Exhibit
10.3


 


IBM
SAVINGS PLAN


(As Amended and Restated as of January 1, 2005)


 


AMENDMENT No. 1


 


Instrument of Amendment


 


Recitals:


 


International
Business Machines Corporation (“IBM”) has established and maintains the IBM
Savings Plan (“the Plan”), a qualified retirement plan that meets the
requirements of Section 401(a) of the Internal Revenue Code (“the Code”) and
that includes a cash or deferred arrangement within the meaning of Section
401(k) of the Code.


 


In
accordance with Section 13.01 of the Plan, IBM has reserved the right to amend
the Plan at any time and from time to time.


 


IBM
amended and restated the Plan, effective as of January 1, 2005.


 


IBM
has determined to amend the Plan, as heretofore restated, in the manner set
forth in this Instrument of Amendment, to be effective as specified herein.


 


Amendment:


 


1.             Section 1.14 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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.


 


2.             Section 1.30 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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.


 


3.             Section 1.35 is amended in its entirety, effective
October 25, 2005, to read as follows:


 

















 


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.


 


4.             Section 4.02(a)(i) is amended in its entirety, effective
October 25, 2005, to read as follows, in order to eliminate the last sentence
which duplicates the rule set forth in Section 4.02(a)(v):


 


(a)           (i)            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.


 


5.             Section 4.06(d) is amended in its entirety, effective
January 1, 2006, to read as follows:


 


(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 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.


 


6.             Section 4.07(d) is amended in its entirety, effective
January 1, 2006, to read as follows:


 


(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.


 


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7.             Section 5.01 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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 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 


 


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


 


(c)           The Committee shall designate the other
Investment 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.


 


8.             Section 5.08 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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.


 


9.             The reference to “Section 5.01(c)” in Section 5.09(e) is revised to read “Section
5.01(e),” effective October 25, 2005.


 


10.           Section 11.01(a) is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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 


 


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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.


 


11.           Section 11.02 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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.


 


12.           Section 11.03 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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


 


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


 


(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).


 


13.           Section 11.04 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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.


 


14.           Section 11.05(c) is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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


 


15.           Section 11.05(e) is amended in its entirety, effective
October 25, 2005, to read as follows:


 


(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.


 


16.           Section 11.06(b) is amended in its entirety, effective
October 25, 2005, to read as follows:


 


(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.


 


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17.           The text of Section
11.07 is deleted in its entirety, effective October 25, 2005, and
Section 11.07 is reserved for future use.


 


18.           Section 11.10 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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.


 


19.           Section 12.01 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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.


 


20.           Article 12 is amended, effective October 25, 2005, by
inserting immediately after Section 12.02 the following new Section 12.03:


 


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 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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21.           Section 13.01 is amended in its entirety, effective
October 25, 2005, to read as follows:


 


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:


 


(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 


 


8

















 


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


 


22.           Article 14 is amended, effective October 25, 2005, by
inserting immediately after Section 14.08 the following new Sections 14.09 and 14.10:


 


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


 


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


 


(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.


 


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


 


10

















 


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 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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Exhibit
10.3


 


IBM SAVINGS PLAN


(As Amended and Restated effective as of January 1, 2005)


 


AMENDMENT No. 2


 


Instrument of Amendment


 


Recitals:


 


International
Business Machines Corporation (“IBM”) has established and maintained the IBM
Savings Plan (“the Plan”), a qualified retirement plan that meets the
requirements of Section 401(a) of the Internal Revenue Code (“the Code”) and that
includes a cash or deferred arrangement within the meaning of Section 401(k) of
the Code.


 


In
accordance with Section 13.01 of the Plan, IBM has reserved the right to amend
the Plan at any time and from time to time.


 


IBM
most recently amended and restated the Plan, effective as of January 1, 2002
and has since further amended the Plan.


 


IBM
has determined to amend the Plan, as heretofore amended, in the manner set
forth in this Instrument of Amendment, to be effective as specified herein.


 


Amendment:


 


1.             Article 1 is amended, effective as of January 1,
2005,  by inserting immediately after
Section 1.50 the following new Section 1.50A:


 


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”.


 


2.             Section 4.01(a) is amended, effective as of January 1, 2005,
by deleting the eighth and ninth sentences and by inserting in lieu thereof the
following new sentences:


 


Effective
January 1, 2005, a Participant may make separate Deferred Cash Contribution
Elections with respect to that portion 


 


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of
his Compensation that is not Variable Pay and with respect to (i) any portion
of his Compensation that is Variable Pay paid under a program maintained by an
Employer for Non-Executive Employees or (ii) any portion of his Compensation
that is Variable Pay paid under a program maintained by an Employer for
Executive Employees and attributable to any period of employment in which the
Participant was a Non-Executive.  Effective
January 1, 2005, and except as provided in the preceding sentence, a
Participant’s Deferred Cash Contribution Election shall apply to his
Compensation, and shall be effective with respect to any portion of his
Compensation, as determined without regard to any Variable Pay paid under any
program maintained by an Employer for Executive Employees.


 


3.             Section 4.03(a) is amended, effective as of July 8, 2005, by
adding at the end thereof the following new sentence:


 


                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.


 


4.             Section 4.03(b) is amended, effective as of July 8, 2005, by
adding at the end thereof the following new sentence:


 


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


 


5.             Section 5.02 is amended, effective as of January 1, 2006,
by adding at the end thereof the following new subsection (d):


 


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


 


 


6.             Section 5.04 is amended, effective as of January 16,
2006, by adding at the end thereof the following new subsections (e) and (f):


 


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(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).


 


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


 


7.             Section 5.05 is amended in its entirety, effective
January 1, 2006, to read as follows:


 


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
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.


 


8.             Section 5A.05(a)(i) is amended, effective as of January 1, 2005,
to read as follows:


 


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(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;


 


9.             Section 5A.06(a) is amended in its entirety, effective as of
January 1, 2005,  to read as follows:


 


(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.


 


10.           Section 5A.07(d) is amended in its entirety, effective as of
January 1, 2005, to read as follows:


 


(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.


 


11.           Section 5A.07 is further amended, effective as of January
1, 2005, by deleting therefrom subsections 
(e), (f), and (g).


 


12.           Section 5A.08(b) is amended in its entirety, effective as of
January 1, 2005, to read as follows:


 


(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 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.


 


13.           Section 6.02(a) is amended in its entirety, effective as of
January 1, 2005, to read as follows:


 


(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


 


15

















 


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.


 


14.           Section 8.02(b) is amended effective as of January 1, 2005,
by deleting all that follows the semicolon at the end of clause (iv), by
inserting new clauses (v), (vi) and (vii), and by inserting at the end thereof
two  new sentences, as follows:


 


(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.


 


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.


 


16

















 


15.           Section 8.02(c) (iii) is amended in its entirety, effective as of
January 1, 2005, to read as follows:


 


(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, 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, 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.


 


16.           Section 8.02(c) is further amended, effective as of January
1, 2005, by adding at the end thereof the following new clause (v):


 


(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


 


17

















 


employer; or (E) by borrowing from commercial sources on reasonable
commercial terms in an amount sufficient to satisfy the need.


 


17.           Section 10.08 is amended in its entirety, effective as of
January 1, 2005, to read as follows:


 


(a)           Except as provided in subsection (b), 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.


 


18.           Section 10.09 is amended, effective as of January 1, 2005,
by adding at the end thereof the following new subsection (f):


 


(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.


 


19.           Section 10.10(b) is amended in its entirety, effective as of
January 1, 2005, to read as follows:


 


(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).


 


20.           Section 13.02 is amended, effective as of January 1, 2006,
by adding at the end thereof the following new subsection (f):


 


(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 


 


18

















 


shall be transferred to any other plan that is qualified under Section
401(a) 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.


 


21.           The Plan
is amended, effective as of January 1, 2005, by the adding at the end thereof
the following new Appendix H:


 


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.


 


19

















 


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.


 


22.           The Plan
is amended effective as of August 28, 2005, by adding at the end thereof  the following new Appendix I:


 


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.


 


20

















 


23.           In accordance with the provisions of Section
5.02(b) and Section 13.01(b), the Investment Fund maintained under the Plan
that (i) is a Stable Value Fund, and (ii) has the largest contract value of any
such Fund as of any date on which contributions are to be allocated, as
determined without taking into account any Fund to which contributions may not
then be allocated pursuant to a restriction imposed by the Plan Administrator
in accordance with Section 5.05(b) or 13.02(f), is designated as the Fund in
which shall be invested all contributions made by or on behalf of any
Participant who has failed to make an investment election in accordance with
Section 5.02(a).


 


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