Document:

EXHIBIT 10.1

 

Note: This
exhibit amends and restates the IBM Excess 401(k) Plus Plan to clarify the
administrative structures of the Plan.

 

 

 

IBM EXCESS 401(k) PLUS PLAN

 

Amended and Restated Effective January 1, 2010

(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

  

 

 

	
  ARTICLE VII. FORFEITURE AND RIGHT OF RECOVERY OF
  COMPANY CONTRIBUTIONS

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.01.

  	
  In General

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.02.

  	
  Detrimental Activity

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.03.

  	
  Applicable Company
  Contributions

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.04.

  	
  Timing

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.05.

  	
  Delegation of Authority

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.06.

  	
  Chief Human Resources
  Officer

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.07.

  	
  Non-Exclusive Remedies

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.08.

  	
  Severability

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII. PAYMENT OF GRANDFATHERED AMOUNTS

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.01.

  	
  Grandfathered Treatment
  of Grandfathered Amounts

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.02.

  	
  Payment of
  Grandfathered Amounts Upon Death

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.03.

  	
  Options for Payment of
  Grandfathered Amounts Upon Termination of Employment

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.04.

  	
  Payment of
  Grandfathered Amounts Upon Termination of Employment

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX. PAYMENT OF NON-GRANDFATHERED AMOUNTS

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.01.

  	
  Payment of
  Non-Grandfathered Amounts Upon Death

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.02.

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

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.03.

  	
  Electing and Changing
  Payment Options for Non-Grandfathered Amounts

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.04.

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

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.05.

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

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.06.

  	
  Valuation of
  Non-Grandfathered Accounts

  	
  26

  

 

2

 

	
   

  	
  9.07.

  	
  Effect of Rehire on
  Non-Grandfathered Payments

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X. ADMINISTRATION

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.01.

  	
  Amendment or
  Termination

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.02.

  	
  Responsibilities

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI. GENERAL PROVISIONS

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.01.

  	
  Funding

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.02.

  	
  No Contract of
  Employment

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.03.

  	
  Facility of Payment

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.04.

  	
  Withholding Taxes

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.05.

  	
  Nonalienation

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.06.

  	
  Administration

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.07.

  	
  Construction

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII. CLAIMS PROCEDURE

  	
  32

  

 

3

 

ARTICLE I. INTRODUCTION

 

1.01.       Name of Plan and Effective Date. 
The IBM Executive Deferred Compensation Plan (the “EDCP”) was renamed
and restated as the “IBM Excess 401(k) Plus Plan” (the “Plan”), 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.  This amended and restated plan document is
effective as of January 1, 2010, except as otherwise provided herein. 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.

 

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

 

 

Exhibit A

 

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 the initial effective
date of the Plan, which is 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 X, 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 8.04
(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

 

15

 

earnings but not dividend
equivalents) shall, for the three-year period 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. FORFEITURE AND RIGHT
OF RECOVERY OF COMPANY CONTRIBUTIONS

 

7.01.       In
General.   If IBM’s chief human resources officer
makes a determination that a Participant has engaged in “Detrimental Activity”
(as defined below), subject to the terms of this ARTICLE VII:  (i) the Participant’s right (if any) to
the payment of the portion of the Participant’s Account attributable to “Applicable
Company Contributions” (as defined below) shall terminate, unless otherwise
determined by such chief human resources officer; and (ii) if such portion
of the Participant’s Account had been paid before such determination is made,
the Participant shall be required to repay such amount to IBM, unless otherwise
determined by such chief human resources officer.  Any determination by IBM’s chief human
resources officer under this ARTICLE VII may be made in such officer’s sole
discretion and shall be binding on the Participant.

 

7.02.       Detrimental
Activity.  For purposes of this ARTICLE VII,  “Detrimental Activity” shall include the
performance of any of the following activities during the Participant’s
employment with the Company (as defined below) or during the 12-month period
immediately following such employment:

 

(a)  the rendering
of services for any organization or engaging directly or indirectly in any
business which is or becomes competitive with the Company, or which
organization or business, or the rendering of services to such organization or
business, is or becomes otherwise prejudicial to or in conflict with the interests
of the Company;

 

(b) the disclosure
to anyone outside the Company, or the use in other than the Company’s business,
without prior written authorization from the Company, of any confidential
information or material, as defined in the Company’s Agreement Regarding
Confidential Information and Intellectual Property, relating to the business of
the Company, acquired by the Participant either during or after employment with
the Company;

 

(c) the failure or
refusal to disclose promptly and to assign to the Company, pursuant to the
Company’s Agreement Regarding Confidential Information and Intellectual
Property, all right, title and interest in any invention or idea, patentable or
not, made or conceived by the Participant during employment by the Company, relating
in any manner to the actual or anticipated business, research or development
work of the Company or the failure or refusal to do anything reasonably
necessary to enable the Company to secure a patent where appropriate in the
United States and in other countries;

 

(d) activity that
results in termination of the Participant’s employment for cause;

 

18

 

(e) a violation of
any rules, policies, procedures or guidelines of the Company, including but not
limited to the Company’s Business Conduct Guidelines;

 

(f) any attempt
directly or indirectly to induce any employee of the Company to be employed or
perform services elsewhere or any attempt directly or indirectly to solicit the
trade or business of any current or prospective customer, supplier or partner
of the Company;

 

(g) the Participant
being convicted of, or entering a guilty plea with respect to, a crime, whether
or not connected with the Company; or

 

(h) any other
conduct or act determined to be injurious, detrimental or prejudicial to any
interest of the Company.

 

7.03.       Applicable
Company Contributions.  For purposes of this ARTICLE
VII, “Applicable Company Contributions” means Company Contributions (adjusted
for deemed earnings, gains, or losses) credited to the Participant’s Account
during the period (i) beginning 12 months before the date of the first
occurrence of the Detrimental Activity, and (ii) ending on the date of the
Participant’s termination of employment with the Company.  For the avoidance of doubt, “Applicable
Company Contributions” include any Company Contributions credited under the
Plan in connection with the last paycheck of the Participant for compensation
earned through the date of termination of employment.  Notwithstanding the foregoing, “Applicable
Company Contributions” do not include Company Contributions credited before April 1,
2010.

 

7.04.       Timing.  This ARTICLE VII applies only if IBM’s chief human
resources officer makes a determination that the Participant engaged in Detrimental
Activity under Section 7.01 no later than the second anniversary of the
date such officer discovers the Detrimental Activity.

 

7.05.       Delegation of Authority.

 

IBM’s chief human resources officer may, by a duly
adopted resolution, delegate to an officer or employee of IBM all or a portion
of his or her authority under this ARTICLE VII.

 

7.06.       Chief Human Resources Officer. For purposes of this ARTICLE VII:

 

(a) if IBM’s chief
human resources officer delegates his or her responsibilities under this ARTICLE
VII to another person or to a committee, references to IBM’s chief human
resources officer in this ARTICLE VII shall, instead, refer to such other
person or committee, except as provided in (b), below; and

 

(b) in the case of a
Participant who is IBM’s chief human resources officer, references to IBM’s
chief human resources officer in this ARTICLE VII shall, instead, refer to the
Board or its delegate.

 

19

 

7.07.       Non-Exclusive Remedies.  The remedies
available under this ARTICLE VII are in addition to, and not in lieu of, any
other remedies available to IBM or its affiliates.

 

7.08.       Severability.  If an
arbitrator or court of competent jurisdiction determines that any term,
provision, or portion of this ARTICLE VII is void, illegal, or unenforceable,
the other terms, provisions, and portions of this ARTICLE VII (as well as the
remainder of the Plan) shall remain in full force and effect, and the terms,
provisions, and portions that are determined to be void, illegal, or
unenforceable shall either be limited so that they shall remain in effect to
the extent permissible by law, or such arbitrator or court shall substitute, to
the extent enforceable, provisions similar thereto or other provisions, so as
to provide to IBM and its affiliates, to the fullest extent permitted by
applicable law, the benefits intended by this ARTICLE VII.

 

ARTICLE VIII. PAYMENT OF
GRANDFATHERED AMOUNTS

 

8.01.       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.

 

8.02.       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.

 

8.03.       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 8.04, 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

 

20

 

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.

 

8.04.       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.

 

21

 

ARTICLE IX. PAYMENT OF NON-GRANDFATHERED
AMOUNTS

 

9.01.       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.

 

9.02.       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 9.03, 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 9.04, below (regarding delays for 409A Key
Employees) and Section 9.05, 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 9.04(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.

 

22

 

9.03.       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 9.05, 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

 

23

 

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 9.02(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 9.03, 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:

 

24

 

i.             only once during 2008; and

 

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

 

9.04.       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 9.02 and 9.03, above (except as provided in Section 9.05, 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 9.01.

 

(c) Involuntary Cash-Out. 
If (i) the applicable payment option is the installment option
described in subsection 9.02(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.

 

25

 

9.05.       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 9.04(a) (delay for
409A Key Employees) and Section 9.04(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 9.02(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 9.02(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 9.02, 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 9.04,
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.

 

9.06.       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 9.02(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

 

26

 

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.

 

9.07.       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 9.03(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.

 

27

 

ARTICLE X. ADMINISTRATION

 

10.01.     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.

 

10.02.     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 10.01
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

 

28

 

(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.

 

29

 

ARTICLE XI.  GENERAL PROVISIONS

 

11.01.     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.

 

11.02.     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.

 

11.03.     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 11.03 shall be a
complete discharge of any obligation arising under the Plan with respect to
such benefit payments.

 

30

 

11.04.     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.

 

11.05.     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.

 

11.06.     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.

 

11.07.     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.

 

31

 

ARTICLE XII.  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.

 

32

 

Appendix A

 

 

 

IBM EXECUTIVE DEFERRED COMPENSATION PLAN

 

Amended and Restated Effective January 1, 2000

Incorporating Amendments Effective Through January 1,
2008

 

 

 

 

INTRODUCTION

 

A.            Name of Plan and Purpose. 
The IBM Executive
Deferred Compensation Plan has been authorized by the Board of Directors of
International Business Machines to be applicable effective on and after January 1,
1995.  The purpose of this Plan is to
attract and retain executives by providing a means for making compensation
deferrals and matching company contributions for those employees eligible to
participate in the Savings Plan (as defined in Article 1) with respect to
whom compensation deferrals and company contributions under the Savings Plan
are or would be limited by application of the limitations imposed on qualified
plans by Sections 401(a)(17), 401(a)(30), and 415 of the Internal Revenue Code
of 1986, as amended (the “Code”).

 

B.            Legal Status.  This
Plan is intended to constitute an unfunded deferred compensation plan for a select
group of management or highly compensated employees under Sections 201(2),
301(a)(2), 401(a)(1), and 4021(b)(6) of the Employee Retirement Income
Security Act of 1974, as amended.  All
benefits payable under the Plan shall be paid out of the general assets of the
Company.

 

C.            Restatement.  The Plan is amended and restated herein
effective as of January 1, 2000, incorporating amendments effective
through January 1, 2008.  The Plan
is superseded, effective January 1, 2008, by the IBM Excess 401(k) Plus
Plan (the “Excess Plan”), except as provided in Paragraph D, below, with
respect to Grandfathered Amounts and Deferred Shares and as otherwise provided
in the text of the Plan.

 

D.            Section 409A.

 

(1)           Grandfathered
Amounts.  Benefits earned and
vested under the Plan 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 (including
Grandfathered Amounts attributable to Deferred Shares) are subject to the terms
of the Plan in effect on October 3, 2004, except to the extent such terms
have been or are hereafter amended in a manner that does not constitute a “material
modification,” as determined under Section 409A of the Code.  An amendment described in the preceding
sentence may be accomplished through an amendment to this Plan document and/or
through an amendment to the Excess Plan (or any successor plan) document.  For recordkeeping purposes, Grandfathered
Amounts shall be accounted for separately.

 

(2)           Non-Grandfathered
Amounts.  With respect to
benefits earned under the Plan other than Grandfathered Amounts described in
Paragraph D(1) above (“Non-Grandfathered Amounts”), the Plan is intended,
and shall be construed, to comply with the requirements of Section 409A of
the Code:

 

1

 

(A)          On and after January 1, 2005, and
before January 1, 2008, the Plan was operated in good faith compliance
with the requirements of Section 409A of the Code with respect to
Non-Grandfathered Amounts.  In this
respect, (I) the timing of deferral elections was modified as described in
Articles 2.02(b) and 2.02(f), (II) the application of deferral
elections was modified as described in Article 3.01, and (III) distribution
rules were modified as described in Article 5.04.  In addition, any payment made during this
period that was contingent upon a “termination of employment” or “retirement,”
was contingent upon a “separation from service” (as defined in accordance with
a good faith, reasonable interpretation of Section 409A of the Code).

 

(B)           On and after January 1, 2008:

 

(i)            Non-Grandfathered Amounts that are
not attributable to Deferred Shares shall be distributed in accordance with the
provisions of the Excess Plan (or any successor plan).

 

(ii)           Non-Grandfathered Amounts that are
attributable to Deferred Shares shall be distributed in accordance with the
provisions of ARTICLE 9 of this Plan.

 

Notwithstanding anything to the contrary in this
Paragraph D, 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

 

IBM
EXECUTIVE DEFERRED COMPENSATION PLAN

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page(s)

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1.          DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2.          PARTICIPATION

  	
  4

  
	
   

  	
   

  	
   

  
	
  2.01

  	
  ELIGIBILITY

  	
  4

  
	
  2.02

  	
  PARTICIPATION

  	
  4

  
	
  2.03

  	
  APPLICATION
  OF THIS ARTICLE AFTER 2007

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3.          CONTRIBUTIONS

  	
  6

  
	
   

  	
   

  	
   

  
	
  3.01

  	
  AMOUNT
  OF DEFERRAL CONTRIBUTIONS

  	
  6

  
	
  3.02

  	
  MATCHING
  CONTRIBUTIONS

  	
  7

  
	
  3.03

  	
  ADDITIONAL
  COMPANY CONTRIBUTIONS

  	
  7

  
	
  3.04

  	
  INVESTMENT
  OF ACCOUNTS

  	
  7

  
	
  3.05

  	
  VESTING
  OF ACCOUNTS

  	
  8

  
	
  3.06

  	
  INDIVIDUAL
  ACCOUNTS

  	
  8

  
	
  3.07

  	
  DEFERRAL
  OF RSUS OR PERFORMANCE SHARE UNITS

  	
  8

  
	
  3.08

  	
  APPLICATION
  OF THIS ARTICLE AFTER 2007

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4.          INVESTMENT OF DEFERRALS AND DEFERRAL
  ACCOUNTS

  	
  10

  
	
   

  	
   

  	
   

  
	
  4.01

  	
  DEEMED
  SAVINGS PLAN INVESTMENTS; PARTICIPANT CONTROL

  	
  10

  
	
  4.02

  	
  CHANGE
  OF INVESTMENT SELECTION ON FUTURE DEFERRALS

  	
  10

  
	
  4.03

  	
  CHANGE
  OF INVESTMENT SELECTION ON EXISTING DEFERRAL ACCOUNTS

  	
  10

  
	
  4.04

  	
  APPLICATION
  OF THIS ARTICLE AFTER 2007

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5.          PAYMENT OF ACCOUNTS

  	
  12

  
	
   

  	
   

  	
   

  
	
  5.01

  	
  COMMENCEMENT
  OF DEFERRAL PAYMENTS

  	
  12

  
	
  5.02

  	
  METHOD
  OF PAYMENT

  	
  12

  
	
  5.03

  	
  DESIGNATION
  OF BENEFICIARY

  	
  13

  
	
  5.04

  	
  DISTRIBUTIONS
  TO SPECIFIED EMPLOYEES

  	
  13

  
	
  5.05

  	
  APPLICATION
  OF THIS ARTICLE AFTER 2007

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6.          GENERAL PROVISIONS

  	
  15

  
	
   

  	
   

  	
   

  
	
  6.01

  	
  FUNDING

  	
  15

  
	
  6.02

  	
  NO
  CONTRACT OF EMPLOYMENT

  	
  15

  
	
  6.03

  	
  FACILITY
  OF PAYMENT

  	
  16

  
	
  6.04

  	
  WITHHOLDING
  TAXES

  	
  16

  
	
  6.05

  	
  NONALIENATION

  	
  16

  
	
  6.06

  	
  ADMINISTRATION

  	
  16

  
	
  6.07

  	
  CONSTRUCTION

  	
  17

  
	
  6.08

  	
  APPLICATION
  OF THIS ARTICLE AFTER 2007

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7.          MANAGEMENT AND ADMINISTRATION

  	
  18

  
	
   

  	
   

  	
   

  
	
  7.01

  	
  AMENDMENT
  OR TERMINATION

  	
  18

  
	
  7.02

  	
  RESPONSIBILITIES

  	
  18

  
	
  7.03

  	
  APPLICATION
  OF THIS ARTICLE AFTER 2007

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8.          CLAIMS PROCEDURE

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9.          PAYMENT OF NON-GRANDFATHERED
  DEFERRED SHARES ON OR AFTER JANUARY 1, 2008

  	
  22

  
	
   

  	
   

  	
   

  
	
  9.01

  	
  PURPOSE

  	
  22

  

 

i

 

	
  9.02

  	
  DEFINITIONS

  	
  22

  
	
  9.03

  	
  PAYMENT
  UPON DEATH

  	
  22

  
	
  9.04

  	
  FORM OF
  PAYMENT FOR AMOUNTS PAID UPON A 409A SEPARATION FROM SERVICE

  	
  23

  
	
  9.05

  	
  ELECTING
  AND CHANGING PAYMENT OPTIONS

  	
  23

  
	
  9.06

  	
  PAYMENT
  OF NG DEFERRED SHARES UPON A 409A SEPARATION FROM SERVICE

  	
  25

  
	
  9.07 

  	
  SPECIAL RULES FOR PAYMENT OF NG
  DEFERRED SHARES UPON A 409A SEPARATION FROM SERVICE IN FIRST QUARTER OF 2008

  	
  25

  

 

ii

 

ARTICLE 1.   DEFINITIONS

 

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

 

1.01                           “Accounts” shall mean the Company Account and the Deferral
Account.

 

1.02                           “Beneficiary” shall mean a person other than a Participant
who is designated by a Participant or by the terms of the Plan to receive a
benefit under the Plan by reason of the death of the Participant.

 

1.03                           “Board” shall mean the Board of Directors of IBM.

 

1.04                           “Code” shall mean 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.

 

1.05                           “Committee” shall mean the Executive Compensation and
Management Resources Committee (“ECMRC”) appointed by the Board or any other
person or committee that the ECMRC has delegated its responsibilities to under
the Plan.

 

1.06                           “Company” shall mean International Business Machines
Corporation (“IBM”), a New York corporation having its principal place of
business at Armonk, New York, and its Domestic Subsidiaries, excluding Foreign
Branches of the Company except as may be otherwise provided in these Articles.

 

1.07                           “Company Account” shall mean, with respect to a Participant,
all amounts credited to the Participant under Articles 3.02, 3.03, and 3.07,
and earnings, gains, or losses on those amounts pursuant to Article 3.04.

 

1.08                           “Company Contributions” shall mean the amount credited to a
Participant under Articles 3.02 and 3.03.

 

1.09                           “Compensation” shall mean the Participant’s salary and annual
incentive payment for a calendar year which would be payable to a Participant
for services rendered to the Company after the Participant is no longer able to
actively participate in the Savings Plan, or would have been unable to actively
participate in the Savings Plan if the Participant was not an active
participant in the Savings Plan, during the calendar year by reason of Code Section 401(a)(17)
or Code Section 401(a)(30).  A
Participant’s Compensation will be determined without regard to a Participant’s
election to make compensation reduction contributions under the Savings Plan,
or under a cafeteria plan pursuant to Code Section 125, or to make
Deferrals under this Plan.  Compensation
shall also include, solely for purposes of Article 3.07, the amount of any
RSUs or performance share units that are determined to be eligible for deferral
in accordance with Article 3.07.

 

1

 

1.10                           “DCP Participant” shall mean a Participant who, for a
calendar year, was offered the opportunity by the Company to defer up to 100%
of his or her annual incentive payment payable for that calendar year.

 

1.11                           “Deferral Account” shall mean, with respect to a Participant,
the Participant’s account balance under the Deferred Compensation Plan that has
been transferred to this Plan, all amounts credited to a Participant under Article 3.01
and earnings, gains, or losses on those amounts pursuant to Article 3.04.

 

1.12                           “Deferral Election Agreement” shall mean the agreement
entered into by the Participant pursuant to Article 2.02 under which he or
she elects to defer a portion of his or her Compensation under this Plan.

 

1.13                           “Deferrals” shall mean the amount credited to a Participant
under Article 3.01.

 

1.14                           “Deferred Compensation Plan” shall mean the incentive
compensation deferral program established by IBM in November 1993.

 

1.15                           “Deferred Shares” means a credit to a Participant’s Company
Account as described in Article 3.07.

 

1.16                           “Domestic Subsidiary” shall mean 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 authorized by the Company’s
chief human resources officer.

 

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

 

1.18                           “Effective Date” shall mean January 1, 1995.

 

1.19                           “Eligible Employee” shall mean, for a calendar year, a
domestic executive employee of the Company.

 

1.20                           “Excess Plan” shall mean the IBM Excess 401(k) Plus
Plan, effective as of January 1, 2008, as amended from time to time.

 

1.21                           “Grandfathered Amounts” has the meaning provided in Paragraph
D(1) of the Introduction to this Plan.

 

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

 

1.23                           “Non-Grandfathered Amounts” has the meaning provided in
Paragraph D(2) of the Introduction to this Plan.

 

2

 

1.24                           “Participant” shall mean each Eligible Employee who has made
the election described in Article 2.02(a) or 3.07, who is credited
with an amount under Article 3.03, or whose account balance under the
Deferred Compensation Plan has been transferred to the employee’s Deferral
Account under this Plan.

 

1.25                           “Plan” shall mean this IBM Executive Deferred Compensation
Plan, as now in effect or as hereafter amended.

 

1.26                           “Plan Administrator” shall mean a person or a committee
appointed pursuant to ARTICLE 7 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.  As of
the Effective Date, the Director of Executive Compensation has been appointed as
the Plan Administrator.

 

1.27                           “Plan Year” shall mean the calendar year with the first Plan
Year commencing on January 1, 1995.

 

1.28                           “PSU” shall mean a performance share unit payable under an
award granted under a Company Long-Term Performance Plan.

 

1.29                           “RSU” shall mean a restricted stock unit payable under an
award granted under a Company Long-Term Performance Plan.

 

1.30                           “Savings Plan” shall mean the IBM TDSP 401(k) Plan
before October 1, 2002, the IBM Savings Plan on or after October 1,
2002 and before January 1, 2008, and the IBM 401(k) Plus Plan on or
after January 1, 2008, each as amended from time to time.

 

1.31                           “Subsidiary” shall mean a corporation or other form of
business organization the majority interest of which is owned, directly or
indirectly, by the Company.

 

3

 

ARTICLE 2.   PARTICIPATION

 

2.01                           Eligibility

 

Eligibility is limited, except as provided
below, to U.S. executive level Eligible Employees of IBM and selected Domestic
Subsidiaries whose rate of annual Compensation (defined as salary and annual
incentive rate) is $150,000 or more for calendar year 1995 (adjusted
periodically thereafter based on industry trends and government guidelines), or who are members of the Company’s
Senior Management Group regardless of rate of annual Compensation.   For this purpose, the defining of “selected
Domestic Subsidiaries”, the “executive level” and “Senior Management Group”, as
well as the ability to change the rate of annual Compensation threshold are
delegated to the chief human resources officer of the Company in his or her
sole discretion and are subject to change. 
Notwithstanding the above, non-U.S. executives designated by the chief
human resources officer are eligible to elect to defer PSUs and RSUs under this
Plan.  The Committee shall notify
employees of their eligibility for participation in the Plan as soon as
practicable after the chief human resources officer has made its determination
that such employees qualify as Eligible Employees for a calendar year.

 

2.02                           Participation

 

(a)           No later than the end of the calendar
year immediately preceding the first day of the calendar year during which an
Eligible Employee desires to have contributions credited on his or her behalf
pursuant to Article 3.01, an Eligible Employee must execute a Deferral
Election Agreement authorizing Deferrals under this Plan for such year in
accordance with the provisions of Article 3.01.

 

(b)           If an Eligible Employee becomes an
employee of the Company during a calendar year, he or she may execute a
Deferral Election Agreement as soon as practical after his or her date of
hire.  Effective January 1, 2005, a
new Eligible Employee may execute a Deferral Election Agreement within 30 days
after becoming eligible.  The Deferral
Election Agreement shall apply to Compensation earned by the Eligible Employee
in the payroll periods beginning after such agreement is submitted to the
Committee.

 

(c)           Each Deferral Election Agreement
under the Plan shall be irrevocable for the calendar year to which it relates.

 

(d)           Irrespective of whether an employee
has made the election described above, any employee who has been selected by
the Committee to have Company Contributions credited on his or her behalf
pursuant to Article 3.03 shall be a Participant.

 

(e)           As a condition to participation in
the Plan, a Participant may also be required by the Committee to provide such
other information as the Committee may deem necessary to properly administer
the Plan.

 

4

 

(f)            A DCP Participant’s Deferral
Election Agreement with respect to his or her annual incentive payment for
calendar year 2005 must be made on or before June 30, 2005 (in compliance
with the rule for performance pay under Section 409A of the Code).  A DCP Participant’s Deferral Election
Agreement with respect to his or her annual incentive payment for a calendar
year that begins after December 31, 2005 must be made before the beginning
of such calendar year.

 

2.03                           Application of this Article After 2007

 

This Article 2 shall cease to apply after December 31,
2007.  An individual who was not a
Participant on December 31, 2007, shall not become a Participant after
that date.  Each individual who was a
Participant on December 31, 2007, ceased to be a Participant on that date
except to the extent that, on that date, Grandfathered Amounts and/or Deferred
Shares were credited to the individual’s Account.

 

5

 

ARTICLE 3.   CONTRIBUTIONS

 

3.01                            Amount of
Deferral Contributions

 

For each payroll period that an Eligible
Employee has Compensation beginning on or after the effective date of an
Eligible Employee’s Deferral Election Agreement, his or her Deferral Account
shall be credited with an amount of Deferrals. 
The amount of Deferrals shall be equal to the designated percentage of
Compensation elected by the Participant in his or her Deferral Election
Agreement.  Under the Deferral Election
Agreement, the Eligible Employee may elect to forego receipt of amounts
equivalent to 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10%, 11%, 12%, 13%, 14% or
15% (or, effective January 1, 2002,
up to 80% in 1% increments) of the Employee’s Compensation (other than
his or her annual incentive payment) for each pay period during which the
election is in effect, and in the event an Eligible Employee is a DCP
Participant for the calendar year, he or she may defer up to 100% of his or her
annual incentive payment for the calendar year (provided that, effective January 1,
2007, if the individual is not an Eligible Employee at the beginning of such
calendar year, the maximum percentage of his or her annual incentive payment
for the calendar year that may be deferred shall be limited, as applicable, in
accordance with the following rules: if the individual became an Eligible
Employee and submitted a Deferral Election Agreement during the period of January 1-February 15
of the calendar year, the maximum percentage is 79%; if the individual became an
Eligible Employee and submitted a Deferral Election Agreement during the period
of February 16-May 15 of the calendar year, the maximum percentage
is  62%; if the individual became an
Eligible Employee and submitted a Deferral Election Agreement during the period
from May 16-August 15 of the calendar year, the maximum percentage is
46%; and if the individual became an Eligible Employee after August 16 of
the calendar year, then no annual incentive may be deferred for the calendar
year).  In addition, any Company officer
who is subject to 162(m) of the Internal Revenue Code may defer up to 100%
of his or her salary. For calendar
years 2006 and 2007, any portion of an Eligible Employee’s annual incentive
payment that is a deal team or other transactional payment under the Engagement
Team Bonus Plan, the Global Dealmaker Plan, or the Managing Directors Incentive
Plan is not eligible for deferral.

 

Deferrals under this Article 3.01 shall
commence for payroll periods for a calendar year at such time as the Participant
may no longer actively participate in the Savings Plan for the calendar year
(or would have been unable to actively participate in the Savings Plan if the
Participant was an active participant in the Savings Plan for the calendar
year) by reason of Code Section 401(a)(17) or Code Section 401(a)(30)
and has Compensation.  No Deferrals may
be made hereunder prior to such time, except for the deferral of a DCP
Participant’s annual incentive payment. On and after January 1, 2007, if a
Participant takes a hardship withdrawal under the Savings Plan, Deferrals under
this Article 3.01 will be cancelled for the remainder of the calendar year
in which the hardship was taken.

 

6

 

3.02                           Matching Contributions

 

Effective before January 1,
2005, the amount of Company Matching Contributions credited to a Participant
for each payroll period shall be equal to 50% of the Participant’s Deferrals
for the payroll period; provided
however, that no Company Matching Contributions will be made for a
Participant’s Deferrals in excess of 6% of the Participant’s Compensation for
that payroll period.  Company Matching
Contributions will be made in units of IBM Stock with no right to transfer such
units, except as otherwise provided in this Plan.

 

Effective January 1, 2005, the amount of
Company Matching Contributions credited to a Participant who is not a 401(k) Pension
Program Participant (as defined in the Savings Plan) for each payroll period
shall be equal to 50% of such Participant’s Deferrals for the payroll period
and, effective January 1, 2005, the amount of Company Matching
Contributions credited to a Participant who is a 401(k) Pension Program
Participant shall be equal to 100% of such Participant’s Deferrals for the
payroll period; provided, however, that in neither case shall Company Matching
Contributions be made for a Participant’s Deferrals in excess of 6% of the
Participant’s Compensation for that payroll period.  Company Matching Contributions will be made
in units of IBM Stock with no right to transfer such units, except as otherwise
provided in this Plan.  No Company
Matching Contributions shall be made to a Participant who is a 401(k) Pension
Program Participant unless such Participant has, on or before the last day of
the payroll period to which such Company Matching Contributions relate,
attained his Program Eligibility Date (as defined in the Savings Plan).

 

3.03                           Additional Company Contributions

 

On behalf of any Participant, or any Eligible
Employee who is not otherwise a Participant for a particular calendar year, IBM
may make any award under this Plan, including an additional amount of Company
Matching Contributions or other Company Contributions, in accordance with the
terms of the agreement evidencing such award, and the terms of this Plan to the
extent not inconsistent with the terms of the agreement.

 

3.04                            Investment
of Accounts

 

A Participant’s Deferral Account shall be
treated as if the Participant had invested it in certain Savings Plan
investment funds in accordance with ARTICLE 4. 
Except as provided in Article 3.07 (regarding Deferred Shares), a
Participant’s Company Account shall be treated as if it had been invested in
the IBM Stock Fund under the Savings Plan; provided however, that in the event a Participant retires from the
Company and does not elect to have the entire amount of his or her Accounts
then paid to him or her, any amounts credited to the Participant’s Company
Account after retirement will be treated as if they were transferred to the Participant’s
Deferral Account for purposes of this Article 3.04 and Article 4.

 

7

 

3.05                            Vesting of
Accounts

 

A Participant always
shall be fully vested in his or her Accounts, except as specified in an agreement
between IBM and a Participant with respect to an award of additional Company
Contributions.

 

3.06                            Individual
Accounts

 

The Committee shall maintain, or cause to be
maintained, records showing the individual balances of each Participant’s
Accounts.  Periodically, each Participant
shall be furnished with a statement setting forth the value of his or her
Accounts.

 

3.07                            Deferral of
RSUs or Performance Share Units

 

A Participant may also
elect, on a form provided by the Company, to defer as Deferred Shares the
amount of any RSUs or PSUs that are determined by the Company to be eligible
for deferral under this Plan, at the time such RSU or PSU would otherwise be
paid to the Participant.  For Deferrals
prior to January 1, 2006, such election must be made at the time specified
by the Plan Administrator and prior to the end of the vesting period of the
PSUs and the RSUs.  On and after January 1,
2006, an election to defer RSUs must be made no later than 30 days after the
date of the grant of such RSUs, and an election to defer PSUs must be made no
later than six months prior to the end of the performance period to which the
PSUs relate.  Notwithstanding the above,
for all Non-U.S. executives who are eligible to defer RSUs or PSUs under this
Plan, an election to defer any RSUs or PSU, must be made prior to the end of
the applicable vesting or performance period. The amount of Deferred Shares
shall be determined under the terms of the applicable award and the Participant’s
deferral election and shall be credited to the Participant’s Company Account as
units of IBM stock, with no right to transfer such units.  No Company Matching Contributions shall be
credited for any amounts deferred under this Article of the Plan.

 

3.08                            Application
of this Article After 2007

 

After December 31, 2007:

 

(a)            Deferrals with respect to annual
incentive payments paid during the first quarter of 2008 shall be determined
and credited to Participants’ Accounts in accordance with Participant Deferral
Election Agreements made in 2006 for payments with respect to 2007 pursuant to
Articles 2.02 and 3.01, and such deferrals shall be credited under the Excess
Plan (and any matching or other contributions with respect to such deferrals
shall be determined under the Excess Plan);

 

(b)            Deferred Shares shall continue to be
credited as units of IBM stock in accordance with elections made by
Participants on or before December 31, 2007 pursuant to Article 3.07;
and

 

8

 

(c)             Articles 3.04 through 3.06 shall
continue to apply with respect to Grandfathered Amounts.

 

Otherwise, this ARTICLE 3 shall cease to apply
after December 31, 2007, and no deferral elections shall be made under the
Plan after that date.

 

9

 

ARTICLE 4.   INVESTMENT OF DEFERRALS AND DEFERRAL
ACCOUNTS

 

4.01                           Deemed Savings Plan Investments; Participant
Control

 

A Participant shall designate the proportions in
which his or her Deferrals shall be treated as if they had been allocated among
any or all of the investment funds under the Savings Plan, other than the
mutual fund window.  If the Participant
does not provide investment instructions, his or her Deferrals shall be treated
as if they had been allocated to the default investment fund under the Savings
Plan.

 

The Committee, in its discretion (which
discretion may be delegated to the Treasurer or other executive officer of
IBM), from time to time may determine that any Savings Plan investment fund may
be terminated as an investment measure under this Plan.

 

A Participant may elect to invest his or her
Deferrals entirely in any one of the funds or may elect any combination in 5%
multiples.

 

Notwithstanding anything else in ARTICLE 4, if
any portion of a Participant’s Deferrals are covered under the IBM Buy-First
Executive Equity Program, such Deferrals are subject to the investment
limitations specified under that program.

 

4.02                            Change of Investment
Selection on Future Deferrals

 

A Participant may elect to change his or her
investment selection for future Deferrals once per month (and, effective January 1,
2002, twice per month).  The Participant
must make this election in the manner prescribed by the Committee.

 

4.03                            Change of Investment
Selection on Existing Deferral Accounts

 

(a)            Before January 1, 2008, with
regard to a Participant’s existing Deferral Account balance, a Participant may
elect to transfer balances among the available Savings Plan investment funds
once per month; provided however,
that the portion of the Deferral Account of a Company officer that is allocated
to the IBM Stock Fund may not be transferred to another investment fund while
the officer remains in Company employment. 
The Participant must make this election in the manner and pursuant to
the rules prescribed by the Committee and Plan Administrator.

 

(b)            On or after January 1, 2008, 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
Deferral Account among the available Savings Plan investment funds, provided
that:

 

(ii)          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); and

 

10

 

(iii)        Any restrictions on transfers into or
out of investment funds that apply under the Savings Plan shall also apply
under the Plan.

 

The Committee may impose such additional rules and
limitations upon transfers between investment funds as the Committee may
consider necessary or appropriate.

 

4.04                            Application
of this Article After 2007

 

Article 4.03 shall continue to apply to Grandfathered
Amounts on and after January 1, 2008. 
Articles 4.01 and 4.02 shall cease to apply after December 31,
2007.

 

11

 

ARTICLE 5.   PAYMENT OF ACCOUNTS

 

5.01                            Commencement of Deferral
Payments

 

A Participant shall receive payment of his or
her Accounts upon the Participant’s (1) termination of employment from the
Company for any reason other than retirement from the Company or (2) retirement
from the Company with a balance of less than $25,000 in his or her Accounts, as
soon as administratively feasible following termination of employment. Any
other Participant who retires from the Company shall be entitled to receive
payment of his or her Accounts as of the January 31 following the calendar
year during which the Participant had a termination of employment from the
Company.

 

5.02                            Method of Payment

 

Payment of Accounts shall be made in a single
lump sum payment. Payments shall be in cash, except that Deferred Shares shall
be paid in shares of IBM stock.  Notwithstanding the foregoing, a Participant
with a balance of at least $25,000 in his or her Accounts who retires from the
Company may elect to receive (1) a lump sum payment upon his or her
termination of employment from the Company, (2) a lump sum payment as of
the January 31 following the calendar year during which the Participant
has a termination of employment from the Company, or (3) up to ten ratable
annual installment payments of the balance in his or her Accounts commencing as
of the January 31 following the calendar year during which the Participant
had a termination of employment from the Company.  For this election to be effective, at least
one full calendar year must pass between the calendar year the Participant
makes the election and the calendar year the Participant has a termination of
employment from the Company; provided, however, that:

 

(i)          effective July 31, 2001 and
before January 1, 2008, such election shall be effective if it is made at
least six months in advance of, and in a calendar year preceding, the
Participant’s termination of employment; and

 

(ii)        effective January 1, 2008, such
election shall be effective if it is made at least twelve months in advance of
the Participant’s termination of employment.

 

The Participant must make this election in the
manner prescribed by the Committee and may make a separate election with
respect to any Deferred Shares allocated to his or her Company Account. For
purposes of this Plan, “retires” means (I) attainment of at least age 55
with at least 15 years of service or age 62 with at least 5 years of service or
at least age 65 with at least 1 year of service at termination of employment
with the Company, (II) attainment of at least 25 years of service as of June 30,
1999, and completion of at least 30 years of service as of termination of
employment with the Company, (III) attainment, as of June 30, 1999,
of at least age 40 with at least 10 years of service and completion of at least
30 years of service as of termination of employment with the Company, or (IV) eligibility
for benefits under the IBM Long-

 

12

 

Term Disability Plan (and for purposes of this
Plan, termination of employment shall be deemed to have occurred coincident
with eligibility for benefits under the IBM Long-Term Disability Plan).

 

Upon application of a Participant, the Committee
may authorize earlier payment to the Participant after termination of
employment with the Company of an amount reasonably needed to satisfy the
emergency need caused by an unforeseeable emergency that causes severe
financial hardship to the Participant. 
If a Participant dies before payment of the entire balance of his or her
Accounts, an amount equal to the unpaid portion thereof as of the date of his
or her death shall be payable in one lump sum to his or her Beneficiary.

 

Dividend equivalents allocated with respect to a
Participant’s Deferred Shares will be paid to the Participant in cash on the
date dividends are paid to IBM shareholders, or as soon as practical thereafter
(but, with respect to Non-Grandfathered Amounts, no later than the latest date
permissible under Section 409A of the Code).

 

Effective January 1, 2005, payment of
Accounts (including in the event of a Participant’s death as described in the
preceding sentence) shall be made based on the value of the Account as of the
date such payment is processed.

 

5.03                            Designation of Beneficiary

 

Before January 1, 2008, each Participant’s
Beneficiary under this Plan shall automatically be the person or persons
designated as the Participant’s beneficiary under the Savings Plan even if such
designation is found to be invalid under the provisions of ERISA or the
Code.  If no such Beneficiary designation
is in effect at the time of the Participant’s death, or if no designated
Beneficiary survives the Participant, the Participant’s Beneficiary shall be
deemed to be the Participant’s beneficiary according to the provisions of the
Savings Plan.

 

On or after January 1, 2008, 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 Savings Plan
(including the default beneficiary rules under the latter plan, if no
beneficiary is designated under that plan).

 

Such Beneficiary shall be entitled to receive
the lump sum amount, if any, payable under the Plan upon the Participant’s
death pursuant to this Article 5.03; provided however, that the Beneficiary is alive at the time of the
Participant’s death.

 

5.04                            Distributions
to Specified Employees

 

Notwithstanding any
provision in this ARTICLE 5 to the contrary, any payment of Non-Grandfathered
Amounts under the Plan that becomes payable to a Participant

 

13

 

who is a “specified
employee” (within the meaning of Section 409A(a)(2)(B)(i) of the
Code) within the first six months following his or her separation from service
on or after January 1, 2005, shall instead be paid in the seventh month
following such separation from service. 
If Non-Grandfathered Amounts are paid in installments the first of which
would otherwise be paid before January 1, 2008, and in the first six
months following the Participant’s separation from service, the first
installment shall instead be paid in the seventh month following a separation
from service, and the next annual installment, and each annual installment
thereafter shall be paid on the anniversary of the date that the first
installment was paid.

 

5.05                            Application
of this Article After 2007

 

This ARTICLE 5 shall apply on and after January 1,
2008 only with respect to Grandfathered Amounts.

 

14

 

ARTICLE 6.   GENERAL PROVISIONS

 

6.01                            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, to the extent not paid by a grantor trust established
pursuant to paragraph (b) below.  In
the sole discretion of the Committee, a Participant’s Accounts may be reduced
to reflect allocable administrative expense.

 

(b)            IBM may, for administrative reasons,
establish a grantor trust for the benefit of Participants participating in the
Plan.  The assets of said trust will be
held separate and apart from other Company funds and shall be used exclusively
for the purposes set forth in the Plan and the applicable trust agreement,
subject to the following conditions:

 

(i)           The creation of said trust shall not
cause the Plan to be other than “unfunded” for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended;

 

(ii)         The
Company shall be treated as “grantor” of said trust for purposes of Section 677
of the Code; and

 

(iii)        Said trust agreement shall provide that
its assets may be used to satisfy claims of the Company’s general creditors in
the event of its insolvency, and the rights of such general creditors are
enforceable by them under federal and state law.

 

(c)            Neither the Company nor the
Committee guarantees the investment alternatives available under the Plan in
any manner against loss or depreciation.

 

6.02                            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.

 

15

 

6.03                            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 any 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 ARTICLE 6 shall be a
complete discharge of any obligation arising under the Plan with respect to
such benefit payments.

 

6.04                            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.

 

6.05                            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.  However, 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.

 

6.06                            Administration

 

All decisions, determinations, or
interpretations the Board, the Committee, 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.

 

16

 

6.07                            Construction

 

The
Plan is intended to constitute an unfunded deferred compensation arrangement
for a select group of management or highly compensated employees, and all
rights hereunder shall be governed by and construed in accordance with the laws
of the State of New York to the extent not governed by the Employee Retirement
Income Security Act of 1974, as amended.

 

6.08                            Application of this Article After 2007

 

Effective January 1, 2008, the provisions
of this Article 6 shall be superseded by the provisions of Article X
of the Excess Plan for any portion of a Participant’s Accounts that is not
attributable to Deferred Shares.

 

17

 

ARTICLE 7.   MANAGEMENT AND ADMINISTRATION

 

7.01                            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 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.

 

7.02                            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:

 

(i)              the
Board,

 

(ii)            the
Committee,

 

(iii)           the
chief human resources officer, and

 

(iv)           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 designating those persons who will serve on
the Committee and for approval of any resolution to amend or terminate the
Plan.

 

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

 

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

 

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

 

18

 

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

 

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

 

(iv)           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 the Committee on a regular
basis.  Additionally, the 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.

 

(e)             The
Committee 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. 
The Committee, 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.

 

(f)             Effective
July 31, 2001, the chief human resources officer of IBM, in addition to
the powers set forth in Article 7.02(d), shall have the full power and
authority to adopt and implement changes to the Plan relating to:

 

(i)             amending
the Plan to conform, to the extent he or she deems appropriate, to the Savings
Plan, including but not limited to the authority to make changes related to
maximum deferral percentages of pay, the amount of IBM match provided based on
deferral percentage selected by the Participant, and vesting provisions;

 

(ii)            the
form and timing of distributions available under the Plan, including the
procedures for distribution elections and rules regarding default distributions;

 

(iii)           deferral
elections, including the manner and timing of such elections;

 

(iv)           the
integration of other deferred compensation liabilities relating to newly hired
or acquired employees; and

 

(v)            any
Plan administration rules that are consistent with the intent of the Plan
and do not materially change the Company’s liability.

 

19

 

7.03                            Application of this Article After 2007

 

Effective January 1,
2008, the provisions of this Article 7 shall be superseded by the
provisions of Article IX of the Excess Plan for any portion of a
Participant’s Accounts that is not attributable to Deferred Shares.

 

20

 

ARTICLE 8.   CLAIMS PROCEDURE

 

Before January 1, 2008, IBM’s Executive
Compensation Department is responsible for advising Participants and
Beneficiaries of their benefits under the Plan. 
In the event a Participant or Beneficiary believes he or she is entitled
to benefits and has not received them, the Participant or Beneficiary must
submit a claim to the Director of Executive Compensation, IBM Corporation, New
Orchard Road, Armonk, New York 10504.  A
written decision setting forth its conclusions will be furnished by the Plan
Administrator to the Participant or Beneficiary within 60 days after the
request for review is received.  Failure
of the Plan Administrator to follow this procedure shall not, in and of itself,
give rise to a cause of action for benefits hereunder.  On and after January 1, 2008, claims shall
be processed as described in the summary description for the Excess Plan.

 

Effective January 1, 2008, if a Participant
or Beneficiary believes he or she is entitled to have received benefits with
respect to his or her Non-Grandfathered Amounts that are attributable to
Deferred Shares 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.

 

21

 

ARTICLE 9.   PAYMENT OF NON-GRANDFATHERED DEFERRED SHARES

ON OR AFTER JANUARY 1, 2008

 

9.01                            Purpose

 

This ARTICLE 9
describes the provisions of the Plan that apply on and after January 1,
2008 to Non-Grandfathered Amounts that are attributable to Deferred Shares (“NG
Deferred Shares”).

 

9.02                            Definitions

 

The following words
and phrases used in this ARTICLE 9 have the following meanings unless a
different meaning is required by the context:

 

(a)             “409A Key Employee” has the meaning described in the IBM Section 409A
Umbrella Document.

 

(b)            “409A Separation from Service” has the meaning described in
the IBM Section 409A Umbrella Document.

 

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

 

(d)            “Retirement-Eligible Participant” means a Participant who:

 

(i)              when
his or her 409A Separation from Service occurs, is (A) at least age 55
with at least 15 years of service, (B) at least age 62 with at least 5
years of service, (C) at least age 65 with at least 1 year of service, or (D) begins
to receive benefits under the Company’s long-term disability plan;

 

(ii)            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

 

(iii)           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.

 

9.03                            Payment
Upon Death

 

If a Participant dies
before his or her NG Deferred Shares are distributed in full, his or her NG
Deferred Shares shall be paid in full in shares of IBM stock 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 

 

22

 

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.

 

9.04                            Form of
Payment for Amounts Paid Upon a 409A Separation from Service

 

A Participant may
elect, at the time and in the manner described in Article 9.05, below, to
have his or her NG Deferred Shares paid under one of the following options,
subject to the limits in Article 9.06, below (regarding delays for 409A
Key Employees) and Article 9.07, 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 January 31 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 January 31
beginning with the January 31 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 Article 9.06(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.  A
Participant’s NG Deferred Shares shall be paid in shares of IBM stock.

 

9.05                            Electing
and Changing Payment Options

 

(a)             Election of Payment Option.  A
Participant shall elect a payment option for his or her NG Deferred Shares in
the form and manner prescribed by the Plan Administrator and during the special
election period in 2007 (except as provided in Article 9.07, below, with
respect to a separation during the first quarter of 2008).  During the special election period designated
by the Plan Administrator and ending no later than December 31, 2007, an
Eligible Employee may elect the payment option that will apply to his or her NG
Deferred Shares under the Plan in the event his or her 409A Separation from
Service occurs on or after April 1, 2008, if the Eligible Employee:

 

23

 

(i)                                      is
eligible to make elective deferrals under the Excess Plan in 2008;

 

(ii)                                   on
October 31, 2007, had a balance in his or her Accounts; or

 

(iii)                                on
October 31, 2007, had a valid 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 under the Excess Plan in 2008, is
not eligible to make a payment election under this paragraph (a), even if he or
she deferred pay under the Plan in 2007.

 

(b)            Irrevocability and Default Payment Option.  If a Participant does not make an election
under subsection (a), above (including a Participant who is not eligible to
make an election under that subsection), the Participant’s initial payment
election shall be the payment option described in Article 9.04(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 the deadline specified in subsection (a).

 

(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 Article 9.05, provided that:

 

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

 

(ii)            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

 

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

 

(A)            only once during 2008;
and

 

(B)             only once on or after January 1,
2009.

 

24

 

9.06                            Payment
of NG Deferred Shares Upon a 409A Separation from Service

 

A Participant’s NG
Deferred Shares shall be paid to the Participant upon his or her 409A Separation from Service on or after January 1,
2008 in the form and at the time provided in Articles 9.04 and 9.05, above
(except as provided in Article 9.07, 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 January 31
due to application of this paragraph, installments after the first installment
shall be paid as of January 31 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 Article 9.03.

 

(c)            Involuntary Cash-Out.  If (i) the applicable payment option is
the installment option described in Article 9.04(c),
above, and (ii) the aggregate value of all of the Participant’s Deferred
Shares (including Grandfathered and Non-Grandfathered Amounts) and all of his
or her “accounts” under the Excess Plan 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 Participant’s NG Deferred Shares 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.

 

9.07                            Special
Rules for Payment 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 NG Deferred Shares shall be paid to the Participant in the form
and at the time described below, except that such payments shall be subject to Article 9.06(a) (delay
for 409A Key Employees) and Article 9.06(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 Deferred Shares (including Grandfathered and Non-Grandfathered
Amounts) and all of his or her “accounts” under the Excess Plan is less than
$25,000 

 

25

 

as of the date
of his or her 409A Separation from Service, the Participant’s NG Deferred
Shares shall be paid in an immediate lump sum as described in Article 9.04(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 NG Deferred Shares shall be paid in a lump sum as of the January 31
following the year of the Participant’s 409A Separation from Service as
described in Article 9.04(b), above, provided that the aggregate value of
all of the Participant’s Deferred Shares (including Grandfathered and
Non-Grandfathered Amounts) and all of his or her “accounts” under the Excess
Plan 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 NG Deferred Shares shall be paid in accordance with
the payment option elected, as described in Article 9.04, above, provided
that the aggregate value of all of the Participant’s Deferred Shares (including
Grandfathered and Non-Grandfathered Amounts) and all of his or her “accounts”
under the Excess Plan is at least $25,000 as of the date of his or her 409A
Separation from Service.

 

For purposes of this Article 9.07,
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 NG Deferred Shares, the
Participant’s valid payment election shall be his or her valid payment election
for his or her Deferred Shares that are Grandfathered Amounts, if any.

 

9.08                            Valuation
of NG Deferred Shares.

 

For purposes of
determining the amount of any lump sum, the Participant’s NG Deferred Shares
will be determined as of the date the payment is processed.  For purposes of determining the amount of any
annual installment, the Participant’s remaining NG Deferred Shares will be
determined as of the date the payment is processed and divided by the remaining
number of installments.  Any resulting
partial share is retained in the Participant’s Account.

 

9.09                            Effect
of Rehire on Payment of NG Deferred Shares.

 

If a Participant
becomes eligible for a payment of NG Deferred Shares on account of a 409A
Separation from Service and is rehired as an employee of the Company before his
or her NG Deferred Shares have been distributed in full, payments shall be made
as if the Participant had not been rehired.

 

9.10                            Payment of Dividend Equivalents on NG Deferred Shares.

 

Dividend equivalents allocated with respect to a
Participant’s NG Deferred Shares will be paid to the Participant (or to the Beneficiary of a deceased Participant)
in cash 

 

26

 

as soon as practicable after, but no later than
30 days following, the date dividends are paid to IBM shareholders.

 

27

 

APPENDIX B

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.

 

2EXHIBIT 10.2

 

Note:  This exhibit reflects an amendment
to the IBM 401(k) Plus Plan to incorporate required changes under Section 415
of the Internal Revenue Code.

 

IBM 401(k) Plus Plan

(As Amended and Restated January 1, 2008)

 

AMENDMENT No. 1

Instrument of Amendment

 

Recitals:

 

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

 

In
accordance with Section 13.01 of the Plan, the Plan Administrator is
authorized to adopt amendments to the Plan that are required to comply with changes
in the law and that are necessary to maintain the tax-qualified status of the
Plan.

 

In
order to comply with the final regulations under Code Section 415, the
Plan shall be amended, in the manner set forth in this instrument, to be
effective as specified herein

 

Amendment:

 

1.             Section 1.15 of the
Plan is amended to add the following immediately after the last sentence of
such Section:

 

“Notwithstanding
the foregoing, effective with respect to Plan Years beginning on or after January 1,
2008, Compensation for purposes of determining Deferred Cash Contributions
shall not include amounts that are excluded from compensation under Section 1.415(c)-2
of the Regulations.”

 

2.             Section 1.51 of the
Plan is amended to add the following immediately after the last sentence of
such Section:

 

“Effective
as of January 1, 2008, Statutory Compensation shall be determined in
accordance with Section 1.415(c)-2 of the Regulations.  Statutory Compensation shall include amounts
that are paid by the later of 21⁄2 months after an  Employee’s severance from employment with the
Employer or an Affiliate or the end of the Plan Year that includes the date of
the Employee’s severance from employment and that are required to be recognized
under Section 1.415(c)-2(e) of the Regulations and, to the extent
applicable, Sections 1.415(c)-2(g)(4),(5),(6),(7) and (8) of the
Regulations, and amounts that are permitted to be recognized under the
provisions of Section 1.415(c)-2(e)(2),(3) and (4) of the
Regulations.”

 

3.             Section 4.10(c) shall
be designated as 4.10(c)(i) and a new Sec. 4.10(c)(ii) shall be added
to provide the following:

 

 

“(ii)    Effective as of January 1, 2008, the
term “remuneration” for purposes of this Section 4.10 shall mean Statutory
Compensation.”

 

4.             Section  4.10(f) shall
be amended in its entirety to read as follows:

 

“(f)          Effective January 1,
2008, the limitations imposed by Section 415 of the Code shall be applied
to the annual additions in accordance with the provisions of the final
regulations promulgated on April 5, 2007, as Treasury Decision 9319 (26
C.F.R. Parts 1 and 11), which regulations are hereby incorporated by reference
in accordance with Section 1.415(a)-1(d)(3).  The dollar limitation on annual additions
shall be adjusted in accordance with Section 415(d) of the Code and Section 1.415(d)-1
of the Regulations, which is hereby incorporated by reference, pursuant to Section 1.415(a)-1(d)(3)(v).  If the annual addition to a Participant’s
Account exceeds the limitation imposed in accordance with this Section, the
provisions of subsection (d) shall apply.”

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}]]