Exhibit 10.2


 


Note:  This exhibit reflects amendments to the IBM
Supplemental Executive Retention Plan to bring the plan into compliance with Section 409A
of the Internal Revenue Code.


 


IBM SUPPLEMENTAL EXECUTIVE
RETENTION PLAN


 


Effective January 1,
2009


 


(As Amended Through December 31,
2008)


 


 

















 


Table of Contents


 


	
  Article 1
  - Purpose

  	
  1

  
	
  Article 2
  - Definitions

  	
  1

  
	
  Article 3
  - Coverage and Effect

  	
  5

  
	
  Article 4
  - Management and Administration

  	
  7

  
	
  Article 5
  - Claims Procedure

  	
  8

  
	
  Article 6
  - Service Credit

  	
  8

  
	
  A. Non-U.S. Service

  	
  8

  
	
  B. Service Credit for Leaves of Absence

  	
  8

  
	
  Article 7
  - Entitlement to Benefits

  	
  10

  
	
  Article 8
  - SERP Benefits

  	
  10

  
	
  A. Formula

  	
  10

  
	
  B. Reduction for Benefits Payable Prior to Age 60

  	
  11

  
	
  C. Form and Method of Payment

  	
  11

  
	
  C. Form and Method of Payment

  	
  12

  
	
  D. Effective Date of Election

  	
  12

  
	
  E. Revocation of Election

  	
  13

  
	
  Article 9
  — Preretirement Survivor Annuity

  	
  13

  
	
  Article 10
  - Suspension of Benefits For Re-Employed participants

  	
  13

  
	
  Article 11 - Forfeiture

  	
  14

  
	
  A. Detrimental Activities

  	
  14

  
	
  B. Forfeiture and Rescission

  	
  14

  
	
  Article 12
  - Information For Benefit Calculations

  	
  15

  
	
  Article 13
  — Non-Alienation Of Benefits

  	
  15

  
	
  Article 14
  — Withholding Taxes

  	
  15

  
	
  Article 15
  — Distributions To Minors And Incompetents

  	
  15

  
	
  Article 16
  — No Right TO Employment

  	
  16

  
	
  Article 17
  — Unfunded Plan

  	
  16

  
	
  Article 18
  - Miscellaneous

  	
  16

  
	
  A. Construction

  	
  16

  
	
  B. Severability

  	
  16

  
	
  C. Titles and Headings Not to Control

  	
  16

  
	
  D. Complete Statement of the Plan

  	
  17

  
	
  E. Booklets and Brochures

  	
  17

  
	
  Article 19
  — Situs Of Plan; Governing Law

  	
  17

  
	
  Appendix
  A - Transition Rules

  	
  18

  
	
  Appendix
  B - IBM Supplemental Executive
  Retirement Plan (the Prior Plan)

  	
  19

  
	
  Article 1 - Purpose

  	
  20

  
	
  Article 2 - Definitions

  	
  20

  
	
  Article 3 — Coverage and Effect

  	
  22

  
	
  Article 4 — Management and Administration

  	
  23

  
	
  Article 5 — Claims Procedure

  	
  24

  
	
  Article 6 — Service Credit

  	
  24

  
	
  A. Foreign Service

  	
  24

  
	
  B. Service Credit for Leaves of Absence

  	
  25

  
	
  C. Other Service Credit

  	
  25

  
	
  Article 7 — Retirement Date and Commencement of
  Benefits

  	
  25

  
	
  A. Foreign Service

  	
  25

  
	
  B. Early Retirement Date

  	
  25

  
	
  C. Commencement of SERP Benefits

  	
  26

  
	
  Article 8 — SERP Benefits

  	
  26

  
	
  A. Normal Retirement Benefit

  	
  26

  
	
  B. SERP Benefit

  	
  27

  
	
  C. Form and Method of Payment

  	
  28

  



 


 

















 


 


	
  D. Effective Date of Election

  	
  29

  
	
  E. Revocation of Election

  	
  29

  
	
  F. SERP Benefits for Disabled Participants

  	
  29

  
	
  Article 9 — Preretirement Spousal Annuity

  	
  30

  
	
  Article 10 — Suspension of Benefits for Reemployed
  Retired Participants

  	
  30

  
	
  Article 11 - Forfeitures

  	
  31

  
	
  A. Competitive or Prejudicial Conduct

  	
  31

  
	
  B. Disclosure of Confidential Information

  	
  31

  
	
  C. Disclosure and Assignment of Rights

  	
  31

  
	
  D. Forfeiture and Rescission

  	
  32

  
	
  Article 12 - Information for Benefits Calculations

  	
  32

  
	
  A. Incomplete or Incorrect Information

  	
  32

  
	
  B. Overpayments

  	
  32

  
	
  Article 13 — Alienation of Benefits

  	
  33

  
	
  Article 14 — Withholding Taxes

  	
  33

  
	
  Article 15 — Distributions to Minors and incompetents

  	
  33

  
	
  Article 16 — No Right to Employment

  	
  34

  
	
  Article 17 — Unfunded Plan

  	
  34

  
	
  Article 18 - Miscellaneous

  	
  34

  
	
  A. Construction

  	
  34

  
	
  B. Severability

  	
  34

  
	
  C. Titles and Headings Not to Control

  	
  34

  
	
  D. Complete Statement of Plan

  	
  35

  
	
  E. Booklets and Brochures

  	
  35

  
	
  Article 19 — Situs of Plan; Governing Law

  	
  35

  
	
  Appendix
  C — PwC SERP

  	
  36

  
	
  Appendix
  D — IBM SECTION 409A UMBRELLA
  DOCUMENT

  	
  48

  



 


 

















 


ARTICLE 1 - Purpose


 


International
Business Machines Corporation, a New York corporation, has established the IBM
Supplemental Executive Retention Plan (the “SERP” or the “Plan”) with the
intention of attracting and retaining executives whose skills and talents are
important to IBM’s operations by providing a monthly post-employment income
that supplements benefits under the IBM Personal Pension Plan and the IBM
Excess Personal Pension Plan.


 


ARTICLE 2 - Definitions


 


a.                                       409A Designated Payment Date - the date
on which payment is designated to begin to be paid pursuant to Section 8.D.


 


b.                                      409A First Issue Date - means the date on
which a benefit from the Plan actually begins to be paid to a Participant or,
in the case of a pre-retirement death benefit, to the Participant’s
Beneficiary.  The 409A First Issue Date
is the 409A Designated Payment Date or any later date specified in the Plan
that is treated as paid on the 409A Designated Payment Date in accordance with
Treasury Regulation section 1.409A-3(d), which permits payment to be made
within thirty days before the date specified in the Plan and later within the
same calendar year, or, if later, within 2-1/2 months following the date
specified in the Plan, provided that the Participant is not permitted to
designate the taxable year of payment.


 


c.                                       409A Key Employee - a specified employee
under section 409A of the Code, determined as described in the IBM Section 409A
Umbrella Document attached to this Plan as APPENDIX D.


 


d.                                      409A Separation from Service - a
separation from service under section 409A of the Code (including the good
faith compliance standard in effect before January 1, 2009), determined as
described in the IBM Section 409A Umbrella Document attached to this Plan
as APPENDIX D.


 


e.                                       Actuarial Equivalent - when comparing a
benefit differing in time, period or manner of payment from another benefit,
having the same value (as of the relevant Annuity Commencement Date unless
otherwise specified in the Plan) as determined by the Plan Administrator based
on the actuarial assumptions specified under the term “Actuarial Equivalent” in
Section 2.1 of the IBM Personal Pension Plan.


 


f.                                         Annuity Commencement Date - the first day
of the month following a Participant’s 409A Separation from Service, which is
the date as of which SERP Benefits are calculated.


 


 


1

















 


g.                                      Annuity Election Period - the period
during which a Participant may elect among actuarially equivalent annuities in
accordance with Treasury Regulation section 1.409A-2(b)(2)(ii).  The Annuity Election Period begins 180 days
before a Participant’s 409A Separation from Service Date and ends on the first
day of the second month following the 409A Separation from Service Date.


 


h.                                      Beneficiary - a person who is designated
by a Participant or by the terms of the Plan to receive a SERP Benefit under
the Plan in respect of a deceased Participant. 
A Beneficiary shall not be considered a Participant by virtue of this
definition.


 


i.                                          Benefit Service - an Executive’s
Continuous Service while a Regular Employee or a Leave of Absence Employee and
while accruing benefits under the IBM Personal Pension Plan or any predecessor
plan, rounded to the next completed month, except that Benefit Service shall
not exceed 35 years and shall not include periods of Continuous Service that
occur prior to the latest date of hire or rehire with IBM except as provided in
ARTICLE 6 hereof.


 


j.                                          Board - the Board of Directors of IBM.


 


k.                                       Choice 1 Employee - an individual who is
defined as a Choice 1 Employee under the IBM Personal Pension Plan.


 


l.                                          Code - the Internal Revenue Code of 1986,
as amended from time to time.  All
citations to sections of the Code are to such sections as they may from time to
time be amended or renumbered.


 


m.                                    Compensation - salary and recurring
payments under any form of variable compensation plan (such as the Variable Pay
Program and the Annual Incentive Program but not any Long-Term Incentive Plan)
in the Plan Year when earned, even if such amounts are paid after the
Participant terminates employment. Compensation includes additional
compensation, including but not limited to payments for nonscheduled workdays,
overtime and shift premium.


 


Effective on or after July 1, 1999,
for a Participant who is a Sales Executive assigned commission targets (or
similar results-based compensation targets, as designated by the Company), and
effective on and after January 1, 2000 for any other Participant assigned
commission targets (or similar results-based compensation targets, as
designated by the Company), Compensation shall equal the sales plan target
commission established for such a Participant based on the respective incentive
plan payout tables, and is credited monthly on a pro rata basis.


 


Neither separation allowances, special
termination incentives, payments under any individually-negotiated separation
arrangement, special awards, cash in lieu of accrued unused vacation, nor
deferred and accrued vacation payments to terminating Employees shall be
considered Compensation. Compensation shall include only such additional items as
are specifically approved by the Committee.


 


 


2

















 


Otherwise eligible compensation deferred
or reduced under the provisions of Section 125, 129, 132(f)(4), or 401(k) of
the Code and amounts deferred under the IBM Executive Deferred Compensation
Plan, or any predecessor or successor plan thereto (in the year the amounts are
deferred instead of being paid) are included in this definition.


 


Compensation shall not include amounts
paid under the LTD Plan.


 


 


n.                                      Continuous Service - service that is
defined as Continuous Service under the IBM Personal Pension Plan except as
provided in ARTICLE 6 hereof.


 


o.                                      Default Annuity Form - the form of
annuity paid to a Participant who is entitled to an annuity form of benefit under
the Plan and does not affirmatively elect the type of annuity. e.g., a single
life annuity or joint and survivor annuity. 
The Default Annuity Form is an annuity for the life of the
Participant, except, if the Participant is married or has a Domestic Partner on
the Annuity Commencement Date, the Excess Default Annuity Form is a joint
and 50% survivor annuity with the Participant’s Spouse or Domestic Partner as
the survivor annuitant.


 


p.                                      Domestic Partner - an individual who is
defined as the Domestic Partner of a Participant under the IBM Personal Pension
Plan.


 


q.                                      Domestic Subsidiary - a Subsidiary
organized and existing under the laws of the United States or any state,
territory or possession thereof, provided, however, that the Plan shall not be
deemed to cover the employees of any Domestic Subsidiary unless so authorized
by the chief human resources officer of IBM.


 


r.                                         Early Retirement Date - a date that is
defined as an Early Retirement Date under the IBM Personal Pension Plan.


 


s.                                       Eligibility Service - an Executive’s
Continuous Service while a Regular Employee or a Leave of Absence Employee,
truncated to years and completed months, except that Eligibility Service shall
not include periods of Continuous Service that occur prior to the latest date
of hire or rehire with IBM except as provided in ARTICLE 6 hereof.


 


t.                                         ERISA - the Employee Retirement Income
Security Act of l974, as amended from time to time.


 


u.                                      Executive - a Regular Employee who is
classified as an Executive in the sole discretion of the Company’s chief human
resources officer.


 


v.                                      Executive Compensation and Management
Resources Committee (also, the “Committee”) - the Executive Compensation and
Management Resources Committee of the Board or such other persons or group as
said Board may appoint to serve as the Committee.


 


 


3

















 


w.                                    IBM  or Company -
International Business Machines Corporation and its Domestic Subsidiaries,
excluding foreign offices of IBM except as otherwise provided in these Articles.


 


x.                                        IBM Personal Pension Plan - the Plan
which amends and restates the terms of the IBM Retirement Plan effective as of January 1,
1995.


 


y.                                      IBM Retirement Plan - the retirement plan
established by IBM pursuant to a resolution of its Board effective December l8,
l945, as amended from time to time which was amended and superseded by the IBM
Personal Pension Plan.


 


z.                                        Leave of Absence Employee - an individual
who commences a leave of absence granted under IBM’s various leave programs
then in effect, who is a Regular Employee immediately before such leave of
absence and who resumes the status of a Regular Employee for at least 30
consecutive days immediately following the completion of the leave of
absence.  An individual who is on a
bridge leave is not a Leave of Absence Employee.


 


aa.                                 Non-U.S. Service - service with a
Subsidiary other than a Domestic Subsidiary or with a branch of IBM or of a
Domestic Subsidiary that operates principally outside the United States, its
territories or possessions.


 


bb.                               Normal Retirement Date - the date that is
defined as the Normal Retirement Date under the IBM Personal Pension Plan.


 


cc.                                 Offset Amount - the annual single life
annuity described in Section A of ARTICLE 8.


 


dd.                               Participant - an Executive who meets the
requirements of ARTICLE 3, or a former Executive who is receiving SERP Benefits
pursuant to the provisions of the Plan. 
A Participant in the Plan shall not be deemed a participant in any Plan
amendment nor have standing to make a claim for benefits under any Plan
amendment except to the degree any such amendment specifically grants benefits
to such Participant.


 


ee.                                 Pay - (i) the annual average of the
Participant’s Compensation during the last 60 months in which Continuous
Service is earned, or (ii) the highest annual average of the Participant’s
Compensation during any five consecutive calendar years in which Continuous
Service is earned, whichever is greater.


 


ff.                                     Pay Threshold - $250,000; provided that
effective January 1, 2000 and each subsequent January 1, the Pay
Threshold in effect on the preceding December 31 shall be increased by 5%,
rounded to the nearest $100. The Pay Threshold described in the preceding
sentence may be increased by any additional amount, and effective as of any
date, by IBM’s chief human resources officer in his or her sole discretion.


 


 


4

















 


gg.                               Personal Pension Account - the account
that is defined as the Personal Pension Account under the IBM Personal Pension
Plan.


 


hh.                               Plan Administrator - a person or a
committee appointed pursuant to ARTICLE 4 which shall be responsible for
overseeing reporting, disclosure, record keeping, claims review and related
administrative matters under the Plan. 
If a committee is appointed to serve as the Plan Administrator, any one
of the members of the committee may act individually on behalf of the committee
to fulfill the committee’s duties as Plan Administrator.


 


ii.                                       Plan Year - the calendar year.


 


jj.                                       Prior Plan - the IBM Supplemental
Executive Retirement Plan as in effect on June 30, 1999, a copy of which
is appended as APPENDIX B and which remains in effect only as described in
APPENDIX A.


 


kk.                                 Qualifying Leave - a “Qualifying Leave”
as defined in the IBM Excess Personal Pension Plan.


 


ll.                                       Regular Employee - an employee who is
defined as a Regular Employee under the IBM Personal Pension Plan.


 


mm.                           SERP Benefit - a single payment or series
of monthly payments made or due under the Plan.


 


nn.                               Spouse - a person who, on the earlier of (i) the
date of the Participant’s death while employed by IBM or (ii) the
Participant’s Annuity Commencement Date, is the husband or wife of a
Participant, according to the marriage laws of the state (or country) of the
Participant’s domicile.


 


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


 


ARTICLE 3 - Coverage and
Effect


 


A.                                   This
Plan amends and restates the terms of the Plan, effective January 1,
2009.  However, benefits that commenced
under the Plan before January 1, 2005, shall be not be subject to this
Plan document but instead shall be subject to the terms of the Plan in effect
on October 3, 2004 (taking into account any subsequent amendments to the
extent that such amendments do not constitute a material modification within
the meaning of section 409A of the Code). 
A Regular Employee who is an Executive employed by IBM on the United
States payroll, and whose Pay after June 30, 1999 equals or exceeds the
Pay Threshold shall be a Participant in the Plan, except as provided in Section B
of this Article 3.  A Regular
Employee who is described in APPENDIX C (relating to certain former partners of
PwC) shall also be a Participant in the Plan, but such a Regular Employee’s
SERP Benefits under the Plan shall be described solely in APPENDIX C.


 


 


5

















 


B.                                     Notwithstanding
any other provision to the contrary, effective on and after May 1, 2004,
an individual shall not be entitled to a SERP Benefit unless the individual
would otherwise be entitled to a SERP Benefit under the terms of the Plan or
any applicable appendix, and:


 


(1)                                  The
individual is a former Executive who is receiving a SERP Benefit as of April 30,
2004 pursuant to the provisions of the Plan, or is a Participant who received a
SERP Benefit that is suspended as of May 1, 2004 under ARTICLE 10,


 


(2)                                  The
individual is entitled to a SERP Benefit under APPENDIX A and B, or C, or


 


(3)                                  The
individual (a) is an Executive throughout the period commencing on April 30,
2004 and ending on his or her termination of employment with IBM, and (b) has
Pay as of December 31, 2003 of at least $319,100, or has an annualized
base salary and target incentive compensation as of May 1, 2004 of at
least $319,100.


 


C.                                     Notwithstanding
any other provision to the contrary other than the last paragraph of ARTICLE
C5.A. (relating to the PwC SERP Participants with Prior C&L Legacy Annual
SERP Benefits under Exhibit II), effective as of the close of business on December 20,
2005:


 


(1)                                  No individual shall accrue
any benefits under the Plan after December 31, 2007.  Thus, no individual shall experience an
increase or decrease in any retirement, ancillary, or other benefit he or she
had already earned or accrued under the Plan as of December 31, 2007,
except as provided in this paragraph. 
The amount of an individual’s SERP Benefit shall be determined without
regard to any change after December 31, 2007, in the individual’s Pay, the
individual’s service, the Pay Threshold, the Earnings Threshold or the
Breakpoint, provided, however, that any change in the individual’s age and
service shall be taken into account for purposes of determining the individual’s
eligibility to receive a SERP Benefit. 
An individual is not considered to experience an increase or decrease in
any SERP Benefit for purposes of this paragraph merely because the SERP Benefit
(including the determination of any offset for the benefit payable under the
IBM Personal Pension Plan or the IBM Excess Personal Pension Plan) is adjusted
because of the time or form of payment. 
Notwithstanding the foregoing, an individual’s SERP Benefit on or after January 1,
2008, may decrease to the extent that the offset for benefits under the IBM
Personal Pension Plan or IBM Excess Personal Pension Plan is increased because
of additional accruals after December 31, 2007.


 


(2)                                  If the SERP Benefit begins
to be paid during 2006, the Pay Threshold shall be $386,100 and if the SERP
Benefit begins to be paid after 2006, the Pay Threshold shall be $405,400.  With respect to the formula in APPENDIX B, if
the SERP Benefit begins to be paid during 2006, the Breakpoint shall be
$296,600 and the Earnings Threshold shall be $160,000, and if the SERP Benefit
begins to be paid after 2006, the Breakpoint shall be $311,400 and the Earnings
Threshold shall be $160,000.


 


 


6

















 


ARTICLE
4 - Management and Administration


 


The Plan may be amended
from time to time for any purpose permitted by law or terminated at any time by
written resolution of the Board or the Committee, but only if the Committee’s
action is not materially inconsistent with a prior action of the Board.  The authority to amend or terminate the Plan
shall include the authority to amend the procedure for amending or terminating
the Plan and the authority to amend or terminate any related instrument or
agreement.


 


The
following persons and groups of persons shall severally have the authority to
control and manage the operation and administration of the Plan as herein
delineated:  (a) the Board, (b) the
Committee, (c) IBM’s chief human resources officer, and (d) the Plan
Administrator and each person on any committee serving as the Plan
Administrator.  Each person or group of
persons shall be responsible for discharging only the duties assigned to it by
the terms of the Plan.


 


The
Board shall be responsible only for designating those persons who will serve on
the Committee and for approving any resolution to terminate the Plan.


 


The
Committee may, pursuant to a duly adopted resolution, delegate to IBM’s chief
financial officer, chief human resources officer, or Treasurer, the Plan
Administrator and/or any other officer or employee of IBM, authority to carry
out any decision, directive or resolution of the Committee.


 


The
Committee shall appoint one or more executives employed by IBM to serve as Plan
Administrator or as a committee to fulfill the function of Plan
Administrator.  The Plan Administrator
shall have the full power and authority, in its sole discretion: (a) to
promulgate and enforce such rules and regulations as it shall deem
necessary or appropriate for the administration of the Plan; (b) to adopt
any amendments to the Plan that are required by law; (c) to interpret the
Plan consistent with the terms and intent thereof; (d) to resolve any
possible ambiguities, inconsistencies and omissions in the Plan; and (e) to
determine eligibility for SERP Benefits and the form, amount, and timing of
SERP Benefits in accordance with the provisions of the Plan.  All such actions shall be conclusive provided
they are in accordance with the terms and intent of the Plan and the Plan
Administrator shall on a regular basis report such actions to the Committee.  Additionally, IBM’s chief human resources
officer shall appoint and designate such other IBM employees as may be needed
to provide adequate staff services to the Committee and the Plan Administrator.


 


The
Committee and/or the Plan Administrator may engage the services of accountants,
attorneys, actuaries, consultants and such other professional personnel as they
deem necessary or advisable to assist them in fulfilling their responsibilities
under the Plan.  The Committee, the Plan
Administrator, and their delegates and assistants shall be entitled to act on
the basis of all tables, valuations, certificates, opinions and reports
furnished by such professional personnel.


 


To the maximum extent
permitted by IBM’s by-laws, IBM shall indemnify each member of the Committee,
the Plan Administrator, and each director, officer, and employee or agent of
the Company 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.


 


 


7

















 


ARTICLE
5 - Claims Procedure


 


IBM’s Executive
Compensation Department is responsible for advising Participants and
Beneficiaries of their SERP Benefits under the Plan.  If a Participant or Beneficiary or putative
Participant or Beneficiary believes he or she is entitled to SERP Benefits and
has not received them, the Participant or Beneficiary must submit a written
claim to the Executive Compensation Department, IBM Corporation, New Orchard
Road, Armonk, New York 10504.  If the
claim is wholly or partially denied, the Executive Compensation Department
shall furnish to the claimant a written decision setting forth the Executive
Compensation Department’s decision within 90 days after receipt of the claim
(or 180 days, if an extension is required).


 


If
the Executive Compensation Department denies a claim for SERP Benefits in whole
or in part, the claimant may appeal the denial of the claim in writing within
60 days of receiving the Executive Compensation Department’s written
decision.  If the claim denial is timely
appealed, the Plan Administrator shall conduct a full and fair review of the
claim.  The decision of the Plan
Administrator shall be made not later than 60 days (or 120 days, if an
extension is required) after the receipt of the appeal.


 


The
following claims procedure applies for purposes of section 409A of the
Code.  If a Participant or Beneficiary
believes he or she is entitled to have received benefits but has not received
them, the Participant or Beneficiary must accept any payment made under the
Plan and make prompt and reasonable, good faith efforts to collect the
remaining portion of the payment, as determined under Treasury Regulation
section 1.409A-3(g).  For this purpose
(and as determined under such regulation), efforts to collect the payment will
be presumed not to be prompt, reasonable, good faith efforts, unless the
Participant or Beneficiary provides notice to the Plan Administrator within 90
days of the latest date upon which the payment could have been timely made in
accordance with the terms of the Plan and the regulations under Code Section 409A,
and unless, if not paid, the Participant or Beneficiary takes further
enforcement measures within 180 days after such latest date.  In addition, a Participant or Beneficiary
must exhaust any other claims procedures established by the Plan Administrator
before initiating litigation.


 


ARTICLE 6 - Service
Credit


 


A.                                   Non-U.S.
Service.   Non-U.S. Service will be deemed as Benefit
Service and Eligibility Service; provided, that such Non-U.S. Service immediately
precedes service as a Regular Employee, and that such Non-U.S. Service ended
and such subsequent service as a Regular Employee started before July 1,
1999; and further provided, that a Participant with such Non-U.S. Service not
immediately preceded by Continuous Service with IBM must, before credit for
such Non-U.S. Service is given, complete one year of Continuous Service as a
Regular Employee subsequent to such Non-U.S. Service.


 


B.                                     Service
Credit for Leaves of Absence.


 


(1)                                  Leave
of Absence.  An individual who commences a leave of absence
granted under IBM’s various leave program practices then in effect, and who is
a Regular Employee immediately before such leave of absence, but who does not
resume the status of a Regular Employee for at least 30 consecutive days
immediately following the completion of the leave of absence (and, therefore,
is not a Leave of Absence Employee):


 


 


8

















 


(a)                                  shall
not be credited with Benefit Service or Eligibility Service for the Continuous
Service completed while a Regular Employee subsequent to such leave of absence,
and


 


(b)                                 shall
not be eligible for a SERP Benefit unless such individual was eligible for a
SERP Benefit when such leave commenced.


 


(2)                                  Military
Leave.


 


A Participant who commences a leave for
the purpose of qualified military service as that term is defined by Section 414(u) of
the Internal Revenue Code and who returns to employment within the time period
specified by said Section and otherwise meets the requirements of said Section and
of the Plan shall be deemed for all Plan purposes as having been a Regular
Employee throughout the period of qualified military service and to have
received Compensation during the leave at the rate in effect immediately before
the military leave began.


 


 


9

















 


ARTICLE 7- Eligibility
for SERP Benefits


 


A
Participant shall be eligible for a SERP Benefit only if the Participant is an
Executive on his or her 409A Separation from Service, the Participant has Pay
in excess of the Pay Threshold on both January 1, 2007, and the date of
his or her 409A Separation from Service, a forfeiture under ARTICLE 11 does not
occur, and either:


 


A.                                   The
Participant’s employment with IBM terminates for any reason other than cause on
a date after the Participant has completed five years of Eligibility Service
and has attained age 60; or


 


B.                                     The
Participant’s 409A Separation from Service occurs on a date after the
Participant has completed 15 years of Eligibility Service and has attained age
55, and either:


 


(1)                                  The
Participant incurs a 409A Separation from Service because of the Participant’s
total and permanent disability (as determined in accordance with the terms of
the IBM Long-Term Disability Plan, as amended from time to time); or


 


(2)                                  Approval
is granted at the discretion of:


 


(a)                                  the
Board, in the case of the two highest paid officers of IBM,


 


(b)                                 the
Committee and the Chairman and Chief Executive Officer of IBM, in the case of
any other officer of IBM, and


 


(c)                                  the
chief human resources officer and any other approvals required by the Chairman’s
and Chief Executive Officer’s delegated powers matrix, in all other cases.


 


ARTICLE 8 - SERP
Benefits


 


A.                                   Formula.


 


The Participant’s annual SERP Benefit, when
expressed as a single life annuity commencing as of the first day of the month
next following the Participant’s 409A Separation from Service, shall be
calculated as follows:


 


(1)                                  1%
times Pay up to the Pay Threshold for the year of 409A Separation from Service
times the number of years of Benefit Service; plus


 


(2)                                  2.5%
times Pay in excess of the Pay Threshold for the year of 409A Separation from
Service times the number of years of Benefit Service.


 


There shall be offset from the amount
calculated in (1) and (2), an Offset Amount.  The Offset Amount shall be the annual single
life annuity the Participant is entitled to receive under the IBM Personal
Pension Plan and the IBM Excess Personal Pension Plan beginning on the Annuity
Commencement Date.  Notwithstanding the
preceding sentence, in the case of a Choice 1 Employee who elected under Section 17.3
of the IBM Personal Pension Plan to have a Personal Pension Account, the Offset
Amount 


 


 


10

















 


shall be the single life annuity the
Participant would have been entitled to receive under the IBM Personal Pension
Plan and the IBM Excess Personal Pension Plan beginning on the Annuity
Commencement Date if such Participant had elected under Section 17.3 of
the IBM Personal Pension Plan not to have a Personal Pension Account.  For purposes of determining the Offset
Amount, the single life annuity will be calculated based on what the
Participant’s benefit under the IBM Personal Pension Plan would have been if
the Participant had not received any distributions from the IBM Personal
Pension Plan before the Annuity Commencement Date.  The Offset Amount shall first be calculated
without regard to any settlement benefit due in connection with the litigation
entitled, Cooper v. IBM.  The
Offset Amount shall then be increased to reflect such settlement benefit in
accordance with the methodology adopted by the Company on or before December 31,
2008.


 


In no event shall the SERP Benefit
(before taking into account the Offset Amount) exceed 65% times Pay times a
fraction the numerator of which is the number of years and completed months of
the Participant’s Benefit Service and the denominator of which is 35.


 


In no event shall the SERP Benefit be
less than what the SERP Benefit would be if the Participant’s Pay, the
Participant’s Benefit Service, and the Pay Threshold were equal to the
Participant’s Pay, the Participant’s Benefit Service, and the Pay Threshold on
the December 31 preceding the Participant’s 409A Separation from Service,
or, for a 409A Separation from Service after December 31, 2006, on December 31,
2006.


 


B.                                     Reduction
for SERP Benefits Payable Prior to Age 60 and Calculation for Qualifying Leaves.


 


If the Participant’s Annuity Commencement
Date is on or after his or her 60th birthday, the Participant’s SERP Benefit
when paid in the form of a single life annuity, shall be equal to the SERP
Benefit calculated in accordance with Section A of this ARTICLE 8.


 


If the Participant’s Annuity Commencement
Date is before his or her 60th birthday, the Participant’s SERP Benefit, as
calculated in the form of a single life annuity and before adjustment for the
Offset Amount described in Section A of this ARTICLE 8, shall be reduced
by 1⁄2 of 1% for each month that the Annuity Commencement Date precedes age 60.


 


If a Participant incurs a Qualifying
Leave, the amount of the Participant’s monthly SERP Benefit shall be calculated
using the same methodology that applies to calculate the amount of a
Participant’s Excess Prior Plan Benefit under Section 5.02(d) of that
plan (including the calculation of the Offset Amount), and the resulting
monthly annuity shall be adjusted in the same manner as described in Section 5.02(e) of
that plan.  Generally, the Participant’s
SERP Benefit is calculated as of the expected end of a leave and then converted
to an actuarially equivalent annuity beginning on the Participant’s Annuity
Commencement Date.  For the avoidance of
doubt, this paragraph regarding Qualifying Leaves does not modify the
eligibility requirements for a SERP Benefit.


 


C.                                     Form and
Method of Payment.


 


A Participant may elect to be paid under
any monthly annuity form of payment described in Section 12.2(b)(2),
(c)(1), (c)(2), or (c)(3) of the IBM Personal Pension Plan.  Any such election must be made in the manner
and form prescribed by IBM’s 


 


 


11

















 


Executive Compensation Department.  Each form of payment shall be the Actuarial
Equivalent of a single life annuity payable to the Participant in accordance
with this ARTICLE 8.


 


 D.                                 Time
of Payment.


 


A Participant’s SERP
Benefit will be calculated as of his or her Annuity Commencement Date and paid
as of his or her 409A Designated Payment Date. 
However, the first actual payment to a Participant will, under some
circumstances, be delayed and will begin on the Participant’s 409A First Issue
Date.  These payment terms are described
below.


 


(1)                                  In
General.


 


(A)                              The
Participant’s Annuity Commencement Date is the
first day of the month following the Participant’s 409A Separation from
Service;


 


(B)                                the
Participant’s 409A Designated Payment Date is
the Participant’s Annuity Commencement Date; and


 


(C)                                the
Participant’s 409A First Issue Date is the 15th
day of the second month following the Participant’s Designated Payment Date,


 


except as provided in paragraph (2),
below, with respect to certain 409A Key Employees.


 


(2)                                  Six-Month
Delay for 409A Key Employees.  If a
Participant is a 409A Key Employee upon his or her 409A Separation from
Service, the Participant’s Annuity Commencement Date remains unchanged, but the
Participant’s 409A Designated Payment Date and 409A First Issue Date become the
first day of the seventh month following the Participant’s 409A Separation from
Service.  Interest shall be added to each
delayed annuity payment from the date the payment is due through the last day
of the month coincident with or immediately preceding the Participant’s 409A
First Issue Date at the “Interest Credit Percentage Rate” in effect on the
Participant’s Annuity Commencement Date (as determined under the IBM Personal
Pension Plan).


 


E.                                      Effective
Date of Election.  The Participant may select an annuity form of
payment as described in Section C, above, at any time during the Annuity
Election Period in a form and manner determined by the Plan Administrator.  The death of a survivor annuitant before the
end of the Annuity Election Period automatically revokes any such
election.  The death of a survivor
annuitant on or after the Annuity Election Period does not revoke the Participant’s
election. If a Participant does not elect a form of annuity during the Annuity
Election Period, the Participant shall receive the Default Annuity Form to
which the Plan Administrator, in its sole discretion, determines that the
Participant is entitled.  If the
Participant disputes and establishes to the satisfaction of the Plan
Administrator, within 45 days after the end of the Annuity Election Period,
that the Plan Administrator’s determination of the Excess Default Annuity Form was
incorrect, the Excess Default Annuity Form shall be changed accordingly
and any underpayments will be paid and any overpayments will be recouped from a
monthly benefit payment in accordance with the Plan Administrator’s procedures
for distributing underpayments or recovering overpayments, provided that any
correction is consistent with Treasury Regulation section 1.409A-3(g) (relating
to disputed payments).


 


 


12














 


F.                                      Revocation
of Election.  A Participant may revoke an election he or
she has made under this ARTICLE 8 at any time before the end of the Annuity
Election Period.  In order to be
effective, any such revocation must be received by IBM’s Executive Compensation
Department before the end of the Annuity Election Period and must be made in
the manner and form prescribed by IBM’s Executive Compensation Department.  A timely revocation of an election shall only
become effective upon receipt by IBM’s Executive Compensation Department.


 


If a Participant revokes an election of
an alternative form of payment, the Participant’s form of payment shall
automatically revert to the default form of payment prescribed by this ARTICLE
8.  After revoking an election, the
Participant may elect an alternative form of payment in accordance with this
ARTICLE 8; however, in order to become effective, the Participant’s election of
an alternative form of payment must be received by IBM’s Executive Compensation
Department before the end of the Annuity Election Period.


 


ARTICLE 9 -
Preretirement Survivor Annuity


 


A
preretirement survivor annuity shall be payable only to the Spouse or Domestic
Partner of a Participant who dies before his or her Annuity Commencement Date,
but who, on the date of death, has a Spouse or Domestic Partner and who, on the
date of death, has completed 15 years of Eligibility Service and has attained
age 55, or has completed five years of Eligibility Service and has attained age
60.  The preretirement survivor annuity
shall be the survivor annuity that the Participant’s Spouse or Domestic Partner
would have received under the Plan had the Participant terminated employment on
his or her date of death with a 50% joint and survivor annuity in effect in
accordance with the provisions of ARTICLE 8. 
The Spouse or Domestic Partner shall begin receiving the preretirement
survivor annuity as of the first day of the month next following the
Participant’s date of death.


 


ARTICLE 10 - Suspension
of SERP Benefits for Re-Employed Participants


 


If
a Participant is re-employed by IBM on or after January 1, 2009, and after
the Participant’s Annuity Commencement Date, the Participant’s SERP Benefit
with respect to such Annuity Commencement Date is not affected by the
Participant’s re-employment.  If a
Participant is re-employed by IBM before January 1, 2009, and the
Participant’s benefit was suspended on account of the Participant’s re-hire,
when the reemployed Participant subsequently incurs a 409A Separation from
Service, the Participant shall receive a monthly SERP Benefit calculated in
whichever of the following two methods produces the greater monthly SERP
Benefit:


 


A.                                   A
SERP Benefit based on (1) the amounts used as the Participant’s Benefit
Service, the Participant’s Pay and the Pay Threshold to calculate the suspended
SERP Benefit as of the date the Participant previously terminated employment,
and (2) the Offset Amount as of the date the Participant subsequently
terminates employment.  This net SERP
Benefit shall be adjusted for early commencement and form of payment in
accordance with Sections B and C of ARTICLE 8 in the same manner, and be
payable in the same form, as the suspended SERP Benefit; or


 


B.                                     The
SERP Benefit the Participant is eligible to receive under the terms of the Plan
in effect on the date the Participant’s subsequent employment with IBM ceases,
based on 


 


 


13

















 


the Participant’s Pay, Benefit Service
and Eligibility Service and the Pay Threshold as of that date, but reduced by
the Actuarial Equivalent of any SERP Benefit paid before the Participant’s
reemployment.


 


ARTICLE 11 - Forfeiture


 


A.                                   Detrimental
Activities.  A
Participant shall not engage in any “Detrimental Activity.”  For purposes of this ARTICLE 11, “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 IBM, 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 IBM; (ii) the
disclosure to anyone outside IBM, or the use in other than the Company’s
business, without prior written authorization from IBM, of any confidential
information or material, as defined in the Company’s Agreement Regarding
Confidential Information and Intellectual Property, relating to the business of
IBM, acquired by the Participant either during or after employment with IBM; (iii) the
failure or refusal to disclose promptly and to assign to IBM, 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 IBM, relating in
any manner to the actual or anticipated business, research or development work
of IBM or the failure or refusal to do anything reasonably necessary to enable
IBM 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 IBM, including but not limited to the Company’s Business
Conduct Guidelines; (vi) any attempt directly or indirectly to induce any
employee of IBM 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 IBM; (vii) the Participant
being convicted of, or entering a guilty plea with respect to, a crime, whether
or not connected with IBM; or (viii) any other conduct or act determined
to be injurious, detrimental or prejudicial to any interest of IBM.


 


B.                                     Forfeiture
and Rescission.  Upon termination of employment, and from time
to time thereafter upon request by the Plan Administrator, a Participant shall
certify in a form and manner acceptable to the Plan Administrator that he or
she is in compliance with the terms and conditions of the Plan.  Failure to comply with the provisions of this
ARTICLE 11 prior to termination of employment or prior to receipt of any SERP
Benefit payment hereunder shall cause the forfeiture of all SERP Benefits even
if the failure to comply is not discovered until SERP Benefits have
commenced.  Failure to comply with the
provisions of this ARTICLE 11 after SERP Benefits have commenced hereunder
shall cause any such payments to be rescinded from the point in time when the
conduct which led to the failure to comply occurred.  The Plan Administrator shall notify the
Participant in writing of any such rescission, and within ten days after
receiving a notice of rescission from IBM, the Participant shall pay to IBM in
cash the amount of any payment that has been rescinded in accordance with this
ARTICLE 11.


 


 


14

















 


ARTICLE
12 - Information For SERP Benefit Calculations


 


Any delay in receiving
from a Participant or Beneficiary information requested by the Company’s
Executive Compensation Department, including but not limited to information
regarding a Participant’s Spouse, Domestic Partner or other factors necessary
for the calculation of SERP Benefits, shall result in the SERP Benefits payable
being based initially on the information then available to IBM’s Executive
Compensation Department and the Plan Administrator, and their estimate of any
unavailable information.  If additional
or different information thereafter becomes available to IBM’s Executive
Compensation Department or the Plan Administrator, SERP Benefits shall be
adjusted appropriately as determined by the Plan Administrator in accordance
with, and only to the extent permitted by, section 409A of the Code (including
any correction procedure thereunder).


 


If
any overpayment of SERP Benefits is made, the Plan Administrator may,
consistent with section 409A of the Code (including any correction procedure
thereunder) recover such overpayment by any means it wishes, in its sole
discretion, including requiring the repayment of any overpaid amount (with a
forfeiture of all future payments being one of the possible remedies for
failure to repay), or offsetting the amount of the overpayment against further
amounts payable to or on account of the person who received the overpayment
until the overpayment has been recovered in full.


 


ARTICLE 13 -
Non-Alienation Of SERP Benefits


 


No
SERP Benefit payable under the Plan shall be subject to alienation, sale,
transfer, assignment, pledge, attachment, garnishment, lien, levy or like
encumbrance.  No SERP Benefit under the
Plan shall in any manner be liable for or subject to the debts or liabilities
of any person entitled to SERP Benefits under the Plan. Notwithstanding the
preceding, the Plan Administrator may withhold any SERP Benefit and use it to
satisfy any debt or other obligation that the Participant has to IBM, but only
to the extent permissible under section 409A of the Code, for example, where
such debt is incurred in the ordinary course of the service relationship
between the Participant and IBM, the entire amount of reduction in any of the
Participant’s taxable years does not exceed $5,000, and the reduction is made
at the same time and in the same amount as the debt otherwise would have been
due and collected from the Participant.


 


ARTICLE 14 - Withholding
Taxes


 


IBM
and the Plan Administrator shall withhold such taxes and make such reports to
governmental authorities as they reasonably believe to be required by law.


 


ARTICLE 15 -
Distributions to Minors and Incompetents


 


If
the Plan Administrator determines that any Participant or Beneficiary receiving
or entitled to receive SERP Benefits under the Plan is incompetent to care for
his or her 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, brother 


 


 


15

















 


or
sister 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.


 


In
the absence of the appointment of a legal guardian of the property of a minor,
any minor’s share of SERP Benefits 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.


 


The
Plan Administrator, however, in its sole discretion, may require that a legal
guardian for the property of any such incompetent or minor be appointed before
authorizing the payment of SERP Benefits in such situations.  SERP Benefit payments made under the Plan in
accordance with determinations of the Plan Administrator pursuant to this
ARTICLE 15 shall be a complete discharge of any obligation arising under the
Plan with respect to such SERP Benefit payments.


 


ARTICLE 16 - No Right to
Employment


 


Nothing
herein contained shall be deemed to give any employee the right to be retained
in the service of IBM or to interfere with the right of IBM to discharge any
employee at any time without regard to the effect that such discharge may have
upon the employee under the Plan.


 


ARTICLE 17 - Unfunded
Plan


 


The
Plan shall be unfunded.  IBM shall not be
required to segregate any assets to provide SERP Benefits, nor shall the Plan
be construed as providing for such segregation, nor shall IBM or the Committee
be deemed to be a trustee of any assets of the Plan.  Any liability of IBM to any Participant or
Beneficiary with respect to SERP Benefits shall be based solely upon any
contractual obligations created by the Plan. 
No such obligation of IBM shall be deemed to be secured by any pledge or
other encumbrance or any property of IBM. 
Neither IBM nor the Committee shall be required to give any security or
bond for the performance of any obligation created by the Plan.


 


ARTICLE 18 -
Miscellaneous


 


A.                                   Construction.  Unless the contrary is plainly required by
the context, wherever any words are used herein in the masculine gender, they
shall be construed as though they were also used in the female gender, and vice
versa, and wherever any words are used herein in the singular form, they shall
be construed as though they were also used in the plural form, and vice versa.


 


B.                                     Severability.  If any provision of the Plan is held illegal
or invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
such illegal or invalid provision had never been inserted herein.


 


C.                                     Titles
and Headings Not to Control.  The titles to ARTICLES and the headings of
Sections in the Plan are placed herein for convenience of reference only, and
in the event of any conflict, the text of the Plan, rather than such titles or
headings, shall control.


 


 


16

















 


D.                                    Complete
Statement of the Plan.  This document is a complete statement of the
Plan.  The Plan may be amended, modified
or terminated only in writing and then only as provided herein.


 


E.                                      Booklets
and Brochures.  IBM may from time to time issue to
Participants one or more booklets or brochures summarizing the Plan.  In the event of any conflict between the Plan
document and the booklets and brochures, the Plan document shall control.


 


F.                                      Section 409A.  The Plan is intended, and shall be construed,
to comply with section 409A of the Code. 
However, in no event shall the Company, its officers, directors,
employees, parents, subsidiaries, or affiliates be liable for any additional
tax, interest, or penalty incurred by a Participant or Beneficiary as a result
of the Plan’s failure to satisfy the requirements of Section 409A of the
Code, or as a result of the Plan’s failure to satisfy any other applicable
requirements for the deferral of tax.


 


ARTICLE 19 - Situs of
Plan; Governing Law


 


The
situs of the Plan shall be the State of New York.  The Plan shall be governed by ERISA to the
extent not exempted there from, and to the extent not preempted by ERISA, the
laws of the State of New York, without regard to the choice of law rules of
any jurisdiction.


 


 


17

















 


APPENDIX A


 


TRANSITION RULES


 


A.                                   A
Participant who:


 


(1)                                  Had
attained his or her Normal Retirement Age or Early Retirement Date or was
within five years of attaining his or her Normal Retirement Age or Early
Retirement Date on June 30, 1999,


 


(2)                                  Was
a Regular Employee throughout the period commencing on July 1, 1998 and
ending on July 1, 1999,


 


(3)                                  Was
an Executive on June 30, 1999, and


 


(4)                                  Had
Pay of at least $160,000 on December 31, 1998,


 


shall
receive a SERP Benefit equal to the greater of the SERP Benefit described in
the Plan without regard to the appendices (“Main Plan”) or the SERP Benefit
under the Prior Plan as described in APPENDIX B (without regard to Section F
of ARTICLE 8 of APPENDIX B).


 


B.                                     A
Participant who is described in Section A(2), (3) and (4) of
this APPENDIX A, but not Section A(1), shall receive a SERP Benefit equal
to the greater of (1) the SERP Benefit described in the Plan without
regard to the appendices, or (2) the SERP Benefit under the Prior Plan as
described in APPENDIX B, but with such SERP Benefit calculated based on the
Participant’s Pension Credit (as described in Section A of ARTICLE 8 of
APPENDIX B) as of the earlier of termination of employment with IBM, or December 31,
2003, and on the Participant’s total annual single life annuity (as described
in Section A(ii) of ARTICLE 8 of APPENDIX B) as of the Participant’s
Annuity Commencement Date.


 


C.                                     A
Participant who is described in Section A or B of this APPENDIX A, who
terminates employment with IBM after June 30, 1999, and who is
subsequently reemployed by IBM shall not be covered under Section A or B
of this APPENDIX A unless such coverage is approved by the officers specified
in Section B(2)(c) of ARTICLE 7.


 


D.                                    No
person shall be entitled to a benefit provided under APPENDIX B, except as
provided in Sections A, B, or C of this APPENDIX A.


 


E.                                      For
purposes of this APPENDIX A, the SERP Benefit under the Prior Plan shall begin
to be paid at the time determined under ARTICLE 8 of the Main Plan (including
the election timing rules in Sections 8.E. and 8.F.).  In addition, the special calculation for a
Qualifying Leave in Section 8.B of the Main Plan shall apply, using (to
the extent applicable) the early retirement reduction factors in Section 8.B
of APPENDIX B to calculate the Participant’s benefit at the expected end of the
leave.  For the avoidance of doubt, this
means that the forms available and the calculation of those forms with respect
to the Appendix B SERP Benefit are determined under Section 8.C of
APPENDIX B.


 


 


18

















 


APPENDIX B


 


IBM Supplemental Executive
Retirement Plan (the “Prior Plan”)


 


IBM SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN


 


(Effective January 1,
1995)


 


 


19

















 


ARTICLE 1 - Purpose


 


International
Business Machines Corporation (“IBM”), a New York corporation, has established
the IBM Supplemental Executive Retirement Plan (the “SERP” or the “Plan”) with
the intention of attracting and retaining executives whose skills and talents
are important to IBM’s operations by providing a monthly retirement income that
supplements benefits under the IBM Retirement Plan.


 


ARTICLE 2 — Definitions


 


a.                                       Company
- IBM and its Domestic Subsidiaries, excluding foreign offices of the Company
except as otherwise provided in these Articles.


 


b.                                      Subsidiary
- a corporation, or other form of business organization, the majority interest
of which is owned, directly or indirectly, by the Company.


 


c.                                       Domestic
Subsidiary - a Subsidiary organized and existing under the laws of the United
States or any state, territory or possession thereof, provided, however, that
the Plan shall not be deemed to cover the employees of any Domestic Subsidiary
unless so authorized by the chief human resources officer of IBM.


 


d.                                      Board
of Directors - the Board of Directors of IBM.


 


e.                                       Executive
Compensation and Management Resources Committee (also, the “Committee”) - the
Executive Compensation and Management Resources Committee of the Board of
Directors or such other persons or group as said Board may appoint to serve as
the Committee.


 


f.                                         Foreign
Service - Service with a Foreign Subsidiary (i.e., a Subsidiary other than a
Domestic Subsidiary) or with a Foreign Branch (i.e., a branch of the Company or
of a Domestic Subsidiary that operates principally outside the United States, its
territories or possessions).


 


g.                                      IBM
Retirement Plan - the retirement plan established by IBM pursuant to a
resolution of its Board of Directors effective December l8, l945, as
amended from time to time.


 


 


20

















 


h.                                      Regular
Employee (also, “Employee”) - an employee so defined by the IBM Retirement
Plan.


 


i.                                          Executive
- A Regular Employee so classified in the sole discretion of the Company’s
chief human resources officer.


 


j.                                          Participant
- an Executive who meets the requirements of ARTICLE 3, or a former Executive
who is accruing or receiving Benefits pursuant to the provisions of the Plan.


 


k.                                       Beneficiary
- a person who is designated by a Participant or by the terms of the Plan to
receive a Benefit under the Plan in respect of a deceased Participant.  A Beneficiary shall not be considered a
Participant by virtue of this definition.


 


l.                                          ERISA
- the Employee Retirement Income Security Act of l974, as amended from time to
time.


 


m.                                    Plan
Administrator - a person or a committee appointed pursuant to ARTICLE 4 hereof
which shall be responsible for reporting, record keeping and related
administrative matters under the Plan. 
If a committee is appointed to serve as the Plan Administrator, any one
of the members of the committee may act individually on behalf of the committee
to fulfill the committee’s duties.


 


n.                                      Continuous
Service - Service as defined in the IBM Retirement Plan except as provided in
ARTICLE 6 hereof; provided that a Participant shall not in any event be considered
to have more than 35 years of Continuous Service hereunder.


 


o.                                      Compensation
- Compensation as defined in the IBM Retirement Plan except that in no event
shall 1989 or 1994 Long-Term Incentive Plan awards or payments or payments
under any successor plan be included in Compensation.


 


p.                                      Plan
Year - the calendar year.


 


q.                                      Normal
Retirement Age - age 65.


 


r.                                         Normal
Retirement Date - the date specified by ARTICLE 7A hereof.


 


 


21

















 


s.                                       Early
Retirement Date - the date on which a Participant retires from employment with
the Company in accordance with the provisions of ARTICLE 7B hereof.


 


t.                                         Spouse
- a person who, according to the laws of the state of a Participant’s domicile,
is the Participant’s spouse on the earlier of (i) the date of the
Participant’s death while employed by the Company or (ii) the Participant’s
Annuity Commencement Date.


 


u.                                      Actuarial
Equivalent - shall mean a form of payment that is equal in value to another
form of payment, as determined by the Plan Administrator in accordance with the
actuarial assumptions specified by the IBM Retirement Plan.


 


v.                                      Annuity
Commencement Date - shall mean the date as of which SERP Benefits are scheduled
to commence.


 


w.                                    SERP
Benefit (also, “Benefit”) - a payment or series of payments made or due under
the Plan.


 


x.                                        Pay
- the average of the Participant’s annual  Compensation
over (i) the last five years of employment or (ii) the highest
consecutive five calendar years of employment, whichever is greater.


 


y.                                      Breakpoint
- $185,000, subject to such adjustments as may be made from time to time by IBM’s
chief human resources officer in his or her sole discretion.


 


z.                                        Earnings
Threshold - $150,000, subject to such adjustments as may be made from time to
time by IBM’s chief human resources officer in his or her sole discretion.


 


ARTICLE 3 - Coverage and
Effect


 


This
document states the terms of the Plan as established by Resolution of the Board
of Directors on October 24, 1994 and first effective on January 1,
1995.  Participation is limited to
Executive Level Regular Employees in the United States whose Pay equals or
exceeds the Earnings Threshold.


 


 


22

















 


ARTICLE 4 - Management
and Administration


 


The
Plan may be amended from time to time for any purpose permitted by law or
terminated at any time by written resolution of the Board or the Committee, but
only if the Committee’s action is not materially inconsistent with a prior
action of the Board.  The authority to
amend or terminate the Plan shall include the authority to amend the procedure
for amending or terminating the Plan and the authority to amend or terminate
any related instrument or agreement.


 


The
following persons and groups of persons shall severally have the authority to
control and manage the operation and administration of the Plan as herein
delineated:  (a) the Board of
Directors, (b) the Executive Compensation and Management Resources
Committee, (c) IBM’s chief human resources officer, and (d) the Plan
Administrator and each person on any committee serving as the Plan
Administrator.  Each person or group of
persons shall be responsible for discharging only the duties assigned to it by
the terms of the Plan.


 


The
Board of Directors shall be responsible only for designating those persons who
will serve on the Committee and for approving any resolution to terminate the
Plan.


 


The
Committee may, pursuant to a duly adopted resolution, delegate to IBM’s chief
financial officer, chief human resources officer, or Treasurer, the Plan
Administrator and/or any other officer or employee of IBM, authority to carry
out any decision, directive or resolution of the Committee.


 


The
Committee shall appoint one or more executives employed by IBM to serve as Plan
Administrator or as a committee to fulfill the function of Plan
Administrator.  The Plan Administrator
shall have the full power and authority, in its sole discretion: (a) to
promulgate and enforce such rules and regulations as it shall deem
necessary or appropriate for the administration of the Plan; (b) to adopt
any amendments to the Plan that are required by law; (c) to interpret the
Plan consistent with the terms and intent thereof; and (d) to resolve any
possible ambiguities, inconsistencies and omissions in the Plan.  All such actions shall be in accordance with
the terms and intent of the Plan and the Plan Administrator shall on a regular
basis report such actions to the Committee. 
Additionally, IBM’s chief human resources officer shall appoint and
designate such other IBM employees as may be needed to provide adequate staff
services to the Committee and the Plan Administrator.


 


The
Committee and/or the Plan Administrator may engage the services of accountants,
attorneys, actuaries, consultants and such other professional personnel as they
deem necessary or advisable to assist them in fulfilling their responsibilities



 


 


23

















 


under
the Plan.  The Committee, the Plan
Administrator, and their delegates and assistants shall be entitled to act on
the basis of all tables, valuations, certificates, opinions and reports
furnished by such professional personnel.


 


ARTICLE 5 - Claims
Procedure


 


IBM’s
Executive Compensation Department is responsible for advising Participants and
Beneficiaries of their Benefits under the Plan. 
If a Participant or Beneficiary believes he or she is entitled to
Benefits and has not received them, the Participant or Beneficiary must submit
a written claim to the Director of Executive Compensation, IBM Corporation, Old
Orchard Road, Armonk, New York l0504. 
The Plan Administrator shall furnish to the Participant or Beneficiary a
written decision setting forth the Plan Administrator’s decision. If the Plan
Administrator denies a claim for Benefits in whole or in part, the claimant may
appeal the denial of the claim in writing within 60 days of receiving the Plan
Administrator’s written decision.


 


ARTICLE 6 - Service
Credit


 


A.            Foreign Service


 


All Foreign Service by a Regular Employee
who is otherwise eligible for Benefits under the Plan will be deemed for all
Plan purposes, in all respects as Continuous Service with the Company, except
that there shall be deducted from the combined amount payable under the Plan
and the IBM Retirement Plan, any amount paid or payable to the Participant or
Beneficiary arising out of Foreign Service to the extent that credit is given
for such Foreign Service under this ARTICLE 6A and pursuant to any pension,
retirement, severance indemnity, provident fund or other similar plan—whether
in the form of installments or lump sum and whether private or sponsored by a
foreign government—to the extent not provided by direct contributions made by
the Participant,


 


(l)                                     provided
that a Participant with such Foreign Service immediately preceded by Continuous
Service with the Company must, before credit for such Foreign Service is given,
resume employment as a Regular Employee of the Company; and


 


(2)                                  further
provided that a Participant with such Foreign Service not immediately preceded
by Continuous Service with the Company must, before credit for such Foreign
Service is given, complete one year of Continuous Service as a Regular Employee
of the Company subsequent to such Foreign Service.


 


 


24

















 


B.            Service Credit for Leaves of
Absence


 


A Participant who commences a leave of
absence granted under IBM’s human resources practices then in effect, and who
resumes the status of an Executive Level Regular Employee upon completion of
the leave, shall be deemed, for all Plan purposes, as having been an actively
employed Participant throughout the leave and to have received Compensation
during the leave at the rate in effect immediately before the leave began.  If the Participant does not so resume his or
her status as an Executive Level Regular Employee for at least 30 days for any
reason other than disability or death, the Participant shall be treated as
having severed from service with the Company on the date immediately preceding
the date the leave began (i.e., the last day worked), and neither the
Participant nor the Participant’s Beneficiary shall be eligible for a SERP
Benefit.


 


C.            Other Service Credit


 


IBM’s chief executive officer, or other
senior officer designated by the Committee, in his or her sole discretion, may
grant Continuous Service credit to an Executive in excess of actual Continuous
Service subject to such limitations and conditions as the officer considers
appropriate, if the officer deems this to be in the best interests of the
Company.


 


ARTICLE 7 - Retirement
Date and Commencement of Benefits


 


A.            Normal Retirement Date


 


A Participant’s Normal Retirement Date is
the last working day of the month in which his or her 65th birthday occurs;
provided that the Participant has completed one year of Continuous Service, and
further provided that, if a Participant was born on the first day of the month,
the Normal Retirement Date shall be the last day of the month immediately
preceding the 65th anniversary of birth.


 


B.            Early Retirement Date


 


A Participant described in any of the
following paragraphs may retire from employment on an Early Retirement Date
specified in the applicable paragraph below:


 


1.                                       A
Participant with 30 years or more of Continuous Service may retire on an Early
Retirement Date at the end of any month,


 


 


25

















 


2.                                       A
Participant with 15 or more years of Continuous Service may retire on an Early
Retirement Date at the end of any month at or after reaching age 55,


 


3.                                       A
Participant with five or more years of Continuous Service who is eligible to
receive Social Security benefits at age 62 may retire on an Early Retirement
Date at the end of any month at or after reaching age 62;


 


provided that in order to retire on an
Early Retirement Date a Participant must give the Company at least six months
prior written notice, in a form approved by the Plan Administrator, of his or
her intention to retire early and to have SERP Benefits commence, unless the
Plan Administrator waives such notice requirement.


 


C.            Commencement of SERP Benefits


 


In addition to all other conditions, in
no event shall payment of SERP Benefits commence unless and until the
Participant applies for such Benefits before his or her Annuity Commencement
Date.  In no event shall any SERP Benefit
be paid under this Plan unless the Participant (1) meets the Plan’s
eligibility conditions on the date of his or her retirement, disability, or
death, (2) retires (or dies while eligible to retire) under the terms of
the IBM Retirement Plan, (3) holds an Executive Level position (as
determined by IBM’s chief human resources officer in his or her sole
discretion) on the date of his or her retirement or death, and (4) complies
with the requirements imposed by ARTICLE 11 hereof.


 


ARTICLE 8 - SERP Benefits


 


A.            Normal Retirement Benefit


 


The Participant’s SERP Benefit, when
expressed as a single life annuity commencing as of the first day of the month
next following the Participant’s Normal Retirement Date, shall be equal to
one-twelfth of the Phase-In Percentage (defined below) multiplied by the excess
of (i) the Pension Credit (defined below) over (ii) the total annual
single life annuity benefit at Normal Retirement Age, including the single life
annuity benefit attributable to the Personal Retirement Provision whether such
is paid in annuity form or not, payable monthly to the Participant under the
IBM Retirement Plan or under any pension arrangement between the Company and a
Participant which is payable monthly for life after termination of employment.


 


                The Phase-In Percentage shall be
determined on the date the Participant retires, and shall not be increased


 


 


26

















 


thereafter.  If the Participant retires on January 31,
1995, the Phase-In Percentage shall be 27%. 
If the Participant retires after January 31, 1995, the Phase-In Percentage
shall be 27% plus 2% for each succeeding month (3% for the month of December)
up to and including the month of the Participant’s retirement, until the
Phase-In Percentage reaches 100% for a Participant retiring on or after December 31,
1997.  The Phase-In Percentage shall in
no event exceed 100%.


 


The Pension Credit shall be a single life
annuity equal to the sum of:


 


(1) 1.7% of Pay up to the
Breakpoint, plus 2.55% of Pay in excess of the Break Point (if any), multiplied
by the Participant’s years of Continuous Service up to a maximum of 20 years,


 


(2) 1.3% of Pay multiplied by the
Participant’s years of Continuous Service between 20 and 30 years (if any),
plus


 


(3) .75% of Pay multiplied by the
Participant’s Continuous Service between 30 and 35 years (if any).


 


B.            Early SERP Benefit


 


If the Participant elects to retire on an
Early Retirement Date with an Annuity Commencement Date on or after his or her
60th birthday, the Participant’s SERP Benefit when paid in the form of a single
life annuity, shall be equal to the SERP Benefit calculated in accordance with Section A
of this ARTICLE 8 based on the Participant’s years of Continuous Service and
Pay on the Participant’s Early Retirement Date.


 


If the Participant elects to retire on an
Early Retirement Date with an Annuity Commencement Date before      his or her 60th birthday, the Participant’s
SERP Benefit, when paid in the form of a single life annuity, shall be be the
amount determined in accordance with the following table:


 


 


27














 


	
  Participant’s Age at Annuity
  Commencement Date begins

  	
   

  	
  SERP Benefit under ARTICLE 8A
  hereof, reduced by the following

  
	
   

  	
   

  	
   

  
	
  59

  	
   

  	
  3%

  
	
  58

  	
   

  	
  7%

  
	
  57

  	
   

  	
  11%

  
	
  56

  	
   

  	
  15%

  
	
  55

  	
   

  	
  20%

  
	
  below 55

  	
   

  	
  20% plus 5% per year
  for each year before the Participant’s 55th birthday

  



 


For each month of age falling between the
ages or years shown above, one-twelfth of the difference between the respective
factors should be added.


 


The reductions described in this Section 8B
shall be applied to the Pension Credit calculation under ARTICLE 8A prior to
the subtraction of any benefit payable under the IBM Retirement Plan.  The Phase-In Percentage shall be applied to
the net SERP Benefit.


 


C.            Form and Method of Payment


 


The normal form of payment of the SERP
Benefit for a Participant who is unmarried on his or her Annuity Commencement
Date is a single life annuity for the Participant’s life.


 


The normal form of payment of the SERP
Benefit for a Participant who is married on his or her Annuity Commencement
Date is a joint and survivor annuity providing an annuity to the Participant
for life, in a monthly amount that is less than that payable under a single
life annuity, and a survivor annuity for the life of the Participant’s Spouse
in a monthly amount equal to 50 percent of the monthly amount payable to the
married Participant during his or her lifetime. 
This form of payment, which constitutes a 50% joint and survivor
annuity, shall be the Actuarial Equivalent of the single life annuity otherwise
payable to the Participant, based on the age of the Participant and the age of
the Participant’s Spouse as of the Annuity Commencement Date.


 


A Participant also may elect to be paid
under any alternative form of payment available under the IBM Retirement Plan
except for the Early Retirement Level Income Option.  Any such election must be made in the manner
and form prescribed by IBM’s Executive Compensation Department which may, in
certain instances, require the consent of the Participant’s Spouse to the
alternative


 


 


28

















 


form of payment.  Each alternative form of payment shall be the
Actuarial Equivalent of the single life annuity payable to the Participant in
accordance with this ARTICLE 8.


 


Payment of the SERP Benefit shall be made
monthly as of the first day of the month beginning with the month following the
month in which the Participant retires from employment with the Company.


 


D.                                    Effective
Date of Election


 


Any election under this ARTICLE 8 shall
be effective on the later of the Participant’s Annuity Commencement Date or 30
days after IBM’s Executive Compensation Department receives the election.  The death of a survivor annuitant before the
Participant’s Annuity Commencement Date automatically revokes any such
election.  The death of a survivor annuitant
on or after the Participant’s Annuity Commencement Date does not revoke the
Participant’s election.


 


E.                                      Revocation
of Election


 


A Participant may revoke an election he
or she has made under this ARTICLE 8 at any time before the Participant’s
Annuity Commencement Date.  In order to
be effective, any such revocation must be received by IBM’s Executive
Compensation Department before the Annuity Commencement Date and must be made
in the manner and form prescribed by IBM’s Executive Compensation Department.  A timely revocation of an election shall only
become effective upon  receipt by IBM’s
Executive Compensation Department.


 


If a Participant revokes an election of
an alternative form of payment, the Participant’s form of payment shall automatically
revert to the normal form of payment prescribed by this ARTICLE 8.  After revoking an election, the Participant
may elect an alternative form of payment in accordance with this ARTICLE 8;
however, in order to become effective, the Participant’s election of an alternative
form of payment (other than the normal form of payment) must be received by IBM’s
Executive Compensation Department before the Participant’s Annuity Commencement
Date.  A timely election shall become
effective as of the later of the Participant’s Annuity Commencement Date or 30 days
after IBM’s Executive Compensation Department receives the election.


 


F.             SERP Benefits for Disabled
Participants


 


A Participant who (i) becomes
totally and permanently disabled (as determined in accordance with the terms of
the IBM Long Term Disability Plan) after becoming eligible


 


 


29

















 


to retire hereunder and while at
Executive Level, (ii)remains so disabled until Normal Retirement Age, and (iii) receives
benefits under the IBM Long Term Disability Plan, shall be eligible to receive
a SERP Benefit upon reaching Normal Retirement Age, notwithstanding his or her
ineligibility for that Benefit under other provisions of the Plan.


 


The Annuity Commencement Date for such
disabled Participant shall be his or her Normal Retirement Date. The disabled
Participant’s SERP benefit shall be based on the Participant’s Pay and
Continuous Service on the date the Participant’s IBM Sickness and Accident
Income Plan benefits cease.


 


ARTICLE 9 -
Preretirement Spousal Annuity


 


A
preretirement spousal annuity shall be payable to the Spouse of a Participant
who dies before his or her Annuity Commencement Date, but who, on the date of
death, is both married and eligible to retire immediately hereunder.  The preretirement spousal annuity shall be
the survivor annuity that the Participant’s Spouse would have received under
the Plan had the Participant retired on his or her date of death with a 50
percent joint and survivor annuity in effect in accordance with the provisions
of ARTICLE 8 hereof.  In no event shall
the preretirement spousal annuity be payable to anyone other than the
Participant’s Spouse on the date of the Participant’s death.


 


ARTICLE 10 - Suspension
of Benefits for Reemployed Retired Participants


 


If
a retired Participant is reemployed by the Company, any SERP Benefits otherwise
payable to the Participant shall be suspended during the period of
reemployment.  If the reemployed
Participant subsequently completes one year of Continuous Service and
retires from the Company, the Participant shall be eligible for SERP Benefits
under the terms of the Plan in effect on the date the Participant’s employment
with the Company ceases, based on the Participant’s Pay and Continuous Service
as of that date, but reduced by the Actuarial Equivalent of any Benefits paid
before the Participant’s reemployment. 
If the reemployed Participant again retires without having completed one
year of Continuous Service during his or her period of reemployment, the SERP
Benefits being paid to the Participant immediately before his or her
reemployment shall resume, without adjustment, immediately following his or her
retirement.


 


 


30

















 


ARTICLE 11 - Forfeiture


 


A.            Competitive or Prejudicial
Conduct


 


A Participant shall not render services
for any organization or engage directly or indirectly in any business which, in
the judgment of the chief executive officer of the Company or other senior
officer designated by the Committee, 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.  For a
Participant whose employment has terminated, the judgment of the chief executive
officer shall be based on the Participant’s position and responsibilities while
employed by the Company, the Participant’s post-employment responsibilities and
position with the other organization or business, the extent of past, current
and potential completion or conflict between the Company and the other organization
or business, the effect on the Company’s customers, suppliers and competitors
of the Participant assuming the post-employment position, the guidelines established
in the then current edition of IBM’s booklet, Business Conduct Guidelines,
and such other considerations as are deemed relevant given the applicable facts
and circumstances.  A Participant who has
retired shall be free, however, to purchase as an investment or otherwise, stock
or other securities of such organization or business so long as they are listed
upon a recognized securities exchange or traded over-the-counter, and such
investment does not represent a substantial investment to the Participant or a
greater than 10 percent equity interest in the organization or business.


 


B.            Disclosure of Confidential
Information


 


A Participant shall not, without prior
written authorization from the Company, disclose to anyone outside the Company,
or use in other than the Company’s business, any confidential information or
material, as defined in the Company’s Agreement Regarding Confidential
Information and Intellectual Property, related to the business of the Company,
acquired by the Participant either during or after employment with the Company.



 


C.            Disclosure and Assignment of
Rights


 


A Participant, pursuant to the Company’s
Agreement Regarding Confidential Information and Intellectual Property shall
disclose promptly and assign to the Company 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


 


 


31

















 


to the actual or anticipated business,
research, or development work of the Company and shall do anything reasonably
necessary to enable the Company to secure a patent where appropriate in the
United States and in other countries.


 


D.            Forfeiture and Rescission


 


Upon retirement, and from time to time
thereafter upon request by the Committee, the Participant shall certify on a
form acceptable to the Committee that he or she is in compliance with the terms
and conditions of the Plan. Failure to comply with the provisions of Section A,
B, or C of this ARTICLE prior to retirement or receipt of any Benefit payment
hereunder shall cause the forfeiture of all SERP Benefits even if the failure
to comply is not discovered until Benefits have commenced.  Failure to comply with the provisions of Section A,
B, and C of this ARTICLE after SERP Benefits have commenced hereunder shall cause
any such payments to be rescinded from the point in time when the conduct which
led to the failure to comply occurred. 
The Plan Administrator shall notify the Participant in writing of any
such rescission, and within ten days after receiving a notice of rescission
from the Company, the Participant shall pay to the Company in cash the amount of any payment that has been
rescinded in accordance with this ARTICLE.


 


ARTICLE 12 - Information for Benefits Calculations


 


A.            Incomplete or Incorrect
Information


 


Any delay in receiving from a Participant
or Beneficiary information requested by the Company’s Executive Compensation
Department, including but not limited to information regarding a Participant’s
Spouse or other factors necessary for the calculation of Benefits under the
Plan, shall result in the Benefits payable being based initially on the
information then available to IBM’s Executive Compensation Department and the
Plan Administrator, and their estimate of any unavailable information.  If additional or different information thereafter
becomes available to IBM’s Executive Compensation Department or the Plan
Administrator, Benefits shall be adjusted appropriately as determined by the
Plan Administrator.


 


B.            Overpayments


 


If any overpayment of Benefits is made
under the Plan, the amount of the overpayment may be set off against further amounts
payable to or on account of the person who received the overpayment until the
overpayment has been 


 


 


32

















 


recovered in full.  The foregoing remedy is not intended to be
exclusive.


 


ARTICLE 13 - Alienation
of Benefits


 


No
Benefit payable under the Plan shall be subject to alienation, sale, transfer,
assignment, pledge, attachment, garnishment, lien, levy or like
encumbrance.  No Benefit under the Plan
shall in any manner be liable for or subject to the debts or liabilities of any
person entitled to Benefits under the Plan.


 


ARTICLE 14 - Withholding
Taxes


 


The
Company and the Plan Administrator shall withhold such taxes and make such
reports to governmental authorities as they reasonably believe to be required
by law.


 


ARTICLE 15 -
Distributions to Minors and Incompetents


 


If
the Plan Administrator determines that any Participant or Beneficiary receiving
or entitled to receive Benefits under the Plan is incompetent to care for his
or her 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, brother or sister 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.


 


In
the absence of the appointment of a legal guardian of the property of a minor,
any minor’s share of Benefits 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.


 


The
Plan Administrator, however, in its sole discretion, may require that a legal
guardian for the property of any such incompetent or minor be appointed before
authorizing the payment of Benefits in such situations.  Benefit payments made under the Plan in
accordance with determinations of the Plan Administrator pursuant to this ARTICLE
15 shall be a complete discharge of any obligation arising under the Plan with
respect to such Benefit payments.


 


 


33

















 


ARTICLE 16 - No Right to
Employment


 


Nothing herein contained
shall be deemed to give any employee the right to be retained in the service of
the Company or to interfere with the right of the Company to discharge any
employee at any time without regard to the effect that such discharge may have
upon the employee under the Plan.


 


ARTICLE 17 - Unfunded
Plan


 


The
Plan shall be unfunded.  The Company
shall not be required to segregate any assets to provide Benefits, nor shall
the Plan be construed as providing for such segregation, nor shall the Company
or the Committee be deemed to be a trustee of any assets of the Plan.  Any liability of the Company to any
Participant or Beneficiary with respect to SERP Benefits shall be based solely
upon any contractual obligations created by the Plan.  No such obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance or any property of the
Company.  Neither the Company nor the
Committee shall be required to give any security or bond for the performance of
any obligation created by the Plan.


 


ARTICLE 18 -
Miscellaneous


 


A.            Construction


 


Unless the contrary is plainly required
by the context, wherever any words are used herein in the masculine  gender, they shall be construed as though they
were also used in the female gender, and vice versa, and wherever any words are
used herein in the singular form, they shall be construed as though they were
also used in the plural form, and vice versa.


 


B.            Severability


 


If any provision of the Plan is held
illegal or invalid for any reason, such illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced
as if such illegal or invalid provision had never been inserted herein.


 


C.            Titles and Headings Not to
Control


 


The titles to ARTICLES and the headings
of Sections in the Plan are placed herein for convenience of reference only, and
in the event of any conflict, the text of the Plan, rather than such titles or
headings, shall control. 


 


 


34

















 


D.            Complete Statement of Plan


 


This document is a complete statement of
the Plan.  The Plan may be amended,
modified or terminated only in writing and then only as provided herein.


 


E.             Booklets and Brochures


 


The Company shall from time to time issue
to Participants one or more booklets or brochures summarizing the Plan. In the
event of any conflict between the Plan document and the booklets and brochures,
the Plan document shall control.


 


ARTICLE 19 - Situs of
Plan; Governing Law


 


The
situs of the Plan shall be the State of New York.  The Plan shall be governed by ERISA, and to
the extent not preempted by ERISA, the law of the State of New York.


 


 


35

















 


APPENDIX C


 


Heritage PwCC Partner Plan


 


ARTICLE C1 - Purpose


 


This
APPENDIX C, which is effective October 1, 2002, describes the SERP Benefit
for a Regular Employee who is an Executive, as the term Executive is defined in
ARTICLE C2.


 


ARTICLE C2 - Definitions


 


For
purposes of this APPENDIX C, capitalized terms shall have the same meaning as
they do in ARTICLE 2, except the following terms shall have the following
meanings:


 


a.                                       Benefit
Service - an Executive’s Continuous Service that occurs on or after October 1,
2002, while a Regular Employee or a Leave of Absence Employee, and while
accruing benefits under the IBM Personal Pension Plan, rounded to the next
completed month, except that Benefit Service shall not exceed 20 years minus
the number of years of Partner Service, and shall not include periods of
Continuous Service that occur prior to the latest date of hire or rehire with
IBM.


 


b.                                      Continuous
Service — shall have the same meaning as it does in ARTICLE 2, except that
Continuous Service shall include Partner Service.


 


c.                                       Eligibility
Service - shall have the same meaning as it does in ARTICLE 2, except that
Eligibility Service shall include Partner Service.


 


d.                                      Executive
— an individual who is listed in Exhibit I, which exhibit is maintained in
the office of the Director of Executive Compensation of IBM.  Exhibit I contains a list of individuals
who were partners with PwC immediately prior to October 1, 2002, and who
became employed by IBM as of October 1, 2002.


 


e.                                       Offset
Amount - the annual single life annuity described in Section A of ARTICLE
C5.


 


f.                                         Pay
— shall have the same meaning as it does in ARTICLE 2, except that Compensation
and Continuous Service earned before October 1, 2002 shall not be
considered.


 


g.                                      Partner
Service — an Executive’s service while a partner with PwC prior to October 1,
2002, as determined based on the methodology for calculating Benefit Service
under the IBM Personal Pension Plan and based on the date the Executive became
a partner at PwC, as provided to IBM by PwC.


 


h.                                      PwC
— PricewaterhouseCoopers.


 


i.                                          Target
Percentage — a percentage that is determined based on age (to a maximum of 50
years) plus Partner Service (to a maximum of 20 years), as shown below:


 


 


36

















 




	
  If age
  on September 30, 2002 plus Partner Service is

  	
   

  	
  Target
  Percentage is

  
	
  60
  or more

  	
   

  	
  100%

  
	
  56
  but less than 60

  	
   

  	
  90

  
	
  52
  but less than 56

  	
   

  	
  80

  
	
  48
  but less than 52

  	
   

  	
  70

  
	
  44
  but less than 48

  	
   

  	
  60

  
	
  40
  but less than 44

  	
   

  	
  50

  
	
  Less
  than 40

  	
   

  	
  0

  






 


ARTICLE C3 - Coverage
and Effect


 


This
Appendix C describes the SERP Benefit for a Regular Employee who is an
Executive, as the term Executive is defined in ARTICLE C2.  The provisions of ARTICLES 2 through 19 shall
apply in determining the SERP Benefit, except as otherwise provided in ARTICLES
C2, C4, C5 and C6.


 


ARTICLE C4 - Eligibility
for SERP Benefits


 


Notwithstanding
ARTICLE 7, a Participant shall be eligible for a SERP Benefit only if the
Participant is an Executive on his or her date of termination with IBM, a
forfeiture under ARTICLE 11 does not occur, and the Participant’s employment
with IBM terminates for any reason other than cause (i) on a date after
the Participant has completed five years of Eligibility Service and has
attained age 50, or (ii) solely with respect to the amount shown in Exhibit II,
which exhibit is maintained in the office of the Director of Executive
Compensation of IBM, on a date when such amount is greater than $0.


 


ARTICLE C5 - SERP
Benefits


 


A.                                   Formula.


 


Notwithstanding Section A of ARTICLE
8, a Participant’s annual SERP Benefit, when expressed as a single life annuity
commencing as of the first day of the month next following the Participant’s
409A Separation from Service, shall equal 1.5% times Pay times the number of
years of Benefit Service (but not to exceed 20 years minus the number of years
of Partner Service) times the Participant’s Target Percentage.


 


There shall be
offset from the amount described in the preceding paragraph, an Offset
Amount.  The Offset Amount shall equal (1) below
if a Participant has a 409A Separation from Service after December 31,
2007, and the sum of (1) and (2) below if a Participant has a 409A
Separation from Service before January 1, 2008:


 


(1)  The annual
single life annuity the Participant is entitled to receive under the IBM
Personal Pension Plan and the IBM Excess Personal Pension Plan beginning on the
Annuity Commencement Date.  For this
purpose, the single life annuity will be 


 


 


37

















 


calculated based on what the Participant’s
benefit under the IBM Personal Pension Plan and IBM Excess Personal Pension
Plan would have been if the Participant had not received any distributions from
such plans before the Annuity Commencement Date, and this offset shall first be
calculated without regard to any settlement benefit due in connection with the
litigation entitled, Cooper v. IBM; the Offset Amount shall then be
increased to reflect such settlement benefit in accordance with the methodology
adopted by the Company on or before December 31, 2008; plus


 


(2)  The annual
single life annuity that would be described in Section A(1) of this ARTICLE
C5 if the Pay Credit Percentage described in Section 11.3(d) of the
IBM Personal Pension Plan was 3% instead of 5%.


 


For purposes of calculating the Offset
Amount in the case of a 409A Separation from Service on account of a Qualifying
Leave, the Participant’s benefits under the IBM Personal Pension Plan and the
IBM Excess Personal Pension Plan shall be calculated using the same methodology
that applies to calculate the amount of a Participant’s Excess Prior Plan
Benefit under Section 5.02(d) of the IBM Excess Personal Pension
Plan.


 


A Participant who is listed in Exhibit II
shall receive an additional annual single life annuity equal to the amount
described in Exhibit II, which amount is dependent on the Participant’s
Annuity Commencement Date, times the Participant’s Target Percentage.  If the Participant’s Annuity Commencement
Date is after December 31, 2007, the amount described in Exhibit II
shall be multiplied by a fraction, the numerator of which is the Participant’s
Benefit Service (disregarding the 20 year cap) as of December 31, 2007, and
the denominator of which is the sum of the numerator and the amount of
Continuous Service the Participant earns after December 31, 2007 and
before the Participant’s Annuity Commencement Date.  For Annuity Commencement Dates not listed in Exhibit II,
linear interpolation shall be used.


 


B.            Reduction for SERP Benefits
Payable Prior to Age 55.


 


Notwithstanding Section B of ARTICLE
8, if the Participant’s Annuity Commencement Date is on or after his or her
55th birthday, the Participant’s SERP Benefit when paid in the form of a single
life annuity, shall be equal to the SERP Benefit calculated in accordance with Section A
of this ARTICLE C5.


 


If the Participant’s Annuity Commencement
Date is before his or her 55th birthday, the Participant’s SERP Benefit, as calculated
in the form of a single life annuity and before offsetting the Offset Amount
described in Section A of this ARTICLE C5 and before adding the additional
amount described in Exhibit II, shall be reduced by 2/3 of 1% for each
month that the Annuity Commencement Date precedes age 55; however, if a
Participant is eligible to receive a SERP Benefit on his or her Annuity
Commencement Date without regard to this sentence and the Participant incurs a
Qualifying Leave, the amount of the Participant’s monthly SERP Benefit shall be
calculated using the same methodology that applies to calculate the amount of a
Participant’s Excess Prior Plan Benefit under Section 5.02(d) of that
plan, and the resulting monthly annuity shall be adjusted in the same manner as
described in Section 5.02(e) of that plan.


 


 


38

















 


ARTICLE C6 -
Preretirement Survivor Annuity


 


 


 


Notwithstanding
ARTICLE 9, a preretirement survivor annuity shall be payable only to the Spouse
or Domestic Partner of a Participant who dies before his or her Annuity
Commencement Date, but who, on the date of death, has a Spouse or Domestic
Partner and who, on the date of death, has (i) completed five years of
Eligibility Service and has attained age 50, or (ii) solely with respect
to the amount shown in Exhibit II, has an amount that is greater than $0.
The preretirement survivor annuity shall be the survivor annuity that the
Participant’s Spouse or Domestic Partner would have received under the Plan had
the Participant terminated employment on his or her date of death with a 50%
joint and survivor annuity in effect in accordance with the provisions of
ARTICLE 8.  The Spouse or Domestic
Partner shall begin receiving the preretirement survivor annuity as of the
first day of the month next following the Participant’s date of death.


 


 


39

















 


EXHIBITS I and II


 


[Employee Data
Redacted]


 


40














 


APPENDIX D


IBM SECTION 409A UMBRELLA DOCUMENT


 


For purposes of plans of International Business
Machines or any member of its controlled group as determined under §414(b) or
(c) of the Internal Revenue Code (collectively, “IBM”) that are subject to
§ 409A of the Internal Revenue Code (“§ 409A”), any benefit subject
to § 409A that is paid on account of a separation from service shall be
paid on account of a “409A Separation from Service,” as defined below.  In addition, for purposes of applying the
six-month delay described in § 409A(a)(2)(B)(i), a “specified employee” is
a 409A Key Employee, as defined below.


 


1.  The term “409A Key Employee” means, for each
12-consecutive-month period beginning on any April 1 that occurs after January 1,
2008 (an “effective period”), an individual who is a “specified employee” of
IBM (within the meaning of Treas. Reg. § 1.409A-1(i)) within the
12-consecutive-month period ending on the December 31 immediately
preceding the start of such effective period. 
For purposes of the preceding sentence, “specified employees” include:


 


(a)                                  each employee of IBM on IBM’s U.S. payroll, not to exceed 50, who is
designated by IBM as an officer and whose pay (as defined under Treas. Reg.
§ 1.415(c)-2(d)(4)) exceeds the  dollar limitation under § 416(i)(1)(A)(i) of
the Internal Revenue Code (“§ 416 Pay Limit”); plus


 


(b)                                  the highest paid Band A executives (as defined by IBM’s rules and regulations) on IBM’s U.S. payroll whose pay exceeds the § 416 Pay Limit (where
pay is defined under Treas. Reg. § 1.415(c)-2(d)(4)), such that, when
combined with the employees in subsection (a) (designated officers), there
are no more than 50 “specified employees” on IBM’s U.S. payroll; plus


 


(c)                                  if the total number of individuals designated as “specified employees”
under subsections (a) and (b) is less than 50, the highest paid other
employees on IBM’s U.S. payroll (where pay is defined under Treas. Reg. §
1.415(c)-2(d)(4)), such that, when combined with the employees in subsections (a) (designated
officers) and (b) (Band A executives), there are no more than 50 “specified
employees” on IBM’s U.S. payroll; plus


 


(d)                                  each employee of IBM who:  (1) is
entitled to a benefit that is subject to § 409A, (2) is not on a U.S.
payroll, and (3) is considered to be an officer for purposes of
identifying “specified employees” under Treas. Reg. § 1.409A-1(i).


 


2.  The term “409A Separation from Service” means,
effective January 1, 2009, a separation from service within the meaning of
Treas. Reg. § 1.409A-1(h), which shall include, but not be limited to, the
following events:


 


(a)                                  A “termination
of employment,” as that term is applied for purposes of the IBM 401(k) Plus
Plan (except to the extent that an earlier event associated with such
termination of employment is described in subsections (b) through (d),
below);


 


(b)                                  The start of a
bridge leave or a pre-retirement planning leave;


 


(c)                                  A permanent
reduction in services to no more than 20% of the average level of services
performed over the immediately preceding 36-month period (or the full period of
services if less);


 


(d)                                  The six-month
anniversary of a leave of absence, when no services are performed (including
paid and unpaid leave and including disability leave or any combination
thereof) other than a military leave.


 


From
January 1, 2008 through December 31, 2008, a “409A Separation from
Service” means a good faith interpretation of “separation from service,” within
the meaning of § 409A(a)(2)(A)(i), and includes the following rules:


 


i.                                         A Participant
who is on a bridge leave or a pre-retirement planning leave as of December 31,
2007, shall have a 409A Separation from Service as of December 31, 2007;


 


 

















 


ii.                                     If a Participant—


 


(1)                                  during 2008 has
an event described in paragraph (c) or has a six-month anniversary
described in paragraph (d),


 


(2)                                  does not
otherwise incur a separation from service prior to December 31, 2008, and


 


(3)                                  has not
returned to active employment (or, in the case of an event described in (c), to
full schedule employment) on or before December 31, 2008,


 


the
Participant shall have a 409A Separation from Service as of December 31,
2008.