Document:

EXHIBIT 10.3

 

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

 

IBM 1999 Long-Term
Performance Plan

 

1. Objectives.

 

The IBM 1999 Long-Term
Performance Plan (the “Plan”) is designed to attract, motivate and retain
selected employees of, and other individuals providing services to, the
Company. These objectives are accomplished by making long-term incentive and
other awards under the Plan, thereby providing Participants with a proprietary
interest in the growth and performance of the Company.

 

2. Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i) “Participant”—An
individual to whom an Award has been made under the Plan. Awards may be made to
any employee of, or any other individual providing services to, the Company. 

 

1

 

However, incentive stock
options may be granted only to individuals who are employed by IBM or by a
subsidiary corporation (within the meaning of section 424(f) of the Code) of
IBM, including a subsidiary that becomes such after the adoption of the Plan.

 

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

 

3. Capital Stock
Available for Awards.

 

The number of shares that
may be issued under the Plan for Awards granted wholly or partly in stock
during the term of the Plan is 118,671,300. In addition, any shares previously
authorized by stockholders for awards under prior Company long-term performance
plans which are still available for issuance or which either wholly or in part
were not earned or that expired or were forfeited, terminated, canceled,
settled in cash, payable solely in cash or exchanged for other awards shall be
available for issuance under the Plan. Shares of Capital Stock may be made
available from the authorized but unissued shares of the Company or from shares
held in the Company’s treasury and not reserved for some other purpose. For
purposes of determining the number of shares of Capital Stock issued under the
Plan, no shares shall be deemed issued until they are actually delivered to a
Participant, or such other person in accordance with Section 10. Shares covered
by Awards that either wholly or in part are not earned, or that expire or
are    forfeited, terminated, canceled,
settled in cash, payable solely in cash or exchanged for other awards, shall be
available for future issuance under Awards. Further, shares tendered to or
withheld by the Company in connection with the exercise of stock options, or
the payment of tax withholding on any Award, shall also be available for future
issuance under Awards.

 

4. Administration.

 

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

 

5. Delegation of
Authority.

 

The Committee may
delegate to officers of the Company its duties, power and authority under the
Plan pursuant to such conditions or limitations as the Committee may establish,
except that only the Committee or the Board may select, and grant Awards to,
Participants who are subject to Section 16 of the Securities Exchange Act of
1934.

 

2

 

6. Awards.

 

The Committee shall
determine the type or types of Award(s) to be made to each Participant and
shall set forth in the related Award Agreement the terms, conditions,
performance requirements, and limitations applicable to each Award. Awards may
include but are not limited to those listed in this Section 6. Awards may be
granted singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement or payment of, or as   alternatives to, grants, rights or
compensation earned under any other plan of the Company, including the plan of
any acquired entity. During any five-year period, no Participant may receive,
under the Plan, stock options or stock appreciation rights with respect to an
aggregate of more than 10,000,000 shares. With regard to any “covered employee”
(as defined by section 162(m) of the Code), the maximum number of shares of
Capital Stock or share equivalents of Capital Stock (stock units) that can be
earned by any Participant for any Performance Period is 400,000 shares, subject
to adjustment for changes in corporate capitalization, such as a stock split,
and if an Award is denominated in cash rather than in shares of Capital Stock
or stock units, the share equivalent for purposes of the maximum will be
determined by dividing the highest amount that the Award could be under the
formula for such Performance Period by the closing price of a share of Capital Stock
on the first trading day of the Performance Period.

 

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

 

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

 

(c) Stock Award—An Award
made in stock and denominated in units of stock. All or part of any stock award
may be subject to conditions established by the Committee, and set forth in the
Award Agreement, which may include, but are not limited to, continuous service
with the Company, achievement of specific business objectives, increases in
specified indices, attaining growth rates, and other comparable measurements of
Company performance. An Award made in 

 

3

 

stock or denominated in
units of stock that is subject to restrictions on transfer and/or forfeiture
provisions may be referred to as an Award of “Restricted Stock,” “Restricted
Stock Units” or “Long-Term Performance Incentive” units.

 

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

 

(e) Performance Criteria
under section 162(m) of the Code for Long-Term Performance Incentive Awards—The
performance criteria for Long-Term Performance Incentive Awards (whether such
Awards take the form of stock, stock units or equivalents or cash) made to any “covered
employee” (as defined by section 162(m) of the Code) shall consist of objective
tests based on one or more of the following: earnings, cash flow, customer
satisfaction, revenues,    financial
return ratios, market performance, shareholder return and/or value, operating
profits (including EBITDA), net profits, earnings per share, profit returns and
margins, stock price and    working
capital. Performance criteria may be measured solely on a corporate, subsidiary
or business unit basis, or a combination thereof. Further, performance criteria
may reflect absolute entity performance or a relative comparison of entity
performance to the performance of a peer group of entities or other external
measure of the selected performance criteria. The formula for any Award may
include or exclude items to measure specific objectives, such as losses from
discontinued operations, extraordinary gains or losses, the cumulative effect
of accounting changes, acquisitions or divestitures, foreign exchange impacts
and any unusual, nonrecurring gain or loss. Nothing herein shall preclude the
Committee from making any payments or granting any Awards whether or not such
payments or Awards qualify for tax deductibility under section 162(m) of the
Code.

 

7. Payment of Awards.

 

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

 

4

 

8. Stock Option Exercise.

 

The price at which shares
of Capital Stock may be purchased under a stock option shall be paid in full in
cash at the time of the exercise or, if permitted by the Committee, by means of
tendering Capital Stock or surrendering another Award or any combination
thereof.

 

The Committee shall
determine acceptable methods of tendering Capital Stock or other Awards and may
impose such conditions on the use of Capital Stock or other Awards to exercise
a stock option as it deems appropriate.

 

9. Tax Withholding.

 

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

 

10. Transferability.

 

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

 

Notwithstanding the
foregoing, in no event shall ISOs be transferable or assignable other than by
will or by the laws of descent and distribution.

 

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

 

The Board may amend,
modify, suspend or terminate the Plan for the purpose of meeting or addressing
any changes in legal requirements or for any other purpose permitted by law.
Subject to changes in law or other legal requirements that would permit
otherwise, the Plan may not be amended without the consent of the holders of a
majority of the shares of Capital Stock then outstanding, to (i) increase the
aggregate number of shares of Capital Stock that may be issued under the Plan
(except for adjustments pursuant to Section 14 of the Plan), or (ii) permit the
granting of stock options or SARs with exercise or grant prices lower than
those specified in Section 6.

 

5

 

12. Termination of
Employment.

 

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

 

13. Cancellation and
Rescission of Awards.

 

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

6

 

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

 

14. Adjustments.

 

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

 

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

 

15. Miscellaneous.

 

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

 

7

 

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

 

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

 

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

 

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

 

(f) In the event that a
Participant or the Company brings an action to enforce the terms of the Plan or
any Award Agreement and the Company prevails, the Participant shall pay all
costs and expenses incurred by the Company in connection with that action,
including reasonable attorneys’ fees, and all further costs and fees, including
reasonable attorneys’ fees incurred by the Company in connection with
collection.

 

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

 

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

 

(i) The Plan shall become
effective on the date it is approved by the requisite vote of the stockholders
of the Company.

 

8

 

IBM 1999 Long-Term
Performance Plan — Federal Income Tax Consequences

 

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

 

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

 

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

 

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

 

4. In the case of ISOs,
there is generally no tax liability at time of exercise. However, the excess of
the fair market value of the stock on the exercise date over the option price
is included in the optionee’s income for purposes of the alternative minimum
tax. If no disposition of the ISO stock is made before the later of one year
from the date of exercise and two years from the date of grant, the optionee
will realize a capital gain or loss upon a sale of the stock, equal to the
difference between the option price and the sale price. If the stock is not
held for the required period, ordinary income tax treatment will generally
apply to the excess of the fair market value of the stock on the date of
exercise (or, if less, the amount of gain realized on the disposition of the
stock) over the option price, and the balance of any gain or any loss will be
treated as capital gain or loss. In order for ISOs to be treated as described
above, the Participant must remain employed by the Company (or a subsidiary in
which the Company holds at least 50 percent of the voting power) from the ISO
grant date until three months before the ISO is exercised. The three-month
period is extended to one year if the 
Participant’s employment terminates on account of disability. If the
Participant does not meet the employment requirement, the option will be
treated for federal income tax purposes as an option as described in paragraph
5 below. A Participant who exercises an ISO might also be subject to an
alternative minimum tax.

 

9

 

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

 

6. Pursuant to section
162(m) of the Code and underlying guidance, the Company may not deduct
compensation of more than $1,000,000 that is paid in a taxable year to an
individual who, on the last day of the taxable year, is the Company’s chief
executive officer or among one of its three other highest compensated officers
for that year, not including the Company’s chief financial officer. The
deduction limit, however, does not apply to certain types of compensation,
including qualified performance-based compensation. The Company believes that
compensation attributable to stock options and stock appreciation rights
granted under the Plan should qualify as performance-based compensation and
therefore should not be subject to the deduction limit. The Plan also
authorizes the grant of long-term performance incentive awards utilizing the
performance criteria set forth in the Plan that may likewise qualify as performance-based
awards.

 

10EXHIBIT 10.4

 

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

 

IBM 1997 Long-Term Performance Plan

 

1. Objectives.

 

The IBM 1997
Long-Term Performance Plan (the “Plan”) is designed to attract, motivate and
retain selected employees of, and other individuals providing services to, the
Company. These objectives are accomplished by making long-term incentive and
other awards under the Plan, thereby providing Participants with a proprietary
interest in the growth and performance of the Company.

 

2.
Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

3. Capital
Stock Available for Awards.

 

The number of
shares that may be issued under the Plan for Awards granted wholly or partly in
stock during the term of the Plan is 25,148,227. Shares of Capital Stock may be
made available from the authorized but unissued shares of the Company or from
shares held in the Company’s treasury and not reserved for some other purpose.
For purposes of determining the number of shares of Capital Stock issued under
the Plan, no shares shall be deemed issued until they are actually delivered to
a Participant, or such other person in accordance with Section 10. Shares
covered by Awards that either wholly or in part are not earned, or that expire
or are forfeited, terminated, canceled, settled in cash, payable solely in cash
or exchanged for other awards, shall be available for future issuance under
Awards. Further, shares tendered to or withheld by the Company in connection
with the exercise of stock options, or the payment of tax withholding on any
Award, shall also be available for future issuance under Awards.

 

4.
Administration.

 

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

 

5. Delegation
of Authority.

 

The Committee
may delegate to officers of the Company its duties, power and authority under
the Plan pursuant to such conditions or limitations as the Committee may
establish, except that only the Committee or the Board may select, and grant
Awards to, Participants who are subject to Section 16 of the Securities
Exchange Act of 1934.

 

 

6. Awards.

 

The Committee
shall determine the type or types of Award(s) to be made to each Participant
and shall set forth in the related Award Agreement the terms, conditions,
performance requirements, and limitations applicable to each Award. Awards may
include but are not limited to those listed in this Section 6. Awards may be
granted singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement or payment of, or as alternatives
to, grants, rights or compensation earned under any other plan of the Company,
including the plan of any acquired entity. During any five-year period, no
Participant may receive, under the Plan, stock options or stock appreciation
rights with respect to an aggregate of more than 2,500,000 shares.

 

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

 

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

 

(c) Stock
Award — An Award made in stock and denominated in units of stock. The maximum
number of shares of Capital Stock that may be issued under Stock Awards shall
not exceed 20% of the aggregate number of shares available for issuance under
Awards. All or part of any stock award may be subject to conditions established
by the Committee, and set forth in the Award Agreement, which may include, but
are not limited to, continuous service with the Company, achievement of
specific business objectives, increases in specified indices, attaining growth
rates, and other comparable measurements of the Company performance. An Award
made in stock or denominated in units of stock that is subject to restrictions
on transfer and/or forfeiture provisions may be referred to as an Award of “Restricted
Stock,” “Restricted Stock Units” or “Long-Term Performance Incentive” units.

 

 

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

 

 

At the Company’s
1995 Annual Meeting, shareholders approved terms adopted by the Committee under
which long-term incentive compensation payable under the Company’s 1994
Long-Term Performance Plan would qualify for an exception from the limitations
on deductibility set forth in section 162(m) of the Code. The Committee shall
continue to make long-term performance incentive awards under the Plan pursuant
to those terms. The foregoing shall not preclude the Committee from making
other compensation payments under different terms even if they do not qualify
for tax deductibility under section 162(m).

 

7. Payment of
Awards.

 

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

 

8. Stock
Option Exercise.

 

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

 

9. Tax
Withholding.

 

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

 

 

10.
Transferability.

 

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

 

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

 

The Board may
amend, modify, suspend or terminate the Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law. Subject to changes in law or other legal requirements that would permit
otherwise, the Plan may not be amended without the consent of the holders of a
majority of the shares of Capital Stock then outstanding, to (i) increase the
aggregate number of shares of Capital Stock that may be issued under the Plan
(except for adjustments pursuant to Section 14 of the Plan), or (ii) permit the
granting of stock options or SARs with exercise or grant prices lower than
those specified in Section 6.

 

12.
Termination of Employment.

 

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

 

13.
Cancellation and Rescission of Awards.

 

(a) Unless the
Award Agreement specifies otherwise, the Committee may cancel, rescind,
suspend, withhold or otherwise limit or restrict any unexpired, unpaid, or
deferred Awards at any time if the Participant is not in compliance with all applicable
provisions of the Award Agreement and the Plan, or if the Participant engages
in any “Detrimental Activity.” For purposes of this Section 13, “Detrimental
Activity” shall include: (i) the rendering of services for any organization or
engaging directly or indirectly in any business which is or becomes competitive
with the Company, or which organization or business, or the rendering of
services to such organization or business, is or becomes 

 

 

otherwise
prejudicial to or in conflict with the interests of the Company; (ii) the
disclosure to anyone outside the Company, or the use in other than the Company’s
business, without prior written authorization from the Company, of any
confidential information or material, as defined in the Company’s Agreement
Regarding Confidential Information and Intellectual Property, relating to the
business of the Company, acquired by the Participant either during or after
employment with the Company; (iii) the failure or refusal to disclose promptly
and to assign to the Company, pursuant to the Company’s Agreement Regarding
Confidential Information and Intellectual Property, all right, title and
interest in any invention or idea, patentable or not, made or conceived by the
Participant during employment by the Company, relating in any manner to the
actual or anticipated business, research or development work of the Company or
the failure or refusal to do anything reasonably necessary to enable the
Company to secure a patent where appropriate in the United States and in other
countries; (iv) activity that results in termination of the Participant’s
employment for cause; (v) a violation of any rules, policies, procedures or
guidelines of the Company, including but not limited to the Company’s Business
Conduct Guidelines; (vi) any attempt directly or indirectly to induce any
employee of the Company to be employed or perform services elsewhere or any
attempt directly or indirectly to solicit the trade or business of any current
or prospective customer, supplier or partner of the Company; (vii) the
Participant being convicted of, or entering a guilty plea with respect to, a
crime, whether or not connected with the Company; or (viii) any other conduct
or act determined to be injurious, detrimental or prejudicial to any interest
of the Company.

 

(b) Upon
exercise, payment or delivery pursuant to an Award, the Participant shall
certify in a manner acceptable to the Company that he or she is in compliance
with the terms and conditions of the Plan. In the event a Participant fails to
comply with the provisions of paragraphs (a)(i)-(viii) of this Section 13 prior
to, or during the six months after, any exercise, payment or delivery pursuant
to an Award, such exercise, payment or delivery may be rescinded within two
years thereafter. In the event of any such rescission, the Participant shall
pay to the Company the amount of any gain realized or payment received as a
result of the rescinded exercise, payment or delivery, in such manner and on
such terms and conditions as may be required, and the Company shall be entitled
to set-off against the amount of any such gain any amount owed to the
Participant by the Company.

 

14.
Adjustments.

 

In the event of any change in the outstanding
Capital Stock of the Company by reason of a stock split, stock dividend,
combination or reclassification of shares, recapitalization, merger, or similar
event, the Committee may adjust proportionately: (a) the number of shares of
Capital Stock (i) available for issuance under the Plan, (ii) available for
issuance under ISO’s, (iii) for which Awards may be granted to an individual
Participant, and (iv) covered by outstanding Awards denominated in stock or
units of stock; (b) the exercise and 

 

 

grant prices related to outstanding Awards;
and (c) the appropriate Fair Market Value and other price determinations for
such Awards. Notwithstanding the foregoing, in the event of any change in the
outstanding Capital Stock of the Company by reason of a stock split or a
reverse stock split, the above-referenced proportionate adjustments, if
applicable, shall be mandatory.

 

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

 

15.
Miscellaneous.

 

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

 

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

 

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

 

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

 

(e) The Plan
and each Award Agreement shall be governed by the laws of the State of New
York, excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of the Plan to the substantive 

 

 

law of another
jurisdiction. Unless otherwise provided in the Award Agreement, recipients of
an Award under the Plan are deemed to submit to the exclusive jurisdiction and
venue of the federal or state courts of New York, County of Westchester, to
resolve any and all issues that may arise out of or relate to the Plan or any
related Award Agreement.

 

(f) In the
event that a Participant or the Company brings an action to enforce the terms
of the Plan or any Award Agreement and the Company prevails, the Participant
shall pay all costs and expenses incurred by the Company in connection with
that action, including reasonable attorneys’ fees, and all further costs and
fees, including reasonable attorneys’ fees, incurred by the Company in
connection with collection.

 

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

 

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

 

(i) The Plan
shall become effective on the date it is approved by the holders of a majority
of the shares of Capital Stock then outstanding.

 

 

IBM
1997 Long-Term Performance Plan — Federal Income Tax Consequences

 

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

 

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

 

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

 

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

 

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

 

 

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

 

6.
Pursuant to section 162(m) of the Code and underlying guidance, the Company may
not deduct compensation of more than $1,000,000 that is paid in a taxable year
to an individual who, on the last day of the taxable year, is the Company’s
chief executive officer or among one of its three other highest compensated
officers for that year, not including the Company’s chief financial officer.
The deduction limit, however, does not apply to certain types of compensation,
including qualified performance-based compensation. The Company believes that
compensation attributable to stock options and stock appreciation rights
granted under the Plan should qualify as performance-based compensation and
therefore should not be subject to the deduction limit. The Plan also
authorizes the grant of long-term performance incentive awards utilizing the
performance criteria set forth in the Plan that may likewise qualify as
performance-based awards.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00131-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00131-of-00352.parquet"}]]