31, 2001 and prior
to January 1, 2009 shall be limited in accordance with the following table:

 

Calendar Year

 

Dollar Limitation

 

2002

 

$

11,000

 

2003

 

$

12,000

 

2004

 

$

13,000

 

2005

 

$

14,000

 

2006

 

$

15,000

 

2007

 

$

15,500

 

2008

 

$

15,500

 

 

43

--------------------------------------------------------------------------------

 

Deferred Cash Contributions made on a Participant’s behalf with respect to any
calendar year beginning after December 31, 2008 are limited to $15,500 (or such
higher dollar limit as may be in effect with respect to such year in accordance
with Section 402(g)(4) of the Code (as amended and redesignated by Public Law
107-16), as in effect for calendar years beginning after December 31, 2001).  If
a Participant’s Deferred Cash Contributions in a calendar year reach the dollar
limitation in effect for such calendar year, his election of Deferred Cash
Contributions for the remainder of the calendar year will be canceled.  As of
the first pay period of the calendar year following such cancellation, the
Participant’s election of Deferred Cash Contributions shall again become
effective in accordance with his previous election, unless a Participant changes
his elections.

 

(d)                                 If a Participant makes elective deferrals,
within the meaning of Section 402(g)(3) of the Code, under any other qualified
defined contribution plan maintained by an Employer or Affiliate for any
calendar year and the sum of such elective deferrals and his Deferred Cash
Contributions under the Plan exceed the dollar limitation specified in
subsection (c) for that calendar year, then the amount by which such sum exceeds
such limitation shall be deemed Excess Deferrals for such calendar year.  The
Participant shall be deemed to have elected to receive a return from this Plan
of the full amount of any Excess Deferrals determined in accordance with this
subsection.  A return of Excess Deferrals pursuant to this subsection shall be
subject to the provisions of subsection (f).

 

(e)                                  If a Participant makes elective deferrals,
within the meaning of Section 402(g)(3) of the Code, under a qualified defined
contribution plan maintained by an employer other than any Employer or any
Affiliate for any calendar year, and the sum of such elective

 

44

--------------------------------------------------------------------------------

 

deferrals and his Deferred Cash Contributions under the Plan exceed the dollar
limitation specified in Section 4.01(c) for that calendar year, then the amount
by which such sum exceeds such limitation shall be deemed Excess Deferrals for
such calendar year.  The Participant may elect to receive a return from this
Plan of all or a portion of any Excess Deferrals determined in accordance with
this subsection, provided, however, that the Plan shall not be required to make
a return of Excess Deferrals, unless the Participant notifies the Plan
Administrator, in writing, by March 1 of the following calendar year of the
amount of the Excess Deferrals that the Participant wishes to have returned by
this Plan.  A return of Excess Deferrals pursuant to this subsection shall be
subject to the provisions of subsection (f).

 

(f)                                    Any return of Excess Deferrals required
under subsection (d) or (e) shall include Attributed Earnings and shall be made
no later than the April 15 following the end of the calendar year in which the
Excess Deferrals were made.  The amount of Excess Deferrals to be returned for
any calendar year shall be reduced by any Deferred Cash Contributions previously
returned to the Participant under Section 4.06 for that calendar year.  In the
event any Deferred Cash Contributions required to be returned under
subsection (d) or (e) were matched by Matching Contributions under Section 3.02,
those Matching Contributions, together with Attributed Earnings, shall be
forfeited and used to reduce Employer contributions.

 

(g)                                 Effective for Plan Years commencing after
December 31, 2001, a Participant who satisfies the requirements of paragraph
(i) for a Plan Year may elect, in accordance with paragraph (ii), to reduce his
Compensation and to have the amount by which his Compensation is so reduced
contributed to the Plan by his Employer as a Catch-Up

 

45

--------------------------------------------------------------------------------

 

Contribution, provided, however, that such Catch-Up Contributions shall be
subject to the conditions set forth in paragraphs (iii), (iv), (v), (vi) ,
(vii), and (viii).

 

(i)                                     A Participant satisfies the requirements
of this paragraph for a Plan Year if:

 

(A)                              his 50th birthday is coincident with or prior
to the last day of the Plan Year; and

 

(B)                                the Deferred Cash Contributions made on his
behalf for the Plan Year have reached the applicable dollar limitation for the
calendar year coincident with such Plan Year, as set forth in subsection (c).

 

(ii)                                  A Participant described in paragraph
(i) shall be deemed to have elected to continue to reduce his Compensation at
the rate in effect under his most recent Deferred Cash Contribution election,
including for this purpose any separate Deferred Cash Contribution with respect
to Variable Pay then in effect for the Participant in accordance with subsection
(a)(vii), and to have the amount contributed to the Plan by his Employer as a
Catch-Up Contribution, unless he provides Notice, in accordance with procedures
established by the Plan Administrator, that he elects not to continue to reduce
his Compensation.

 

(iii)                               Any Catch-Up Contributions shall be paid to
the Trustee as soon as practicable . Catch-Up Contributions attributable
elections applicable to Compensation payable prior to January 1, 2008 shall be
allocated to the Participant’s Catch-Up Account.  Catch-Up Contributions
attributable to elections applicable to Compensation payable after December 31,
2007 shall be allocated to the Participant’s Catch-Up Account, except that, to
the extent that such Catch-Up

 

46

--------------------------------------------------------------------------------

 

Contributions have been designated as Roth Catch-Up Contributions pursuant to
paragraph (vii), the amount so designated shall be allocated to the
Participant’s Roth Catch-Up Account.

 

(iv)                              A Participant’s Catch-Up Contributions in
calendar years beginning after December 31, 2001 and prior to January 1, 2009
shall be limited in accordance with the following table:

 

Calendar Year

 

Dollar Limitation

 

2002

 

$

1,000

 

2003

 

$

2,000

 

2004

 

$

3,000

 

2005

 

$

4,000

 

2006

 

$

5,000

 

2007

 

$

5,000

 

2008

 

$

5,000

 

 

Catch-Up Contributions made on a Participant’s behalf with respect to any
calendar year beginning after December 31, 2008 shall limited to $5,000, as
adjusted in accordance with Section 414(v)(2)(C) of the Code.  In no event shall
the Participant’s Catch-Up Contributions for a Plan Year exceed the excess of
his Statutory Compensation for such Plan Year over his Deferred Cash
Contributions for such Plan Year.

 

(v)                                 Catch-Up Contributions that are allocated to
the IBM Stock Fund in accordance with the provisions of Section 5.02 shall be
deemed to be contributions to the ESOP.

 

47

--------------------------------------------------------------------------------

 

(vi)                              The provisions of this subsection shall be
subject to the requirements of Section 414(v) of the Code and Regulations
thereunder.

 

(vii)                           An election in accordance with this subsection
shall apply only to that portion of the Participant’s Compensation to which a
Deferred Cash Contribution would be applicable in accordance with subsection
(a), but for the limitation imposed by subsection (c).

 

(viii)                        Effective January 1, 2008, a Participant is deemed
to have made an election to reduce his Compensation in accordance with paragraph
(ii) may elect, in accordance with procedures prescribed by the Plan
Administrator, that all or a portion of the amounts that otherwise would be
contributed to his Catch-Up Account as Catch-Up Contributions shall instead be
designated as Roth Catch-Up Contributions and included in the Participant’s
gross income at the time of deferral.  An amount so designated shall be
contributed to the Participant’s Roth Catch-Up Account.  An election pursuant to
this paragraph may be revoked only with respect to amounts to be contributed
after the effective date of the revocation election.

 

(h)                                 Effective July 1, 2004, a Participant may
elect in the Notice filed under Section 3.02(b), Section 3.02A(b)(ii),
Section 4.04(e), or Section 4.05(b), as applicable, to make After-Tax
Contributions, provided, however, that After-Tax Contributions shall be subject
to the conditions set forth in paragraphs (i), (ii), (iii), (iv) and (v).

 

48

--------------------------------------------------------------------------------

 

(i)            The Participant’s election to make After-Tax Contributions shall
specify the rate of After-Tax Contributions as a percentage of his Compensation,
which rate shall not exceed 10% and shall be an integral multiple of 1%.

 

(ii)           Any After-Tax Contributions shall be paid to the Trustee as soon
as practicable and shall be allocated to the Participant’s After-Tax Account.

 

(iii)          After-Tax Contributions that are allocated to the IBM Stock Fund
in accordance with the provisions of Section 5.02 shall be deemed to be
contributions to the ESOP.

 

(iv)          A Participant may make separate After-Tax Contribution elections
with respect to that portion of his Compensation that is not Variable Pay and
with respect to that portion of his Compensation that is Variable Pay. 
Effective January 1, 2005, a Participant may make separate After-Tax
Contribution elections with respect to that portion of his Compensation that is
not Variable Pay and with respect to any portion of his Compensation that is
Variable Pay paid under a program maintained by an Employer for Non-Executives,
provided, however, that if a Participant fails to make a separate After-Tax
Contribution election with respect to any portion of his Compensation that is
Variable Pay that is payable to him after December 31, 2005, he shall be deemed
to have made a 0% After-Tax Contribution election with respect to such Variable
Pay.

 

(v)           [Reserved]

 

49

--------------------------------------------------------------------------------

 

(vi)                              Notwithstanding any other provision of this
subsection, the Plan Administrator, in its sole discretion, may reduce the rate
of After-Tax Contributions that may be elected by any Highly Compensated
Employee, in order to achieve or maintain compliance with the limitations
described in Sections 4.07, 4.09, and 4.10.

 

4.02                           EMPLOYER MATCHING CONTRIBUTIONS

 

(a)                                  (i)                                    
Matching Contributions for Participants other than 401(k) Pension Program
Participants:

 

(A)                              For Plan Years commencing after December 31,
1994 and prior to January 1, 2008, each Employer shall contribute, out of its
Profits, on behalf of each of its Participants who is not a 401(k) Pension
Program Participant and who elects to make Deferred Cash Contributions, an
amount equal to 50% of the Deferred Cash Contributions made on behalf of the
Participant to the Plan during each payroll period, provided, however, that for
this purpose Deferred Cash Contributions in excess of 6% of the Participant’s
Compensation for a payroll period shall not be taken into account.  In no event
shall the Matching Contributions pursuant to this Section with respect to a Plan
Year exceed 3% of the Participant’s Compensation while a Participant during such
Plan Year.

 

(B)                                For Plan Years commencing after December 31,
2007, each Employer shall contribute, out of its Profits, on behalf of each of
its Participants who is not a 401(k) Pension Program Participant and who elects
to make Deferred Cash Contributions, an amount equal to 100% of the Deferred
Cash Contributions made on behalf of the Participant to the Plan during each
payroll period, provided, however, that for this purpose Deferred

 

50

--------------------------------------------------------------------------------

 

Cash Contributions in excess of 6% of the Participant’s Compensation for a
payroll period shall not be taken into account.  In no event shall the Matching
Contributions pursuant to this Section with respect to a Plan Year exceed 6% of
the Participant’s Compensation while a Participant during such Plan Year.

 

(ii)                                  Matching Contributions for 401(k) Pension
Program Participants:

 

(A)                              Effective January 1, 2005, each Employer shall
contribute, out of its Profits, on behalf of each of its Participants who (I) is
a 401(k) Pension Program Participant, (II) elects or is deemed to have elected
to make Deferred Cash Contributions, and (III) has, on or before the last day of
the payroll period, attained his Program Eligibility Date an amount equal to
100% of the Deferred Cash Contributions made on behalf of the Participant to the
Plan during each payroll period, provided, however, that for this purpose
Deferred Cash Contributions in excess of 6% of the Participant’s Compensation
for a payroll period shall not be taken into account.  In no event shall the
Matching Contributions pursuant to this Section with respect to a Plan Year
exceed 6% of the Participant’s Compensation while a Participant during such Plan
Year.

 

(B)                                Effective January 1, 2008, each Employer
shall contribute, out of its Profits, on behalf of each of its Participants who
(I) is a 401(k) Pension Program Participant, (II) elects or is deemed to have
elected to make Deferred Cash Contributions, and (III) has, on or before the
last day of the payroll period, attained his Program Eligibility Date an amount
equal to 100% of the Deferred Cash Contributions made on behalf of the

 

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Participant to the Plan during each payroll period, provided, however, that for
this purpose Deferred Cash Contributions in excess of 5% of the Participant’s
Compensation for a payroll period shall not be taken into account.  In no event
shall the Matching Contributions pursuant to this Section with respect to a Plan
Year exceed 5% of the Participant’s Compensation while a Participant during such
Plan Year.

 

(iii)                               Employer Matching Contributions made in
accordance with paragraph (i) or paragraph (ii) shall be paid to the Trustee as
soon as practicable and shall be allocated to the Participant’s Employer
Account.

 

(iv)                              Match Maximizer for 401(k) Pension Program
Participants for 2005, 2006, and 2007 Plan Years:

 

Effective as of January 1, 2005, if as of the last day of the Plan Year, the
amount of Matching Contributions allocated in accordance with paragraph (ii) for
such Plan Year to the Employer Account of a 401(k) Pension Program Participant
who satisfies the requirements set forth in the following sentence is less than
the lesser of (A) 6% of his Compensation or (B) the amount contributed on behalf
of such Participant as Deferred Cash Contributions for the Plan Year, the
Employer shall make a special Matching Contribution on behalf of such
Participant in an amount equal to the lesser of (X) such difference or (Y) the
excess of (I) the dollar limitation determined in accordance with
Section 4.01(c) over (II) the amount of Matching Contributions allocated in
accordance with paragraph (ii).  A Participant shall satisfy the requirements
set forth in this sentence for a Plan Year if (A) he remains in employment with
the Employer on the last day of such

 

52

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Plan Year, (B) he was a Non-Executive at all times during such Plan Year,
provided, however, that this requirement shall apply only for the Plan Year
beginning before January 1, 2006, and (C) no portion of his Compensation was
deferred in accordance with any salary deferral election or incentive pay
deferral election under any plan maintained by the Employer, including but not
limited to the Executive Deferred Compensation Plan, but excluding this Plan, at
any time during such Plan Year, provided, however, that this requirement shall
apply only to Plan Years beginning after December 31, 2005. For purposes of this
paragraph, a Participant’s Compensation shall not include any amount earned
prior to the first day of the payroll period that includes  his Program
Eligibility Date, shall not include any amount earned during a period in which
Deferred Cash Contributions were not permitted to be made on his behalf in
accordance with Sections 8.02(c) or 9.02(c)(i), shall not include any amount of
Variable Pay attributable to any period in any prior Plan Year during which he
was an Executive, and shall not include Compensation earned during any period in
which the Participant was not a Regular Employee.    Any special Matching
Contribution made pursuant to this paragraph shall be paid to the Trustee as
soon as practicable following the close of the Plan Year to which it relates and
the determination of the amount thereof by the Plan Administrator or its
designee.  This paragraph shall not apply for Plan Years beginning after
December 31, 2007.

 

(v)                                 Employer Matching Contributions that are
allocated to the IBM Stock Fund in accordance with the provisions of
Section 5.02 shall be deemed to be contributions to the ESOP.

 

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(vi)                              A Participant’s Compensation, as taken into
account for purposes of this subsection, shall be determined in accordance with
the requirements set forth in Section 4.01 for the determination of Compensation
to which a Deferred Cash Contribution Election shall be applicable.

 

(vii)                           Match Maximizer for Participants other than
401(k) Pension Program Participants for 2006 and 2007 Plan Years:

 

Effective as of January 1, 2006, if as of the last day of the Plan Year, the
amount of Matching Contributions allocated in accordance with paragraph (ii) for
such Plan Year to the Employer Account of a Participant who satisfies the
requirements set forth in the following sentence is less than the lesser of
(A) 3% of his Compensation or (B) 50% of the amount contributed on behalf of
such Participant as Deferred Cash Contributions for the Plan Year, the Employer
shall make a special Matching Contribution on behalf of such Participant in an
amount equal to the lesser of (X) such difference or (Y) the excess of (I) 50%
of the dollar limitation determined in accordance with Section 4.01(c) over
(II) the amount of Matching Contributions allocated in accordance with paragraph
(ii).  A Participant shall satisfy the requirements set forth in this sentence
for a Plan Year if (A) he is not a 401(k) Pension Program Participant, (B) he
remains in employment with the Employer on the last day of such Plan Year, and
(C) no portion of his Compensation was deferred in accordance with any salary
deferral election or incentive pay deferral election under any plan maintained
by the Employer, including but not limited to the Executive Deferred
Compensation Plan, but excluding this Plan, at any time during such Plan Year.
For purposes of this paragraph, a Participant’s Compensation shall not include
any amount earned during a period in which Deferred Cash Contributions were

 

54

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not permitted to be made on his behalf in accordance with Sections 8.02(c) or
9.02(c)(i), shall not include any amount of Variable Pay attributable to any
period in any prior Plan Year during which he was an Executive, and shall not
include Compensation earned during any period in which the Participant was not a
Regular Employee.  Any special Matching Contribution made pursuant to this
paragraph shall be paid to the Trustees as soon as practicable following the
close of the Plan Year to which it relates and the determination of the amount
thereof by the Plan Administrator or its designee. This paragraph shall not
apply for Plan Years beginning after December 31, 2007.

 

(viii)                        Match Maximizer for Plan Years beginning after
2007:

 

(A)                              Match Maximizer for Participants other than
401(k) Pension Program Participants:

 

Effective January 1, 2008, and subject to the provisions of subparagraph (C), if
as of the close of any payroll period, the amount of Matching Contributions
allocated in accordance with paragraph (ii) and this paragraph (viii) to the
Employer Account of a Participant other than a 401(k) Pension Program
Participant for such period and for all payroll periods to date ending within
such Plan Year is less than the lesser of (A) 6% of his Compensation or (B) 100%
of the amount contributed on behalf of such Participant as Deferred Cash
Contributions for all payroll periods to date ending within the Plan Year, the
Employer shall make a special Matching Contribution on behalf of such
Participant in an amount equal to the lesser of (X) such difference or (Y) the
excess of (I) 100% of the dollar limitation determined in accordance with
Section 4.01(c) over (II) the amount of Matching Contributions allocated in
accordance with paragraph (ii) and this paragraph (viii).

 

55

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(B)                                Match Maximizer for 401(k) Pension Program
Participants:

 

Effective January 1, 2008, and subject to the provisions of subparagraph (C), if
as of the close of any payroll period, the amount of Matching Contributions
allocated in accordance with paragraph (ii) and this section (viii) to the
Employer Account of a 401(k) Pension Program Participant for such period and for
all prior payroll periods to date ending within such Plan Year is less than the
lesser of (A) 5% of his Compensation or (B) 100% of the amount contributed on
behalf of such Participant as Deferred Cash Contributions for all payroll
periods to date ending within the Plan Year, the Employer shall make a special
Matching Contribution on behalf of such Participant in an amount equal to the
lesser of (X) such difference or (Y) the excess of (I) 100% of the dollar
limitation determined in accordance with Section 4.01(c) over (II) the amount of
Matching Contributions allocated in accordance with paragraph (ii) and this
paragraph (viii).

 

(C)                                For purposes of this paragraph (viii), a
Participant’s Compensation (i) shall only include Compensation that is earned on
and after a Participant has attained his Program Eligibility Date; (ii) shall
not include any amount earned during a period in which Deferred Cash
Contributions were not permitted to be made on his behalf in accordance with
Sections 8.02(c) and, (iii) shall not include Compensation earned during any
period in which the Participant was not a Regular Employee.  Any special
Matching Contribution made pursuant to this paragraph shall be paid to the
Trustees as soon as practicable following the close of the payroll period

 

56

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to which it relates and the determination of the amount thereof by the Plan
Administrator or its designee.

 

(b)                                 Matching Contributions are made expressly
conditional on the Plan satisfying the provisions of Sections 4.01(c), (d), and
(e), 4.06, 4.07, and 4.08.  If any portion of the Deferred Cash Contribution to
which a Matching Contribution relates is returned to the Participant pursuant to
Section 4.01(d) or (e), 4.06(c), or 4.08, the corresponding Matching
Contribution shall be forfeited, and if any amount of the Matching Contribution
is deemed an Excess Aggregate Contribution under Section 4.07 such amount shall
be forfeited in accordance with the provisions of that Section.

 

(c)                                  Effective only for the period beginning on
January 1, 2002 and ending on December 31, 2004, and solely for purposes of
subsection (a), a Participant’s Deferred Cash Contributions shall be deemed to
include his Catch-Up Contributions.

 

(d)                                 Effective January 1, 2004, and solely for
purposes of subsection (a), a Participant’s Compensation shall not include any
amount earned while employed by the Employer or an Affiliate as a Long-Term
Supplemental Employee.

 

4.02A                 NON-MATCHING EMPLOYER CONTRIBUTIONS

 

(a)                                  Automatic Contributions:

 

                                               
(i)                                     401(k) Pension Program Participants:

 

Effective January 1, 2008, each Employer shall contribute, out of its Profits,
on behalf of each of its Participants who is a 401(k) Pension Program
Participant and who has, on or before the last day of the payroll period,
attained his

 

57

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Program Eligibility Date, an amount equal to 1% of the Participant’s
Compensation during each payroll period, as an Automatic Contribution.

 

(ii)                                  PPA Participants:

 

Effective January 1, 2008, each Employer shall contribute, out of its Profits,
on behalf of each of its Participants who is a PPA Participant an amount equal
to 2% of the Participant’s Compensation during each payroll period, as an
Automatic Contribution.

 

(iii)                               PCF Participants:

 

Effective January 1, 2008, each Employer shall contribute, out of its Profits,
on behalf of each of its Participants who is a PCF Participant an amount equal
to 4% of the Participant’s Compensation during each payroll period, as an
Automatic Contribution.

 

(iv)                              Automatic Contributions made in accordance
with paragraph (i) paragraph (ii), or paragraph (iii) shall be paid to the
Trustee as soon as practicable after the payroll period to which they relate and
shall be allocated to the Participant’s Employer Account.

 

(b)                                 Transition Credit Contributions for PPA
Participants:

 

(i)                                     Effective January 1, 2008, each Employer
shall contribute, out of its Profits, on behalf of each of its Participants who
is a PPA Participant and who, as of June 30, 1999 had satisfied the age and
service requirements for transition credits under the terms of the IBM Personal
Pension Plan as in effect on July 1, 1999,

 

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an amount equal to the applicable percentage of the Participant’s Compensation,
as a Transition Credit Contribution.  For each PPA Participant who is eligible
to receive Transition Credit Contributions, the applicable percentage shall be
no less than 1% and no more than 4% and shall be same percentage that would have
been credited to the Participant benefit under the Personal Pension Account
Formula of the IBM Personal Pension Plan for the latest monthly pay credit
period that began prior to January 1, 2008, but based on the PPA Participant’s
age and service as of June 30, 1999.  A PPA Participant shall cease to be
eligible to receive Transition Credit Contributions at the earlier of June 30,
2009 or the date on which the PPA Participant has completed 30 years of Service
as determined in accordance with the provisions of the IBM Personal Pension
Plan.

 

(ii)           Transition Credit Contributions made in accordance with paragraph
(i) shall be paid to the Trustee as soon as practicable after the payroll period
to which they relate and shall be allocated to the Participant’s Employer
Account.

 

(c)                                  Special Savings Award Contributions for PCF
Participants who are Non-Exempt Employees:

 

(i)                                     Effective January 1, 2008, each Employer
shall contribute, out of its Profits, on behalf of each of its Participants who
is a PCF Participant and who is a Non-Exempt Employee as of the last business
day of the calendar year, ,an amount equal to 5% of the Participant’s
Compensation during the Calendar Year, as a Special Savings Award Contribution.

 

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(ii)           Special Savings Award Contributions made in accordance with
paragraph (i) shall be paid to the Trustee as soon as practicable after the
close of the calendar year to which they relate and shall be allocated to the
Participant’s Employer Account.

 

(d)           Any Non-Matching Employer Contribution that is allocated to the
IBM Stock Fund in accordance with the provisions of Section 5.02 shall be deemed
to be a contribution to the ESOP.

 

4.03         ROLLOVER CONTRIBUTIONS, ROTH ROLLOVER CONTRIBUTIONS, AND AFTER-TAX
ROLLOVER CONTRIBUTIONS

 

(a)           Without regard to any limitations on contributions set forth in
this Article 4, the Plan may receive from or on behalf of a Participant who is
then a Regular Employee, in cash, as a Rollover Contribution or, effective
January 1, 2008, as a Roth Rollover Contribution, an amount previously
distributed or deemed to be distributed to him

 

(i)            from a plan that satisfies the requirements of Section 401(a) of
the Code, or

 

(ii)           from an individual retirement account described in
Section 408(a) of the Code which contains only amounts that were originally
distributed from a qualified plan described in Section 401(a) or 403(a) of the
Code, or

 

(iii)          from an eligible deferred compensation plan described in
Section 457(b) of the Code that is maintained by an employer that is described
in Section 457(e)(1)(A) of the Code,

 

(iv)          from an annuity contract described in Section 403(b) of the Code,
or

 

(v)           from the Federal Thrift Savings Plan, in a distribution described
in Section 8433(c) of Title 5 of the United States Code,

 

60

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provided, however, clauses (ii), (iii), and (iv) of this sentence shall be
effective only with respect to Rollover Contributions made subsequent to
March 31, 2002 and clause (v) of this sentence shall be effective only with
respect to Rollover Contributions made subsequent to December 31, 2001.  The
Plan may receive such amount either directly from the Participant, or from an
individual retirement account that satisfies the requirements of
Section 408(d)(3)(A)(ii) of the Code, or from a qualified plan in the form of a
direct rollover that satisfies the requirements of Section 401(a)(31) of the
Code.   For purposes of this subsection, a distribution made or deemed to be
made to a Participant who is then a Regular Employee to which the Participant is
entitled on account of his status as an alternate payee or surviving spouse
under the terms of the plan from which such distribution is made shall be
treated in the same manner as if he were entitled to such a distribution on
account of his status as a participant in such plan.

 

(b)           Without regard to any limitations on contributions set forth in
this Article 4, the Plan may receive from or on behalf of a Participant who has
terminated employment with the Employer in cash, as a Rollover Contribution, any
amount previously distributed or deemed to be distributed to him from a
retirement plan sponsored by IBM that is qualified under Section 401(a) of the
Code.  The Plan may receive such amount either directly from the Participant, or
from such qualified plan in the form of a direct rollover that satisfies the
requirements of Section 401(a)(31) of the Code.  For purposes of this
subsection, a distribution made or deemed to be made to a Participant who has
terminated employment with the Employer to which such Participant is entitled on
account of his status as an alternate payee or surviving spouse under the terms
of the retirement plan sponsored by IBM from which such distribution is made
shall be treated in the same manner as if he were entitled to such a
distribution on account of his status

 

61

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as a participant in such plan and the Plan shall be treated in the same manner
as any other retirement plan sponsored by IBM.

 

(c)           Notwithstanding the provisions of subsections (a) or (b), the Plan
shall not accept any amount as a Rollover Contribution, unless such amount is
eligible to be rolled over to a qualified trust in accordance with applicable
law and the Participant provides evidence satisfactory to the Plan Administrator
that such amount qualifies as an eligible rollover distribution, within the
meaning of Section 402(c)(4) of the Code.  Unless received by the Plan in the
form of a direct rollover, the Rollover Contribution must be paid to the Trustee
on or before the 60th day after the day it was received by the Employee.  For
purposes of this Section, the terms “eligible rollover distribution” and “direct
rollover” shall have the meaning specified in Section 10.14.

 

(d)           Except as provided in subsection (f), any Rollover Contribution
shall be allocated to a Participant’s Rollover Account.

 

(e)           Any Rollover Contribution that is allocated to the IBM Stock Fund
in accordance with the provisions of Section 5.02 shall be deemed to be a
contribution to the ESOP.

 

(f)            Any Rollover Contribution made prior to January 1, 2008 shall not
include any Roth contributions made in accordance with Section 402A(c)(1)(B) of
the Code.  Effective January 1, 2008, any Roth contributions made in accordance
with Section 402A(c)(1)(B) of the Code may be directly rolled over from an
eligible employer plan qualified under Section 401(a) of the Code to the Plan,
which amount shall be deemed to be a Roth Rollover Contribution and shall be
credited to the Participant’s Roth Rollover Account.

 

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(g)           Any Rollover Contribution that is made prior to January 1, 2008
shall not include any  after-tax contributions.  Effective January 1, 2008, an
amount that had been treated as after-tax contributions by the plan to which
such contributions were made may be directly rolled over from an eligible
employer plan qualified under Section 401(a) of the Code to the Plan, which
amount shall be deemed to be an After-Tax Rollover Contribution and shall be
credited to the Participant’s After-Tax Rollover Account.

 

4.04         CHANGES IN CONTRIBUTION RATES

 

(a)           The percentage of Compensation designated by a Participant under
Section 4.01(a) shall automatically apply to increases and decreases in his
Compensation.  A Participant may change his election under Section 4.01(a) at
any time during the Plan Year by giving such advance Notice as the Plan
Administrator shall prescribe.  The changed percentage shall become effective as
of the first day of the first payroll period beginning after the provision of
the Notice, or as soon thereafter as may be administratively practicable.

 

(b)           Effective as of January 1, 2004, and solely for purposes of
subsection (a), a Participant’s deemed election to make Catch-Up Contributions,
in accordance with Section 4.01(g)(ii), shall be treated as a designation under
Section 4.01(a) for the period beginning on the date that the Participant first
satisfies the condition set forth in Section 4.01(g)(i)(B) for a Plan Year and
ending on the last day of such Plan Year.

 

(c)           If an eligible Employee has become a Participant in accordance
with Section 3.02(b), then he shall be permitted to make an initial designation
under Section 4.01(a) at any time thereafter, in accordance with the procedure
specified in subsection (a).

 

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(d)           The percentage of Compensation designated by a Participant under
Section 4.01(h) shall automatically apply to increases and decreases in his
Compensation.  A Participant may change his election under Section 4.01(h) at
any time during the Plan Year by giving such advance Notice as the Plan
Administrator shall prescribe.  The changed percentage shall become effective as
of the first day of the first payroll period beginning after the provision of
the Notice, or as soon thereafter as may be administratively practicable.

 

(e)           If an eligible Employee has become a Participant in accordance
with Section 3.02(a), then he shall be permitted to make an initial election
under Section 4.01(h) at any time thereafter, in accordance with the procedure
specified in subsection (a).

 

(f)            An eligible Employee who is deemed, in accordance with
Section 3.02A(c),  to have made an election under Section 4.01(a) to commence
Deferred Cash Contributions, shall be permitted to change such election, either
before the first payroll period for which it is effective, or at any time
thereafter, in accordance with the procedure specified in subsection (a).  An
election in accordance with this subsection to reduce the percentage of his
Deferred Cash Contributions to 0% shall be deemed a revocation of such election
for purposes of Section 4.05.

 

(g)           If an eligible Employee has become a Participant in accordance
with Section 3.02A(c), then he shall be permitted to make an initial election 
under Section 4.01(h) at any time thereafter, in accordance with the procedure
specified in subsection (a).

 

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(h)           Effective January 1, 2008 and in accordance with procedures
established by the Plan Administrator, a Participant who has not made an
election pursuant to Section 4.01(a)(xi) with respect to a Plan Year may elect
automatic annual increases in the percentage of his Compensation that shall be
contributed as Deferred Cash Contributions pursuant to Section 4.01(a).  Such
automatic increases shall be in integral multiples of 1% and shall not exceed 3%
each year and shall become effective in each Plan Year on the date specified by
the Participant; provided, however, that no such automatic increase shall become
effective during any period in which Deferred Cash Contributions were not
permitted to be made on his behalf in accordance with Section 8.02(c).

 

4.05         SUSPENSION AND RESUMPTION OF CONTRIBUTIONS

 

(a)           A Participant may suspend and/or revoke his election under
Section 4.01(a) or Section 4.01(h) by giving such advance Notice as the Plan
Administrator shall prescribe.  The suspension or revocation shall become
effective as of the first day of the first payroll period beginning after the
provision of the Notice, or as soon thereafter as may be administratively
practicable.

 

(b)           A Participant who has suspended and/or revoked his election under
Section 4.01(a) or Section 4.01(h) may elect to reinstate such election by
giving such advance Notice as the Plan Administrator shall prescribe.  Such
reinstatement shall be effective as of the first day of the first payroll period
beginning after the provision of the Notice, or as soon thereafter as may be
administratively practicable.

 

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4.06         ACTUAL DEFERRAL PERCENTAGE TEST

 

(a)           With respect to each Plan Year commencing on or after January 1,
1997, the Actual Deferral Percentage for that Plan Year for Highly Compensated
Employees of each Employer who are Participants or eligible to become
Participants for that Plan Year shall not exceed the greater of:

 

(i)            the product of:

 

(A)          Actual Deferral Percentage for the preceding Plan Year for all
Non-Highly Compensated Employees of such Employer for the preceding Plan Year
who were Participants or eligible to become Participants during such preceding
Plan Year, and

 

(B)           1.25, or

 

(ii)           the lesser of:

 

(A)          the sum of:

 

(I)            the Actual Deferral Percentage for the preceding Plan Year for
all Non-Highly Compensated Employees of such Employer for the preceding Plan
Year who were Participants or eligible to become Participants during the
preceding Plan Year, and

 

(II)           2.00%, or

 

(B)           the product of:

 

(I)            the Actual Deferral Percentage for the preceding Plan Year for
all Non-Highly Compensated Employees of such Employer for the preceding Plan
Year who were Participants or eligible to become Participants during the
preceding Plan Year, and

 

(II)           2.00.

 

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(b)           For purposes of subsection (a), an Employer, with the consent of
the Plan Administrator, may elect to use the Actual Deferral Percentage for
Non-Highly Compensated Employees for the Plan Year being tested rather than the
preceding Plan Year, provided that any such election, except an election
applicable to a Plan Year ending before January 1, 2000, may not be changed for
any subsequent Plan Year, except as provided by the Secretary of the Treasury,
and that any such election is incorporated in an amendment to the Plan adopted
by the Plan Administrator, pursuant to Section 13.01(c).

 

(c)           If the Plan Administrator determines that the limitation under
subsection (a) has been exceeded in any Plan Year, with respect to the Highly
Compensated Employees of any Employer, the following provisions shall apply with
respect to such group of Highly Compensated Employees:

 

(i)            The Actual Deferral Ratio of the Highly Compensated Employee with
the highest Actual Deferral Ratio shall be reduced to the extent necessary to
satisfy the limitation set forth in subsection (a) or to cause such ratio to
equal the Actual Deferral Ratio of the Highly Compensated Employee with the next
highest ratio.  This process shall be repeated until the limitation set forth in
subsection (a) is satisfied.  The sum of the amounts of Deferred Cash
Contributions made by each Highly Compensated Employee in excess of the amount
permitted under his revised deferral ratio shall be deemed to be Excess
Contributions.  This total dollar amount of Excess Contributions shall then be
allocated to some or all Highly Compensated Employees in accordance with the
provisions of paragraph (ii).

 

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(ii)           The Deferred Cash Contributions of the Highly Compensated
Employee with the highest dollar amount of Deferred Cash Contributions shall be
reduced by the lesser of (A) the amount required to cause that Participant’s
Deferred Cash Contributions to equal the dollar amount of the Deferred Cash
Contributions of the Highly Compensated Employee with the next highest dollar
amount of Deferred Cash Contributions, or (B) an amount equal to the total
Excess Contributions.  This procedure shall be repeated until all Excess
Contributions are allocated.  The amount of Excess Contributions allocated to
each Highly Compensated Employee, together with Attributed Earnings, shall be
distributed to him in accordance with the provisions of paragraph (iii).

 

(iii)          The Excess Contributions allocated to a Participant shall be paid
to the Participant before the close of the Plan Year following the Plan Year in
which the Excess Contributions were made, and to the extent practicable, within
2½ months of the close of the Plan Year in which the Excess Contributions were
made.  Any Excess Contributions for any Plan Year shall be reduced by any
Deferred Cash Contributions previously returned to the Participant under
Section 4.01 for that Plan Year.  In the event any Deferred Cash Contributions
returned under this Section were matched by Matching Contributions under
Section 4.02, such corresponding Matching Contributions, with Attributed
Earnings, shall be forfeited and used to reduce Employer contributions.

 

(d)           For Plan Years commencing after December 31, 2001, and before
January 1, 2006, the Actual Deferral Percentage Test described in this
Section shall be applied separately with respect to Deferred Cash Contributions
that are deemed, pursuant to

 

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Section 4.01(a) to be contributions to the ESOP and with respect to Deferred
Cash Contributions that are not deemed to be contributions to the ESOP.

 

4.07         ACTUAL CONTRIBUTION PERCENTAGE TEST

 

(a)           With respect to each Plan Year commencing on or after January 1,
1997, the Actual Contribution Percentage for that Plan Year for Highly
Compensated Employees of each Employer who are Participants or eligible to
become Participants for that Plan Year shall not exceed the greater of:

 

(i)            the product of:

 

(A)          the Actual Contribution Percentage for the preceding Plan Year for
all Non-Highly Compensated Employees of such Employer for the preceding Plan
Year who were Participants or eligible to become Participants during the
preceding Plan Year, and

 

(B)           1.25, or

 

(ii)           the lesser of:

 

(A)          the sum of

 

(I)            the Actual Contribution Percentage for the preceding Plan Year
for all Non-Highly Compensated Employees of such Employer for the preceding Plan
Year who were Participants or eligible to become Participants during the
preceding Plan Year and

 

(II)           2.00%, or

 

(B)           the product of:

 

(I)            the Actual Contribution Percentage for the preceding Plan Year
for all Non-Highly Compensated Employees of such Employer for

 

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the preceding Plan Year who were Participants or eligible to become Participants
during the preceding Plan Year, and

 

(II)           2.00.

 

(b)           For purposes of subsection (a), an Employer, with the consent of
the Plan Administrator, may elect to use the Actual Contribution Percentage for
Non-Highly Compensated Employees for the Plan Year being tested rather than the
preceding Plan Year, provided that any such election, except an election
applicable to a Plan Year ending before January 1, 2000, once made may not be
changed for any subsequent Plan Year, except as provided by the Secretary of the
Treasury and that any such election is incorporated in an amendment to the Plan
adopted by the Plan Administrator, pursuant to Section 13.01(c).

 

(c)           If the Plan Administrator determines that the limitation under
subsection (a) has been exceeded in any Plan Year with respect to the Highly
Compensated Employees of any Employer, the following provisions shall apply with
respect to such group of Highly Compensated Employees:

 

(i)            The Actual Contribution Ratio of the Highly Compensated Employee
with the highest Actual Contribution Ratio shall be reduced to the extent
necessary to satisfy the limitation set forth in subsection (a) or to cause such
ratio to equal the Actual Contribution Ratio of the Highly Compensated Employee
with the next highest Actual Contribution Ratio.  This process shall be repeated
until the limitation set forth in subsection (a) is satisfied.  The sum of the
amounts of Matching Contributions on behalf of plus After-Tax Contributions made
by each Highly Compensated Employee in excess of the amount permitted under his

 

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revised contribution ratio shall be deemed Excess Aggregate Contributions.  This
total dollar amount of Excess Aggregate Contributions shall then be allocated to
some or all Highly Compensated Employees in accordance with the provisions of
paragraph (ii).

 

(ii)           The sum of the Matching Contributions and After-Tax Contributions
of the Highly Compensated Employee with the highest dollar amount of such
contributions shall be reduced by the lesser of (A) the amount required to cause
the sum of that Participant’s Matching Contributions and After-Tax Contributions
to equal the dollar amount of such contributions of the Highly Compensated
Employee with the next highest dollar amount of such contributions, or (B) an
amount equal to the total Excess Aggregate Contributions.  This procedure shall
be repeated until all Excess Aggregate Contributions are allocated.   Effective
for Plan Years beginning after December 31, 2003 the amount of Excess Aggregate
Contributions allocated to each Highly Compensated Employee, together with
Attributed Earnings, shall be distributed or forfeited in accordance with the
provisions of paragraph (iii).

 

(iii)          Excess Aggregate Contributions allocated to a Highly Compensated
Employee under paragraph (ii) shall be distributed or forfeited as follows:

 

(A)          After-Tax Contributions, to the extent of the Excess Aggregate
Contributions, together with Attributed Earnings, shall be paid to the
Participant and then, if necessary,

 

(B)           so much of the Matching Contributions together with Attributed
Earnings, as shall be necessary, as shall be necessary to equal the balance of
the Excess Aggregate Contributions shall be forfeited and applied to reduce
Employer contributions.

 

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(iv)          Any repayment or forfeiture of Excess Aggregate Contributions
shall be made before the close of the Plan Year following the Plan Year for
which the Excess Aggregate Contributions were made, and to the extent
practicable, any repayment or forfeiture shall be made within 2½ months of the
close of the Plan Year in which the Excess Aggregate Contributions were made.

 

(d)           For Plan Years commencing after December 31, 2001 and prior to
January 1, 2004, the Actual Contribution Percentage Test described in this
Section shall be applied separately with respect to Employer Matching
Contributions that are deemed, pursuant to Section 4.02(a) to be contributions
to the ESOP and with respect to Employer Matching Contributions that are not
deemed to be contributions to the ESOP.   For Plan Years commencing after
December 31, 2003, and before January 1, 2006, the Actual Contribution
Percentage Test described in this Section shall be applied separately (i) with
respect to the sum of Employer Matching Contributions that are deemed, pursuant
to Section 4.02(a), to be contributions to the ESOP and After-Tax Contributions
that are deemed, pursuant to Section 4.01(h)(iii), to be contributions to the
ESOP, and (ii) with respect to the sum of Employer Matching Contributions and
After-Tax Contributions that are not deemed to be contributions to the ESOP.

 

4.08         AGGREGATE CONTRIBUTION LIMITATION

 

Notwithstanding the provisions of Sections 4.06 and 4.07, for Plan Years
commencing prior to January 1, 2002, in no event shall the sum of the Actual
Deferral Percentage of the group of eligible Highly Compensated Employees of any
Employer and the Actual Contribution Percentage of such group, after applying
the provisions of Sections 4.06 and 4.07, exceed the “aggregate limit” as
provided in Section 401(m)(9) of the Code and

 

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the Regulations issued thereunder.  In the event the aggregate limit is exceeded
for any Plan Year, the Contribution Percentages of the Highly Compensated
Employees of such Employer shall be reduced to the extent necessary to satisfy
the aggregate limit in accordance with the procedure set forth in Section 4.07.

 

4.09         ADDITIONAL DISCRIMINATION TESTING PROVISIONS

 

(a)           If any Highly Compensated Employee is a member of another
qualified plan of the Employer or an Affiliate, other than an employee stock
ownership plan described in Section 4975(e)(7) of the Code or any other
qualified plan which must be mandatorily disaggregated from this Plan under
Section 410(b) of the Code, which includes a qualified cash or deferred
arrangement within the meaning of Section 401(k) of the Code or matching
contributions within the meaning of Section 401(m) of the Code, or under which
the Highly Compensated Employee may make employee contributions other than by
elective deferral, within the meaning of Section 402(g)(3) of the Code, the Plan
Administrator shall implement rules, which shall be uniformly applicable to all
employees similarly situated, to take into account all such contributions by or
on behalf of the Highly Compensated Employee under all such plans in applying
the limitations of Sections 4.06, 4.07, and 4.08.  If any other such qualified
plan has a plan year other than the Plan Year, the contributions to be taken
into account in applying the limitations of Sections 4.06, 4.07, and 4.08 will
be those made in the plan years ending with or within the same calendar year.

 

(b)           In the event that this Plan is aggregated with one or more other
plans to satisfy the requirements of Sections 401(a)(4) or 410(b) of the Code,
other than for purposes of the average benefit percentage test under
Section 410(b)(2)(A)(ii) of the Code, or if one or

 

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more other plans is aggregated with this Plan to satisfy the requirements of
such sections of the Code, then the provisions of Sections 4.06, 4.07, and 4.08
shall be applied by determining the Actual Deferral Percentage and Actual
Contribution Percentage of employees as if all such plans were a single plan. 
If this Plan is permissively aggregated with any other plan or plans for
purposes of satisfying the provisions of Section 401(k)(3) of the Code, the
aggregated plans must also satisfy the requirements of Sections 401(a)(4) and
410(b) of the Code as though they were a single plan. Plans may be aggregated
under this subsection (b) only if they have the same plan year.

 

(c)           Notwithstanding any provision of the Plan to the contrary, if
employees included in a unit of employees covered by a collective bargaining
agreement are participating in the Plan and not more than 2% of such employees
are Highly Compensated Employees or professionals, within the meaning of
Section 1.410(b)-9 of the Regulations, then such employees shall be disregarded
in applying the provisions of Section 4.06, 4.07, and 4.08.  However,
Section 4.06 shall be applied separately for each group of collectively
bargained employees.

 

4.10         MAXIMUM ANNUAL ADDITIONS

 

(a)           The annual addition to a Participant’s Account for any Plan Year,
when added to the Participant’s annual addition for that Plan Year under any
other qualified defined contribution plan of the Employer or an Affiliate, shall
not exceed an amount which is equal to the lesser of:

 

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(i)            for Plan Years commencing prior to January 1, 2002, 25% of his
aggregate remuneration for that Plan Year and for Plan Years commencing
subsequent to December 31, 2001, 100% of his remuneration for that Plan Year; or

 

(ii)           for Plan Years commencing prior to January 1, 2002, $30,000, and
for Plan Years commencing subsequent to December 31, 2001, $40,000, each as
adjusted pursuant to Section 415(d) of the Code.

 

The Plan Year shall be the “limitation year” for purposes of Section 415 of the
Code.

 

(b)           For purposes of this Section, the “annual addition” to a
Participant’s Account under this Plan or any other qualified defined
contribution plan maintained by the Employer or an Affiliate, including any
provision of a qualified defined benefit plan that is required to be treated as
a defined contribution plan in accordance with Section 414(k)(2) of the Code
shall be the sum of:

 

(i)            the total contributions, including Deferred Cash Contributions
and Employer Contributions, made on the Participant’s behalf by the Employer and
all Affiliates,

 

(ii)           all Participant contributions, exclusive of any Rollover
Contributions, Roth Rollover Contributions, or After-Tax Rollover Contributions,
and

 

(iii)          forfeitures, if applicable, that have been allocated to the
Participant’s Accounts under this Plan or his accounts under any other such
qualified defined contribution plan, and

 

(iv)          amounts described in Sections 415(l)(1) and 419A(d)(2) allocated
to the Participant solely for purposes of clause (ii) of subsection (a).

 

For purposes of this subsection, any Deferred Cash Contributions distributed
under the provisions of Section 4.01 or 4.06, any After-Tax Contributions
distributed under the provisions of Section 4.07, and any Matching Contributions
distributed or forfeited under

 

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the provisions of Section 4.07 or 4.08 shall be included in the annual addition
for the year allocated.

 

(c)           For purposes of this Section, the term “remuneration” with respect
to any Participant shall mean the wages, salaries and other amounts paid in
respect of such Participant by the Employer or an Affiliate for personal
services actually rendered, and shall include elective deferrals within the
meaning of Section 402(g)(3) of the Code and amounts contributed or deferred by
the Employer at the election of the Participant which are not includible in the
gross income of the Participant under Sections 125, 132(f)(4) (with respect to
Plan Years beginning after December 31, 2000), or 457 of the Code, but shall
exclude deferred compensation, stock options and other distributions which
receive special tax benefits under the Code.  Notwithstanding the foregoing, for
limitation years commencing prior to January 1, 1998, remuneration shall exclude
amounts contributed by the Employer pursuant to a salary reduction agreement
which are not includible in the gross income of the employee under Sections 125,
402(e)(3) or 457 of the Code.

 

(d)           If the annual addition to a Participant’s Account for any Plan
Year, prior to the application of the limitation set forth in
subsection (a) above, exceeds that limitation due to a reasonable error in
estimating a Participant’s annual compensation or in determining the amount of
Deferred Cash Contributions that may be made with respect to a Participant under
Section 415 of the Code, or as the result of the allocation of forfeitures, then
the amount of contributions credited to the Participant’s Account in that Plan
Year shall be adjusted to the extent necessary to satisfy that limitation in
accordance with the following order of priority:

 

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(i)            Effective for Plan Years beginning after December 31, 2003, the
Participant’s After-Tax Contributions under Section 4.01(h) shall be reduced to
the extent necessary.  The amount of the reduction shall be returned to the
Participant, together with any Attributed Earnings.

 

(ii)           The Participant’s unmatched Deferred Cash Contributions under
Section 4.01 shall be reduced to the extent necessary.  The amount of the
reduction shall be returned to the Participant together with any Attributed
Earnings.

 

(iii)          The Participant’s matched Deferred Cash Contributions and
corresponding Matching Contributions shall be reduced to the extent necessary. 
The amount of the reduction attributable to the Participant’s matched Deferred
Cash Contributions shall be returned to the Participant together with any
Attributed Earnings, and the amount attributable to the Matching Contributions
together with any Attributed Earnings shall be forfeited and used to reduce
subsequent contributions payable by the Employer.

 

(iv)          The Participant’s Non-Matching Employer Contributions under
Section 4.02A shall be reduced to the extent necessary.  The amount of the
reduction attributable to the Participant’s Non-Matching Employer Contributions
together with any Attributed Earnings shall be forfeited and used to reduce
subsequent contributions payable by the Employer.

 

Any Deferred Cash Contributions returned to a Participant under this subsection
shall be disregarded in applying the dollar limitation on Deferred Cash
Contributions under Section 4.01(c), and in performing the Actual Deferral
Percentage Test under Section 4.06.  Effective January 1, 2008, the provisions
of this subsection (d) shall be given effect if the Plan Administrator
determines that compliance with the provisions of this subsection is not
inconsistent with the requirements of any applicable corrective

 

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procedures established by the Internal Revenue Service pursuant to
Section 601.202 of the Regulations.

 

(e)           For Plan Years beginning prior to January 1, 2000, if a
Participant is a participant in any qualified defined benefit plan maintained by
the Employer or an Affiliate that is required to be taken into account for
purposes of applying the combined plan limitations contained in
Section 415(e) of the Code, then for any year the sum of the defined benefit
plan fraction and the defined contribution plan fraction, as such terms are
defined in said Section 415(e), shall not exceed 1.0.  If for any year the
foregoing combined plan limitation would be exceeded, the benefits provided
under any defined benefit plan maintained by an Employer or Affiliate and the
contributions allocated under any other defined contribution plan maintained by
the Employer or an Affiliate shall be discontinued, suspended or reduced, as
applicable, before any adjustments to a Participant’s Account are made in
accordance with subsection (d).

 

(f)            Effective January 1, 2008, the limitations imposed by Section 415
of the Code shall be applied to the annual additions in accordance with the
provisions of the final regulations promulgated on April 5, 2007, (26 C.F.R.
Parts 1 and 11), which regulations are hereby incorporated by reference in
accordance with Section 1.415(a)-1(d)(3).  The dollar limitation on annual
additions shall be adjusted in accordance with Section 415(d) of the Code and
Section 1.415(d)-1 of the Regulations, which is hereby incorporated by
reference, pursuant to Section 1.415(a)-1(d)(3)(v) of the Regulations.  If the
annual additions to a Participant’s Account exceeds the limitation imposed in
accordance with this subsection, the provisions of subsection (d) shall apply.

 

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4.11         CONTRIBUTIONS FOR PERIODS OF MILITARY LEAVE

 

Except as otherwise specified, the provisions of this Section 4.11 are effective
as of December 12, 1994.

 

(a)           Participant Make-Up Contributions

 

Without regard to any limitations on contributions set forth in this Article 4,
a Participant who is absent from employment because of a period of service in
the uniformed services of the United States beginning on or after August 1, 1990
and whose right to reemployment is protected under the Uniformed Services
Employment and Reemployment Rights Act of 1994, may, subsequent to his return to
employment as a Regular Employee, elect to contribute to the Plan, as a make-up
contribution, the Deferred Cash Contributions that could have been contributed
to the Plan in accordance with the provisions of the Plan, had he remained
continuously employed by the Employer throughout such period of absence.  The
amount of make-up contributions shall be determined on the basis of the
Participant’s Compensation in effect immediately prior to the period of absence,
and the terms of the Plan at such time.  Any Deferred Cash Contributions so
determined shall be subject to the limitations provided in Sections 4.01(c),
4.06, 4.07, and 4.08 with respect to the Plan Year or Plan Years to which such
contributions relate, rather than the Plan Year in which payment is made.  Any
payment to the Plan described in this subsection must be made during the
applicable repayment period.  The applicable repayment period shall begin on the
latest of:  (i) the Participant’s date of reemployment, (ii) October 13, 1996,
or (iii) date on which the Employer notifies the Employee of his rights under
this Section.  The applicable repayment period shall continue for a period of
whole months equal to the lesser of (i) the number of whole months of the
Participant’s period of absence multiplied by 3, or (ii) 60 months.

 

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(b)           Employer Make-Up Contributions

 

(i)            With respect to a Participant who makes the election described in
subsection (a), the Employer shall make Matching Contributions on such make-up
contributions in an amount determined in accordance with the provisions of
Section 4.02, as in effect for the Plan Year to which such make-up contributions
relate. Any Matching Contributions so determined shall be subject to the
limitations provided in Sections 4.02, 4.06, 4.07, and 4.08 with respect to the
Plan Year or Plan Years to which such contributions relate, rather than the Plan
Year or Plan Years in which payment is made.  Employer Matching Contributions
under this paragraph shall be made during the applicable repayment period
described in subsection (a).

 

(ii)           If a Participant who is absent from employment because of a
period of service in the uniformed services of the United States beginning on or
after August 1, 1990 and whose right to reemployment is protected under the
Uniformed Services Employment and Reemployment Rights Act of 1994, returns to
employment as a Regular Employee, his Employer shall contribute to the Plan, as
a make-up contribution, an amount equal to the excess of the Non-Matching
Employer Contributions that would have been made to the Participant’s Employer
Account if the Participant had remained continuously employed by the Employer
throughout such period of absence over the amount, if any, of Non-Matching
Employer Contributions made to the Participant’s Employer Account during such
period of absence.  The amount of make-up contributions shall be determined on
the basis of the Participant’s Compensation in effect immediately prior to the

 

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period of absence, and the terms of the Plan at such time. Non-Matching Employer
Contributions under this paragraph shall be made within 90 days of the
Participant’s return to employment or, if later the date on which such
contributions would have been made if the Participant had remained continuously
employed during such period of absence.

 

(c)           All contributions under this Section shall be considered “annual
additions,” as defined in Section 415(c)(2) of the Code, and shall be limited in
accordance with the provisions of Section 4.10 with respect to the Plan Year or
Plan Years to which such contributions relate rather than the Plan Year in which
payment is made.

 

(d)           Earnings (or losses) on make-up contributions made pursuant to
subsection (a) and Matching Contributions made pursuant to subsection (b) shall
be credited in accordance with Article 6, commencing with the date such
contributions are made.

 

4.12         RETURN OF CONTRIBUTIONS

 

(a)           If all or part of an Employer’s deductions for contributions to
the Plan are disallowed by the Internal Revenue Service, the portion of the
contributions to which that disallowance applies shall be returned to the
Employer, upon written request to the Trustee, without interest, but reduced by
any investment loss attributable to those contributions, provided that such
contributions are returned within one year after the disallowance of deduction. 
For this purpose, all contributions made by each Employer are expressly declared
to be conditioned upon their deductibility under Section 404 of the Code.

 

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(b)           Upon written request to the Trustee, the Employer may recover
without interest the amount of its contributions to the Plan made on account of
a mistake of fact, reduced by any investment loss attributable to those
contributions, if recovery is made within one year after the date of those
contributions.

 

(c)           In the event that Deferred Cash Contributions made under
Section 4.01 are returned to the Employer in accordance with the provisions of
subsection (a) or (b), the elections to reduce Compensation which were made by
Participants on whose behalf those contributions were made shall be deemed void
retroactively to the beginning of the period for which those contributions were
made.  The Deferred Cash Contributions so returned shall be distributed in cash
to those Participants for whom those contributions were made, provided, however,
that the amount of Deferred Cash Contributions to be distributed to Participants
shall be adjusted to reflect any investment gains or losses attributable to
those contributions.

 

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ARTICLE 5.  INVESTMENT OF CONTRIBUTIONS AND ELECTIVE DISTRIBUTION
OF DIVIDENDS PAYABLE ON STOCK HELD IN IBM STOCK FUND

 

5.01         INVESTMENT FUNDS

 

(a)           The assets of the Plan shall be invested in one or more Investment
Funds, except to the extent such assets are invested in accordance with the
Mutual Fund Window Program.

 

(b)           The IBM Stock Fund shall be one of the Investment Funds and shall
constitute the ESOP.

 

(i)             The IBM Stock Fund shall not be a managed Investment Fund and
shall be invested, to the maximum extent practicable, entirely in the common
stock of IBM at all times, except to the extent that cash may be required to
make distributions under the Plan, to pay expenses, or to meet other short-term
needs.

 

(ii)            IBM, the settlor of the ESOP, intends the ESOP to offer eligible
employees opportunities to invest indirectly in the common stock of IBM and to
participate in the performance of the common stock of IBM on terms similar to
those that apply to IBM shareholders.  IBM intends the ESOP to offer such
opportunities over an indefinite period of time during which the performance of
the common stock of IBM could vary widely.  IBM intends the ESOP to continue to
offer such opportunities under all market conditions and regardless of the
current, recent, or historical performance of

 

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IBM or the common stock of IBM (for example, regardless of whether, over any
period of time (of whatever duration), IBM pays dividends to its shareholders
and regardless of whether, over any period of time (of whatever duration), the
market price of the common stock of IBM (A) rises or falls, (B) is volatile or
stable, or (C) is high or low in relation to any reference point).  IBM
recognizes that an investment in an undiversified fund, such as the ESOP, is
subject to greater risk than is an investment in a diversified fund, and IBM
expects eligible employees to take that greater risk into account when deciding
whether to participate (or to continue participating) in the ESOP.

 

(iii)           Because the purpose of the ESOP is to offer eligible employees
opportunities to invest indirectly in the common stock of IBM and to participate
in the performance of such stock on terms similar to those that apply to IBM’s
shareholders, the Plan’s fiduciaries and administrators shall not (A) disclose
material non-public information regarding IBM or the common stock of IBM to the
Plan, to the Trustee or other Plan fiduciaries, or to Plan participants,
beneficiaries, or alternate payees before such information is publicly disclosed
or (B) based on such non-public information (and before such information is
publicly disclosed), cause the Plan, the Trustee or other Plan fiduciaries, or
Plan participants, beneficiaries, or alternate payees to take any action with
respect to the common stock of IBM (such as buying or

 

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selling IBM stock or directing funds into or out of the IBM Stock Fund).

 

(c)           The Committee shall designate other Investment Funds as primary
funds from time to time.  The Investment Funds authorized by the Committee may
include such equity funds, international equity funds, fixed income funds, money
market funds, and other funds as the Committee, in its discretion, elects.  Each
Investment Fund authorized by the Committee under this Section 5.01(c) shall be
managed by the Trustee or one or more Investment Managers appointed by the
Committee in accordance with Section 11.03(a)(i).

 

(d)           The Trustee or Investment Manager responsible for managing an
Investment Fund authorized by the Committee under Section 5.01(c) may allocate
such portion of such Investment Fund as it deems necessary or desirable in its
sole discretion to cash or cash equivalents, subject to any applicable
limitations specified in the applicable trust agreement or investment management
agreement.

 

(e)           Dividends, interest, and other distributions received on the
assets held by the Trustee in respect to each of the above Investment Funds
shall be reinvested in the respective Fund, except to the extent otherwise
provided in Section 5.09.

 

5.01A      MUTUAL FUND WINDOW PROGRAM

 

(a)           Effective as of January 1, 2005, the Committee shall establish an
inventory of Designated Mutual Funds that shall be available for the investment
of a portion of a Participant’s Account under the Mutual Fund Window Program, in
accordance with the provisions of this Section.

 

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(b)           A Participant may elect, in accordance with Section 5.04(a) and
subject to the limitations prescribed in subsection (c), that a portion of his
Account shall be reallocated from one or more of the Investment Funds to be
invested under the Mutual Fund Window Program and, effective January 1, 2008,
may elect, in accordance with Section 5.02 and subject to the limitations
prescribed in subsection (c), that all or a portion of the contributions to his
Account shall be invested under the Mutual Fund Window Program.

 

(c)           The Plan Administrator or its designee shall establish rules for
the investment of, or the reallocation of Participant Accounts from the
Investment Funds to investment under the Mutual Fund Window Program, and may
change such rules from time to time in its sole discretion.  Such rules may
include, without limitation:

 

(i)            A limit on the portion of a Participant’s Account that is
available for investment under the Mutual Fund Window Program, which limit may
take the form of a minimum dollar amount or minimum percentage, or both a
minimum dollar amount and a minimum percentage, of a Participant’s Account that
must be invested in the primary Investment Funds.

 

(ii)           A minimum amount that a Participant who elects to invest a
portion of his Account under the Mutual Fund Window Program is required to
reallocate from investment in the Investment Funds to investment under the
Mutual Fund Window Program, in order to commence investment under the Mutual
Fund Window Program, and a minimum amount that a Participant who elects to
increase the portion of his Account that is invested under the Mutual Fund

 

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Window Program is required to reallocate from investment in the Investment Funds
to investment under the Mutual Fund Window Program.

 

A Participant shall not be permitted to elect an investment reallocation in
accordance with Section 5.04(a) that would cause the portion of his Account that
is invested in the Investment Funds, as determined as of the date of such
reallocation, to be less than the minimum dollar amount or minimum percentage
established by the Plan Administrator or its designee in accordance with
paragraph (i), or that fails to comply with the minimum reallocation
requirements established by the Plan Administrator or its designee in accordance
with paragraph (ii), as in effect as of the date of such reallocation.

 

(d)           A Participant who elects, in accordance with subsection (b), to
allocate a portion of his Account or a portion of contributions to his Account
to be invested under the Mutual Fund Window Program shall specify the Designated
Mutual Fund or Designated Mutual Funds in which such portion of his Account or
contributions shall be invested, by giving such Notice of such specification as
the Plan Administrator or its designee shall prescribe and, if he specifies more
than one Designated Mutual Fund, shall further specify, in multiples of 1%, the
percentage of the amount so reallocated that shall be invested in each such
fund.

 

(e)           A Participant may elect to reallocate the portion of his Account
that is invested under the Mutual Fund Window Program, among the Designated
Mutual Funds, in multiples of 1%, by giving such advance Notice as the Plan
Administrator or its designee shall prescribe.  Such reallocation shall be
effective as soon as administratively practicable following provision of such
Notice.

 

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(f)            A Participant who elects, pursuant to Section 5.04(a), to
reallocate any portion of his Account that is invested under the Mutual Fund
Window Program to be invested in one of more of the primary Investment Funds
shall specify the Designated Mutual Fund or Designated Mutual Funds from which
the amount to be so reallocated shall be taken, by giving such Notice of such
specification as the Plan Administrator or its designee shall prescribe.

 

(g)           If any portion of a Participant’s Account is invested under the
Mutual Fund Window Program as of the date selected by the Plan Administrator as
the date of reference for the assessment of administrative fees for a calendar
quarter, an administrative fee shall be charged against his Account, in an
amount determined by the Plan Administrator, which prior to January 1, 2007,
such fee shall be debited proportionally from the Investment Funds in which his
Account is invested as of such date or, effective January 1, 2008, from the
Designated Mutual Funds in which his Account is invested as of such date, in a
manner as the Plan Administrator shall direct.

 

(h)           Upon the occurrence of an event described in paragraph (i), the
Plan Administrator or its designee may, without the consent of the Participant,
cause the mandatory reallocation of the Participant’s Account from investment
under the Mutual Fund Window Program to investment under the Investment Funds. 
The amount so reallocated shall be determined in accordance with paragraph (ii);
such amount shall be debited from the amounts invested in Designated Mutual
Funds in accordance with paragraph (iii); and, to the extent available for
investment, shall be invested in accordance with paragraph (iv).

 

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(i)            A Participant’s Account shall be subject to mandatory
reallocation in any of the following circumstances:

 

(A)          as of the date an administrative fee is assessed in accordance with
subsection (g) that is required to be debited from the Investment Funds in which
his Account is invested, the portion of the Participant’s Account that is
invested in any of the Investment Funds is less than the amount of such fee;

 

(B)           the balance of the Participant’s Account is required to be paid to
the Participant’s Beneficiary in accordance with Section 10.01(b);

 

(C)           the amount of an installment distribution that is required to be
made to a Participant pursuant to his election in accordance with
Section 10.02(b)(i) exceeds the portion of the Participant’s Account that is
invested in the Investment Funds;

 

(D)          the Participant’s Account is subject to mandatory distribution in
accordance with Section 10.03;

 

(E)           the amount required to be distributed to the Participant in
accordance with Section 10.06 exceeds the portion of the Participant’s Account
that is invested in the Investment Funds, determined as of the date such
distribution is required to be made;

 

(F)           the portion of a Participant’s Account that is required to be
distributed to an alternate payee, or allocated to an account established for an
alternate payee, in accordance with Section 14.02(c) exceeds the portion of the
Participant’s Account that is invested in the Investment Funds; or

 

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(G)           an adjustment is required to be made to the Participant’s Account
in accordance with rules established by the Plan Administrator or its designee.

 

(ii)           In any of the circumstances described in paragraph (i), the
amount that the Plan Administrator or its designee shall cause to be reallocated
from investment under the Mutual Fund Window Program shall be the lesser of:

 

(A)          the sum of (X) the product of (I) 1.05 and (II) the excess of the
amount of the amount of the required distribution, reallocation or
administrative fee, as applicable, over the amount then invested in any of the
Investment Funds, plus (Y) the minimum dollar amount, if any, then in effect in
accordance with subsection (c)(ii); or

 

(B)           the portion of the Participant’s Account that is invested under
the Mutual Fund Window Program.

 

(iii)          In the event that the portion of the Participant’s Account that
is invested under the Mutual Fund Window Program as of the date of a
reallocation described in paragraph (i) is invested in more than one Designated
Mutual Fund, then the amount of such reallocation, as determined in accordance
with paragraph (ii), shall be taken ratably from the amount invested in each
such fund.

 

(iv)          To the extent that a portion of an amount that is the subject of a
mandatory reallocation in accordance with paragraph (i) is available for
investment, it shall be invested in the Investment Fund specified in
Section 5.02(b).

 

(i)            The Plan Administrator or its designee is authorized to establish
procedures for the maintenance of the Mutual Fund Window Program and the
investment of Participant Accounts thereunder which rules may include provisions
for the establishment of

 

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transition accounts to which amounts reallocated pursuant to subsection
(b) shall be credited, pending investment in the Designated Mutual Fund
specified by the Participant, or to which amounts reallocated pursuant to
subsection (f) shall be credited, pending reallocation to one or more of the
Investment Funds.

 

5.02         INVESTMENT OF CONTRIBUTIONS TO PARTICIPANTS’ ACCOUNTS

 

(a)           A Participant shall make an investment election which shall
specify the manner in which the Deferred Cash Contributions, Catch-Up
Contributions, Employer Matching Contributions, After-Tax Contributions, and
Rollover Contributions allocated to his Account shall be invested.  Such
election shall provide for the investment of such contributions in one or more
than one of the primary Investment Funds, as designated by the Participant, or,
effective January 1, 2008, in one or more than one of the Designated Mutual
Funds, as designated by the Participant, apportioned in multiples of 1%.  A
Participant may make (i) a single election that shall be applicable to all
contributions allocated to his Account, or (ii) separate elections with respect
to (A) his Deferred Cash Contributions, Catch-Up Contributions, Employer
Matching Contributions, and, effective January 1, 2008, Non-Matching Employer
Contributions, (B) his After-Tax Contributions, (C) his Rollover Contributions,
and, effective January 1, 2007, (D) his Roth Contributions, to (E) his Roth
Rollover Contributions, and (F) his After-Tax Rollover Contributions.

 

(b)           Effective as of January 1, 2005, (i) if a Participant has an
election pursuant to subsection (a)(ii)(A) in effect, but not does not have an
election in effect with respect to After-Tax Contributions pursuant to
subsection (a)(ii)(B), then any After-Tax

 

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Contributions allocated to the Participant’s Account shall be invested in
accordance with his election pursuant to subsection (a)(ii)(A);  (ii) if a
Participant has an election pursuant to subsection (a)(ii)(B) in effect, but not
does not have an election in effect with respect to Deferred Cash Contributions,
Catch-Up Contributions, and Employer Matching Contributions and, effective
January 1, 2008, Non-Matching Employer Contributions, pursuant to subsection
(a)(ii)(A), then any Deferred Cash Contributions, Catch-Up Contributions or
Employer Matching Contributions, or, effective January 1, 2008, Employer
Non-Matching Contributions allocated to the Participant’s Account shall be
invested in accordance with his election pursuant to subsection (a)(ii)(B);
(iii) if a Participant fails to make an election with respect to a Rollover
Contribution pursuant to subsection (a)(ii)(C), then such Rollover Contribution,
when allocated to his Account, shall be invested in accordance with the
Participant’s election pursuant to subsection (a)(i) or (a)(ii)(A) which is then
in effect or deemed to be in effect; (iv) if a Participant fails to make an
investment election in accordance with subsection (a), any contributions made by
or on behalf of the Participant shall be invested in the Investment Fund
designated by the Committee from time to time, which designation shall be deemed
to be an amendment to the Plan in accordance with Section 13.01(b), provided,
however, that any such designation, as in effect from time to time, shall apply
to all contributions by or on behalf of all Participants who have failed to make
an investment election.  Effective January 1, 2008, (v) if a Participant has an
election pursuant to subsection (a)(ii)(A) in effect or deemed to be in effect,
but not does not have an election in effect with respect to Roth Contributions
pursuant to subsection (a)(ii)(D), then any Roth Contributions allocated to the
Participant’s Account shall be invested in accordance with his election pursuant
to subsection (a)(ii)(A); (vi) notwithstanding clause (iii) of the foregoing
sentence, if a Participant fails to make an election with respect to a Rollover

 

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Contribution pursuant to subsection (a)(ii)(C), with respect to a Roth Rollover
Contribution pursuant to subsection (a)(ii)(E), or with respect to an After-Tax
Rollover Contribution pursuant to subsection (a)(ii)(F) then such Rollover
Contribution, Roth Rollover Contribution, or After-Tax Rollover Contribution,
when allocated to his Account, shall be invested in accordance with clause
(iv) of the foregoing sentence.

 

(c)           An election by a Participant pursuant to subsection (a) that
specifies that all or any portion of his Deferred Cash Contributions, Catch-Up
Contributions, Employer Matching Contributions, After-Tax Contributions,
Non-Matching Employer Contributions, Rollover Contribution, or Roth Rollover
Contribution shall be invested in the IBM Stock Fund shall be deemed to be an
election that such amount shall be contributed to the ESOP.

 

(d)           An election pursuant to subsection (a) shall be subject to the
provisions of Section 5.05 and 13.02(f).

 

5.03         CHANGE OF INVESTMENT ELECTION

 

A Participant may change his investment election under Section 5.02 at any time
by giving such advance Notice as the Plan Administrator shall prescribe. Such
changed investment election shall become effective as of the first day of the
first payroll period beginning after the provision of the Notice, or soon
thereafter as administratively practicable, and shall be effective only with
respect to contributions allocated subsequent thereto.

 

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5.04         REALLOCATION OF ACCOUNTS AMONG THE FUNDS

 

(a)           Subject to the provisions of subsection (b) and Section 5.05, a
Participant may elect to reallocate his Account among the Investment Funds, or,
effective as of January 1, 2005, among the Investment Funds and the Mutual Fund
Window Program, at any time, in multiples of 1%, or in specified whole dollar
amounts, by giving such advance Notice as the Plan Administrator shall
prescribe, provided, however, that any election that reallocates any portion of
his Account to be invested under the Mutual Fund Window Program shall be subject
to the limitations of Section 5.01A(c).   A Participant may make (i) a single
election that shall be applicable to all amounts allocated to his Account, or
(ii) separate elections with respect to (A) his Before-Tax Deferral Account,
Catch-Up Account, Employer Account, and Rollover Account, (B) his After-Tax
Account and, effective January 1, 2008, his After-Tax Rollover Account, and,
effective January 1, 2008, (C) his Roth Contributions Account and Roth Rollover
Account. Such reallocation shall be effective as soon as administratively
practicable following provision of such Notice, provided, however, that no such
reallocation shall be effective as of a Valuation Date for which the Plan
Administrator has made a direction pursuant to Section 6.02(b).

 

(b)           The Plan Administrator may assess an administrative fee for
investment reallocations under subsection (a), the amount of which fee may be
changed from time to time, and may further provide that such fee shall be
assessed only if the number of investment reallocations made by a Participant in
a Plan Year exceeds a specified limit, which limit may be changed from time to
time.  Any such fee shall be deducted from the amount so reallocated and charged
to the Participant’s Deferred Account, Employer Account, and Rollover Account on
a proportional basis.

 

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(c)                                  An election by a Participant pursuant to
subsection (a) that causes any portion of his Account to be reallocated to the
IBM Stock Fund shall be deemed to be an election to transfer such portion of his
Account to the ESOP.  An election by a Participant that reallocates any portion
of his Account from the IBM Stock Fund to any other Fund shall be deemed to be
an election to transfer such portion of his Account from the ESOP.

 

(d)                                 Effective as of January 1, 2004, the Plan
Administrator may, in its discretion, impose restrictions on excessive trading
by Participants. Such restrictions may, in the discretion of the Plan
Administrator, be applied (i) to Participants on an individual basis or to all
Participants or (ii) to an Investment Fund or to all Investment Funds. In
addition, the Designated Mutual Funds may have their own trading restrictions,
on Participants or on the mutual fund or both, which shall be governed by the
terms of the applicable Designated Mutual Fund prospectus.

 

(e)                                  A Participant who makes an election
pursuant to subsection (a) (an “initial election”) to reallocate any portion of
his Account from an Investment Fund (“a transferor Investment Fund”) to any
other Investment Fund shall not be permitted to make another election pursuant
to subsection (a) under which any portion of his Account would be allocated to
such transferor Investment Fund, for a period of 30 days after such initial
transfer election.  For purposes of this subsection, (i) any Investment Fund
that is invested primarily in money market instruments and any Investment Fund
that is a Stable Value Fund shall not be deemed a transferor Investment Fund and
(ii) an election pursuant to subsection (a) shall not be deemed an initial
transfer election, to the extent that such election reallocates a portion of a
Participant’s Account from a Fund described in clause (i).

 

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(f)                                    Elections pursuant to subsection
(a) shall be subject to the provisions of Sections 5.05 and 13.02(f).

 

(g)                                 Effective January 1, 2008 and in accordance
with procedures established by the Plan Administrator, a Participant shall be
permitted to elect the automatic reallocation of his Account among the primary
Investment Funds and the designated mutual funds made available under the Mutual
Fund Window Program.  The automatic reallocation shall occur annually on the
anniversary of an allocation election made by the Participant in accordance with
subsection (a) and shall cause the allocation of his Account to be restored to
the allocation that he had elected in his original allocation election. 
Effective January 1, 2009, a Participant may elect to have automatic allocation
occur either (i) on the anniversary of the original allocation election; (ii) 90
days from the original allocation election and 90 days from each reallocation
thereafter; or (iii) 180 days from the original allocation election and 180 days
from each reallocation thereafter.

 

5.05                           LIMITATIONS ON INVESTMENT ELECTIONS AND
INVESTMENT REALLOCATIONS IMPOSED BY CONTRACT OR BY PLAN ADMINISTRATOR

 

(a)                                  Notwithstanding anything in this Article to
the contrary, an investment of any portion of an Account in a Stable Value Fund
shall be subject to any and all terms of the guaranteed investment contracts and
benefit responsive contracts held in such Stable Value Fund, including any
limitations therein placed on the right of a Participant to reallocate such
amounts pursuant to Section 5.04(a) or on the exercise of any rights

 

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otherwise granted to a Participant under any other provisions of this Plan with
respect to such amounts.

 

(b)                                 Notwithstanding anything in this Article to
the contrary, the Plan Administrator may impose temporary restrictions on
investment elections pursuant to Section 5.02 and reallocations pursuant to
Section 5.04, in order to prevent or limit the investment of additional amounts
in any Investment Fund, by all Participants or by any class of Participants, as
determined on a nondiscriminatory basis, when the Plan Administrator determines,
in its sole discretion, but after consultation with the Investment Manager of
the Investment Fund, that such restrictions are necessary to preserve the
equitable treatment of those Participants who have theretofore invested a
portion of their Accounts in such Investment Fund.

 

5.06                           RESPONSIBILITY FOR INVESTMENTS

 

Each Participant is solely responsible for the selection of his or her
investment options.  The Trustee, the Investment Managers, the Committee, the
Plan Administrator, the Employer, and the officers, supervisors and other
employees of the Employer are not empowered to advise a Participant as to the
manner in which his Account shall be invested.  The fact that an Investment Fund
is available to Participants for investment under the Plan shall not be
construed as a recommendation for investment in the Investment Fund by any
Participant.  The fact that the Mutual Fund Window Program is available to
Participants under the Plan shall not be construed as a recommendation for
investment under the Mutual Fund Window Program by any Participant; and the fact
that any mutual fund is determined to be a Designated Mutual Fund shall not be
construed as a recommendation for investment in such mutual fund by any
Participant.

 

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5.07                           VOTING OF IBM SHARES

 

Shares of IBM held in the IBM Stock Fund shall be voted by the Trustee in
accordance with instructions received from each Participant who has allocated
any portion of his Account to such Fund.  The instructions given by a
Participant shall apply to that portion of the shares of IBM held in the Fund
equal to the ratio of the units of the Fund allocated to his Account under
Article 6 to the total number of units in the Fund.  The Trustee shall vote the
shares of IBM for which it does not receive such instructions in the same
proportion as it votes the shares of IBM for which it does receive such
instructions.

 

5.08                           ERISA SECTION 404(C) COMPLIANCE

 

This Plan, including its constituent ESOP, is intended to constitute a plan
described in Section 404(c) of ERISA.

 

5.09                           ELECTIVE DISTRIBUTION OF DIVIDENDS PAYABLE ON
STOCK HELD IN IBM STOCK FUND

 

(a)                                  Effective January 1, 2002, a Participant
whose Account includes an amount invested in the IBM Stock Fund shall be
permitted to elect:

 

(i)                                     to receive a cash distribution of his
allocable share of the dividends payable on common stock of IBM held in the IBM
Stock Fund, or

 

(ii)                                  to direct that his allocable share of the
dividends payable on common stock of IBM held in the IBM Stock Fund be
reinvested in common stock of IBM.

 

For purposes of this Section, a Participant’s allocable share of the dividends
payable on the common stock of IBM shall be that portion of each dividend
payment made to such Fund that bears the same ratio to the total dividend
payment that the number of units of

 

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such Fund credited to his Account bears to the total number of units of such
Fund that are outstanding on the date of such dividend payment.

 

(b)                                 A Participant shall provide Notice of his
election pursuant to subsection (a) in the manner specified in rules established
by the Plan Administrator pursuant to Section 14.05, provided, however, that an
election to receive a distribution of dividends payable on any dividend payment
date declared by IBM shall not be effective unless Notice thereof is filed on or
before the ex-dividend date with respect to such dividends,  or such earlier
date or time as may be specified by the Plan Administrator.  A Participant who
has not provided timely Notice of his election pursuant subsection (a) with
respect to the dividends payable on any dividend payment date declared by IBM
shall be deemed to have directed that his allocable share of such dividends be
reinvested in common stock of IBM, pursuant to subsection (a)(ii).

 

(c)                                  An election made by a Participant in
accordance with subsection (b) shall remain in effect until changed by the
Participant.  A Participant shall be permitted to change an election made in
accordance with subsection (b) at any time, by providing Notice of a new
election in accordance with subsection (b), which new election shall become
effective as provided in subsection (b).

 

(d)                                 In the event that a Participant elects to
receive a distribution of his allocable share of any dividends, in accordance
with the provisions of subsection (a)(i), the dividends that are subject to such
election in each Plan Year shall be paid to him in accordance with paragraph
(i) or paragraph (ii) as applicable:

 

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(i)                                     Dividends declared in 2002 shall be
segregated and credited to the Participant in a separate sub-account of the
ESOP, which sub-account shall be invested in short-term securities or money
market instruments, in the discretion of the Investment Manager designated in
accordance with Section 11.03. The total amount of dividends that are subject to
the Participant’s distribution election for such Plan Year shall then be paid to
him in cash subsequent to the latest dividend payment date declared by IBM in
such Plan Year, but in no event, later than 90 days after the close of the Plan
Year in which such dividends were paid to the Plan.  The interest income or
other investment earnings credited to the Participant’s separate sub-account in
each month shall be reallocated to the IBM Stock Fund at the end of the month.

 

(ii)                                  Dividends declared after 2002 that are
subject to the Participant’s distribution election shall be distributed to the
Participant as soon as practicable following the payment of such dividends,
provided, however, that such distribution shall in any event be made no later
than 90 days after the close of the Plan Year in which such dividends were paid
to the Plan.

 

(e)                                  In the event that a Participant has
directed, or is deemed to have directed, that his allocable share of any
dividends be reinvested in common stock of IBM, in accordance with the
provisions of subsection (a)(ii), such dividends shall be reinvested in
accordance with Section 5.01(e).

 

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ARTICLE 5A.  DISABILITY PROTECTION PROGRAM

 

5A.01                 ELIGIBILITY

 

A Participant who is a Regular Employee of an Employer and who made Before-Tax
Contributions during a calendar year commencing on or after January 1, 2004
shall be eligible to enroll in the Disability Protection Program for the next
succeeding calendar year, in accordance with the provisions of Section 5A.03.

 

5A.02                 LEVELS OF COVERAGE UNDER DISABILITY PROTECTION PROGRAM

 

(a)                                  An eligible Participant who enrolls in the
Disability Protection Program shall specify the scope of coverage for which he
is enrolling, from among the following options:

 

Option 1:                                               Coverage for Before-Tax
Contributions only;

Option 2:                                               Coverage for Employer
Matching Contributions only;

Option 3:                                               Coverage for Automatic
Contributions only

Option 4:                                               Coverage for Special
Savings Awards only

Option 5                                                  Coverage for any
combination of Options 1 through 4.

 

The scope of coverage specified by the Participant shall be taken into account
in accordance with Section 5A.05 in the determination of the amount of premium
required to be paid during the term of such coverage and in accordance with
Section 5A.06 in the determination of the amount of benefits payable in the
event that the Participant incurs a Total and Permanent Disability during the
term of such coverage.

 

(b)                                 For purposes of this Article, a
Participant’s Before-Tax Contributions for any year shall be deemed to include
any Catch-Up Contributions made in accordance with Section 4.02(g) for such
year.

 

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5A.03                 ENROLLMENT PROCEDURES

 

(a)                                  An eligible Participant may enroll in the
Disability Protection Program for a calendar year commencing after December 31,
2004, by providing such Notice as the Plan Administrator may prescribe,
including the specification of the scope of his coverage in accordance with
Section 5A.02, during the period prior to the first day of such calendar year
specified by the Plan Administrator as the open enrollment period.  The Notice
provided by the Participant shall include his election to invest a portion of
his Account, as determined in accordance with Section 5A.05, in the payment of
premiums under the Disability Insurance Policy.

 

(b)                                 A Participant who was enrolled in the
Disability Protection Program for a calendar year shall automatically continue
to be enrolled in the Disability Protection Program, with  the same scope of
coverage, for the next succeeding calendar year, provided that he satisfies the
eligibility requirements prescribed in Section 5A.01 as of the first day of such
next succeeding year, unless he either elects to terminate his coverage by
providing such Notice as the Plan Administrator may prescribe, or elects to
enroll for a different scope of coverage, in accordance with the provisions of
subsection (a).

 

(c)                                  A Participant’s enrollment in the
Disability Protection Program shall become effective on the first day of the
calendar year to which such enrollment relates, provided that the Participant
satisfies the requirements of Section 5A.04 as of such date.  In the event that
a Participant fails to satisfy the requirements of Section 5A.04 as of the first
day of a calendar year to which his enrollment relates, his enrollment in the
Disability Protection Program for such year shall be void and without effect.

 

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5A.04                 REQUIREMENTS FOR COMMENCEMENT OF COVERAGE UNDER DISABILITY
PROTECTION PROGRAM

 

A Participant who has enrolled in the Disability Protection Program for a
calendar year, in accordance with Section 5A.03(a), or who is automatically
enrolled in the Disability Protection Program for a calendar year, in accordance
with Section 5A.03(b), shall commence coverage under the Program only if he
satisfies the requirements of the Disability Insurance Policy as of the first
day of such calendar year.

 

5A.05                 INVESTMENT IN PREMIUMS UNDER DISABILITY INSURANCE POLICY
AND ASSESSMENT OF ADMINISTRATIVE FEE

 

(a)                                  For each month that a Participant is
enrolled in the Disability Protection Program, the amount determined in
accordance with subsection (b) shall be invested in premiums under the
Disability Insurance Policy.  The amount so invested shall be paid by the Plan
to the Disability Insurer in accordance with the terms of the Disability
Insurance Policy.

 

(b)                                 The amount of the premium charged against a
Participant’s Account for coverage under the Disability Protection Program for a
calendar year shall be determined in accordance with the terms of the Disability
Insurance Policy on the basis of:

 

(i)                                     the Participant’s attained age on the
last day of the calendar year prior to the calendar year for which the premium
is being determined;

 

(ii)                                  for a Participant who has elected the
scope of coverage described as Option 1 or Before-Tax Contributions in Option 5 
in Section 5A.02,  the amount of the

 

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Before-Tax Contributions allocated to the Participant’s Account for the
preceding calendar year;

 

(iii)                               for a Participant who has elected the scope
of coverage described as Option 2 or Employer Matching Contributions in Option 5
in Section 5A.02, for the 2008 Plan Year an estimate of the amount of the
Employer Matching Contributions, which estimate is determined by multiplying the
Employer Matching Contributions allocated to the Participant’s Account for the
2007 Plan Year, times two, and for the 2009 Plan Year and thereafter the amount
of the Employer Matching Contributions allocated to the Participant’s Account
for the preceding calendar year;

 

(iv)                              for a Participant who has elected the scope of
coverage described as Option 3 or Automatic Contributions in Option 5 in
Section 5A.02, for the 2008 Plan Year an estimate of the amount of the Automatic
Contributions, which estimate is determined by multiplying the Participant’s
Compensation for 2007 times the Participant’s Automatic Contribution percentage
(determined in accordance with Section 402A (a)), and for the 2009 Plan Year and
thereafter, the amount of the Automatic Contributions allocated to a
Participant’s Account for the preceding calendar year; and

 

(v)                                 for a Participant who has elected the scope
of coverage described as Option 4 or Special Savings Awards in Option 5 in
Section 5A.02 for the 2008 Plan Year, an estimate of the amount of the Special
Savings Award, which estimate is determined by multiplying the Participant’s
Compensation for 2007 times 5%, and for the 2009 Plan Year and thereafter, the
amount of the Special Savings Award allocated to a participant’s Account for the
preceding calendar year.

 

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(c)                                  The premium amount for each month, as
determined in accordance with subsection (b), required to be paid by the Plan to
the Disability Insurer in accordance with subsection (a) shall be debited from
the Participant’s Deferred Account.

 

(d)                                 For each month that a Participant is
enrolled in the Disability Protection Program, an amount determined by the Plan
Administrator or its designee shall be debited from his Deferred Account, as an
administrative fee for the maintenance of such coverage, which administrative
fee shall be in addition to the premium amount determined in accordance with
subsection (b).

 

(e)                                  The amounts debited from a Participant’s
Deferred Account in accordance with subsections (c) and (d) shall be apportioned
among the Investment Funds and among and Designated Mutual Funds invested under
the Mutual Fund Window Program on basis of the value of the Participant’s
Account in each Investment Fund or Designated Mutual Fund, as of the date such
amounts are debited from his Account.

 

(f)                                    In the event that the amounts required to
be debited from the Participant’s Deferred Account in accordance with
subsections (c) and (d) as of any date exceeds the value of the Participant’s
Deferred Account invested in the Investment Funds and the Designated Mutual
Funds, as of such date, then any excess shall be debited from the Participant’s
Employer Account and shall be apportioned among the Investment Funds and the
Designated Mutual Funds in accordance with subsection (e).  In the event that
amounts required to be debited from the Participant’s Deferred Account in
accordance with subsections (c) and (d) as of any date exceeds the sum of the
value of the Participant’s Deferred Account invested in the Investment Funds and
the Designated Mutual Funds

 

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and the value of the Participant’s Employer Account invested in the Investment
Funds Designated Mutual Funds as of such date , then no premium shall be paid
and the Participant’s coverage under the Disability Protection Program shall
terminate in accordance with Section 5A.07(b).

 

5A.06                 BENEFITS PAYABLE UNDER DISABILITY PROTECTION PROGRAM

 

(a)                                  In the event that a Participant who is
covered under the Disability Protection Program becomes Totally and Permanently
Disabled and remains Totally and Permanently Disabled at the conclusion of any
elimination period provided for under the Disability Insurance Policy, then
monthly benefits shall commence to be paid in accordance with the terms of the
Disability Insurance Policy and shall continue to be paid until terminated in
accordance with the terms of the Disability Insurance Policy.

 

(b)                                 The amount of each monthly benefit shall be
determined on the basis of the scope of coverage elected by the Participant in
accordance with Section 5A.02(a) and shall be determined in accordance with the
terms of the Disability Insurance Policy and the Certificate of Disability
Insurance.

 

(c)                                  All monthly benefits payable in accordance
with subsection (a) on account of a Participant’s Total and Permanent Disability
shall be treated as investment earnings on and shall be allocated to the
Participant’s Deferred Account.

 

(d)                                 All monthly benefits payable in accordance
with subsection (a) shall be invested in accordance with the Participant’s
election under Section 5.02(a) as in effect on the date such benefits are paid.

 

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5A.07                 TERMINATION OF COVERAGE UNDER DISABILITY PROTECTION
PROGRAM

 

A Participant’s coverage under the Disability Protection Program shall terminate
on the earliest of the following events:

 

(a)                                  the last day of the month in which the
Participant terminates employment with an Employer;

 

(b)                                 the last day of the month preceding the
first month for which no premium is paid pursuant to the provisions of
Section 5A.05(f);

 

(c)                                  the last day of a calendar year preceding a
calendar year for which the Participant has not enrolled in the Disability
Protection Program in accordance with Section 5A.03(a) and is not automatically
enrolled in the Disability Protection Program in accordance with
Section 5A.03(b); or

 

(d)                                 any event specified in the Disability
Insurance Policy or the Certificate of Disability Insurance as an event that
shall cause the termination of coverage.

 

5A.08                 CLAIMS PROCEDURE AND INCORPORATION OF DISABILITY INSURANCE
POLICY

 

(a)                                  Claims for benefits under the Disability
Protection Program shall be made in accordance with the provisions of the
Disability Insurance Policy and the Certificate of Disability Insurance.  
Claims for benefits shall be adjudicated by the Disability Insurer and the
denial of any such claim shall be subject to appeal.  The adjudication of a
claim and the appeal of the denial of a claim shall comply with the requirements
of ERISA and regulations thereunder, in accordance with the provisions of the
Disability Insurance Policy and Certificate of Disability Insurance.

 

(b)                                 The terms of the Disability Protection
Program shall be subject to the provisions of the Disability Insurance Policy
and the Certificate of Disability Insurance, which are

 

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incorporated by reference.  A Participant’s eligibility for coverage under the
Disability Protection Program and entitlement to benefits under the Disability
Protection Program shall be subject to the conditions, restrictions and
limitations contained in the Disability Insurance Policy and the Certificate of
Disability Insurance, regardless of whether such conditions, restrictions, or
limitations are specifically set forth in this Article 5A.  In the event of a
conflict between (i) the provisions of this Article 5A and (ii) the Disability
Insurance Policy or the Certificate of Disability Insurance, the latter shall be
given effect.

 

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ARTICLE 6.  VALUATION OF UNITS AND CREDITS TO ACCOUNTS

 

6.01                           UNITS OF PARTICIPATION

 

A Participant’s interest in each Investment Fund shall be represented by units
of participation.  Prior to the first Valuation Date for any Investment Fund in
accordance with Section 6.02, each unit in such Investment Fund shall be valued
at $1.00 for each dollar allocated to that Fund prior to such first Valuation
Date, unless a different initial value is established by the Plan Administrator.

 

6.02                           VALUATION OF UNITS

 

(a)                                  The value of a unit in each Fund shall be
determined on each Valuation Date by dividing the investment value of the assets
in that Fund on that date by the total number of units in that Fund.  For
purposes of this subsection, the investment value of the assets of a Fund shall
be the current market value, determined after taking into account any brokerage
fees and transfer taxes applicable to purchases and sales for that Fund made
since the previous Valuation Date and any other expenses either paid from or
accrued to such Fund since the previous Valuation Date and by excluding, on each
Valuation Date after the first, the contributions that are to be credited to
Accounts in such Fund as of such Valuation Date, provided, however, that the
investment value of a Stable Value Fund shall be the contract value of its
assets, determined by taking into account contributions made to investment
contracts, investment earnings, participant withdrawals and administrative
expenses.  The valuation of units in each Fund shall be performed by the party
so directed by the Plan Administrator and shall be conclusive.

 

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(b)                                 In the event that the value of the units in
one or more Funds cannot be determined on any Valuation Date, for reasons beyond
the control of the Trustee or Plan Administrator, then the Plan Administrator
may direct that such valuation be deferred until the next regularly scheduled
Valuation Date.

 

6.03                           CREDITING THE ACCOUNTS

 

(a)                                  The Deferred Account, and effective
January 1, 2008, the Before-Tax Deferral Account of a Participant in each
Investment Fund shall be credited on each Valuation Date with the number of
units determined by dividing the Deferred Cash Contributions, if any, made by
the Employer to the Deferred Account in that Fund on behalf of the Participant
since the previous Valuation Date by the unit value for that Fund as determined
on that Valuation Date.

 

(b)                                 The Employer Account of a Participant in
each Investment Fund shall be credited on each Valuation Date with the number of
units determined by dividing the Employer’s contributions, if any, made on the
Participant’s behalf to the Employer Account in that Fund since the previous
Valuation Date by the unit value for that Fund as determined on that Valuation
Date.

 

(c)                                  The Rollover Account of a Participant in
each Investment Fund shall be credited on each Valuation Date with the number of
units determined by dividing the Rollover Contributions, if any, made by the
Participant to his Rollover Account that Fund since the previous Valuation Date
by the unit value for that Fund as determined on that Valuation Date.

 

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(d)                                 The Catch-Up Account of a Participant in
each Investment Fund shall be credited on each Valuation Date with the number of
units determined by dividing the Catch-Up Contributions, if any, made by the
Participant to his Catch-Up Account in that Fund since the previous Valuation
Date by the unit value for that Fund as determined on that Valuation Date.

 

(e)                                  The After-Tax Account of a Participant in
each Investment Fund shall be credited on each Valuation Date with the number of
units determined by dividing the After-Tax Contributions, if any, made by the
Participant to his After-Tax Account in that Fund since the previous Valuation
Date by the unit value for that Fund as determined on that Valuation Date.

 

(f)                                    Effective January 1, 2008, the Roth
Contributions Account of a Participant in each Investment Fund shall be credited
on each Valuation Date with the number of units determined by dividing the Roth
Contributions, if any, made by the Participant to his Roth Contributions Account
in that Fund since the previous Valuation Date by the unit value for that Fund
as determined on that Valuation Date.

 

(g)                                 Effective January 1, 2008, the Roth Catch-Up
Account of a Participant in each Investment Fund shall be credited on each
Valuation Date with the number of units determined by dividing the Roth Catch-Up
Contributions, if any, made by the Participant to his After-Tax Account in that
Fund since the previous Valuation Date by the unit value for that Fund as
determined on that Valuation Date.

 

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(h)                                 Effective January 1, 2008, the Roth Rollover
Account of a Participant in each Investment Fund shall be credited on each
Valuation Date with the number of units determined by dividing the Roth Rollover
Contributions, if any, made by the Participant to his Roth Rollover Account in
that Fund since the previous Valuation Date by the unit value for that Fund as
determined on that Valuation Date.

 

(i)                                     Effective January 1, 2008, the After-Tax
Rollover Account of a Participant in each Investment Fund shall be credited on
each Valuation Date with the number of units determined by dividing the
After-Tax Rollover Contributions, if any, made by the Participant to his
After-Tax Account in that Fund since the previous Valuation Date by the unit
value for that Fund as determined on that Valuation Date.

 

6.04                           STATEMENTS OF PARTICIPANT ACCOUNTS

 

At least once per calendar year, and effective January 1, 2007, at least once
per quarter, each Participant shall be furnished with a statement setting forth
the value of his Accounts.

 

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ARTICLE 7.  VESTED STATUS OF ACCOUNTS

 

7.01                           NONFORFEITABILITY ACCOUNTS

 

A Participant shall at all times be 100% vested in, and have a nonforfeitable
right to, his entire Account.

 

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ARTICLE 8.  IN-SERVICE WITHDRAWALS

 

8.01                           WITHDRAWAL AFTER AGE 59½

 

(a)                                  A Participant who is in the employ of an
Employer or Affiliate and who shall have attained age 59½ may, subject to the
provisions of subsections (b) and (c) and the provisions of Section 8.03, elect
to withdraw all or any portion of his Account.

 

(b)                                 A Participant shall not be permitted to make
more than a total of four withdrawals pursuant to subsection (a),
Section 8.01A(a), and Section 8.02 in any Plan Year.

 

(c)                                  The minimum withdrawal under
subsection (a) shall be the lesser of (i) $500 or (ii) the total value of the
Participant’s Account.

 

8.01A                 WITHDRAWAL FROM AFTER-TAX ACCOUNT

 

(a)                                  Effective as of July 1, 2004, a Participant
who is in the employ of an Employer may, subject to the provisions of
subsections (b) and (c), elect to withdraw all or any portion of his After-Tax
Account.

 

(b)                                 Withdrawals pursuant to this Section shall
be subject to the provisions of Section 8.01(b).

 

(c)                                  The minimum withdrawal under subsection
(a) shall be the lesser of (i) $500 or (ii) the total value of the Participant’s
After-Tax Account.

 

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8.02         HARDSHIP WITHDRAWAL

 

(a)           A Participant may, subject to the provisions Section 8.03, elect
to withdraw (i) all or part of the excess of his Deferred Cash Contributions
(but not including any investment gains or losses therein) over any amount
previously distributed to him on account of Hardship, but not any amount greater
than the balance of his Deferred Account, (ii) all or part of his After-Tax
Account (but not including any invest gains or losses therein), and (iii) all or
part of his Rollover Account (but not including any invest gains or losses
therein), provided that he furnishes proof of Hardship satisfactory to the Plan
Administrator in accordance with the provisions of subsections (b) and (c).

 

(b)           As a condition for Hardship there must exist with respect to the
Participant an immediate and heavy financial need to draw upon his Account. The
Plan Administrator shall presume the existence of such immediate and heavy
financial need, if the requested withdrawal is on account of any of the
following:

 

(i)            expenses for medical care described in Section 213(d) of the Code
previously incurred by the Participant, his spouse or any of his dependents, as
defined in Section 152 of the Code, or necessary for those persons to obtain
such medical care;

 

(ii)           costs directly related to the purchase of a principal residence
of the Participant, excluding mortgage payments;

 

(iii)          payment of tuition and related educational fees, and room and
board expenses, for the next 12 months of post-secondary education of the
Participant, his spouse, children or dependents, as defined in Section 152 of
the Code;

 

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(iv)          payment of amounts necessary to prevent eviction of the
Participant from his principal residence or to avoid foreclosure on the mortgage
of his principal residence;

 

(v)           payment for burial or funeral expenses for the Participant’s
deceased parent, spouse, children or dependents, as defined in Section 152 of
the Code;

 

(vi)          expenses for the repair of damage to the Participant’s principal
residence that would qualify for treatment as a casualty loss within the meaning
of Section 165(c)(3) of the Code; or

 

(vii)         any circumstance that is permitted to be treated as a deemed
immediate and heavy financial need in accordance with guidance prescribed by the
Internal Revenue Service, pursuant to Section 1.401(k)-1(d)(3)(v) of the
Regulations.

 

For purposes of clauses (i), (iii) and (v) of the foregoing sentence, references
to Section 152 of the Code shall not include subsections (b)(1), (b)(2), or
(d)(1) thereof and, effective January 1, 2008, the Participant’s Beneficiary
shall be deemed to be a dependent of the Participant.

 

In the event that the requested withdrawal is on account of expenses, debts, or
obligations other than those with respect to which the Plan Administrator shall
presume the existence of an immediate and heavy financial need, then the Plan
Administrator shall make a determination regarding the existence of an immediate
and heavy financial need on the basis of all of the facts and circumstances of
which proof is provided by the Participant.

 

(c)           As a condition for a Hardship withdrawal, the Participant must
demonstrate and the Plan Administrator must determine that the requested
withdrawal is necessary to satisfy the

 

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financial need described in subsection (b).  The Participant shall request, on
such form as the Plan Administrator shall prescribe, that the Plan Administrator
make its determination of the necessity for the withdrawal solely on the basis
of his application.  The Plan Administrator shall make a determination that the
withdrawal is necessary, if and only if all of the following requirements are
met:

 

(i)            The amount of the withdrawal does not exceed the amount described
in subsection (d).

 

(ii)           The Participant has obtained all distributions, other than
distributions available only on account of hardship, and all nontaxable loans
currently available under all plans of the Employer and Affiliates.

 

(iii)          The Participant is prohibited from making Deferred Cash
Contributions to the Plan and from making elective deferrals, within the meaning
of Section 402(g)(3) of the Code, or otherwise making employee contributions to
or under all other plans of the Employer and Affiliates, under the terms of such
plans or by means of an otherwise legally enforceable agreement for the required
suspension period.  For Hardship withdrawals made prior to January 1, 2002, the
required suspension period shall be a period of 12 months from the date of the
distribution; for Hardship withdrawals made subsequent to December 31, 2001, the
required suspension period shall be a period of 6 months from the date of the
distribution; for Hardship withdrawals made subsequent to December 31, 2005, the
required suspension period shall be a period of 6 months or, if longer, such
other period that is specified under the terms of the other plan, from the date
of the distribution.  For purposes this paragraph, the phrase “all other plans
of the Employer and Affiliates” shall include  stock purchase plans, including
any “employee stock purchase plan” described in Section 423(b) of the Code,

 

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qualified and non-qualified deferred compensation plans, and such other plans as
may be designated under Regulations issued under Section 401(k) of the Code, but
shall not include health and welfare benefit plans, any mandatory employee
contribution portion of a defined benefit plan, or, for Hardship withdrawals
made subsequent to September 29, 2005 and prior to January 1, 2008, incentive
compensation that is eligible for deferral under the IBM Executive Deferred
Compensation Plan.  Notwithstanding the foregoing, no suspension of employee
contributions to the IBM Executive Deferred Compensation Plan will occur during
2005.

 

(iv)          For Hardship withdrawals made prior to January 1, 2001, the
limitation described in Section 4.01(c) under all plans of the Employer and
Affiliates for the calendar year following the year in which the withdrawal is
made must be reduced by the Participant’s elective deferrals, within the meaning
of Section 402(g)(3) of the Code, made in the calendar year of the distribution
for hardship.

 

(v)           The Participant certifies, and the Plan Administrator has no
knowledge to the contrary, that the financial need described in subsection
(b) cannot reasonably be relieved (A) through reimbursement or compensation by
insurance or otherwise; (B) by liquidation of the Participant’s assets; (C) by
cessation of elective contributions or employee contributions under the Plan;
(D) by other currently available distributions (including distribution of ESOP
dividends under Section 404(k) of the Code) and nontaxable (at the time of the
loan) loans, under plans maintained by the Employer and Affiliates or by any
other employer; or (E) 

 

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by borrowing from commercial sources on reasonable commercial terms in an amount
sufficient to satisfy the need.

 

(d)          The amount of a Hardship withdrawal may not be in excess of the
amount of the financial need of the Participant, including any amounts necessary
to pay any federal, state or local taxes and any amounts necessary to pay any
tax penalties reasonably anticipated to result from the Hardship distribution.

 

(e)          A Participant may not receive more than one Hardship withdrawal in
any period of 6 calendar months.

 

 (f)           In evaluating the relevant facts and circumstances, the Plan
Administrator shall act in a nondiscriminatory fashion and shall treat uniformly
those Participants who are similarly situated.  The Participant shall furnish to
the Plan Administrator such supporting documents as the Plan Administrator may
request in accordance with uniform and nondiscriminatory rules prescribed by the
Plan Administrator.

 

8.03         PROCEDURES AND RESTRICTIONS

 

(a)          To make a withdrawal pursuant to Section 8.01, 8.01A or 8.02, a
Participant shall give such advance Notice as the Plan Administrator shall
prescribe. In no event shall the amount of the withdrawal exceed the portion of
the Participant’s Account that is invested in one or more of the Investment
Funds and Designated Mutual Funds, as applicable.

 

(b)          Each withdrawal shall be debited from the Participant’s Account as
of the Valuation Date coincident with the payment of the amount so withdrawn to
the Participant, or such other

 

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Valuation Date as may be determined in accordance with the procedures
established by the Plan Administrator, provided, however, that no such payment
shall be made as of a Valuation Date with respect to which the Plan
Administrator has made a direction pursuant to Section 6.02(b).

 

(c)          The amount of any withdrawal shall be allocated among the
Investment Funds and Designated Mutual Funds, as applicable, in proportion to
the value of the Participant’s Account in each Investment Fund or Designated
Mutual Fund, as applicable, as of the date determined in accordance with
subsection (b).

 

(d)           All payments to Participants under this Article shall be made in
cash as soon as practicable, after the Participant’s delivery of the Notice
required under subsection (a), but shall nonetheless be subject to the
provisions of Section 10.15 and a withdrawal pursuant to Section 8.01 shall be
subject to the provisions of Section 10.12(c).

 

8.04         DISTRIBUTIONS AT AGE 70½

 

(a)           Notwithstanding any provision of the Plan to the contrary, if a
Participant is a Five Percent Owner, distribution of the Participant’s Account
shall begin, in accordance with procedures established by the Plan
Administrator, no later than the April 1 following the calendar year in which he
attains age 70½.  No minimum distributions pursuant to Section 401(a)(9) of the
Code will be made on or after January 1, 1997 to a Participant who remains in
the employ of an Employer or Affiliate, if he is not a Five Percent Owner.  Such
a Participant may elect to receive withdrawals from his Account in accordance
with Section 8.01, to the extent that he is eligible therefor.

 

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(b)           In the event that a distribution is required to be made to a Five
Percent Owner pursuant to subsection (a), the schedule for and amount of such
distribution shall be determined in accordance with Section 10.06(b).

 

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ARTICLE 9.  LOANS TO PARTICIPANTS

 

9.01         LOAN AMOUNTS AVAILABLE AND INTEREST RATE

 

(a)           A Participant who is a Regular Employee or, effective as of
January 1, 2004, a Long-Term Supplemental Employee, of the Employer or an
Affiliate may borrow, on application to the Plan Administrator and on approval
by the Plan Administrator under such uniform rules as it shall adopt, an amount
which, when added to the outstanding balance of any other loans to the
Participant from this Plan or any other qualified plan of any Employer or
Affiliate, does not exceed the lesser of:

 

(i)            50% of the present value of the Participant’s nonforfeitable
accrued benefit under such plans, or

 

(ii)           $50,000 reduced by the excess, if any, of (A) the highest
outstanding balance of loans to the Participant from such plans during the one
year period ending on the day before the day the loan is made, over (B) the
outstanding balance of loans to the Participant from such plans on the date on
which the loan is made;

 

provided, however, that in no event shall a Participant be permitted to borrow
an amount, which when added to the outstanding balance of any other loan to the
Participant from this Plan, will exceed 50% of his Account.

 

(b)          The Plan Administrator may establish a minimum loan amount, which
amount may be changed from time to time.

 

(c)          The interest rate to be charged on loans shall be determined by the
Plan Administrator from time to time and shall be commensurate with interest
rates charged by persons in the business of lending money in similar
circumstances.  The interest rate so

 

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determined for purposes of the Plan shall be fixed for the duration of each
loan, except to the extent that an adjustment to the interest rate on a loan to
a Participant who has entered the uniformed services of the United States is
required in accordance with the Soldiers and Sailors Civil Relief Act or any
similar legislation.

 

(d)           The amount of the loan shall be deducted from the Investment Funds
and Designated Mutual Funds, as applicable, in which the Participant’s Accounts
are invested, as of the Valuation Date coincident with the payment of the
proceeds of the loan to the Participant, or such other Valuation Date as may be
determined in accordance with the procedure established by the Plan
Administrator, provided, however, that no such payment shall be made as of a
Valuation Date with respect to which the Plan Administrator has made a direction
pursuant to Section 6.02(b).  Such deduction shall be either in specific amounts
from one or more of such Funds or on a proportional basis from all such Funds,
as elected by the Participant under rules established by the Plan Administrator,
and shall be recorded as a special “Loan Fund” for the Participant under the
Plan.  If, pursuant to the Participant’s election, all or any portion of the
amount of a loan shall be deducted from the portion of his Account that is
allocated to the IBM Stock Fund, then such election shall be deemed to be an
election to transfer such amount from the ESOP.  The Loan Fund shall comprise
only the amount recorded thereunder and shall be deemed to be invested solely in
the loan made to the Participant.  The amount of the Loan Fund shall be pledged
as security for the loan.  Payments of principal on the loan will reduce the
amount recorded in the Participant’s Loan Fund.  Those payments, together with
the attendant interest payment, will be reinvested in the Investment Funds or
Designated Mutual Funds in accordance with the Participant’s investment election
as then in effect in accordance with Section 5.02.

 

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9.02         TERMS

 

(a)                                  In addition to such rules and regulations
as the Plan Administrator may adopt, all loans from the Plan shall comply with
the following terms and conditions:

 

(i)            An application for a loan by a Participant shall be by Notice to
the Plan Administrator, whose action in approving or disapproving the
application shall be final.

 

(ii)           Each loan shall be evidenced by a promissory note payable to the
Plan or by written instruments that collectively have equivalent effect.

 

(iii)          The Plan Administrator may assess an administrative fee for the
issuance of a loan, the amount of which fee may be changed from time to time. 
Any such fee shall be deducted from the proceeds of the loan.

 

(iv)          The period of repayment for any loan shall be arrived at by mutual
agreement between the Plan Administrator and the Participant, but shall not
exceed 5 years, except where the loan is made to purchase a principal residence,
and in such case the period of repayment of the loan shall not exceed 10 years. 
In the event a Participant enters the uniformed services of the United States
and retains reemployment rights under law, repayments shall be suspended during
the period of such service and the period of repayment shall be extended by the
number of months of the period of service in the uniformed services.

 

(v)           Payments of principal and interest shall be made by payroll
deductions, or in a manner agreed to by the Participant and the Plan
Administrator, in substantially level amounts, but in no event less frequently
than quarterly, in an amount sufficient to amortize the loan over the repayment
period.

 

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(vi)                              A loan may be prepaid in full without penalty
as of any date after the Participant has made payments for a period of at least
3 months.

 

(vii)                           A Participant may not have more than 2 loans
outstanding at any given time.

 

(viii)                        Effective January 1, 2008, a Participant who has
an outstanding loan from the Plan and who is absent from employment on account
of a leave of absence, or who has terminated employment shall be permitted to
make installment repayments during such leave or subsequent to such termination
of employment through an automated repayment facility, in accordance with
procedures established by the Plan Administrator.

 

(ix)                                Effective January 1, 2008, if a Participant
who has an outstanding loan from the Plan is absent from employment on a leave
of absence for 12 months or less, other than a military leave of absence, the
participant’s loan shall not be considered delinquent during such leave, even if
no repayments are made during such leave. Upon his return to employment, the
amount of the installment repayments of such loan shall be redetermined to take
account of any payments that were scheduled to be made during the leave of
absence but were not made, so that the loan shall be fully repaid as of the date
originally established in accordance with paragraph (iv).

 

(b)                                 The Plan Administrator shall establish
procedures for the determination of whether a loan has become delinquent or
whether there has been a default on a loan, provided, however, that such
procedures shall provide that a default has occurred no later than the last day
of a calendar quarter following a calendar quarter during which a Participant
has failed to make any required repayments, unless all payments required under
the terms of the loan to have been made on or before such date have been made.

 

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(c)           In the event that a Participant’s loan is determined to be in
default pursuant to subsection (b), then:

 

(i)            the Participant shall be prohibited from making Deferred Cash
Contributions for a period of 12 months from the date of such default, if such
default occurs prior to January 1, 2002 or for a period of 6 months from the
date of such default, if such default occurs subsequent to December 31, 2001,
provided, however, that, in any event, such prohibition shall cease to apply if
the Participant repays the defaulted loan and provided further, however, that
this paragraph shall cease to be effective as of January 1, 2008; and

 

(ii)           the Participant shall be prohibited from initiating a new loan
until the later of (A) the first anniversary of the date of default or (B) the
date that the Participant fully repays the defaulted loan, including accrued
interest.

 

A Participant may repay a defaulted loan at any time prior to the Plan’s
execution upon its security interest in accordance with subsection (d).

 

(d)          If a loan is not repaid in accordance with the terms specified in
the instrument thereof and a default occurs, the Plan may execute upon its
security interest in the Participant’s Accounts under the Plan to satisfy the
debt, provided, however, that the Plan shall not levy against any portion of the
Loan Fund attributable to amounts held in the Participant’s Deferred Account or
Employer Account until such time as a distribution of the Deferred Account or
Employer Account could otherwise be made under the Plan.

 

(e)          The Plan Administrator shall promulgate such additional rules or
restrictions as may be necessary to implement and administer the loan program. 
Such additional rules are

 

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hereby incorporated into the Plan by reference, and the Plan Administrator is
hereby authorized to make such revisions to these rules as it deems necessary or
appropriate.

 

(f)                                    To the extent required by law and under
such rules as the Plan Administrator shall adopt, loans shall also be made
available on a reasonably equivalent basis to any Beneficiary or former Employee
(i) who maintains an Account under the Plan and (ii) who is with respect to the
Plan, a party-in-interest within the meaning of Section 3(14) of ERISA.

 

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ARTICLE 10.  DISTRIBUTION OF ACCOUNTS UPON TERMINATION OF
EMPLOYMENT, DISABILITY, OR DEATH

 

10.01                     APPLICABILITY

 

(a)          Upon a Participant’s termination of employment, or incurrence of
disability, he shall be eligible to receive a distribution of his Account in
accordance with the provisions of this Article.

 

(b)          Upon a Participant’s death, his Account shall be distributed to his
Beneficiary in accordance with the provisions of this Article.

 

10.02                     FORMS OF DISTRIBUTION

 

(a)          A Participant who has terminated employment may elect to receive a
distribution of his Account in a single lump sum payment. The provisions of this
subsection shall be subject to the provisions of Sections 10.07, 10.12, and
10.15.

 

(b)          In addition to the election provided in accordance with subsection
(a), a Participant who either (A) is retirement eligible under the IBM Personal
Pension Plan in accordance with the terms thereof as in effect on June 30, 1999,
when the Participant terminates employment, (B) is eligible to receive
disability payments under the IBM Medical Disability Income Plan or the IBM Long
Term Disability Plan, or (C) has attained age 55 at the time or after the
Participant terminates employment with an Employer; may elect to receive a
distribution of his Account in either of the following forms:

 

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(i)            payment in annual installments over a period not less than 2 nor
more than 10 years and effective January 1, 2008, payment in annual installments
over a period not less than 2, nor more than 20 years; or

 

(ii)           payment in annual installments over his life expectancy,
determined in accordance with Section 10.13 and with applicable regulations, and
recalculated annually, provided, however, that a Participant shall not be
permitted to commence payment in this form after December 31, 2007.

 

The provisions of this subsection shall be subject to the provisions of
Sections 10.07, 10.12, and 10.15.

 

(c)                                  In the event that a Participant elects to
receive a distribution of his Account in the form of installment payments, in
accordance with subsection (b), the amount of each payment shall be determined
by dividing the balance of the Participant’s Account on the Valuation Date as of
which such payment is to be determined, in accordance with Section 10.12(a), by
the number of years remaining in the installment payment period, taking into
account the year for which such amount is being determined.

 

(d)                                 A Participant who is eligible to make an
election to receive a distribution of his Account in accordance with
subsections (a) or (b), but who has not made such an election, shall be
permitted to elect withdrawals from his Account, in accordance with
Section 10.04.

 

10.03                     MANDATORY DISTRIBUTION OF SMALL ACCOUNTS

 

For Plan Years beginning prior to January 1, 2000, and notwithstanding any
provision hereof to the contrary, if the balance of the Account of a Participant
described in Section 10.02(b) has not exceeded $3,500, then the balance of his
Account shall be

 

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distributed to him in a lump sum as soon as practicable after his termination of
employment and the provisions of Sections 10.02(b) and 10.02(d) shall not be
applicable, provided, however, that, effective with respect to terminations of
employment occurring after December 31, 1997, $5,000 shall be substituted for
$3,500.  For Plan Years beginning after December 31, 1999, if the balance of the
Account of a Participant does not exceed $5,000, then the balance of his Account
shall be distributed to him in a lump sum as soon as practicable after his
termination of employment and the provisions of Sections 10.02(b) and
10.02(d) shall not be applicable, provided, however, that effective with respect
to distributions made on or after March 28, 2005, $1,000 shall be substituted
for $5,000.

 

10.04                     WITHDRAWALS FROM ACCOUNT AFTER TERMINATION OF
EMPLOYMENT

 

(a)                                  A Participant who is eligible to elect to
receive a distribution of his Account in accordance with Section 10.02(a) or
(b) and who has not made such an election may elect to take withdrawals from his
Account at any time, provided, however, that:

 

(i)                                     no Participant may take more than 4
withdrawals from his Account in any Plan Year; and

 

(ii)                                  the minimum amount of a withdrawal shall
be the lesser of $500 or the balance of the Participant’s Account.

 

In no event shall the amount of the withdrawal elected by the Participant exceed
the portion of his Account that is invested in the Investment Funds or in
Designated Mutual Funds.  The provisions of this subsection shall be subject to
the provisions of Sections 10.07, 10.12, and 10.15.

 

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(b)                                 A Participant who has made an election to
receive a distribution of his Account in the form of installment payments, in
accordance with Section 10.02(b) may elect to take additional withdrawals from
his Account at any time.  Such additional withdrawals shall be subject to the
provisions of subsection (a).

 

10.05                     COMMENCEMENT OF PAYMENTS

 

(a)                                  Distribution of a Participant’s Account
shall not be made prior to a Participant’s provision of Notice of his election
to receive such Distribution to the Plan Administrator, except for distributions
in accordance with Section 10.03 or 10.06.

 

(b)                                 In the case of the death of a Participant
before distribution of his Account has been made or commenced, unless an
election under Section 10.08 (c) or (d) is made, his Account shall be
distributed to his Beneficiary in accordance with Section 10.08 as soon as
administratively practicable following the Participant’s date of death.

 

10.06                     REQUIRED DISTRIBUTIONS AT AGE 70½

 

(a)                                  Notwithstanding any provision hereof to the
contrary, a Participant who has terminated employment and has attained age 70½
but has not received, or commenced to receive, a distribution of his Account in
accordance with Section 10.02(a)(ii), shall commence to receive a distribution
of his Account in annual installments, in accordance with the provisions of
subsection (b).

 

(b)                                 The Account of a Participant described in
subsection (a) who attains age 70½ prior to January 1, 2001 shall be distributed
in 10 annual installment payments, except as provided in subsection (d).  The
Account of a Participant who attains age 70½

 

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subsequent to December 31, 2000 shall be distributed in annual installments over
the Participant’s life expectancy, determined in accordance with Section 10.13
and applicable regulations, and recalculated annually.  At the discretion of the
Plan Administrator, the first such installment payment shall be made in the year
in which the Participant attains age 70½, or in the first quarter of the
following year, and shall be attributable to the year in which the Participant
attained age 70½, provided, however, that in no event shall payments commence
later than April 1 of the calendar year following the year in which the
Participant attained age 70½.  The installment payments attributable to each
subsequent year shall be made in such subsequent year.  The amount of each
installment shall be determined in the manner specified in Section 10.02(c).

 

(c)                                  A Participant who has commenced to receive
a distribution of his Account pursuant to subsection (a) may nonetheless make an
election described in Section 10.04(b).

 

(d)                                 Effective January 1, 2002, a Participant who
has commenced receipt of installment payments in accordance with the first
sentence of subsection (b) shall be afforded the opportunity to elect to receive
installment payments in accordance with the second sentence of subsection (b). 
Such election shall be made by providing Notice to the Plan Administrator at the
time and in the manner specified in rules established by the Plan Administrator
in accordance with Section 14.05 and shall become effective as of the date
specified by the Plan Administrator.

 

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10.07                     EFFECT OF REEMPLOYMENT

 

(a)                                  A Participant who terminates employment
with an Employer, but remains in employment with any other Employer or any
Affiliate of any Employer, shall not be deemed to have terminated employment for
purposes of Section 10.01.

 

(b)                                 A Participant who has terminated employment
and has not elected to receive a distribution of his Account in installments
under Section 10.02(a)(ii) and is thereafter reemployed by any Employer or any
Affiliate of any Employer shall thereupon cease to be eligible to elect to
receive a distribution in accordance with Section 10.02 or to take a withdrawal
from his Account in accordance with Section 10.04.

 

(c)                                  In the event that a Participant who has
terminated employment and elected to receive a distribution of his Account in
installments, under Section 10.02(a)(ii), is thereafter reemployed by any
Employer or any Affiliate of any Employer, payment of such installments shall
thereupon cease.

 

(d)                                 The provisions of this Section shall have no
effect on the right of a Participant to elect to receive a withdrawal in
accordance with Section 8.01, provided that he is eligible therefor.

 

(e)                                  The provisions of this Section shall not be
applicable to a Participant during any period in which he is a Supplemental
Employee, but, effective as of January 1, 2004, not a Long-Term Supplemental
Employee, of an Employer or any Affiliate of any Employer.

 

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10.08                     DISTRIBUTION OF ACCOUNT UPON DEATH

 

(a)                                  Except as provided in subsection (b),
subsection (c), or subsection (d) in the event of the death of a Participant who
has not received a complete distribution of his Account, the entire balance of
his Account shall be paid in a lump sum to the Participant’s Beneficiary.

 

(b)                                 In the event that the Beneficiary of a
deceased Participant, with respect to any portion of the Participant’s Account
is a minor child, then any distribution of such portion of the deceased
Participant’s Account shall be made only to the guardian of such minor child,
upon presentation of proof of guardianship satisfactory to the Plan
Administrator.

 

(c)                                  Effective January 1, 2008, if the
Participant’s Beneficiary is his spouse, then his Beneficiary shall be permitted
to elect to defer receipt of the Participant’s Account until no later than the
date that the Participant would have attained age 70 ½.  If a Participant’s
Beneficiary elects to defer receipt of the Participant’s Account in accordance
with this subsection, then during the period in which the Account continues to
be maintained, the Beneficiary shall be permitted to make investment
reallocations in accordance with Section 5.04.  If a Participant’s Beneficiary
elects to defer receipt of the Participant’s Account in accordance with this
subsection, the Beneficiary may elect to receive a distribution of the balance
of the Account in a lump sum at any time, and if the Beneficiary has not
received a distribution prior to the date that the Participant would have
attained age 70 ½ , then the entire balance of the Account shall be paid to the
Beneficiary on such date according to Section 10.06.

 

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(d)                                 Effective January 1, 2008, if the
Participant’s Beneficiary is his Domestic Partner, then his Beneficiary shall be
permitted to elect to defer receipt of the Participant’s Account until no later
than five years from the date of the Participant’s death.  If a Participant’s
Beneficiary elects to defer receipt of the Participant’s Account in accordance
with this subsection, then during the period in which the Account continues to
be maintained, the Beneficiary shall be permitted to make investment
reallocations in accordance with Section 5.04.  If a Participant’s Beneficiary
elects to defer receipt of the Participant’s Account in accordance with this
subsection, the Beneficiary may elect to receive a distribution of the balance
of the Account in a lump sum at any time, and if the Beneficiary has not
received a distribution prior to five years from the date of the Participant’s
death, then the entire balance of the Account shall be paid to the Beneficiary
in a lump sum on such date, unless the Beneficiary makes an election pursuant to
Section 10.06(d), in which case the Account shall be paid in accordance with
Section 10.06.

 

10.09       DESIGNATION OF BENEFICIARY

 

(a)                                  A Participant shall designate his
Beneficiary by filing such Notice as may be required by the Plan Administrator,
but subject to the provisions of subsection (b).  The Participant’s designation
shall become effective upon receipt by the Plan Administrator prior to the death
of the Participant.

 

(b)                                 If a Participant is married, a designation
of a person other than his spouse as his Beneficiary shall be effective if and
only if his spouse has consented to such designation.  The consent of the
Participant’s spouse shall be in writing, on a form provided by the Plan
Administrator, shall be witnessed by a representative of the Plan or

 

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by a Notary Public, and shall acknowledge the effect on the spouse of the
Participant’s designation.  A spousal consent form witnessed by a person acting
with apparent authority as a Notary Public shall be conclusively deemed to have
been witnessed by a Notary Public for all purposes under the Plan.  The
requirement of spousal consent may be waived by the Plan Administrator, if it is
established to the satisfaction of the Plan Administrator that there is no
spouse or that the spouse cannot be located, or under such other circumstances
as may permit such waiver under applicable law.

 

(c)                                  A Participant may revoke his designation of
a Beneficiary and make a new designation at any time.  However, if the
Participant is married, any such new designation shall be subject to the
provisions of subsection (b).

 

(d)                                 In the event that a Participant dies without
having an effective designation of his Beneficiary then in effect, or if the
Participant’s Beneficiary does not survive him, then the person deemed to be the
Participant’s Beneficiary shall be determined in the following order:

 

(i)                                     the Participant’s spouse;

 

(ii)                                  if the Participant is not survived by a
spouse, the Participant’s surviving children, in equal shares;

 

(iii)                               if the Participant is not survived by a
spouse or a child, then the Participant’s surviving parents, in equal shares;

 

(iv)                              if the Participant is not survived by a
spouse, a child, or a parent, then the Participant’s estate.

 

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(e)                                  The Plan Administrator shall provide to
each Participant a written explanation of (i) the terms, conditions, and effect
of a Beneficiary designation under the Plan; (ii) the Participant’s right to
change such designation, and the effect thereof; (iii) the rights of the
Participant’s spouse; and (iv) the Participant’s right to revoke such a
designation, and the effect thereof.

 

(f)                                    For purposes of subsection (b), if a
Participant has married a person of the same gender as the Participant, in
accordance with and as recognized under the laws of the state in which such
marriage was performed, and who resides in a state which recognizes such
marriage, then the person to whom such Participant is married shall be deemed
his spouse.

 

10.10       PROOF OF DEATH AND RIGHT OF BENEFICIARY OR OTHER PERSON

 

(a)                                  The Plan Administrator may require and rely
upon such proof of death and such evidence of the right of any Beneficiary or
other person to receive the value of the Account of a deceased Participant as
the Plan Administrator may deem proper and its determination of the right of
that Beneficiary or other person to receive payment shall be conclusive.

 

(b)                                 Notwithstanding the provisions of
Section 10.11, the Plan Administrator may direct that the balance of a deceased
Participant’s Account shall be invested in the Investment Fund that is
designated by the Committee for purposes of Section 5.02(b), at any time during
the period in which the distribution of the Participant’s Account is pending,
including, without limitation, the period required to make a determination in
accordance with subsection (a), or to comply with the provisions of
Section 10.08(b), provided,

 

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however, that this subsection shall not be applicable to Accounts pursuant to
which the Participant’s Beneficiary has made, or is deemed to have made, an
election in accordance with Section 10.08(c) or 10.08(d).

 

10.11                     STATUS OF ACCOUNTS PENDING DISTRIBUTION

 

Until completely distributed, the Account of a Participant who is entitled to a
distribution shall continue to be invested as part of the funds of the Plan, and
the Participant shall retain the right to reallocate his Account among
Investment Funds and under the Mutual Fund Window Program, in accordance with
Section 5.04 during any period in which a balance remains in his Account. 
However, loans to Participants who are eligible to receive a distribution in
accordance with Section 10.02 shall not be permitted, except to the extent
required by Section 9.02(d).

 

10.12                     PROCEDURES AND FORM OF PAYMENT

 

(a)                                  All amounts distributed or withdrawn in
accordance with this Article shall be debited from the Participant’s or
Beneficiary’s Account as of the Valuation Date coincident with the payment of
the amount so distributed or withdrawn, or such other date as may be determined
in accordance with the procedures established by the Plan Administrator,
provided, however, that no such payment shall be made as of a Valuation Date
with respect to which the Plan Administrator has made a direction pursuant to
Section 6.02(b).

 

(b)                                 In the event that the payment of a
distribution or a withdrawal to a Participant does not reduce his Account to
zero, then the amount so distributed or withdrawn shall be allocated among the
Investment Funds in proportion to the value of the Participant’s

 

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Account in each Investment Fund as of the date determined in accordance with
subsection (a).

 

(c)                                  All distributions and withdrawals under the
Plan shall be paid to the Participant or Beneficiary in cash, except that if any
portion of a Participant’s Account is allocated to the IBM Stock Fund, the
Participant or Beneficiary may elect to receive shares of IBM stock having a
fair market value as of the date of such distribution or withdrawal equal to the
value of the units of the IBM Stock Fund allocated to such Participant’s
Account, provided, however, that the value of any fractional share shall be
distributed in cash.

 

10.13       DISTRIBUTION LIMITATION

 

Notwithstanding any other provision of this Article 10, all distributions from
this Plan shall conform to the Regulations issued under Section 401(a)(9) of the
Code, including the incidental death benefit provisions of
Section 401(a)(9)(G) of the Code.  Such Regulations shall override any Plan
provision that is inconsistent with Section 401(a)(9) of the Code. With respect
to distributions under the Plan made for calendar year 2002, the Plan will apply
the minimum distribution requirements of Section 401(a)(9) of the Code in
accordance with the Regulations under Section 401(a)(9) of the Code that were
proposed on January 17, 2001, notwithstanding any provisions of the Plan to the
contrary.  With respect to distributions under the Plan made for calendar years
beginning on or after January 1, 2003, the Plan will apply the minimum
distribution requirements of Section 401(a)(9) of the Code in accordance with
the Final and Temporary Regulations under Section 401(a)(9) of the Code that
were issued on April 17, 2002, by Treasury Decision 8987, notwithstanding any
provisions of the Plan to the contrary.

 

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10.14       DIRECT ROLLOVER OF CERTAIN DISTRIBUTIONS

 

Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee’s election, a distributee may elect, at the time and in the
manner prescribed by the Plan Administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.  For purposes of this Section:

 

(a)                                  The term “eligible rollover distribution”
means any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include:

 

(i)            any distribution that is one of a series of substantially equal
periodic payments, not less frequently than annually, made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee’s designated beneficiary, or for a
specified period of ten years or more,

 

(ii)           any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code,

 

(iii)          any distribution made subsequent to December 31, 1998 on account
of the Hardship of the Participant, and

 

(iv)          the portion of any distribution that is not includible in the
gross income of the distributee, determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities.

 

(b)                                 The term “eligible retirement plan” means:

 

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(i)                                     an individual retirement account
described in Section 408(a) of the Code,

 

(ii)                                  an individual retirement annuity described
in Section 408(b) of the Code,

 

(iii)                               an annuity plan described in
Section 403(a) of the Code,

 

(iv)                              a qualified trust described in
Section 401(a) of the Code, that is a defined contribution plan and that accepts
the distributee’s eligible rollover distribution,

 

(v)                                 with respect to eligible rollover
distributions made after December 31, 2001, an annuity contract described in
Section 403(b) of the Code, or

 

(vi)                              with respect to eligible rollover
distributions made after December 31, 2001, an eligible deferred compensation
plan described in Section 457(b) of the Code, which is maintained by an eligible
employer as described in Section 457(e)(1)(A) of the Code,

 

provided, however, in the case of an eligible rollover distribution to a
distributee who is the surviving spouse of a Participant surviving spouse, prior
to January 1, 2001, an eligible retirement plan is only an individual retirement
account or individual retirement annuity;

 

(c)                                  The term “distributee” means an employee or
former employee.  In addition, the employee’s or former employee’s surviving
spouse and the employee’s or former employee’s spouse or former spouse who is an
alternate payee under a qualified domestic relations order as defined in
Section 414(p) of the Code, are distributees with regard to the interest of the
spouse or former spouse.

 

(d)                                 The term “direct rollover” means a payment
by the Plan to the eligible retirement plan specified by the distributee.

 

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(e)                                  Effective January 1, 2007, in accordance
with Section 402(c)(11) of the Code, a Participant’s Beneficiary who is not his
surviving spouse shall be deemed a distributee, with respect to whom a
distribution to which he is entitled pursuant to Section 10.08 shall be an
eligible rollover distribution only if he elects to receive such distribution in
the form of a direct rollover to an eligible retirement plan and with respect to
whom an individual retirement account established in accordance with
Section 402(c)(8)(B) of the Code shall be the only eligible retirement plan.

 

10.15                     WAIVER OF NOTICE PERIOD

 

(a)                                  Except as provided in subsection (b) or
subsection (c), an election by the Participant to receive a distribution shall
not be valid unless the written election is made (i) after the Participant has
received the notice required under Section 1.411(a)-11(c) of the Regulations and
(ii) within a reasonable time before the effective date of the commencement of
the distribution, as prescribed by said Regulations.

 

(b)                                 Notwithstanding the requirements of
subsection (a), a distribution may commence less than 30 days after the notice
required under Section 1.411(a)-11(c) of the Regulations is given, provided
that: (i) the Plan Administrator clearly informs the Participant that he has a
right to a period of at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution and, if applicable, a
particular distribution option, and  (ii)                                the
Participant, after receiving the notice under Sections 411 and 417 of the Code,
affirmatively elects a distribution.

 

(c)                                  For Plan Years beginning prior to
January 1, 2000, if the balance of the Account of a Participant described in
Section 10.02(b) has not exceeded $3,500, then subsection (a) shall not apply
and Section 10.03 shall apply, provided, however, that, effective with

 

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respect to terminations of employment occurring after December 31, 1997, $5,000
shall be substituted for $3,500.  For Plan Years beginning after December 31,
1999, if the balance of the Account of a Participant does not exceed $5,000,
then subsection (a) shall not apply and Section 10.03 shall apply.

 

10.16                     DISTRIBUTION OF ACCOUNTS UPON A SALE OF ASSETS OR A
SALE OF A SUBSIDIARY PRIOR TO DECEMBER 31, 2001

 

(a)                                  Upon the disposition by an Employer of at
least 85% of the assets, within the meaning of Section 409(d)(2) of the Code,
used by the Employer in a trade or business, or upon the disposition by an
Employer of its interest in a subsidiary, within the meaning of
Section 409(d)(3) of the Code, prior to December 31, 2001, those Participants
who continue in employment with the employer acquiring such assets or with the
sold subsidiary shall be deemed to have terminated employment for purposes of
Sections 10.01 and 10.03, provided that (i) the Employer continues to maintain
the Plan after the disposition and (ii) the buyer is not an Employer or an
Affiliate of any Employer, does not adopt the Plan or otherwise become a
participating employer in the Plan, and does not accept any transfer of assets
or liabilities from the Plan to a plan it maintains in a transaction subject to
Section 414(l)(1) of the Code.

 

(b)                                 A Participant who is deemed to have
terminated employment pursuant to subsection (a) shall be permitted to receive a
distribution pursuant to Section 10.02 only in a form that constitutes a lump
sum distribution within the meaning of Section 401(k)(10)(B)(ii) of the Code. 
At the end of the second calendar year following the calendar year in which the
sale or disposition described in subsection (a) occurred, such Participant’s
entitlement to receive a distribution in accordance with Section 10.02 shall be
suspended until he terminates employment with the buyer.

 

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ARTICLE 11.  ADMINISTRATION OF PLAN

 

11.01                     Named Fiduciaries

 

(a)                                  The following persons and groups of persons
shall severally have the authority to control and manage the administration of
the Plan and shall each be a named fiduciary with respect to the Plan, within
the meaning of Section 402(a) and 403(a)(1) of ERISA:

 

(i)                                     the Committee; and

 

(ii)                                  the Plan Administrator and, if the Plan
Administrator is constituted as a committee, pursuant to Section 11.04(a), each
member of such committee.

 

(b)                                 Each named fiduciary shall be responsible
for discharging only those duties assigned to it by the Plan or by the Trust
Agreement.

 

(c)                                  The named fiduciaries with respect to the
Plan may, in their discretion, (i) designate persons other than named
fiduciaries to carry out fiduciary responsibilities under the Plan, other than
trustee responsibilities, within the meaning of Section 405(c)(3) of ERISA;
(ii) allocate fiduciary responsibilities, other than such trustee
responsibilities, among named fiduciaries; and (iii) employ one or more persons
to render advice or to provide services with respect to the Plan, provided,
however, that fiduciary responsibilities may be delegated only pursuant to a
written instrument adopted by the named fiduciary making the delegation and
accepted in writing by the person assuming such fiduciary responsibilities.

 

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11.02                     Authority of the Board of Directors

 

The Board of Directors, or a committee thereof that the Board may designate from
time to time, expressly reserves the following settlor (i.e., non-fiduciary)
powers, functions, and authority:

 

(i)                                    the power to terminate the Plan pursuant
to Section 13.04; and

 

(ii)                                the power to amend the Plan in any manner
pursuant to Section 13.01.

 

11.03                     Responsibilities of Committee

 

(a)                                  The Committee shall be responsible for:

 

(i)                                    the appointment, retention, and removal
of:

 

(A)                              the Trustee that holds the assets of the Fund,
and

 

(B)                                the Trustee or Investment Managers that
direct or manage the investment, acquisition, and disposition of the assets of
the Fund or of any Investment Fund;

 

(ii)                                 the establishment and amendment of
investment policies and guidelines for the Plan, provided, however, that the
Committee, in its sole discretion, may delegate all or part of such
responsibility to the Trustee or Investment Managers, or to employees of IBM, or
to Participants;

 

(iii)                               the review of the performance of the Plan
Administrator, the Trustee, the Investment Managers, and any others appointed by
it at such times as the Committee determines; and

 

(iv)                             the establishment of such rules as it may deem
appropriate for the conduct of its business with respect to the Plan.

 

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(b)                                 The Committee may, by duly adopted
resolution, delegate to the Plan Administrator, or any officer or employee of
IBM, the authority to carry out any decision, resolution, directive, or
delegation of the Committee.  The Committee may, by duly adopted resolution,
delegate to the Treasurer of IBM the authority granted to the Committee under
subsection (a)(i)(B) or Section 5.01(c).

 

11.04                     Appointment of Plan Administrator

 

(a)                                  The Committee shall appoint one or more
persons employed by IBM in the capacity of Assistant Controller, Vice President
in Human Resources, Managing Director of U.S. Retirement Funds, or such other
person or persons holding comparable positions as it deems appropriate in its
discretion, to serve as the Plan Administrator, or to comprise a committee that
shall serve as the Plan Administrator, the members of which committee may be
authorized to act jointly or severally.

 

(b)                                 The Committee shall appoint and designate
other employees of IBM as may be needed to provide adequate staff support and
services to the Committee and the Plan Administrator.

 

11.05                     Responsibilities of Plan Administrator and Effect of
Decisions of Plan Administrator

 

(a)                                  The Plan Administrator shall have the full
authority and discretion to promulgate and enforce such rules and regulations as
it shall deem necessary or appropriate for the administration of the Plan, which
rules and regulations shall include a claims procedure in accordance with
Section 503 of ERISA and regulations thereunder, provided,

 

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however, such claims procedure shall not be applicable to claims arising under
the Disability Protection Program, which claims shall be subject only to the
provisions of Section 5A.08(b).

 

(b)                                 The Plan Administrator shall have the full
authority and discretion to construe and interpret the Plan, and correct any
defect, supply any omission, reconcile any inconsistency, or resolve any
ambiguities, consistent with the intent hereof, to determine the amount, timing,
and recipients of benefits payable under the Plan, and to determine the date as
of which any individual became or ceased to be a Participant.

 

(c)                                  The Plan Administrator shall report to the
Committee on its activities at such times as the Committee determines.

 

(d)                                 All determinations of the Plan Administrator
as to the interpretation of the Plan or as to any disputed question shall be in
accordance with the terms of the Plan and the requirements of ERISA and the
Code, and shall be conclusive and binding on all persons, to the extent
permitted by applicable law.

 

(e)                                  The Plan Administrator, in its discretion,
may delegate to others responsibility and authority for discharging any or all
of the functions assigned to it by the Plan, except for the functions enumerated
in Sections 13.01(c) and 14.09.

 

11.06                     Retention of Professional Advisors

 

(a)                                  The Committee or the Plan Administrator may
engage the services of accountants, attorneys, actuarial and employee benefit
consultants, recordkeepers, and such other

 

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professional or administrative personnel or organizations as they deem necessary
or advisable to assist them in fulfilling their responsibilities under the Plan.

 

(b)                                 The expenses for professional or
administrative services engaged pursuant to subsection (a) shall be paid out of
the assets of the Trust, in accordance with Section 12.03, except to the extent
that such expenses are paid by the Employer.

 

(c)                                  The Committee, the Plan Administrator, all
other fiduciaries with respect to the Plan, and their delegates and assistants
shall be entitled to act on the basis of any tables, valuations, certificates,
opinions, or reports furnished by the professional or administrative personnel
engaged in accordance with subsection (a).

 

11.07                     [Reserved]

 

11.08                     Service in More Than One Fiduciary Capacity

 

Any individual, entity or group of persons may serve in more than one fiduciary
capacity with respect to the Plan and/or the funds of the Plan.

 

11.09                     Compensation and Bonding

 

The members of the Committee and the Plan Administrator shall not receive any
compensation from the Plan for their services as such.  Except as may otherwise
be required by law, no bond or other security shall be required of any person
serving in any capacity with respect to the Plan in any jurisdiction.

 

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11.10                     Limitation of Liability

 

To the maximum extent permitted by IBM’s by-laws, as amended from time to time,
IBM shall indemnify each member of the Committee, the Plan Administrator, and
each director, officer, and employee or agent of the Employer against any
expenses and liabilities that such person may incur as a result of any act or
failure to act, in good faith, by such person in relation to the Plan or the
funds of the Plan.

 

11.11                     Individual Accounts

 

The Plan Administrator shall maintain, or cause to be maintained, records
showing the individual balances in each Participant’s Account.  However,
maintenance of such records and Accounts shall not require any segregation of
the funds of the Plan.

 

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ARTICLE 12.  MANAGEMENT OF FUNDS

 

12.01                     Trust Agreement

 

All the funds of the Plan shall be held by Trustee appointed from time to time
by the Committee under a trust agreement adopted, or as amended, by the
Committee for use in providing the benefits of the Plan and paying Plan expenses
as described in Section 12.03.  The Employer shall have no liability for the
payment of benefits under the Plan nor for the administration of the funds paid
over to the Trustee.

 

12.02                     Exclusive Benefit Rule

 

Except as otherwise provided in the Plan, no part of the corpus or income of the
funds of the Plan shall be used for, or diverted to, purposes other than for the
exclusive benefit of Participants and other persons entitled to benefits under
the Plan and paying the expenses of the Plan not paid directly by the Employer. 
No person shall have any interest in, or right to, any part of the earnings of
the funds of the Plan, or any right in, or to, any part of the assets held under
the Plan, except as and to the extent expressly provided in the Plan.

 

12.03                     Expenses

 

The reasonable expenses incurred in the administration of the Plan, including
fees for professional services and the costs of such other technical or clerical
assistance as may be required, shall be paid out of the Trust Fund except to the
extent that the Employer pays such expenses.  If such expenses are paid by the
Employer, the Employer shall be entitled to reimbursement from the Trust Fund if
the Employer so requests.  Reimbursement from the Trust  Fund shall be available
even where, at the time of the

 

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Employer’s initial payment of the expense it is not clear that the Employer may
lawfully seek reimbursement from the Trust Fund, but the Employer’s legal right
to reimbursement from the Trust Fund is later clarified.  The Employer may
choose to pay expenses initially and to obtain reimbursement from the Trust Fund
many years after the Employer pays the expenses. Such delayed reimbursements are
permissible.

 

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ARTICLE 13.  AMENDMENT, MERGER, TRANSFERS, AND TERMINATION

 

13.01                     Amendment of Plan

 

(a)                                  The Board of Directors reserves the right
at any time and from time to time, and retroactively if deemed necessary or
appropriate, to amend in whole or in part any or all of the provisions of the
Plan.

 

(b)                                 The Committee shall have the authority to
amend in whole or in part any or all provisions of the Plan at any time and from
time to time, and retroactively if deemed necessary or appropriate, provided,
that the Board of Directors may, in its discretion, limit the authority of the
Committee and in no event may the Committee:

 

(i)                                      approve any Plan amendment or take any
other settlor action that disproportionately benefits IBM corporate officers
(such as by approving that a new award or other form of compensation be included
in Compensation only for IBM corporate officers);

 

(ii)                                   approve any Plan amendment, or any series
of amendments adopted within any 12 month period, that affects projected cash
flow by more than $100,000,000 in a single year;

 

(iii)                                take any settlor actions materially
inconsistent with prior actions of the Board of Directors or any committee
thereof; or

 

(iv)                               revise the procedures for amending the Plan.

 

(c)                                 The Plan Administrator shall have the
authority to adopt amendments to the Plan that:

 

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(i)                                    may be required to maintain the qualified
status of the Plan under Section 401(a) of the Code and the tax-exempt status of
the Trust under Section 501(a) of the Code, or

 

(ii)                                 relate to the compliance of the Plan with
the requirements of the Code and constitute an election permitted by any section
of the Code, or Regulations or rulings thereunder, or

 

(iii)                              have the effect of modifying the optional
forms of distribution provided under any special rules adopted pursuant to
Section 13.02(d),

 

and shall have such additional authority to amend the Plan as may be delegated
to it by the Committee.  Any such amendment shall be effective as specified by
the Plan Administrator and may be given retroactive effect to the extent
required or permitted by Section 401(b) of the Code and Regulations and rulings
thereunder, provided, however, that any amendment described in paragraph
(iii) shall not be effective with respect to a Participant who receives or
commences to receive a distribution from the Plan within 90 days after the date
on which he is notified of the adoption of such amendment and provided further,
that the Plan Administrator may not adopt an amendment to the Plan that,
pursuant to subsection (b), could not be adopted by the Committee.

 

(d)                                No amendment shall make it possible for any
part of the funds of the Plan to be used for, or diverted to, purposes other
than for the exclusive benefit of persons entitled to benefits under the Plan or
the payment of reasonable Plan administration expenses.

 

(e)                                 No amendment shall be made which has the
effect of decreasing the balance of the Account of any Participant or of
reducing the nonforfeitable percentage of the balance of the Account of a
Participant below the nonforfeitable percentage computed under the

 

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Plan as in effect on the date on which the amendment is adopted, or if later,
the date on which the amendment becomes effective.

 

13.02                     MERGER, CONSOLIDATION OR TRANSFER OF ASSETS AND
LIABILITIES

 

(a)                                  The Plan may not be merged or consolidated
with, and its assets or liabilities may not be transferred to, any other plan
unless each person entitled to benefits under the Plan would, if the resulting
plan were then terminated, receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately before the merger,
consolidation, or transfer if the Plan had then terminated.

 

(b)                                 Subject to the provisions of subsection (a),
the Committee shall have the authority (i) to direct the merger of the Plan into
or with any other plan that is qualified under Section 401(a) of the Code,
(ii) to cause the Plan to be divided into 2 or more separate plans, each of
which shall be qualified under Section 401(a) of the Code, (iii) to instruct the
Trustee to transfer any portion of the assets and liabilities of the Plan from
the Trust to any other plan that is qualified under Section 401(a) of the Code,
or (iv) to instruct the Trustee to accept a transfer to the Trust of any portion
of the assets and liabilities of any other plan that is qualified under
Section 401(a) of the Code.

 

(c)                                  Subject to the provisions of
subsection (a), the Plan Administrator shall have the authority (i) to instruct
the Trustee to accept a transfer to the Trust, by another plan that is qualified
under Section 401(a) of the Code, of all or any portion of the assets and
liabilities of such other plan that are allocated thereunder to the accounts of
individuals that have or will become Employees and have or will become eligible
to be Participants

 

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in the Plan or (ii) to instruct the Trustee to transfer from the Trust to
another Plan that is qualified under Section 401(a) of the Code all or any
portion of the assets and liabilities of the Trust that are allocated hereunder
to the Accounts of Participants who have terminated or will terminate from
employment with an Employer as the result of a transaction undertaken by such
Employer.  In exercising its authority under clause (ii) of the foregoing
sentence, the Plan Administrator may, in its discretion, but shall not be
required to, permit each Participant affected by such termination to elect
whether or not the assets and liabilities allocated to his Account hereunder
shall be included in such transfer and may establish conditions for the
inclusion in such transfer of the assets and liabilities allocated to any
Account hereunder.

 

(d)                                 In each transaction in which another plan is
merged into and with the Plan in accordance with subsection (b)(i) and in each
case in which the Plan receives a transfer of assets and liabilities in
accordance with subsection (b)(iv) or (c)(i), the Plan Administrator shall
establish rules for the treatment of the Accounts established or increased as a
result thereof, which rules may include the establishment of additional
sub-accounts.  Such rules, which are hereby incorporated by reference, shall
comply with the requirement of Section 411(d)(6) of the Code and Regulations
thereunder.

 

(e)                                  Rescission of Special Rules adopted prior
to September 30, 2002.

 

(i)                                     Notwithstanding any rule adopted
pursuant to Section 13.02(d) prior to September 30, 2002, distributions to a
Participant who has terminated employment shall be not be made in any form other
than the forms described in Sections 10.02, 10.03, or 10.04, except that
distributions to a Participant who has attained age 70½ shall be made in
accordance with Section 10.06.  A

 

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Participant’s election of any form of distribution described in Sections 10.02,
10.04, or 10.06 shall not be subject to the consent of his or her spouse.

 

(ii)                                  Notwithstanding any rule adopted pursuant
to Section 13.02(d) prior to September 30, 2002, distributions to a
Participant’s Beneficiary upon the death of a Participant shall be made only in
the form described in Section 10.08.

 

(iii)                               Notwithstanding any rule adopted pursuant to
Section 13.02(d) prior to September 30, 2002, in no event shall a Participant’s
application for a loan in accordance with Section 9.01(a) and 9.02(a) be subject
to the consent of his or her spouse.

 

(iv)                              Notwithstanding any special rule adopted
pursuant to Section 13.02(d) prior to September 30, 2002, in no event shall a
Participant’s application pursuant to Section 8.03 for a withdrawal in
accordance with Section 8.01 or 8.02 be subject to the consent of his or her
spouse.

 

(v)                                 This subsection shall be effective as of
September 30, 2002, provided, however, that the provisions of this subsection
shall not be effective with respect to distributions to a Participant or
Beneficiary occurring before the earlier of (i) 90 days after a Summary of
Material Modifications describing the provisions of this subsection has been
furnished to Participants in accordance with Sec. 2520-104b-3(a) of the
regulations of the Department of Labor, or (ii) the date that the Proposed
Regulation amending Section 1.411(d)-4, Q&A 2(e) of the Regulations, published
on July 8, 2003, becomes final.

 

(f)                                    (i)                                    
In advance of, and in preparation for the implementation of, any transaction
pursuant to subsection (b) or subsection (c) in which assets and liabilities of
the Plan shall be transferred to any other plan that is qualified under
Section 401(a) 

 

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of the Code, the Plan Administrator may direct that the portion of any
Investment Fund that is attributable to the Accounts that will be included in
such transfer shall be segregated in a sub-fund that shall be accounted for
separately from and after the date of such segregation.

 

(ii)                                  The amount allocated to a sub-fund
established pursuant to paragraph (i) shall be determined on the basis of the
market value of the assets of the Investment Fund as of the date of such
segregation, provided, however, that if the Investment Fund is a Stable Value
Fund, then the rights under the guaranteed investment contracts and
benefit-responsive contracts held in such Stable Value Fund shall be allocated
to the sub-fund on the basis of the contract value of such Stable Value Fund
prior to such segregation.

 

(iii)                               Any election pursuant to Section 5.02 or
5.04 to invest any portion of his contributions in, or to reallocate any portion
of his Account to, an Investment Fund in which a sub-fund has been segregated
pursuant to paragraph (i), by a Participant whose Account has been allocated to
the sub-fund, shall be deemed to be an election to invest contributions in, or
to reallocate his Account to, such sub-fund.

 

(iv)                              No Participant whose Account will not be
included in the transfer in preparation for which a sub-fund has been segregated
pursuant to paragraph (i) shall be permitted to invest any portion of his
Account in such sub-fund.

 

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13.03                     TERMINATION BY PARTICIPATING EMPLOYERS

 

Any Domestic Subsidiary may terminate its participation in the Plan upon
appropriate action by it, including such notice to the Committee as the
Committee shall require. In that event, the funds of the Plan held on account of
Participants in the employ of that Domestic Subsidiary, and any unpaid balances
of the Accounts of all Participants who have separated from the employ of that
Domestic Subsidiary and who are not then employed by an Employer other than that
Domestic Subsidiary, shall be determined by the recordkeeper appointed by the
Plan Administrator.  The Plan Administrator shall direct the Trustee to
segregate the amount so determined as a separate trust and such segregation
shall be deemed a division of the Plan into 2 plans, in accordance with
Section 13.02(b)(ii).  With respect to the separate trust and plan so
established, the board of directors of the Domestic Subsidiary that has
terminated its participation in the Plan shall succeed to the powers and duties
of the Board of Directors and the Committee, including without limitation, the
appointment of the Plan Administrator and the authority to terminate such
separate plan in accordance with Section 13.04.

 

13.04                     TERMINATION OF PLAN

 

(a)                                  The Board of Directors may terminate the
Plan at any time.  Subject to Section 11.02, the Committee may completely
discontinue contributions under the Plan for any reason at any time.  In case of
termination or partial termination of the Plan, or complete discontinuance of
Employer contributions to the Plan, the rights of affected Participants to their
Accounts under the Plan as of the date of the termination or discontinuance
shall be nonforfeitable.  The total amount in each Participant’s Accounts shall
be distributed to him or for his benefit, as the Plan Administrator shall
direct, subject to the provisions of subsection (b), or continued in trust for
his benefit.

 

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(b)                                 Upon termination of the Plan, Deferred Cash
Contributions and Employer Matching Contributions, with earnings thereon, shall
be distributed to Participants only if (i) neither the Employer nor any
Affiliate establishes or maintains a successor defined contribution plan, and
(ii) payment is made to the Participants in the form of a lump sum distribution,
as defined in Section 401(k)(10)(B)(ii) of the Code.  For purposes of this
paragraph, a “successor defined contribution plan” is a defined contribution
plan within the meaning of Section 414(i) of the Code, other than an employee
stock ownership plan as defined in Sections 4975(e)(7) or 409(a) of the Code
(“ESOP”) or a simplified employee pension as defined in Section 408(k) of the
Code (“SEP”), which exists at the time the Plan is terminated or within the 12
month period beginning on the date all assets are distributed.  However, in no
event shall a defined contribution plan be deemed a successor plan if fewer than
2% of the employees who are eligible to participate in the Plan at the time of
its termination are or were eligible to participate under such other defined
contribution plan of the Employer or an Affiliate, other than an ESOP or a SEP,
at any time during the period beginning 12 months before and ending 12 months
after the date of the Plan’s termination.

 

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ARTICLE 14.  GENERAL PROVISIONS

 

14.01       NONALIENATION AND PAYMENT PURSUANT TO QUALIFIED DOMESTIC RELATIONS
ORDERS

 

(a)           Except as required by any applicable law, no benefit under the
Plan shall in any manner be anticipated, assigned or alienated, and any attempt
to do so shall be void.

 

(b)           Notwithstanding subsection (a), payment shall be made in
accordance with the provisions of any judgment, decree, or order which:

 

(i)            creates for, or assigns to, a spouse, former spouse, child or
other dependent of a Participant the right to receive all or a portion of the
Participant’s benefits under the Plan for the purpose of providing child
support, alimony payments or marital property rights to that spouse, child or
dependent,

 

(ii)           is made pursuant to a State domestic relations law,

 

(iii)          does not require the Plan to provide any type of benefit, or any
option, not otherwise provided under the Plan, and

 

(iv)          otherwise meets the requirements of Section 206(d) of ERISA, as
amended, as a Qualified Domestic Relations Order, as determined by the Plan
Administrator in accordance with its established procedures.

 

(c)           Notwithstanding anything herein to the contrary, if the amount
payable to the alternate payee under a Qualified Domestic Relations Order is
less than $3,500, such amount shall be paid in one lump sum as soon as
practicable following the qualification of the order.  If such amount exceeds
$3,500, it shall be paid in one lump sum as soon as

 

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practicable following the qualification of the order, unless the Qualified
Domestic Relations Order provides that such payment may not be made without the
consent of the alternate payee.  If a Qualified Domestic Relations Order
requires the consent of the alternate payee prior to the payment of the amount
awarded thereunder and if such amount exceeds $3,500, then such amount shall be
paid in one lump sum as soon as practicable following receipt of the consent of
the alternate payee, but in no event later than the date on which the
Participant named in such order attains Normal Retirement Age.  Effective
January 1, 1998, $5,000 shall be substituted for $3,500 for purposes of this
subsection.

 

(d)           For the sole purpose of applying the provisions of Sections 5.04
and 10.11 with respect to the portion of an Account that has been made payable
to an alternate payee pursuant to a Qualified Domestic Relations Order, such
alternate payee shall be deemed to be a Participant.

 

(e)           The Plan Administrator shall establish rules for determining
whether an order, judgment or decree meets the requirements of a Qualified
Domestic Relations Order set forth in subsection (b) and procedures for
implementing such order, judgment or decree in the event that it is determined
to be a Qualified Domestic Relations Order.  The Plan Administrator may impose a
charge to defray the cost of such determination and implementation, which charge
shall be deducted from the Participant’s Account.

 

14.02       FACILITY OF PAYMENT

 

(a)           In the event that the Plan Administrator determines that any
Participant or Beneficiary receiving or entitled to receive benefits under the
Plan is incompetent or unable to care

 

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for his affairs, and in the absence of the appointment of a legal guardian of
the property of the incompetent, payments due under the Plan, unless prior claim
thereto has been made by a duly qualified guardian, committee, or other legal
representative, may be made to the spouse, parent, sibling, adult child, or
other person, including a hospital or other institution, deemed by the Plan
Administrator to have incurred or to be liable for expenses on behalf of such
incompetent.

 

(b)           In the absence of the appointment of a legal guardian of the
property of a minor, any payment due under the Plan may be paid to such adult or
adults as in the opinion of the Plan Administrator have assumed the custody and
principal support of such minor.

 

(c)           Notwithstanding the provisions of subsection (a) or (b), the Plan
Administrator, in its sole discretion, may require that a legal guardian for the
property of an incompetent or a minor be appointed, before authorizing any
payment hereunder to or for the benefit of such minor or incompetent.

 

(d)           Payments made pursuant to this Section shall be a complete
discharge of any obligation arising under the Plan with respect to such
payments.

 

14.03       TAX WITHHOLDING

 

The Trustee, the Plan Administrator, and the Employer shall withhold applicable
taxes from payments made under the Plan, shall pay over the amounts so withheld
to the Internal Revenue Service, or state or local tax authority, in accordance
with applicable law, and shall report information to government agencies when
required to do so by law.

 

14.04       PREVENTION OF ESCHEAT

 

If the Plan Administrator cannot ascertain the whereabouts of any person to whom
a payment is due under the Plan, the Plan Administrator may, prior to January 1,
2004, no

 

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earlier than 3 years and, after December 31, 2003, no earlier than 1 year, from
the date such payment is due, mail a notice of such due and owing payment to the
last known address of such person, as shown on the records of the Plan
Administrator or the Employer.  If such person has not made written claim
therefor within 3 months of the date of the mailing, the Plan Administrator may,
if it so elects and upon receiving advice from counsel to the Plan, direct that
such payment and all remaining payments otherwise due such person be canceled on
the records of the Plan and the amount thereof applied to reduce the
contributions of the Employer.  Upon such cancellation, the Plan and the Trust
shall have no further liability therefor except that, in the event such person
or his beneficiary later notifies the Plan Administrator of his whereabouts and
requests the payment or payments due to  him under the Plan, the amount so
applied shall be paid to him, without interest, in accordance with the
provisions of the Plan.

 

14.05       ELECTIONS AND NOTIFICATIONS

 

(a)           Any elections, notifications or designations made by an Employee,
Participant, Beneficiary, or spouse  pursuant to the provisions of the Plan
shall be made and filed with the Plan Administrator in a time and manner
determined by the Plan Administrator under rules uniformly applicable to all
persons similarly situated.  In establishing such rules, the Plan Administrator
shall have the authority in its discretion to provide that telephonic or
electronic communication may be accepted in lieu of a written instrument, except
to the extent otherwise required by law.

 

(b)           The Plan Administrator reserves the right to change from time to
time the time and manner for making notifications, elections or designations
under the Plan, if it determines that such action improves the administration of
the Plan.  In the event of a conflict between the provisions for making an
election, notification or designation set

 

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forth in the Plan and such new administrative procedures, those new
administrative procedures shall prevail.

 

(c)           The Plan Administrator shall have the authority to suspend the
rights of Participants to make elections under the Plan if the Plan
Administrator, in its discretion, deems such suspension to be necessary to
preserve the interests of the Plan and its Participants.

 

(d)           Any Notice that is not received by the Plan Administrator or its
delegate shall be without force or effect and shall not be binding on the Plan,
regardless of the circumstances or cause of such nondelivery.  In no event shall
the Plan, any Employer, the Committee, or the Plan Administrator by liable to
any Employee, Participant, spouse of a Participant, Beneficiary, or any other
person for the consequences of the nondelivery of any Notice required to be
provided hereunder.

 

14.06       INFORMATION

 

Each Participant, Beneficiary or other person entitled to a benefit, before any
benefit shall be payable to him or on his account under the Plan, shall file
with the Plan Administrator the information that it shall require to establish
his rights and benefits under the Plan.

 

14.07       CONDITIONS OF EMPLOYMENT NOT AFFECTED BY PLAN

 

The establishment of the Plan shall not confer any legal rights upon any
Employee or other person for a continuation of employment, nor shall it
interfere with the rights of the Employer to discharge any Employee and to treat
him without regard to the effect which that treatment might have upon him as a
Participant or potential Participant of the Plan.

 

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14.08       CONSTRUCTION

 

(a)           The Plan shall be construed, regulated and administered under
ERISA and the laws of the State of New York, except where ERISA controls.

 

(b)           For purposes of ERISA and other applicable laws of the United
States or any state, the situs of the Plan and the Trust Fund shall be the State
of New York.

 

(c)           The masculine pronoun shall include the feminine wherever
appropriate.

 

(d)           The titles and headings of the Articles and Sections in this Plan
are for convenience of reference only.  In the case of ambiguity or
inconsistency, the text rather than the titles or headings shall control.

 

14.09       LIMITATION OF TIME FOR FILING CLAIMS IN COURT

 

Effective October 25, 2005, neither

 

(a)           a claim or action to recover benefits allegedly due under the
provisions of the Plan or by reason of any law, nor

 

(b)           a claim or action to enforce rights under the Plan, nor

 

(c)           a claim or action to clarify rights to future benefits under the
Plan, nor

 

(d)           any other claim or action that (I) relates to the Plan and
(II) seeks a remedy, ruling, or judgment of any kind against the Plan, the Plan
Administrator, a Plan fiduciary (within the meaning of Section 3(21) of ERISA),
or a party in interest (within the meaning of Section 3(14) of ERISA) with
respect to the Plan may be filed in any court—

 

(i)            Until the claimant has exhausted the administrative review
procedure set forth in Section 11.05(a) or Section 5A.08; and

 

(ii)           Unless such claim or action is filed in a court with jurisdiction
over such claim or action no later than two years after:

 

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(A)          in the case of a claim or action to recover benefits, the date the
first benefit payment was actually made or was allegedly due, whichever is
earlier;

 

(B)           in the case of a claim or action to enforce a right, the date the
Plan Administrator or its delegate first denied the claimant’s request to
exercise such right, regardless of whether such denial occurred during
administrative review pursuant to Section 11.05(a) or 5A.08;

 

(C)           in the case of a claim or action to clarify rights to future
benefits, the date the Plan Administrator first repudiated its alleged
obligation to provide such future benefits, regardless of whether such
repudiation occurred during administrative review pursuant to
Section 11.05(a) or 5A.08; or

 

(D)          in the case of any other claim or action described in clause (d),
above, the earliest date on which the claimant knew or should have known of the
material facts on which such claim or action is based;

 

provided that if a request for administrative review pursuant to
Section 11.05(a) or 5A.08 is pending before the claims administrator designated
by the Plan Administrator to review such claims when the two-year period
described in this paragraph (ii) expires, the deadline for filing such claim or
action in a court with proper jurisdiction shall be extended to the date that is
60 calendar days after the final denial of the claim on administrative review.

 

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The period described by paragraph (ii), above, is hereafter referred to as the
“Applicable Limitations Period.”  The Applicable Limitations Period replaces and
supersedes any limitations period that might otherwise be deemed applicable
under state or federal law in the absence of this Section 14.09.  Except as
provided in the following two sentences, a claim or action filed after the
expiration of the Applicable Limitations Period shall be deemed time-barred. 
The Plan Administrator shall have discretion to extend the Applicable
Limitations Period upon a showing of exceptional circumstances that, in the
opinion of the Plan Administrator, provide good cause for an extension.  The
exercise of this discretion is committed solely to the Plan Administrator, and
is not subject to review.  Notwithstanding the foregoing, neither paragraph
(ii), above, nor the Applicable Limitations Period shall apply to an action
governed by Section 413 of ERISA.

 

14.10     CLASS ACTION FORUM

 

(a)            To the fullest extent permitted by law, any putative class action
lawsuit brought in whole or in part under Section 502 of ERISA (or any successor
provision) and relating to the Plan, the lawfulness of any Plan provision, the
administration of the Plan, the management, investment, or handling of Plan
assets, or the performance or non-performance of Plan fiduciaries or
administrators shall be filed in one of the following jurisdictions: (i) the
jurisdiction in which the Plan is principally administered, which is currently
New York State, or (ii) the jurisdiction in which the largest number of putative
class members resides (or if that jurisdiction cannot be determined, the
jurisdiction in which the largest number of class members is reasonably believed
to reside).

 

(b)           If any putative class action within the scope of subsection
(a) above is filed in a jurisdiction other than one of those described in
subsection (a), or if any non-class

 

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action filed in such a jurisdiction is subsequently amended or altered to
include class action allegations, then the Plan, all parties to such action that
are related to the Plan (such as a Plan fiduciary, administrator, or party in
interest), and all alleged Plan participants and beneficiaries shall take all
necessary steps to have the action removed to, transferred to, or re-filed in a
jurisdiction described in subsection (a). Such steps may include, but are not
limited to, (i) a joint motion to transfer the action, or (ii) a joint motion to
dismiss the action without prejudice to its re-filing in a jurisdiction
described in subsection (a), with any applicable time limits or statutes of
limitations applied as if the suit or class action allegation had originally
been filed or asserted in a jurisdiction described in subsection (a) at the same
time that it was filed or asserted in a jurisdiction not described therein.

 

(c)            This forum selection provision is waived if no party invokes it
within 120 days of the filing of a putative class action or the assertion of
class action allegations.

 

(d)           This provision does not relieve any putative class member from any
obligation existing under the Plan or by law to exhaust administrative remedies
before initiating litigation.

 

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APPENDIX A.  SPECIAL PROVISIONS FOR MICRUS

 

MiCRUS has been a participating Employer in the Plan.  All provisions of the
Plan, as set forth in Articles 1 through 14, inclusive, and in Appendix D, apply
fully to MiCRUS and employees of MiCRUS, except to the extent that such
provisions are modified in this Appendix.  This Appendix shall be applicable
only during the period in which MiCRUS is a participating Employer in the Plan
and shall cease to be effective as of October 1, 2000.

 

1.04         Actual Deferral Percentage

 

For the purpose of determining the Actual Deferral Percentage of any group of
Employees employed by MiCRUS, any Special Discretionary Contribution made
pursuant to Section 4.13 of Appendix A shall be taken into account in the same
manner as a Deferred Cash Contribution.

 

1.32         ‘Hour of Service’ means, with respect to any applicable computation
period,

 

(a)                                  each hour for which the employee is paid or
entitled to payment for the performance of duties for the Employer or an
Affiliated Employer;

 

(b)                                 each hour for which the employee is paid or
entitled to payment by the Employer or an Affiliated Employer on account of a
period during which no duties are performed, whether or not the employment
relationship has terminated, due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, uniformed service duty, or leave of
absence, but not more than 501 hours for any single continuous period; and

 

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(c)

each hour for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Employer or an Affiliated Employer, excluding any
hour credited under (a) or (b), which shall be credited to the computation
period or periods to which the award, agreement, or payment pertains rather than
to the computation period in which the award, agreement, or payment is made.

 

 

 

 

No hours shall be credited on account of any period during which the employee
performs no duties and receives payment solely for the purpose of complying with
unemployment compensation, workers’ compensation, or disability insurance laws.
The Hours of Service credited shall be determined as required by Title 29 of the
Code of Federal Regulations, Sections 2530.200b-2(b) and (c).

 

 

 

1.50X

“Special Discretionary Contributions” means amounts contributed pursuant to
Section 4.13 of Appendix A. For purposes of Section 1.401(k)-1(b)(5) of the
Regulations, Special Discretionary Contributions made under the Plan shall be
deemed “Qualified Nonelective Contributions.”

 

 

 

3.01

Each Employee of MiCRUS shall be eligible to become a Participant at any time
during service as a full time Regular Employee.

 

 

 

3.02

Participation

 

 

 

(c)

An Employee of MiCRUS who has not satisfied the requirements of
subsection (a) but who is eligible to receive an allocation of a Special
Discretionary Contribution in accordance with Section 4.13 of Appendix A shall
become a Participant in the Plan on the date that such allocation is made.

 

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(d)

 

Notwithstanding any provision hereof, no Employee of MiCRUS shall be eligible to
make an election described in Section 4.01 for any period during which he is not
a full time Regular Employee.

 

 

 

4.13

 

Special Discretionary Contribution

 

 

 

(a)

 

MiCRUS, in its sole discretion, may make a Special Discretionary Contribution to
the Plan, out of its Profits, not more than once per Plan Year.

 

 

 

(b)

 

If a Special Discretionary Contribution is made for a Plan Year, it shall be
paid to the Trustee not later than the time prescribed by law for the filing of
the Employer’s Federal income tax return, including extensions thereof, for the
taxable year of the Employer that contains the last day of the Plan Year to
which the contribution relates.

 

 

 

(c)

 

If a Special Discretionary Contribution is made for a Plan Year, it shall be
allocated to the Employer Account of each Eligible Employee in the proportion
that his Compensation for the Plan Year bears to the Compensation of all
Eligible Employees for such Plan Year.

 

 

 

(d)

 

For purposes of subsection (c), an Employee of MiCRUS shall be deemed an
Eligible Employee if, and only if, (i) he satisfies the requirements of
Section 3.01 of Appendix A, (ii) the date on which he first completed an Hour of
Service was no later than the first day of the Plan Year to which the Special
Discretionary Contribution relates, (iii) he is an Employee in active
employment, or is on an authorized leave of absence, on the last day of the Plan
Year to which the Special Discretionary Contributions relates, and (iv) he is
not eligible to participate in the MiCRUS Retirement Plan.

 

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APPENDIX B.  SPECIAL PROVISIONS FOR
TECHNOLOGY SERVICE SOLUTIONS (“TSS”)

 

Technology Service Solutions (“TSS”) has been a participating employer in the
Plan.  All provisions of the Plan, as set forth in Articles 1 through 14,
inclusive, and Appendix D apply fully to TSS and employees of TSS, except to the
extent that such provisions are modified in this Appendix.  This Appendix shall
be applicable only during the period in which TSS is a participating Employer in
the Plan shall cease to be effective as of January 1, 1999.

 

4.02

 

Employer Matching Contributions

 

 

 

(a)

 

TSS shall contribute, out of its Profits, on behalf of each of its Participants
who elects to make Deferred Cash Contributions, an amount equal to 100% of the
Deferred Cash Contributions made by the Participant during each payroll period;
provided, however, that for this purpose, Deferred Cash Contributions in excess
of 7% of the Participant’s Compensation for a payroll period shall not be taken
into account. In no event shall the Matching Contributions pursuant to this
Section with respect to a Plan Year exceed 7% of the Participant’s Compensation
while a Participant during such Plan Year.

 

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APPENDIX C.  SPECIAL RULES APPLICABLE
TO PUERTO RICO EMPLOYEES

 

The Plan includes as participating Employers entities that conduct business
operations in Puerto Rico and covers Employees who perform services only in
Puerto Rico.  All provisions of the Plan, as set forth in Articles 1 through 14,
inclusive, apply fully to Employers conducting business in Puerto Rico and
employees performing services in Puerto Rico, except to the extent that such
provisions are modified in this Appendix.

 

1.04

 

Actual Deferral Percentage

 

 

 

 

 

For the purpose of determining the Actual Deferral Percentage of a group of
Puerto Rico Employees, and at the election of the Plan Administrator, which
election may be made or changed each Plan Year, all or any portion of Matching
Contributions made pursuant to Section 3.02 with respect to such Plan Year may
be taken into account, in accordance with Section 1165(e)(3)(D)(ii)(I) of the
Puerto Rico Code.

 

 

 

1.31

 

“Highly Compensated Employee” means, for purposes of all determinations required
to be made in accordance with the Puerto Rico Code, an employee of an Employer
who is a Participant or who is eligible to become a Participant and whose
compensation for a Plan Year exceeds the compensation of two-thirds of the
employees of the Employer who are Participants or eligible to become
Participants.

 

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1.45W

“Puerto Rico Code” means the Puerto Rico Internal Revenue Code of 1994, as
amended from time to time. References to specific sections of the Puerto Rico
Code shall be deemed to refer to such sections as they may be amended or
redesignated.

 

 

 

1.45X

“Puerto Rico Employee” means an Employee of an Employer in Puerto Rico who is
subject to income taxation under the laws of Puerto Rico.

 

 

 

1.45Y

“Puerto Rico Participant” means a Puerto Rico Employee who has become
Participant in accordance with Section 3.02 and who has not ceased to be a
Participant in accordance with Section 3.05.

 

 

 

4.01

Deferred Cash Contributions

 

 

 

(a)

(i)

Notwithstanding the provisions of this subsection, the Compensation reduction
elected by a Puerto Rico Participant

 

may not exceed 10% of his Compensation.

 

 

 

(x)

This paragraph shall not apply to Puerto Rico Participants

 

 

 

(f)

Notwithstanding any other provision of this Section, in no event shall the
Deferred Cash Contributions of a Puerto Rico Participant in any calendar year
exceed the lesser of (i) 10% of his Compensation or (ii) the excess, if any, of
$7,500 over the amount contributed by the Puerto Rico Participant pursuant to
Section 1169 of the Puerto Rico Code, determined without regard to contributions
attributable to his spouse, if he resides with his spouse. Effective January 1,
1998, $8,000 shall be substituted for $7,500 in the foregoing sentence.

 

 

 

(g)

This subsection shall not apply to Puerto Rico Participants.

 

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(h)

 

This subsection shall not apply to Puerto Rico Participants.

 

 

 

4.03

 

ROLLOVER CONTRIBUTIONS, ROTH ROLLOVER CONTRIBUTIONS, AND AFTER-TAX ROLLOVER
CONTRIBUTIONS

 

 

 

(f)

 

This subsection shall not apply to Puerto Rico Participants.

 

 

 

(g)

 

This subsection shall not apply to Puerto Rico Participants.

 

 

 

4.06

 

Actual Deferral Percentage Test

 

 

 

(d)

 

For each Plan Year, the Actual Deferral Percentage for Highly Compensated
Employees who are Puerto Rico Participants shall be subject to the limitation
described in subsection (a), provided, however, that for purposes of this
subsection, the Employer shall be deemed to have made the election described in
subsection (b). If the Plan Administrator determines that the limitation under
this subsection has been exceeded, then the Plan Administrator shall apply the
procedures described in subsection (c), provided, however, that clause (ii) of
subsection (c) shall not be applicable and all Excess Contributions shall be
distributed to the Highly Compensated Employee with respect to whom such Excess
Contributions were determined in accordance with clause (i) of subsection (c).

 

 

 

4.07

 

Actual Contribution Percentage Test

 

 

 

 

 

This Section shall not apply to Highly Compensated Employees who are Puerto Rico
Participants.

 

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4.08

 

Aggregate Contribution Limitation

 

 

 

 

 

This Section shall not be applicable to Highly Compensated Employees who are
Puerto Rico Participants.

 

 

 

4.09

 

Additional Discrimination Testing Provisions

 

 

 

(d)

 

The provisions of subsections (a), (b), and (c) shall not be applied to test any
Contributions made on behalf of Highly Compensated Employees who are Puerto Rico
Participants. In the event that any Highly Compensated Employee who is a Puerto
Rico Participant participates in more than one plan of an Employer that includes
a cash or deferred contribution arrangement under Section 1165(e) of the Puerto
Rico Code, or if the plan and any other plan containing a cash or deferred
contribution arrangement under Section 1165(e) of the Puerto Rico Code are
treated as one plan for purposes of Section 1165(a)(3) or (a)(4) of the Puerto
Rico Code, all such cash or deferred contribution arrangements shall be treated
as a single arrangement for purposes of Section 4.06(d) of Appendix C.

 

 

 

4.12

 

Return of Contributions

 

 

 

(d)

 

If all or part of an Employer’s deductions for contributions on behalf of Puerto
Rico Participants are disallowed by the Secretary of the Treasury of Puerto Rico
or his delegate, the portion of contributions to which that disallowance applies
shall be returned to the Employer, upon its written request to the Trustee,
without interest, but reduced by any investment losses attributable to those
contributions, provided one year of the disallowance of the deduction. For this
purpose, all contributions made by each Employer on behalf of Puerto Rico
Participants are expressly declared to be conditioned on their deductibility
under Section 1023(n) of the Puerto Rico Code. In the event that

 

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Deferred Cash Contributions are returned to an Employer in accordance with this
subsection, then the provisions of subsection (c) shall apply to the amount so
returned.

 

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APPENDIX D.  TOP-HEAVY PROVISIONS

 

A.

The following definitions apply to the terms used in this Appendix:

 

 

 

 

(i)

“applicable determination date” means, for any Plan Year, the last day of the
preceding Plan Year;

 

 

 

 

(ii)

“top-heavy ratio” means the ratio of (A) the value of the aggregate of the
Accounts under the Plan for key employees to (B) the value of the aggregate of
the Accounts under the Plan for all key employees and non-key employees;

 

 

 

 

(iii)

“key employee” means an employee who is in a category of employees determined in
accordance with the provisions of Sections 416(i)(1) and (5) of the Code and any
Regulations thereunder and, where applicable, on the basis of the Employee’s
Statutory Compensation from the Employer or an Affiliate;

 

 

 

 

(iv)

“non-key employee” means any Employee who is not a key employee;

 

 

 

 

(v)

“applicable Valuation Date” means the Valuation Date coincident with or
immediately preceding the last day of the preceding Plan Year;

 

 

 

 

(vi)

“required aggregation group” means any other qualified plan(s) of the Employer
or an Affiliate in which there are members who are key employees or which
enable(s) the Plan to meet the requirements of Section 401(a)(4) or 410(b) of
the Code; and

 

 

 

 

(vii)

“permissive aggregation group” means each plan in the required aggregation group
and any other qualified plan(s) of the Employer or an Affiliate in which all
members are non-key employees, if the resulting aggregation group continues to
meet the requirements of Sections 401(a)(4) and 410(b) of the Code.

 

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B.

 

For purposes of this Appendix, the Plan shall be “top-heavy” with respect to any
Plan Year if as of the applicable determination date the top-heavy ratio exceeds
60%. The top-heavy ratio shall be determined as of the applicable Valuation Date
in accordance with Sections 416(g)(3) and (4) of the Code and Article 6 of this
Plan, and shall take into account any contributions made after the applicable
Valuation Date but before the last day of the Plan Year in which the applicable
Valuation Date occurs. For purposes of determining whether the Plan is
top-heavy, the account balances under the Plan will be combined with the account
balances or the present value of accrued benefits under each other plan in the
required aggregation group, and in the Employer’s discretion, may be combined
with the account balances or the present value of accrued benefits under any
other qualified plan in the permissive aggregation group. Distributions made
with respect to a Participant under the Plan during the 5-year period ending on
the applicable determination date shall be taken into account for purposes of
determining the top-heavy ratio; distributions under plans that terminated
within such 5-year period shall also be taken into account, if any such plan
contained key employees and therefore would have been part of the required
aggregation group.

 

 

 

C.

 

The following provision shall be applicable to Participants for any Plan Year
with respect to which the Plan is top-heavy. An additional Employer contribution
shall be allocated on behalf of each Participant and each Employee eligible to
become a Participant who is a non-key employee, and who has not separated from
service as of the last day of the Plan Year, to the extent that the
contributions made on his behalf under Sections 4.02 for the Plan Year, and not
necessary to be taken into account to meet the contribution percentage test set
forth in Section 4.07, would otherwise be less than 3% of his remuneration.
However, if the greatest percentage of remuneration contributed on behalf of a
key employee under Sections 4.01 and 4.02 for the Plan Year, disregarding

 

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any contributions made under Section 4.11 for the Plan Year, would be less than
3%, that lesser percentage shall be substituted for “3%” in the preceding
sentence. Notwithstanding the foregoing provisions of this paragraph, no minimum
contribution shall be made under this Plan with respect to a Participant, or an
Employee eligible to become a Participant, if the required minimum benefit under
Section 416(c)(1) of the Code is provided to him by any other qualified pension
plan of the Employer or an Affiliate. For the purposes of this paragraph,
remuneration has the same meaning as set forth in Section 4.10(c).

 

 

 

 

 

D.

If, during any Plan Year, the Plan is top heavy, the multiplier ‘1.25’ in
Sections 415(e)(2)(B)(i) and (3)(B)(i) of the Code shall be reduced to ‘1.0’,
and the dollar amount ‘$51,875’ in Section 415(e)(6)(B)(i)(I) of the Code shall
be reduced to ‘$41,500’. This Section shall not apply if:

 

 

 

 

 

 

(a)

The benefits or allocations provided for such Plan Year to each Participant who
is a non-key employee would satisfy the requirements of Section C, if ‘4%” were
substituted for ‘3%’ in each place that it appears in such subsection and ‘3%’
were substituted for ‘2%’ in Section 416(c)(1) of the Code; and

 

 

 

 

 

 

(b)

The top heavy ratio does not exceed 90%.

 

 

 

 

 

 

This Section shall not apply to any Plan Year beginning after December 31, 1999.

 

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APPENDIX E.  SPECIAL PROVISIONS APPLICABLE TO PARTICIPANTS IN

UNISON, INC. 401(K) SAVINGS AND INVESTMENT PLAN

 

The provisions of this Appendix E shall be effective for the period commencing
on December 10, 1997 and ending on August 15, 2001, and shall be applicable only
as specified herein.

 

3.01         Eligibility

 

Notwithstanding any provision hereof to the contrary, in no event shall an
Employee who is then eligible to make elective deferrals, within the meaning of
Section 402(g) of the Code, under the Unison Software, Inc. 401(k) Savings and
Investment Plan, as amended from time to time, be eligible to become a
Participant in the Plan.

 

 

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APPENDIX F: SPECIAL PROVISIONS APPLICABLE TO FORMER EMPLOYEES OF

PRICEWATERHOUSE COOPERS, LLP

 

The provisions of this Appendix F shall be applicable only to Participants who
became Employees as a result of the acquisition by the Employer of certain
assets of Pricewaterhouse Coopers, LLP and shall be effective only for the
period commencing on October 1,   2002 and ending on December 31, 2002.

 

1.45Z      ‘PwCC Participant’ shall mean a Participant who became an Employee as
a result of the acquisition by the Employer of certain assets of Pricewaterhouse
Coopers, LLP on October 1, 2002.

 

4.01         Deferred Cash Contributions and Catch-Up Contributions

 

(z)            Notwithstanding any other provision of this subsection, if a PwCC
Participant made elective deferrals, within the meaning of Section 402(g)(3) of
the Code, during 2002, under the Savings Plan for Employees and Partners of
Pricewaterhouse Coopers, LLP, or the Savings Plan of BPO (each of which plans is
a qualified plan maintained by Pricewaterhouse Coopers, LLP or an affiliate
thereof), and also made Deferred Cash Contributions  under the Plan, and the sum
of such elective deferrals and Deferred Cash Contributions exceeded the dollar
limit specified in Section 4.01(c) for 2002, then the PwCC Participant shall be
deemed to have elected to receive a refund of Excess Deferrals from the Plan, in
the amount by which the sum of such elective deferrals and Deferred Cash
Contributions exceeds such dollar limit.

 

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4.02         Employer Matching Contributions

 

(z)            For the Plan Year ending on December 31, 2002, the Employer shall
make a special adjustment to the Matching Contributions made on behalf of PwCC
Participants, which adjustment shall be taken into account for all purposes as a
Matching Contribution.  The amount of the special adjustment shall be equal to
the excess, if any, of (i) the lesser of (A) 50% of the Participant’s Deferred
Cash Contributions made during the period beginning on October 1, 2002 and
ending on December 31, 2002, or (B) 3% of the Participant’s Compensation for
such period, over (ii) the Matching Contributions made on behalf of the
Participant for such period in accordance with subsection (a).  Any amount
required to be contributed under this subsection shall be contributed by the
Employer as soon as practicable following December 31, 2002.

 

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APPENDIX G.  SPECIAL PROVISIONS APPLICABLE TO FORMER EMPLOYEES OF

VF CORPORATION

 

The provisions of this Appendix G shall be applicable only to individuals who
had been employed by VF Corporation immediately prior to the effective date of a
contract between the Employer and VF Corporation, pursuant to which the Employer
agreed to provide certain services to VF Corporation, and who became Employees
in accordance with the provisions  of such contract.

 

3.01         Eligibility

 

(z)            Notwithstanding any provision of this subsection, subsection
(a) shall be applicable to any individual who was employed by VF Corporation
immediately prior to the effective date of  a contract between the Employer and
VF Corporation and who becomes an Employee as the result of, and in accordance
with the terms of such contract.

 

3.02A      Participation by 401(k) Pension Program Participants after
December 31, 2004

 

(z)            The provisions of this Section shall not be applicable to any
individual who was employed by VF Corporation immediately prior to the effective
date of a contract between the Employer and VF Corporation and who becomes an
Employee as the result of, and in accordance with the terms of, such contract. 
No individual to whom this subsection applies shall be a 401(k) Pension Program
Participant.

 

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APPENDIX H.  SPECIAL RULES APPLICABLE TO PARTICIPANTS IN

NONQUALIFIED DEFERRED COMPENSATION PLANS

 

A.            Notwithstanding the provisions of Section 4.04 and 4.05, for a
Participant who is an Executive and who has made a salary deferral election
under the Employer’s Executive Deferred Compensation Plan that is in effect on
March 15, 2005, any change in his election pursuant to Section 4.01(a),  as in
effect on March 15, 2005, that is made during the period commencing on March 16,
2005 and ending on December 31, 2005 will not be effective until January 1,
2006.

 

B.            Notwithstanding the provisions of Section 4.04 and 4.05, for a
Participant who is an Executive and who has made a salary deferral election
under the Employer’s Executive Deferred Compensation Plan that is in effect on
January 1 of any calendar year beginning after December 31, 2005, any change in
his election pursuant to Section 4.01(a), as in effect on January 1 of such
calendar year, that is made at any time during such calendar year will not be
effective until January 1 of the following calendar year.

 

C.            Notwithstanding the provisions of Section 4.04 and 4.05, for a
Participant who is an Executive, who is not subject to the provisions of
Paragraph B of this Appendix H and who makes an initial salary deferral election
under the Employer’s Executive Deferred Compensation Plan, any change in his
election pursuant to Section 4.01(a), as in effect on the date of such initial
salary deferral election, that is made at any time during the remainder of the
calendar year in which such initial salary deferral election was made will not
be effective until January 1 of the following calendar year.

 

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APPENDIX I. SPECIAL PROVISIONS FOR

 

QUALIFIED HURRICANE KATRINA DISTRIBUTIONS

 

The provisions of this Appendix I shall be effective as of August 28, 2005.

 

A.            For purposes of this Appendix I, the term “Qualified Individual”
means a Participant whose principal place of abode as of August 28, 2005 was
located in the Hurricane Katrina disaster area, as defined in Section 2(1) of
the Katrina Emergency Tax Relief Act of 2005 (“KETRA”)  and who sustained an
economic loss by reason of Hurricane Katrina.

 

B.            For purposes of this Appendix I, the term “Qualified Hurricane
Katrina Distribution” shall mean a distribution made to a Participant who is a
Qualified Individual during the period beginning on August 28, 2005 and ending
on December 31, 2006, provided however, that a distribution shall not be a
Qualified Hurricane Katrina Distribution to the extent that the sum of such
distributions and all previous Qualified Hurricane Katrina Distributions made to
such Participant from the Plan and any other qualified plan maintained by the
Employer or an Affiliate exceeds $100,000.

 

C.            A Qualified Individual shall be permitted to receive a Qualified
Hurricane Katrina Distribution upon application to the Plan Administrator at
such time, in such manner, and subject to such rules as the Plan Administrator
shall prescribe, which rules shall be applied to all Participants who are
Qualified Individuals on a uniform and nondiscriminatory basis.

 

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