Exhibit 10.3


 


Note:  This exhibit reflects amendments to clarify
the administrative structure of the IBM Excess 401(k) Plus Plan.


 


IBM EXCESS 401(k) PLUS PLAN


 


Effective January 1, 2008


(except as
otherwise provided herein)


 


 


 













 


TABLE OF CONTENTS


 


 


	
  ARTICLE I. INTRODUCTION

  	
  1

  
	
  1.01.

  	
  Name of
  Plan and Effective Date

  	
  1

  
	
  1.02.

  	
  Purpose

  	
  1

  
	
  1.03.

  	
  Legal
  Status

  	
  1

  
	
  1.04.

  	
  Section
  409A

  	
  1

  
	
  ARTICLE
  II. DEFINITIONS

  	
  3

  
	
  ARTICLE
  III. ELIGIBILITY

  	
  9

  
	
  3.01.

  	
  Eligibility
  for Elective Deferrals

  	
  9

  
	
  3.02.

  	
  Eligibility
  for Matching and Match Maximizer Contributions

  	
  9

  
	
  3.03.

  	
  Eligibility
  for Automatic Contributions and Transition Credits

  	
  9

  
	
  3.04.

  	
  Eligibility
  for Section 415 Excess Credits

  	
  10

  
	
  3.05.

  	
  Eligibility
  for Discretionary Awards

  	
  10

  
	
  ARTICLE IV. ELECTIVE DEFERRALS
  AND MATCHING CONTRIBUTIONS

  	
  11

  
	
  4.01.

  	
  Elective
  Deferrals

  	
  11

  
	
  4.02.

  	
  Matching
  Contributions

  	
  12

  
	
  ARTICLE V. NON-ELECTIVE CREDITS

  	
  14

  
	
  5.01.

  	
  Automatic
  Contributions

  	
  14

  
	
  5.02.

  	
  Transition
  Credits

  	
  14

  
	
  5.03.

  	
  Section
  415 Excess Credits

  	
  14

  
	
  5.04.

  	
  Discretionary
  Awards

  	
  14

  
	
  ARTICLE
  VI. VESTING, DEEMED INVESTMENT OF ACCOUNTS

  	
  15

  
	
  6.01.

  	
  Individual
  Accounts

  	
  15

  
	
  6.02.

  	
  Vesting
  of Accounts

  	
  15

  
	
  6.03.

  	
  Deemed
  Investment of Accounts

  	
  15

  



 

















 


Exhibit A


 


	
  ARTICLE VII. PAYMENT OF
  GRANDFATHERED AMOUNTS

  	
  18

  
	
  7.01.

  	
  Grandfathered
  Treatment of Grandfathered Amounts

  	
  18

  
	
  7.02.

  	
  Payment
  of Grandfathered Amounts Upon Death

  	
  18

  
	
  7.03.

  	
  Options
  for Payment of Grandfathered Amounts Upon Termination of Employment

  	
  18

  
	
  7.04.

  	
  Payment
  of Grandfathered Amounts Upon Termination of Employment

  	
  19

  
	
  ARTICLE VIII. PAYMENT OF
  NON-GRANDFATHERED AMOUNTS

  	
  20

  
	
  8.01.

  	
  Payment
  of Non-Grandfathered Amounts Upon Death

  	
  20

  
	
  8.02.

  	
  Form of
  Payment for Non-Grandfathered Amounts Paid Upon a 409A Separation from
  Service.

  	
  20

  
	
  8.03.

  	
  Electing
  and Changing Payment Options for Non-Grandfathered Amounts

  	
  21

  
	
  8.04.

  	
  Payment
  of Non-Grandfathered Upon a 409A Separation from Service

  	
  23

  
	
  8.05.

  	
  Special Rules for
  Payment of Non-Grandfathered Amounts Upon a 409A Separation from Service in
  First Quarter of 2008

  	
  24

  
	
  8.06.

  	
  Valuation
  of Non-Grandfathered Accounts

  	
  24

  
	
  8.07.

  	
  Effect
  of Rehire on Non-Grandfathered Payments

  	
  25

  
	
  ARTICLE IX. ADMINISTRATION

  	
  26

  
	
  9.01.

  	
  Amendment
  or Termination

  	
  26

  
	
  9.02.

  	
  Responsibilities

  	
  26

  
	
  ARTICLE X. GENERAL PROVISIONS

  	
  28

  
	
  10.01.

  	
  Funding

  	
  28

  
	
  10.02.

  	
  No
  Contract of Employment

  	
  28

  
	
  10.03.

  	
  Facility
  of Payment

  	
  28

  
	
  10.04.

  	
  Withholding
  Taxes

  	
  29

  
	
  10.05.

  	
  Nonalienation

  	
  29

  



 


2

















 


Exhibit A


 


	
  10.06.

  	
  Administration

  	
  29

  
	
  10.07.

  	
  Construction

  	
  29

  
	
  ARTICLE
  XI. CLAIMS PROCEDURE

  	
  30

  



 


3

















 


ARTICLE I. INTRODUCTION


 


1.01.       Name
of Plan and Effective Date. The IBM Executive Deferred Compensation Plan (the “EDCP”)
is hereby renamed and restated as the “IBM Excess 401(k) Plus Plan” (the “Plan”).
The Plan is effective as of January 1, 2008 (the “Effective Date”), except
as provided in Section 1.04, below, with respect to amounts earned before
the Effective Date. In addition, the EDCP plan document in effect prior to the
Effective Date (the “EDCP document”) continues to govern the portion of the
Plan consisting of “deferred shares” (as defined in the EDCP document). The
EDCP document is Appendix A (and will be attached when its restatement is first
adopted after the Effective Date).


 


1.02.       Purpose. The purpose of the Plan is
to attract and retain employees by providing a means for employees to defer
their pay and obtain matching and other company contributions outside of the
IBM 401(k) Plus Plan, which is subject to certain limits under the
Internal Revenue Code of 1986, as amended (the “Code”). All Plan benefits are
paid out of the general assets of the Company (as defined in ARTICLE II).


 


1.03.       Legal Status. The Plan
consists of two separate plans:


 


(a) An unfunded
deferred compensation plan for a select group of management or highly compensated
employees (within the meaning of Sections 201(2), 301(a)(3), 401(a)(1), 4021(b)(6) of
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), except
to the extent that the Plan provides benefits as described in subsection (b),
below; and


 


(b) An “excess
benefit plan” (within the meaning of Section 3(36) of ERISA), to the
extent the Plan provides benefits that Section 415 of the Code prevents the IBM 401(k) Plus
Plan from providing.


 


1.04.       Section 409A.


 


(a) Grandfathered Amounts under Section 409A. Benefits
earned and vested under the EDCP before January 1, 2005, as adjusted for earnings,
gains, or losses on those benefits (“Grandfathered Amounts”) are treated as
grandfathered for purposes of Section 409A of the Code. Grandfathered
Amounts are subject to the terms of the EDCP in effect on October 3, 2004,
except as provided herein or in Appendix A. For recordkeeping purposes, the
Company will account separately for Grandfathered Amounts.


 


(b) Non-Grandfathered Amounts. With respect to benefits under
the Plan (including benefits earned before the Effective Date) other than
Grandfathered Amounts (“Non-Grandfathered Amounts”), the Plan is intended, and
shall be construed, to comply with the requirements of Section 409A of the
Code. Non-Grandfathered Amounts earned before the Effective Date were subject,
before


 





















 


the Effective Date, to the terms of the EDCP, as
amended, including, for example, the requirement that any payment to a 409A Key
Employee (as defined in ARTICLE II) that would otherwise be paid in the first
six months after a separation from service was instead paid in the seventh
month. Notwithstanding anything to the contrary in this Section 1.04, 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.


 


2





















 


ARTICLE
II. DEFINITIONS


 


The
following words and phrases as used herein have the following meanings unless a
different meaning is required by the context:


 


“401(k) Plan” means the IBM 401(k) Plus
Plan as in effect from time to time, including, with respect to periods before
the Effective Date, the IBM Savings Plan and any other predecessor to the IBM
401(k) Plus Plan, as applicable.


 


“409A Key Employee” has the meaning described
in the IBM Section 409A Umbrella
Document, which is Appendix B.


 


“409A Separation from Service” has the meaning described
in the IBM Section 409A Umbrella
Document  attached to this
Plan as Appendix B.


 


“Account” means a record-keeping account maintained
for a Participant under the Plan. A Participant’s Accounts under the Plan
include, where applicable, a Pre-2005 Elective Deferral Account, a Pre-2005
Company Account, a Post-2004 Elective Deferral Account, and a Post-2004 Company
Account.


 


“Actively Employed” means actively employed by
the Company, including on a leave of absence other than a bridge leave, a
pre-retirement planning leave, or a leave during which the individual is
receiving LTD Benefits.


 


“Automatic Contribution” has the
meaning provided in Section 5.01.


 


“Base Pay” means an Employee’s base pay (determined
under the 401(k) Plan) from the Company for employment while on a U.S.
payroll, determined before reduction for deferrals under the Plan or the 401(k) Plan
or for amounts not included in income on account of salary reductions under
Code section 125 or 132(f). However, Base Pay does not include any pay during a
Deferral Period that is paid after an Employee’s 409A Separation from Service
(except amounts paid in the pay period in which the Employee’s 409A Separation
from Service occurs and Rehire Pay).


 


“Beneficiary” means a person who is designated by a
Participant or by the terms of the Plan to receive a benefit under the Plan by
reason of the Participant’s death. Each Participant’s Beneficiary under the
Plan shall be the person or persons designated as the Participant’s Beneficiary
under the Plan, in the form and manner prescribed by the Plan Administrator. If
no such beneficiary designation is in effect under the Plan at the time of the
Participant’s death, or if no designated beneficiary under the Plan survives
the Participant, the Participant’s Beneficiary shall be the person or persons
determined to be the Participant’s beneficiary under the 401(k) Plan
(including the default beneficiary rules under the 401(k) Plan, if no
beneficiary is designated under that plan).


 


“Board” means the Board of Directors of IBM.


 


3

















 


“Code” means 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.


 


“Combined Base Pay Election” has the meaning provided in Section 4.01(a)(1).


 


“Company” means International Business Machines
Corporation (“IBM”), a New York corporation having its principal place of
business at Armonk, New York, and its Domestic Subsidiaries that are
participating employers in the 401(k) Plan.


 


“Company Contributions” means amounts credited to a
Participant’s Post-2004 Company Account, including Matching Contributions,
Match Maximizer Contributions, Automatic Contributions, Transition Credits,
Discretionary Awards, Section 415 Excess Credits, and any similar credits
under the EDCP.


 


“Deferral Election” means an Eligible Employee’s
election to defer Base Pay or Performance Pay under Section 4.01.


 


“Deferral Period” means a period that begins
on or after the Effective Date that (a) starts on January 1 and ends
on the next following December 31 for Base Pay and (b) starts on April 1
and ends on the next following March 31 for Performance Pay.


 


“Discretionary Award” means a credit to a
Participant’s Account as described in Section 5.04.


 


“Domestic Subsidiary” means a “Domestic
Subsidiary” as defined in the 401(k) Plan.


 


“EDCP” means the IBM Executive Deferred Compensation Plan
in effect before the Effective Date.


 


“Effective Date” means January 1, 2008.


 


“Elective Deferrals” means deferrals of Base Pay
or Performance Pay credited to the Participant’s Post-2004 Elective Deferral
Account pursuant to a Participant’s election under Section 4.01(a) or
any similar provision of the EDCP.


 


“Eligible Employee” means, with respect to a
Plan Year, an Employee who is eligible to make Elective Deferrals or to receive
Company Contributions during the Plan Year pursuant to ARTICLE III.


 


“Employee” means an employee of the Company who is
eligible to participate in the 401(k) Plan and is not a Supplemental
Employee. Notwithstanding the foregoing, an individual who, on or after January 1,
2009, was an Employee and becomes a Supplemental Employee or begins receiving
LTD Benefits before or during a Deferral Period with respect to which the
individual has a valid, irrevocable Deferral Election and


 


4

















 


without
first incurring a 409A Separation from Service shall continue to be considered
to be an Employee solely for purposes of the individual’s eligibility during
such Deferral Period to make Elective Deferrals (but not for purposes of the
individual’s eligibility for any Company Contribution). For example, an
individual who is receiving
LTD Benefits is not eligible to participate in the 401(k) Plan
(as in effect on the Effective Date) and is therefore not an Employee, except
that if the individual has not incurred a 409A Separation from Service, the
Employee’s Elective Deferrals shall continue pursuant to any irrevocable
Deferral Election.


 


“ERISA” means the Employee Retirement Income Security Act
of 1974, as amended from time to time.


 


“Excess 401(k) Eligible Pay” means, for each payroll
period that ends after an Eligible Employee reaches his or her Program
Eligibility Date, the excess, if any, of (A) the Eligible Employee’s
eligible compensation under the 401(k) Plan for such payroll period
determined without regard to the Pay Limit, over (B) the Eligible Employee’s
eligible compensation under the 401(k) Plan during such payroll period
determined taking into account the Pay Limit. Solely for purposes of each
payroll period in Plan Year 2008:


 


(a)          Excess 401(k) Eligible
Pay of an Eligible Employee who is an executive includes Performance Pay that
is paid during the payroll period and is
not eligible compensation under the 401(k) Plan minus Elective Deferrals
made with respect to such Performance Pay; and


 


(b)         solely for purposes of
calculating Match Maximizer Contributions, Excess 401(k) Eligible Pay does
not include Growth Driven Profit-Sharing amounts and employee sales or services incentives that are
paid in the first quarter of 2008 (however, these amounts are
Excess 401(k) Eligible Pay for purposes of calculating Automatic
Contributions and Transition Credits).


 


“Grandfathered Amounts” has the meaning provided in
Section 1.04(a).


 


“IBM” means International Business Machines Corporation,
any predecessor, or any successor by merger, purchase, or otherwise.


 


“LTD Benefits” means benefits under the Company’s long-term
disability plan.


 


“Matching Contribution” has the meaning provided in
Section 4.02(a).


 


“Match Maximizer Contribution” has the meaning provided in
Section 4.02(b).


 


“Non-Grandfathered Amounts” has the meaning provided in
Section 1.04(b).


 


“Participant” means an individual who has a positive
balance in an Account under the Plan.


 


5

















 


“Pay Limit” means, for a Plan Year, the limit on
compensation that may be taken into account during such Plan Year under a
tax-qualified plan as determined under Code Section 401(a)(17).


 


“Performance Pay” means an Employee’s
performance pay (determined under the 401(k) Plan) from the Company for
employment while on a U.S. payroll, determined before reduction for deferrals
under the Plan or the 401(k) Plan or for amounts not included in income on
account of salary reductions under Code section 125 or 132(f). However,
Performance Pay does not include any pay during a Deferral Period that is paid
after an Employee’s 409A Separation from Service (except amounts paid in the
pay period in which the Employee’s 409A Separation from Service occurs and
Rehire Pay). Notwithstanding this definition, Performance Pay that is paid in
the first quarter of 2008 is subject to the following special rules:


 


(a)          such
Performance Pay does not include Growth Driven Profit-Sharing and employee sales or
services incentives;


 


(b)         such Performance Pay
includes incentive pay (such as Annual Incentive Plan payments or sales or
services incentives) that is paid to an executive; and


 


(c)          an Employee’s deferral election with respect to such Performance Pay is
subject to the advance election and deferral percentage limit terms of the
EDCP.


 


“Plan” means this IBM Excess 401(k) Plus Plan.


 


“Plan Administrator” means the VP HR with
functional responsibilities for IBM’s benefit programs, or such other person or
committee appointed pursuant to ARTICLE IX, which shall be responsible for
reporting, recordkeeping, and related administrative requirements. If appointed
as a committee, any one of the members of the committee may act individually on
behalf of the committee to fulfill the committee’s duties.


 


“Plan Year” means the calendar year.


 


“Pre-2005 Accounts” means a Participant’s
Pre-2005 Company Account and Pre-2005 Elective Deferral Account.


 


“Pre-2005 Company Account” means, for any Participant,
the aggregate of the company contributions (including any discretionary awards)
credited to the Participant under the EDCP before January 1, 2005, to the
extent such contributions were vested as of December 31, 2004, and
earnings, gains, or losses credited on those contributions, but reduced for any
prior distribution under the EDCP or the Plan.


 


“Pre-2005 Elective Deferral Account” means, for any Participant,
the aggregate of the elective deferrals credited to the Participant under the
EDCP before January 1, 2005, and earnings, gains, or losses credited on
those elective deferrals, but reduced for any prior distribution under the EDCP
or the Plan.


 


6

















 


“Post-2004 Accounts” means a Participant’s
Post-2004 Company Account and Post-2004 Elective Deferral Account.


 


“Post-2004 Company Account” means, for any Participant,
the aggregate of (a) the Company Contributions credited to the Participant
under the EDCP or the Plan on or after January 1, 2005, plus (b) any
such contributions credited under the EDCP before January 1, 2005, to the
extent such contributions were not vested as of December 31, 2004, and
earnings, gains, or losses credited on amounts described in (a) and (b),
but reduced for any prior distribution under the EDCP or the Plan.


 


“Post-2004 Elective Deferral Account” means, for any
Participant, the aggregate of the Elective Deferrals credited to the
Participant under the EDCP or the Plan on or after January 1, 2005, and
earnings, gains, or losses credited on those Elective Deferrals, but reduced
for any prior distribution under the EDCP or the Plan.


 


“Program Eligibility Date” means an Eligible Employee’s
“Program Eligibility Date” under the 401(k) Plan.


 


“Rehire Pay” means Base Pay or Performance Pay, as
applicable, that is payable on or after the date an Employee returns to active
employment with the Company following a 409A Separation from Service or, if
later, after the end of the Deferral Period in which the Employee’s 409A
Separation from Service occurred. For example, if an Employee incurs a 409A Separation
from Service in April 2009 (whether on account of a leave in excess of six
months or because of a termination of employment with IBM) and returns to
active employment with IBM in November 2009, the Employee’s Rehire Pay
would include (a) Base Pay payable on or after January 1, 2010 (i.e.,
the beginning of the Base Pay Deferral Period after the 409A Separation from
Service), and (b) Performance Pay payable on or after April 1, 2010
(i.e., the beginning of the Performance Pay Deferral Period after the 409A
Separation from Service). By contrast, if instead the Employee returned to
active employment on February 1, 2010, the Employee’s Rehire Pay would
include (a) Base Pay payable on or after on February 1, 2010, and (b) Performance
Pay payable on or after April 1, 2010.


 


“Retirement-Eligible Participant” means a
Participant who:


 


(a)          when his or her 409A Separation from
Service occurs, (1) is at least age 55 with at least 15 years of service, (2) is
at least age 62 with at least 5 years of service, (3) is at least age 65
with at least 1 year of service, or (4) begins to receive LTD Benefits;


 


(b)         as of June 30, 1999, had at least 25
years of service and, when his or her 409A Separation from Service occurs, has
at least 30 years of service; or


 


7

















 


(c)          as of June 30, 1999, was at least
age 40 with at least 10 years of service and, when his or her 409A Separation
from Service occurs, has at least 30 years of service.


 


For
purposes of this definition, “year of service” means a year of “Eligibility
Service” as defined in the IBM Personal Pension Plan. In addition, for purposes
of Section 7.04 (payment of grandfathered amounts upon termination of
employment), this definition of “Retirement-Eligible Participant” is applied by
replacing “409A Separation from Service” with “termination of employment.” Furthermore,
the conditions in (a), (b), and/or (c) above are modified to the extent
necessary to be consistent with the retirement-eligibility criteria in the
EDCP.


 


“Section 415 Excess Credit” means a credit
to a Participant’s Account as described in Section 5.03.


 


“Subsidiary” means a “Subsidiary” as defined in the 401(k) Plan.


 


“Supplemental Employee” means an employee who is
designated by the Company as a “long-term supplemental employee” or a “supplemental
employee” in accordance with the Company’s established personnel practices.


 


“Transition Credit” means a credit
to a Participant’s Account as described in Section 5.02.


 


8

















 


ARTICLE
III. ELIGIBILITY


 


3.01.       Eligibility for Elective Deferrals. An Employee shall be eligible to make
Elective Deferrals for a Deferral Period if:


 


(a) he or she
qualifies as an Employee (i.e., an employee of the Company who is eligible to
participate in the 401(k) Plan and is not a Supplemental Employee) and is
Actively Employed on both August 31 and December 31 immediately
preceding the first day of the Deferral Period;


 


(b) the Plan
Administrator, in its sole discretion, estimates as of the September 1
immediately preceding the first day of the Deferral Period (or such other date
prescribed by the Plan Administrator) that the Employee’s pay for the calendar
year immediately preceding the first day of the Deferral Period will exceed the
Pay Limit as then in effect; and


 


(c) the Plan
Administrator notifies the Employee between September 1 and December 31
immediately preceding the Deferral Period that he or she will be eligible to
make Elective Deferrals under the Plan during the Deferral Period.


 


3.02.       Eligibility
for Matching and Match Maximizer Contributions. An Employee shall be eligible for Matching and Match
Maximizer Contributions for a payroll period that ends after the Employee has
reached his or her Program Eligibility Date, provided that the Employee is eligible for, and makes,
Elective Deferrals during the Plan Year in which the payroll period ends. However, an
Employee shall not be eligible for Matching and Match Maximizer Contributions
during any payroll period:


 


(a)  beginning
after the Employee has a 409A Separation from Service and ending before the
Employee returns to active employment as an Employee;


 


(b) beginning after
the Employee receives a hardship withdrawal under the 401(k) Plan and
within the same Plan Year as such hardship withdrawal occurs; or


 


(c) beginning after
the Employee becomes a Supplemental Employee or begins to receive LTD Benefits
(whether or not he or she makes Elective Deferrals) and ending before he again
becomes an Employee.


 


3.03.       Eligibility
for Automatic Contributions and Transition Credits.


 


(a) General Rule. Except as provided in subsection (b) (regarding
Employees hired before September 1, 2007) and subsection (c) (regarding
the period following a 409A Separation from Service), an Employee shall be
eligible for Automatic Contributions and Transition Credits during a payroll
period if:


 


(1) with respect to
eligibility for Automatic Contributions, the Employee is eligible during that
payroll period for “automatic contributions” 


 


9





















 


under the 401(k) Plan, and, with respect to
eligibility for Transition Credits, the Employee is eligible during that
payroll period for “transition credits” under the 401(k) Plan; and


 


(2) the Employee is
eligible to make Elective Deferrals during the payroll period (regardless of
whether the Employee has elected to make Elective Deferrals for the payroll
period).


 


If the individual is
eligible to make Elective Deferrals during the Plan Year only with respect to
Performance Pay during the Performance Pay Deferral Period that ends in the
Plan Year, the individual is eligible for Automatic Contributions and
Transition Credits, if at all, only during payroll periods ending during such
Performance Pay Deferral Period and only with respect to the portion of the
Performance Pay actually deferred under this Plan (except as provided in
subsection (b), below). For example, if an individual is eligible to make
Elective Deferrals for Deferral Periods that begin in 2008 but is not eligible
to make Elective Deferrals for Deferral Periods that begin in 2009, the
individual is not eligible for Automatic Contributions and Transition Credits
in 2009 except with respect to any Elective Deferrals of Performance Pay for
the Performance Pay Deferral Period ending March 31, 2009 (and except as
provided in subsection (b), below).


 


(b) Employees Hired Before September 1, 2007.           Notwithstanding subsection (a),
above, an Employee who is continuously employed by the Company since August 31,
2007, shall be eligible for Automatic Contributions and Transition Credits
during a payroll period if the Employee is eligible during that payroll period, respectively, for “automatic
contributions” and “transition credits” under the 401(k) Plan as described
in subsection (a)(1), above, even if the Employee is not eligible to make
Elective Deferrals during the payroll period.


 


(c) Eligibility after 409A Separation from Service. An Employee
shall not be eligible for Automatic Contributions or Transition Credits during
any payroll period that begins after the Employee has a 409A Separation from
Service and ends before the Employee returns to active employment as an
Employee.


 


3.04.       Eligibility for Section 415 Excess
Credits. An Employee shall be eligible for Section 415
Excess Credits during a payroll period if the Employee’s allocations during the
payroll period under the 401(k) Plan are limited by Section 415 of
the Code. However, an Employee shall not be eligible for Section 415
Excess Credits during any payroll period that begins after the Employee has a
409A Separation from Service and ends before the Employee returns to active
employment as an Employee.


 


3.05.       Eligibility for Discretionary Awards. An Employee
shall be eligible for Discretionary Awards during a Plan Year as determined by
the Company, in its discretion.


 


10


















 


ARTICLE
IV. ELECTIVE DEFERRALS AND MATCHING CONTRIBUTIONS


 


4.01.       Elective
Deferrals.  Beginning with the payroll period that
includes the Effective Date, Elective Deferrals made pursuant to an Eligible
Employee’s Deferral Election, as described below, shall be credited to the
Employee’s Post-2004 Elective Deferral Account on the date on which the amount
would otherwise be paid to the Eligible Employee absent a Deferral Election.


 


(a) Amount of Elective Deferrals.


 


(1) Amount of
Base Pay Deferrals.  An Employee who,
pursuant to Section 3.01, is eligible to make Elective Deferrals under the
Plan for a Deferral Period with respect to Base Pay may elect to defer Base Pay
in the amounts specified below, subject to any restriction imposed by the Plan
Administrator to ensure sufficient pay remains for other deductions and
withholding, which limitations shall be imposed prior to the date on which the
election becomes irrevocable.


 


i.             Standard Base Pay Election. 
From 1% to 80%, in 1% increments, of the Eligible Employee’s Base Pay,
if any, for each payroll period that ends during the Deferral Period; or


 


ii.          Combined Base Pay Election. 
From 1% to 80%, in 1% increments, of the Eligible Employee’s Base Pay,
if any, for each payroll period that ends during the Deferral Period, reduced
(but not below zero) by the product of (A) the company matching
contribution percentage applicable to the Eligible Employee under the 401(k) Plan
and (B) 1/24 of the Pay Limit in effect for the Deferral Period.


 


(2) Amount
of Performance Pay Deferrals.  An
Employee who, pursuant to Section 3.01, may elect to make Elective
Deferrals under the Plan for a Deferral Period with respect to Performance Pay
may elect to make Deferrals from 1% to 80%, in 1% increments, of his or her Performance Pay, if any,
paid during the Deferral Period.


 


(b) Timing of Deferral Elections.   An Eligible Employee’s Deferral
Elections under subsection (a), above, shall be made as follows:


 


(1) Election
Period.  The election must be made
while the individual is an Employee and Actively Employed, in the form and
manner prescribed by the Plan Administrator, and during the time period
prescribed by the Plan Administrator, which shall begin no earlier than the September 1
and end no later than the December 31 of the Plan Year 


 


11





















 


immediately preceding the first day of the Deferral
Period to which the election applies.


 


(2) Irrevocability.  The election must become irrevocable on the December 31st
immediately preceding the Plan Year during which the applicable Deferral Period
begins.  Once a Deferral Election becomes
irrevocable, an Eligible Employee’s Deferral Election shall apply
for the entire Deferral Period to which it relates and shall cease to apply
after such Deferral Period except to the extent that the individual makes a new
Deferral Election in accordance with this Section for subsequent Deferral
Periods, subject to
the cancellation rules in subsection (c), below.


 


(c) Cancellation of Deferral Election upon a 401(k) Plan Hardship
Distribution. Notwithstanding the irrevocability of elections in
subsection (b)(2), above, an individual’s Deferral Election shall not apply
with respect to:


 


(1) any payroll
period that ends after the Employee receives a hardship withdrawal under the
401(k) Plan and within the same Plan Year as the hardship withdrawal
occurs; or


 


(2) any payroll
period for which Performance Pay would, absent a Deferral Election, be paid to
the individual during a Deferral Period that begins during the Plan Year in
which the hardship withdrawal occurs.


 


For example, if an
individual receives a hardship withdrawal on June 1, 2009, the individual’s
Deferral Election with respect to Performance Pay is cancelled for the
remainder of the Deferral Period ending March 31, 2010.  Furthermore, if the individual instead
receives a hardship withdrawal on March 1, 2009, the individual’s Deferral
Election is cancelled with respect to the remainder of the Deferral Period
ending on March 31, 2009, and for the Deferral Period beginning on April 1,
2009, and ending on March 31, 2010.


 


4.02.       Matching
Contributions.  Beginning with the payroll period that
includes the Effective Date, Matching Contributions and Match Maximizer
Contributions shall be credited to the Post-2004 Company Account for each
Eligible Employee who satisfies the eligibility requirements described in Section 3.02
for such payroll period in an amount equal to the sum of the Matching
Contribution and Match Maximizer Contribution described below.


 


(a) Matching Contribution. 
An Eligible Employee’s Matching Contribution is the sum of the
following:


 


(1) the lesser of (A) the
company matching contribution percentage applicable to the Eligible Employee
under the 401(k) Plan or (B) the Elective Deferral percentage elected
by the Eligible Employee (without regard to any Combined Base Pay Election) for
such payroll period, 


 


12





















 


multiplied by the Eligible Employee’s Elective
Deferrals for such payroll period; and


 


(2) the lesser of (A) the
company matching contribution percentage applicable to the Eligible Employee
under the 401(k) Plan or (B) the Elective Deferral percentage elected
by the Eligible Employee (without regard to any Combined Base Pay Election) for
such payroll period, multiplied by the Eligible Employee’s Excess 401(k) Eligible
Pay for such payroll period;


 


provided
that the sum of (1) and (2) shall not exceed the Elective Deferrals
credited to the Eligible Employee for such payroll period.


 


(b) Match Maximizer Contribution.  An Eligible Employee’s Match Maximizer
Contribution for a payroll period is determined as described below.  The formula differs (as noted in paragraph
(ii), below) depending on whether or not the Eligible Employee elected the
Combined Base Pay Election for the Plan Year. The Match Maximizer Contribution
shall equal:


 


The lesser of: (1) The company matching contribution
percentage applicable to the Eligible Employee under the 401(k) Plan or (2) the
percentage derived from the ratio of:


 


 (i)                                  the aggregate Elective Deferrals previously credited
to the Eligible Employee’s Post-2004 Elective Deferral Account for the portion
of the Plan Year after the Eligible Employee’s Program Eligibility Date, to


 


(ii)                                  the sum, aggregated for the portion of
the Plan Year that is after the Eligible Employee’s Program Eligibility Date
and determined as of the date the applicable payroll period ends, of (A) the Eligible Employee’s
Elective Deferrals, (B) the Eligible Employee’s Excess 401(k) Eligible
Pay, and (C) if the Eligible Employee did not elect a Combined Base Pay
Election for the Plan Year, the compensation eligible for a matching
contribution under the 401(k) Plan.


 


Multiplied by: The Eligible Employee’s Excess 401(k) Eligible
Pay plus the Eligible Employee’s Elective Deferrals, each aggregated only for the portion of the Plan Year that is
after the Eligible Employee’s Program Eligibility Date and until the applicable
payroll period ends.


 


Minus: The Matching Contributions and Match Maximizer
Contributions previously credited to the Eligible Employee through the date the
applicable payroll period ends.


 


13

















 


ARTICLE V.  NON-ELECTIVE CREDITS


 


5.01.       Automatic
Contributions.  Beginning with the payroll period that includes
the Effective Date, an Automatic Contribution shall be credited to the
Post-2004 Company Account of an Employee who is eligible for Automatic
Contributions under Section 3.03 in an amount equal to the sum of:


 


(a) the Employee’s “automatic
contribution percentage” under the 401(k) Plan multiplied by the Employee’s
Elective Deferrals, if any, for the applicable payroll period; plus


 


(b) the Employee’s “automatic
contribution percentage” under the 401(k) Plan multiplied by the Employee’s
Excess 401(k) Eligible Pay, if any, for the applicable payroll period.


 


5.02.       Transition
Credits.  Beginning with the payroll period that
includes the Effective Date, a Transition Credit shall be credited to the
Post-2004 Company Account of an Employee who is eligible for Transition Credits
under Section 3.03 in an amount equal to the sum of:


 


(a) the Employee’s “transition
credit percentage” under the 401(k) Plan multiplied by, if any, the
Employee’s Elective Deferrals for the applicable payroll period; plus


 


(b) the Employee’s “transition
credit percentage” under the 401(k) Plan multiplied by the Employee’s
Excess 401(k) Eligible Pay, if any, for the applicable payroll period.


 


5.03.       Section 415 Excess Credits. 
Beginning with the payroll period that includes the Effective Date, a Section 415
Excess Credit shall be credited to the Post-2004 Company Account of an Employee
who is eligible for Section 415 Excess Credits under Section 3.04 in
an amount equal to the excess of (A) the amount that would have been
allocated to the Employee’s account under the 401(k) Plan (including any
forfeiture that would have been allocated to such account in lieu of such a
contribution) for such payroll period if the limits imposed by Section 415
of the Code did not apply to such allocation over (B) the amount actually
allocated to such Employee’s account under the 401(k) Plan (including any
forfeiture allocated in lieu of such a contribution) for such payroll period.


 


5.04.       Discretionary Awards. 
From time to time on and after the Effective Date, the Company, in its
discretion, may credit an Eligible Employee’s Post-2004 Company Account with an
amount determined under an agreement evidencing the Discretionary Award, and
such award shall be subject to the terms specified in such agreement in addition
to the terms of this Plan.


 


14





















 


ARTICLE VI. VESTING, DEEMED
INVESTMENT OF ACCOUNTS


 


6.01.       Individual
Accounts.  For record-keeping purposes only, the
Plan Administrator shall maintain, or cause to be maintained, records showing
the individual balances of each Account maintained for a Participant from time
to time under the Plan.  Periodically,
each Participant shall be furnished with a statement setting forth the value of
his or her Accounts under the Plan.


 


6.02.       Vesting
of Accounts.  A Participant shall be fully vested in all
Accounts maintained for the Participant under the Plan; provided, however, that
Discretionary Awards credited to a Participant’s Post-2004 Company Account and
earnings, gains, or losses on those contributions, shall become vested only as
set forth in the agreement evidencing the award and, to the extent not vested,
shall not be paid.


 


6.03.       Deemed
Investment of Accounts.  A Participant’s Accounts under
the Plan shall be adjusted for deemed earnings, gains, or losses.  Earnings, gains, or losses for any period
before the Effective Date shall be determined in accordance with the applicable
provisions of the EDCP.  Earnings, gains,
or losses for any period on or after the Effective Date shall be determined in
accordance with the following:


 


(a) Deemed Investment Options Available.


 


(1) General Rule.  A Participant’s Account shall be treated as
if the Participant had invested such accounts in certain 401(k) Plan
investment funds in accordance with subsection (b), below, except with respect
to certain amounts credited before the Effective Date and attributable to
Matching Contributions or the Buy-First Program as described in paragraphs (2) and
(3), below.


 


(2) Matching
Contributions Credited Before the Effective Date.  The portion of a Participant’s Pre-2005
Company Account (if any) and the Participant’s Post-2004 Company Account
attributable to Matching Contributions credited to the Participant before the
Effective Date (and related earnings but not dividend equivalents) shall be
treated as if invested at all times in the IBM Stock Fund under the 401(k) Plan.  Notwithstanding the foregoing, if a
Participant has a termination of employment for purposes of the 401(k) Plan
and his or her entire Plan benefit is not immediately payable in a lump sum,
amounts described in this paragraph (2) shall no longer be subject to the restrictions of this paragraph (2) and may be invested as described in
paragraph (1), above.


 


(3) Amounts Attributable to Buy-First Executive
Equity Program. Any portion
of a Participant’s Post-2004 Elective Deferral Account that is attributable to
a Participant’s deferrals under the EDCP through the IBM Buy-First Executive
Equity Program before the Effective Date (and related earnings but not dividend
equivalents) shall, for the three-year period 


 


15





















 


following the date such
deferrals were credited, be treated as if invested in the IBM Stock Fund under
the 401(k) Plan; provided, however, that if a Participant has a
termination of employment for purposes of the 401(k) Plan before the end
of such three-year period and his or her entire Plan benefit is not immediately
payable in a lump sum, amounts described in this paragraph (3) shall no
longer be subject to the restrictions of this paragraph (3) and may be
invested as described in paragraph (1), above.


 


(b) Elections for Deemed Investment Options.


 


(1) Initial
Election For Future Credits.  A
Participant shall designate, in such form and at such time in advance as may be
prescribed by the Plan Administrator, the proportions (in multiples of 1%) in
which Elective Deferrals and Company Contributions credited to his or her Plan
Accounts on or after the Effective Date shall be treated as if they had been
allocated among any or all of the investment funds that are available under the
401(k) Plan (other than the mutual fund window) at the time such amounts
are credited.  If the Participant makes
no such designation, the Participant shall be deemed to have designated the
default investment fund under the 401(k) Plan.


 


(2) Change in
Election for Future Credits.  A
Participant may elect, in such form and at such time in advance as may be
prescribed by the Plan Administrator, to change his or her investment elections
for future Elective Deferrals and Company Contributions credited to his or her
Plan Accounts.  Any restrictions on
investment election changes that apply under the 401(k) Plan shall also
apply under the Plan.


 


(3) Transfers
Among Deemed Investment Options.  A
Participant may elect, in such form and at such time in advance as may be
prescribed by the Plan Administrator, to transfer balances in his or her Plan
Accounts (other than amounts described in subsections (a)(1), (a)(2), or (a)(3) that
are required to be treated as invested in IBM stock or the IBM Stock Fund)
among the available investment funds, provided that:


 


i.             Transfers must be made in multiples of 1%, provided
that the minimum amount transferred shall be $250 if that is greater than 1%
(provided, however, that the Plan Administrator may specify a different
percentage and/or a different dollar amount to be applied in this paragraph);


 


ii.          Any restrictions on transfers into or out
of investment funds that apply under the 401(k) Plan shall also apply
under the Plan; and


 


16





















 


iii.       Plan Administrator may impose such
additional rules and limits upon transfers between investment funds as the
Plan Administrator may deem necessary or appropriate.


 


(c) Administrative Fee. 
Each calendar quarter, an administrative fee shall be deducted pro rata
from each Participant’s Accounts.  The
amount of the fee shall be determined by the Plan Administrator and, as of the
Effective Date is $8 each quarter.


 


17





















 


ARTICLE VII. PAYMENT OF
GRANDFATHERED AMOUNTS


 


7.01.       Grandfathered
Treatment of Grandfathered Amounts.  Pre-2005
Accounts are paid in accordance with the EDCP in effect on October 3,
2004, except as the EDCP is amended, where each such amendment does not
constitute a “material modification,” as determined under Section 409A of
the Code.  This ARTICLE VII describes the
key provisions of the EDCP (as amended), as it applies to Grandfathered Amounts
on and after the Effective Date.


 


7.02.       Payment
of Grandfathered Amounts Upon Death.   If a
Participant dies before his or her Pre-2005 Accounts have been distributed in
full, the value of his or her Pre-2005 Accounts shall be paid in a lump sum to
the Participant’s Beneficiary as soon as practicable after the Participant’s death.


 


7.03.       Options
for Payment of Grandfathered Amounts Upon Termination of Employment.


 


(a) Forms of Payment.  A
Participant may elect, at the time and in the manner described in subsection
(b), below, to have the value of his or her Pre-2005 Accounts paid under one of
the following options, subject to the limits in Section 7.04, below
(regarding retirement-eligibility and $25,000 cash-out limit):


 


(1) A lump sum
payment as soon as practicable following the Participant’s termination from
employment;


 


(2) A lump sum
payment as of the last business day in January of the calendar year
immediately following the calendar year in which the Participant’s termination
from employment occurs; or


 


(3) From two to 10
annual installments (as elected by the Participant), each paid as of the last
business day in January beginning with the January immediately
following the calendar year in which the Participant’s termination from
employment occurs, until the elected number of installments have been paid.


 


Solely for purposes of
this subsection (a), termination of employment includes the date on which a
Participant begins to receive LTD Benefits.


 


(b) Election of Payment Option. 
A Participant shall elect a payment option for his or her Pre-2005
Accounts in the form and manner prescribed by the Plan Administrator.  A payment election made before January 1,
2008, applies to a termination of employment that occurs at least six months
after, and in a calendar year after, the payment election is made.  A payment election made on or after January 1,
2008, applies to a termination of employment that occurs at least twelve months
after the payment election is made.


 


18





















 


7.04.       Payment
of Grandfathered Amounts Upon Termination of Employment. The Participant’s Pre-2005 Accounts
shall be paid to the Participant in the form and at the time described below:


 


(a) Non-Retirement-Eligible
or Benefit Is Less than $25,000.  If
the Participant is not a Retirement-Eligible Participant or if the aggregate
value of all of the Participant’s Accounts under the Plan (including, for this
purpose, “deferred shares” as defined in the EDCP) is less than $25,000 when
the Participant terminates employment, the Participant’s Pre-2005 Accounts
shall be paid in an immediate lump sum;


 


(b) Retirement-Eligible
Without Valid Payment Election.  If
the Participant is a Retirement-Eligible Participant but has not made a valid
payment election, the Participant’s Pre-2005 Accounts shall be paid in a lump
sum as of the last business day in January immediately following the
calendar year of the Participant’s termination of employment, provided that the
aggregate value of all of the Participant’s Accounts (including, for this
purpose, “deferred shares” as defined in the EDCP) under the Plan is at least
$25,000 when the Participant terminates employment.


 


(c) Retirement-Eligible
With Valid Payment Election.  If the
Participant is a Retirement-Eligible Participant and has made a valid payment
election, the Participant’s Pre-2005 Accounts shall be paid in accordance with
the payment option elected, provided that the aggregate value of all of the
Participant’s Accounts under the Plan is at least $25,000 (including, for this
purpose, “deferred shares” as defined in the EDCP) when the Participant
terminates employment.


 


19





















 


ARTICLE VIII. PAYMENT OF
NON-GRANDFATHERED AMOUNTS


 


8.01.       Payment of Non-Grandfathered
Amounts Upon Death.  If a Participant dies before his or her
Post-2004 Accounts have been distributed in full, the value of his or her
Post-2004 Accounts shall be paid in a lump sum to the Participant’s Beneficiary
on the date that is 30 days after
the date of the Participant’s death (or, if that date is not a business day,
the first business day thereafter). 
However, the Plan Administrator may make payment on any other day to the
extent that such payment is treated as being paid on the date specified in the
previous sentence under Treasury Regulation section 1.409A-3(d), which permits
payment to be made within thirty days before the specified date and later
within the same calendar year, or, if later, within 2-1/2 months following the
specified date, provided that the Participant is not permitted to designate the
taxable year of payment.  For purposes of
determining the amount payable to the Beneficiary, the Participant’s Post-2004
Accounts will be valued as of the date the payment is processed.


 


8.02.       Form of
Payment for Non-Grandfathered Amounts Paid Upon a 409A Separation from Service. 
A
Participant may elect, at the time and in the manner described in Section 8.03,
below, to have the value of his or her Post-2004 Accounts paid under one of the
following options, subject to the limits in Section 8.04, below (regarding
delays for 409A Key Employees) and Section 8.05, below (special rules for
separations during the first quarter of 2008):


 


(a) A lump sum
payment as of the first business day that is at least 30 days after the
Participant’s 409A Separation from Service;


 


(b) A lump sum
payment as of the last business day in January of the calendar year
immediately following the calendar year in which the Participant’s 409A
Separation from Service occurs; or


 


(c) From two to 10
annual installments (as elected by the Participant), each paid as of the last
business day in January beginning with the January immediately
following the calendar year in which the Participant’s 409A Separation from
Service occurs, until the elected number of installments have been paid,
subject to Section 8.04(c) (involuntary cash-outs).  This installment option is treated as the
entitlement to a single payment for purposes of Treasury Regulation section
1.409A-2(b)(2)(iii).


 


However, the Plan Administrator
may make payment on any other day to the extent that such payment is treated as
being paid on the date specified above under Treasury Regulation section
1.409A-3(d), which permits payment to be made within thirty days before the
specified date and later within the same calendar year, or, if later, within
2-1/2 months following the specified date, provided that the Participant is not
permitted to designate the taxable year of payment.


 


20


















 


 


8.03.       Electing
and Changing Payment Options for Non-Grandfathered Amounts.


 


(a) Election of Payment Option. 
A Participant shall elect a payment option for his or her Post-2004
Accounts in the form and manner prescribed by the Plan Administrator and during
whichever of the following election periods applies to the Participant (except
as provided in Section 8.05, below, with respect to a separation during
the first quarter of 2008):


 


(1) Special
Election Period in 2007.  During the
special election period designated by the Plan Administrator and ending no
later than December 31, 2007, an Employee may elect the payment option
that will apply to his or her Post-2004 Accounts under the Plan in the event
his 409A Separation from Service occurs on or after April 1, 2008, if the
Employee:


 


i.             is eligible to make Elective Deferrals in 2008;


 


ii.          on October 31, 2007, had a balance in his or her
EDCP Accounts; or


 


iii.       on October 31, 2007, had a valid EDCP election on
file for deferrals in 2007.


 


Accordingly, an individual
who first became an executive after October 31, 2007 and who is not
eligible to make Elective Deferrals in 2008, is not eligible to make a payment
election under this paragraph (1), even if he or she deferred pay under the
EDCP in 2007.


 


(2) Election in
Plan Year Before Initial Eligibility. 
An individual who is first eligible to make Elective Deferrals in a Plan
Year beginning after the Effective Date, and who before such Plan Year has not
earned any other benefit under the Plan (including the EDCP) may, during the
annual enrollment period prescribed by the Plan Administrator that immediately
precedes such Plan Year, elect the payment option that will apply to his or her
Post-2004 Accounts under the Plan, whether or not the individual also elects to
make Elective Deferrals during such enrollment period.


 


(3) Initial
Election for Pre-September 1, 2007 Hire.  If, during a Plan Year, an Eligible Employee
earns for the first time Automatic Contributions and/or Transition Credits (but
not Section 415 Excess Credits), and the benefit the Eligible Employee
earns under the Plan for the Plan Year is equal only to the excess of amounts
that would otherwise be allocated to the Participant’s account in the 401(k) Plan
in the absence of one or more limits applicable to tax-qualified plans over the
amount actually credited to the Participant’s account in the 401(k) Plan,
the Participant may elect, in accordance with Treas. Reg.
§ 1.409A-2(a)(7)(iii), the payment option that 


 


21





















 


will apply to his or her
Post-2004 Accounts under the Plan during the period determined by the Plan
Administrator that ends no later than January 31st of the calendar year
immediately following the calendar year in which the Automatic and/or
Transition Credit is credited, but only if the Participant:


 


i.             was hired by the Company before September 1, 2007
and has been employed continuously since his or her hire date;


 


ii.          was not, during the Plan Year of such credit or any
previous Plan Year beginning on or after the Effective Date, eligible to make
an Elective Deferral;


 


iii.       was not previously eligible to elect a payment option
under this subsection (a);


 


iv.      has not, in any calendar year prior to
the calendar year of the contribution, accrued a benefit or deferred
compensation under a plan as determined under Treas. Reg.
§ 1.409A-2(a)(7)(iii).


 


(b) Irrevocability and Default Payment Option.  If a Participant does not make an election
under paragraphs (a)(1), (a)(2), or (a)(3), above (including a Participant who
is not eligible to make an election under any of those paragraphs), the
Participant’s initial payment election shall be the payment option described in
subsection 8.02(a) (immediate lump sum), above.  A Participant’s initial payment election
(including the default option described in the previous sentence) becomes
irrevocable, and can be changed only in accordance with subsection (c), below,
after (i) the deadline specified in paragraphs (a)(1) or (a)(3), for
Participants eligible to make elections under those paragraphs, and (ii) December 31
of the Plan Year preceding the Plan Year in which the Participant first earns a
credit under the Plan, for all other Participants.


 


(c) Changing Payment Options. 
A Participant may elect, in the form and manner prescribed by the Plan
Administrator, to change the Participant’s initial payment option determined
under this Section 8.03, provided that:


 


(1) The Participant
must make such election at least 12 months before the date of his 409A
Separation from Service;


 


(2) If the election
is made on or after January 1, 2009, the payment date for any lump sum or
the start date for any series of installments provided for under the new
payment option shall be the fifth anniversary of the payment date or start date
that would have applied absent a change in payment option; and


 


(3) The Participant
may change his or her payment option:


 


22





















 


i.             only once during 2008; and


 


ii.          only once on or after January 1, 2009.


 


8.04.       Payment
of Non-Grandfathered Amounts Upon a 409A Separation from Service. 
The value of a Participant’s Post-2004 Accounts shall be paid to the
Participant upon his or her 409A Separation from Service on or after the
Effective Date in the form and at the time provided in Sections 8.02 and 8.03,
above (except as provided in Section 8.05, below (special rules for
first quarter of 2008)), subject to the following:


 


(a) Delay for 409A Key Employees. 
If the Participant is a 409A Key Employee on the date of his or her 409A
Separation from Service, the payment date for any lump sum or the start date
for any series of installments provided for under the applicable payment option
shall be the later of (I) the
first business day  that is
six months after the date of the Participant’s 409A Separation from Service, or
(II) the otherwise applicable payment date or start date, subject to
subsection (b) (death).  If the
start date of a series of installments occurs other than as of  the last business day in January due to
application of this paragraph, installments after the first installment shall
be paid as of the last business day in January of each subsequent year, as
scheduled without regard to the delay described in this subsection (a).


 


(b) Death of Participant After 409A Separation from Service.  If the death of a Participant (including a
409A Key Employee described in subsection (a), above) occurs before the payment
date for any lump sum or installment provided for under the applicable payment
option, payment shall be made to the Participant’s Beneficiary as provided in Section 8.01.


 


(c) Involuntary Cash-Out. 
If (i) the applicable payment option is the installment option
described in subsection 8.02(c), above, and (ii) the aggregate value of
all of the Participant’s Accounts under the Plan (including, for this purpose, “deferred
shares” as defined in the EDCP) determined as of the date of his or her 409A
Separation from Service is less than 50% of the Pay Limit in effect for the
calendar year in which the Participant’s 409A Separation from Service occurs,
the value of the Participant’s Post-2004 Accounts shall be distributed in a
lump sum on the start date that would otherwise have applied for the elected
installments, taking into account any applicable delay for a 409A Key Employee
described in subsection (a), above.


 


23





















 


8.05.       Special
Rules for Payment of Non-Grandfathered Amounts Upon a 409A Separation from
Service in First Quarter of 2008.  If a
Participant’s 409A Separation from Service occurs on or after January 1,
2008, and before April 1, 2008, the Participant’s Post-2004 Accounts shall
be paid to the Participant in the form and at the time described below, except
that such payments shall be subject to Section 8.04(a) (delay for
409A Key Employees) and Section 8.04(b) (death of Participant after
409A Separation from Service):


 


(a) Non-Retirement-Eligible or Benefit Is Less than $25,000.  If the Participant is not a
Retirement-Eligible Participant or if the aggregate value of all of the
Participant’s Accounts under the Plan (including, for this purpose, “deferred
shares” as defined in the EDCP) is less than $25,000 as of the date of his or
her 409A Separation from Service, the Participant’s Post-2004 Accounts shall be
paid in an immediate lump sum as described in Section 8.02(a), above;


 


(b) Retirement-Eligible Without Valid Payment Election.  If the Participant is a Retirement-Eligible
Participant but has not made a valid payment election, the Participant’s Post-2004
Accounts shall be paid in a lump sum as of the last business day in January immediately
following the calendar year of the Participant’s 409A Separation from Service
as described in Section 8.02(b), above, provided that the aggregate value
of all of the Participant’s Accounts under the Plan (including, for this
purpose, “deferred shares” as defined in the EDCP) is at least $25,000 as of
the date of his or her 409A Separation from Service.


 


(c) Retirement-Eligible With Valid Payment Election.  If the Participant is a Retirement-Eligible
Participant and has made a valid payment election, the Participant’s Post-2004
Accounts shall be paid in accordance with the payment option elected, as
described in Section 8.02, above, provided that the aggregate value of all
of the Participant’s Accounts under the Plan (including, for this purpose, “deferred
shares” as defined in the EDCP) is at least $25,000 as of the date of his or
her 409A Separation from Service.


 


For purposes of this Section 8.04,
a valid payment election is a payment election made at least six months before
the Participant’s 409A Separation from Service in a manner prescribed by the
Plan Administrator.  If a Participant did
not make a valid payment election for his or her Post-2004 Accounts, the Participant’s
valid payment election shall be his or her valid payment election for his or
her Pre-2005 Accounts, if any.


 


8.06.       Valuation
of Non-Grandfathered Accounts.  For purposes
of determining the amount of any payment of the Participant’s Post-2004 Accounts,
the Participant’s Post-2004 Accounts will be valued as of the date the payment
is processed, except that if payment is required under the terms of the Plan to
be made as of the last business day in January of a Plan Year (for
example, pursuant to Section 8.02(b)), the Participant’s Post-2004
Accounts with respect to such payment shall be valued as of such last business
day in January.  For purposes of
determining the amount of any annual installment payment of the Participant’s
Post-2004 Accounts, the 


 


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value of the Participant’s Post-2004 Accounts on the
valuation date shall be divided by the remaining number of installments.  No adjustment shall be made to the amount of
any lump sum or installment after the valuation date.


 


8.07.       Effect
of Rehire on Non-Grandfathered Payments.  If a
Participant becomes eligible for a payment of benefits on account of a 409A
Separation from Service and is rehired as an Employee before his or her
Post-2004 Accounts have been distributed in full, payments shall be made as if
the Participant had not been rehired.  If
the Participant again becomes eligible to make Elective Deferrals or receive
Company Contributions following his or her rehire, the Plan Administrator shall
arrange separate accounting for Elective Deferrals and Company Contributions
(and related earnings, gains, or losses) credited to the Participant’s
Post-2004 Accounts following the Participant’s rehire, and the Participant’s
opportunity to make an initial distribution election under subsection 8.03(a)(2) (election
in Plan Year before initial eligibility) shall be determined without regard to
the benefits earned under the Plan prior to the Participant’s rehire.


 


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ARTICLE IX.  ADMINISTRATION


 


9.01.       Amendment or Termination.  This 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 by IBM’s chief human resources
officer, but only if the chief human resource officer’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.


 


9.02.       Responsibilities.


 


(a) 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:


 


(1) the Board,


 


(2) IBM’s chief
human resources officer, and


 


(3) 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.


 


(b) The Board shall
be responsible only for approval of a resolution in accordance with Section 9.01
to amend or terminate the Plan.


 


(c) IBM’s chief
human resources officer may, pursuant to a duly adopted resolution, delegate to
any officer or employee of IBM, or a committee thereof, authority to carry out
any decision, directive, or resolution of IBM’s chief human resources officer.
IBM’s chief human resources officer may 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 VP HR with
functional responsibilities for IBM’s benefit programs shall serve as the Plan
Administrator if no such appointment is made by IBM’s chief human resources
officer.


 


(d) In the sole
discretion of the Plan Administrator, the Plan Administrator shall have the
full power and authority to:


(1) promulgate and
enforce such rules and regulations as shall be deemed to be necessary or
appropriate for the administration of the Plan;


 


(2) adopt any
amendments to the Plan that are required by law;


 


(3) interpret the
Plan consistent with the terms and intent thereof; and


 


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(4) resolve any
possible ambiguities, inconsistencies, and omissions.


 


All
such determinations and interpretations shall be in accordance with the terms
and intent of the Plan, and the Plan Administrator shall report such actions to
IBM’s chief human
resources officer on a regular basis.


 


(e) IBM’s chief
human resources officer and the Plan Administrator may engage the services of
accountants, attorneys, actuaries, investment consultants, and such other
professional personnel as are deemed necessary or advisable to assist them in
fulfilling their responsibilities under the Plan.  IBM’s chief human resources officer, the Plan
Administrator, and their delegates and assistants will be entitled to act on
the basis of all tables, valuations, certificates, opinions, and reports
furnished by such professional personnel.


 


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ARTICLE X.  GENERAL PROVISIONS


 


10.01.     Funding.


 


(a) All amounts
payable in accordance with this Plan shall constitute a general unsecured
obligation of the Company.  Such amounts,
as well as any administrative costs relating to the Plan, shall be paid out of
the general assets of the Company.  In
the sole discretion of IBM’s chief human resources officer , a Participant’s
accounts under the Plan may be reduced to reflect allocable administrative
expenses.


 


(b) The Company, the
IBM’s chief human resources officer, and the Plan Administrator do not
guarantee the investment alternatives available under the Plan in any manner
against loss or depreciation.


 


10.02.     No
Contract of Employment.  Nothing herein contained shall
be deemed to give any employee the right to be retained in the service of the
Company or an affiliate or to interfere with the right of the Company or an
affiliate to discharge any employee at any time without regard to the effect
that such discharge may have upon the employee under the Plan.  Nothing appearing in or done pursuant to the
Plan shall be held or construed to create a contract of employment with the
Company, to obligate the Company to continue the services of any employee, or
to affect or modify any employee’s terms of employment in any way or to give
any person any legal or equitable right or interest in the Plan or any part
thereof or distribution therefrom or against the Company except as expressly
provided herein.


 


10.03.     Facility of Payment.  In the event
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, benefit 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 payable 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 such incompetent or minor be appointed before
authorizing the payment of benefits in such situation.  Benefit payments made under the Plan in
accordance with determinations of the Plan Administrator pursuant to this Section 10.03
shall be a complete discharge of any obligation arising under the Plan with
respect to such benefit payments.


 


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10.04.     Withholding
Taxes. The Plan
Administrator shall have the right to withhold all applicable taxes or other
payments from benefits hereunder and to report information to government
agencies when required to do so by law.


 


10.05.     Nonalienation. 
No benefits 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. On and after the Effective Date,
compliance with any domestic relations order relating to a Participant’s
Account that the Plan Administrator determines must be complied with under
applicable law shall not be considered a violation of this provision; provided,
however, that an administrative fee determined by the Plan Administrator shall
be deducted from any Participant’s Account that is subject to a domestic
relations order.


 


10.06.     Administration. 
All decisions, determinations, or interpretations the Board, IBM’s chief
human resources officer, the Plan Administrator, the Company, or any member,
officer or employee thereof are authorized to make under the Plan (including
the delegation of any authority hereunder to another party) shall be made in
that party’s sole discretion and shall be final, binding, and conclusive on all
interested persons.


 


10.07.     Construction. 
All rights hereunder shall be governed by and construed in accordance
with federal law and, to the extent not preempted by federal law, the laws of
the State of New York without regarding to the choice of law rules of any
jurisdiction.


 


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ARTICLE XI.  CLAIMS PROCEDURE


 


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
Treas. Reg. § 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.


 


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