EXHIBIT
10.1


 


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


 


IBM 2001 Long-Term
Performance Plan


 


1. Objectives.


 


The IBM
2001 Long-Term Performance Plan (the “Plan”) is designed to attract, motivate
and retain selected employees of, and other individuals providing services to,
the Company. These objectives are accomplished by making long-term incentive
and other awards under the Plan, thereby providing Participants with a
proprietary interest in the growth and performance of the Company.


 


2.
Definitions.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(i) “Participant”—An
individual to whom an Award has been made under the Plan. Awards may be made to
any employee of, or any other individual providing services to, the Company.
However, incentive stock options may be granted only to individuals who are
employed by IBM or by a subsidiary corporation (within the meaning of section
424(f) of the Code) of IBM, including a subsidiary that becomes such after the
adoption of the Plan.


 


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


 

















 


3.
Capital Stock Available for Awards.


 


The
number of shares that may be issued under the Plan for Awards granted wholly or
partly in stock during the term of the Plan is 112,882,869. Shares of Capital
Stock may be made available from the authorized but unissued shares of the
Company or from shares held in the Company’s treasury and not reserved for some
other purpose. For purposes of determining the number of shares of Capital
Stock issued under the Plan, no shares shall be deemed issued until they are
actually delivered to a Participant, or such other person in accordance with
Section 10. Shares covered by Awards that either wholly or in part are not
earned, or that expire or are forfeited, terminated, canceled, settled in cash,
payable solely in cash or exchanged for other awards, shall be available for
future issuance under Awards. Further, shares tendered to or withheld by the
Company in connection with the exercise of stock options, or the payment of tax
withholding on any Award, shall also be available for future issuance under
Awards.


 


4.
Administration.


 


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


 


5.
Delegation of Authority.


 


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


 


6.
Awards.


 


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


 


(a)
Stock Option—A grant of a right to purchase a specified number of shares of
Capital Stock the exercise price of which shall be not less than 100% of Fair
Market Value on the date of grant of such right, as determined by the
Committee, provided that, in the case of a stock option granted retroactively
in tandem with or as substitution for another award granted under any plan of
the Company, the exercise price may be the same as the purchase or designated
price of such other award. A stock option may be in the form of an incentive
stock option (“ISO”) which, in addition to being subject to applicable terms,
conditions and limitations established by the Committee, complies with section
422 of the Code. The number of shares of stock that shall be available for
issuance under ISOs granted under the Plan is limited to twenty million.


 


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


 


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


 


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


 


7.
Payment of Awards.


 


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


 


8. Stock
Option Exercise.


 


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


 


9. Tax
Withholding.


 


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


 


10.
Transferability.


 


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


 


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


 


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


 


12.
Termination of Employment.


 


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


 


13.
Cancellation and Rescission of Awards.


 


(a)
Unless the Award Agreement specifies otherwise, the Committee may cancel,
rescind, suspend, withhold or otherwise limit or restrict any unexpired,
unpaid, or deferred Awards at any time if the Participant is not in compliance
with all applicable provisions of the Award Agreement and the Plan, or if the
Participant engages in any “Detrimental Activity.” For purposes of this Section
13, “Detrimental Activity” shall include: (i) the rendering of services for any
organization or engaging directly or indirectly in any business which is or
becomes competitive with the Company, or which organization or business, or the
rendering of services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of the Company; (ii) the
disclosure to anyone outside the Company, or the use in other than the Company’s
business, without prior written authorization from the Company, of any
confidential information or material, as defined in the Company’s Agreement
Regarding Confidential Information and Intellectual Property, relating to the
business of the Company, acquired by the Participant either during or after
employment with the Company; (iii) the failure or refusal to disclose promptly
and to assign to the Company, pursuant to the Company’s Agreement Regarding
Confidential Information and Intellectual Property, all right, title and
interest in any invention or idea, patentable or not, made or conceived by the
Participant during employment by the Company, relating in any manner to the
actual or anticipated business, research or development work of the Company or
the failure or refusal to do anything reasonably necessary to enable the
Company to secure a patent where appropriate in the United States and in other
countries; (iv) activity that results in termination of the Participant’s employment
for cause; (v) a violation of any rules, policies, procedures or guidelines of
the Company, including but not limited to the Company’s Business Conduct
Guidelines; (vi) any attempt directly or indirectly to induce any employee of
the Company to be employed or perform services elsewhere or any attempt
directly or indirectly to solicit the trade or business of any current or
prospective customer, supplier or partner of the Company; (vii) the Participant
being convicted of, or entering a guilty plea with respect to, a crime, whether
or not connected with the Company; or (viii) any other conduct or act
determined to be injurious, detrimental or prejudicial to any interest of the
Company.


 


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


 


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14.
Adjustments.


 


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


 


In the
event of any other change affecting the Capital Stock or any distribution
(other than normal cash dividends) to holders of Capital Stock, such
adjustments in the number and kind of shares and the exercise, grant and
conversion prices of the affected Awards as may be deemed equitable by the Committee,
including adjustments to avoid fractional shares, shall be made to give proper
effect to such event. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation,
the Committee shall be authorized to cause IBM to issue or assume stock
options, whether or not in a transaction to which section 424(a) of the Code
applies, by means of substitution of new stock options for previously issued
stock options or an assumption of previously issued stock options. In such
event, the aggregate number of shares of Capital Stock available for issuance
under Awards under Section 3, including the individual Participant maximums set
forth in Section 6 will be increased to reflect such substitution or assumption.


 


15.
Miscellaneous.


 


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


 


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


 


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


 


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


 


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


 


(f) In
the event that a Participant or the Company brings an action to enforce the
terms of the Plan or any Award Agreement and the Company prevails, the
Participant shall pay all costs and expenses incurred by 


 


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the
Company in connection with that action, including reasonable attorneys’ fees,
and all further costs and fees, including reasonable attorneys’ fees incurred
by the Company in connection with collection.


 


(g) The
Committee and any officers to whom it may delegate authority under Section 5
shall have full power and authority to interpret the Plan and to make any
determinations thereunder, including determinations under Section 13, and the
Committee’s or such officer’s determinations shall be binding and conclusive.
Determinations made by the Committee or any such officer under the Plan need
not be uniform and may be made selectively among individuals, whether or not
such individuals are similarly situated.


 


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


 


(i) The
Plan shall become effective on the date it is approved by the Board.


 


Federal
Income Tax Consequences


 


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


 


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


 


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


 


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


 


4. In
the case of ISOs, there is generally no tax liability at time of exercise.
However, the excess of the fair market value of the stock on the exercise date
over the option price is included in the optionee’s income for purposes of the
alternative minimum tax. If no disposition of the ISO stock is made before the
later of one year from the date of exercise and two years from the date of
grant, the optionee will realize a capital gain or loss upon a sale of the
stock, equal to the difference between the option price and the sale price. If
the stock is not held for the required period, ordinary income tax treatment
will generally apply to the excess of the fair market value of the stock on the
date of exercise (or, if less, the amount of gain realized on the disposition
of the stock) over the option price, and the balance of any gain or any loss
will be treated as capital gain or loss. In order for ISOs to be treated as
described above, the Participant must 


 


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remain
employed by the Company (or a subsidiary in which the Company holds at least 50
percent of the voting power) from the ISO grant date until three months before
the ISO is exercised. The three-month period is extended to one year if the
Participant’s employment terminates on account of disability. If the
Participant does not meet the employment requirement, the option will be
treated for federal income tax purposes as an option as described in paragraph
5 below. A Participant who exercises an ISO might also be subject to an
alternative minimum tax.


 


5. Upon
the exercise of a stock option other than an ISO, the exercise of a SAR, the
award of stock, or the recognition of income on restricted stock, the Company
will generally be allowed an income tax deduction equal to the ordinary income
recognized by a Participant. The Company will not receive an income tax
deduction as a result of the exercise of an ISO, provided that the ISO stock is
held for the required period as described above. When a cash payment is made
pursuant to the Award, the recipient will recognize the amount of the cash
payment as ordinary income, and the Company will generally be entitled to a
deduction in the same amount.


 


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