Document:

Exhibit
10.1

 

IBM SAVINGS PLAN

 

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

 

 

IBM
SAVINGS PLAN

 

TABLE OF CONTENTS

 

	
  PREAMBLE

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2.

  	
  PARTICIPATING
  EMPLOYERS

  	
   

  
	
   

  	
  2.01

  	
  Participation
  of IBM

  	
   

  
	
   

  	
  2.02

  	
  Participation
  by Domestic Subsidiaries

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3.

  	
  ELIGIBILITY
  AND PARTICIPATION

  	
   

  
	
   

  	
  3.01

  	
  Eligibility

  	
   

  
	
   

  	
  3.02

  	
  Participation

  	
   

  
	
   

  	
  3.02A

  	
  Participation by 401(k) Pension Program
  Participants after December 31, 2004

  	
   

  
	
   

  	
  3.03

  	
  Reemployment
  of Certain Former Employees and Former Participants

  	
   

  
	
   

  	
  3.04

  	
  Effect of
  Status Change on Participation

  	
   

  
	
   

  	
  3.05

  	
  Termination
  of Participation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4.

  	
  CONTRIBUTIONS

  	
   

  	
   

  
	
   

  	
  4.01

  	
  Deferred Cash
  Contributions and Catch-Up Contributions

  	
   

  
	
   

  	
  4.02

  	
  Employer
  Matching Contributions

  	
   

  
	
   

  	
  4.03

  	
  Rollover
  Contributions

  	
   

  
	
   

  	
  4.04

  	
  Changes in
  Contribution Rates

  	
   

  
	
   

  	
  4.05

  	
  Suspension
  and Resumption of Contributions

  	
   

  
	
   

  	
  4.06

  	
  Actual
  Deferral Percentage Test

  	
   

  
	
   

  	
  4.07

  	
  Actual
  Contribution Percentage Test

  	
   

  
	
   

  	
  4.08

  	
  Aggregate
  Contribution Limitation

  	
   

  
	
   

  	
  4.09

  	
  Additional
  Discrimination Testing Provisions

  	
   

  
	
   

  	
  4.10

  	
  Maximum
  Annual Additions

  	
   

  
	
   

  	
  4.11

  	
  Contributions
  for Periods of Military Leave

  	
   

  
	
   

  	
  4.12

  	
  Return of
  Contributions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5.

  	
  INVESTMENT
  OF CONTRIBUTIONS AND ELECTIVE DISTRIBUTION OF DIVIDENDS PAYABLE ON STOCK HELD
  IN IBM STOCK FUND

  	
   

  
	
   

  	
  5.01

  	
  Investment
  Funds

  	
   

  
	
   

  	
  5.01A

  	
  Mutual Fund Window Program

  	
   

  
	
   

  	
  5.02

  	
  Investment of
  Contributions to Participants’ Accounts

  	
   

  
	
   

  	
  5.03

  	
  Change of
  Investment Election

  	
   

  
							

 

 

	
   

  	
  5.04

  	
  Reallocation
  of Accounts Among the Funds

  	
   

  
	
   

  	
  5.05

  	
  Limitations
  Imposed by Contract

  	
   

  
	
   

  	
  5.06

  	
  Responsibility
  for Investments

  	
   

  
	
   

  	
  5.07

  	
  Voting of IBM
  Shares

  	
   

  
	
   

  	
  5.08

  	
  ERISA Section 404(c)
  Compliance

  	
   

  
	
   

  	
  5.09

  	
  Elective
  Distribution of Dividends Payable on Stock Held in IBM Stock Fund

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 5A
  – 

  	
  Disability
  Protection Program

  	
   

  
	
   

  	
  5A.01

  	
  Eligibility

  	
   

  
	
   

  	
  5A.02

  	
  Levels of Coverage under Disability Protection
  Program

  	
   

  
	
   

  	
  5A.03

  	
  Enrollment Procedures

  	
   

  
	
   

  	
  5A.04

  	
  Requirements for Commencement of Coverage under
  Disability Protection Program

  	
   

  
	
   

  	
  5A.05

  	
  Investment in Premiums under Disability Insurance
  Policy and Assessment of Administrative Fee

  	
   

  
	
   

  	
  5A.06

  	
  Benefits Payable under Disability Protection
  Program

  	
   

  
	
   

  	
  5A.07

  	
  Termination of Coverage under Disability
  Protection Program

  	
   

  
	
   

  	
  5A.08

  	
  Claims Procedure and Incorporation of Disability
  Insurance Policy

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6.

  	
  VALUATION
  OF UNITS AND CREDITS TO ACCOUNTS

  	
   

  
	
   

  	
  6.01

  	
  Units of
  Participation

  	
   

  
	
   

  	
  6.02

  	
  Valuation of
  Units

  	
   

  
	
   

  	
  6.03

  	
  Crediting the
  Accounts

  	
   

  
	
   

  	
  6.04

  	
  Statements of
  Participant Accounts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7.

  	
  VESTED
  STATUS OF ACCOUNTS

  	
   

  
	
   

  	
  7.01

  	
  Nonforfeitability
  of Deferred Account, Employer Account, and Rollover Account

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8.

  	
  IN-SERVICE
  WITHDRAWALS

  	
   

  
	
   

  	
  8.01

  	
  Withdrawal
  After Age 591⁄2

  	
   

  
	
   

  	
  8.01A

  	
  Withdrawal from After-Tax Account

  	
   

  
	
   

  	
  8.02

  	
  Hardship
  Withdrawal

  	
   

  
	
   

  	
  8.03

  	
  Procedures
  and Restrictions

  	
   

  
	
   

  	
  8.04

  	
  Distributions
  at Age 701⁄2

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9.

  	
  LOANS
  TO PARTICIPANTS

  	
   

  
	
   

  	
  9.01

  	
  Loan Amounts
  Available and Interest Rate

  	
   

  
	
   

  	
  9.02

  	
  Terms

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10.

  	
  DISTRIBUTION
  OF ACCOUNTS UPON TERMINATION OF EMPLOYMENT, DISABILITY, OR DEATH

  	
   

  
	
   

  	
  10.01

  	
  Applicability

  	
   

  
	
   

  	
  10.02

  	
  Forms of
  Distribution

  	
   

  
	
   

  	
  10.03

  	
  Mandatory
  Distribution of Small Accounts

  	
   

  
	
   

  	
  10.04

  	
  Withdrawals
  From Account After Termination of Employment

  	
   

  
	
   

  	
  10.05

  	
  Commencement
  of Payments

  	
   

  
	
   

  	
  10.06

  	
  Required
  Distributions at Age 701⁄2

  	
   

  
	
   

  	
  10.07

  	
  Effect of
  Reemployment

  	
   

  
					

 

ii

 

	
   

  	
  10.08

  	
  Distribution
  of Account Upon Death

  	
   

  
	
   

  	
  10.09

  	
  Designation
  of Beneficiary

  	
   

  
	
   

  	
  10.10

  	
  Proof of
  Death and Right of Beneficiary or Other Person

  	
   

  
	
   

  	
  10.11

  	
  Status of
  Accounts Pending Distribution

  	
   

  
	
   

  	
  10.12

  	
  Procedures
  and Form of Payment

  	
   

  
	
   

  	
  10.13

  	
  Distribution
  Limitation

  	
   

  
	
   

  	
  10.14

  	
  Direct
  Rollover of Certain Distributions

  	
   

  
	
   

  	
  10.15

  	
  Waiver of
  Notice Period

  	
   

  
	
   

  	
  10.16

  	
  Distribution
  of Accounts Upon a Sale of Assets or a Sale of a Subsidiary prior to December 31,
  2001

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11.

  	
  ADMINISTRATION
  OF PLAN

  	
   

  
	
   

  	
  11.01

  	
  Named
  Fiduciaries

  	
   

  
	
   

  	
  11.02

  	
  Exclusive
  Authority of the Board of Directors

  	
   

  
	
   

  	
  11.03

  	
  Responsibilities
  of Committee

  	
   

  
	
   

  	
  11.04

  	
  Appointment
  of Plan Administrator

  	
   

  
	
   

  	
  11.05

  	
  Responsibilities
  of Plan Administrator and Effect of Decisions of Plan Administrator

  	
   

  
	
   

  	
  11.06

  	
  Retention
  of Professional Advisors

  	
   

  
	
   

  	
  11.07

  	
  Prudent
  Conduct

  	
   

  
	
   

  	
  11.08

  	
  Service in
  More Than One Fiduciary Capacity

  	
   

  
	
   

  	
  11.09

  	
  Compensation
  and Bonding

  	
   

  
	
   

  	
  11.10

  	
  Limitation
  of Liability

  	
   

  
	
   

  	
  11.11

  	
  Individual
  Accounts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12.

  	
  MANAGEMENT
  OF FUNDS

  	
   

  
	
   

  	
  12.01

  	
  Trust
  Agreement

  	
   

  
	
   

  	
  12.02

  	
  Exclusive
  Benefit Rule

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13.

  	
  AMENDMENT,
  MERGER, TRANSFERS, AND TERMINATION

  	
   

  
	
   

  	
  13.01

  	
  Amendment
  of Plan

  	
   

  
	
   

  	
  13.02

  	
  Merger,
  Consolidation or Transfer of Assets and Liabilities

  	
   

  
	
   

  	
  13.03

  	
  Termination
  by Participating Employers

  	
   

  
	
   

  	
  13.04

  	
  Termination of Plan

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14.

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
  14.01

  	
  Nonalienation
  and Payment Pursuant to Qualified Domestic Relations Orders

  	
   

  
	
   

  	
  14.02

  	
  Facility of Payment

  	
   

  
	
   

  	
  14.03

  	
  Tax Withholding

  	
   

  
	
   

  	
  14.04

  	
  Prevention of Escheat

  	
   

  
	
   

  	
  14.05

  	
  Elections and
  Notifications

  	
   

  
	
   

  	
  14.06

  	
  Information

  	
   

  
	
   

  	
  14.07

  	
  Conditions
  of Employment Not Affected by Plan

  	
   

  
	
   

  	
  14.08

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX A.

  	
  SPECIAL
  PROVISIONS FOR MiCRUS

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX B.

  	
  SPECIAL PROVISIONS
  FOR TECHNOLOGY SERVICE SOLUTIONS (“TSS”)

  	
   

  
					

 

iii

 

	
  APPENDIX C.

  	
  SPECIAL RULES
  APPLICABLE TO PUERTO RICO EMPLOYEES

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX D.

  	
  TOP-HEAVY PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX
  E.

  	
  SPECIAL
  PROVISIONS APPLICABLE TO PARTICIPANTS IN UNISON, INC. 401(k) SAVINGS AND
  INVESTMENT PLAN

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX
  F:

  	
  SPECIAL
  PROVISIONS APPLICABLE TO FORMER EMPLOYEES OF PRICEWATERHOUSE COOPERS, LLP

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX
  G.

  	
  SPECIAL
  PROVISIONS APPLICABLE TO FORMER EMPLOYEES OF VF CORPORATION

  	
   

  

 

iv

 

PREAMBLE

 

International Business Machines Corporation (“IBM”) has established the
IBM Tax Deferred Savings Plan (the “Plan”) to assist eligible employees in
saving for retirement.  The Plan was
initially effective as of July 1, 1983 and has since been amended from
time to time.  Effective as of July 1,
1999, the name of the Plan was changed to the IBM TDSP 401(k) Plan.  The Plan was renamed the IBM Savings Plan,
effective October 1, 2002.

 

The Plan is intended to be a qualified plan under Section 401(a)
of the Internal Revenue Code (the “Code”) that includes a qualified cash or
deferred arrangement pursuant to Section 401(k) of the Code.  Effective as of January 1, 2002, the
Plan is intended to comprise two constituent plans: a qualified plan under Section 401(a)
of the Code that includes a qualified cash or deferred arrangement pursuant to Section 401(k)
of the Code, and an employee stock ownership plan, within the meaning of Section 4975(e)(7)
of the Code (“the ESOP”).  Except as otherwise explicitly provided, the provisions set forth
herein shall apply to each such constituent plan.

 

The Plan is also intended to be a qualified plan under Section 1165(a)
of Puerto Rico Internal Revenue Code (the “Puerto Rico Code”), including a
qualified cash or deferred contributions arrangement under Section 1165(e)
of the Puerto Rico Code, in furtherance of which intention, special provisions
applicable to employees employed in Puerto Rico are incorporated in the

 

 

Plan in Appendix C.  The
Plan shall, at all times, be construed and administered
in a manner consistent with such intentions.

 

From time to time, the Plan has included and may include, as
participating employers, and has covered or may cover eligible employees of,
certain entities in which IBM had or has an ownership interest, but which were
or are not members of any controlled group of corporations, within the meaning
of Section 414(b) of the Code, that included or includes IBM, and were or
are not trades or business under common control, within the meaning of Section 414(c)
of the Code, with IBM.  Accordingly, at
such times, the Plan shall be deemed a plan maintained by more than one
employer, within the meaning of Section 413(c) of the Code.  The Plan shall, at such times, be construed
and administered in a manner consistent with its status as a multiple employer
plan.  All provisions of the Plan shall
be applicable to all participating employers and to the employees of all
participating employers, except to the extent that any such provision is
modified by an Appendix to the Plan that is specifically made applicable to a
named participating employer and its employees.

 

The Plan was most recently amended and restated as of January 1,
2002 (“the January 1, 2002 Restatement”). 
This Amendment, Restatement, and Recodification of the Plan as of January 1,
2005 (“the January 1, 2005 Recodification”) incorporates amendments
heretofore made to the Plan, including amendments adopted pursuant to Section 401(b)
of the Code in connection with and pursuant to the issuance of a favorable determination
letter by the Internal Revenue Service on September 10, 2004, and makes
additional amendments to the Plan.  This January 1,
2005 Recodification shall generally be effective as of January 1, 2005,
provided, however, that the amendments heretofore made to the January 1,
2002 Restatement are

 

2

 

effective as specified in the instruments by which such amendments were
adopted, and provided further, however, that the effective date of any
provision or provisions of the Plan shall, to the extent required by specific
provisions of the Plan, the Uruguay Round Agreements Act, the Uniformed
Services Employment and Reemployment Rights Act of 1994, the Small Business Job
Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue
Service Restructuring and Reform Act of 1998, the Community Renewal Tax Relief
Act of 2000, the Economic Growth and Tax Relief Reconciliation Act of 2001, or
other law, be any such earlier or other effective date required by the Plan,
such acts, or such law.

 

This January 1, 2005 Recodification includes all provisions of the
Plan that are applicable as of its effective date.

 

3

 

ARTICLE 1. 
DEFINITIONS

 

1.01                           “Account” means, with respect to each
Participant, the total of his Deferred Account, Employer Account, Rollover
Account, Catch-Up Account, and any other sub-account established by the Plan
Administrator pursuant to Section 13.02(d).  That portion of his Account, if any, that is invested in the IBM Stock Fund pursuant to the
provisions of Article 5, and any separate sub-account established
in accordance with Section 5.09(d) shall be deemed to be his ESOP Account.

 

1.02                           “Actual Contribution Percentage”
means, with respect to a specified group of Employees, the average of the
ratios, calculated separately for each Employee in that group, of (a) the sum
of (i) the Employee’s Matching Contributions for that Plan Year, excluding any
Matching Contributions forfeited under the provisions of Sections 4.01(f)
and 4.06(c)(iii) plus (ii) the Employee’s After-Tax Contributions for that Plan
Year, to (b) his Statutory Compensation for that Plan Year.  The Actual Contribution Percentage for each
group and the ratio determined for each Employee in the group shall be
calculated to the nearest one one-hundredth of 1% (0.0001).  Any Matching Contributions that are taken
into account in determining the Actual Deferral Percentage for any group of
Employees for a Plan Year shall not be taken into account in determining the
Actual Contribution Percentage for such group of Employees for such Plan Year.

 

4

 

1.03                           “Actual Contribution Ratio” means the
ratio taken into account with respect to an Employee in the determination of
the Actual Contribution Percentage for a group of Employees in which he is
included.

 

1.04                           “Actual Deferral Percentage” means,
with respect to a specified group of Employees, the average of the ratios,
calculated separately for each Employee in that group, of (a) the amount of
Deferred Cash Contributions made pursuant to Section 4.01 for a Plan Year,
including Deferred Cash Contributions returned to a Highly Compensated Employee
under Section 4.01(d) and Deferred Cash Contributions returned to any
Employee pursuant to Section 4.01(e), to (b) the Employees’ Statutory
Compensation for that Plan Year.  The
Actual Deferral Percentage for each group and the ratio determined for each
Employee in the group shall be calculated to the nearest one one-hundredth of
1% (0.0001).  For purposes of determining
the Actual Deferral Percentage for a Plan Year, Deferred Cash Contributions may
be taken into account for a Plan Year only if they:

 

(i)                                     relate
to compensation that either would have been received by the Employee in the
Plan Year but for his deferral election, or are attributable to services
performed by the Employee in the Plan Year and would have been received by the
Employee within 21⁄2 months after the close of the Plan Year but for his deferral
election,

 

(ii)                                  are
allocated to the Employee as of a date within that Plan Year and are not
contingent on the participation or performance of service after such date, and

 

(iii)                               are actually paid to the Trustee no later than 12 months
after the end of the Plan Year to which the contributions relate.

 

5

 

At the election of the Plan Administrator,
which election may be made or changed each Plan Year, all or any portion of
Matching Contributions made pursuant to Section 4.02 with respect to such
Plan Year may be taken into account in determining the Average Deferral
Percentage of any group or groups of Employees, in accordance with Section 1.401(k)-1(b)(5) of the Regulations.

 

1.05                           “Actual Deferral Ratio” means the
ratio taken into account with respect to an Employee in the determination of
the Actual Deferral Percentage.

 

1.06                           “Affiliate” means, with respect to
any Employer, any company that is a member of a controlled group of
corporations, as defined in Section 414(b) of the Code, which also
includes such Employer as a member; any trade or business under common control,
as defined in Section 414(c) of the Code, with such Employer; any
organization, whether or not incorporated, which is a member of an affiliated
service group, as defined in Section 414(m) of the Code, which includes
such Employer; and any other entity required to be aggregated with such
Employer pursuant to Regulations under Section 414(o) of the Code.  Solely for the purpose of determining whether
an individual is a Leased Employee and for purposes of Section 4.10, the
definitions in Sections 414(b) and (c) of the Code shall be modified by
substituting the phrase “more than 50 percent” for the phrase “at least
80 percent” in each place it appears in Section 1563(a)(1) of the Code.

 

1.06A                 “After-Tax Account”
means the account credited with the After-Tax Contributions made by
a Participant and earnings on those contributions.

 

6

 

1.06B                   “After-Tax Contributions”
means amounts contributed to the Plan in accordance with Section 4.01(h).

 

1.07                           “Annual Dollar Limit” means, for Plan
Years commencing after December 31, 1993 and prior to January 1,
2002, $150,000, as adjusted from time to time in accordance with Section 401(a)(17)(B)
of the Code, as in effect for Plan Years commencing prior to January 1,
2002; and, effective January 1, 2002, $200,000, as adjusted from time to
time in accordance with Section 401(a)(17)(B) of the Code as in effect for
Plan Years commencing after December 31, 2001.

 

1.08                           “Attributed Earnings” means the
amount of investment income attributed to Excess Contributions or Excess
Deferrals or to any Deferred Cash Contributions in excess of the limit
described in Section 4.10(a), that are required to be returned to the
Participant in accordance with Sections 4.01(f), 4.06(c), or 4.10(d)(i) or
(ii), as applicable, and the amount of investment income attributed to Excess
Aggregate Contributions or any Matching Contributions in excess of the limit
described in Section 4.10(a), that are required to be forfeited in
accordance with Section 4.07(c) or 4.10(d)(ii).  Attributed Earnings on Excess Deferrals,
Excess Contributions, or Deferred Cash Contributions required to be returned
shall be determined by multiplying the income earned on the Deferred Account
for the Plan Year by a fraction, the numerator of which is the Excess
Deferrals, Excess Contributions, or Deferred Cash Contributions that are
required to be returned for the Plan Year and the denominator of which is the
Deferred Account balance at the end of the Plan Year, disregarding any income
or loss occurring during

 

7

 

the
Plan Year.  Attributed Earnings on Excess
Aggregate Contributions or Matching Contributions that are required to be
forfeited shall be determined in a similar manner by substituting the Employer
Account for the Deferred Account, and the Excess Aggregate Contributions or
Matching Contributions required to be forfeited for the Excess Deferrals,
Excess Contributions, or Deferred Cash Contributions required to be returned in
the preceding sentence.

 

1.09                           “Beneficiary” means any person,
persons or entity designated, or deemed to have been designated, by a
Participant to receive any benefits payable in the event of the Participant’s
death in accordance with the provisions of Section 10.09.

 

1.10                           “Board of Directors” or “Board” means the Board of Directors
of IBM.

 

1.11                           “Catch-Up Account” means the account
credited with the Catch-Up Contributions made on a Participant’s behalf and
earnings on those contributions.

 

1.12                           “Catch-Up Contributions” means
amounts contributed to the Plan that satisfy the
requirements of Section 4.01(g).

 

1.12A                 “Certificate of Disability Insurance” means
the certificate issued in accordance with the terms of the Disability Insurance
Policy by the Disability Insurer and furnished to a Participant who has
elected, in accordance with Section 5A.03(a), to
invest a portion of his Account in the payment of premiums under the Disability
Insurance Policy.

 

8

 

1.13                           “Code” means the Internal Revenue
Code of 1986, as amended from time to time. 
References to specific sections of the Code shall be deemed to refer to
such sections as they may be amended or redesignated.

 

1.14                           “Committee” means Retirement Plans
Committee of IBM, comprising the persons named by the Board of Directors to
supervise the administration of the Plan as provided in Article 11.

 

1.15                           “Compensation” means the cash
remuneration paid to an Employee for services rendered to the Employer,
including salary, commission payments, and recurring payments under any form of
variable compensation plan and additional compensation paid for nonscheduled
workdays, overtime, and shift premium, determined prior to any reduction
pursuant to Section 4.01 or pursuant to a cafeteria plan under Section 125
of the Code, or pursuant to a qualified transportation fringe under Section 132(f)
of the Code, but excluding special awards, expenses or relocation
reimbursements, sign-on bonuses, separation pay, termination incentive
payments, and payments for accrued or deferred vacations.  Amounts other than Variable Pay paid
subsequent to the first regularly scheduled payroll date coincident with or
next following the date of an Employee’s termination of employment shall not be
taken into account as Compensation.  Any
amount of Variable Pay that is otherwise subject to being taken into account as
Compensation shall nonetheless not be taken into account if the payroll
processing for an Employee’s termination of employment preceded the payroll
processing date for such Variable Pay. 
The Plan Administrator, in its discretion, shall determine whether any
form of remuneration not described in this Section shall be

 

9

 

treated
as Compensation for purposes of the Plan. 
Compensation taken into account for a Plan Year shall not exceed the
Annual Dollar Limit.

 

1.16                           “Deferred Account” means the account credited
with the Deferred Cash Contributions made on a Participant’s behalf and
earnings on those contributions.

 

1.17                           “Deferred Cash Contributions” means
amounts contributed pursuant to Section 4.01(a).

 

1.17A                 “Designated Mutual Fund” means a mutual
fund that is established and maintained in accordance with the requirements of
Investment Company Act of 1940, that offers shares for purchase by the general
public, and that is designated by the Committee, in accordance with Section 5.01A(a), to be available to Participants for investment
under the terms of the Mutual Fund Window Program, effective as of January 1,
2005.  A Designated Mutual Fund shall not
be deemed an Investment Fund for purposes of Section 5.01.

 

1.17B                   “Disability Insurance Policy”
means the insurance policy underwritten by the Disability Insurer under
which premiums are paid through investments made in accordance with the
Disability Protection Program and benefits are payable in accordance with the
Disability Protection Program.

 

10

 

1.17C                   “Disability Insurer”  means
the insurance company selected by the Plan Administrator that underwrites the
Disability Insurance Policy.  Effective January 1,
2005, the Disability Insurer is Metropolitan Life Insurance Company.

 

1.17D                  “Disability Protection Program”
means the program provided in Article 5A, effective as of January 1,
2005, under which a Participant who satisfies specified eligibility
requirements is permitted to elect to invest a portion of his Account in the
payment of premiums under the Disability Insurance Policy and pursuant to which
benefit payments made from the Disability Insurance Policy and in accordance
with the Certificate of Disability Insurance are allocated to the Accounts of
Participants who have suffer a Total and Permanent Disability while enrolled
thereunder.

 

1.18                           “Domestic Subsidiary” means a
Subsidiary organized and existing under the laws of the United States, or any
state, territory, or possession thereof.

 

1.19                           “Effective Date” means July 1,
1983.  The Effective Date of this
amendment and recodification of the Plan shall be January 1, 2005, except
as otherwise specified herein, and subject to the Preamble hereto.

 

1.20                           “Employee” means an employee of any
Employer who receives stated compensation other than a pension, severance pay,
retainer, or fee under contract.  The
term “Employee” excludes any Leased Employee and any person who is included in
a unit of employees covered by a collective bargaining agreement that does not
provide for his membership in the Plan. 
Any person deemed to be an independent contractor by any

 

11

 

Employer and paid by the Employer in
accordance with its practices for the payment of independent contractors,
including the provision of tax reporting on Internal Revenue Service
Form 1099, shall be excluded from the definition of Employee for all
purposes under the Plan, notwithstanding any subsequent reclassification of
such person for any purpose under the Code, whether agreed to by the Employer
or adjudicated under applicable law.

 

1.21                           “Employer” means IBM or any successor
by merger, purchase or otherwise, with respect to its employees, or any other
entity participating in the Plan as provided in Article 2, with respect to
its employees.  All entities that are
members of a controlled group of corporations, within the meaning of Section 414(b)
of the Code, or a group of trades or businesses under common control, within
the meaning of Section 414(c) of the Code, and that are participating in
the Plan in accordance with Article 2 shall be deemed to be a single
Employer for all purposes under the Plan.

 

1.22                           “Employer Account” means the account
credited with Matching Contributions and earnings on those contributions

 

1.23                           “Enrollment Date” means the date on
which a Participant makes the election described in Section 4.01.

 

1.24                           “Excess Aggregate Contributions”
means the amount of Matching Contributions and, effective as of January 1,
2004, After-Tax Contributions on behalf of Highly

 

12

 

Compensated Employees in excess of the
limitation described in Section 4.07(a) for a Plan Year, as determined in
accordance with Section 4.07(c)(i).

 

1.25                           “Excess Contributions” means the
amount of Deferred Cash Contributions on behalf of Highly Compensated Employees
in excess of the limitation described in Section 4.06(a) for a Plan Year,
as determined in accordance with Section 4.06(c)(i).

 

1.26                           “Excess Deferrals” means the amount
of Deferred Cash Contributions on behalf of a Participant that, taken together
with similar contributions on his behalf to any other plan described in Section 401(a)(30) of the Code, exceed the dollar limitation described in
Section 4.01(c) for a calendar year.

 

1.27                           “ERISA” means the Employee Retirement
Income Security Act of 1974, as amended from time to time.  References to sections of ERISA shall be
deemed to refer to such sections as they may be amended or redesignated.

 

1.27A                 “Executive Employee”  means
an Employee who is classified as an executive, based on the compensation band
to which he is assigned, in accordance with the personnel policies and
practices of his Employer.

 

1.28                           “Five Percent Owner” means with
respect to a corporation, any person who owns or is considered as owning within
the meaning of Section 318 of the Code more than 5% of the outstanding
stock of the corporation, or stock possessing more than 5% of the total voting
power of the corporation.

 

13

 

1.29                           “Foreign Branch” means a branch,
division, or other unit of IBM or a Domestic Subsidiary that operates
principally outside the United States, its territories, or possessions.

 

1.29A                 “401(k) Pension Program Participant”
means a Participant who is admitted to participation in the Plan in
accordance with Section 3.02A.

 

1.30                           “Fund” or “Investment
Fund” means the separate funds authorized by the Committee in
accordance with Section 5.01(a) in which contributions to the Plan are
invested.  Amounts invested under the
Mutual Fund Window Program, effective as of January 1, 2005, shall not be
deemed to be invested in any of the Investment Funds.

 

1.31                           “Highly Compensated Employee” means
for a Plan Year commencing on or after January 1, 1997, any employee of
the Employer or an Affiliate, whether or not eligible to participate in the
Plan, who

 

(i)                                     was a Five Percent Owner for such Plan Year or the prior
Plan Year, or

 

(ii)                                  for the preceding Plan Year received Statutory Compensation
in excess of $80,000, and, effective with respect to Plan Years
commencing on or after January 1, 2002, was among the highest 20%
of employees for the preceding Plan Year when ranked by Statutory Compensation
paid for that year.  No employee shall be excluded under Section 414(q)(5)
of the Code for purposes of determining the number of such employees.  The $80,000 dollar amount in this

 

14

 

paragraph (ii) shall be adjusted from time to time in accordance with Section 414(q)(1)
of the Code.

 

Notwithstanding the foregoing, employees who
are nonresident aliens and who receive no earned income from the Employer or an
Affiliate which constitutes income from sources within the United States shall
be disregarded for all purposes of this Section.

The provisions of this Section shall be
further subject to such additional requirements as shall be described in Section 414(q)
of the Code and Regulations thereunder, which shall override any provisions of
this Section inconsistent therewith.

 

1.32                           “Hour of Service” means each hour for
which an employee is paid or entitled to payment for the performance of duties
for the Employer or an Affiliate.

 

1.33                           “IBM” means International Business
Machines Corporation, a corporation organized and existing under the laws of
the State of New York.

 

1.34                           “IBM Staff Investment Manager” means
one or more IBM employees who have been appointed by the Committee to direct,
either jointly or severally, the management of the acquisition and disposition
of all or any portion of the assets of the Trust Fund.

 

1.35                           “IBM Stock Fund” means the Investment
Fund of the Plan that is invested primarily in common stock of IBM, in
accordance with Section 5.01(a) and which shall be included within the
ESOP.

 

15

 

1.36                           “Independent Investment Manager”
means any person or entity that satisfies the requirements of Section 3(38)(B)
of ERISA, which has been appointed by the Committee to manager, acquire, and
dispose of all or any portion of the assets of the Trust Fund and which has
acknowledged in writing that it is a fiduciary with respect to the Plan.

 

1.37                           “Investment Manager” means any
Independent Investment Manager or any IBM Staff Investment Manager.

 

1.38                           “Leased Employee” means any person
(other than a common law employee of the Employer) who, pursuant to an
agreement between the Employer and any other person (“leasing organization”),
has performed services for the Employer or any related persons determined in
accordance with Section 414(n)(6) of the Code on
a substantially full-time basis for a period of at least one year and such
services are performed under the primary direction of or control by the
Employer.  In the case of any person who
is a Leased Employee before or after a period of service as an Employee, the
entire period during which he has performed services as a Leased Employee shall
be counted as service as an Employee for all purposes of the Plan, except that
he shall not, by reason of that status, become a participant in the Plan.

 

1.38A                 “Long-Term Supplemental Employee” means,
effective as of January 1, 2004, a Supplemental Employee so designated by
his Employer, in accordance with its established personnel practices.  A Supplemental Employee who has not been
explicitly

 

16

 

designated
as a Long-Term Supplemental Employee by his Employer shall not be deemed to be
a Long-Term Supplemental Employee.

 

1.39                           “Matching Contributions” means
amounts contributed pursuant to Section 4.02.  For purposes of Section 1.401(k)-1(b)(5) of the Regulations, Matching Contributions made under
the Plan shall be deemed “Qualified Matching Contributions,” provided, however,
that, for the period commencing on January 1, 2002 and ending on December 31,
2004, Matching Contributions that are determined on the basis of Catch-Up
Contributions made on a Participant’s behalf shall not be deemed “Qualified
Matching Contributions”.

 

1.39A                 “Mutual Fund Window Program”
means the program provided in Section 5.01A, effective as of January 1,
2005, pursuant to which a Participant is permitted to elect to invest a portion
of his Account in one or more Designated Mutual Funds.

 

1.39B                   “Non-Executive Employee”
means an Employee who is not an Executive Employee.

 

1.40                           “Non-Highly Compensated Employee”
means for any Plan Year an employee of the Employer or an Affiliate who is not
a Highly Compensated Employee for that Plan Year.

 

1.41                           “Notice” means a specification by the
Employee of his designation, election, or intention under any provision of the
Plan, through written, electronic, or telephonic means, as provided for the
particular purpose by the Plan Administrator, pursuant to Section 14.05.

 

17

 

1.41A                 “One-Year Period of Service”
means with respect to any employee, effective as of January 1, 2005, a
12-month period of employment with the Employer or any Affiliate, whether or
not as an Employee, beginning on the date he first
completes an Hour of Service.  For the
purpose of determining whether an employee has completed a One-Year Period of
Service, the following rules shall apply:

 

(a)                                  If
an employee’s employment is terminated and he is later
reemployed within one year of the date that is the earlier of (i) his date of termination of service or (ii) the first day of
an absence from service immediately preceding his
date of termination, the period between
such date and his date of
reemployment shall be included as a period of employment in determining whether he has completed a
One-Year Period of Service.

 

(b)                                 If
an employee’s employment is terminated and he is later
reemployed more than one year after the date that is the earlier of (a) his date of termination of service or (b) the first day of
an absence from service immediately preceding his
date of termination, his period of
employment prior to such date shall be aggregated with his
period of employment after his reemployment in determining whether he has
completed a One-Year Period of Service.

 

(c)                                  For
the purpose of determining whether an employee has completed a One-Year Period
of Service, his Recognized Predecessor Employment shall be taken into account
as if it were employment with an Employer.

 

1.42                           “Participant” means any person who
has been admitted to participation in the Plan in accordance with Section 3.02
or Section 3.02A and has not ceased to be a Participant in accordance with
Section 3.05.  Except to the extent
otherwise specified, references to a

 

18

 

Participant shall be deemed also to refer to
a 401(k) Pension Program Participant and provisions of the Plan that apply to
Participants shall apply equally to 401(k) Pension Program Participants.

 

1.43                           “Plan” means the IBM Savings Plan, as
set forth in this document or as amended from time to time.  Effective as of January 1, 2002, the IBM
Stock Fund maintained pursuant to Section 5.01, together with any separate
sub-account established pursuant to Section 5.09(d) shall be designated as
an ESOP, within the meaning of Section 4975(e)(7) of the Code and shall be
a separate constituent plan.

 

1.44                           “Plan Year” means the 12-month period
beginning on any January 1, on or after the Effective Date.

 

1.44A                 “Predecessor Employment”
means employment with any entity prior to the date that (a) such entity becomes
a member of a controlled group of corporations that also includes any Employer
as a member, (b) substantially all of the assets of such entity are acquired by
a member of a controlled group of corporations that includes any Employer as a
member, or (c) such entity enters into a contractual relationship with an
Employer pursuant to which employees of such entity become Employees.  For purposes of this Section, the term “controlled
group of corporations” shall have the meaning specified in Section 414(b)
of the Code.

 

1.45                           “Profits” means both (a) the
accumulated earnings and profits of an Employer and (b) an Employer’s current
net taxable income, before deduction of Federal, state, or local

 

19

 

income taxes and before any contributions
made by the Employer to this Plan or any other employee benefit plan, as
determined by its independent public accountants in accordance with generally
accepted accounting principles.

 

1.45A                 “Program Eligibility Date”
means, with respect to a 401(k) Pension Program Participant, the earliest day
during his employment or reemployment as a Regular Employee that is coincident
with or next following the date as of which he completes or is deemed to have
completed a One-Year Period of Service.

 

1.45B                   “Recognized Predecessor Employment”
means Predecessor Employment that is taken into account under the Plan pursuant
to rules established by the Plan Administrator, which rules shall apply
uniformly to all individuals who become employees as the result of the same
transaction.

 

1.46                           “Regular Employee” means an Employee
as so defined by the rules and regulations of his Employer, who is (i)
compensated by salary or by commission, or partly by salary and partly by
commission, (ii) subject to the Employer’s performance evaluation program, and
(iii) employed for an indefinite period.

 

1.47                           “Regulations” means the Income Tax
Regulations codified at Title 26 of the Code of Federal Regulations, as
amended from time to time.  References to
specific sections of the Regulations shall be deemed to refer to such sections
as they may be amended or redesignated.

 

20

 

1.48                           “Rollover Account” means the account
credited with the Rollover Contributions made by a Participant and earnings on
those contributions.

 

1.49                           “Rollover Contributions” means
amounts contributed pursuant to Section 4.03.

 

1.50                           “Severance Date” means the earlier of
(a) the date an employee quits, retires, is discharged or dies, or (b) the
first anniversary of the date on which an employee is first absent from
service, with or without pay, but without interruption, for any reason such as
vacation, sickness, disability, layoff or leave of absence.

 

1.51                           “Statutory Compensation” means the
wages, salaries, and other amounts paid in respect of an employee for services
actually rendered to an Employer or an Affiliate, including, by way of example,
overtime, bonuses and commissions, but excluding deferred compensation, stock
options and other distributions which receive special tax benefits under the
Code.  For purposes of determining Highly
Compensated Employees and key employees under Appendix D, Statutory
Compensation shall include amounts contributed by the Employer pursuant to a
salary reduction agreement which are not includible in the gross income of the
employee under Sections 125, 132(f)(4) (with respect to Plan Years
commencing after December 31, 2000), 402(e)(3) (with respect to Plan Years
commencing prior to January 1, 1998), 402(g)(3) (with respect to Plan
Years beginning after December 31, 1997), 402(h) or 403(b), or 457 of the
Code.  For all other purposes, Statutory
Compensation shall also include the amounts referred to in the preceding
sentence, unless the Plan Administrator directs otherwise for a particular Plan
Year.  For Plan Years beginning after
1988, Statutory Compensation shall not exceed

 

21

 

the
Annual Dollar Limit, provided that such Annual Dollar Limit shall not be
applied in the determination of Highly Compensated Employees.

 

In determining the compensation of a
Participant for purposes of the application of the Annual Dollar Limit, for
Plan Years commencing prior to January 1, 1997, the rules of Section 414(q)(6)
(as in effect on the day before the date of enactment of Public Law 104-188)
shall apply, except that in applying such rules, the term “family” shall
include only the Spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of the Plan Year.  If, as a result of the application of such
rules, the Annual Dollar Limit is exceeded, then the limitation shall be
prorated among the affected individuals in proportion to each such individual’s
compensation as determined prior to the application of this limitation.

 

1.52                           “Subsidiary” means a corporation or
other form of business organization, the majority interest of which is owned
directly or indirectly by IBM.

 

1.53                           “Supplemental Employee” means an
Employee so designated by his Employer in accordance with its established
personnel practices who is not classified as a Regular
Employee.

 

1.53A                 “Total and Permanent Disability” means a
condition that provides a predicate for the payment of benefits from the
Disability Insurance Policy, and shall be determined in accordance with the
terms of Disability Insurance Policy and the Certificate of Disability
Insurance.

 

22

 

1.54                           “Trust” or “Trust
Fund” means the fund established as part of the Plan into which
contributions are to be made and from which benefits are to be paid in
accordance with the terms of the Plan.

 

1.55                           “Trustee” means the trustee holding
the funds of the Plan as provided in Article 12.

 

1.56                           “Valuation Date” means each trading
day of the New York Stock Exchange, except as may be determined by the Plan
Administrator in accordance with Section 6.02(b).

 

1.57                           “Variable Pay” means that portion of
a Participant’s Compensation which is determined and paid in accordance with
the provisions of the Employer’s annual performance-based compensation program.

 

23

 

ARTICLE 2.  PARTICIPATING EMPLOYERS

 

2.01                           Participation of IBM

 

IBM shall be a participating Employer under
the Plan, provided, however, that no Foreign Branch of IBM shall be included as
an Employer and IBM shall not be a participating Employer with respect to the
employees of any Foreign Branch.

 

2.02                           Participation by Domestic Subsidiaries

 

(a)                                  Domestic
Subsidiaries of IBM that were acquired or established prior to July 1,
1983 shall be participating Employers under the Plan, and shall be subject to
subsection (c).

 

(b)                                 Any
entity that becomes, is established as, or is acquired as a Domestic Subsidiary
on or after July 1, 1983 shall become a participating Employer under the
Plan if and only if the Committee authorizes its participation by resolution
and such entity takes such actions as may be necessary for it to adopt the
Plan.  With the consent of the Plan
Administrator, a Domestic Subsidiary that adopts the Plan may also adopt
special provisions that shall be applicable to its employees, which special
provisions shall be set forth in an Appendix to the Plan.  A Domestic Subsidiary that becomes a
participating Employer shall be subject to the provisions of subsection (c).

 

(c)                                  No
Foreign Branch of a Domestic Subsidiary shall be included as an Employer under
the Plan and no Domestic Subsidiary shall be a participating Employer under the
Plan with respect to the employees of a Foreign Branch.

 

24

 

ARTICLE 3.  ELIGIBILITY AND PARTICIPATION

 

3.01                           Eligibility

 

(a)                                  Except
as provided in subsection (c), each Employee of an Employer shall be
eligible to become a Participant at any time during service as a Regular
Employee.

 

(b)                                 Effective
as of January 1, 2004, each Employee of an Employer shall be eligible to
become a Participant at any time during service as a Long-Term Supplemental
Employee.

 

(c)                                  Effective
as of January 1, 2005, subsection (a) shall be applicable only to an
Employee who, (i) as of December 31, 2004, was (A) actively employed as a
Regular Employee, or (B) on authorized leave of absence from employment as a
Regular Employee and (ii) has remained in employment as a Regular Employee from
December 31, 2004 through the date as of which he files a Notice described
in Section 3.02(a) or (b).  An
Employee for whom subsection (a) is made inapplicable by this subsection shall
be eligible to become a Participant only in accordance with subsection (b)
or Section 3.02A.

 

3.02                           Participation

 

An eligible Employee who is eligible to
become a Participant in accordance with Section 3.01(a) or 3.01(b) shall
become a Participant as of:

 

(a)                                  the
first day of the first payroll period beginning after the date he files with
the Plan Administrator the Notice prescribed by the Plan Administrator in which
he:

 

(i)                                     makes the election described in Section 4.01, and

 

(ii)                                  authorizes the Employer to reduce his Compensation by the
percentage specified in his election; or, if earlier,

 

25

 

(b)                                 the
first day of the first payroll period beginning after July 1, 2004 after
the date he files with the Plan Administrator the Notice prescribed by the Plan
Administrator in which he

 

(i)                                     makes the election described in Section 4.01(h), and

 

(ii)                                  authorizes the Employer to withhold from his Compensation,
on an after-tax basis, the percentage specified in his election and to pay the
amount so withheld to the Plan on his behalf.

 

3.02A                 Participation by 401(k) Pension Program
Participants after December 31, 2004

 

(a)                                  The
provisions of this Section shall be applicable to any Employee who becomes
a Regular Employee after December 31, 2004.

 

(b)                                 An
Employee described in subsection (a) shall be eligible to become a 401(k)
Pension Program Participant as of the first payroll processing date that occurs
on or after the 30th day following his date of hire.

 

(c)                                  An
Employee who is eligible to become a 401(k) Pension Program Participant in
accordance with subsection (b) shall be deemed to have made an election in
accordance with Section 4.01(a), effective as of the date he first becomes
eligible to become a Participant, to reduce his Compensation by 3% and to have
that amount contributed to the Plan by his Employer as a Deferred Cash
Contribution, and shall become a 401(k) Pension Program Participant as of such
date, unless he revokes such deemed election in advance of the effective date
thereof, by electing, in accordance with Section 4.04(f), not to reduce his
Compensation.

 

(d)                                 An
Employee who is eligible to become a 401(k) Pension Program Participant in
accordance with subsection (b) but who does not become a Participant in
accordance

 

26

 

with
subsection (c), because he made an election in accordance with Section 4.04(f)
not to reduce his Compensation, shall remain eligible to become a Participant
and shall become a Participant in accordance with the procedures set forth in Section 3.02.  An Employee who becomes a Participant in
accordance with this subsection shall be a 401(k) Pension Program
Participant.

 

(e)                                  For
purposes of this Section, an Employee described in subsection (a) who had
become a Participant prior to January 1, 2005 and whose participation had not
terminated, in accordance with Section 3.05, prior to the first date
subsequent to December 31, 2004 on which he becomes a Regular Employee
shall nonetheless be deemed not to be a Participant as of such date.  The provisions of this subsection shall
not have any effect on the Employee’s rights under the Plan with respect to
that portion of his Account attributable to contributions made prior to January 1,
2005.

 

3.03                           Reemployment of Certain Former Employees and Former Participants

 

(a)                                  Any
person who is reemployed by an Employer after December 31, 2003 as a
Long-Term Supplemental Employee and who had not become a Participant prior to
the date of his reemployment, shall become a Participant upon the filing of
Notice in accordance with Section 3.02.

 

(b)                                 Any
person who is reemployed by an Employer after December 31, 2003 as a
Long-Term Supplemental Employee, who had become a Participant prior to the date
of his reemployment, but who had subsequently ceased to be a Participant in
accordance with Section 3.05, shall again become a Participant upon the
filing of Notice in accordance with Section 3.02.

 

27

 

(c)                                  Any
person who is reemployed by an Employer after December 31, 2003 as a
Long-Term Supplemental Employee, who had become a Participant prior to the date
of his reemployment, and who has not ceased to be a Participant in accordance
with Section 3.05, shall be permitted to make an election under Section 4.01
immediately upon reemployment by an as a Long-Term Supplemental Employee.

 

3.04                           Effect of Status Change on Participation

 

(a)                                  Except
as provided in subsection (b), a Participant who

 

(i)                                     had been employed by the Employer or an Affiliate as a
Regular Employee, then

 

(ii)                                  ceases to be a Regular Employee, but

 

(iii)                               remains in the employ of an Employer or an Affiliate

 

shall continue to be a
Participant in the Plan, but shall not be eligible to receive allocations of
Deferred Cash Contributions or Matching Contributions, and shall not be
eligible to make After-Tax Contributions, while his employment status is other
than as a Regular Employee.

 

(b)                                 Notwithstanding
the provisions of subsection (a), a Participant who

 

(i)                                     had been employed by the Employer or an Affiliate as a
Regular Employee, then

 

(ii)                                  ceases to be a Regular Employee, but

 

(iii)                               remains in the employ of an Employer or an Affiliate as a
Long-Term Supplemental Employee after December 31, 2003

 

shall, effective as of January 1,
2004, be eligible to receive allocations of Deferred Cash Contributions, and
shall.  effective
July 1, 2004, be eligible to make After-Tax Contributions, but ineligible
to receive allocations of Matching Contributions, while his employment status
remains that of a Long-Term Supplemental Employee.

 

28

 

(c)                                  A
Participant who

 

(i)                                     had been employed by the Employer or an Affiliate as a
Long-Term Supplemental Employee after December 31, 2003, then

 

(ii)                                  ceases to be a Long-Term Supplemental Employee, but

 

(iii)                               remains in the employ of
the Employer or an Affiliate (other than as a Regular Employee)

 

shall
continue to be a Participant in the Plan, but shall not be eligible to receive
allocations of Deferred Cash Contributions and shall not be eligible to make
After-Tax Contributions.

 

(d)                                 A
Participant who

 

(i)                                     had been employed by the Employer or an Affiliate as a
Long-Term Supplemental Employee after December 31, 2003, then

 

(ii)                                  ceased to be a Long-Term Supplemental Employee prior to January 1,
2005, but

 

(iii)                               upon ceasing to be a Long-Term Supplemental Employee
remained in the employ of the Employer as a Regular Employee, which status
became effective for the Participant prior to January 1, 2005,

 

shall
continue to be a Participant in the Plan, shall continue to be eligible to
receive allocations of Deferred Cash Contributions, shall be eligible to
receive allocations of Matching Contributions, and shall be eligible to make
After-Tax Contributions.

 

3.05                           Termination of Participation

 

Participation shall terminate on the latest
of (a) the date a Participant is no longer employed by an Employer or any
Affiliate, (b) the date that a Participant receives a

 

29

 

distribution
that reduces the balance of his Account to zero, or (c) the date of the Participant’s
death.

 

30

 

ARTICLE 4. 
CONTRIBUTIONS

 

4.01                           Deferred Cash Contributions and Catch-Up Contributions

 

(a)                                  A
Participant may elect in the Notice filed under Section 3.02(a), or Section 4.04(c),
or Section 4.05(b), as applicable, to reduce his Compensation payable
while a Participant by at least 1% and not more than 15%, in multiples of 1%,
and have that amount contributed to the Plan by his Employer as Deferred Cash
Contributions.  Effective as of January 1,
2002, the 15% maximum specified in the foregoing sentence shall be increased to
80%.  The amount of the reduction may, in
the discretion of the Plan Administrator, be rounded to the next higher or
lower multiple of $1.00 per pay period. 
Deferred Cash Contributions shall be further limited as provided in
subsections (c), (d), and (e) and in Sections 4.06, 4.09 and
4.10.  A Participant’s election pursuant
to this subsection shall become effective as soon as administratively
practicable after his provision of Notice, but shall in any event be effective
as of the first day of a payroll period. 
Any Deferred Cash Contributions shall be paid to the Trustees as soon as
practicable and shall be allocated to the Participant’s Deferred Account.  An election made by a Participant in
accordance with this subsection shall remain in effect until it is changed
in accordance with Section 4.04 or suspended in accordance with
Sections 4.05, 8.02(c)(iii), or 9.02(c)(i),
provided however, that any election shall cease to be effective upon a
Participant’s termination of employment.  
Effective for the period beginning on January 1, 2002 and ending on
December 31, 2004, a Participant may make separate Deferred Cash
Contribution elections with respect to that portion of his Compensation that is
not Variable Pay and with respect to that portion of his Compensation that is
Variable Pay.  Effective January 1,
2005, a Participant may make

 

31

 

separate
Deferred Cash Contribution Elections with respect to that portion of his
Compensation that is not Variable Pay and with respect to any portion of his
Compensation that is Variable Pay paid under a program maintained by an
Employer for Non-Executive Employees. 
Effective January 1, 2005, a Participant’s Deferred Cash
Contribution Election shall apply only to his Compensation as determined
without regard to any Variable Pay paid under any program maintained by an
Employer for Executive Employees and shall not be effective with respect to any
portion of his Compensation that is Variable Pay paid under any program
maintained by an Employer for Executive Employees.   Effective January 1, 2002, Deferred
Cash Contributions that are allocated to the IBM Stock Fund in accordance with
the provisions of Section 5.02 shall be deemed to be contributions to the
ESOP.

 

(b)                                 Notwithstanding
any other provision of this Section, the Plan Administrator, in its sole
discretion, may restrict the percentage of Compensation reduction that may be
elected by any Highly Compensated Employee, in order to achieve or maintain
compliance with the limitations described in Sections 4.06, 4.07, and
4.08.

 

(c)                                  In
no event shall the Participant’s Deferred Cash Contributions and similar
contributions made on his behalf by an Employer or an Affiliate to all plans,
contracts or arrangements subject to the provisions of Section 401(a)(30)
of the Code, in any calendar year commencing prior to January 1, 2002,
exceed $7,000, as adjusted from time to time pursuant to Section 402(g)(5)
of the Code (as in effect on the day before the date of enactment of Public Law
107-16).  The Participant’s Deferred Cash
Contributions and similar contributions made on his behalf by an Employer or an
Affiliate to all plans contracts or arrangements subject to the provisions of Section 401(a)(30) in calendar

 

32

 

years
beginning after December 31, 2001 and prior to January 1, 2007 shall
be limited in accordance with the following table:

 

	
  Calendar Year

  	
   

  	
  Dollar Limitation

  	
   

  
	
  2002

  	
   

  	
  $

  	
  11,000

  	
   

  
	
  2003

  	
   

  	
  $

  	
  12,000

  	
   

  
	
  2004

  	
   

  	
  $

  	
  13,000

  	
   

  
	
  2005

  	
   

  	
  $

  	
  14,000

  	
   

  
	
  2006

  	
   

  	
  $

  	
  15,000

  	
   

  

 

Deferred Cash Contributions made on a
Participant’s behalf with respect to any calendar year beginning after December 31,
2006 are limited to $15,000 (or such higher dollar limit as may be in effect
with respect to such year in accordance with Section 402(g)(4) of the Code (as amended and redesignated by Public Law
107-16), as in effect for calendar years beginning after December 31,
2001).  If a Participant’s Deferred Cash
Contributions in a calendar year reach the dollar limitation in effect for such
calendar year, his election of Deferred Cash Contributions for the remainder of
the calendar year will be canceled.  As of
the first pay period of the calendar year following such cancellation, the
Participant’s election of Deferred Cash Contributions shall again become
effective in accordance with his previous election.

 

(d)                                 If
a Participant makes elective deferrals, within the meaning of Section 402(g)(3)
of the Code, under any other qualified defined contribution plan maintained by
an Employer or Affiliate for any calendar year and the sum of such elective
deferrals and his Deferred Cash Contributions under
the Plan exceed the dollar limitation specified in subsection (c) for that
calendar year, then the amount by which such sum exceeds such limitation shall
be deemed Excess Deferrals for such calendar year.  The Participant shall be deemed to have
elected to receive a return from this Plan of the full amount of any Excess
Deferrals determined in accordance with this subsection.  A return of

 

33

 

Excess Deferrals pursuant to this subsection shall
be subject to the provisions of subsection (f).

 

(e)                                  If
a Participant makes elective deferrals, within the meaning of Section 402(g)(3)
of the Code, under a qualified defined contribution plan maintained by an
employer other than any Employer or any Affiliate for any calendar year, and
the sum of such elective deferrals and his Deferred Cash Contributions under
the Plan exceed the dollar limitation specified in Section 4.01(c) for
that calendar year, then the amount by which such sum exceeds such limitation
shall be deemed Excess Deferrals for such calendar year.  The Participant may elect to receive a return
from this Plan of all or a portion of any Excess Deferrals determined in
accordance with this subsection, provided, however, that the Plan shall not be
required to make a return of Excess Deferrals, unless the Participant notifies
the Plan Administrator, in writing, by March 1 of the following calendar
year of the amount of the Excess Deferrals that the Participant wishes to have
returned by this Plan.  A return of
Excess Deferrals pursuant to this subsection shall be subject to the
provisions of subsection (f).

 

(f)                                    Any
return of Excess Deferrals required under subsection (d) or (e) shall
include Attributed Earnings and shall be made no later than the April 15
following the end of the calendar year in which the Excess Deferrals were
made.  The amount of Excess Deferrals to
be returned for any calendar year shall be reduced by any Deferred Cash
Contributions previously returned to the Participant under Section 4.06
for that calendar year.  In the event any
Deferred Cash Contributions required to be returned under subsection (d)
or (e) were matched by Matching Contributions under Section 3.02, those
Matching Contributions, together with Attributed Earnings, shall be forfeited
and used to reduce Employer contributions.

 

34

 

(g)                                 Effective
for Plan Years commencing after December 31, 2001, a Participant who
satisfies the requirements of paragraph (i) for a Plan Year may elect, in
accordance with paragraph (ii), to reduce his Compensation and to have the
amount by which his Compensation is so reduced contributed to the Plan by his
Employer as a Catch-Up Contribution, provided, however, that such Catch-Up
Contributions shall be subject to the conditions set forth in paragraphs (iii),
(iv), and (v).

 

(i)                                     A
Participant satisfies the requirements of this paragraph for a Plan Year if:

 

(A)                              his 50th birthday is coincident with or prior to
the last day of the Plan Year; and

 

(B)                                the Deferred Cash Contributions made on his behalf for the
Plan Year have reached the applicable dollar limitation for the calendar year
coincident with such Plan Year, as set forth in subsection (c).

 

(ii)                                  A
Participant described in paragraph (i) shall be deemed to have elected to
continue to reduce his Compensation at the rate in effect under his most recent
Deferred Cash Contribution election and to have the amount contributed to the
Plan by his Employer as a Catch-Up Contribution, unless he provides Notice, in
accordance with procedures established by the Plan Administrator, that he
elects not to continue to reduce his Compensation.

 

(iii)                               Any
Catch-Up Contributions shall be paid to the Trustees as soon as practicable and
shall be allocated to the Participant’s Catch-Up Account.

 

(iv)                              A
Participant’s Catch-Up Contributions in calendar years beginning after December 31,
2001 and prior to January 1, 2007 shall be limited in accordance with the
following table:

 

35

 

	
  Calendar Year

  	
   

  	
  Dollar Limitation

  	
   

  
	
  2002

  	
   

  	
  $

  	
  1,000

  	
   

  
	
  2003

  	
   

  	
  $

  	
  2,000

  	
   

  
	
  2004

  	
   

  	
  $

  	
  3,000

  	
   

  
	
  2005

  	
   

  	
  $

  	
  4,000

  	
   

  
	
  2006

  	
   

  	
  $

  	
  5,000

  	
   

  

 

Catch-Up Contributions made on a Participant’s
behalf with respect to any calendar year beginning after December 31, 2006
shall limited to $5,000, as adjusted in accordance with Section 414(v)(2)(C)
of the Code.  In no event shall the
Participant’s Catch-Up Contributions for a Plan Year exceed the excess of his
Statutory Compensation for such Plan Year over his Deferred Cash Contributions
for such Plan Year.

 

(v)                                 Catch-Up
Contributions that are allocated to the IBM Stock Fund in accordance with the
provisions of Section 5.02 shall be deemed to be contributions to the
ESOP.

 

(vi)                              The
provisions of this subsection shall be subject to the requirements of Section 414(v)
of the Code and Regulations thereunder.

 

(h)                                 Effective
July 1, 2004, a Participant may elect in the Notice filed under Section 3.02(b)
or Section 4.04(e), or Section 4.05(b), as applicable, to make
After-Tax Contributions, provided, however, that After-Tax Contributions shall
be subject to the conditions set forth in paragraphs (i), (ii), and (iii).

 

(i)                                     The
Participant’s election to make After-Tax Contributions shall specify the rate
of After-Tax Contributions as a percentage of his Compensation, which rate
shall not exceed 10% and shall be an integral multiple of 1%.

 

(ii)                                  Any
After-Tax Contributions shall be paid to the Trustee as soon as practicable and
shall be allocated to the Participant’s After-Tax Account.

 

36

 

(iii)                               After-Tax
Contributions that are allocated to the IBM Stock Fund in accordance with the
provisions of Section 5.02 shall be deemed to be contributions to the
ESOP.

 

4.02                           Employer Matching Contributions

 

(a)                                  (i)                                     Each
Employer shall contribute, out of its Profits, on behalf of each of its
Participants who is not a 401(k) Pension Program Participant and who elects to
make Deferred Cash Contributions, an amount equal to 50% of the Deferred Cash
Contributions made on behalf of the Participant to the Plan during each payroll
period, provided, however, that for this purpose Deferred Cash Contributions in
excess of 6% of the Participant’s Compensation for a payroll period shall not
be taken into account.  In no event shall
the Matching Contributions pursuant to this Section with respect to a Plan
Year exceed 3% of the Participant’s Compensation while a Participant during
such Plan Year.  Employer Matching
Contributions that are allocated to the IBM Stock Fund in accordance with the
provisions of Section 5.02 shall be deemed to be contributions to the
ESOP.

 

(ii)                                  Each Employer shall
contribute, out of its Profits, on behalf of each of its Participants who (A)
is a 401(k) Pension Program Participant, (B) elects or is deemed to have
elected to make Deferred Cash Contributions, and (C) has, on or before the last
day of the payroll period, attained his Program Eligibility Date an amount
equal to 100% of the Deferred Cash Contributions made on behalf of the
Participant to the Plan during each payroll period, provided, however, that for
this purpose Deferred Cash Contributions in excess of 6% of the Participant’s
Compensation for a payroll period shall not be taken into account.  In no event shall the Matching Contributions
pursuant to

 

37

 

this
Section with respect to a Plan Year exceed 6% of the Participant’s
Compensation while a Participant during such Plan Year.

 

(iii)                               Employer Matching
Contributions made in accordance with paragraph (i) or paragraph (ii) shall be
paid to the Trustee as soon as practicable and shall be allocated to the
Participant’s Employer Account.

 

(iv)                              Effective as of January 1,
2005, if as of the last day of the Plan Year, the amount of Matching
Contributions allocated in accordance with paragraph (ii) for such Plan Year to
the Employer Account of a 401(k) Pension Program Participant, who has been a
Non-Executive Employee at all times during such Plan Year and who remains in
employment with the Employer on the last day of such Plan Year, is less than
the lesser of (A) 6% of his Compensation or (B) the amount contributed on
behalf of such Participant as Deferred Cash Contributions for the Plan Year,
the Employer shall make a special Matching Contribution on behalf of such
Participant in an amount equal to the lesser of (X) such difference or (Y) the
excess of (I) the dollar limitation determined in accordance with Section 4.01(c)
over (II) the amount of Matching Contributions allocated in accordance with
paragraph (ii). For purposes of this paragraph, a Participant’s Compensation
shall not include any amount earned prior to the first day of the payroll
period that includes his Program Eligibility Date, shall not include any amount
earned during a period in which Deferred Cash Contributions were not permitted
to be made on his behalf in accordance with Sections 8.02(c) or 9.02(c)(i), and
shall not include any amount of Variable Pay attributable to any period in any
prior Plan Year during which he was an Executive Employee.  Any special Matching Contribution made pursuant
to this paragraph shall be paid to the Trustees as soon as practicable
following the close of the

 

38

 

Plan Year to
which it relates and the determination of the amount thereof by the Plan
Administrator or its designee.

 

(v)                                 Employer Matching
Contributions that are allocated to the IBM Stock Fund in accordance with the
provisions of Section 5.02 shall be deemed to be contributions to the
ESOP.

 

(b)                                 Matching
Contributions are made expressly conditional on the Plan satisfying the
provisions of Sections 4.01(c), (d), and (e), 4.06, 4.07, and 4.08.  If any portion of the Deferred Cash
Contribution to which a Matching Contribution relates is returned to the
Participant pursuant to Section 4.01(d) or (e), 4.06(c), or 4.08, the
corresponding Matching Contribution shall be forfeited and if any amount of the
Matching Contribution is deemed an Excess Aggregate Contribution under Section 4.07
such amount shall be forfeited in accordance with the provisions of that Section.

 

(c)                                  Effective
only for the period beginning on January 1, 2002 and ending on December 31,
2004, and solely for purposes of subsection (a),
a Participant’s Deferred Cash Contributions shall be deemed to include his
Catch-Up Contributions.

 

(d)                                 Effective
January 1, 2004, and solely for purposes of subsection (a), a
Participant’s Compensation shall not include any amount earned while employed
by the Employer or an Affiliate as a Long-Term Supplemental Employee.

 

4.03                           Rollover Contributions

 

(a)                                  Without
regard to any limitations on contributions set forth in this Article 4,
the Plan may receive from or on behalf of a Participant who is then a Regular
Employee, in cash, as a Rollover Contribution, any amount previously
distributed or deemed to be distributed to him

 

39

 

(i)                                     from a plan that satisfies the requirements of Section 401(a)
of the Code, or

 

(ii)                                  from an individual retirement account described in Section 408(a)
of the Code, or

 

(iii)                               from
an eligible deferred compensation plan described in Section 457(b) of the
Code that is maintained by an employer that is described in Section 457(e)(1)(A)
of the Code,

 

(iv)                              from an annuity contract described in Section 403(b) of
the Code, or

 

(v)                                 from
the Federal Thrift Savings Plan, in a distribution described in Section 8433(c)
of Title 5 of the United States Code,

 

provided, however, clauses (ii), (iii), and
(iv) of this sentence shall be effective only with respect to Rollover
Contributions made subsequent to March 31, 2002 and clause (v) of this
sentence shall be effective only with respect to Rollover Contributions made
subsequent to December 31, 2001. 
The Plan may receive such amount either directly from the Participant,
or from an individual retirement account that satisfies the requirements of Section 408(d)(3)(A)(ii) of the Code, or from a qualified plan in the
form of a direct rollover that satisfies the requirements of Section 401(a)(31)
of the Code.

 

(b)                                 Without
regard to any limitations on contributions set forth in this Article 4,
the Plan may receive from or on behalf of a Participant who has terminated
employment with the Employer subsequent to June 30, 1999, in cash, as a
Rollover Contribution, any amount previously distributed or deemed to be
distributed to him from a retirement plan sponsored by IBM that is qualified
under Section 401(a) of the Code. 
The Plan may receive such amount either directly from the Participant,
or from such qualified plan in the form of a direct rollover that satisfies the
requirements of Section 401(a)(31) of the Code.

 

40

 

(c)                                  Notwithstanding
the provisions of subsections (a) or (b), the Plan shall not accept any
amount as a Rollover Contribution, unless such amount is eligible to be rolled
over to a qualified trust in accordance with applicable law and the Participant
provides evidence satisfactory to the Plan Administrator that such amount
qualifies as an eligible rollover distribution, within the meaning of Section 402(c)(4) of the Code. 
Unless received by the Plan in the form of a direct rollover, the
Rollover Contribution must be paid to the Trustee on or before the 60th day
after the day it was received by the Employee. 
For purposes of this Section, the terms “eligible rollover distribution”
and “direct rollover” shall have the meaning specified in Section 10.14.

 

(d)                                 Any
Rollover Contribution shall be allocated to a Participant’s Rollover
Account.  Any Rollover Contribution that
is allocated to the IBM Stock Fund in accordance with the provisions of Section 5.02
shall be deemed to be a contribution to the ESOP.

 

4.04                           Changes in Contribution Rates

 

(a)                                  The
percentage of Compensation designated by a Participant under Section 4.01(a)
shall automatically apply to increases and decreases in his Compensation.  A Participant may change his election under Section 4.01(a)
at any time during the Plan Year by giving such advance Notice as the Plan
Administrator shall prescribe.  The
changed percentage shall become effective as of the first day of the first
payroll period beginning after the provision of the Notice, or as soon
thereafter as may be administratively practicable.

 

(b)                                 Effective
as of January 1, 2004, and solely for purposes of subsection (a), a
Participant’s deemed election to make Catch-Up Contributions, in accordance
with Section 4.01(g)(ii), shall be treated as a
designation under Section 4.01(a) for the period

 

41

 

beginning on the date that the Participant
first satisfies the condition set forth in Section 4.01(g)(i)(B) for a
Plan Year and ending on the last day of such Plan Year.

 

(c)                                  If
an eligible Employee has become a Participant in accordance with Section 3.02(b),
then he shall be permitted to make an initial designation under Section 4.01(a)
at any time thereafter, in accordance with the procedure specified in subsection (a).

 

(d)                                 The
percentage of Compensation designated by a Participant under Section 4.01(h)
shall automatically apply to increases and decreases in his Compensation.  A Participant may change his election under Section 4.01(h)
at any time during the Plan Year by giving such advance Notice as the Plan
Administrator shall prescribe.  The
changed percentage shall become effective as of the first day of the first
payroll period beginning after the provision of the Notice, or as soon
thereafter as may be administratively practicable.

 

(e)                                  If
an eligible Employee has become a Participant in accordance with Section 3.02(a),
then he shall be permitted to make an initial election under Section 4.01(h)
at any time thereafter, in accordance with the procedure specified in subsection (a).

 

(f)                                    An
eligible Employee who is deemed, in accordance with Section 3.02A(c), to
have made an election under Section 4.01(a) to commence Deferred Cash
Contributions, shall be permitted to change such election, either before the
first payroll period for which it is effective, or at any time thereafter, in
accordance with the procedure specified in subsection (a).  An election in accordance with this subsection to
reduce the percentage of his Deferred Cash Contributions to 0% shall be deemed
a revocation of such election for purposes of Section 4.05.

 

42

 

(g)                                 If
an eligible Employee has become a Participant in accordance with Section 3.02A(c),
then he shall be permitted to make an initial election under Section 4.01(h)
at any time thereafter, in accordance with the procedure specified in subsection (a).

 

4.05                           Suspension and Resumption of Contributions

 

(a)                                  A
Participant may suspend and/or revoke his election under Section 4.01(a)
or Section 4.01(h) by giving such advance Notice as the Plan Administrator
shall prescribe.  The suspension or
revocation shall become effective as of the first day of the first payroll
period beginning after the provision of the Notice, or as soon thereafter as
may be administratively practicable.

 

(b)                                 A
Participant who has suspended and/or revoked his election under Section 4.01(a)
or Section 4.01(h) may elect to reinstate such election by giving such
advance Notice as the Plan Administrator shall prescribe.  Such reinstatement shall be effective as of
the first day of the first payroll period beginning after the provision of the
Notice, or as soon thereafter as may be administratively practicable.

 

4.06                           Actual Deferral Percentage Test

 

(a)                                  With
respect to each Plan Year commencing on or after January 1, 1997, the
Actual Deferral Percentage for that Plan Year for Highly Compensated Employees
of each Employer who are Participants or eligible to become Participants for
that Plan Year shall not exceed the greater of:

 

(i)                                     the
product of:

 

(A)                              Actual
Deferral Percentage for the preceding Plan Year for all Non-Highly Compensated
Employees of such Employer for the preceding Plan Year

 

43

 

who were Participants or eligible to become
Participants during such preceding Plan Year, and

 

(B)                                1.25,
or

 

(ii)                                  the
lesser of:

 

(A)                              the
sum of:

 

(I)                                    the
Actual Deferral Percentage for the preceding Plan Year for all Non-Highly
Compensated Employees of such Employer for the preceding Plan Year who were
Participants or eligible to become Participants during the preceding Plan Year,
and

 

(II)                                2.00%,
or

 

(B)                                the
product of:

 

(I)                                    the
Actual Deferral Percentage for the preceding Plan Year for all Non-Highly
Compensated Employees of such Employer for the preceding Plan Year who were
Participants or eligible to become Participants during the preceding Plan Year,
and

 

(II)                                2.00.

 

(b)                                 For
purposes of subsection (a), an Employer, with the consent of the Plan
Administrator, may elect to use the Actual Deferral Percentage for Non-Highly
Compensated Employees for the Plan Year being tested rather than the preceding
Plan Year, provided that any such election, except an election applicable to a
Plan Year ending before January 1, 2000, may not be changed for any
subsequent Plan Year, except as provided by the Secretary of the Treasury, and
that any such election is incorporated in an amendment to the Plan adopted by
the Plan Administrator, pursuant to Section 13.01(c).

 

44

 

(c)                                  If
the Plan Administrator determines that the limitation under subsection (a)
has been exceeded in any Plan Year, with respect to the Highly Compensated
Employees of any Employer, the following provisions shall apply with respect to
such group of Highly Compensated Employees:

 

(i)                                     The
Actual Deferral Ratio of the Highly Compensated Employee with the highest
Actual Deferral Ratio shall be reduced to the extent necessary to satisfy the
limitation set forth in subsection (a) or to cause such ratio to equal the
Actual Deferral Ratio of the Highly Compensated Employee with the next highest
ratio.  This process shall be repeated
until the limitation set forth in subsection (a) is satisfied.  The sum of the amounts of Deferred Cash
Contributions made by each Highly Compensated Employee in excess of the amount
permitted under his revised deferral ratio shall be deemed to be Excess
Contributions.  This total dollar amount
of Excess Contributions shall then be allocated to some or all Highly
Compensated Employees in accordance with the provisions of paragraph (ii).

 

(ii)                                  The
Deferred Cash Contributions of the Highly Compensated Employee with the highest
dollar amount of Deferred Cash Contributions shall be reduced by the lesser of
(A) the amount required to cause that Participant’s Deferred Cash Contributions
to equal the dollar amount of the Deferred Cash Contributions of the Highly
Compensated Employee with the next highest dollar amount of Deferred Cash
Contributions, or (B) an amount equal to the total Excess Contributions.  This procedure shall be repeated until all
Excess Contributions are allocated.  The
amount of Excess Contributions allocated to each Highly

 

45

 

Compensated Employee, together with
Attributed Earnings, shall be distributed to him in accordance with the
provisions of paragraph (iii).

 

(iii)                               The
Excess Contributions allocated to a Participant shall be paid to the
Participant before the close of the Plan Year following the Plan Year in which
the Excess Contributions were made, and to the extent practicable, within 21⁄2
months of the close of the Plan Year in which the Excess Contributions were
made.  Any Excess Contributions for any
Plan Year shall be reduced by any Deferred Cash Contributions previously
returned to the Participant under Section 4.01 for that Plan Year.  In the event any Deferred Cash Contributions
returned under this Section were matched by Matching Contributions under Section 4.02,
such corresponding Matching Contributions, with Attributed Earnings, shall be
forfeited and used to reduce Employer contributions.

 

(d)                                 For
Plan Years commencing after December 31, 2001, the Actual Deferral
Percentage Test described in this Section shall be applied separately with
respect to Deferred Cash Contributions that are deemed, pursuant to Section 4.01(a)
to be contributions to the ESOP and with respect to Deferred Cash Contributions
that are not deemed to be contributions to the ESOP.

 

4.07                           Actual Contribution Percentage Test

 

(a)                                  With
respect to each Plan Year commencing on or after January 1, 1997, the
Actual Contribution Percentage for that Plan Year for Highly Compensated
Employees of each Employer who are Participants or eligible to become
Participants for that Plan Year shall not exceed the greater of:

 

(i)                                     the
product of:

 

46

 

(A)                              the
Actual Contribution Percentage for the preceding Plan Year for all Non-Highly
Compensated Employees of such Employer for the preceding Plan Year who were
Participants or eligible to become Participants during the preceding Plan Year,
and

 

(B)                                1.25,
or

 

(ii)                                  the
lesser of:

 

(A)                              the
sum of

 

(I)                                    the
Actual Contribution Percentage for the preceding Plan Year for all Non-Highly
Compensated Employees of such Employer for the preceding Plan Year who were
Participants or eligible to become Participants during the preceding Plan Year
and

 

(II)                                2.00%,
or

 

(B)                                the
product of:

 

(I)                                    the
Actual Contribution Percentage for the preceding Plan Year for all Non-Highly
Compensated Employees of such Employer for the preceding Plan Year who were
Participants or eligible to become Participants during the preceding Plan Year,
and

 

(II)                                2.00.

 

(b)                                 For
purposes of subsection (a), an Employer, with the consent of the Plan
Administrator, may elect to use the Actual Contribution Percentage for
Non-Highly Compensated Employees for the Plan Year being tested rather than the
preceding Plan Year, provided that any such election, except an election
applicable to a Plan Year ending before January 1, 2000, once made may not
be changed for any subsequent Plan Year, except as provided by the Secretary of
the Treasury and that any such election is incorporated

 

47

 

in an amendment to the Plan adopted by the
Plan Administrator, pursuant to Section 13.01(c).

 

(c)                                  If
the Plan Administrator determines that the limitation under subsection (a)
has been exceeded in any Plan Year with respect to the Highly Compensated
Employees of any Employer, the following provisions shall apply with respect to
such group of Highly Compensated Employees:

 

(i)                                     The
Actual Contribution Ratio of the Highly Compensated Employee with the highest
Actual Contribution Ratio shall be reduced to the extent necessary to satisfy
the limitation set forth in subsection (a) or to cause such ratio to equal
the Actual Contribution Ratio of the Highly Compensated Employee with the next
highest Actual Contribution Ratio.  This
process shall be repeated until the limitation set forth in subsection (a)
is satisfied.  The sum of the amounts of
Matching Contributions on behalf of plus After-Tax Contributions made by each
Highly Compensated Employee in excess of the amount permitted under his revised
contribution ratio shall be deemed Excess Aggregate Contributions.  This total dollar amount of Excess Aggregate
Contributions shall then be allocated to some or all Highly Compensated
Employees in accordance with the provisions of paragraph (ii).

 

(ii)                                  The
sum of the Matching Contributions and After-Tax Contributions of the Highly
Compensated Employee with the highest dollar amount of such contributions shall
be reduced by the lesser of (A) the amount required to cause the sum of that
Participant’s Matching Contributions and After-Tax Contributions to equal the
dollar amount of such contributions of the Highly Compensated Employee with the
next highest dollar amount of such contributions, or (B) an amount equal

 

48

 

to the total Excess Aggregate
Contributions.  This procedure shall be
repeated until all Excess Aggregate Contributions are allocated.  Effective for Plan Years beginning after December 31,
2003he amount of Excess Aggregate Contributions allocated to each Highly
Compensated Employee, together with Attributed Earnings, shall be distributed
or forfeited in accordance with the provisions of paragraph (iii).

 

(iii)                               Excess
Aggregate Contributions allocated to a Highly Compensated Employee under
paragraph (ii) shall be distributed or forfeited as follows:

 

(A)                              After-Tax
Contributions, to the extent of the Excess Aggregate Contributions, together
with Attributed Earnings, shall be paid to the Participant and then, if
necessary,

 

(B)                                so
much of the Matching Contributions together with Attributed Earnings, as shall
be necessary, as shall be necessary to equal the balance of the Excess
Aggregate Contributions shall be forfeited and applied to reduce Employer
contributions.

 

(iv)                              Any
repayment or forfeiture of Excess Aggregate Contributions shall be made before
the close of the Plan Year following the Plan Year for which the Excess
Aggregate Contributions were made, and to the extent practicable, any repayment
or forfeiture shall be made within 21⁄2 months of the close of the Plan Year in
which the Excess Aggregate Contributions were made.

 

(d)                                 For
Plan Years commencing after December 31, 2001 and prior to January 1,
2004, the Actual Contribution Percentage Test described in this Section shall
be applied separately with respect to Employer Matching Contributions that are
deemed, pursuant to Section 4.02(a) to be contributions to the ESOP and
with respect to Employer

 

49

 

Matching Contributions that are not deemed to
be contributions to the ESOP.  For Plan
Years commencing after December 31, 2003, the Actual Contribution
Percentage Test described in this Section shall be applied separately (i)
with respect to the sum of Employer Matching Contributions that are deemed,
pursuant to Section 4.02(a), to be contributions to the ESOP and After-Tax
Contributions that are deemed, pursuant to Section 4.01(h)(iii), to be
contributions to the ESOP, and (ii) with respect to the sum of Employer
Matching Contributions and After-Tax Contributions that are not deemed to be
contributions to the ESOP.

 

4.08                           Aggregate Contribution Limitation

 

Notwithstanding the provisions of
Sections 4.06 and 4.07, for Plan Years commencing prior to January 1,
2002, in no event shall the sum of the Actual Deferral Percentage of the group
of eligible Highly Compensated Employees of any Employer and the Actual
Contribution Percentage of such group, after applying the provisions of
Sections 4.06 and 4.07, exceed the “aggregate limit” as provided in Section 401(m)(9)
of the Code and the Regulations issued thereunder.  In the event the aggregate limit is exceeded
for any Plan Year, the Contribution Percentages of the Highly Compensated
Employees of such Employer shall be reduced to the extent necessary to satisfy
the aggregate limit in accordance with the procedure set forth in Section 4.07.

 

4.09                           Additional Discrimination Testing Provisions

 

(a)                                  If
any Highly Compensated Employee is a member of another qualified plan of the
Employer or an Affiliate, other than an employee stock ownership plan described
in Section 4975(e)(7) of the Code or any other qualified plan which must
be mandatorily

 

50

 

disaggregated from this Plan under Section 410(b)
of the Code, which includes a qualified cash or deferred arrangement within the
meaning of Section 401(k) of the Code or matching contributions within the
meaning of Section 401(m) of the Code, or under which the Highly
Compensated Employee may make employee contributions other than by elective
deferral, within the meaning of Section 402(g)(3) of the Code, the Plan
Administrator shall implement rules, which shall be uniformly applicable to all
employees similarly situated, to take into account all such contributions by or
on behalf of the Highly Compensated Employee under all such plans in applying
the limitations of Sections 4.06, 4.07, and 4.08.  If any other such qualified plan has a plan
year other than the Plan Year, the contributions to be taken into account in
applying the limitations of Sections 4.06, 4.07, and 4.08 will be those
made in the plan years ending with or within the same calendar year.

 

(b)                                 In
the event that this Plan is aggregated with one or more other plans to satisfy
the requirements of Sections 401(a)(4) or 410(b) of the Code, other than
for purposes of the average benefit percentage test under Section 410(b)(2)(A)(ii)
of the Code, or if one or more other plans is aggregated with this Plan to
satisfy the requirements of such sections of the Code, then the provisions of
Sections 4.06, 4.07, and 4.08 shall be applied by determining the Actual
Deferral Percentage and Actual Contribution Percentage of employees as if all
such plans were a single plan.  If this
Plan is permissively aggregated with any other plan or plans for purposes of
satisfying the provisions of Section 401(k)(3) of the Code, the aggregated
plans must also satisfy the requirements of Sections 401(a)(4) and 410(b)
of the Code as though they were a single plan.  Plans may be aggregated under this subsection (b)
only if they have the same plan year.

 

51

 

(c)                                  Notwithstanding
any provision of the Plan to the contrary, if employees included in a unit of
employees covered by a collective bargaining agreement are participating in the
Plan and not more than 2% of such employees are Highly Compensated Employees or
professionals, within the meaning of Section 1.410(b)-9 of the
Regulations, then such employees shall be disregarded in applying the
provisions of Section 4.06, 4.07, and 4.08.  However, Section 4.06 shall be applied
separately for each group of collectively bargained employees.

 

4.10                           Maximum Annual Additions

 

(a)                                  The
annual addition to a Participant’s Account for any Plan Year, when added to the
Participant’s annual addition for that Plan Year under any other qualified
defined contribution plan of the Employer or an Affiliate, shall not exceed an amount
which is equal to the lesser of:

 

(i)                                     for
Plan Years commencing prior to January 1, 2002, 25% of his aggregate
remuneration for that Plan Year and for Plan Years commencing subsequent to December 31,
2001, 100% of his remuneration for that Plan Year; or

 

(ii)                                  for
Plan Years commencing prior to January 1, 2002, $30,000, and for Plan
Years commencing subsequent to December 31, 2001, $40,000, each as
adjusted pursuant to Section 415(d) of the Code.

 

The Plan Year shall be the “limitation year”
for purposes of Section 415 of the Code.

 

(b)                                 For
purposes of this Section, the “annual addition” to a Participant’s Account
under this Plan or any other qualified defined contribution plan maintained by
the Employer or an Affiliate, including any provision of a qualified defined
benefit plan that is required to be

 

52

 

treated as a defined contribution plan in
accordance with Section 414(k)(2) of the Code shall be the sum of:

 

(i)                                     the
total contributions, including Deferred Cash Contributions, made on the
Participant’s behalf by the Employer and all Affiliates,

 

(ii)                                  all
Participant contributions, exclusive of any Rollover Contributions, and

 

(iii)                               forfeitures,
if applicable, that have been allocated to the Participant’s Accounts under
this Plan or his accounts under any other such qualified defined contribution
plan, and

 

(iv)                              amounts
described in Sections 415(1)(1) and 419A(d)(2) allocated to the
Participant solely for purposes of clause (ii) of subsection (a).

 

For purposes of this subsection, any Deferred
Cash Contributions distributed under the provisions of Section 4.01 or
4.06, any After-Tax Contributions distributed under the provisions of Section 4.07,
and any Matching Contributions distributed or forfeited under the provisions of
Section 4.07 or 4.08 shall be included in the annual addition for the year
allocated.

 

(c)                                  For
purposes of this Section, the term “remuneration” with respect to any
Participant shall mean the wages, salaries and other amounts paid in respect of
such Participant by the Employer or an Affiliate for personal services actually
rendered, and shall include elective deferrals within the meaning of Section 402(g)(3)
of the Code and amounts contributed or deferred by the Employer at the election
of the Participant which are not includible in the gross income of the
Participant under Sections 125, 132(f)(4) (with respect to Plan Years
beginning after December 31, 2000), or 457 of the Code, but shall exclude
deferred compensation, stock options and other distributions which receive
special tax benefits under the Code. 
Notwithstanding the foregoing, for limitation years

 

53

 

commencing prior to January 1, 1998,
remuneration shall exclude amounts contributed by the Employer pursuant to a
salary reduction agreement which are not includible in the gross income of the
employee under Sections 125, 402(e)(3) or 457 of the Code.

 

(d)                                 If
the annual addition to a Participant’s Account for any Plan Year, prior to the
application of the limitation set forth in subsection (a) above, exceeds
that limitation due to a reasonable error in estimating a Participant’s annual
compensation or in determining the amount of Deferred Cash Contributions that
may be made with respect to a Participant under Section 415 of the Code,
or as the result of the allocation of forfeitures, then the amount of
contributions credited to the Participant’s Account in that Plan Year shall be
adjusted to the extent necessary to satisfy that limitation in accordance with
the following order of priority:

 

(i)                                     Effective
for Plan Years beginning after December 31, 2003, the Participant’s
After-Tax Contributions under Section 4.01(h) shall be reduced to the
extent necessary.  The amount of the
reduction shall be returned to the Participant, together with any Attributed
Earnings.

 

(ii)                                  The
Participant’s unmatched Deferred Cash Contributions under Section 4.01
shall be reduced to the extent necessary. 
The amount of the reduction shall be returned to the Participant
together with any Attributed Earnings.

 

(iii)                               The
Participant’s matched Deferred Cash Contributions and corresponding Matching
Contributions shall be reduced to the extent necessary.  The amount of the reduction attributable to
the Participant’s matched Deferred Cash Contributions shall be returned to the
Participant together with any Attributed Earnings, and the amount attributable
to the Matching Contributions together

 

54

 

with any Attributed Earnings shall be
forfeited and used to reduce subsequent contributions payable by the Employer.

 

Any Deferred Cash Contributions returned to a
Participant under this subsection shall be disregarded in applying the
dollar limitation on Deferred Cash Contributions under Section 4.01(c),
and in performing the Actual Deferral Percentage Test under Section 4.06.

 

(e)                                  For
Plan Years beginning prior to January 1, 2000, if a Participant is a
participant in any qualified defined benefit plan maintained by the Employer or
an Affiliate that is required to be taken into account for purposes of applying
the combined plan limitations contained in Section 415(e) of the Code,
then for any year the sum of the defined benefit plan fraction and the defined
contribution plan fraction, as such terms are defined in said Section 415(e),
shall not exceed 1.0.  If for any year
the foregoing combined plan limitation would be exceeded, the benefits provided
under any defined benefit plan maintained by an Employer or Affiliate and the
contributions allocated under any other defined contribution plan maintained by
the Employer or an Affiliate shall be discontinued, suspended or reduced, as
applicable, before any adjustments to a Participant’s Account are made in
accordance with subsection (d).

 

4.11                           Contributions for Periods of Military Leave

 

The provisions of this Section 4.11 are
effective as of December 12, 1994.

 

(a)                                  Without
regard to any limitations on contributions set forth in this Article 4, a
Participant who is absent from employment because of a period of service in the
uniformed services of the United States beginning on or after August 1,
1990 and whose right to reemployment is protected under the Uniformed Services
Employment and

 

55

 

Reemployment Rights Act of 1994, may,
subsequent to his return to employment as a Regular Employee, elect to
contribute to the Plan, as a make-up contribution, the Deferred Cash
Contributions that could have been contributed to the Plan in accordance with
the provisions of the Plan, had he remained continuously employed by the
Employer throughout such period of absence. 
The amount of make-up contributions shall be determined on the basis of
the Participant’s Compensation in effect immediately prior to the period of
absence, and the terms of the Plan at such time.  Any Deferred Cash Contributions so determined
shall be subject to the limitations provided in Sections 4.01(c), 4.06,
4.07, and 4.08 with respect to the Plan Year or Plan Years to which such contributions
relate, rather than the Plan Year in which payment is made.  Any payment to the Plan described in this subsection must
be made during the applicable repayment period. 
The applicable repayment period shall begin on the latest of:  (i) the Participant’s date of reemployment,
(ii) October 13, 1996, or (iii) date on which the Employer notifies the
Employee of his rights under this Section. 
The applicable repayment period shall continue for a period of whole
months equal to the lesser of (i) the number of whole months of the Participant’s
period of absence multiplied by 3, or (ii) 60 months.

 

(b)                                 With
respect to a Participant who makes the election described in subsection (a),
the Employer shall make Matching Contributions on such make-up contributions in
an amount determined in accordance with the provisions of Section 4.02, as
in effect for the Plan Year to which such make-up contributions relate.  Any Matching Contributions so determined shall
be subject to the limitations provided in Sections 4.02, 4.06, 4.07, and
4.08 with respect to the Plan Year or Plan Years to which such contributions
relate, rather than the Plan Year or Plan Years in which payment is made.  Employer Matching

 

56

 

Contributions under this subsection shall
be made during the applicable repayment period described in subsection (a).

 

(c)                                  All
contributions under this Section shall be considered “annual additions,”
as defined in Section 415(c)(2) of the Code, and shall be limited in accordance
with the provisions of Section 4.10 with respect to the Plan Year or Plan
Years to which such contributions relate rather than the Plan Year in which
payment is made.

 

(d)                                 Earnings
(or losses) on make-up contributions made pursuant to subsection (a) and
Matching Contributions made pursuant to subsection (b) shall be credited
in accordance with Article 6, commencing with the date such contributions
are made.

 

4.12                           Return of Contributions

 

(a)                                  If
all or part of an Employer’s deductions for contributions to the Plan are
disallowed by the Internal Revenue Service, the portion of the contributions to
which that disallowance applies shall be returned to the Employer, upon written
request to the Trustee, without interest, but reduced by any investment loss
attributable to those contributions, provided that such contributions are
returned within one year after the disallowance of deduction.  For this purpose, all contributions made by
each Employer are expressly declared to be conditioned upon their deductibility
under Section 404 of the Code.

 

(b)                                 Upon
written request to the Trustee, the Employer may recover without interest the
amount of its contributions to the Plan made on account of a mistake of fact,
reduced by any investment loss attributable to those contributions, if recovery
is made within one year after the date of those contributions.

 

(c)                                  In
the event that Deferred Cash Contributions made under Section 4.01 are
returned to the Employer in accordance with the provisions of subsection (a)
or (b), the elections to

 

57

 

reduce Compensation which were made by
Participants on whose behalf those contributions were made shall be deemed void
retroactively to the beginning of the period for which those contributions were
made.  The Deferred Cash Contributions so
returned shall be distributed in cash to those Participants for whom those
contributions were made, provided, however, that the amount of Deferred Cash
Contributions to be distributed to Participants shall be adjusted to reflect
any investment gains or losses attributable to those contributions.

 

58

 

ARTICLE 5.  INVESTMENT OF CONTRIBUTIONS AND ELECTIVE
DISTRIBUTION

OF DIVIDENDS PAYABLE ON STOCK HELD IN IBM STOCK FUND

 

5.01                           Investment Funds

 

(a)                                  Contributions
to the Plan shall be invested in one or more Investment Funds, as authorized by
the Committee from time to time, except to the extent invested under the Mutual
Fund Window Program.  The Investment
Funds authorized by the Committee may include such equity funds, international
equity funds, fixed income funds, money market funds, and such other funds as
the Committee, in its discretion, elects to provide, and which shall include
the IBM Stock Fund, which Fund shall constitute the ESOP.  Each Fund shall be managed by the Trustee or
one or more Investment Managers appointed by the Committee in accordance with Section 11.03(a)(i).

 

(b)                                 The
Trustee or Investment Manager may keep such amounts of cash as it, in its sole
discretion, shall deem necessary or advisable as part of the Investment Funds,
all within the limitations specified in the trust agreement or investment
management agreement, provided, however, that the IBM Stock Fund shall remain
primarily invested in common stock of IBM at all times.

 

(c)                                  Dividends,
interest, and other distributions received on the assets held by the Trustee in
respect to each of the above Investment Funds shall be reinvested in the
respective Fund, except to the extent otherwise provided in Section 5.09.

 

5.01A                 Mutual Fund Window Program

 

(a)                                  Effective
as of January 1, 2005, the Committee shall establish an inventory of
Designated Mutual Funds that shall be available for the investment of a portion
of a

 

59

 

Participant’s Account under the Mutual Fund
Window Program, in accordance with the provisions of this Section.

 

(b)                                 A
Participant may elect, in accordance with 5.04(a) and subject to the
limitations prescribed in subsection (c), that a portion of his Account
shall be reallocated from one or more of the Investment Funds to be invested
under the Mutual Fund Window Program.

 

(c)                                  The
Plan Administrator or its designee shall establish rules for the reallocation
of Participant Accounts from the Investment Funds to investment under the
Mutual Fund Window Program, and may change such rules from time to time in its
sole discretion.  Such rules may include:

 

(i)                                     A
limit on the portion of a Participant’s Account that is available for
investment under the Mutual Fund Window Program, which limit may take the form
of a minimum dollar amount or minimum percentage, or both a minimum dollar
amount and a minimum percentage, of a Participant’s Account that must be
invested in the Investment Funds.

 

(ii)                                  A
minimum amount that a Participant who elects to invest a portion of his Account
under the Mutual Fund Window Program is required to reallocate from investment
in the Investment Funds to investment under the Mutual Fund Window Program, in
order to commence investment under the Mutual Fund Window Program, and a
minimum amount that a Participant who elects to increase the portion of his
Account that is invested under the Mutual Fund Window Program is required to
reallocate from investment in the Investment Funds to investment under the
Mutual Fund Window Program.

 

60

 

A Participant shall not be permitted to elect
an investment reallocation in accordance with Section 5.04(a) that would
cause the portion of his Account that is invested in the Investment Funds
Program, as determined as of the date of such reallocation, to be less than the
minimum dollar amount or minimum percentage established by the Plan
Administrator or its designee in accordance with this paragraph (i), or that
fails to comply with the minimum reallocation requirements established by the
Plan Administrator or its designee in accordance with paragraph (ii), as in
effect as of the date of such reallocation.

 

(d)                                 A
Participant who elects, in accordance with subsection (b), to reallocate a
portion of his Account to be invested under the Mutual Fund Window Program
shall specify the Designated Mutual Fund or Designated Mutual Funds in which
such portion of his Account shall be invested, by giving such Notice of such
specification as the Plan Administrator or its designee shall prescribe and, if
he specifies more than one Designated Mutual Fund, shall further specify, in
multiples of 1%, the percentage of the amount so reallocated that shall be
invested in each such fund.

 

(e)                                  A
Participant may elect to reallocate the portion of his Account that is invested
under the Mutual Fund Window Program, among the Designated Mutual Funds, in
multiples of 1%, by giving such advance Notice as the Plan Administrator or its
designee shall prescribe.  Such
reallocation shall be effective as soon as administratively practicable
following provision of such Notice.

 

(f)                                    A
Participant who elects, pursuant to Section 5.04(a), to reallocate any
portion of his Account that is invested under the Mutual Fund Window Program to
be invested in one of more of the Investment Funds shall specify the Designated
Mutual Fund or Designated Mutual Funds from which the amount to be so
reallocated shall be taken, by

 

61

 

giving such Notice of such specification as
the Plan Administrator or its designee shall prescribe.

 

(g)                                 If
any portion of a Participant’s Account is invested under the Mutual Fund Window
Program as of the date selected by the Plan Administrator as the date of
reference for the assessment of administrative fees for a calendar quarter, an
administrative fee shall be charged against his Account, in an amount
determined by the Committee, which fee shall be debited proportionally from the
Investment Funds in which his Account is invested as of such date.

 

(h)                                 Upon
the occurrence of an event described in paragraph (i), the Plan Administrator
or its designee may, without the consent of the Participant, cause the
mandatory reallocation of the Participant’s Account from investment under the
Mutual Fund Window Program to investment under the Investment Funds.  The amount so reallocated shall be determined
in accordance with paragraph (ii); such amount shall be debited from the
amounts invested in Designated Mutual Funds in accordance with paragraph (iii);
and, to the extent available for investment, shall be invested in accordance
with paragraph (iv).

 

(i)                                     A
Participant’s Account shall be subject to mandatory reallocation in any of the
following circumstances:

 

(A)                              as
of the date an administrative fee is assessed in accordance with subsection (g),
the portion of the Participant’s Account that is invested in any of the
Investment Funds is less than the amount of such fee;

 

(B)                                the
balance of the Participant’s Account is required to be paid to the Participant’s
Beneficiary in accordance with Section 10.01(b);

 

62

 

(C)                                the
amount of an installment distribution that is required to be made to a
Participant pursuant to his election in accordance with Section 10.02(b)(i)
exceeds the portion of the Participant’s Account that is invested in the
Investment Funds;

 

(D)                               the
Participant’s Account is subject to mandatory distribution in accordance with Section 10.03;

 

(E)                                 the
amount required to be distributed to the Participant in accordance with Section 10.06
exceeds the portion of the Participant’s Account that is invested in the
Investment Funds, determined as of the date such distribution is required to be
made;

 

(F)                                 the
portion of a Participant’s Account that is required to be distributed to an
alternate payee, or allocated to an account established for an alternate payee,
in accordance with Section 14.02(c) exceeds the portion of the Participant’s
Account that is invested in the Investment Funds; or

 

(G)                                an
adjustment is required to be made to the Participant’s Account in accordance
with rules established by the Plan Administrator or its designee

 

(ii)                                  In
any of the circumstances described in paragraph (i), the amount that the Plan
Administrator or its designee shall cause to be reallocated from investment
under the Mutual Fund Window Program shall be the lesser of:

 

(A)                              the
sum of (X) the product of (I) 1.05 and (II) the excess of the amount of the
amount of the required distribution, reallocation or administrative fee, as
applicable, over the amount then invested in any of the Investment

 

63

 

Funds, plus (Y) the minimum dollar amount, if
any, then in effect in accordance with subsection (c)(ii); or

 

(B)                                the
portion of the Participant’s Account that is invested under the Mutual Fund
Window Program.

 

(iii)                               In
the event that the portion of the Participant’s Account that is invested under
the Mutual Fund Window Program as of the date of a reallocation described in
paragraph (i) is invested in more than one Designated Mutual Fund, then the
amount of such reallocation, as determined in accordance with paragraph (ii),
shall be taken ratably from the amount invested in each such fund.

 

(iv)                              To
the extent that a portion of an amount that is the subject of a mandatory
reallocation in accordance with paragraph (i) is available for investment, it
shall be invested in the Investment Fund specified in Section 5.02(b).

 

(i)                                     The
Plan Administrator or its designee is authorized to establish procedures for
the maintenance of the Mutual Fund Window Program and the investment of
Participant Accounts thereunder which rules may include provisions for the
establishment of transition accounts to which amounts reallocated pursuant to
subsection (b) shall be credited, pending investment in the Designated
Mutual Fund specified by the Participant, or to which amounts reallocated
pursuant to subsection (f) shall be credited, pending reallocation to one
or more of the Investment Funds.

 

5.02                           Investment of Contributions to Participants’ Accounts

 

(a)                                  A
Participant shall make an investment election which shall specify the manner in
which the Deferred Cash Contributions, Catch-Up Contributions, Employer
Matching

 

64

 

Contributions, After-Tax Contributions, and
Rollover Contributions allocated to his Account shall be invested.  Such election shall provide for the
investment of such contributions in one or more than one of the Investment
Funds, as designated by the Participant, apportioned in multiples of 1%.

 

(b)                                 Effective
as of January 1, 2005, if a Participant fails to make an investment
election in accordance with subsection (a), any contributions made by or
on behalf of the Participant shall be invested in the Investment Fund
designated by the Committee from time to time, which designation shall be
deemed to be an amendment to the Plan in accordance with Section 13.01(b),
provided, however, that any such designation, as in effect from time to time,
shall apply to all contributions by or on behalf of all Participants who have
failed to make an investment election.

 

(c)                                  An
election by a Participant pursuant to subsection (a) that specifies that a
all or any portion of his Deferred Cash Contributions, Catch-Up Contributions,
Employer Matching Contributions, After-Tax Contributions, or Rollover
Contribution shall be invested in the IBM Stock Fund shall be deemed to be an
election that such amount shall be contributed to the ESOP.

 

5.03                           Change of Investment Election

 

A Participant may change his investment
election under Section 5.02 at any time by giving such advance Notice as
the Plan Administrator shall prescribe.  Such
changed investment election shall become effective as of the first day of the
first payroll period beginning after the provision of the Notice, or soon
thereafter as administratively practicable, and shall be effective only with
respect to contributions allocated subsequent thereto.

 

65

 

5.04                           Reallocation of Accounts Among the Funds

 

(a)                                  Subject
to the provisions of subsection (b) and Section 5.05, a Participant
may elect to reallocate his Account among the Investment Funds, or, effective
as of January 1, 2005, among the Investment Funds and the Mutual Fund
Window Program, at any time, in multiples of 1%, or in specified whole dollar
amounts, by giving such advance Notice as the Plan Administrator shall
prescribe, provided, however, that any election that reallocates any portion of
his Account to be invested under the Mutual Fund Window Program shall be
subject to the limitations of Section 5.01A(c).  Such reallocation shall be effective as soon
as administratively practicable following provision of such Notice, provided,
however, that no such reallocation shall be effective as of a Valuation Date
for which the Plan Administrator has made a direction pursuant to Section 6.02(b).

 

(b)                                 The
Plan Administrator may assess an administrative fee for investment
reallocations under subsection (a), the amount of which fee may be changed
from time to time, and may further provide that such fee shall be assessed only
if the number of investment reallocations made by a Participant in a Plan Year
exceeds a specified limit, which limit may be changed from time to time.  Any such fee shall be deducted from the
amount so reallocated and charged to the Participant’s Deferred Account,
Employer Account, and Rollover Account on a proportional basis.

 

(c)                                  An
election by a Participant pursuant to subsection (a) that causes any
portion of his Account to be reallocated to the IBM Stock Fund shall be deemed
to be an election to transfer such portion of his Account to the ESOP.  An election by a Participant that reallocates
any portion of his Account from the IBM Stock Fund to any other Fund shall be
deemed to be an election to transfer such portion of his Account from the ESOP.

 

66

 

(d)                                 Effective
as of January 1, 2004, the Plan Administrator may, in its discretion,
impose restrictions on short-term trading by Participants.  Such restrictions may, in the discretion of
the Plan Administrator, be applied to Participants on an individual basis or to
all Participants.  For purposes of this
subsection, “short-term trading” shall be deemed to include, without
limitation, a series of transactions through which a Participant reallocates a
portion of his Account out of an Investment Fund and then reallocates a portion
of his Account into such Investment Fund within a period of no more than 5
business days, and a series of transactions through which a Participant
reallocates a portion of his Account into an Investment Fund and then
reallocates a portion of his Account out of such Investment Fund within a
period of no more than 5 business days.

 

5.05                           Limitations Imposed by Contract

 

Notwithstanding anything in this Article to
the contrary, any amounts invested in a fund that holds in its assets any
contractual instruments, including, without limitation, a fund of guaranteed
investment contracts, shall be subject to any and all terms of such contracts,
including any limitations therein placed on the right of a Participant to
reallocate such amounts pursuant to Section 5.04(a) or on the exercise of
any rights otherwise granted to a Participant under any other provisions of
this Plan with respect to such amounts.

 

5.06                           Responsibility for Investments

 

Each Participant is solely responsible for
the selection of his or her investment options. 
The Trustee, the Investment Managers, the Committee, the Plan
Administrator, the Employer, and the officers, supervisors and other employees
of the Employer are not

 

67

 

empowered to advise a Participant as to the
manner in which his Account shall be invested. 
The fact that an Investment Fund is available to Participants for
investment under the Plan shall not be construed as a recommendation for
investment in the Investment Fund by any Participant.  The fact that the Mutual Fund Window Program
is available to Participants under the Plan shall not be construed as a
recommendation for investment under the Mutual Fund Window Program by any
Participant; and the fact that any mutual fund is determined to be a Designated
Mutual Fund shall not be construed as a recommendation for investment in such
mutual fund by any Participant.

 

5.07                           Voting of IBM Shares

 

Shares of IBM held in the IBM Stock Fund
shall be voted by the Trustee in accordance with instructions received from
each Participant who has allocated any portion of his Account to such
Fund.  The instructions given by a
Participant shall apply to that portion of the shares of IBM held in the Fund
equal to the ratio of the units of the Fund allocated to his Account under Article 6
to the total number of units in the Fund. 
The Trustee shall vote the shares of IBM for which it does not receive
such instructions in the same proportion as it votes the shares of IBM for
which it does receive such instructions.

 

5.08                           ERISA Section 404(c) Compliance

 

This Plan is intended to constitute a plan
described in Section 404(c) of ERISA.

 

5.09                           Elective Distribution of Dividends Payable on
Stock Held in IBM Stock Fund

 

(a)                                  Effective
January 1, 2002, a Participant whose Account includes an amount invested
in the IBM Stock Fund shall be permitted to elect:

 

68

 

(i)                                     to
receive a cash distribution of his allocable share of the dividends payable on
common stock of IBM held in the IBM Stock Fund, or

 

(ii)                                  to
direct that his allocable share of the dividends payable on common stock of IBM
held in the IBM Stock Fund be reinvested in common stock of IBM.

 

For purposes of this Section, a Participant’s
allocable share of the dividends payable on the common stock of IBM shall be
that portion of each dividend payment made to such Fund that bears the same
ratio to the total dividend payment that the number of units of such Fund
credited to his Account bears to the total number of units of such Fund that
are outstanding on the date of such dividend payment.

 

(b)                                 A
Participant shall provide Notice of his election pursuant to subsection (a)
in the manner specified in rules established by the Plan Administrator pursuant
to Section 14.05, provided, however, that an election to receive a
distribution of dividends payable on any dividend payment date declared by IBM
shall not be effective unless Notice thereof is filed on or before the
ex-dividend date with respect to such dividends, or such earlier date or time
as may be specified by the Plan Administrator. 
A Participant who has not provided timely Notice of his election
pursuant subsection (a) with respect to the dividends payable on any
dividend payment date declared by IBM shall be deemed to have directed that his
allocable share of such dividends be reinvested in common stock of IBM,
pursuant to subsection (a)(ii).

 

(c)                                  An
election made by a Participant in accordance with subsection (b) shall
remain in effect until changed by the Participant.  A Participant shall be permitted to change an
election made in accordance with subsection (b) at any time, by providing
Notice of a new election in accordance with subsection (b), which new
election shall become effective as provided in subsection (b).

 

69

 

(d)                                 In the event that a Participant elects to
receive a distribution of his allocable share of any dividends, in accordance
with the provisions of subsection (a)(i), the dividends that are subject
to such election in each Plan Year shall be paid to him in accordance with
paragraph (i) or paragraph (ii) as applicable:

 

(i)                                     Dividends
declared in 2002 shall be segregated and credited to the Participant in a
separate sub-account of the ESOP, which sub-account shall be invested in
short-term securities or money market instruments, in the discretion of the
Investment Manager designated in accordance with Section 11.03. The total
amount of dividends that are subject to the Participant’s distribution election
for such Plan Year shall then be paid to him in cash subsequent to the latest
dividend payment date declared by IBM in such Plan Year, but in no event, later
than 90 days after the close of the Plan Year in which such dividends were paid
to the Plan.  The interest income or
other investment earnings credited to the Participant’s separate sub-account in
each month shall be reallocated to the IBM Stock Fund at the end of the month.

 

(ii)                                  Dividends
declared after 2002 that are subject to the Participant’s distribution election
shall be distributed to the Participant as soon as practicable following the
payment of such dividends, provided, however, that such distribution shall in
any event be made no later than 90 days after the close of the Plan Year in
which such dividends were paid to the Plan.

 

(e)                                  In
the event that a Participant has directed, or is deemed to have directed, that
his allocable share of any dividends be reinvested in common stock of IBM, in
accordance with the provisions of subsection (a)(ii), such dividends shall
be reinvested in accordance with Section 5.01(c).

 

70

 

Article 5A –
Disability Protection Program

 

5A.01                 Eligibility

 

A Participant who is a Regular Employee of an
Employer and who made Deferred Cash Contributions during a calendar year
commencing on or after January 1, 2004 shall be eligible to enroll in the
Disability Protection Program for the next succeeding calendar year, in
accordance with the provisions of Section 5A.03.

 

5A.02                 Levels of Coverage under Disability
Protection Program

 

(a)                                  An
eligible Participant who enrolls in the Disability Protection Program shall
specify the scope of coverage for which he is enrolling, from among the
following options:

 

Option 1:                                               Coverage
for Deferred Cash Contributions only;

 

Option 2:                                               Coverage
for Employer Matching Contributions only; or

 

Option 3:                                               Coverage
for both Deferred Cash Contributions and Employer Matching Contributions.

 

The scope of coverage specified by the Participant
shall be taken into account in accordance with Section 5A.05 in the
determination of the amount of premium required to be paid during the term of
such coverage and in accordance with Section 5A.06 in the determination of
the amount of benefits payable in the event that the Participant incurs a Total
and Permanent Disability during the term of such coverage.

 

(b)                                 For
purposes of this Article, a Participant’s Deferred Cash Contributions for any
year shall be deemed to include any Catch-Up Contributions made in accordance
with Section 4.02(g) for such year.

 

71

 

5A.03                 Enrollment Procedures

 

(a)                                  An
eligible Participant may enroll in the Disability Protection Program for a
calendar year commencing after December 31, 2004, by providing such Notice
as the Plan Administrator may prescribe, including the specification of the
scope of his coverage in accordance with Section 5A.02, during the period
prior to the first day of such calendar year specified by the Plan Administrator
as the open enrollment period.  The
Notice provided by the Participant shall include his election to invest a
portion of his Account, as determined in accordance with Section 5A.05, in
the payment of premiums under the Disability Insurance Policy.

 

(b)                                 A
Participant who was enrolled in the Disability Protection Program for a
calendar year shall automatically continue to be enrolled in the Disability
Protection Program, with the same scope of coverage, for the next succeeding
calendar year, provided that he satisfies the eligibility requirements
prescribed in Section 5A.01 as of the first day of such next succeeding
year, unless he either elects to terminate his coverage by providing such
Notice as the Plan Administrator may prescribe, or elects to enroll for a
different scope of coverage, in accordance with the provisions of subsection (a).

 

(c)                                  A
Participant’s enrollment in the Disability Protection Program shall become
effective on the first day of the calendar year to which such enrollment relates,
provided that the Participant satisfies the requirements of Section 5A.04
as of such date.  In the event that a
Participant fails to satisfy the requirements of Section 5A.04 as of the
first day of a calendar year to which his enrollment relates, his enrollment in
the Disability Protection Program for such year shall be void and without
effect.

 

72

 

5A.04                 Requirements for Commencement of Coverage
under Disability Protection Program

 

A Participant who has enrolled in the
Disability Protection Program for a calendar year, in accordance with Section 5A.03(a),
or who is automatically enrolled in the Disability Protection Program for a
calendar year, in accordance with Section 5A.03(b), shall commence coverage
under the Program only if he satisfies the requirements of the Disability
Insurance Policy as of the first day of such calendar year.

 

5A.05                 Investment in Premiums under Disability
Insurance Policy and Assessment of Administrative Fee

 

(a)                                  For
each month that a Participant is enrolled in the Disability Protection Program,
the amount determined in accordance with subsection (b) shall be invested
in premiums under the Disability Insurance Policy.  The amount so invested shall be paid by the
Plan to the Disability Insurer in accordance with the terms of the Disability
Insurance Policy.

 

(b)                                 The
amount of the premium charged against a Participant’s Account for coverage
under the Disability Protection Program for a calendar year shall be determined
in accordance with the terms of the Disability Insurance Policy on the basis
of:

 

(i)                                     the
Participant’s age as of the first day of the calendar year,

 

(ii)                                  for
a Participant who has elected the scope of coverage described as Option 1 or
Option 3 in Section 5A.02, the amount of the Deferred Cash Contributions
allocated to the Participant’s Account for the preceding calendar year, and

 

(iii)                               for
a Participant who has elected the scope of coverage described as Option 2 or
Option 3 in Section 5A.02, the amount of the Employer Matching
Contributions allocated to the Participant’s Account for the preceding calendar
year.

 

73

 

(c)                                  The
premium amount for each month, as determined in accordance with subsection (b),
required to be paid by the Plan to the Disability Insurer in accordance with
subsection (a) shall be debited from the Participant’s Deferred Account.

 

(d)                                 For
each month that a Participant is enrolled in the Disability Protection Program,
an amount determined by the Plan Administrator or its designee shall be debited
from his Deferred Account, as an administrative fee for the maintenance of such
coverage, which administrative fee shall be in addition to the premium amount
determined in accordance with subsection (b).

 

(e)                                  The
amounts debited from a Participant’s Deferred Account in accordance with
subsections (c) and (d) shall be apportioned among the Investment Funds on
basis of the value of the Participant’s Account in each Investment Fund, as of
the date such amounts are debited from his Account, without regard to any
portion of his Account that might then be invested under the Mutual Fund Window
Program.

 

(f)                                    In
the event that the amounts required to be debited from the Participant’s
Deferred Account in accordance with subsections (c) and (d) as of any date
exceeds the value of the Participant’s Deferred Account invested in the
Investment Funds as of such date, then any excess shall be debited from the
Participant’s Employer Account and shall be apportioned among the Investment
Funds in accordance with subsection (e). 
In the event that amounts required to be debited from the Participant’s
Deferred Account in accordance with subsections (c) and (d) as of any date
exceeds the sum of the value of the Participant’s Deferred Account invested in
the Investment Funds and the value of the Participant’s Employer Account
invested in the Investment Funds as of such date , then no premium shall be
paid and the Participant’s coverage under the Disability Protection Program
shall terminate in accordance with Section 5A.07(b).

 

74

 

5A.06                 Benefits Payable under Disability
Protection Program

 

(a)                                  In
the event that a Participant who is covered under the Disability Protection
Program becomes Totally and Permanently Disabled and remains totally and
permanently disabled at the conclusion of any elimination period provided for
under the Disability Insurance Policy, then monthly benefits shall commence to
be paid in accordance with the terms of the Disability Insurance Policy and
shall continue to be paid until the earliest of:

 

(i)                                     the
date as of which the Participant is determined to have recovered from his Total
and Permanent Disability,

 

(ii)                                  the
later of

 

(A)                              the
Participant’s attainment of age 65 or

 

(B)                                the
fifth anniversary of the commencement of benefit payments;

 

(iii)                               the
date as of which a Participant elects

 

(A)                              a
withdrawal from his Deferred Cash Account, in accordance with Section 8.01
or 8.02, or

 

(B)                                a
distribution in accordance with Section 10.02 or 10.04,

 

the amount of which withdrawal or
distribution exceeds the excess of the balance of his Deferred Cash Account, as
of the date of such withdrawal or distribution over the amount previously
allocated to his Deferred Cash Account in accordance with subsection (c);
or

 

(iv)                              the
Participant’s death.

 

(b)                                 The
amount of each monthly benefit shall be determined on the basis of the scope of
coverage elected by the Participant in accordance with Section 5A.02(a)
and shall be

 

75

 

determined in accordance with the terms of
the Disability Insurance Policy and the Certificate of Disability Insurance.

 

(c)                                  All
monthly benefits payable in accordance with subsection (a) on account of a
Participant’s Total and Permanent Disability shall be treated as investment
earnings on and shall be allocated to the Participant’s Deferred Account.

 

(d)                                 All
monthly benefits payable in accordance with subsection (a) shall be
invested in accordance with the Participant’s election under Section 5.02(a)
as in effect on the date such benefits are paid.

 

5A.07                 Termination of Coverage under Disability
Protection Program

 

A Participant’s coverage under the Disability
Protection Program shall terminate on the earliest of the following events:

 

(a)                                  the
last day of the month in which the Participant terminates employment with an
Employer;

 

(b)                                 the
last day of the month preceding the first month for which no premium is paid
pursuant to the provisions of Section 5A.05(f);

 

(c)                                  the
last day of a calendar year preceding a calendar year for which the Participant
has not enrolled in the Disability Protection Program in accordance with Section 5A.03(a)
and is not automatically enrolled in the Disability Protection Program in
accordance with Section 5A.03(b);

 

(d)                                 the
effective date of the cancellation of the Disability Insurance Policy by the
Plan or by the Disability Insurer;

 

(e)                                  the
effective date of an amendment to the Plan that eliminates the Disability
Protection Program;

 

76

 

(f)                                    the
effective date of the merger of the Plan with another plan, unless the Plan is
deemed the surviving plan of such merger;

 

(g)                                 the
effective date of the termination of the Plan.

 

5A.08                 Claims Procedure and Incorporation of
Disability Insurance Policy

 

(a)                                  Claims
for benefits under the Disability Protection Program shall be made in
accordance with the provisions of the Disability Insurance Policy and the
Certificate of Disability Insurance. 
Claims for benefits shall be adjudicated by the Disability Insurer and
the denial of any such claim shall be subject to appeal.  The adjudication of a claim and the appeal of
the denial of a claim shall comply with the requirements of ERISA and
regulations thereunder, in accordance with the provisions of the Disability
Insurance Policy and Certificate of Disability Insurance.

 

(b)                                 The
terms of the Disability Protection Program shall be subject to the provisions
of the Disability Insurance Policy and the Certificate of Disability Insurance,
which are incorporated by reference.

 

77

 

ARTICLE 6.  VALUATION OF UNITS AND CREDITS TO ACCOUNTS

 

6.01                           Units of Participation

 

A Participant’s interest in each Investment Fund shall be represented
by units of participation.  Prior to the
first Valuation Date for any Investment Fund in accordance with Section 6.02,
each unit in such Investment Fund shall be valued at $1.00 for each dollar
allocated to that Fund prior to such first Valuation Date, unless a different
initial value is established by the Plan Administrator.

 

6.02                           Valuation of Units

 

(a)                                  The
value of a unit in each Fund shall be determined on each Valuation Date by
dividing the current market value of the assets in that Fund on that date by
the total number of units in that Fund. 
For this purpose, the current market value shall reflect any brokerage
fees and transfer taxes applicable to purchases and sales for that Fund made
since the previous Valuation Date and any other expenses either paid from or
accrued to such Fund since the previous Valuation Date and shall exclude, on
each Valuation Date after the first, the contributions that are to be credited
to Accounts in such Fund as of such Valuation Date.  The valuation of units in each Fund shall be
performed by the party so directed by the Plan Administrator and shall be
conclusive.

 

(b)                                 In
the event that the value of the units in one or more Funds cannot be determined
on any Valuation Date, for reasons beyond the control of the Trustee or Plan
Administrator, then the Plan Administrator may direct that such valuation be
deferred until the next regularly scheduled Valuation Date.

 

78

 

6.03                           Crediting the Accounts

 

(a)                                  The
Deferred Account of a Participant in each Investment Fund shall be credited on
each Valuation Date with the number of units determined by dividing the
Deferred Cash Contributions, if any, made by the Employer to the Deferred
Account in that Fund on behalf of the Participant since the previous Valuation
Date by the unit value for that Fund as determined on that Valuation Date.

 

(b)                                 The
Employer Account of a Participant in each Investment Fund shall be credited on
each Valuation Date with the number of units determined by dividing the
Employer’s contributions, if any, made on the Participant’s behalf to the
Employer Account in that Fund since the previous Valuation Date by the unit
value for that Fund as determined on that Valuation Date.

 

(c)                                  The
Rollover Account of a Participant in each Investment Fund shall be credited on
each Valuation Date with the number of units determined by dividing the
Rollover Contributions, if any, made by the Participant to his Rollover Account
that Fund since the previous Valuation Date by the unit value for that Fund as
determined on that Valuation Date.

 

(d)                                 The
Catch-Up Account of a Participant in each Investment Fund shall be credited on
each Valuation Date with the number of units determined by dividing the
Catch-Up Contributions, if any, made by the Participant to his Catch-Up Account
in that Fund since the previous Valuation Date by the unit value for that Fund
as determined on that Valuation Date.

 

(e)                                  The
After-Tax Account of a Participant in each Investment Fund shall be credited on
each Valuation Date with the number of units determined by dividing the
After-Tax Contributions, if any, made by the Participant to his After-Tax
Account in that Fund since

 

79

 

the previous Valuation Date by the unit value
for that Fund as determined on that Valuation Date.

 

6.04                           Statements of Participant Accounts

 

At least once per calendar year, or more
frequently, in the discretion of the Plan Administrator, each Participant shall
be furnished with a statement setting forth the value of his Accounts.

 

80

 

ARTICLE 7.  VESTED STATUS OF ACCOUNTS

 

7.01                           Nonforfeitability of Deferred Account, Employer Account, and Rollover
Account

 

A Participant shall at all times be 100% vested
in, and have a nonforfeitable right to, his entire Account, including his
Deferred Account, his After-Tax Account, his Employer Account, and his Rollover
Account.

 

81

 

ARTICLE 8.  IN-SERVICE WITHDRAWALS

 

8.01                           Withdrawal After Age 591⁄2

 

(a)                                  A
Participant who is in the employ of an Employer or Affiliate and who shall have
attained age 591⁄2 may, subject to the provisions of subsections (b)
and (c) and the provisions of Section 8.03, elect to withdraw all or any
portion of his Account.

 

(b)                                 A
Participant may not make more than 4 withdrawals pursuant to subsection (a)
in any Plan Year.

 

(c)                                  The
minimum withdrawal under subsection (a) shall be the lesser of (i) $500 or
(ii) the total value of the Participant’s Account.

 

8.01A                 Withdrawal from After-Tax Account

 

(a)                                  Effective
as of July 1, 2004, a Participant who is in the employ of an Employer may,
subject to the provisions of subsections (b) and (c), elect to withdraw all or
any portion of his After-Tax Account.

 

(b)                                 A
Participant may not make more than 4 withdrawals pursuant to subsection (a)
in any Plan Year.

 

(c)                                  The
minimum withdrawal under subsection (a) shall be the lesser of (i) $500 or
(ii) the total value of the Participant’s After-Tax Account.

 

8.02                           Hardship Withdrawal

 

(a)                                  A
Participant may, subject to the provisions Section 8.03, elect to withdraw
(i) all or part of the excess of his Deferred Cash Contributions over any
amount previously distributed to him on account of Hardship, but not any amount
greater than the balance of his

 

82

 

Deferred Account, and (ii) all or part of his
Rollover Account, provided that he furnishes proof of Hardship satisfactory to
the Plan Administrator in accordance with the provisions of
subsections (b) and (c).

 

(b)                                 As
a condition for Hardship there must exist with respect to the Participant an
immediate and heavy financial need to draw upon his Account.  The Plan Administrator shall presume the
existence of such immediate and heavy financial need, if the requested
withdrawal is on account of any of the following:

 

(i)                                     expenses
for medical care described in Section 213(d) of the Code previously
incurred by the Participant, his spouse or any of his dependents, as defined in
Section 152 of the Code, or necessary for those persons to obtain such
medical care;

 

(ii)                                  costs
directly related to the purchase of a principal residence of the Participant,
excluding mortgage payments;

 

(iii)                               payment
of tuition and related educational fees, and room and board expenses, for the
next 12 months of post-secondary education of the Participant, his spouse,
children or dependents, as defined in Section 152 of the Code;

 

(iv)                              payment
of amounts necessary to prevent eviction of the Participant from his principal
residence or to avoid foreclosure on the mortgage of his principal residence;
or

 

(v)                                 the
inability of the Participant to meet any other expenses, debts or other
obligations that may be recognized by the Internal Revenue Service, pursuant to
Section 1.401(k)-1(d)(2)(iv)(C) of the Regulations, as giving rise to
immediate and heavy financial need for purposes of Section 401(k) of the
Code.

 

83

 

(c)                                  As
a condition for a Hardship withdrawal, the Participant must demonstrate and the
Plan Administrator must determine that the requested withdrawal is necessary to
satisfy the financial need described in subsection (b).  The Participant shall request, on such form
as the Plan Administrator shall prescribe, that the Plan Administrator make its
determination of the necessity for the withdrawal solely on the basis of his
application.  The Plan Administrator
shall make a determination that the withdrawal is necessary, if and only if all
of the following requirements are met::

 

(i)                                     The
amount of the withdrawal does not exceed the amount described in subsection (d).

 

(ii)                                  The
Participant has obtained all distributions, other than distributions available
only on account of hardship, and all nontaxable loans currently available under
all plans of the Employer and Affiliates.

 

(iii)                               The
Participant is prohibited from making Deferred Cash Contributions to the Plan
and from making elective deferrals, within the meaning of Section 402(g)(3)
of the Code, or otherwise making employee contributions to or under all other
plans of the Employer and Affiliates, under the terms of such plans or by means
of an otherwise legally enforceable agreement for the required suspension
period.  For Hardship withdrawals made
prior to January 1, 2002, the required suspension period shall be a period
of 12 months from the date of the distribution; for Hardship withdrawals made
subsequent to December 31, 2001, the required suspension period shall be a
period of 6 months from the date of the distribution.  For purposes this paragraph, the phrase “all
other plans of the Employer and Affiliates” shall include stock option plans,
stock purchase plans, including any “employee stock purchase plan” described in
Section 423(b) of the

 

84

 

Code, qualified and non-qualified deferred
compensation plans, and such other plans as may be designated under Regulations
issued under Section 401(k) of the Code, but shall not include health and
welfare benefit plans or any mandatory employee contribution portion of a
defined benefit plan.

 

(iv)                              For
Hardship withdrawals made prior to January 1, 2001, the limitation
described in Section 4.01(c) under all plans of the Employer and
Affiliates for the calendar year following the year in which the withdrawal is
made must be reduced by the Participant’s elective deferrals, within the
meaning of Section 402(g)(3) of the Code, made in the calendar year of the
distribution for hardship.

 

(d)                                 The
amount of a withdrawal on account of Hardship may not be in excess of the
amount of the financial need of the Participant, including any amounts
necessary to pay any federal, state or local taxes and any amounts necessary to
pay any tax penalties reasonably anticipated to result from the Hardship distribution.

 

(e)                                  A
Participant may not receive more than one withdrawal on account of Hardship in
any period of 6 calendar months.

 

(f)                                    In
evaluating the relevant facts and circumstances, the Plan Administrator shall
act in a nondiscriminatory fashion and shall treat uniformly those Participants
who are similarly situated.  The
Participant shall furnish to the Plan Administrator such supporting documents
as the Plan Administrator may request in accordance with uniform and
nondiscriminatory rules prescribed by the Plan Administrator.

 

8.03                           Procedures and Restrictions

 

(a)                                  To
make a withdrawal pursuant to Section 8.01, 8.01A or 8.02, a Participant
shall give such advance Notice as the Plan Administrator shall prescribe.  In no event shall the

 

85

 

amount of the withdrawal exceed the portion
of the Participant’s Account that is invested in one or more of the Investment
Funds.

 

(b)                                 Each
withdrawal shall be debited from the Participant’s Account as of the Valuation Date
coincident with the payment of the amount so withdrawn to the Participant, or
such other Valuation Date as may be determined in accordance with the
procedures established by the Plan Administrator, provided, however, that no
such payment shall be made as of a Valuation Date with respect to which the
Plan Administrator has made a direction pursuant to Section 6.02(b).

 

(c)                                  The
amount of any withdrawal shall be allocated among the Investment Funds in
proportion to the value of the Participant’s Account in each Investment Fund as
of the date determined in accordance with subsection (b).

 

(d)                                 All
payments to Participants under this Article shall be made in cash as soon
as practicable, after the Participant’s delivery of the Notice required under
subsection (a), but shall nonetheless be subject to the provisions of Section 10.15
and a withdrawal pursuant to Section 8.01 shall be subject to the
provisions of Section 10.12(c).

 

8.04                           Distributions at Age 701⁄2

 

(a)                                  Notwithstanding
any provision of the Plan to the contrary, if a Participant is a Five Percent
Owner, distribution of the Participant’s Account shall begin, in accordance
with procedures established by the Plan Administrator, no later than the April 1
following the calendar year in which he attains age 701⁄2.  No minimum distributions pursuant to Section 401(a)(9)
of the Code will be made on or after January 1, 1997 to a Participant who
remains in the employ of an Employer or Affiliate, if he is not a Five Percent
Owner.

 

86

 

Such a Participant may elect to receive
withdrawals from his Account in accordance with Section 8.01, to the
extent that he is eligible therefor.

 

(b)                                 In
the event that a distribution is required to be made to a Five Percent Owner
pursuant to subsection (a), the schedule for and amount of such
distribution shall be determined in accordance with Section 10.06(b).

 

87

 

ARTICLE 9.  LOANS TO PARTICIPANTS

 

9.01                           Loan Amounts Available and Interest Rate

 

(a)                                  A
Participant who is a Regular Employee or, effective as of January 1, 2004,
a Long-Term Supplemental Employee, of the Employer or an Affiliate may borrow,
on application to the Plan Administrator and on approval by the Plan
Administrator under such uniform rules as it shall adopt, an amount which, when
added to the outstanding balance of any other loans to the Participant from
this Plan or any other qualified plan of any Employer or Affiliate, does not
exceed the least of:

 

(i)                                     50%
of the present value of the Participant’s nonforfeitable accrued benefit under
such plans, or

 

(ii)                                  $50,000
reduced by the excess, if any, of (A) the highest outstanding balance of loans
to the Participant from such plans during the one year period ending on the day
before the day the loan is made, over (B) the outstanding balance of loans to
the Participant from such plans on the date on which the loan is made, or

 

(iii)                               the
portion of his Account that is invested in the Investment Funds;

 

provided, however, that in no event shall a
Participant be permitted to borrow an amount, which when added to the
outstanding balance of any other loan to the Participant from this Plan, will
exceed 50% of his Account.

 

(b)                                 The
Plan Administrator may establish a minimum loan amount, which amount may be
changed from time to time.

 

(c)                                  The
interest rate to be charged on loans shall be determined by the Plan
Administrator from time to time and shall be commensurate with interest rates
charged by persons in

 

88

 

the business of lending money in similar
circumstances.  The interest rate so
determined for purposes of the Plan shall be fixed for the duration of each
loan.

 

(d)                                 The
amount of the loan shall be deducted from the Investment Funds in which the
Participant’s Accounts are invested, as of the Valuation Date coincident with
the payment of the proceeds of the loan to the Participant, or such other
Valuation Date as may be determined in accordance with the procedure
established by the Plan Administrator, provided, however, that no such payment
shall be made as of a Valuation Date with respect to which the Plan
Administrator has made a direction pursuant to Section 6.02(b).  Such deduction shall be either in specific
amounts from one or more of such Funds or on a proportional basis from all such
Funds, as elected by the Participant under rules established by the Plan
Administrator, and shall be recorded as a special “Loan Fund” for the
Participant under the Plan.  If, pursuant
to the Participant’s election, all or any portion of the amount of a loan shall
be deducted from the portion of his Account that is allocated to the IBM Stock
Fund, then such election shall be deemed to be an election to transfer such
amount from the ESOP.  The Loan Fund shall
comprise only the amount recorded thereunder and shall be deemed to be invested
solely in the loan made to the Participant. 
The amount of the Loan Fund shall be pledged as security for the loan.  Payments of principal on the loan will reduce
the amount recorded in the Participant’s Loan Fund.  Those payments, together with the attendant
interest payment, will be reinvested in the Investment Funds in accordance with
the Participant’s investment election as then in effect in accordance with Section 5.02.

 

89

 

9.02                           Terms

 

(a)                                  In
addition to such rules and regulations as the Plan Administrator may adopt, all
loans from the Plan shall comply with the following terms and conditions:

 

(i)                                     An
application for a loan by a Participant shall be by Notice to the Plan
Administrator, whose action in approving or disapproving the application shall
be final.

 

(ii)                                  Each
loan shall be evidenced by a promissory note payable to the Plan or by written
instruments that collectively have equivalent effect.

 

(iii)                               The
Plan Administrator may assess an administrative fee for the issuance of a loan,
the amount of which fee may be changed from time to time.  Any such fee shall be deducted from the
proceeds of the loan.

 

(iv)                              The
period of repayment for any loan shall be arrived at by mutual agreement
between the Plan Administrator and the Participant, but shall not exceed 5
years.  In the event a Participant enters
the uniformed services of the United States and retains reemployment rights
under law, repayments shall be suspended during the period of such service and
the period of repayment shall be extended by the number of months of the period
of service in the uniformed services.

 

(v)                                 Payments
of principal and interest shall be made by payroll deductions, or in a manner
agreed to by the Participant and the Plan Administrator, in substantially level
amounts, but in no event less frequently than quarterly, in an amount
sufficient to amortize the loan over the repayment period.

 

(vi)                              A
loan may be prepaid in full without penalty as of any date after the
Participant has made payments for a period of at least 3 months.

 

(vii)                           A Participant may not have
more than 2 loans outstanding at any given time.

 

90

 

(b)                                 The
Plan Administrator shall establish procedures for the determination of whether
a loan has become delinquent or whether there has been a default on a loan,
provided, however, that such procedures shall provide that a default has
occurred no later than the last day of a calendar quarter following a calendar
quarter during which a Participant has failed to make any required repayments,
unless all payments required under the terms of the loan to have been made on
or before such date have been made.

 

(c)                                  In
the event that a Participant’s loan is determined to be in default pursuant to
subsection (b), then:

 

(i)                                     the
Participant shall be prohibited from making Deferred Cash Contributions for a
period of 12 months from the date of such default, if such default occurs prior
to January 1, 2002 or for a period of 6 months from the date of such
default, if such default occurs subsequent to December 31, 2001, provided,
however, that, in any event, such prohibition shall cease to apply if the
Participant repays the defaulted loan; and

 

(ii)                                  the
Participant shall be prohibited from initiating a new loan until the later of
(A) the first anniversary of the date of default or (B) the date that the
Participant fully repays the defaulted loan, including accrued interest.

 

A Participant may repay a defaulted loan at
any time prior to the Plan’s execution upon its security interest in accordance
with subsection (d).

 

(d)                                 If
a loan is not repaid in accordance with the terms specified in the instrument
thereof and a default occurs, the Plan may execute upon its security interest
in the Participant’s Accounts under the Plan to satisfy the debt, provided,
however, that the Plan shall not levy against any portion of the Loan Fund
attributable to amounts held in the

 

91

 

Participant’s Deferred Account or Employer
Account until such time as a distribution of the Deferred Account or Employer
Account could otherwise be made under the Plan.

 

(e)                                  The
Plan Administrator shall promulgate such additional rules or restrictions as may
be necessary to implement and administer the loan program.  Such additional rules are hereby incorporated
into the Plan by reference, and the Plan Administrator is hereby authorized to
make such revisions to these rules as it deems necessary or appropriate.

 

(f)                                    To
the extent required by law and under such rules as the Plan Administrator shall
adopt, loans shall also be made available on a reasonably equivalent basis to
any Beneficiary or former Employee (i) who maintains an Account under the Plan
and (ii) who is with respect to the Plan, a party-in-interest within the
meaning of Section 3(14) of ERISA.

 

92

 

ARTICLE 10.  DISTRIBUTION OF ACCOUNTS UPON TERMINATION OF

EMPLOYMENT, DISABILITY, OR DEATH

 

10.01                     Applicability

 

(a)                                  Upon
a Participant’s termination of employment, or incurrence of disability, he
shall be eligible to receive a distribution of his Account in accordance with
the provisions of this Article.

 

(b)                                 Upon
a Participant’s death, his Account shall be distributed to his Beneficiary in
accordance with the provisions of this Article.

 

10.02                     Forms of Distribution

 

(a)                                  A
Participant who has terminated employment may elect to receive a distribution
of his Account in a single lump sum payment.  The provisions of this subsection shall
be subject to the provisions of Sections 10.07, 10.12, and 10.15.

 

(b)                                 In
addition to the election provided in accordance with subsection (a), a
Participant who has terminated employment and who (A) is eligible either to commence
receipt of a pension benefit from the IBM Personal Pension Plan, in accordance
with the terms thereof as in effect on June 30, 1999, or for disability
benefits under the IBM Medical Disability Income Plan or the IBM Long Term
Disability Plan, or (B) has attained age 55 may elect to receive a distribution
of his Account in either of the following forms:

 

(i)                                     payment in annual installments over a period not less than 2
nor more than 10 years; or

 

93

 

(ii)                                  payment in annual installments over his life expectancy,
determined in accordance with Section 10.13 and with applicable
regulations, and recalculated annually.

 

The provisions of this subsection shall
be subject to the provisions of Sections 10.07, 10.12, and 10.15.

 

(c)                                  In
the event that a Participant elects to receive a distribution of his Account in
the form of installment payments, in accordance with subsection (b), the
amount of each payment shall be determined by dividing the balance of the
Participant’s Account on the Valuation Date as of which such payment is to be
determined, in accordance with Section 10.12(a), by the number of years
remaining in the installment payment period, taking into account the year for
which such amount is being determined.

 

(d)                                 A
Participant who is eligible to make an election to receive a distribution of
his Account in accordance with subsections (a) or (b), but who has not
made such an election, shall be permitted to elect withdrawals from his
Account, in accordance with Section 10.04.

 

10.03                     Mandatory Distribution of Small Accounts

 

For Plan Years beginning prior to January 1,
2000, and notwithstanding any provision hereof to the contrary, if the balance
of the Account of a Participant described in Section 10.02(b) has not
exceeded $3,500, then the balance of his Account shall be distributed to him in
a lump sum as soon as practicable after his termination of employment and the
provisions of Sections 10.02(b) and 10.02(d) shall not be applicable,
provided, however, that, effective with respect to terminations of employment
occurring after December 31, 1997, $5,000 shall be substituted for
$3,500.  For Plan Years beginning after December 31,
1999, if the balance of the Account of a Participant

 

94

 

does not exceed $5,000, then the balance of
his Account shall be distributed to him in a lump sum as soon as practicable
after his termination of employment and the provisions of
Sections 10.02(b) and 10.02(d) shall not be applicable, provided, however,
that effective with respect to distributions made on or after March 28,
2005, $1,000 shall be substituted for $5,000.

 

10.04                     Withdrawals From Account After Termination of
Employment

 

(a)                                  A
Participant who is eligible to elect to receive a distribution of his Account
in accordance with Section 10.02(a) or (b) and who has not made such an
election may elect to take withdrawals from his Account at any time, provided,
however, that:

 

(i)                                     no Participant may take more than 4 withdrawals from his
Account in any Plan Year; and

 

(ii)                                  the minimum amount of a withdrawal shall be the lesser of
$500 or the balance of the Participant’s Account.

 

In no event shall the amount of the
withdrawal elected by the Participant exceed the portion of his Account that is
invested in the Investment Funds.  The
provisions of this subsection shall be subject to the provisions of
Sections 10.07, 10.12, and 10.15.

 

(b)                                 A
Participant who has made an election to receive a distribution of his Account
in the form of installment payments, in accordance with Section 10.02(b)
may elect to take additional withdrawals from his Account at any time.  Such additional withdrawals shall be subject
to the provisions of subsection (a).

 

95

 

10.05                     Commencement of Payments

 

(a)                                  Unless
a Participant elects otherwise in accordance with the provisions of this
Article, distribution of a Participant’s Account shall be made or shall
commence as soon as administratively practicable following the later of (i) the
Participant’s termination of employment or (ii) the 65th anniversary of the
Participant’s date of birth, but in no event more than 60 days after the close
of the Plan Year in which the later of (i) or (ii) occurs, provided, however,
that distribution of a Participant’s Account shall not be made prior to his
provision of Notice of his election to receive such distribution, except for
distributions in accordance with Section 10.03 or 10.06.

 

(b)                                 In
the case of the death of a Participant before distribution of his Account has
been made or commenced, his Account shall be distributed to his Beneficiary in
accordance with Section 10.08 as soon as administratively practicable
following the Participant’s date of death.

 

10.06                     Required Distributions at Age 701⁄2

 

(a)                                  Notwithstanding
any provision hereof to the contrary, a Participant who has terminated
employment and has attained age 701⁄2 but has not received, or commenced to
receive, a distribution of his Account in accordance with Section 10.02(a)(ii), shall commence to receive a distribution of his
Account in annual installments, in accordance with the provisions of subsection (b).

 

(b)                                 The
Account of a Participant described in subsection (a) who attains age 701⁄2
prior to January 1, 2001 shall be distributed in 10 annual installment
payments, except as provided in subsection (d).  The Account of a Participant who attains age
701⁄2 subsequent to December 31, 2000 shall be distributed in annual
installments over the

 

96

 

Participant’s life expectancy, determined in
accordance with Section 10.13 and applicable regulations, and recalculated
annually.  At the discretion of the Plan
Administrator, the first such installment payment shall be made in the year in
which the Participant attains age 701⁄2, or in the first quarter of the
following year, and shall be attributable to the year in which the Participant
attained age 701⁄2, provided, however, that in no event shall payments
commence later than April 1 of the calendar year following the year in
which the Participant attained age 701⁄2. 
The installment payments attributable to each subsequent year shall be
made in such subsequent year.  The amount
of each installment shall be determined in the manner specified in Section 10.02(c).

 

(c)                                  A
Participant who has commenced to receive a distribution of his Account pursuant
to subsection (a) may nonetheless make an election described in Section 10.04(b).

 

(d)                                 Effective
January 1, 2002, a Participant who has commenced receipt of installment
payments in accordance with the first sentence of subsection (b) shall be
afforded the opportunity to elect to receive installment payments in accordance
with the second sentence of subsection (b).  Such election shall be made by providing Notice
to the Plan Administrator at the time and in the manner specified in rules
established by the Plan Administrator in accordance with Section 14.05 and
shall become effective as of the date specified by the Plan Administrator.

 

10.07                     Effect of Reemployment

 

(a)                                  A
Participant who terminates from the employ of an Employer, but remains in
employment with any other Employer or any Affiliate of any Employer,
shall not be deemed to have terminated employment for purposes of Section 10.01.

 

97

 

(b)                                 A
Participant who has terminated employment and is thereafter reemployed by any
Employer or any Affiliate of any Employer shall thereupon cease to be eligible
to elect to receive a distribution in accordance with Section 10.02 or to
take a withdrawal from his Account in accordance with Section 10.04.

 

(c)                                  In
the event that a Participant who has terminated employment and elected to
receive a distribution of his Account in the form of installments, in
accordance with Section 10.02(a)(ii), is thereafter reemployed by any
Employer or any Affiliate of any Employer, payment of such installments shall
thereupon cease.

 

(d)                                 The
provisions of this Section shall have no effect on the right of a
Participant to elect to receive a withdrawal in accordance with Section 8.01,
provided that he is eligible therefor.

 

(e)                                  The
provisions of this Section shall not be applicable to a Participant during
any period in which he is a Supplemental Employee, but, effective as of January 1,
2004, not a Long-Term Supplemental Employee, of an Employer or any Affiliate of
any Employer.

 

10.08                     Distribution of Account Upon Death

 

In the event of the death of a Participant
who has not received a complete distribution of his Account, the entire balance
of his Account shall be paid in a lump sum to the Participant’s Beneficiary.

 

10.09                     Designation of Beneficiary

 

(a)                                  A
Participant shall designate his Beneficiary by filing such Notice as may be
required by the Plan Administrator, but subject to the provisions of subsection (b).  The Participant’s

 

98

 

designation
shall become effective upon receipt by the Plan Administrator prior to the
death of the Participant.

 

(b)                                 If
a Participant is married, a designation of a person other than his spouse as
his Beneficiary shall be effective if and only if his spouse has consented to
such designation.  The consent of the
Participant’s spouse shall be in writing, on a form provided by the Plan
Administrator, shall be witnessed by a representative of the Plan or by a
Notary Public, and shall acknowledge the effect on the spouse of the
Participant’s designation.  A spousal
consent form witnessed by a person acting with apparent authority as a Notary
Public shall be conclusively deemed to have been witnessed by a Notary Public
for all purposes under the Plan.  The
requirement of spousal consent may be waived by the Plan Administrator, if it
is established to the satisfaction of the Plan Administrator that there is no
spouse or that the spouse cannot be located, or under such other circumstances
as may permit such waiver under applicable law.

 

(c)                                  A
Participant may revoke his designation of a Beneficiary and make a new
designation at any time.  However, if the
Participant is married, any such new designation shall be subject to the
provisions of subsection (b).

 

(d)                                 In
the event that a Participant dies without having an effective designation of
his Beneficiary then in effect, or if the Participant’s Beneficiary does not
survive him, then the person deemed to be the Participant’s Beneficiary shall
be determined in the following order:

 

(i)                                     the Participant’s spouse;

 

(ii)                                  if the Participant is not survived by a spouse, the
Participant’s surviving children, in equal shares;

 

99

 

(iii)                               if the Participant is not survived by a spouse or a child,
then the Participant’s surviving parents, in equal shares;

 

(iv)                              if the Participant is not survived by a spouse, a child, or
a parent, then the Participant’s estate.

 

(e)                                  The
Plan Administrator shall provide to each Participant a written explanation of
(i) the terms, conditions, and effect of a Beneficiary designation under the
plan; (ii) the Participant’s right to change such designation, and the effect
thereof; (iii) the rights of the Participant’s spouse; and (iv)
the Participant’s right to revoke such a designation, and the effect
thereof.

 

10.10                     Proof of Death and Right of Beneficiary or Other Person

 

(a)                                  The
Plan Administrator may require and rely upon such proof of death and such
evidence of the right of any Beneficiary or other person to receive the value
of the Account of a deceased Participant as the Plan Administrator may deem
proper and its determination of the right of that Beneficiary or other person
to receive payment shall be conclusive.

 

(b)                                 Notwithstanding
the provisions of Section 10.11, the Plan Administrator may direct that
the balance of a deceased Participant’s Account shall be invested in the
Investment Fund that is designated by the Committee for purposes of Section 5.02(b),
during the period required to make a determination in accordance with subsection (a).

 

10.11                     Status of Accounts Pending Distribution

 

Until completely distributed, the Account of
a Participant who is entitled to a distribution shall continue to be invested
as part of the funds of the Plan, and the Participant shall

 

100

 

retain
the right to reallocate his Account among Investment Funds and under the Mutual
Fund Window Program, in accordance with Section 5.04 during any period in
which a balance remains in his Account. 
However, loans to Participants who are eligible to receive a
distribution in accordance with Section 10.02 shall not be permitted,
except to the extent required by Section 9.02(d).

 

10.12                     Procedures and Form of Payment

 

(a)                                  All
amounts distributed or withdrawn in accordance with this Article shall be
debited from the Participant’s or Beneficiary’s Account as of the Valuation
Date coincident with the payment of the amount so distributed or withdrawn, or
such other date as may be determined in accordance with the procedures
established by the Plan Administrator, provided, however, that no such payment
shall be made as of a Valuation Date with respect to which the Plan
Administrator has made a direction pursuant to Section 6.02(b).

 

(b)                                 In
the event that the payment of a distribution or a withdrawal to a Participant
does not reduce his Account to zero, then the amount so distributed or
withdrawn shall be allocated among the Investment Funds in proportion to the
value of the Participant’s Account in each Investment Fund as of the date
determined in accordance with subsection (a).

 

(c)                                  All
distributions and withdrawals under the Plan shall be paid to the Participant or
Beneficiary in cash, except that if any portion of a Participant’s Account is
allocated to the IBM Stock Fund, the Participant or Beneficiary may elect to
receive shares of IBM stock having a fair market value as of the date of such
distribution or withdrawal equal to

 

101

 

the
value of the units of the IBM Stock Fund allocated to such Participant’s
Account, provided, however, that the value of any fractional share shall be
distributed in cash.

 

10.13                     Distribution Limitation

 

Notwithstanding any other provision of this Article 10,
all distributions from this Plan shall conform to the Regulations issued under Section 401(a)(9)
of the Code, including the incidental death benefit provisions of Section 401(a)(9)(G)
of the Code.  Such Regulations shall
override any Plan provision that is inconsistent with Section 401(a)(9) of the Code.  With
respect to distributions under the Plan made for calendar year 2002, the Plan
will apply the minimum distribution requirements of Section 401(a)(9) of
the Code in accordance with the Regulations under Section 401(a)(9) of the
Code that were proposed on January 17, 2001, notwithstanding any
provisions of the Plan to the contrary. 
With respect to distributions under the Plan made for calendar years
beginning on or after January 1, 2003, the Plan will apply the minimum
distribution requirements of Section 401(a)(9) of
the Code in accordance with the Final and Temporary Regulations under Section 401(a)(9)
of the Code that were issued on April 17, 2002, by Treasury Decision 8987,
notwithstanding any provisions of the Plan to the contrary.

 

10.14                     Direct Rollover of Certain Distributions

 

Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a distributee’s election, a distributee
may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution
paid

 

102

 

directly
to an eligible retirement plan specified by the distributee in a direct
rollover.  For purposes of this Section:

 

(a)                                  The
term “eligible rollover distribution” means any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include:

 

(i)                                     any
distribution that is one of a series of substantially equal periodic payments,
not less frequently than annually, made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee’s designated beneficiary, or for a specified
period of ten years or more,

 

(ii)                                  any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code,

 

(iii)                               any distribution made subsequent to December 31, 1998
on account of the Hardship of the Participant, and

 

(iv)                              the portion of any distribution that is not includible in
the gross income of the distributee, determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities;

 

(b)                                 The term “eligible
retirement plan” means:

 

(i)                                     an individual retirement account described in Section 408(a)
of the Code,

 

(ii)                                  an individual retirement annuity described in Section 408(b)
of the Code,

 

(iii)                               an annuity plan described in Section 403(a) of the
Code,

 

(iv)                              a qualified trust described in Section 401(a) of the
Code, that is a defined contribution plan and that accepts the distributee’s
eligible rollover distribution,

 

103

 

(v)                                 with
respect to eligible rollover distributions made after December 31, 2001,
an annuity contract described in Section 403(b) of the Code, or

 

(vi)                              with
respect to eligible rollover distributions made after December 31, 2001,
an eligible deferred compensation plan described in Section 457(b) of the
Code, which is maintained by an eligible employer as described in Section 457(e)(1)(A)
of the Code,

 

provided, however, in the case of an eligible
rollover distribution to a distributee who is the surviving spouse of a
Participant surviving spouse, prior to January 1, 2001, an eligible
retirement plan is only an individual retirement account or individual
retirement annuity;

 

(c)                                  The
term “distributee” means an employee or former employee.  In addition, the employee’s or former employee’s
surviving spouse and the employee’s or former employee’s spouse or former
spouse who is an alternate payee under a qualified domestic relations order as
defined in Section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse; and

 

(d)                                 The
term “direct rollover” means a payment by the Plan to the eligible retirement
plan specified by the distributee.

 

10.15                     Waiver of Notice Period

 

(a)                                  Except as provided in subsection (b)
or subsection (c), an election by the Participant to receive a
distribution shall not be valid unless the written election is made (i) after
the Participant has received the notice required under Section 1.411(a)-11(c)
of the Regulations and (ii) within a reasonable time before the effective date
of the commencement of the distribution, as prescribed by said Regulations.

 

104

 

(b)                                 Notwithstanding the requirements of subsection (a),
a distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c)
of the Regulations is given, provided that: (i) the Plan Administrator clearly
informs the Participant that he has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether or not to elect
a distribution and, if applicable, a particular distribution option, and  (ii)                                the Participant, after receiving the
notice under Sections 411 and 417 of the Code, affirmatively elects a
distribution.

 

(c)                                  For Plan Years beginning prior to January 1,
2000, if the balance of the Account of a Participant described in Section 10.02(b)
has not exceeded $3,500, then subsection (a) shall not apply and Section 10.03
shall apply, provided, however, that, effective with respect to terminations of
employment occurring after December 31, 1997, $5,000 shall be substituted
for $3,500.  For Plan Years beginning
after December 31, 1999, if the balance of the Account of a Participant does
not exceed $5,000, then subsection (a) shall not apply and Section 10.03
shall apply.

 

10.16                     Distribution of Accounts Upon a Sale of Assets
or a Sale of a Subsidiary prior to December 31, 2001

 

(a)                                  Upon
the disposition by an Employer of at least 85% of the assets, within the
meaning of Section 409(d)(2) of the Code, used by the Employer in a trade
or business, or upon the disposition by an Employer of its interest in a
subsidiary, within the meaning of Section 409(d)(3) of the Code, prior to December 31,
2001, those Participants who continue in employment with the employer acquiring
such assets or with the sold subsidiary shall be deemed to have terminated
employment for purposes of Sections 10.01 and 10.03, provided that (i) the
Employer continues to maintain the Plan

 

105

 

after the disposition and (ii) the buyer is
not an Employer or an Affiliate of any Employer, does not adopt the Plan or
otherwise become a participating employer in the Plan, and does not accept any
transfer of assets or liabilities from the Plan to a plan it maintains in a
transaction subject to Section 414(l)(1) of the
Code.

 

(b)                                 A
Participant who is deemed to have terminated employment pursuant to subsection (a)
shall be permitted to receive a distribution pursuant to Section 10.02
only in a form that constitutes a lump sum distribution within the meaning of Section 401(k)(10)(B)(ii)
of the Code.  At the end of the second
calendar year following the calendar year in which the sale or disposition
described in subsection (a) occurred, such Participant’s entitlement to
receive a distribution in accordance with Section 10.02 shall be suspended
until he terminates employment with the buyer.

 

106

 

ARTICLE 11.  ADMINISTRATION OF PLAN

 

11.01                     Named Fiduciaries

 

(a)                                  The
following persons and groups of persons shall severally have the authority to
control and manage the administration of the Plan and shall each be a named
fiduciary with respect to the Plan, within the meaning of Section 402(a)
and 403(a)(1) of ERISA:

 

(i)                                     the Board of Directors;

 

(ii)                                  the Committee;

 

(iii)                               the highest ranking IBM officer responsible for Finance and
the highest ranking IBM officer responsible for Human Resources; and

 

(iv)                              the Plan Administrator and, if the Plan Administrator is
constituted as a committee, pursuant to Section 11.04(a), each member of
such committee.

 

(v)                                 any
IBM Staff Investment Manager.

 

(b)                                 Each
named fiduciary shall be responsible for discharging only those duties assigned
to it by the Plan or by the Trust Agreement.

 

(c)                                  The
named fiduciaries with respect to the Plan may, in their discretion, (i)
designate persons other than named fiduciaries to carry out fiduciary
responsibilities under the Plan, other than trustee responsibilities, within
the meaning of Section 405(c)(3) of ERISA; (ii) allocate fiduciary
responsibilities, other than such trustee responsibilities, among named
fiduciaries; and (iii) employ one or more persons to render advice or to
provide services with respect to the Plan, provided, however, that fiduciary
responsibilities may be delegated only pursuant to a written instrument adopted
by the named fiduciary making the delegation and accepted in writing by the
person assuming such fiduciary responsibilities.

 

107

 

11.02                     Exclusive Authority of the Board of Directors

 

The Board of Directors, or a committee
thereof that the Board may designate from time to time, expressly reserves the
following exclusive authority:

 

(i)                                     the power to designate those persons who shall serve as
members of the Committee;

 

(ii)                                  the power to terminate the Plan pursuant to Section 13.04;

 

(iii)                               the power to amend the Plan in any manner, except that such
power shall not be exclusive, to the extent that it has been delegated to the
Committee or the Plan Administrator, in accordance with Section 13.02(b),
(c);

 

(iv)                              the right to approve any amendment or new award or other
compensation action to be included in Compensation only for IBM corporate
officers, or any other action that disproportionately benefits IBM corporate
officers;

 

(v)                                 the
right to approve any Plan amendment, or any series of amendments adopted within
any 12 month period, that affects projected cash flow by more than $100,000,000
in a single year;

 

(vi)                              the power to take any actions materially inconsistent in any
material respect with prior actions of the Board or any committee thereof; and

 

(vii)                           the power to revise the procedures to amend the Plan.

 

11.03                     Responsibilities of Committee

 

(a)                                  The
Committee shall be responsible for:

 

(i)                                     the appointment, retention, and removal of:

 

(A)                              the Trustee which holds the assets of the Fund, and

 

108

 

(B)                                the Trustee or Investment Managers which direct or manage
the investment, acquisition, and disposition of the assets of the Fund or of
any Investment Fund;

 

(ii)                                  the
establishment and amendment of investment policies and guidelines for the Plan,
including guidelines regarding the diversification of assets, pursuant to Section 404(a)(1)(C) of ERISA, to the extent applicable, provided,
however, that the Committee, in its sole discretion, may delegate all or part
of such responsibility to the Trustee or Investment Managers, or to employees
of IBM, or to Participants;

 

(iii)                               the
review, on a basis no less frequent than annually, of the performance of the
Plan Administrator, the Trustee, the Investment Managers, and any others
appointed by it; and

 

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

 

(b)                                 The
Committee may, by duly adopted resolution, delegate to the highest ranking IBM
officer responsible for Finance, the highest ranking IBM officer responsible
for Human Resources, the IBM Treasurer, the Plan Administrator, or any other
officer or employee of IBM, the authority to carry out any decision,
resolution, directive, or delegation of the Committee.  The Committee may, by duly adopted
resolution, delegate to the Treasurer of IBM the authority granted to the
Committee under subsection (a)(i)(B) or Section 5.01(a).

 

109

 

11.04                     Appointment of Plan Administrator

 

(a)                                  The
highest ranking IBM officer responsible for Finance and the highest ranking IBM
officer responsible for Human Resources shall appoint one or more persons
employed by IBM in the capacity of Assistant Controller, Director of Employee
Benefits, Director (or Manager) of U.S. Retirement Funds, or such other person
or persons holding comparable positions as they deem appropriate in their
discretion, to serve as the Plan Administrator or to comprise a committee that
shall serve as the Plan Administrator, the members of which committee may be
authorized to act jointly or severally.

 

(b)                                 The
IBM officers designated in subsection (a) shall appoint and designate such
other employees of IBM as may be needed to provide adequate staff support and
services to the Committee and the Plan Administrator.

 

11.05                     Responsibilities of Plan Administrator and Effect of Decisions of Plan
Administrator

 

(a)                                  The
Plan Administrator shall have the full authority and discretion to promulgate
and enforce such rules and regulations as it shall deem necessary or
appropriate for the administration of the Plan, which rules and regulations
shall include a claims procedure in accordance with Section 503 of ERISA
and regulations thereunder, provided, however, such claims procedure shall not
be applicable to claims arising under the Disability Protection Program, which
claims shall be subject only to the provisions of Section 5A.08(b).

 

(b)                                 The
Plan Administrator shall have the full authority and discretion to construe and
interpret the Plan, and correct any defect, supply any omission, reconcile any
inconsistency, or resolve any ambiguities, consistent with the intent hereof,
to determine

 

110

 

the
amount, timing, and recipients of benefits payable under the Plan, and to
determine the date as of which any individual became or ceased to be a
Participant.

 

(c)                                  The
Plan Administrator shall report to the Committee at least annually on its
activities.

 

(d)                                 All
determinations of the Plan Administrator as to the interpretation of the Plan
or as to any disputed question shall be in accordance with the terms of the
Plan and the requirements of ERISA and the Code, and shall be conclusive and
binding on all persons, to the extent permitted by applicable law.

 

(e)                                  The
Plan Administrator, in its discretion, may delegate the functions assigned to
it by the Plan, except for the functions enumerated in subsections (a),
(b), and (c) and in Section 13.01(c).

 

11.06                     Retention of Professional Advisors

 

(a)                                  The
Committee or the Plan Administrator may engage the services of accountants,
attorneys, actuarial and employee benefit consultants, recordkeepers, and such
other professional or administrative personnel or organizations as they deem
necessary or advisable to assist them in fulfilling their responsibilities
under the Plan.

 

(b)                                 The
expenses for professional or administrative services engaged pursuant to subsection (a)
shall be paid by the Company or, in the discretion of the Committee, which
discretion may be delegated, may be paid out of the assets or income of the
Trust, in accordance with Article 12.

 

(c)                                  The
Committee, the Plan Administrator, all other fiduciaries with respect to the
Plan, and their delegates and assistants shall be entitled to act on the basis
of any tables, valuations, certificates, opinions, or reports furnished by the
professional or administrative personnel engaged in accordance with subsection (a).

 

111

 

11.07                     Prudent Conduct

 

The Committee and the Plan Administrator
shall use that degree of care, skill, prudence and diligence that a prudent man
acting in a like capacity and familiar with such matters would use in his
conduct of a similar situation.

 

11.08                     Service in More Than One Fiduciary Capacity

 

Any individual, entity or group of persons
may serve in more than one fiduciary capacity with respect to the Plan and/or
the funds of the Plan.

 

11.09                     Compensation and Bonding

 

The members of the Committee and the Plan
Administrator shall not receive any compensation from the Plan for their
services as such.  Except
as may otherwise be required by law, no bond or other security shall be
required of any person serving in any capacity with respect to the Plan in any
jurisdiction.

 

11.10                     Limitation of Liability

 

The Employer, the Board of Directors, the
Committee, the Plan Administrator, and any officer, employee or agent of the
Employer shall not incur any liability individually or on behalf of any other
individuals or on behalf of the Employer for any act or failure to act, made in
good faith in relation to the Plan or the funds of the Plan.  However, this limitation shall not act to
relieve any such individual or the Employer from a responsibility or liability
for any fiduciary responsibility, obligation or duty under Part 4,
Title I of ERISA.

 

112

 

11.11                     Individual Accounts

 

The Plan Administrator shall maintain, or
cause to be maintained, records showing the individual balances in each
Participant’s Account.  However,
maintenance of such records and Accounts shall not require any segregation of
the funds of the Plan.

 

113

 

ARTICLE 12.  MANAGEMENT OF FUNDS

 

12.01                     Trust Agreement

 

All the funds of the Plan shall be held by
Trustee appointed from time to time by the Committee under a trust agreement
adopted, or as amended, by the Committee for use in providing the benefits of
the Plan and paying its expenses not paid directly by the Employer.  The Employer shall have no liability for the
payment of benefits under the Plan nor for the
administration of the funds paid over to the Trustee.

 

12.02                     Exclusive Benefit Rule

 

Except as otherwise provided in the Plan, no
part of the corpus or income of the funds of the Plan shall be used for, or
diverted to, purposes other than for the exclusive benefit of Participants and
other persons entitled to benefits under the Plan and paying the expenses of
the Plan not paid directly by the Employer. 
No person shall have any interest in, or right to, any part of the
earnings of the funds of the Plan, or any right in, or to, any part of the
assets held under the Plan, except as and to the extent expressly provided in
the Plan.

 

114

 

ARTICLE 13.  AMENDMENT, MERGER, TRANSFERS, AND TERMINATION

 

13.01                     Amendment of Plan

 

(a)                                  The
Board of Directors reserves the right at any time and from time to time, and
retroactively if deemed necessary or appropriate, to amend in whole or in part
any or all of the provisions of the Plan.

 

(b)                                 The
Committee shall have the authority to amend the Plan at any time and from time
to time, and retroactively if deemed necessary or appropriate, provided,
however, that the Board of Directors may, in its discretion, limit the
authority of the Committee and that any amendment that is subject to the approval
of the Board pursuant to Section 11.02 shall not become effective until
such approval is granted.

 

(c)                                  The
Plan Administrator shall have the authority to adopt amendments to the Plan:

 

(i)                                     that may be required to maintain the qualified status of the
Plan under Section 401(a) of the Code and the tax-exempt status of the
Trust under Section 501(a) of the Code, or

 

(ii)                                  that relate to the compliance of the Plan with the
requirements of the Code and constitute an election permitted by any section of
the Code, or Regulations or rulings thereunder, or

 

(iii)                               that have the effect of modifying the optional forms of
distribution provided under any special rules adopted pursuant to Section 13.02(d),

 

and
shall have such additional authority to amend the Plan as may be delegated to
it by the Committee.  Any such amendment
shall be effective as specified by the Plan Administrator and may be given
retroactive effect to the extent required or permitted by Section 401(b)
of the Code and Regulations and rulings thereunder, provided, however,

 

115

 

that any amendment described in paragraph
(iii) shall not be effective with respect to a Participant who receives or
commences to receive a distribution from the Plan within 90 days after the date
on which he is notified of the adoption of such amendment and provided further,
however, that any amendment that is subject to the approval of the Board
pursuant to Section 11.02 shall not become effective until such approval
is granted.

 

(d)                                 No
amendment shall make it possible for any part of the funds of the Plan to be
used for, or diverted to, purposes other than for the exclusive benefit of
persons entitled to benefits under the Plan.

 

(e)                                  No
amendment shall be made which has the effect of decreasing the balance of the
Account of any Participant or of reducing the nonforfeitable percentage of the
balance of the Account of a Participant below the nonforfeitable percentage
computed under the Plan as in effect on the date on which the amendment is
adopted, or if later, the date on which the amendment becomes effective.

 

13.02                     Merger, Consolidation or Transfer of Assets and Liabilities

 

(a)                                  The
Plan may not be merged or consolidated with, and its assets or liabilities may
not be transferred to, any other plan unless each person entitled to benefits
under the Plan would, if the resulting plan were then terminated, receive a
benefit immediately after the merger, consolidation, or transfer which is equal
to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer if the Plan had then
terminated.

 

(b)                                 Subject
to the provisions of subsection (a), the Committee shall have the
authority (i) to direct the merger of the Plan into or with any other plan that
is qualified under

 

116

 

Section 401(a) of the Code, (ii) to
cause the Plan to be divided into 2 or more separate plans, each of which shall
be qualified under Section 401(a) of the Code, (iii) to instruct
the Trustee to transfer any portion of the assets and liabilities of the Plan
from the Trust to any other plan that is qualified under Section 401(a) of
the Code, or (iv) to instruct the Trustee to accept a transfer to the
Trust of any portion of the assets and liabilities of any other plan that is
qualified under Section 401(a) of the Code.

 

(c)                                  Subject
to the provisions of subsection (a), the Plan Administrator shall have the
authority (i) to instruct the Trustee to accept a transfer to the Trust,
by another plan that is qualified under Section 401(a) of the Code,
of all or any portion of the assets and liabilities of such other plan that are
allocated thereunder to the accounts of individuals that have or will become
Employees and have or will become eligible to be Participants in the Plan or (ii) to
instruct the Trustee to transfer from the Trust to another Plan that is
qualified under Section 401(a) of the Code all or any portion of the
assets and liabilities of the Trust that are allocated hereunder to the
Accounts of Participants who have terminated or will terminate from employment
with an Employer as the result of a transaction undertaken by such
Employer.  In exercising its authority
under clause (ii) of the foregoing sentence, the Plan Administrator
may, in its discretion, but shall not be required to, permit each Participant
affected by such termination to elect whether or not the assets and liabilities
allocated to his Account hereunder shall be included in such transfer and may
establish conditions for the inclusion in such transfer of the assets and
liabilities allocated to any Account hereunder.

 

(d)                                 In
each transaction in which another plan is merged into and with the Plan in
accordance with subsection (b)(i) and in each case in which the Plan
receives a transfer of assets and liabilities in accordance with subsection (b)(iv) or
(c)(i), the Plan

 

117

 

Administrator shall establish rules for
the treatment of the Accounts established or increased as a result thereof,
which rules may include the establishment of additional sub-accounts.  Such rules, which are hereby incorporated by
reference, shall comply with the requirement of Section 411(d)(6) of
the Code and Regulations thereunder.

 

(e)                                  Rescission
of Special Rules adopted prior to September 30, 2002.

 

(i)                                     Notwithstanding
any rule adopted pursuant to Section 13.02(d) prior to September 30,
2002, distributions to a Participant who has terminated employment shall be not
be made in any form other than the forms described in Sections 10.02, 10.03, or
10.04, except that distributions to a Participant who has attained age 701⁄2
shall be made in accordance with Section 10.06.  A Participant’s election of any form of
distribution described in Sections 10.02, 10.04, or 10.06 shall not be subject
to the consent of his or her spouse.

 

(ii)                                  Notwithstanding
any rule adopted pursuant to Section 13.02(d) prior to September 30,
2002, distributions to a Participant’s Beneficiary upon the death of a
Participant shall be made only in the form described in Section 10.08.

 

(iii)                               Notwithstanding
any rule adopted pursuant to Section 13.02(d) prior to September 30,
2002, in no event shall a Participant’s application for a loan in accordance
with Section 9.01(a) and 9.02(a) be subject to the consent of
his or her spouse.

 

(iv)                              Notwithstanding
any special rule adopted pursuant to Section 13.02(d) prior to September 30,
2002, in no event shall a Participant’s application pursuant to Section 8.03
for a withdrawal in accordance with Section 8.01 or 8.02 be subject to the
consent of his or her spouse.

 

118

 

(v)                                 This
subsection shall be effective as of September 30, 2002, provided,
however, that the provisions of this subsection shall not be effective
with respect to distributions to a Participant or Beneficiary occurring before
the earlier of (i) 90 days after a Summary of Material Modifications
describing the provisions of this subsection has been furnished to
Participants in accordance with Sec. 2520-104b-3(a) of the regulations of
the Department of Labor, or (ii) the date that the Proposed Regulation
amending Section 1.411(d)-4, Q&A 2(e) of the Regulations,
published on July 8, 2003, becomes final.

 

13.03                     Termination by Participating Employers

 

Any Domestic Subsidiary may terminate its
participation in the Plan upon appropriate action by it, including such notice
to the Committee as the Committee shall require. In that event, the funds of
the Plan held on account of Participants in the employ of that Domestic
Subsidiary, and any unpaid balances of the Accounts of all Participants who
have separated from the employ of that Domestic Subsidiary and who are not then
employed by an Employer other than that Domestic Subsidiary, shall be
determined by the recordkeeper appointed by the Plan Administrator.  The Plan Administrator shall direct the
Trustee to segregate the amount so determined as a separate trust and such
segregation shall be deemed a division of the Plan into 2 plans, in accordance
with Section 13.02(b)(ii).  With
respect to the separate trust and plan so established, the board of directors
of the Domestic Subsidiary that has terminated its participation in the Plan
shall succeed to the powers and duties of the Board of Directors and the
Committee, including without limitation, the appointment of the Plan
Administrator and the authority to terminate such separate plan in accordance
with Section 13.04.

 

119

 

13.04                     Termination of Plan

 

(a)                                  The
Board of Directors may terminate the Plan at any time.  Subject to Section 11.02, the Committee
may completely discontinue contributions under the Plan for any reason at any
time.  In case of termination or partial
termination of the Plan, or complete discontinuance of Employer contributions
to the Plan, the rights of affected Participants to their Accounts under the
Plan as of the date of the termination or discontinuance shall be
nonforfeitable.  The total amount in each
Participant’s Accounts shall be distributed to him or for his benefit, as the
Plan Administrator shall direct, subject to the provisions of subsection (b),
or continued in trust for his benefit.

 

(b)                                 Upon
termination of the Plan, Deferred Cash Contributions and Employer Matching
Contributions, with earnings thereon, shall be distributed to Participants only
if (i) neither the Employer nor any Affiliate establishes or maintains a
successor defined contribution plan, and (ii) payment is made to the
Participants in the form of a lump sum distribution, as defined in Section 401(k)(10)(B)(ii) of
the Code.  For purposes of this
paragraph, a “successor defined contribution plan” is a defined contribution
plan within the meaning of Section 414(i) of the Code, other than an
employee stock ownership plan as defined in Sections 4975(e)(7) or
409(a) of the Code (“ESOP”) or a simplified employee pension as defined in
Section 408(k) of the Code (“SEP”), which exists at the time the Plan is
terminated or within the 12 month period beginning on the date all assets are
distributed.  However, in no event shall
a defined contribution plan be deemed a successor plan if fewer than 2% of the
employees who are eligible to participate in the Plan at the time of its
termination are or were eligible to participate under such other defined
contribution plan of the Employer or an Affiliate, other than an ESOP or a SEP,

 

120

 

at any time during the period beginning 12
months before and ending 12 months after the date of the Plan’s termination.

 

121

 

ARTICLE 14.  GENERAL PROVISIONS

 

14.01                     Nonalienation and Payment Pursuant to Qualified Domestic Relations
Orders

 

(a)                                  Except
as required by any applicable law, no benefit under the Plan shall in any
manner be anticipated, assigned or alienated, and any attempt to do so shall be
void.

 

(b)                                 Notwithstanding
subsection (a), payment shall be made in accordance with the provisions of
any judgment, decree, or order which:

 

(i)                                     creates
for, or assigns to, a spouse, former spouse, child or other dependent of a
Participant the right to receive all or a portion of the Participant’s benefits
under the Plan for the purpose of providing child support, alimony payments or
marital property rights to that spouse, child or dependent,

 

(ii)                                  is
made pursuant to a State domestic relations law,

 

(iii)                               does
not require the Plan to provide any type of benefit, or any option, not
otherwise provided under the Plan, and

 

(iv)                              otherwise
meets the requirements of Section 206(d) of ERISA, as amended, as a
Qualified Domestic Relations Order, as determined by the Plan Administrator in
accordance with its established procedures.

 

(c)                                  Notwithstanding
anything herein to the contrary, if the amount payable to the alternate payee
under a Qualified Domestic Relations Order is less than $3,500, such amount
shall be paid in one lump sum as soon as practicable following the
qualification of the order.  If such
amount exceeds $3,500, it shall be paid in one lump sum as soon as practicable
following the qualification of the order, unless the Qualified Domestic

 

122

 

Relations Order provides that such payment
may not be made without the consent of the alternate payee.  If a Qualified Domestic Relations Order
requires the consent of the alternate payee prior to the payment of the amount
awarded thereunder and if such amount exceeds $3,500, then such amount shall be
paid in one lump sum as soon as practicable following receipt of the consent of
the alternate payee, but in no event later than the date on which the
Participant named in such order attains Normal Retirement Age.  Effective January 1, 1998, $5,000 shall
be substituted for $3,500 for purposes of this subsection.

 

(d)                                 For
the sole purpose of applying the provisions of Sections 5.04 and 10.11
with respect to the portion of an Account that has been made payable to an
alternate payee pursuant to a Qualified Domestic Relations Order, such
alternate payee shall be deemed to be a Participant.

 

14.02                     Facility of Payment

 

(a)                                  In
the event that the Plan Administrator determines that any Participant or
Beneficiary receiving or entitled to receive benefits under the Plan is
incompetent or unable to care for his affairs, and in the absence of the
appointment of a legal guardian of the property of the incompetent, payments
due under the Plan, unless prior claim thereto has been made by a duly
qualified guardian, committee, or other legal representative, may be made to
the spouse, parent, sibling, adult child, 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.

 

123

 

(b)                                 In
the absence of the appointment of a legal guardian of the property of a minor,
any payment due 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.

 

(c)                                  Notwithstanding
the provisions of subsection (a) or (b), the Plan Administrator, in
its sole discretion, may require that a legal guardian for the property of an
incompetent or a minor be appointed, before authorizing any payment hereunder
to or for the benefit of such minor or incompetent.

 

(d)                                 Payments
made pursuant to this Section shall be a complete discharge of any
obligation arising under the Plan with respect to such payments.

 

14.03                     Tax Withholding

 

The Trustee, the Plan Administrator, and the
Employer shall withhold applicable taxes from payments made under the Plan,
shall pay over the amounts so withheld to the Internal Revenue Service, or
state or local tax authority, in accordance with applicable law, and shall
report information to government agencies when required to do so by law.

 

14.04                     Prevention of Escheat

 

If the Plan Administrator cannot ascertain
the whereabouts of any person to whom a payment is due under the Plan, the Plan
Administrator may, prior to January 1, 2004, no earlier than 3 years and,
after December 31, 2003, no earlier than 1 year, from the date such payment
is due, mail a notice of such due and owing payment to the last known address
of such person, as shown on the records of the Plan Administrator or the
Employer.  If such person has not made
written claim therefor within 3 months of the date of the mailing, the Plan
Administrator may, if it so elects and upon receiving advice

 

124

 

from counsel to the Plan, direct that such
payment and all remaining payments otherwise due such person be canceled on the
records of the Plan and the amount thereof applied to reduce the contributions
of the Employer.  Upon such cancellation,
the Plan and the Trust shall have no further liability therefor except that, in
the event such person or his beneficiary later notifies the Plan Administrator
of his whereabouts and requests the payment or payments due to  him under the Plan, the amount so applied
shall be paid to him, without interest, in accordance with the provisions of
the Plan.

 

14.05                     Elections and Notifications

 

(a)                                  Any
elections, notifications or designations made by an Employee, Participant,
Beneficiary, or spouse  pursuant to the
provisions of the Plan shall be made and filed with the Plan Administrator in a
time and manner determined by the Plan Administrator under rules uniformly
applicable to all persons similarly situated. 
In establishing such rules, the Plan Administrator shall have the
authority in its discretion to provide that telephonic or electronic
communication may be accepted in lieu of a written instrument, except to the
extent otherwise required by law.

 

(b)                                 The
Plan Administrator reserves the right to change from time to time the time and
manner for making notifications, elections or designations under the Plan, if
it determines that such action improves the administration of the Plan.  In the event of a conflict between the
provisions for making an election, notification or designation set forth in the
Plan and such new administrative procedures, those new administrative
procedures shall prevail.

 

125

 

(c)                                  The
Plan Administrator shall have the authority to suspend the rights of
Participants to make elections under the Plan if the Plan Administrator, in its
discretion, deems such suspension to be necessary to preserve the interests of
the Plan and its Participants.

 

(d)                                 Any
Notice that is not received by the Plan Administrator or its delegate shall be
without force or effect and shall not be binding on the Plan, regardless of the
circumstances or cause of such nondelivery. 
In no event shall the Plan, any Employer, the Committee, or the Plan
Administrator by liable to any Employee, Participant, spouse of a Participant,
Beneficiary, or any other person for the consequences of the nondelivery of any
Notice required to be provided hereunder.

 

14.06                     Information

 

Each Participant, Beneficiary or other person
entitled to a benefit, before any benefit shall be payable to him or on his
account under the Plan, shall file with the Plan Administrator the information
that it shall require to establish his rights and benefits under the Plan.

 

14.07                     Conditions of Employment Not Affected by Plan

 

The establishment of the Plan shall not
confer any legal rights upon any Employee or other person for a continuation of
employment, nor shall it interfere with the rights of the Employer to discharge
any Employee and to treat him without regard to the effect which that treatment
might have upon him as a Participant or potential Participant of the Plan.

 

126

 

14.08                     Construction

 

(a)                                  The
Plan shall be construed, regulated and administered under ERISA and the laws of
the State of New York, except where ERISA controls.

 

(b)                                 For
purposes of ERISA and other applicable laws of the United States or any state,
the situs of the Plan and the Trust Fund shall be the State of New York.

 

(c)                                  The
masculine pronoun shall include the feminine wherever appropriate.

 

(d)                                 The
titles and headings of the Articles and Sections in this Plan are for
convenience of reference only.  In the
case of ambiguity or inconsistency, the text rather than the titles or headings
shall control.

 

127

 

APPENDIX A. 
SPECIAL PROVISIONS FOR MiCRUS

 

MiCRUS has been a participating Employer in the Plan.  All provisions of the Plan, as set forth in
Articles 1 through 14, inclusive, and in Appendix D, apply fully to
MiCRUS and employees of MiCRUS, except to the extent that such provisions are
modified in this Appendix.  This Appendix
shall be applicable only during the period in which MiCRUS is a participating
Employer in the Plan and shall cease to be effective as of October 1,
2000.

 

1.04                           Actual Deferral Percentage

 

For the purpose of
determining the Actual Deferral Percentage of any group of Employees employed
by MiCRUS, any Special Discretionary Contribution made pursuant to Section 4.13
of Appendix A shall be taken into account in the same manner as a Deferred
Cash Contribution.

 

1.32                           ‘Hour of Service’
means,
with respect to any applicable computation period,

 

(a)                                  each hour for which the employee is paid
or entitled to payment for the performance of duties for the Employer or an
Affiliated Employer;

 

(b)                                 each hour for which the employee is paid
or entitled to payment by the Employer or an Affiliated Employer on account of
a period during which no duties are performed, whether or not the employment
relationship has terminated, due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, uniformed service duty, or leave of
absence, but not more than 501 hours for any single continuous period; and

 

128

 

(c)                                  each hour for which back pay,
irrespective of mitigation of damages, is either awarded or agreed to by the
Employer or an Affiliated Employer, excluding any hour credited under (a) or
(b), which shall be credited to the computation period or periods to which the
award, agreement, or payment pertains rather than to the computation period in
which the award, agreement, or payment is made.

 

No hours shall be credited on account of any
period during which the employee performs no duties and receives payment solely
for the purpose of complying with unemployment compensation, workers’
compensation, or disability insurance laws. The Hours of Service credited shall
be determined as required by Title 29 of the Code of Federal Regulations,
Sections 2530.200b-2(b) and (c).

 

1.50X                  “Special Discretionary Contributions”
means amounts contributed pursuant to Section 4.13 of Appendix A.  For purposes of Section 1.401(k)-1(b)(5) of
the Regulations, Special Discretionary Contributions made under the Plan shall
be deemed “Qualified Nonelective Contributions.”

 

3.01                           Each Employee of
MiCRUS shall be eligible to become a Participant at any time during service as
a full time Regular Employee.

 

3.02                           Participation

 

(c)                                  An
Employee of MiCRUS who has not satisfied the requirements of subsection (a) but
who is eligible to receive an allocation of a Special Discretionary
Contribution in accordance with Section 4.13 of Appendix A shall
become a Participant in the Plan on the date that such allocation is made.

 

129

 

(d)                                 Notwithstanding
any provision hereof, no Employee of MiCRUS shall be eligible to make an
election described in Section 4.01 for any period during which he is not a
full time Regular Employee.

 

4.13                           Special Discretionary Contribution

 

(a)                                  MiCRUS,
in its sole discretion, may make a Special Discretionary Contribution to the
Plan, out of its Profits, not more than once per Plan Year.

 

(b)                                 If
a Special Discretionary Contribution is made for a Plan Year, it shall be paid
to the Trustee not later than the time prescribed by law for the filing of the
Employer’s Federal income tax return, including extensions thereof, for the
taxable year of the Employer that contains the last day of the Plan Year to
which the contribution relates.

 

(c)                                  If
a Special Discretionary Contribution is made for a Plan Year, it shall be
allocated to the Employer Account of each Eligible Employee in the proportion
that his Compensation for the Plan Year bears to the Compensation of all
Eligible Employees for such Plan Year.

 

(d)                                 For
purposes of subsection (c), an Employee of MiCRUS shall be deemed an
Eligible Employee if, and only if, (i) he satisfies the requirements of Section 3.01
of Appendix A, (ii) the date on which he first completed an Hour of
Service was no later than the first day of the Plan Year to which the Special
Discretionary Contribution relates, (iii) he is an Employee in active
employment, or is on an authorized leave of absence, on the last day of the
Plan Year to which the Special Discretionary Contributions relates, and (iv) he
is not eligible to participate in the MiCRUS Retirement Plan.

 

130

 

APPENDIX B. 
SPECIAL PROVISIONS FOR

TECHNOLOGY SERVICE SOLUTIONS (“TSS”)

 

Technology Service Solutions (“TSS”) has been a participating employer
in the Plan.  All provisions of the Plan,
as set forth in Articles 1 through 14, inclusive, and Appendix D
apply fully to TSS and employees of TSS, except to the extent that such
provisions are modified in this Appendix. 
This Appendix shall be applicable only during the period in which TSS is
a participating Employer in the Plan shall cease to be effective as of January 1,
1999.

 

4.02                           Employer Matching Contributions

 

(a)                                  TSS
shall contribute, out of its Profits, on behalf of each of its Participants who
elects to make Deferred Cash Contributions, an amount equal to 100% of the Deferred
Cash Contributions made by the Participant during each payroll period;
provided, however, that for this purpose, Deferred Cash Contributions in excess
of 7% of the Participant’s Compensation for a payroll period shall not be taken
into account.  In no event shall the
Matching Contributions pursuant to this Section with respect to a Plan
Year exceed 7% of the Participant’s Compensation while a Participant during
such Plan Year.

 

131

 

APPENDIX C. 
SPECIAL RULES APPLICABLE

TO PUERTO RICO EMPLOYEES

 

The Plan includes as participating Employers entities that conduct
business operations in Puerto Rico and covers Employees who perform services
only in Puerto Rico.  All provisions of
the Plan, as set forth in Articles 1 through 14, inclusive, apply fully to
Employers conducting business in Puerto Rico and employees performing services
in Puerto Rico, except to the extent that such provisions are modified in this
Appendix.

 

1.04                           Actual Deferral Percentage

 

For the purpose of
determining the Actual Deferral Percentage of a group of Puerto Rico Employees,
and at the election of the Plan Administrator, which election may be made or
changed each Plan Year, all or any portion of Matching Contributions made
pursuant to Section 3.02 with respect to such Plan Year may be taken into
account, in accordance with Section 1165(e)(3)(D)(ii)(I) of the Puerto
Rico Code.

 

1.31                           “Highly
Compensated Employee” means, for purposes of all
determinations required to be made in accordance with the Puerto Rico Code, an
employee of an Employer who is a Participant or who is eligible to become a
Participant and whose compensation for a Plan Year exceeds the compensation of
two-thirds of the employees of the Employer who are Participants or eligible to
become Participants.

 

132

 

1.45W              “Puerto Rico Code”
means the Puerto Rico Internal Revenue Code of 1994, as amended from time to
time.  References to specific sections of
the Puerto Rico Code shall be deemed to refer to such sections as they may be
amended or redesignated.

 

1.45X                  “Puerto Rico Employee”
means an Employee of an Employer in Puerto Rico who is subject to income
taxation under the laws of Puerto Rico.

 

1.45Y                   “Puerto Rico Participant” means a
Puerto Rico Employee who has become Participant in accordance with Section 3.02
and who has not ceased to be a Participant in accordance with Section 3.05.

 

4.01                           Deferred Cash Contributions

 

(a)                                  (i)                                     Notwithstanding
the provisions of this subsection, the Compensation reduction elected by a
Puerto Rico Participant may not exceed 10% of his Compensation.

 

(f)                                    Notwithstanding
any other provision of this Section, in no event shall the Deferred Cash
Contributions of a Puerto Rico Participant in any calendar year exceed the
lesser of (i) 10% of his Compensation or (ii) the excess, if any, of
$7,500 over the amount contributed by the Puerto Rico Participant pursuant to Section 1169
of the Puerto Rico Code, determined without regard to contributions
attributable to his spouse, if he resides with his spouse.  Effective January 1, 1998, $8,000 shall
be substituted for $7,500 in the foregoing sentence.

 

(g)                                 This
subsection shall not apply to Puerto Rico Participants.

 

(h)                                 This
subsection shall not apply to Puerto Rico Participants.

 

133

 

4.06                           Actual Deferral Percentage Test

 

(d)                                 For
each Plan Year, the Actual Deferral Percentage for Highly Compensated Employees
who are Puerto Rico Participants shall be subject to the limitation described
in subsection (a), provided, however, that for purposes of this
subsection, the Employer shall be deemed to have made the election described in
subsection (b).  If the Plan
Administrator determines that the limitation under this subsection has
been exceeded, then the Plan Administrator shall apply the procedures described
in subsection (c), provided, however, that clause (ii) of subsection (c) shall
not be applicable and all Excess Contributions shall be distributed to the
Highly Compensated Employee with respect to whom such Excess Contributions were
determined in accordance with clause (i) of subsection (c).

 

4.07                           Actual Contribution Percentage Test

 

This Section shall
not apply to Highly Compensated Employees who are Puerto Rico Participants.

 

4.08                           Aggregate Contribution Limitation

 

This Section shall
not be applicable to Highly Compensated Employees who are Puerto Rico
Participants.

 

4.09                           Additional Discrimination Testing Provisions

 

(d)                                 The
provisions of subsections (a), (b), and (c) shall not be applied to
test any Contributions made on behalf of Highly Compensated Employees who are
Puerto Rico Participants.  In the event
that any Highly Compensated Employee who is a Puerto Rico

 

134

 

Participant
participates in more than one plan of an Employer that includes a cash or
deferred contribution arrangement under Section 1165(e) of the Puerto
Rico Code, or if the plan and any other plan containing a cash or deferred
contribution arrangement under Section 1165(e) of the Puerto Rico
Code are treated as one plan for purposes of Section 1165(a)(3) or
(a)(4) of the Puerto Rico Code, all such cash or deferred contribution
arrangements shall be treated as a single arrangement for purposes of Section 4.06(d) of
Appendix C.

 

4.12                           Return of Contributions

 

(d)                                 If
all or part of an Employer’s deductions for contributions on behalf of Puerto
Rico Participants are disallowed by the Secretary of the Treasury of Puerto
Rico or his delegate, the portion of contributions to which that disallowance
applies shall be returned to the Employer, upon its written request to the
Trustee, without interest, but reduced by any investment losses attributable to
those contributions, provided one year of the disallowance of the deduction.  For this purpose, all contributions made by
each Employer on behalf of Puerto Rico Participants are expressly declared to
be conditioned on their deductibility under Section 1023(n) of the Puerto
Rico Code.  In the event that Deferred
Cash Contributions are returned to an Employer in accordance with this
subsection, then the provisions of subsection (c) shall apply to the
amount so returned.

 

135

 

APPENDIX
D.  TOP-HEAVY PROVISIONS

 

A.                                   The
following definitions apply to the terms used in this Appendix:

 

(i)                                     “applicable
determination date” means, for any Plan Year, the last day of the preceding
Plan Year;

 

(ii)                                  “top-heavy
ratio” means the ratio of (A) the value of the aggregate of the Accounts
under the Plan for key employees to (B) the value of the aggregate of the
Accounts under the Plan for all key employees and non-key employees;

 

(iii)                               “key
employee” means an employee who is in a category of employees determined in
accordance with the provisions of Sections 416(i)(1) and (5) of
the Code and any Regulations thereunder and, where applicable, on the basis of
the Employee’s Statutory Compensation from the Employer or an Affiliate;

 

(iv)                              “non-key
employee” means any Employee who is not a key employee;

 

(v)                                 “applicable
Valuation Date” means the Valuation Date coincident with or immediately
preceding the last day of the preceding Plan Year;

 

(vi)                              “required
aggregation group” means any other qualified plan(s) of the Employer or an
Affiliate in which there are members who are key employees or which enable(s)
the Plan to meet the requirements of Section 401(a)(4) or 410(b) of
the Code; and

 

(vii)                           “permissive
aggregation group” means each plan in the required aggregation group and any
other qualified plan(s) of the Employer or an Affiliate in which all members
are non-key employees, if the resulting aggregation group continues to meet the
requirements of Sections 401(a)(4) and 410(b) of the Code.

 

136

 

B.                                     For
purposes of this Appendix, the Plan shall be “top-heavy” with respect to any
Plan Year if as of the applicable determination date the top-heavy ratio
exceeds 60%.  The top-heavy ratio shall
be determined as of the applicable Valuation Date in accordance with Sections 416(g)(3) and
(4) of the Code and Article 6 of this Plan, and shall take into
account any contributions made after the applicable Valuation Date but before
the last day of the Plan Year in which the applicable Valuation Date
occurs.  For purposes of determining
whether the Plan is top-heavy, the account balances under the Plan will be
combined with the account balances or the present value of accrued benefits
under each other plan in the required aggregation group, and in the Employer’s
discretion, may be combined with the account balances or the present value of
accrued benefits under any other qualified plan in the permissive aggregation
group.  Distributions made with respect
to a Participant under the Plan during the 5-year period ending on the applicable
determination date shall be taken into account for purposes of determining the
top-heavy ratio; distributions under plans that terminated within such 5-year
period shall also be taken into account, if any such plan contained key
employees and therefore would have been part of the required aggregation group.

 

C.                                     The
following provision shall be applicable to Participants for any Plan Year with
respect to which the Plan is top-heavy. 
An additional Employer contribution shall be allocated on behalf of each
Participant and each Employee eligible to become a Participant who is a non-key
employee, and who has not separated from service as of the last day of the Plan
Year, to the extent that the contributions made on his behalf under
Sections 4.02 for the Plan Year, and not necessary to be taken into
account to meet the contribution percentage test set forth in Section 4.07,
would otherwise be less than 3% of his remuneration.  However, if the greatest percentage of
remuneration contributed on

 

137

 

behalf of a key employee under
Sections 4.01 and 4.02 for the Plan Year, disregarding any contributions
made under Section 4.11 for the Plan Year, would be less than 3%, that
lesser percentage shall be substituted for “3%” in the preceding sentence.  Notwithstanding the foregoing provisions of
this paragraph, no minimum contribution shall be made under this Plan with
respect to a Participant, or an Employee eligible to become a Participant, if
the required minimum benefit under Section 416(c)(1) of the Code is
provided to him by any other qualified pension plan of the Employer or an
Affiliate.  For the purposes of this
paragraph, remuneration has the same meaning as set forth in Section 4.10(c).

 

D.                                    If, during any Plan Year, the Plan is top
heavy, the multiplier ‘1.25’ in Sections 415(e)(2)(B)(i) and (3)(B)(i) of
the Code shall be reduced to ‘1.0’, and the dollar amount ‘$51,875’ in Section 415(e)(6)(B)(i)(I)
of the Code shall be reduced to ‘$41,500’. 
This Section shall not apply if:

 

(a)                                  The benefits or allocations provided for
such Plan Year to each Participant who is a non-key employee would satisfy the
requirements of Section C, if ‘4%” were substituted for ‘3%’ in each place
that it appears in such subsection and ‘3%’ were substituted for ‘2%’ in Section 416(c)(1) of
the Code; and

 

(b)                                 The top heavy ratio does not exceed 90%.

 

This Section shall not apply to any Plan
Year beginning after December 31, 1999.

 

138

 

APPENDIX E. 
SPECIAL PROVISIONS APPLICABLE TO PARTICIPANTS IN

UNISON, INC. 401(k) SAVINGS AND INVESTMENT
PLAN

 

The provisions of this Appendix E shall be effective for the
period commencing on December 10, 1997 and ending on August 15, 2001,
and shall be applicable only as specified herein.

 

3.01                           Eligibility

 

Notwithstanding any
provision hereof to the contrary, in no event shall an Employee who is then
eligible to make elective deferrals, within the meaning of Section 402(g) of
the Code, under the Unison Software, Inc. 401(k) Savings and Investment
Plan, as amended from time to time, be eligible to become a Participant in the
Plan.

 

139

 

APPENDIX F: SPECIAL PROVISIONS APPLICABLE TO
FORMER EMPLOYEES OF

PRICEWATERHOUSE COOPERS, LLP

 

The provisions of this Appendix F shall be
applicable only to Participants who became Employees as a result of the
acquisition by the Employer of certain assets of Pricewaterhouse Coopers, LLP
and shall be effective only for the period commencing on October 1,  2002 and ending on December 31, 2002.

 

1.45Z                   ‘PwCC Participant’ shall mean a Participant
who became an Employee as a result of the acquisition by the Employer of
certain assets of Pricewaterhouse Coopers, LLP on October 1, 2002.

 

4.01                           Deferred Cash Contributions and Catch-Up Contributions

 

(e)                                  Notwithstanding
any other provision of this subsection, if a PwCC Participant made elective
deferrals, within the meaning of Section 402(g)(3) of the Code,
during 2002, under the Savings Plan for Employees and Partners of
Pricewaterhouse Coopers, LLP, or the Savings Plan of BPO (each of which plans
is a qualified plan maintained by Pricewaterhouse Coopers, LLP or an affiliate
thereof), and also made Deferred Cash Contributions  under the Plan, and the sum of such elective
deferrals and Deferred Cash Contributions exceeded the dollar limit specified
in Section 4.01(c) for 2002, then the PwCC Participant shall be
deemed to have elected to receive a refund of Excess Deferrals from the Plan,
in the amount by which the sum of such elective deferrals and Deferred Cash
Contributions exceeds such dollar limit.

 

140

 

4.02                           Employer Matching Contributions

 

(c)                                  For
the Plan Year ending on December 31, 2002, the Employer shall make a
special adjustment to the Matching Contributions made on behalf of PwCC
Participants, which adjustment shall be taken into account for all purposes as
a Matching Contribution.  The amount of
the special adjustment shall be equal to the excess, if any, of (i) the
lesser of (A) 50% of the Participant’s Deferred Cash Contributions made
during the period beginning on October 1, 2002 and ending on December 31,
2002, or (B) 3% of the Participant’s Compensation for such period, over (ii) the
Matching Contributions made on behalf of the Participant for such period in
accordance with subsection (a).  Any
amount required to be contributed under this subsection shall be
contributed by the Employer as soon as practicable following December 31,
2002.

 

141

 

APPENDIX G. 
SPECIAL PROVISIONS APPLICABLE TO FORMER EMPLOYEES OF

VF CORPORATION

 

The provisions of this Appendix G shall be applicable only to
individuals who had been employed by VF Corporation immediately prior to the
effective date of a contract between the Employer and VF Corporation, pursuant
to which the Employer agreed to provide certain services to VF Corporation, and
who became Employees in accordance with the provisions  of such contract.

 

3.01                           Eligibility

 

(c)                                  Notwithstanding
any provision of this subsection, subsection (a) shall be applicable
to any individual who was employed by VF Corporation immediately prior to the
effective date of  a contract between the
Employer and VF Corporation and who becomes an Employee as the result of, and
in accordance with the terms of such contract.

 

3.02A                 Participation by 401(k) Pension Program Participants
after December 31, 2004

 

(f)                                    The
provisions of this Section shall not be applicable to any individual who
was employed by VF Corporation immediately prior to the effective date of a
contract between the Employer and VF Corporation and who becomes an Employee as
the result of, and in accordance with the terms of, such contract.  No individual to whom this subsection applies
shall be a 401(k) Pension Program Participant.

 

142Exhibit 10.2

 

IBM Executive Deferred Compensation Plan

(Amended and Restated Effective January 1, 2000)

(the “Plan”)

 

(reflecting all Plan
amendments through January 1, 2005)

 

1. 
Elections made by eligible participants under Section 5.02 of the
Plan (relating to alternative methods of payment) shall be effective if made at
least six months in advance of, and in the calendar year preceding, the
participant’s termination of employment. (amendment
effective July 31, 2001)

 

2.  All
references to “TDSP,” “IBM Tax-Deferred Savings Plan” and “IBM TDSP 401(k) Plan”
are replaced with such plan’s current name, “IBM Savings Plan.”  (amendment effective
October 1, 2002)

 

3.  Section 3.02
is restated in its entirely to read as follows:

 

3.02 
Matching Contributions

 

The
amount of Company Matching Contributions credited to a Participant who is not a
401(k) Pension Program Participant (as defined in the IBM 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) Pe nsion 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 IBM Savings Plan).  (amendment effective January 1, 2005)

 

4.  Section 5.02, Method of
Payment, is amended by inserting the following sentence following the end of the
last sentence thereof:  “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.” (amendment
effective January 1, 2005)

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