Document:

Exhibit
10.1

 

The IBM Executive Deferred Compensation Plan
is amended by adding the following, effective January 1, 2005, at the end of
Article 2.02(c):

 

Notwithstanding the previous
sentence, a Participant’s Deferral Election Agreement with respect to salary
earned during 2005 is cancelled, in whole or in part, in accordance with
Q&A-20(a) of Notice 2005-1, and the designated percentage of Compensation
elected by the Participant in his or her Deferral Election Agreement with
respect to salary earned in 2005 shall be deemed to be zero, as of a date
specified by the Company, provided that:

 

(1)          before January 1, 2005, the Participant designated a percentage under his or
her Deferral Election Agreement with respect to salary earned during 2005 equal
to 75% or greater;

 

(2)          before January 1, 2006, the Participant requested that his or her Deferral
Election Agreement with respect to salary earned in 2005 be cancelled; and

 

(3)          before January 1, 2006, the Company specifies a date for cancellation of the
Participant’s Deferral Election Agreement with respect to salary earned in 2005
and such date is before January 1, 2006.Exhibit 10.2

 

IBM
SUPPLEMENTAL EXECUTIVE RETENTION PLAN

 

Effective
July 1, 1999

 

(As
Amended Through February 17, 2006)

 

 

Table
of Contents

 

	
  Article 1 - Purpose

  	
  1

  
	
  Article 2
  - Definitions

  	
  1

  
	
  Article 3 - Coverage and Effect

  	
  4

  
	
  Article 4 - Management and
  Administration

  	
  5

  
	
  Article 5 - Claims Procedure

  	
  6

  
	
  Article 6
  - Service Credit

  	
  7

  
	
  A. Non-U.S. Service

  	
  7

  
	
  B. Service Credit for Leaves of
  Absence

  	
  7

  
	
  Article 7 - Eligibility for
  SERP Benefits

  	
  8

  
	
  Article 8
  - SERP Benefits

  	
  8

  
	
  A. Formula

  	
  8

  
	
  B. Reduction for SERP Benefits
  Payable Prior to Age 60

  	
  9

  
	
  C. Form and Method of Payment

  	
  9

  
	
  D. Effective Date of Election

  	
  9

  
	
  E. Revocation of Election

  	
  9

  
	
  F. SERP Benefit for Disabled
  Participants

  	
  10

  
	
  Article 9 – Preretirement
  Survivor Annuity

  	
  10

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

  	
  10

  
	
  Article 11 - Forfeiture

  	
  11

  
	
  A. Detrimental
  Activities

  	
  11

  
	
  B. Forfeiture and Rescission

  	
  11

  
	
  Article 12 - Information for
  SERP Benefit Calculations

  	
  12

  
	
  Article 13 – Non-Alienation of
  SERP Benefits

  	
  12

  
	
  Article 14 – Withholding Taxes

  	
  12

  
	
  Article 15 – Distributions to
  Minors and Incompetents

  	
  12

  
	
  Article 16 – No Right to Employment

  	
  13

  
	
  Article 17
  – Unfunded Plan

  	
  13

  
	
  Article 18
  - Miscellaneous

  	
  13

  
	
  A. Construction

  	
  13

  
	
  B. Severability

  	
  13

  
	
  C. Titles and Headings Not to Control

  	
  13

  
	
  D. Complete Statement of the Plan

  	
  14

  
	
  E. Booklets and Brochures

  	
  14

  
	
  Article 19 – Situs of Plan;
  Governing Law

  	
  14

  
	
  Appendix A -
  Transition Rules

  	
  15

  

 

 

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

  	
  16

  
	
  Article 1 - Purpose

  	
  17

  
	
  Article 2 - Definitions

  	
  17

  
	
  Article 3 – Coverage and Effect

  	
  19

  
	
  Article 4 – Management and
  Administration

  	
  20

  
	
  Article 5 – Claims Procedure

  	
  21

  
	
  Article 6 – Service Credit

  	
  21

  
	
  A. Foreign Service

  	
  21

  
	
  B. Service Credit for Leaves of
  Absence

  	
  22

  
	
  C. Other Service Credit

  	
  22

  
	
  Article 7 – Retirement Date
  and Commencement of Benefits

  	
  22

  
	
  A. Foreign Service

  	
  22

  
	
  B. Early Retirement Date

  	
  22

  
	
  C. Commencement of SERP Benefits

  	
  23

  
	
  Article 8 – SERP Benefits

  	
  23

  
	
  A. Normal Retirement Benefit

  	
  23

  
	
  B. SERP Benefit

  	
  24

  
	
  C. Form and Method of Payment

  	
  25

  
	
  D. Effective Date of Election

  	
  26

  
	
  E. Revocation of Election

  	
  26

  
	
  F. SERP Benefits for Disabled
  Participants

  	
  26

  
	
  Article 9 – Preretirement
  Spousal Annuity

  	
  27

  
	
  Article 10 – Suspension of
  Benefits for Reemployed Retired Participants

  	
  27

  
	
  Article 11 - Forfeitures

  	
  28

  
	
  A. Competitive or Prejudicial
  Conduct

  	
  28

  
	
  B. Disclosure of Confidential Information

  	
  28

  
	
  C. Disclosure and Assignment of
  Rights

  	
  28

  
	
  D. Forfeiture and Rescission

  	
  29

  
	
  Article 12 - Information for
  Benefits Calculations

  	
  29

  
	
  A. Incomplete or Incorrect
  Information

  	
  29

  
	
  B. Overpayments

  	
  29

  
	
  Article 13 – Alienation of Benefits

  	
  30

  
	
  Article 14 – Withholding Taxes

  	
  30

  
	
  Article 15 – Distributions to
  Minors and incompetents

  	
  30

  
	
  Article 16 – No Right to Employment

  	
  31

  
	
  Article 17 – Unfunded Plan

  	
  31

  
	
  Article 18 - Miscellaneous

  	
  31

  

 

 

	
  A. Construction

  	
  31

  
	
  B. Severability

  	
  31

  
	
  C. Titles and Headings Not to Control

  	
  31

  
	
  D. Complete Statement of Plan

  	
  32

  
	
  E. Booklets and Brochures

  	
  32

  
	
  Article 19 – Situs of Plan;
  Governing Law

  	
  32

  
	
  Appendix C –
  Heritage PwCC Partner Plan

  	
  33

  

 

 

ARTICLE 1 - Purpose

 

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

 

ARTICLE 2 -
Definitions

 

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

 

b.                                 Annuity
Commencement Date - the first day of the month following a Participant’s
termination of employment with IBM and members of the IBM controlled group
within the meaning of Section 414(b) of the Internal Revenue Code,
which is the date as of which SERP Benefits commence.

 

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

 

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

 

e.                                  Board
- the Board of Directors of IBM.

 

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

 

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

 

Effective on or after July 1,
1999, for a Participant who is a Sales Executive assigned commission targets
(or similar results-based compensation targets, as designated by the Company),
and effective on and after January 1, 2000 for any other Participant
assigned commission targets (or similar results-based 

 

1

 

compensation targets, as
designated by the Company), Compensation shall equal the sales plan target
commission established for such a Participant based on the respective incentive
plan payout tables, and is credited monthly on a pro rata basis.

 

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

 

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

 

Compensation shall not
include amounts paid under the LTD Plan.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

aa.                            Plan
Administrator - a person or a committee appointed pursuant to ARTICLE 4
which shall be responsible for overseeing reporting, disclosure, record
keeping, claims review and related administrative matters under the Plan.  If a committee is appointed to serve as the
Plan Administrator, any one of the 

 

3

 

members of the committee
may act individually on behalf of the committee to fulfill the committee’s
duties as Plan Administrator.

 

ab.                           Plan
Year - the calendar year.

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 3
- Coverage and Effect

 

A.                                   This
Plan amends and restates the terms of the Prior Plan, effective as of July 1,
1999.  A Regular Employee who is an
Executive employed by IBM on the United States payroll, and whose Pay after June 30,
1999 equals or exceeds the Pay Threshold shall be a Participant in the Plan.  A Regular Employee who is described in APPENDIX
C (relating to certain former partners of PwC) shall also be a Participant in
the Plan, but such a Regular Employee’s SERP Benefits under the Plan shall be
described solely in APPENDIX C.

 

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

 

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

 

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

 

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

 

4

 

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

 

(1)                                  No individual shall accrue any SERP Benefits
under the Plan after December 31, 2007. 
Thus, no individual shall experience an increase or decrease in any SERP
Benefit he or she had already earned or accrued under the Plan as of December 31,
2007, except as provided in this paragraph.  
The amount of an individual’s SERP Benefit shall be determined without
regard to any change after December 31, 2007, in the individual’s Pay, the
individual’s service, the Pay Threshold, the Earnings Threshold or the Breakpoint,
provided, however, that any change in the individual’s age and service shall be
taken into account for purposes of determining the individual’s eligibility to
receive a SERP Benefit.  An individual is
not considered to experience an increase or decrease in any SERP Benefit for
purposes of this paragraph merely because the SERP Benefit (including the
determination of any offset for the benefit payable under the IBM Personal
Pension Plan) is adjusted because of the time or form of payment.  Notwithstanding the foregoing, an individual’s
SERP Benefit on or after January 1, 2008, may decrease to the extent that
the offset for benefits under the IBM Personal Pension Plan is increased because
of additional accruals under the IBM Personal Pension Plan after December 31,
2007.  Notwithstanding the third sentence
of this A., if a Participant’s SERP Benefit is determined under ARTICLE 8,
the amount of the Participant’s SERP Benefit shall not be less than what the
SERP Benefit would be if the Participant’s Pay, the Participant’s Benefit
Service, and the Pay Threshold were equal to the Participant’s Pay, the Participant’s
Benefit Service, and the Pay Threshold on December 31, 2006.

 

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

 

ARTICLE 4
- Management and Administration

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

To the maximum extent
permitted by IBM’s by-laws, IBM shall indemnify each member of the Committee,
the Plan Administrator, and each director, officer, and employee or agent of
the Company against any expenses and liabilities that such person may incur as
a result of any act or failure to act, in good faith, by such person in
relation to the Plan.

 

ARTICLE 5 - Claims
Procedure

 

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

 

If the Executive
Compensation Department denies a claim for SERP Benefits in whole or in part,
the claimant may appeal the denial of the claim in writing within 60 days of
receiving the Executive Compensation Department’s written decision.  If the claim denial is timely appealed, the
Plan Administrator shall conduct a full and fair review of the claim.  The 

 

6

 

decision of the Plan
Administrator shall be made not later than 60 days (or 120 days, if an
extension is required) after the receipt of the appeal.

 

ARTICLE 6 - Service
Credit

 

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

 

B.                                     Service
Credit for Leaves of Absence.

 

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

 

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

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

 

(2)               Military
Leave.

 

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

 

7

 

ARTICLE 7-
Eligibility for SERP Benefits

 

A Participant shall be eligible
for a SERP Benefit only if the Participant is an Executive on his or her date
of termination with IBM, the Participant has Pay in excess of the Pay Threshold
on his or her date of termination with IBM, a forfeiture under ARTICLE 11
does not occur, and either:

 

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

 

B.                                     The
Participant’s employment with IBM terminates on a date after the Participant
has completed 15 years of Eligibility Service and has attained age 55, and either:

 

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

 

(2)                                  Approval
is granted at the discretion of:

 

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

 

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

 

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

 

ARTICLE 8 - SERP
Benefits

 

A.                                   Formula.

 

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

 

(1)                                  1%
times Pay up to the Pay Threshold for the year of termination times the number
of years of Benefit Service; plus

 

(2)                                  2.5%
times Pay in excess of the Pay Threshold for the year of termination times the
number of years of Benefit Service.

 

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

 

8

 

the Participant would
have been entitled to receive under the IBM Personal Pension Plan beginning on
the Annuity Commencement Date if such Participant had elected under Section 17.3
of the IBM Personal Pension Plan not to have a Personal Pension Account.  For purposes of determining the Offset Amount,
the single life annuity will be calculated based on what the Participant’s
benefit under the IBM Personal Pension Plan would have been if the Participant
had not received any distributions from the IBM Personal Pension Plan before
the Annuity Commencement Date.

 

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

 

In no event shall the SERP
Benefit be less than what the SERP Benefit would be if the Participant’s Pay,
the Participant’s Benefit Service, and the Pay Threshold were equal to the
Participant’s Pay, the Participant’s Benefit Service, and the Pay Threshold on
the December 31 preceding the Participant’s termination of employment.

 

B.                                     Reduction
for SERP Benefits Payable Prior to Age 60.

 

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

 

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

 

C.                                     Form and
Method of Payment.

 

A Participant may elect
to be paid under any annuity form of payment described in Section 12.2(c)(1),(2),
or (3) of the IBM Personal Pension Plan. 
Any such election must be made in the manner and form prescribed by IBM’s
Executive Compensation Department.  Each
form of payment shall be the Actuarial Equivalent of a single life annuity
payable to the Participant in accordance with this ARTICLE 8.

 

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

 

D.                                    Effective Date of
Election.  Any election under this ARTICLE 8 shall be
effective on the Participant’s Annuity Commencement Date.  The death of a survivor annuitant before the
Participant’s Annuity Commencement Date automatically revokes any such
election.  The death of a survivor
annuitant on or after the Participant’s Annuity Commencement Date does not
revoke the Participant’s election.

 

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

 

9

 

Department.  A timely revocation of an election shall only
become effective upon receipt by IBM’s Executive Compensation Department.

 

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

 

F.                                      SERP
Benefit for Disabled Participants.
 The SERP Benefit for a Participant who
becomes totally and permanently disabled (as determined in accordance with the
terms of the IBM Long-Term Disability Plan, as amended from time to time) shall
be based on the Participant’s Benefit Service, the Participant’s Pay, and the
Pay Threshold as of the date such Participant starts receiving benefits under
the IBM Long-Term Disability Plan and on the Offset Amount calculated as of the
Participant’s Annuity Commencement Date. 
For purposes of determining such a Participant’s Annuity Commencement
Date, such a Participant shall be treated as an Executive (and may not receive
SERP Benefits) until the date such Participant ceases receiving disability
benefits under the IBM Long-Term Disability Plan.

 

ARTICLE 9
- Preretirement Survivor Annuity

 

A preretirement survivor
annuity shall be payable only to the Spouse or Domestic Partner of a
Participant who dies before his or her Annuity Commencement Date, but who, on
the date of death, has a Spouse or Domestic Partner and who, on the date of
death, has completed 15 years of Eligibility Service and has attained age 55,
or has completed five years of Eligibility Service and has attained age 60.  The preretirement survivor annuity shall be
the survivor annuity that the Participant’s Spouse or Domestic Partner would
have received under the Plan had the Participant terminated employment on his
or her date of death with a 50% joint and survivor annuity in effect in
accordance with the provisions of ARTICLE 8.  The Spouse or Domestic Partner shall begin
receiving the preretirement survivor annuity as of the first day of the month
next following the Participant’s date of death, unless the Spouse or Domestic
Partner elects to defer receiving the preretirement survivor annuity until the
first day of any subsequent month, but not later than the first day of the
month next following the date the Participant would have attained age 60, had
the Participant lived.  If the Spouse or
Domestic Partner elects to defer the preretirement survivor annuity, the
reduction for SERP Benefits payable prior to age 60 in Section B of ARTICLE 8
shall be based on such deferred commencement date.

 

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

 

If a Participant who has
previously terminated employment and is receiving SERP Benefits pursuant to the
Plan is re-employed by IBM, any SERP Benefit otherwise payable to the
Participant shall be suspended during the period of reemployment.  When the reemployed Participant subsequently terminates
employment, the Participant shall receive, at the Participant’s election, either:

 

10

 

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

 

B.                                     The
SERP Benefit the Participant is eligible to receive under the terms of the Plan
in effect on the date the Participant’s subsequent employment with IBM ceases,
based on the Participant’s Pay, Benefit Service and Eligibility Service and the
Pay Threshold as of that date, but reduced by the Actuarial Equivalent of any SERP
Benefit paid before the Participant’s reemployment.

 

ARTICLE 11 - Forfeiture

 

A.                                   Detrimental Activities.  A
Participant shall not engage in any “Detrimental Activity.”  For purposes of this ARTICLE 11, “Detrimental
Activity” shall include: (i) the rendering of services for any
organization or engaging directly or indirectly in any business which is or
becomes competitive with IBM, or which organization or business, or the
rendering of services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of IBM; (ii) the
disclosure to anyone outside IBM, or the use in other than the Company’s
business, without prior written authorization from IBM, of any confidential
information or material, as defined in the Company’s Agreement Regarding
Confidential Information and Intellectual Property, relating to the business of
IBM, acquired by the Participant either during or after employment with IBM; (iii) the
failure or refusal to disclose promptly and to assign to IBM, pursuant to the
Company’s Agreement Regarding Confidential Information and Intellectual
Property, all right, title and interest in any invention or idea, patentable or
not, made or conceived by the Participant during employment by IBM, relating in
any manner to the actual or anticipated business, research or development work
of IBM or the failure or refusal to do anything reasonably necessary to enable
IBM to secure a patent where appropriate in the United States and in other
countries; (iv) activity that results in termination of the Participant’s
employment for cause; (v) a violation of any rules, policies, procedures
or guidelines of IBM, including but not limited to the Company’s Business
Conduct Guidelines; (vi) any attempt directly or indirectly to induce any
employee of IBM to be employed or perform services elsewhere or any attempt
directly or indirectly to solicit the trade or business of any current or
prospective customer, supplier or partner of IBM; (vii) the Participant
being convicted of, or entering a guilty plea with respect to, a crime, whether
or not connected with IBM; or (viii) any other conduct or act determined
to be injurious, detrimental or prejudicial to any interest of IBM.

 

B.                                     Forfeiture and
Rescission.  Upon termination of employment, and from time
to time thereafter upon request by the Plan Administrator, a Participant shall
certify in a form and manner acceptable to the Plan Administrator that he or
she is in compliance with the terms and conditions of the Plan.  Failure to comply with the provisions of this
ARTICLE 11 prior to termination of employment or prior to receipt of any SERP
Benefit payment hereunder shall cause the forfeiture of all SERP Benefits even
if the failure to comply is not discovered until SERP Benefits have
commenced.  Failure to comply with the
provisions of this ARTICLE 11 after SERP Benefits have commenced hereunder
shall cause any such payments to be rescinded from the point in 

 

11

 

time when the conduct
which led to the failure to comply occurred. 
The Plan Administrator shall notify the Participant in writing of any
such rescission, and within ten days after receiving a notice of rescission
from IBM, the Participant shall pay to IBM in cash the amount of any payment
that has been rescinded in accordance with this ARTICLE 11.

 

ARTICLE 12
- Information For SERP Benefit Calculations

 

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

 

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

 

ARTICLE 13
- Non-Alienation Of SERP Benefits

 

No SERP Benefit payable
under the Plan shall be subject to alienation, sale, transfer, assignment,
pledge, attachment, garnishment, lien, levy or like encumbrance.  No SERP Benefit under the Plan shall in any
manner be liable for or subject to the debts or liabilities of any person
entitled to SERP Benefits under the Plan. Notwithstanding the preceding, the
Plan Administrator may withhold any SERP Benefit and use it to satisfy any debt
or other obligation that the Participant has to IBM.

 

ARTICLE 14
- Withholding Taxes

 

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

 

ARTICLE 15
- Distributions to Minors and Incompetents

 

If the Plan
Administrator determines that any Participant or Beneficiary receiving or
entitled to receive SERP Benefits under the Plan is incompetent to care for his
or her affairs, and in the absence of the appointment of a legal guardian of
the property of the incompetent, payments due under the Plan (unless prior
claim thereto has been made by a duly qualified guardian, committee or other
legal representative) may be made to the spouse, parent, brother 

 

12

 

or sister or other
person, including a hospital or other institution, deemed by the Plan
Administrator to have incurred or to be liable for expenses on behalf of such
incompetent.

 

In the absence of the
appointment of a legal guardian of the property of a minor, any minor’s share
of SERP Benefits under the Plan may be paid to such adult or adults as in the
opinion of the Plan Administrator have assumed the custody and principal
support of such minor.

 

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

 

ARTICLE 16
- No Right to Employment

 

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

 

ARTICLE 17 -
Unfunded Plan

 

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

 

ARTICLE 18 -
Miscellaneous

 

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

 

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

 

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

 

13

 

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

 

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

 

ARTICLE 19
- Situs of Plan; Governing Law

 

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

 

14

 

APPENDIX A

 

TRANSITION
RULES

 

A.                                   A
Participant who:

 

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

 

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

 

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

 

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

 

shall receive a SERP Benefit equal to the greater of the SERP Benefit described
in the Plan without regard to the appendices or the SERP benefit under the
Prior Plan as described in APPENDIX B; provided, however, that effective July 1,
1999, Section F of ARTICLE 8 of the Plan shall apply instead of Section F
of ARTICLE 8 of APPENDIX B.

 

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

 

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

 

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

 

15

 

APPENDIX B

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

 

 

IBM
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(Effective
January 1, 1995)

 

16

 

ARTICLE 1 - Purpose

 

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

 

ARTICLE 2 -
Definitions

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

p.                                      Plan
Year - the calendar year.

 

q.                                      Normal
Retirement Age - age 65.

 

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

 

18

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 3
- Coverage and Effect

 

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

 

19

 

ARTICLE 4
- Management and Administration

 

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

 

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

 

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

 

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

 

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

 

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

 

20

 

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

 

ARTICLE 5 - Claims
Procedure

 

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

 

ARTICLE 6 - Service
Credit

 

A.                                   Foreign Service

 

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

 

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

 

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

 

21

 

B.                                     Service
Credit for Leaves of Absence

 

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

 

C.                                     Other Service Credit

 

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

 

ARTICLE 7
- Retirement Date and Commencement of Benefits

 

A.                                   Normal Retirement Date

 

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

 

B.                                     Early Retirement Date

 

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

 

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

 

22

 

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

 

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

 

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

 

C.  Commencement
of SERP Benefits

 

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

 

ARTICLE 8 - SERP
Benefits

 

A.                                   Normal Retirement
Benefit

 

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

 

23

 

The Phase-In Percentage
shall be determined on the date the Participant retires, and shall not be
increased thereafter.  If the Participant
retires on January 31, 1995, the Phase-In Percentage shall be 27%.  If the Participant retires after January 31,
1995, the Phase-In Percentage shall be 27% plus 2% for each succeeding month
(3% for the month of December) up to and including the month of the Participant’s
retirement, until the Phase-In Percentage reaches 100% for a Participant
retiring on or after December 31, 1997. 
The Phase-In Percentage shall in no event exceed 100%. 

 

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

 

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

 

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

 

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

 

B.                                     Early SERP Benefit

 

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

 

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

 

24

 

	
  Participant’s

  Age at Annuity

  Commencement Date

  begins

  	
   

  	
  SERP Benefit under

  ARTICLE 8A hereof,

  reduced

  by the following

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  59

  	
   

  	
  3%

  	
   

  
	
  58

  	
   

  	
  7%

  	
   

  
	
  57

  	
   

  	
  11%

  	
   

  
	
  56

  	
   

  	
  15%

  	
   

  
	
  55

  	
   

  	
  20%

  	
   

  
	
  below 55

  	
   

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

  	
   

  

 

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

 

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

 

C.                                     Form and Method of
Payment

 

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

 

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

 

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

 

25

 

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

 

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

 

D.                                    Effective Date of
Election

 

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

 

E.                                      Revocation of Election

 

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

 

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

 

F.                                      SERP
Benefits for Disabled Participants

 

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

 

26

 

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

 

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

 

ARTICLE 9
- Preretirement Spousal Annuity

 

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

 

ARTICLE 10
- Suspension of Benefits for Reemployed Retired Participants

 

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

 

27

 

ARTICLE 11 -
Forfeiture

 

A.                                   Competitive
or Prejudicial Conduct

 

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

 

B.                                     Disclosure
of Confidential Information

 

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

 

C.                                     Disclosure
and Assignment of Rights

 

A Participant, pursuant
to the Company’s Agreement Regarding Confidential Information and
Intellectual  Property shall disclose promptly
and assign to the Company  all right,
title, and interest in any invention or idea, patentable or not, made or
conceived by the Participant  during
employment by the Company, relating in any manner 

 

28

 

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

 

D.                                    Forfeiture
and Rescission

 

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

 

ARTICLE 12 - Information for Benefits Calculations

 

A.                                   Incomplete
or Incorrect Information

 

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

 

B.                                     Overpayments

 

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

 

29

 

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

 

ARTICLE 13
- Alienation of Benefits

 

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

 

ARTICLE 14
- Withholding Taxes

 

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

 

ARTICLE 15
- Distributions to Minors and Incompetents

 

If the Plan
Administrator determines that any Participant or Beneficiary receiving or
entitled to receive Benefits under the Plan is incompetent to care for his or
her affairs, and in the absence of the appointment of a legal guardian of the
property of the incompetent, payments due under the Plan (unless prior claim
thereto has been made by a duly qualified guardian, committee or other legal
representative) may be made to the spouse, parent, brother or sister or other
person, including a hospital or other institution, deemed by the Plan
Administrator to have incurred or to be liable for expenses on behalf of such
incompetent.

 

In the absence of the
appointment of a legal guardian of the property of a minor, any minor’s share
of Benefits under the Plan may be paid to such adult or adults as in the
opinion of the Plan Administrator have assumed the custody and principal
support of such minor.

 

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

 

30

 

ARTICLE 16
- No Right to Employment

 

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

 

ARTICLE 17 -
Unfunded Plan

 

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

 

ARTICLE 18 -
Miscellaneous

 

A.                                   Construction

 

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

 

B.                                     Severability

 

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

 

C.                                     Titles
and Headings Not to Control

 

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

 

31

 

D.                                    Complete
Statement of Plan

 

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

 

E.                                      Booklets
and Brochures

 

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

 

ARTICLE 19
- Situs of Plan; Governing Law

 

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

 

32

 

APPENDIX C

 

Heritage
PwCC Partner Plan

 

ARTICLE C1 -
Purpose

 

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

 

ARTICLE C2 -
Definitions

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

h.                                 PwC
– PricewaterhouseCoopers.

 

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

 

33

 

	
  If age on September 30,
  2002 plus

  Partner Service is

  	
   

  	
  Target
  Percentage is

  
	
  60
  or more

  	
   

  	
  100%

  
	
  56
  but less than 60

  	
   

  	
  90

  
	
  52
  but less than 56

  	
   

  	
  80

  
	
  48
  but less than 52

  	
   

  	
  70

  
	
  44
  but less than 48

  	
   

  	
  60

  
	
  40
  but less than 44

  	
   

  	
  50

  
	
  Less
  than 40

  	
   

  	
  0

  

 

ARTICLE C3
- Coverage and Effect

 

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

 

ARTICLE C4
- Eligibility for SERP Benefits

 

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

 

ARTICLE C5 - SERP
Benefits

 

A.                                   Formula.

 

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

 

There shall be offset
from the amount described in the preceding paragraph, an Offset Amount.  The Offset Amount shall equal the sum of (1) and
(2):

 

(1)          The
annual single life annuity the Participant is entitled to receive under the IBM
Personal Pension Plan beginning on the Annuity Commencement Date.  For this purpose, the single life annuity
will be calculated based on what the Participant’s benefit under the IBM
Personal Pension Plan would have been if the Participant had not received any
distributions from the IBM Personal Pension Plan before the Annuity
Commencement Date; plus

 

34

 

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

 

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

 

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

 

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

 

If the Participant’s
Annuity Commencement Date is before his or her 55th birthday, the Participant’s
SERP Benefit, as calculated in the form of a single life annuity and before
offsetting the Offset Amount described in Section A of this ARTICLE C5
and before adding the additional amount described in Exhibit II, shall be
reduced by 2/3 of 1% for each month that the Annuity Commencement Date precedes
age 55.

 

ARTICLE C6
- Preretirement Survivor Annuity

 

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

 

35

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