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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



FORM 10-K
ANNUAL REPORT
pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
FOR THE YEAR ENDED DECEMBER 31, 2009

1-2360
(Commission file number)

INTERNATIONAL BUSINESS MACHINES CORPORATION
(Exact name of registrant as specified in its charter)

NEW YORK
(State of Incorporation)
  13-0871985
(IRS Employer Identification Number)

ARMONK, NEW YORK
(Address of principal executive offices)

 

10504
(Zip Code)

914-499-1900
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
  Voting shares outstanding
at February 10, 2010
  Name of each exchange
on which registered
Capital stock, par value $.20 per share   1,299,003,390   New York Stock Exchange
        Chicago Stock Exchange
4.00% Notes due 2011       New York Stock Exchange
4.95% Notes due 2011       New York Stock Exchange
6.625% Notes due 2014       New York Stock Exchange
7.50% Debentures due 2013       New York Stock Exchange
8.375% Debentures due 2019       New York Stock Exchange
7.00% Debentures due 2025       New York Stock Exchange
6.22% Debentures due 2027       New York Stock Exchange
6.50% Debentures due 2028       New York Stock Exchange
7.00% Debentures due 2045       New York Stock Exchange
7.125% Debentures due 2096       New York Stock Exchange

         Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes  ý     No  o

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o     No  ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý     No  o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ý     No  o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "accelerated filer," "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ý   Accelerated filer  o   Non-Accelerated filer  o
Smaller reporting company  o       (Do not check if a smaller reporting company)

         Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes  o     No  ý

         The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed second fiscal quarter was $136.8 billion.

Documents incorporated by reference:

         Portions of IBM's Annual Report to Stockholders for the year ended December 31, 2009 into Parts I, II and IV of Form 10-K.

         Portions of IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 27, 2010 are incorporated by reference into Part III of Form 10-K.



PART I

Item 1. Business:

        International Business Machines Corporation (IBM or the company) was incorporated in the State of New York on June 16, 1911, as the Computing-Tabulating-Recording Co. (C-T-R), a consolidation of the Computing Scale Co. of America, the Tabulating Machine Co. and The International Time Recording Co. of New York. Since that time, IBM has focused on the intersection of business insight and technological invention, and its operations and aims have been international in nature. This was signaled over 80 years ago, in 1924, when C-T-R changed its name to International Business Machines Corporation. And it continues today: The company creates business value for clients and solves business problems through integrated solutions that leverage information technology and deep knowledge of business processes. IBM solutions typically create value by reducing a client's operational costs or by enabling new capabilities that generate revenue. These solutions draw from an industry leading portfolio of consulting, delivery and implementation services, enterprise software, systems and financing.

STRATEGY

        Despite the volatility of the information technology (IT) industry over the past decade, IBM has consistently delivered superior performance, with a steady track record of sustained earnings per share growth. The company has shifted its business mix, exiting commoditized segments while increasing its presence in higher-value areas such as services, software and integrated solutions. As part of this shift, the company has acquired over 100 companies this past decade, complementing and scaling its portfolio of products and offerings.

        IBM's clear strategy has enabled steady results in core business areas, while expanding its offerings and addressable markets. The key tenets of this strategy are:

    Deliver value to enterprise clients through integrated business and IT innovation

    Build/expand strong positions in growth initiatives

    Shift the business mix to higher-value software and services

    Become the premier globally integrated enterprise

        These priorities reflect a broad shift in client spending away from "point products" and toward integrated solutions, as companies seek higher levels of business value from their IT investments. IBM has been able to deliver this enhanced client value thanks to its industry expertise, understanding of clients' businesses and the breadth and depth of the company's capabilities.

        IBM's growth initiatives, like its strengthened capabilities, align with these client priorities. These initiatives include Smarter Planet and Industry Frameworks, Growth Markets, Business Analytics and Cloud Computing. Each initiative represents a significant growth opportunity with attractive profit margins for IBM.

Smarter Planet and Industry Frameworks

        Smarter planet is an overarching strategy that highlights IBM's differentiated capabilities and generates broad-based demand for the company's products and services. Smarter Planet encapsulates IBM's view of enterprise IT's next major revolution: the instrumentation and integration of the world's processes and infrastructures—from energy grids and pipelines to supply chains and traffic systems. The massive amount of data these systems are generating can now be captured and analyzed. This infusion of intelligence enables more efficiency, productivity and responsiveness.

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        Clients seeking these "smart" solutions value IBM's deep industry and process expertise, powerful back-end systems and data analytics, complex systems integration capability and unique research capacity.

        IBM's Industry Frameworks create a flexible software foundation for developing, acquiring and deploying smart industry solutions. Each framework supports multiple solutions, enabling fast, efficient and tailored capabilities in support of clients' business needs. These frameworks represent a proven technique for the company to engage with its clients, driving sustained growth and high business value. They cover a wide variety of industries and domains, most of which are directly tied to Smarter Planet.

Growth Markets

        The company has benefited from its investments over the past several years in growth markets. The focus now is on geographic expansion of IBM's presence; on specific industry verticals of the highest impact and opportunity; on countries' build-out of infrastructure aligned with their national agendas; and on creating markets and new business models to serve the different requirements that exist in these emerging countries.

        In order to support this growth, IBM is continuing to invest significantly in these markets to expand capacity and develop talent. At the same time, IBM is expanding and benefiting from large teams of talent with global missions of delivery. The company continues to deepen its research and development (R&D) teams to design for the unique challenges and rapid growth facing these markets.

Business Analytics and Optimization

        Business optimization through the application of advanced analytics is emerging as another major category of business value. It succeeds earlier generations of back-office automation, basic enterprise resource planning and traditional business intelligence. Advanced analytics allow clients to see patterns in data they could not see before, understand their exposure to risk and predict the outcomes of business decisions with greater certainty.

        IBM's approach is end-to-end, providing cross-enterprise as well as industry-based analytics solutions. IBM has established the Business Analytics and Optimization practice, leveraging IBM consulting capabilities and software products, along with systems and research assets. IBM's breadth of expertise uniquely positions the company for revenue and profit growth.

Cloud Computing

        "Cloud" is an emerging consumption and delivery model for many IT-related services. Clients are attracted to its improved economics, flexibility and user experience. Traditional enterprise IT will increasingly integrate with these new cloud deployments, delivered as services via the Internet (also known as public clouds) or behind a firewall (private clouds). In discussions with enterprise clients, most are initially focused on private cloud implementations, the middle ground between the traditional enterprise IT and public clouds.

        IBM is helping clients determine how to leverage cloud computing to achieve business advantage. The company provides a full set of capabilities, from support in designing and implementing cloud solutions, to services for running and managing them if desired. IBM is applying its deep experience in critical areas such as security, reliability and innovation to deliver differentiated value. The company is also investing in new cloud initiatives tailored to particular industries, in conjunction with its partners and clients, to deliver cloud business services directly to the market. By providing deployment choice, optimizing solutions based on workload characteristics and delivering complete service management capabilities, IBM is positioned as the leading cloud service and infrastructure provider for enterprises.

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BUSINESS MODEL

        The company's business model is built to support two principal goals: helping clients succeed in delivering business value by becoming more innovative, efficient and competitive through the use of business insight and IT solutions; and providing long-term value to shareholders. The business model has been developed over time through strategic investments in capabilities and technologies that have the best long-term growth and profitability prospects based on the value they deliver to clients.

        The company's global capabilities include services, software, systems, fundamental research and related financing. The broad mix of businesses and capabilities are combined to provide business insight and solutions for the company's clients.

        The business model is flexible, adapting to the continuously changing market and economic environment. The company continues to divest commoditizing businesses and strengthen its position through strategic investments and acquisitions in higher value segments like business analytics, smarter planet and cloud computing. In addition, the company has transformed itself into a globally integrated enterprise which has improved overall productivity and is driving investment and participation in the world's fastest growing markets. As a result, the company is a higher performing enterprise today than it was several years ago.

        The business model, supported by the company's long-term financial model, has enabled the company to deliver consistently strong earnings, cash flows and returns to shareholders in changing economic environments.

BUSINESS SEGMENTS AND CAPABILITIES

        The company's major operations comprise: a Global Technology Services segment; a Global Business Services segment; a Software segment; a Systems and Technology segment; and a Global Financing segment.

         Global Services is a critical component of the company's strategy of providing IT infrastructure and business insight and solutions to clients. While solutions often include industry-leading IBM software and systems, other suppliers' products are also used if a client solution requires it. Approximately 60 percent of external Global Services segment revenue is annuity-based, coming primarily from outsourcing, maintenance and custom application management services arrangements. The Global Services backlog provides a solid revenue base entering each year. Within Global Services, there are two reportable segments: Global Technology Services and Global Business Services.

Global Technology Services (GTS) primarily provides IT infrastructure services and business process services, delivering business value through the company's global scale, standardization and automation.

G TS CAPABILITIES

         Strategic Outsourcing Services. Comprehensive IT outsourcing services dedicated to transforming clients' existing infrastructures to ensure better quality, cost control, adaptability, security and compliance. IBM integrates long-standing experience in service management, technology and industry applications with new technologies, such as cloud computing and virtualization, to enable new capabilities for clients.

         Business Transformation Outsourcing. A range of offerings from standardized processing platforms and Business Process Outsourcing through transformational offerings that deliver improved business results to clients through the strategic change and/or operation of the client's business processes, applications and infrastructure.

         Integrated Technology Services. Project-based portfolio of services that enable clients to optimize their IT environments by driving efficiency, flexibility and productivity, while reducing costs. The

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standardized portfolio is built around key assets and patented software, and incorporates best practices and proven methodologies that ensure predictive quality of delivery, security and compliance.

         Maintenance. A complete line of support services from product maintenance through solution support to maintain and improve the availability of clients' IT infrastructure.

        The GTS outsourcing businesses are supported by integrated worldwide delivery organizations:

         Integrated Technology Delivery (ITD) is responsible for worldwide service delivery supporting the Strategic Outsourcing business. It manages the world's largest privately-owned IT infrastructure with employees in over 40 countries, supporting over 450 data centers. ITD operates a globally integrated delivery model which supports regional client-facing teams by utilizing a global network of competencies and centers. Each competency provides industry-leading, standardized, integrated tools and processes. By leveraging IBM's global scale, skills and technology which is combined with the innovation from IBM research, clients gain access to leading edge, high-quality services with improved productivity, flexibility and cost.

         Business Process Delivery (BPD) provides highly efficient, world-class delivery capabilities in IBM's business process delivery operations, which include Business Transformation Outsourcing, Business Process Outsourcing and Business Process Services. BPD has employees and delivery centers in over 40 countries worldwide.

Global Business Services (GBS) primarily provides professional services and application outsourcing services, delivering business value and innovation to clients through solutions which leverage industry- and business-process expertise.

G BS CAPABILITIES

         Consulting and Systems Integration. Delivery of value to clients through consulting services for client-relationship management, financial management, human-capital management, business strategy and change, and supply-chain management. In 2009, the company announced the creation of a new consulting service line dedicated to the market for advanced business analytics and business optimization.

         Application Management Services. Application development, management, maintenance and support services for packaged software, as well as custom and legacy applications. Value is delivered through the company's global resource capabilities, industry knowledge and the standardization and automation of application development.

Software consists primarily of middleware and operating systems software. Middleware software enables clients to integrate systems, processes and applications across a standard software platform. IBM middleware is designed on open standards, making it easier to integrate disparate business applications, developed by different methods and implemented at different times. Operating systems are the software engines that run computers. Approximately two-thirds of external software segment revenue is annuity-based, coming from recurring license charges and ongoing subscription and support from one-time charge (OTC) arrangements. The remaining one-third relates to OTC arrangements in which clients pay one, up-front payment for a perpetual license. Typically, arrangements for the sale of OTC software include one year of subscription and support. Clients can also purchase ongoing subscription and support after the first year, which includes product upgrades and technical support.

S OFTWARE CAPABILITIES

         WebSphere Software. Delivers capabilities that enable clients to integrate and manage business processes across their organizations with the flexibility and agility they need to respond to changing

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conditions quickly. With a services-oriented architecture (SOA), businesses can more easily link together their fragmented data and business processes to extract value from their existing technology.

         Information Management Software. Enables clients to integrate, manage and use their information to gain business value and improve their outcomes. Solutions include advanced database management, enterprise content management, information integration, data warehousing, business analytics and intelligence, performance management and predictive analytics.

         Tivoli Software. Helps clients manage their technology and business assets by providing visibility, control and automation across their organizations. With solutions for identity management, data security, storage management and the ability to provide automation and provisioning of the datacenter, Tivoli helps build the infrastructure needed to make the world's systems—from transportation to water, energy and telecommunications—run smarter.

         Lotus Software. Enables businesses to connect people and processes for more effective communication and increased productivity through collaboration, messaging and social networking software. By remaining at the forefront of collaboration tools, Lotus helps organizations reap the benefits of social networking and other Web 2.0 modalities.

         Rational Software. Supports software development for both IT and embedded system solutions with a suite of Application Lifecycle Management products. Jazz, Rational's technology platform, transforms the way people work together to build software, making software delivery more collaborative, productive and transparent.

         Operating Systems. Software that manages the fundamental processes that make computers run.

Systems and Technology provides clients with business solutions requiring advanced computing power and storage capabilities. Approximately 55 percent of Systems and Technology's server and storage sales transactions are through the company's business partners; approximately 45 percent are direct to end-user clients. In addition, Systems and Technology provides leading semiconductor technology, products and packaging solutions to clients and for IBM's own advanced technology needs.

S YSTEMS AND TECHNOLOGY CAPABILITIES

         Systems. A range of general purpose and integrated systems designed and optimized for specific business, public and scientific computing needs. These systems—System z, converged System p and System x—are typically the core technology in data centers that provide required infrastructure for business and institutions. Also, these systems form the foundation for IBM's integrated offerings, such as IBM Smart Business Storage Cloud, IBM Smart Analytics Cloud, IBM Smart Analytics System and IBM CloudBurst. IBM servers use both IBM and non-IBM microprocessor technology and operating systems. All IBM servers run Linux, a key open-source operating system.

         Storage. IBM provides data storage products and solutions that allow clients to retain and manage rapidly growing, complex volumes of digital information. These solutions address critical client requirements for information retention and archiving, data deduplication, availability and virtualization, and security and compliance. The portfolio consists of a broad range of disk and tape storage systems and software, including the next-generation, ultra-scalable disk storage system XIV.

         Retail Store Solutions. Point-of-sale retail systems (network connected cash registers) as well as solutions which connect them to other store systems.

         Microelectronics. Semiconductor design and manufacturing primarily for use in IBM systems and storage products and for sale to external clients.

Global Financing facilitates clients' acquisition of IBM systems, software and services. Global Financing invests in financing assets, leverages with debt and manages the associated risks with the objective of

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generating consistently strong returns on equity. The primary focus on the company's offerings and clients mitigates many of the risks normally associated with a financing company. Global Financing has the benefit of both a deep knowledge of its client base and a clear insight into the products and services that are being financed. This combination allows Global Financing to effectively manage two of the major risks (credit and residual value) that are normally associated with financing.

G LOBAL FINANCING CAPABILITIES

         Client Financing. Lease and loan financing to end users and internal clients for terms generally between two and seven years. Internal financing is predominantly in support of Global Services' long-term client service contracts. Global Financing also factors a selected portion of the company's accounts receivable, primarily for cash management purposes. All internal financing arrangements are at arm's-length rates and are based upon market conditions.

         Commercial Financing. Short-term inventory and accounts receivable financing to dealers and remarketers of IT products.

         Remarketing. The sale and lease of used equipment to new or existing clients both externally and internally. This equipment is primarily sourced from the conclusion of lease transactions. Externally remarketed equipment revenue represents sales or leases to clients and resellers. Internally remarketed equipment revenue primarily represents used equipment that is sold or leased internally to the Systems and Technology and Global Services segments. The Systems and Technology segment may also sell the equipment that it purchases from Global Financing to external clients.

IBM WORLDWIDE ORGANIZATIONS

        The following worldwide organizations play key roles in IBM's delivery of value to its clients:

    Sales and Distribution

    Research, Development and Intellectual Property

    Integrated Supply Chain

Sales and Distribution

        IBM has a significant global presence, operating in more than 170 countries, with an increasingly broad-based geographic distribution of revenue. The company's Sales and Distribution organization manages a strong global footprint, with dedicated country-based operating units focused on delivering client value. Within these units, client relationship professionals work with integrated teams of consultants, product specialists and delivery fulfillment teams to improve clients' business performance. These teams deliver value by understanding the clients' businesses and needs, and then bring together capabilities from across IBM and an extensive network of Business Partners to develop and implement solutions.

        By combining global expertise with local experience, IBM's geographic structure enables dedicated management focus for local clients, speed in addressing new market opportunities and timely investments in emerging opportunities. The geographic units align industry-skilled resources to serve clients' agendas. IBM extends capabilities to mid-market client segments by leveraging industry skills with marketing, ibm.com and local Business Partner resources.

        In 2008, the company implemented a new growth markets organization to increase its focus on the emerging markets around the world that have market growth rates greater than the global average—countries within Southeast Asia, Eastern Europe, the Middle East and Latin America. The company's major markets include the United States (U.S.), Canada, the United Kingdom (U.K.), France,

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Germany, Italy, Japan, Denmark, Sweden, Switzerland, Austria, Belgium, Finland, Greece, Ireland, the Netherlands, Portugal, Cyprus, Norway, Israel, Spain, the Bahamas and the Caribbean region.

        The majority of IBM's revenue, excluding the company's original equipment manufacturer (OEM) technology business, occurs in industries that are broadly grouped into six sectors:

    Financial Services: Banking, Financial Markets, Insurance

    Public: Education, Government, Healthcare, Life Sciences

    Industrial: Aerospace and Defense, Automotive, Chemical and Petroleum, Electronics

    Distribution: Consumer Products, Retail, Travel and Transportation

    Communications: Telecommunications, Media and Entertainment, Energy and Utilities

    General Business: Mainly companies with fewer than 1,000 employees

Research, Development and Intellectual Property

        IBM's R&D operations differentiate the company from its competitors. IBM annually invests approximately $6 billion for R&D, focusing on high-growth, high-value opportunities. As a result of innovations in these and other areas, IBM was once again awarded more U.S. patents in 2009 than any other company, the 17th consecutive year IBM has been the patent leader. IBM's 4,914 patents in 2009 were the most U.S. patents ever awarded to one company in a single year. Consistent with the shift in the company's business mix, approximately 70 percent of these patents were for software and services. The company will continue to actively seek intellectual property protection for its innovations, while increasing emphasis on other initiatives designed to leverage its intellectual property leadership and promote innovation.

        In addition to producing world-class systems, software and technology products, IBM innovations are also a major differentiator in providing solutions for the company's clients through its services businesses. The company's investments in R&D also result in intellectual property (IP) income of approximately $1 billion annually. Some of IBM's technological breakthroughs are used exclusively in IBM products, while others are licensed and may be used in either/both IBM products and/or the products of the licensee. While the company's various proprietary intellectual property rights are important to its success, IBM believes its business as a whole is not materially dependent on any particular patent or license, or any particular group of patents or licenses. IBM owns or is licensed under a number of patents, which vary in duration, relating to its products. Licenses under patents owned by IBM have been and are being granted to others under reasonable terms and conditions.

Integrated Supply Chain

        Consistent with the company's work with clients to transform their supply chains for greater efficiency and responsiveness to global market conditions, the company continues to derive business value from its own globally integrated supply chain, thereby providing a strategic advantage for the company to create value for clients. IBM leverages its supply-chain expertise for clients through its supply-chain business transformation outsourcing service to optimize and help operate clients' end-to-end supply-chain processes, from procurement to logistics.

        IBM spends approximately $35 billion annually through its supply chain, procuring materials and services globally. The supply, manufacturing and logistics and customer fulfillment operations are integrated in one operating unit that has optimized inventories over time, improved response to marketplace opportunities and external risks and converted fixed costs to variable costs. Simplifying and streamlining internal processes has improved operations, sales force productivity and processes.

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COMPETITION

        The company is a globally-integrated enterprise, doing business in more than 170 countries. The company participates in the highly competitive information technology (IT) industry, where its competitors vary by industry segment, and range from large multinational enterprises to smaller, more narrowly focused entities. Overall, across its business segments, the company recognizes hundreds of competitors worldwide.

        The markets for each of the company's business segments is characterized by aggressive competition among all types of competitors. Across its business, the company's principal methods of competition are: technology innovation; performance; price; quality; brand; its broad range of capabilities, products and services; client relationships; the ability to deliver business value to clients; and, service and support. In order to maintain leadership in the IT industry, a corporation must continue to invest, innovate and integrate. Over the past several years, the company has been executing a strategy to transform its business, including shifting to higher value market segments and offerings and increasing its capabilities through internal investments and strategic acquisitions. Overall, the company is the leader or among the leaders in each of its business segments.

        A summary of the competitive environment for each business segment is included below:

Global Services:

        The services segments, GTS and GBS, operate in a highly competitive and continually evolving global market. GTS competes in strategic outsourcing, business transformation outsourcing, integrated technology services and IT support services. GBS competes in consulting, system integration and application management services. The principal competitive factors in these business segments include: technical skills and capabilities, innovative service and product offerings, the ability to add value and the time-to-value, price, client relationships, quality of sales and delivery, reliability, security and the availability of resources. The company's competitive advantages in the services business include its global reach and scale, best-of-breed process and industry skills, extensive technology expertise and infrastructure management, an ability to deliver integrated solutions that can address clients' needs in any environment and a strong set of relationships with clients and strategic business partners worldwide. The company competes with broad based competitors including Accenture, Computer Sciences Corporation, Fujitsu and Hewlett-Packard Company (HP); India-based service providers including HCL, Infosys, Tata Consulting Services and Wipro Technologies; and, many companies that primarily focus on local markets or niche service areas.

Software:

        The enterprise management software market is highly competitive and the key competitive factors in this segment include: functionality, ease of use, scalability, compliance with open standards and total cost of ownership. The company's leadership in these areas provides it with competitive advantages. The company's software business includes middleware, operating systems and related software provided to all industry segments worldwide. The middleware portfolio is the broadest in the industry and it also covers both mainframe and distributed computing environments. The depth and breadth of the company's software offerings, coupled with its global sales and technical support infrastructure differentiate the company's software business from its competitors. In addition, the company's research and development capabilities and intellectual property patent portfolio contribute to this segment's leadership. The company's principal competitors in this segment include BMC Software, CA, Inc., Microsoft Corporation and Oracle Corporation. In addition, the company competes with smaller, niche competitors in specific geographic or product markets worldwide.

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Systems and Technology:

        The enterprise server and storage market is highly competitive and is characterized by ongoing technology innovation, with competition focused on value, function and reliability, and new entrants leveraging technology to compete against traditional offerings. The company's principal competitors include Dell, Inc. (Dell), EMC Corporation, HP and Sun Microsystems. The company's leadership in virtualization, power management, security, multi-operating system capabilities and the ability of its systems platforms to leverage the entire system, from the company's custom semiconductors through the software stack to increase efficiency and lower cost, provide the company with competitive advantages in this segment. In addition, the company's research and development capabilities and intellectual property patent portfolio contribute significantly to this segment's leadership.

Global Financing:

        The Global Financing business provides client financing, commercial financing and participates in the remarketing of used equipment. In 2009, the continued global financial credit crisis impacted both the client and commercial financing markets. The supply of credit remained tight and financial institutions continued to face increases in loan losses, higher borrowing costs and liquidity challenges. Global Financing's access to capital and its ability to manage increased exposures provide a competitive advantage for the company. The key competitive factors include price, IT product expertise, client service, contract flexibility, ease of doing business and residual values. In client and commercial financing, Global Financing competes with three types of companies in providing financial services to IT customers: other captive financing companies such as Dell and HP, non-captive companies such as General Electric Company and banks or financial institutions. In remarketing, the company competes with local and regional brokers plus original manufacturers in the fragmented worldwide used IT equipment market.

Forward-looking and Cautionary Statements

        7 Certain statements contained in this Form 10-K may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("Reform Act"). The company may also make forward-looking statements in other reports filed with the Securities and Exchange Commission, in materials delivered to stockholders and in press releases. In addition, the company's representatives may from time to time make oral forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Words such as "anticipates," "believes," "expects," "estimates," "intends," "plans," "projects," and similar expressions, may identify such forward-looking statements. The company assumes no obligation to update or revise any forward-looking statements. In accordance with the Reform Act, set forth under Item 1A. "Risk Factors" on pages 11 to 14 are cautionary statements that accompany those forward-looking statements. Readers should carefully review such cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. Those cautionary statements are not exclusive and are in addition to other factors discussed elsewhere in this Form 10-K, in the company's filings with the Securities and Exchange Commission or in materials incorporated therein by reference.

        The following information is included in IBM's 2009 Annual Report to Stockholders and is incorporated herein by reference:

        Segment information and revenue by classes of similar products or services—pages 122 to 126.

        Financial information by geographic areas—page 125.

        Amount spent during each of the last three years on R&D activities—page 103.

        Financial information regarding environmental activities—pages 97 and 98.

        The number of persons employed by the registrant—page 56.

        The management discussion overview—pages 19 and 20.

        Available information—pages 132 and 133.

Also refer to Item 1A. entitled "Risk Factors" in Part I of this Form.

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Executive Officers of the Registrant (at February 23, 2010):

 
  Age   Officer since  

Samuel J. Palmisano, Chairman of the Board, President and Chief Executive Officer(1)

    58     1997  

Rodney C. Adkins, Senior Vice President, Systems and Technology Group

    51     2007  

Colleen F. Arnold, Senior Vice President, Application Management Services

    52     2010  

Michael E. Daniels, Senior Vice President, Global Technology Services

    55     2005  

Jon C. Iwata, Senior Vice President, Marketing and Communications

    47     2002  

James J. Kavanaugh, Vice President and Controller

    43     2008  

John E. Kelly III, Senior Vice President, Research and Intellectual Property

    56     2000  

R. Franklin Kern III, Senior Vice President, Global Business Services

    56     2008  

Robert J. LeBlanc, Senior Vice President, Software Middleware Group

    51     2010  

Mark Loughridge, Senior Vice President, Chief Financial Officer

    56     1998  

J. Randall MacDonald, Senior Vice President, Human Resources

    61     2000  

Steven A. Mills, Senior Vice President, Software Group

    58     2000  

Michael D. Rhodin, Senior Vice President, Software Solutions Group

    49     2010  

Virginia M. Rometty, Senior Vice President, Global Sales and Distribution

    52     2005  

Linda S. Sanford, Senior Vice President, Enterprise Transformation

    57     2000  

Timothy S. Shaughnessy, Senior Vice President, Services Delivery

    52     2004  

Robert C. Weber, Senior Vice President, Legal and Regulatory Affairs, and General Counsel

    59     2006  

(1)
Member of the Board of Directors.

        All executive officers are elected by the Board of Directors and serve until the next election of officers in conjunction with the annual meeting of the stockholders as provided in the By-laws. Each executive officer named above, with the exception of Robert C. Weber, has been an executive of IBM or its subsidiaries during the past five years.

        Mr. Weber was a partner at Jones Day, an international law firm, until joining IBM in 2006. He was with Jones Day for almost 30 years, and his career included counseling corporations, individuals and boards of directors, as well as extensive experience in corporate derivative litigation, federal and state enforcement actions and commercial litigation.

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Item 1A. Risk Factors:

         Downturn in Economic Environment and Corporate IT Spending Budgets could impact the Company's Business: If overall demand for systems, software and services decreases, whether due to general economic conditions or a shift in corporate buying patterns, the company's revenue and profit could be impacted.

         The Company may not meet its Growth and Productivity Objectives under its Internal Business Transformation and Global Integration Initiatives: On an ongoing basis, IBM seeks to drive greater productivity, flexibility and cost savings by transforming and globally integrating its own business processes and functions to remain competitive and to enable scaling of resources in both emerging and more established geographical markets. These various initiatives may not yield their intended gains in quality, productivity and enablement of rapid scaling, which may impact the company's ability to meet its growth and productivity objectives.

         Failure of Innovation Initiatives could impact the Long-Term Success of the Company: IBM has been moving away from commoditized categories of the IT industry and into areas in which it can differentiate itself through innovation and by leveraging its investments in R&D. If IBM is unable to continue its cutting-edge innovation in the highly competitive IT industry, the company could fail in its ongoing efforts to maintain and increase its market share and its profit margins. In addition, IBM has one of the strongest brand names in the world, and its brand and overall reputation could be negatively impacted by many factors, including if the company does not continue to be recognized for its industry-leading technology and solutions. If the company's brand image is tarnished by negative perceptions, our ability to attract and retain customers could be impacted.

         Risks from Investing in Growth Opportunities could impact the Company's Business: The company continues to invest significantly in growth opportunities, including higher-value segments of enterprise computing and dozens of emerging countries, including Brazil, Russia, India and China, to drive revenue growth and market share gains. Client adoption rates and viable economic models are uncertain in the high-value and rapidly-growing segments. In addition, as the company expands to capture emerging growth opportunities, it needs to rapidly secure the appropriate mix of trained, skilled and experienced personnel. In emerging growth countries, the developing nature presents potential political, social and economic risks from inadequate infrastructure, creditworthiness of customers and business partners, labor disruption and corruption, which could impact the company's ability to meet its growth objectives and to deliver to its clients around the world.

         IBM's Intellectual Property Portfolio may not prevent Competitive Offerings, and IBM may not be able to Obtain Necessary Licenses: The company's patents and other intellectual property may not prevent competitors from independently developing products and services similar to or duplicative to the company's, nor can there be any assurance that the resources invested by the company to protect its intellectual property will be sufficient or that the company's intellectual property portfolio will adequately deter misappropriation or improper use of the company's technology. In addition, the company may be the target of aggressive and opportunistic enforcement of patents by third parties, including non-practicing entities. Also, there can be no assurances that IBM will be able to obtain from third parties the licenses it needs in the future.

         Breaches of Data Security could impact the Company's Business: The company's products and services, as well as its internal systems and processes, involve the storage and transmission of proprietary information and sensitive or confidential data, including personal information of employees, customers and others. Breaches in security could expose the company, its customers or the individuals affected to a risk of loss or misuse of this information, resulting in litigation and potential liability for the company, as well as the loss of existing or potential customers and damage to the company's brand and reputation. In addition, the cost and operational consequences of implementing further data protection measures could be significant.

11


         The Company's Revenues for Particular Periods are Difficult to Predict: IBM's revenues are affected by such factors as the introduction of new products and services, the length of the sales cycles, the structure of products and services contracts and the seasonality of technology purchases. As a result, the company's results are difficult to predict. These factors historically have resulted in lower revenue in the first quarter than in the immediately preceding fourth quarter. In addition, the high volume of products ordered at the end of each quarter, especially at the end of the fourth quarter, may affect IBM's ability to successfully ship all orders before the end of the quarter.

         Due to the Company's Global Presence, its Business and Operations could be impacted by Local Legal, Economic, Political and Health Conditions: The company is a globally integrated entity, operating in over 170 countries worldwide and deriving more than sixty percent of its revenues from sales outside the United States. Changes in the laws or policies of the countries in which the company operates, or inadequate enforcement of such laws or policies, could affect the company's business in that country and the company's overall results of operations. The company's results of operations also could be affected by economic and political changes in those countries and by macroeconomic changes, including recessions, inflation and currency fluctuations between the U.S. dollar and local currency. In addition, any widespread outbreak of an illness, pandemic or other local or global health issue, or any terrorist activities, could adversely affect customer demand and the company's operations and its ability to source and deliver products and services to its customers.

         The Company could incur Substantial Costs for Environmental Matters: The company is subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. Compliance with environmental laws and regulations is not expected to have a material adverse effect on the company's financial position, results of operations and competitive position.

         Tax Matters could impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service and other tax authorities. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.

         The Company's Results of Operations and Financial Condition could be negatively impacted by its U.S. and non-U.S. Pension Plans: Adverse equity market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results of operations and financial results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the U.S. Premium increases can be significant due to the level of insolvencies of unrelated companies in the country at issue. Currently, Canada, Germany, Luxembourg and the United Kingdom require that these premiums be paid directly by the company and not out of plan assets,

12



which could negatively impact the company's earnings. IBM's 2009 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.

         Ineffective Internal Controls could impact the Company's Business and Operating Results: The company's internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If the company fails to maintain the adequacy of its internal controls, including any failure to implement required new or improved controls, or if the company experiences difficulties in their implementation, the company's business and operating results could be harmed and the company could fail to meet its financial reporting obligations.

         The Company's Use of Accounting Estimates involves Judgment and could impact the Company's Financial Results: The company's most critical accounting estimates are described in the Management Discussion in IBM's 2009 Annual Report to Stockholders, under "Critical Accounting Estimates." In addition, as discussed in note O, "Contingencies and Commitments," in IBM's 2009 Annual Report to Stockholders, the company makes certain estimates including decisions related to legal proceedings and reserves. Because by definition these estimates and assumptions involve the use of judgment, actual financial results may differ.

         The Company Depends on Skilled Personnel and could be impacted by the loss of Critical Skills: Much of the future success of the company depends on the continued service, availability and integrity of skilled personnel, including technical, marketing and staff resources. Experienced personnel in the information technology industry are in high demand, and competition for their talents is intense. Changing demographics and labor work force trends may result in a loss of knowledge and skills as experienced workers leave the company. In addition, as global opportunities and industry demand shifts, realignment and scaling of skilled resources may not be sufficiently rapid. Further, many of IBM's key personnel receive a total compensation package that includes equity awards. New regulations, volatility in the stock market and other factors could diminish the company's use, and the value, of the company's equity awards, putting the company at a competitive disadvantage or forcing the company to use more cash compensation.

         The Company's Business could be impacted by its Relationships with Critical Suppliers: IBM's business employs a wide variety of components, supplies, services and raw materials from a substantial number of suppliers around the world. Certain of the company's businesses rely on single or a limited number of suppliers. Changes in the financial or business condition of these suppliers could subject the company to losses and affect its ability to bring products to market. Further, the failure of the company's suppliers to deliver components, supplies, services and raw materials in sufficient quantities and in a timely manner could adversely affect the company's business. In addition, any defective components, supplies or materials, or inadequate services, received from suppliers could reduce the reliability of the company's products and services and harm the company's reputation.

         The Company is exposed to Currency and Customer Financing Risks that could impact its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar. Further, inherent in the company's customer financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities, the determination of residual values and the financing of other than traditional IT assets. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments; derivatives involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and customer financing risks will be successful.

13


         The Company's Financial Performance could be impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2009 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many worldwide enterprises, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of the company's sales are on an open credit basis and the company performs ongoing credit evaluations of its clients' financial conditions. If the company becomes aware of information related to the credit worthiness of a major customer, or, if future actual default rates on receivables in general differ from those currently anticipated, the company may have to adjust its reserves for uncollectible receivables, which could affect the company's consolidated net income in the period the adjustments are made.

         The Company's Reliance on Third Party Distribution Channels could impact its Business: The company offers its products directly and through a variety of third party distributors and resellers. Changes in the financial or business condition of these distributors and resellers could subject the company to losses and affect its ability to bring its products to market. As the company moves into new areas, distributors and resellers may be unable to keep up with changes in technology and offerings, and the company may be unable to fund and enable appropriate partners to achieve growth objectives.

         Risks to the Company from Acquisitions and Alliances include Integration Challenges, Failure to Achieve Objectives, and the Assumption of Liabilities: The company has made and expects to continue to make acquisitions or enter into alliances from time to time. Acquisitions and alliances present significant challenges and risks relating to the integration of the business into the company, and there can be no assurances that the company will manage acquisitions and alliances successfully. The related risks include the company failing to achieve strategic objectives and anticipated revenue improvements and cost savings, as well as the failure to retain key personnel of the acquired business and the assumption of liabilities related to litigation or other legal proceedings involving the acquired business.

         Risk Factors Related to IBM Securities: The company and its subsidiaries issue debt securities in the worldwide capital markets from time to time, with a variety of different maturities and in different currencies. The value of the company's debt securities fluctuates based on many factors, including the methods employed for calculating principal and interest, the maturity of the securities, the aggregate principal amount of securities outstanding, the redemption features for the securities, the level, direction and volatility of interest rates, changes in exchange rates, exchange controls, governmental and stock exchange regulations and other factors over which the company has little or no control. The company's ability to pay interest and repay the principal for its debt securities is dependent upon its ability to manage its business operations, as well as the other risks described under this Item 1A. entitled "Risk Factors." There can be no assurance that the company will be able to manage any of these risks successfully.

        The company also issues its common stock from time to time in connection with various compensation plans, contributions to its pension plan and certain acquisitions. The market price of IBM common stock is subject to significant volatility, due to other factors described under this Item 1A. entitled "Risk Factors," as well as economic and geopolitical conditions generally, trading volumes, speculation by the press or investment community about the company's financial condition, and other factors, many of which are beyond the company's control. Since the market price of IBM's common stock fluctuates significantly, stockholders may not be able to sell the company's stock at attractive prices.

        In addition, changes by any rating agency to the company's outlook or credit ratings can negatively impact the value and liquidity of both the company's debt and equity securities. The company does not make a market in either its debt or equity securities and cannot provide any assurances with respect to the liquidity or value of such securities.

14



Item 1B. Unresolved Staff Comments:

        Not applicable.


Item 2. Properties:

        At December 31, 2009, IBM's manufacturing and development facilities in the United States had aggregate floor space of 19 million square feet, of which 16 million was owned and 3 million was leased. Of these amounts, 3 million square feet was vacant and 1 million square feet was being leased to non-IBM businesses. Similar facilities in 8 other countries totaled 6 million square feet, of which 2 million was owned and 4 million was leased. Of these amounts, 1 million square feet was being leased to non-IBM businesses.

        Although improved production techniques, productivity gains and infrastructure reduction actions have resulted in reduced manufacturing floor space, continuous maintenance and upgrading of facilities is essential to maintain technological leadership, improve productivity and meet customer demand.


Item 3. Legal Proceedings:

        Refer to note O, "Contingencies and Commitments," on pages 99 to 101 of IBM's 2009 Annual Report to Stockholders, which is incorporated herein by reference.


Item 4. Submission of Matters to a Vote of Security Holders:

        Not applicable.


PART II


Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities:

        Refer to pages 128, 132 and 133 of IBM's 2009 Annual Report to Stockholders, which are incorporated herein by reference solely as they relate to this item.

        IBM common stock is listed on the New York Stock Exchange and the Chicago Stock Exchange. There were 543,807 common stockholders of record at February 10, 2010.

        The following table provides information relating to the company's repurchase of common stock for the fourth quarter of 2009.

 
  Total Number
of Shares
Purchased
  Average
Price Paid
per Share
  Total Number
of Shares Purchased
as Part of Publicly
Announced Program
  Approximate
Dollar Value
of Shares that
May Yet Be
Purchased Under
the Program(1)
 

October 1, 2009—
October 31, 2009

    1,725,379   $ 121.71     1,725,379   $ 9,031,145,176  

November 1, 2009—
November 30, 2009

    12,952,318   $ 125.68     12,952,318   $ 7,403,282,907  

December 1, 2009—
December 31, 2009

    10,027,838   $ 128.66     10,027,838   $ 6,113,066,348  
                     

Total

    24,705,535   $ 126.61     24,705,535        
                     

(1)
On February 26, 2008, the Board of Directors authorized $15.0 billion in funds for use in the company's common stock repurchase program. This authorization was fully utilized by November 2009. On April 28,

15


    2009 and October 27, 2009, the Board of Directors authorized an additional $3.0 billion and $5.0 billion, respectively, in funds for use in such program. In each case, the company stated that it would repurchase shares on the open market or in private transactions depending on market conditions, and that it expects to use cash from operations for the repurchases. The common stock repurchase program does not have an expiration date. This table does not include shares tendered to satisfy the exercise price in connection with cashless exercises of employee stock options or shares tendered to satisfy tax withholding obligations in connection with employee equity awards.


Item 6. Selected Financial Data:

        Refer to pages 127 and 128 of IBM's 2009 Annual Report to Stockholders, which are incorporated herein by reference.


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations:

        Refer to pages 18 through 61 of IBM's 2009 Annual Report to Stockholders, which are incorporated herein by reference.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk:

        Refer to the section titled "Market Risk" on pages 55 and 56 of IBM's 2009 Annual Report to Stockholders, which is incorporated herein by reference.


Item 8. Financial Statements and Supplementary Data:

        Refer to pages 64 through 126 of IBM's 2009 Annual Report to Stockholders, which are incorporated herein by reference. Also refer to the Financial Statement Schedule on page S-1 of this Form 10-K.


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure:

        Not applicable.


Item 9A. Controls and Procedures:

        The company's management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report.

        Refer to "Report of Management" and "Report of Independent Registered Public Accounting Firm" on pages 62 and 63 of IBM's 2009 Annual Report to Stockholders, which are incorporated herein by reference. There has been no change in the company's internal control over financial reporting that occurred during the fourth fiscal quarter that has materially affected, or is reasonably likely to material affect, the company's internal control over financial reporting.


Item 9B. Other Information:

        On February 23, 2010, IBM announced that Andrew N. Liveris has been elected to the IBM Board of Directors, effective February 23, 2010. Mr. Liveris has also become a member of IBM's Executive Compensation and Management Resources Committee. The company's compensatory and other arrangements for non-management directors are set forth in the company's most recent Proxy Statement. In connection with Mr. Liveris' election, Article III, Section 2 of IBM's By-laws was amended to increase the number of directors to fourteen, effective February 23, 2010. The full text of IBM's By-laws, as amended, is included as Exhibit 3 to this report.

16



PART III

Item 10. Directors, Executive Officers and Corporate Governance:

        Refer to the information under the captions "Election of Directors for a Term of One Year," "General Information—Committees of the Board," "Audit Committee" and "Section 16(a) Beneficial Ownership Reporting Compliance" in IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 27, 2010, all of which information is incorporated herein by reference. Also refer to Item 1 of this Form 10-K under the caption "Executive Officers of the Registrant (at February 23, 2010)" on page 10 for additional information on the company's executive officers.


Item 11. Executive Compensation:

        Refer to the information under the captions "General Information—2009 Director Compensation Narrative," "2009 Director Compensation Table," "2009 Compensation Discussion and Analysis," "2009 Summary Compensation Table Narrative," "2009 Summary Compensation Table," "2009 Grants of Plan-Based Awards Table," "2009 Outstanding Equity Awards at Fiscal Year-End Narrative," "2009 Outstanding Equity Awards at Fiscal Year-End Table," "2009 Option Exercises and Stock Vested Table," "2009 Retention Plan Narrative," "2009 Retention Plan Table," "2009 Pension Benefits Narrative," "2009 Pension Benefits Table," "2009 Nonqualified Deferred Compensation Narrative," "2009 Nonqualified Deferred Compensation Table," "2009 Potential Payments Upon Termination Narrative," "2009 Potential Payments Upon Termination Table," "Compensation Committee Interlocks and Insider Participation" and "2009 Report of the Executive Compensation and Management Resources Committee of the Board of Directors" in IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 27, 2010, all of which information is incorporated herein by reference.


Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters:

        Refer to the information under the caption "Ownership of Securities—Security Ownership of Certain Beneficial Owners" and "Ownership of Securities—Common Stock and Stock-Based Holdings of Directors and Executive Officers" in IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 27, 2010, all of which information is incorporated herein by reference.

17


Equity Compensation Plan Information

 
  (a)   (b)   (c)  
Plan category
  Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights(1)
  Weighted-average
exercise price
of outstanding
options, warrants
and rights(1)
  Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
 

Equity compensation plans approved by security holders

                   
 

Options

    31,625,285   $ 108.10      
 

RSUs

    1,277,722     n/a      
 

PSUs

    2,848,328 (2)   n/a      
   

Subtotal

   
35,751,335
 
$

108.10
   
120,810,231
 

Equity compensation plans not approved by security holders

                   
 

Options

    41,585,172   $ 89.54      
 

RSUs

    12,127,932     n/a      
 

PSUs

    2,366,778 (2)   n/a      
 

DCEAP Shares

    102,660     n/a      
   

Subtotal

   
56,182,542
 
$

89.54
   
19,551,357
 

Total

   
91,933,877
 
$

97.56
   
140,361,588
 

n/a is not applicable

RSUs—Restricted Stock Units, including Retention Restricted Stock Units

PSUs—Performance Share Units

DCEAP Shares—Shares under the DCEAP (see plan description below)

(1)
In connection with 35 acquisition transactions, 1,122,425 additional options were outstanding at December 31, 2009 as a result of the company's assumption of options granted by the acquired entities. The weighted-average exercise price of these options was $76.39. The company has not made, and will not make, any future grants or awards of equity securities under the plans of these acquired companies.

(2)
The numbers included for PSUs in column (a) above reflect the maximum number payout. Assuming target number payout, the number of securities to be issued upon the exercise of PSUs for equity compensation plans approved by security holders is 1,898,885 and for equity compensation plans not approved by security holders is 1,577,852. For additional information about PSUs, including payout calculations, refer to the information under "2009 Summary Compensation Table Narrative" in IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 27, 2010.

        The material features of each equity compensation plan under which equity securities are authorized for issuance that was adopted without stockholder approval are described below:

2001 LONG-TERM PERFORMANCE PLAN

        The 2001 Long-Term Performance Plan (the "2001 Plan") is used to fund awards for employees other than senior executives of the company. Awards for senior executives of the company will continue

18



to be funded from the stockholder-approved 1999 Long-Term Performance Plan (the "1999 Plan"). Otherwise, the provisions of the 2001 Plan are identical to the 1999 Plan, including the type of awards that may be granted under the plan (stock options, restricted stock and unit awards and long-term performance incentive awards).

        The 2001 Plan is administered by the Executive Compensation and Management Resources Committee of the Board of Directors, and that Committee may delegate to officers of the company certain of its duties, powers and authority. Payment of awards may be made in the form of cash, stock or combinations thereof and may be deferred with Committee approval. Awards are not transferable or assignable except (i) by law, will or the laws of descent and distribution, (ii) as a result of the disability of the recipient, or (iii) with the approval of the Committee.

        If the employment of a participant terminates, other than as a result of the death or disability of a participant, all unexercised, deferred and unpaid Awards shall be canceled immediately, unless the Award Agreement provides otherwise. In the event of the death of a participant or in the event a participant is deemed by the company to be disabled and eligible for benefits under the terms of the IBM Long-Term Disability Plan (or any successor plan or similar plan of another employer), the participant's estate, beneficiaries or representative, as the case may be, shall have the rights and duties of the participant under the applicable Award Agreement. In addition, unless the Award Agreement specifies otherwise, the Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid, or deferred Awards at any time if the participant is not in compliance with all applicable provisions of the Award Agreement and the Plan. In addition, Awards may be cancelled if the participant engages in any conduct or act determined to be injurious, detrimental or prejudicial to any interest of the Company.

PWCC ACQUISITION LONG-TERM PERFORMANCE PLAN

        The IBM PWCC Acquisition Long-Term Performance Plan (the "PWCC Plan") was adopted by the Board of Directors in connection with the Company's acquisition of PricewaterhouseCoopers Consulting ("PwCC") from PricewaterhouseCoopers LLP, as announced on October 1, 2002. The PWCC Plan has been and will continue to be used solely to fund awards for employees of PwCC who have come over to the company as a result of the acquisition. Awards for senior executives of the company will not be funded from the PWCC Plan. The terms and conditions of the PWCC Plan are substantively identical to the terms and conditions of the 2001 Plan, described above.

IBM DEFERRED COMPENSATION AND EQUITY AWARD PLAN

        The IBM Deferred Compensation and Equity Award Plan (the "DCEAP") was adopted in 1993. Under the DCEAP, non-management directors receive Promised Fee Shares in connection with deferred annual retainer payments. Each Promised Fee Share is equal in value to one share of the company's common stock. Upon a director's retirement or other completion of service as a director, all amounts deferred into Promised Fee Shares are payable in either cash and/or shares of the company's stock at the director's election. (For additional information about the DCEAP, see the 2009 Director Compensation Narrative in IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 27, 2010).


Item 13. Certain Relationships and Related Transactions, and Director Independence:

        Refer to the information under the captions "General Information—Board of Directors" and "General Information—Certain Transactions and Relationships" in IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with

19



the Annual Meeting of Stockholders to be held April 27, 2010, which information is incorporated herein by reference.


Item 14. Principal Accounting Fees and Services:

        Refer to the information under the captions "Report of the Audit Committee of the Board of Directors" and "Audit and Non-Audit Fees" in IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 27, 2010, all of which information is incorporated herein by reference.


PART IV

Item 15. Exhibits, Financial Statement Schedules:

    (a)
    The following documents are filed as part of this report:

    1.
    Financial statements from IBM's 2009 Annual Report to Stockholders, which are incorporated herein by reference:

        Report of Independent Registered Public Accounting Firm (page 63).

        Consolidated Statement of Earnings for the years ended December 31, 2009, 2008 and 2007 (page 64).

        Consolidated Statement of Financial Position at December 31, 2009 and 2008 (page 65).

        Consolidated Statement of Cash Flows for the years ended December 31, 2009, 2008 and 2007 (page 66).

        Consolidated Statement of Changes in Equity at December 31, 2009, 2008 and 2007 (pages 67 through 69).

        Notes to Consolidated Financial Statements (pages 70 through 126).

      2.
      Financial statement schedule required to be filed by Item 8 of this Form:

Page
  Schedule
Number
   
 

26

       

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule.

 

S-1

    II  

Valuation and Qualifying Accounts and Reserves.

        All other schedules are omitted as the required matter is not present, the amounts are not significant or the information is shown in the Consolidated Financial Statements or the notes thereto.

      3.
      Exhibits:

Reference Number per Item 601 of Regulation S-K   Description of Exhibits   Exhibit Number
in this
Form 10-K
 
  (2)   Plan of acquisition, reorganization, arrangement, liquidation or succession.      Not applicable  

 

(3)

 

Certificate of Incorporation and By-laws. 

 

 

 

 

 

 

 

The Certificate of Incorporation of IBM is Exhibit 3.2 to Form 8-K filed April 27, 2007, and is hereby incorporated by reference. 

 

 

 

 

20


Reference Number per Item 601 of Regulation S-K   Description of Exhibits   Exhibit Number
in this
Form 10-K
 
      The By-laws of IBM as amended through February 23, 2010.      3  

 

(4)

 

Instruments defining the rights of security holders. 

 

 

 

 

 

 

 

The instruments defining the rights of the holders of the 7.50% Debentures due 2013 are Exhibits 4(a) through 4(l) to Registration Statement No. 33-49475(1) on Form S-3, filed May 24, 1993, and are hereby incorporated by reference. 

 

 

 

 

 

 

 

The instruments defining the rights of the holders of the 8.375% Debentures due 2019 are Exhibits 4(a)(b)(c) and (d), respectively, to Registration Statement No. 33-31732 on Form S-3, filed on October 24, 1989, and are hereby incorporated by reference. 

 

 

 

 

 

 

 

The instruments defining the rights of the holders of the 7.00% Debentures due 2025 and the 7.00% Debentures due 2045 are Exhibits 2 and 3, respectively, to Form 8-K, filed on October 30, 1995, and are hereby incorporated by reference. 

 

 

 

 

 

 

 

The instrument defining the rights of the holders of the 7.125% Debentures due 2096 is Exhibit 2 to Form 8-K/A, filed on December 6, 1996, and is hereby incorporated by reference. 

 

 

 

 

 

 

 

The instrument defining the rights of the holders of the 6.22% Debentures due 2027 is Exhibit 3 to Form 8-K, filed on August 1, 1997, and is hereby incorporated by reference. 

 

 

 

 

 

 

 

The instrument defining the rights of the holders of the 6.50% Debentures due 2028 is Exhibit 2 to Form 8-K, filed on January 8, 1998, and is hereby incorporated by reference. 

 

 

 

 

 

 

 

The instrument defining the rights of the holders of the 4.00% Notes due 2011 is Exhibit 2 to Form 8-K, filed on November 9, 2006, and is hereby incorporated by reference. 

 

 

 

 

 

 

 

The instrument defining the rights of the holders of the 4.95% Notes due 2011 is Exhibit 2 to Form 8-K, filed on March 21, 2007, and is hereby incorporated by reference. 

 

 

 

 

 

 

 

The instrument defining the rights of the holders of the 6.625% Notes due 2014 is Exhibit 2 to Form 8-K, filed November 5, 2008, and is hereby incorporated by reference. 

 

 

 

 

 

 

 

The instruments defining the rights of the holders of the 2.1% Notes due 2013 and Floating Rate Notes are Exhibits 2.1 and 3.1, respectively, to Form 8-K, filed on November 5, 2009, and are hereby incorporated by reference. 

 

 

 

 

 

(9)

 

Voting trust agreement

 

 

Not applicable

 

 

(10)

 

Material contracts

 

 

 

 

21


Reference Number per Item 601 of Regulation S-K   Description of Exhibits   Exhibit Number
in this
Form 10-K
 
      The IBM 2001 Long-Term Performance Plan, a compensatory plan, contained in Registration Statement No. 333-87708 on Form S-8, as such amended plan was filed as Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2007, is hereby incorporated by reference.*        

 

 

 

The IBM PWCC Acquisition Long-Term Performance Plan, a compensatory plan, contained in Registration Statement No. 333-102872 on Form S-8, as such amended plan was filed as Exhibit 10.2 to Form 10-Q for the quarter ended September 30, 2007, is hereby incorporated by reference.*

 

 

 

 

 

 

 

The IBM 1999 Long-Term Performance Plan, a compensatory plan, contained in Registration Statement No. 333-30424 on Form S-8, as such amended plan was filed as Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2007, is hereby incorporated by reference.*

 

 

 

 

 

 

 

The IBM 1997 Long-Term Performance Plan, a compensatory plan, contained in Registration Statement No. 333-31305 on Form S-8, as such amended plan was filed as Exhibit 10.4 to Form 10-Q for the quarter ended September 30, 2007, is hereby incorporated by reference.*

 

 

 

 

 

 

 

The IBM 1994 Long-Term Performance Plan, a compensatory plan, contained in Registration Statement No. 33-53777 on Form S-8, as such amended plan was filed as Exhibit 10.5 to Form 10-Q for the quarter ended September 30, 2007, is hereby incorporated by reference.*

 

 

 

 

 

 

 

Forms of LTPP equity award agreements for (i) stock options, restricted stock, restricted stock units, cash-settled restricted stock units, SARS, (ii) performance share units and (iii) retention restricted stock unit awards. Such equity award agreement forms and the related terms and conditions document effective June 8, 2009 were filed as Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2009, are hereby incorporated by reference.*

 

 

 

 

 

 

 

Board of Directors compensatory plans, as described under the caption "General Information—2009 Director Compensation" in IBM's definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 27, 2010, are hereby incorporated by reference.*

 

 

 

 

 

 

 

The IBM Non-Employee Directors Stock Option Plan, contained in Registration Statement 33-60227 on Form S-8, is hereby incorporated by reference.*

 

 

 

 

22


Reference Number per Item 601 of Regulation S-K   Description of Exhibits   Exhibit Number
in this
Form 10-K
 
      The IBM Board of Directors Deferred Compensation and Equity Award Plan, a compensatory plan, as amended effective October 28, 2008, was filed as Exhibit 10.1 to Form 10-K for the year ended December 31, 2008, is hereby incorporated by reference.*        

 

 

 

The IBM Supplemental Executive Retention Plan, a compensatory plan, as amended and restated through December 31, 2008, was filed as Exhibit 10.2 to Form 10-K for the year ended December 31, 2008, is hereby incorporated by reference.*

 

 

 

 

 

 

 

The IBM Excess 401(k) Plus Plan, a compensatory plan, as amended and restated through January 1, 2010 (formerly the IBM Executive Deferred Compensation Plan contained in Registration Statement No. 333-33692 on Form S-8), which amended and restated Plan is hereby incorporated by reference into such Registration Statement.*

 

 

10.1

 

 

 

 

The IBM 401(k) Plus Plan, a compensatory plan, as amended and restated effective as of January 1, 2008, which was filed as Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2008 (formerly the IBM Tax Deferred Savings Plan, contained in Registration Statement No. 333-09055 on Form S-8), is hereby incorporated by reference.*

 

 

 

 

 

 

 

Amendment No. 1 to the IBM 401(k) Plus Plan, a compensatory plan, as approved September 11, 2009.*

 

 

10.2

 

 

 

 

Amendment No. 2 to the IBM 401(k) Plus Plan, a compensatory plan, as approved November 16, 2009.*

 

 

10.3

 

 

 

 

The IBM 2003 Employees Stock Purchase Plan, contained in Registration Statement 333-104806 on Form S-8, as amended through April 1, 2005, which was filed as Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2005, is hereby incorporated by reference. 

 

 

 

 

 

 

 

Form of Noncompetition Agreement, filed as Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2009, is hereby incorporated by reference.*

 

 

 

 

 

 

 

The $10,000,000,000 5-Year Credit Agreement dated as of June 28, 2006, among International Business Machines Corporation, each Subsidiary Borrower, the several banks and other financial institutions from time to time parties to the Credit Agreement, JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders, and Citibank, N.A., as Syndication Agent, which was filed as Exhibit 10.1 to Form 8-K dated June 29, 2006, is hereby incorporated by reference. 

 

 

 

 

 

(11)

 

Statement re computation of per share earnings

 

 

 

 

 

 

 

The statement re computation of per share earnings is note R, "Earnings Per Share of Common Stock," on page 104 of IBM's 2009 Annual Report to Stockholders, and is hereby incorporated by reference. 

 

 

 

 

23


Reference Number per Item 601 of Regulation S-K   Description of Exhibits   Exhibit Number
in this
Form 10-K
 
  (12)   Statement re computation of ratios     12  

 

(13)

 

Annual report to security holders**

 

 

13

 

 

(18)

 

Letter re: change in accounting principles

 

 

Not applicable

 

 

(19)

 

Previously unfiled documents

 

 

Not applicable

 

 

(21)

 

Subsidiaries of the registrant

 

 

21

 

 

(22)

 

Published report regarding matters submitted to vote of security holders

 

 

Not applicable

 

 

(23.1)

 

Consent of experts

 

 

23.1

 

 

(24.1)

 

Powers of attorney

 

 

24.1

 

 

(24.2)

 

Resolution of the IBM Board of Directors authorizing execution of this report by Powers of Attorney

 

 

24.2

 

 

(28)

 

Information from reports furnished to state insurance regulatory authorities

 

 

Not applicable

 

 

(31.1)

 

Certification by CEO pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

31.1

 

 

(31.2)

 

Certification by CFO pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

31.2

 

 

(32.1)

 

Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

32.1

 

 

(32.2)

 

Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

32.2

 

 

(101)

 

Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statement of Earnings for the twelve month period ended December 31, 2009, 2008 and 2007, (ii) the Consolidated Statement of Financial Position at December 31, 2009 and 2008, (iii) the Consolidated Statement of Cash Flows for the twelve months ended December, 2009, 2008 and 2007, (iv) the Consolidated Statement of Changes in Equity for the twelve month period ended December 31, 2009, 2008 and 2007, (v) Financial Statement Schedule II, tagged as a single block of text and (vi) the notes to the Consolidated Financial Statements, tagged as blocks of text

 

 

101

 

*
Management contract or compensatory plan or arrangement.

**
The Performance Graphs, set forth on pages 129 and 130 of IBM's 2009 Annual Report to Stockholders, are deemed to be furnished but not filed.

24



SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

    INTERNATIONAL BUSINESS MACHINES CORPORATION
(Registrant)

 

 

By:

 

/s/ SAMUEL J. PALMISANO

Samuel J. Palmisano
Chairman of the Board,
President and Chief Executive Officer

 

 

 

 

Date: February 23, 2010

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature
 
Title
 
Date

 

 

 

 

 

/s/ SAMUEL J. PALMISANO


Samuel J. Palmisano
 

Chairman of the Board, President and Chief Executive Officer

  February 23, 2010

/s/ MARK LOUGHRIDGE


Mark Loughridge
 

Senior Vice President, Chief Financial Officer

 

February 23, 2010

/s/ JAMES J. KAVANAUGH


James J. Kavanaugh
 

Vice President and Controller

 

February 23, 2010


    Cathleen Black
 
 
William R. Brody
 
 
Michael L. Eskew
 
 
Shirley Ann Jackson
  
  
W. James McNerney, Jr.
  
  
Taizo Nishimuro
  
  
James W. Owens
  
  
Joan E. Spero
 
 
Sidney Taurel
    
   
Director
  
  
Director
  
  
Director
  
  
Director
  
  
Director
  
  
Director
 
 
Director
 
 
Director
 
 
Director
    
 






By:
  
  
  
  
  
  
  
  
  
  
  
  
 
    
 






/s/ Andrew Bonzani

Andrew Bonzani
Attorney-in-fact
February 23, 2010
  
  
  
  
  
  
  
  
  
  

25



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE

To the Stockholders and Board of Directors of
International Business Machines Corporation:

        Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 23, 2010 appearing in the 2009 Annual Report to Shareholders of International Business Machines Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 23, 2010

26



SCHEDULE II

INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31:
(Dollars in Millions)

Description
  Balance at
Beginning
of Period
  Additions*   Writeoffs   Other**   Balance at
End of
Period
 

Allowance For Doubtful Accounts

                               

2009

                               

—Current

  $ 633   $ 115   $ (189 ) $ 111   $ 669  
                       

—Noncurrent

  $ 180   $ 33   $ (56 ) $ (58 ) $ 100  
                       

2008

                               

—Current

  $ 549   $ 170   $ (92 ) $ 5   $ 633  
                       

—Noncurrent

  $ 59   $ 138   $ (19 ) $ 2   $ 180  
                       

2007

                               

—Current

  $ 543   $ 79   $ (112 ) $ 40   $ 549  
                       

—Noncurrent

  $ 48   $ 23   $ (18 ) $ 5   $ 59  
                       

Allowance For Inventory Losses

                               

2009

  $ 643   $ 259   $ (242 ) $ 18   $ 679  
                       

2008

  $ 669   $ 285   $ (248 ) $ (63 ) $ 643  
                       

2007

  $ 612   $ 315   $ (308 ) $ 50   $ 669  
                       

Revenue Based Provisions

                               

2009

  $ 984   $ 3,969   $ (4,019 ) $ (65 ) $ 871  
                       

2008

  $ 1,085   $ 6,145   $ (6,195 ) $ (52 ) $ 984  
                       

2007

  $ 990   $ 5,812   $ (5,722 ) $ 5   $ 1,085  
                       

*
Additions for Allowance for Doubtful Accounts and Allowance for Inventory Losses are charged to expense and cost accounts, respectively, while Revenue Based Provisions are charged to revenue accounts.

**
Primarily comprises currency translation adjustments.

S-1




QuickLinks

PART I
PART II
PART III
PART IV
SIGNATURES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31: (Dollars in Millions)

EXHIBIT 3

 

BY-LAWS

 

of

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

 

Adopted April 29, 1958

 

As Amended Through

 

February 23, 2010

 



 

TABLE OF CONTENTS

 

ARTICLE I — Definitions

1

 

 

ARTICLE II — MEETINGS OF STOCKHOLDERS

 

 

 

SECTION  1.

Place of Meetings

1

SECTION 2.

Annual Meetings

1

SECTION  3.

Special Meetings

2

SECTION  4.

Notice of Meetings

2

SECTION  5.

Quorum

2

SECTION  6.

Organization

3

SECTION  7.

Items of Business

3

SECTION  8.

Voting

5

SECTION  9.

List of Stockholders

5

SECTION 10.

Inspectors of Election

5

 

 

 

ARTICLE III — BOARD OF DIRECTORS

 

 

 

 

SECTION  1.

General Powers

6

SECTION  2.

Number; Qualifications; Election; Term of Office

6

SECTION  3.

Place of Meetings

6

SECTION  4.

First Meeting

6

SECTION  5.

Regular Meetings

6

SECTION  6.

Special Meetings

7

SECTION  7.

Notice of Meetings

7

SECTION  8.

Quorum and Manner of Acting

7

SECTION  9.

Organization

7

SECTION 10.

Resignations

7

SECTION 11.

Vacancies

8

SECTION 12.

Retirement of Directors

8

 

 

 

ARTICLE IV — EXECUTIVE AND OTHER COMMITTEES

 

 

 

 

SECTION  1.

Executive Committee

8

SECTION  2.

Powers of the Executive Committee

9

SECTION  3.

Meetings of the Executive Committee

9

SECTION  4.

Quorum and Manner of Acting of the Executive Committee

9

SECTION  5.

Other Committees

9

SECTION  6.

Changes in Committees; Resignations; Removals; Vacancies

10

 

i



 

ARTICLE V — OFFICERS

 

 

 

SECTION  1.

Number and Qualifications

10

SECTION  2.

Resignations

11

SECTION  3.

Removal

11

SECTION  4.

Vacancies

11

SECTION  5.

Chairman of the Board

11

SECTION  6.

Vice Chairman of the Board

11

SECTION  7.

President

12

SECTION  8.

Designated Officers

12

SECTION  9.

Executive Vice Presidents, Senior Vice Presidents and Vice Presidents

12

SECTION 10.

Treasurer

13

SECTION 11.

Secretary

13

SECTION 12.

Controller

14

SECTION 13.

Compensation

14

 

 

 

ARTICLE VI — CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

 

 

 

SECTION  1.

Execution of Contracts

14

SECTION  2.

Loans

14

SECTION  3.

Checks, Drafts, etc

15

SECTION  4.

Deposits

15

SECTION  5.

General and Special Bank Accounts

15

SECTION  6.

Indemnification

15

 

 

 

ARTICLE VII — SHARES

 

 

 

SECTION  1.

Stock Certificates

16

SECTION  2.

Books of Account and Record of Stockholders

16

SECTION  3.

Transfers of Stock

16

SECTION  4.

Regulations

17

SECTION  5.

Fixing of Record Date

17

SECTION  6.

Lost, Destroyed or Mutilated Certificates

17

SECTION  7.

Inspection of Records

17

SECTION  8.

Auditors

18

 

 

 

ARTICLE VIII — OFFICES

 

 

 

SECTION  1.

Principal Office

18

SECTION  2.

Other Offices

18

 

 

 

ARTICLE IX — Waiver of Notice

18

 

 

ARTICLE X — Fiscal Year

19

 

 

ARTICLE XI — Seal

19

 

 

ARTICLE XII — Amendments

19

 

ii



 

BY-LAWS

 

OF

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

 

 ARTICLE I

 

DEFINITIONS

 

In these By-laws, and for all purposes hereof, unless there be something in the subject or context inconsistent therewith:

 

(a) ‘Corporation’ shall mean International Business Machines Corporation.

 

(b) ‘Certificate of Incorporation’ shall mean the restated Certificate of Incorporation as filed on May 27, 1992, together with any and all amendments and subsequent restatements thereto.

 

(c)  ‘Board’ shall mean the Board of Directors of the Corporation.

 

(d) ‘stockholders’ shall mean the stockholders of the Corporation.

 

(e) ‘Chairman of the Board’, ‘Vice Chairman of the Board’, ‘Chairman of the Executive Committee’, ‘Chief Executive Officer,’ ‘Chief Financial Officer’, ‘Chief Accounting Officer’, ‘President’, ‘Executive Vice President’, ‘Senior Vice President’, ‘Vice President’, ‘Treasurer’, ‘Secretary’, or ‘Controller’, as the case may be, shall mean the person at any given time occupying the particular office with the Corporation.

 

ARTICLE II

 

MEETINGS OF STOCKHOLDERS

 

SECTION 1.  Place of Meetings.  Meetings of the stockholders of the Corporation shall be held at such place either within or outside the State of New York as may from time to time be fixed by the Board or specified or fixed in the notice of any such meeting.

 

SECTION 2.  Annual Meetings.  The annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on the last Tuesday of April of each year, if not a legal holiday, or, if such day shall be a legal holiday, then on the next succeeding day not a legal holiday. If any annual meeting shall not be held on the day designated herein, or if the directors to be elected at such annual meeting shall not have been elected thereat or at any adjournment thereof, the Board shall forthwith call a special meeting of the stockholders for the election of directors to be held as soon thereafter as convenient and give notice thereof as provided in these By-laws in respect

 

1



 

of the notice of an annual meeting of the stockholders. At such special meeting the stockholders may elect the directors and transact other business with the same force and effect as at an annual meeting of the stockholders duly called and held.

 

SECTION 3.  Special Meetings.  Special meetings of the stockholders, unless otherwise provided by law, may be called at any time by the Chairman of the Board or by the Board, and shall be called by the Board upon written request delivered to the Secretary of the Corporation by the holder(s) with the power to vote and dispose of at least 25% of the outstanding shares of the Corporation.  Such request shall be signed by each such holder, stating the number of shares owned by each holder, and shall indicate the purpose of the requested meeting.  In addition, any stockholder(s) requesting a special meeting shall promptly provide any other information reasonably requested by the Corporation.

 

SECTION 4.  Notice of Meetings.  Notice of each meeting of the stockholders, annual or special, shall be given in the name of the Chairman of the Board, a Vice Chairman of the Board or the President or a Vice President or the Secretary.  Such notice shall state the purpose or purposes for which the meeting is called and the date and hour when and the place where it is to be held. A copy thereof shall be duly delivered or transmitted to all stockholders of record entitled to vote at such meeting, and all stockholders of record who, by reason of any action proposed to be taken at such meeting, would be entitled to have their stock appraised if such action were taken, not less than ten or more than sixty days before the day on which the meeting is called to be held. If mailed, such copy shall be directed to each stockholder at the address listed on the record of stockholders of the Corporation, or if the stockholder shall have filed with the Secretary a written request that notices be mailed to some other address, it shall be mailed to the address designated in such request. Nevertheless, notice of any meeting of the stockholders shall not be required to be given to any stockholder who shall waive notice thereof as hereinafter provided in Article IX of these By-laws. Except when expressly required by law, notice of any adjourned meeting of the stockholders need not be given nor shall publication of notice of any annual or special meeting thereof be required.

 

SECTION 5.  Quorum.  Except as otherwise provided by law, at all meetings of the stockholders, the presence of holders of record of a majority of the outstanding shares of stock of the Corporation having voting power, in person or represented by proxy and entitled to vote thereat, shall be necessary to constitute a quorum for the transaction of business. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, a majority in voting interest of those present in person or represented by proxy and entitled to vote thereat, or, in the absence of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting, may adjourn such meeting from time to time without further notice, other than by announcement at the meeting at which such adjournment shall be taken, until a quorum shall be present thereat. At any adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting as originally called.

 

2



 

SECTION  6.  Organization.  At each meeting of the stockholders, the Chairman of the Board, or in the absence of the Chairman of the Board, the President, or in the absence of the Chairman of the Board and the President, a Vice Chairman of the Board, or if the Chairman of the Board, the President, and all Vice Chairmen of the Board shall be absent therefrom, an Executive Vice President, or if the Chairman of the Board, the President, all Vice Chairmen of the Board and all Executive Vice Presidents shall be absent therefrom, a Senior Vice President shall act as chairman. The Secretary, or, if the Secretary shall be absent from such meeting or unable to act, the person whom the Chairman of such meeting shall appoint secretary of such meeting shall act as secretary of such meeting and keep the minutes thereof.

 

SECTION  7.   Items of Business.  The items of business at all meetings of the stockholders shall be, insofar as applicable, as follows:

 

·

Call to order.

 

 

·

Proof of notice of meeting or of waiver thereof.

 

 

·

Appointment of inspectors of election, if necessary.

 

 

·

A quorum being present.

 

 

·

Reports.

 

 

·

Election of directors proposed by the Corporation’s Board of Directors, as set forth in the Corporation’s proxy statement.

 

 

·

Other business specified in the notice of the meeting.

 

 

·

Voting.

 

 

·

Adjournment.

 

Any items of business not referred to in the foregoing may be taken up at the meeting as the chairman of the meeting shall determine.

 

No other business shall be transacted at any annual meeting of stockholders, except business as may be: (i) specified in the notice of meeting (including stockholder proposals included in the Corporation’s proxy materials under Rule 14a-8 of Regulation 14A under the Securities Exchange Act of 1934), (ii) otherwise brought before the meeting by or at the direction of the Board of Directors, or (iii) a proper subject for the meeting which is timely submitted by a stockholder of the Corporation entitled to vote at such meeting who complies fully with the notice requirements set forth below.

 

3



 

For business to be properly submitted by a stockholder before any annual meeting under subparagraph (iii) above, a stockholder must give timely notice in writing of such business to the Secretary of the Corporation.  To be considered timely, a stockholder’s notice must be received by the Secretary at the principal executive offices of the Corporation not less than 120 calendar days nor more than 150 calendar days before the date of the Corporation’s proxy statement released to stockholders in connection with the prior year’s annual meeting.

 

However, if no annual meeting was held in the previous year, or if the date of the applicable annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year’s proxy statement, a stockholder’s notice must be received by the Secretary not later than 60 days before the date the Corporation commences mailing of its proxy materials in connection with the applicable annual meeting.

 

A stockholder’s notice to the Secretary to submit business to an annual meeting of stockholders shall set forth: (i) the name and address of the stockholder, (ii) the number of shares of stock held of record and beneficially by such stockholder, (iii) the name in which all such shares of stock are registered on the stock transfer books of the Corporation, (iv) a representation that the stockholder intends to appear at the meeting in person or by proxy to submit the business specified in such notice, (v) a brief description of the business desired to be submitted to the annual meeting, including the complete text of any resolutions intended to be presented at the annual meeting, and the reasons for conducting such business at the annual meeting, (vi) any personal or other material interest of the stockholder in the business to be submitted,  and (vii) all other information relating to the proposed business which may be required to be disclosed under applicable law.   In addition, a stockholder seeking to submit such business at the meeting shall promptly provide any other information reasonably requested by the Corporation.

 

The chairman of the meeting shall determine all matters relating to the efficient conduct of the meeting, including, but not limited to, the items of business, as well as the maintenance of order and decorum. The chairman shall, if the facts warrant, determine and declare that any putative business was not properly brought before the meeting in accordance with the procedures prescribed by this Section 7, in which case such business shall not be transacted.

 

Notwithstanding the foregoing provisions of this Section 7, a stockholder who seeks to have any proposal included in the Corporation’s proxy materials shall comply with the requirements of Rule 14a-8 under Regulation 14A of the Securities Exchange Act of 1934, as amended.

 

4



 

SECTION 8.  Voting.  Except as otherwise provided by law, each holder of record of shares of stock of the Corporation having voting power shall be entitled at each meeting of the stockholders to one vote for every share of such stock standing in the stockholder’s name on the record of stockholders of the Corporation:

 

(a) on the date fixed pursuant to the provisions of Section 5 of Article VII of these By-laws as the record date for the determination of the stockholders who shall be entitled to vote at such meeting, or

 

(b) if such record date shall not have been so fixed, then at the close of business on the day next preceding the day on which notice of such meeting shall have been given, or

 

(c) if such record date shall not have been so fixed and if no notice of such meeting shall have been given, then at the time of the call to order of such meeting.

 

Any vote on stock of the Corporation at any meeting of the stockholders may be given by the stockholder of record entitled thereto in person or by proxy appointed by such stockholder or by the stockholder’s attorney thereunto duly authorized and delivered or transmitted to the secretary of such meeting at or prior to the time designated in the order of business for turning in proxies. At all meetings of the stockholders at which a quorum shall be present, all matters (except where otherwise provided by law, the Certificate of Incorporation or these By-laws) shall be decided by the vote of a majority in voting interest of the stockholders present in person or represented by proxy and entitled to vote thereat.  Unless required by law, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by the stockholder’s proxy as such, if there be such proxy.

 

SECTION 9.  List of Stockholders.  A list, certified by the Secretary, of the stockholders of the Corporation entitled to vote shall be produced at any meeting of the stockholders upon the request of any stockholder of the Corporation pursuant to the provisions of applicable law, the Certificate of Incorporation or these By-laws.

 

SECTION  10.   Inspectors of Election.   Prior to the holding of each annual or special meeting of the stockholders, two inspectors of election to serve thereat shall be appointed by the Board, or, if the Board shall not have made such appointment, by the Chairman of the Board. If there shall be a failure to appoint inspectors, or if, at any such meeting, any inspector so appointed shall be absent or shall fail to act or the office shall become vacant, the chairman of the meeting may, and at the request of a stockholder present in person and entitled to vote at such meeting shall, appoint such inspector or inspectors of election, as the case may be, to act thereat. The inspectors of election so appointed to act at any meeting of the stockholders, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of inspectors at such meeting, with strict impartiality and according to the best of their ability, and the oath so taken shall be subscribed by them. Such inspectors of election shall take charge of the

 

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polls, and, after the voting on any question, shall make a certificate of the results of the vote taken. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders.

 

ARTICLE III

 

BOARD OF DIRECTORS

 

SECTION 1.  General Powers.  The business and affairs of the Corporation shall be managed by the Board. The Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these By-laws, directed or required to be exercised or done by the stockholders.

 

SECTION 2.  Number; Qualifications; Election; Term of Office.  The number of directors of the Corporation shall be fourteen, but the number thereof may be increased to not more than twenty-five, or decreased to not less than nine, by amendment of these By-laws. The directors shall be elected at the annual meeting of the stockholders. At each meeting of the stockholders for the election of directors at which a quorum is present, the vote required for election of a director shall, except in a contested election, be the affirmative vote of a majority of the votes cast in favor of or against such nominee.  In a contested election, a nominee receiving a plurality of the votes cast at such election shall be elected.  An election shall be considered to be contested if, as of the record date for such meeting, there are more nominees for election than positions on the Board to be filled by election at the meeting.  Each director shall hold office until the annual meeting of the stockholders which shall be held next after the election of such director and until a successor shall have been duly elected and qualified, or until death, or until the director shall have resigned as hereinafter provided in Section 10 of this Article III.

 

SECTION 3.  Place of Meetings.  Meetings of the Board shall be held at such place either within or outside State of New York as may from time to time be fixed by the Board or specified or fixed in the notice of any such meeting.

 

SECTION 4.  First Meeting.  The Board shall meet for the purpose of organization, the election of officers and the transaction of other business, on the same day the annual meeting of stockholders is held. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice thereof given as hereinafter provided in Section 7 of this Article III.

 

SECTION 5.  Regular Meetings.  Regular meetings of the Board shall be held at times and dates fixed by the Board or at such other times and dates as the Chairman of the Board shall determine and as shall be specified in the notice of such meetings. Notice of regular meetings of the Board need not be given except as otherwise required by law or these By-laws.

 

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SECTION 6.  Special Meetings.  Special meetings of the Board may be called by the Chairman of the Board.

 

SECTION 7.  Notice of Meetings.  Notice of each special meeting of the Board (and of each regular meeting for which notice shall be required) shall be given by the Secretary as hereinafter provided in this Section 7, in which notice shall be stated the time, place and, if required by law or these By-laws, the purposes of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each director, by first-class mail, at least four days before the day on which such meeting is to be held, or shall be sent by facsimile transmission or comparable medium, or be delivered personally or by telephone, at least twenty-four hours before the time at which such meeting is to be held. Notice of any such meeting need not be given to any director who shall waive notice thereof as provided in Article IX of these By-laws. Any meeting of the Board shall be a legal meeting without notice thereof having been given, if all the directors of the Corporation then holding office shall be present thereat.

 

SECTION 8.  Quorum and Manner of Acting.  A majority of the Board shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting. Participation in a meeting by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other shall constitute presence in person at a meeting. Except as otherwise expressly required by law or the Certificate of Incorporation and except also as specified in Section 1, Section 5, and Section 6 of Article IV, in Section 3 of Article V and in Article XII of these By-laws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum at any meeting of the Board, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present thereat. Notice of any adjourned meeting need not be given. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such.

 

SECTION  9.   Organization.   At each meeting of the Board, the Chairman of the Board, or in the case of the Chairman’s absence therefrom, the President, or in the case of the President’s absence therefrom, a Vice Chairman, or in the case of the absence of all such persons, another director chosen by a majority of directors present, shall act as chairman of the meeting and preside thereat. The Secretary, or if the Secretary shall be absent from such meeting, any person appointed by the chairman, shall act as secretary of the meeting and keep the minutes thereof.

 

SECTION 10.  Resignations.

 

(a) Any director of the Corporation may resign at any time by giving written notice of resignation to the Board or the Chairman of the Board or the Secretary. Subject to Section 10(b), any such resignation shall take effect at the time specified therein, or if the time when it shall become effective shall not be specified therein, then it shall take

 

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effect immediately upon its receipt; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

(b) In an uncontested election, any incumbent nominee for director who does not receive an affirmative vote of a majority of the votes cast in favor of or against such nominee shall promptly tender his or her resignation after such election.  The independent directors of the Board, giving due consideration to the best interests of the Corporation and its stockholders, shall evaluate the relevant facts and circumstances, and shall make a decision, within 90 days after the election, on whether to accept the tendered resignation.  Any director who tenders a resignation pursuant to this provision shall not participate in the Board’s decision. The Board will promptly disclose publicly its decision and, if applicable, the reasons for rejecting the tendered resignation.

 

SECTION 11.  Vacancies.  Any vacancy in the Board, whether arising from death, resignation, an increase in the number of directors or any other cause, may be filled by the Board.

 

SECTION 12.  Retirement of Directors. The Board may prescribe a retirement policy for directors on or after reaching a certain age, provided, however, that such retirement shall not cut short the annual term for which any director shall have been elected by the stockholders.

 

ARTICLE IV

 

EXECUTIVE AND OTHER COMMITTEES

 

SECTION 1.  Executive Committee.  The Board, by resolution adopted by a majority of the Board, may designate not less than four of the directors then in office to constitute an Executive Committee, each member of which unless otherwise determined by resolution adopted by a majority of the whole Board, shall continue to be a member of such Committee until the annual meeting of the stockholders which shall be held next after designation as a member of such Committee or until the earlier termination as a director. The Chief Executive Officer shall always be designated as a member of the Executive Committee. The Board may by resolution appoint one member as the Chairman of the Executive Committee who shall preside at all meetings of such Committee. In the absence of said Chairman, the Chief Executive Officer shall preside at all such meetings. In the absence of both the Chairman of the Executive Committee and the Chief Executive Officer, the Chairman of the Board shall preside at all such meetings. In the absence of the Chairman of the Executive Committee and the Chief Executive Officer and the Chairman of the Board, the President shall preside at all such meetings. In the absence of all such persons, a majority of the members of the Executive Committee present shall choose a chairman to preside at such meetings. The Secretary, or if the Secretary shall be absent from such meeting, any person appointed by the chairman, shall act as secretary of the meeting and keep the minutes thereof.

 

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SECTION 2.  Powers of the Executive Committee.  To the extent permitted by law, the Executive Committee may exercise all the powers of the Board in the management of specified matters where such authority is delegated to it by the Board, and also, to the extent permitted by law, the Executive Committee shall have, and may exercise, all the powers of the Board in the management of the business and affairs of the Corporation (including the power to authorize the seal of the Corporation to be affixed to all papers which may require it; but excluding the power to appoint a member of the Executive Committee) in such manner as the Executive Committee shall deem to be in the best interests of the Corporation and not inconsistent with any prior specific action of the Board. An act of the Executive Committee taken within the scope of its authority shall be an act of the Board. The Executive Committee shall render in the form of minutes a report of its several acts at each regular meeting of the Board and at any other time when so directed by the Board.

 

SECTION 3.  Meetings of the Executive Committee.  Regular meetings of the Executive Committee shall be held at such times, on such dates and at such places as shall be fixed by resolution adopted by a majority of the Executive Committee, of which regular meetings notice need not be given, or as shall be fixed by the Chairman of the Executive Committee or in the absence of the Chairman of the Executive Committee the Chief Executive Officer and specified in the notice of such meeting. Special meetings of the Executive Committee may be called by the Chairman of the Executive Committee or by the Chief Executive Officer. Notice of each such special meeting of the Executive Committee (and of each regular meeting for which notice shall be required), stating the time and place thereof shall be mailed, postage prepaid, to each member of the Executive Committee, by first-class mail, at least four days before the day on which such meeting is to be held, or shall be sent by facsimile transmission or comparable medium, or be delivered personally or by telephone, at least twenty-four hours before the time at which such meeting is to be held; but notice need not be given to a member of the Executive Committee who shall waive notice thereof as provided in Article IX of these By-laws, and any meeting of the Executive Committee shall be a legal meeting without any notice thereof having been given, if all the members of such Committee shall be present thereat.

 

SECTION 4.  Quorum and Manner of Acting of the Executive Committee.  Four members of the Executive Committee shall constitute a quorum for the transaction of business, and the act of a majority of the members of the Executive Committee present at a meeting at which a quorum shall be present shall be the act of the Executive Committee. Participating in a meeting by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other shall constitute presence at a meeting of the Executive Committee. The members of the Executive Committee shall act only as a committee and individual members shall have no power as such.

 

SECTION 5.  Other Committees.  The Board may, by resolution adopted by a majority of the Board, designate members of the Board to constitute other committees, which shall have, and may exercise, such powers as the Board may by resolution delegate to them, and shall in each case consist of such number of directors as the

 

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Board may determine; provided, however, that each such committee shall have at least three directors as members thereof. Such a committee may either be constituted for a specified term or may be constituted as a standing committee which does not require annual or periodic reconstitution. A majority of all the members of any such committee may determine its action and its quorum requirements and may fix the time and place of its meetings, unless the Board shall otherwise provide. Participating in a meeting by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other shall constitute presence at a meeting of such other committees.

 

In addition to the foregoing, the Board may, by resolution adopted by a majority of the Board, create a committee of indeterminate membership and duration and not subject to the limitations as to the membership, quorum and manner of meeting and acting prescribed in these By-laws, which committee, in the event of a major disaster or catastrophe or national emergency which renders the Board incapable of action by reason of the death, physical incapacity or inability to meet of some or all of its members, shall have, and may exercise all the powers of the Board in the management of the business and affairs of the Corporation (including, without limitation, the power to authorize the seal of the Corporation to be affixed to all papers which may require it and the power to fill vacancies in the Board). An act of such committee taken within the scope of its authority shall be an act of the Board.

 

SECTION 6.  Changes in Committees; Resignations; Removals; Vacancies.  The Board shall have power, by resolution adopted by a majority of the Board, at any time to change or remove the members of, to fill vacancies in, and to discharge any committee created pursuant to these By-laws, either with or without cause. Any member of any such committee may resign at any time by giving written notice to the Board or the Chairman of the Board or the Secretary. Such resignation shall take effect upon receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. Any vacancy in any committee, whether arising from death, resignation, an increase in the number of committee members or any other cause, shall be filled by the Board in the manner prescribed in these By-laws for the original appointment of the members of such committee.

 

ARTICLE V

 

OFFICERS

 

SECTION 1.  Number and Qualifications. The officers of the Corporation shall include the Chairman of the Board, and may include one or more Vice Chairmen of the Board, the President, one or more Vice Presidents (one or more of whom may be designated as Executive Vice Presidents or as Senior Vice Presidents or by other designations), the Treasurer, the Secretary and the Controller.  Officers shall be elected from time to time by the Board, each to hold office until a successor shall have been duly elected and shall have qualified, or until death, or until resignation as hereinafter

 

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provided in Section 2 of this Article V, or until removed as hereinafter provided in Section 3 of this Article V.

 

SECTION  2.   Resignations.   Any officer of the Corporation may resign at any time by giving written notice of resignation to the Board, the Chairman of the Board, the Chief Executive Officer or the Secretary. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective shall not be specified therein, then it shall become effective upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

SECTION  3.  Removal.  Any officer of the Corporation may be removed, either with or without cause, at any time, by a resolution adopted by a majority of the Board at any meeting of the Board.

 

SECTION  4.  Vacancies.  A vacancy in any office, whether arising from death, resignation, removal or any other cause, may be filled for the unexpired portion of the term of office which shall be vacant, in the manner prescribed in these By-laws for the regular election or appointment to such office.

 

SECTION  5.  Chairman of the Board.  The Chairman of the Board shall, if present, preside at each meeting of the stockholders and of the Board and shall perform such other duties as may from time to time be assigned by the Board. The Chairman may sign certificates representing shares of the stock of the Corporation pursuant to the provisions of Section 1 of Article VII of these By-laws; sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board or these By- laws to some other officer or agent of the Corporation or where they shall be required by law otherwise to be signed, executed and delivered; and affix the seal of the Corporation to any instrument which shall require it. The Chairman of the Board, when there is no President or in the absence or incapacity of the President, shall perform all the duties and functions and exercise all the powers of the President.

 

SECTION 6.  Vice Chairman of the Board. Each Vice Chairman of the Board shall assist the Chairman of the Board and have such other duties as may be assigned by the Board or the Chairman of the Board. The Vice Chairman may sign certificates representing shares of the stock of the Corporation pursuant to the provisions of Section 1 of Article VII of these By-laws; sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board or these By-laws to some officer or agent of the Corporation or where they shall be required by law otherwise to be signed, executed and delivered; and affix the seal of the Corporation to any instrument which shall require it.

 

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SECTION  7.  President.  The President shall perform all such duties as from time to time may be assigned by the Board or the Chairman of the Board. The President may sign certificates representing shares of the stock of the Corporation pursuant to the provisions of Section 1 of Article VII of these By-laws; sign, execute and deliver in the name of the Corporation all deeds mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board or these By-laws to some other officer or agent of the Corporation or where they shall be required by law otherwise to be signed, executed and delivered, and affix the seal of the Corporation to any instrument which shall require it; and, in general, perform all duties incident to the office of President. The President shall in the absence or incapacity of the Chairman of the Board, perform all the duties and functions and exercise all the powers of the Chairman of the Board.

 

SECTION  8.   Designated Officers.   (a)  Chief Executive Officer.  Either the Chairman of the Board, or the President, as the Board of Directors may designate, shall be the Chief Executive Officer of the Corporation. The officer so designated shall have, in addition to the powers and duties applicable to the office set forth in Section 5 or 7 of this Article V, general and active supervision over the business and affairs of the Corporation and over its several officers, agents, and employees, subject, however, to the control of the Board. The Chief Executive Officer shall see that all orders and resolutions of the Board are carried into effect, be an ex officio member of all committees of the Board (except the Audit Committee, the Directors and Corporate Governance Committee, and committees specifically empowered to fix or approve the Chief Executive Officer’s compensation or to grant or administer bonus, option or other similar plans in which the Chief Executive Officer is eligible to participate), and, in general, shall perform all duties incident to the position of Chief Executive Officer and such other duties as may from time to time be assigned by the Board.    (b) Other Designated Officers.  The Board of Directors may designate officers to serve as Chief Financial Officer, Chief Accounting Officer and other such designated positions and to fulfill the responsibilities of such designated positions in addition to their duties as officers as set forth in this Article V.

 

SECTION 9.  Executive Vice Presidents, Senior Vice Presidents and Vice Presidents. Each Executive and Senior Vice President shall perform all such duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President. Each Vice President shall perform all such duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President or an Executive or a Senior Vice President. Any Vice President may sign certificates representing shares of stock of the Corporation pursuant to the provisions of Section 1 of Article VII of these By-laws.

 

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SECTION 10.  Treasurer.  The Treasurer shall:

 

(a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation, and may invest the same in any securities, may open, maintain and close accounts for effecting any and all purchase, sale, investment and lending transactions in securities of any and all kinds for and on behalf of the Corporation or any employee pension or benefit plan fund or other fund established by the Corporation, as may be permitted by law;

 

(b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation;

 

(c) deposit all moneys and other valuables to the credit of the Corporation in such depositaries as may be designated by the Board or the Executive Committee;

 

(d) receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever;

 

(e) disburse the funds of the Corporation and supervise the investment of its funds, taking proper vouchers therefor;

 

(f) render to the Board, whenever the Board may require, an account of all transactions as Treasurer; and

 

(g) in general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President or an Executive or Senior Vice President.

 

SECTION 11.  Secretary.  The Secretary shall:

 

(a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board, the Executive Committee and other committees of the Board and the stockholders;

 

(b) see that all notices are duly given in accordance with the provisions of these By-laws and as required by law;

 

(c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal;

 

(d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and

 

(e) in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President or an Executive or Senior Vice President.

 

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SECTION  12.  Controller.  The Controller shall:

 

(a) have control of all the books of account of the Corporation;

 

(b) keep a true and accurate record of all property owned by it, of its debts and of its revenues and expenses;

 

(c) keep all accounting records of the Corporation (other than the accounts of receipts and disbursements and those relating to the deposits of money and other valuables of the Corporation, which shall be kept by the Treasurer);

 

(d) render to the Board, whenever the Board may require, an account of the financial condition of the Corporation; and

 

(e) in general, perform all the duties incident to the office of Controller and such other duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President or an Executive or Senior Vice President.

 

SECTION 13.  Compensation.  The compensation of the officers of the Corporation shall be fixed from time to time by the Board; provided, however, that the Board may delegate to a committee the power to fix or approve the compensation of any officers. An officer of the Corporation shall not be prevented from receiving compensation by reason of being also a director of the Corporation; but any such officer who shall also be a director shall not have any vote in the determination of the amount of compensation paid to such officer.

 

ARTICLE VI

 

CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

 

SECTION 1.  Execution of Contracts.  Except as otherwise required by law or these By-laws, any contract or other instrument may be executed and delivered in the name and on behalf of the Corporation by any officer (including any assistant officer) of the Corporation. The Board or the Executive Committee may authorize any agent or employee to execute and deliver any contract or other instrument in the name and on behalf of the Corporation, and such authority may be general or confined to specific instances as the Board or such Committee, as the case may be, may by resolution determine.

 

SECTION 2.  Loans.  Unless the Board shall otherwise determine, the Chairman of the Board or a Vice Chairman of the Board or the President or any Vice President, acting together with the Treasurer or the Secretary, may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation, but in making such loans or advances no officer or officers shall

 

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mortgage, pledge, hypothecate or transfer any securities or other property of the Corporation, except when authorized by resolution adopted by the Board.

 

SECTION 3.  Checks, Drafts, etc.  All checks, drafts, bills of exchange or other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of indebtedness of the Corporation, shall be signed in the name and on behalf of the Corporation by such persons and in such manner as shall from time to time be authorized by the Board or the Executive Committee or authorized by the Treasurer  acting together with either the General Manager of an operating unit or a nonfinancial Vice President of the Corporation, which authorization may be general or confined to specific instances.

 

SECTION 4.  Deposits.  All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board or the Executive Committee may from time to time designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may from time to time be delegated by the Board or the Executive Committee. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer, employee or agent of the Corporation.

 

SECTION 5.  General and Special Bank Accounts.  The Board or the Executive Committee may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board or the Executive Committee may designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may from time to time be delegated by the Board or the Executive Committee. The Board or the Executive Committee may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these By-laws, as it may deem expedient.

 

SECTION 6.  Indemnification.  The Corporation shall, to the fullest extent permitted by applicable law as in effect at any time, indemnify any person made, or threatened to be made, a party to an action or proceeding whether civil or criminal (including an action or proceeding by or in the right of the Corporation or any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, for which any director or officer of the Corporation served in any capacity at the request of the Corporation), by reason of the fact that such person or such person’s testator or intestate was a director or officer of the Corporation, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys’ fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein. Such indemnification shall be a contract right and shall include the right to be paid advances of any expenses incurred by such person in connection with such action, suit or proceeding, consistent with the provisions of applicable law in effect at any time.

 

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Indemnification shall be deemed to be ‘permitted’ within the meaning of the first sentence hereof if it is not expressly prohibited by applicable law as in effect at the time.

 

ARTICLE VII

 

SHARES

 

SECTION 1.  Stock Certificates.  The shares of the Corporation shall be represented by certificates, or shall be uncertificated shares.  Each owner of stock of the Corporation shall be entitled to have a certificate, in such form as shall be approved by the Board, certifying the number of shares of stock of the Corporation owned.  To the extent that shares are represented by certificates, such certificates of stock shall be signed in the name of the Corporation by the Chairman of the Board or a Vice Chairman of the Board or the President or a Vice President and by the Secretary and sealed with the seal of the Corporation (which seal may be a facsimile, engraved or printed); provided, however, that where any such certificate is signed by a registrar, other than the Corporation or its employee, the signatures of the Chairman of the Board, a Vice Chairman of the Board, the President, the Secretary, and transfer agent or a transfer clerk acting on behalf of the Corporation upon such certificates may be facsimiles, engraved or printed. In case any officer, transfer agent or transfer clerk acting on behalf of the Corporation ceases to be such officer, transfer agent, or transfer clerk before such certificates shall be issued, they may nevertheless be issued by the Corporation with the same effect as if they were still such officer, transfer agent or transfer clerk at the date of their issue.

 

SECTION 2.  Books of Account and Record of Stockholders.  There shall be kept at the office of the Corporation correct books of account of all its business and transactions, minutes of the proceedings of stockholders, Board, and Executive Committee, and a book to be known as the record of stockholders, containing the names and addresses of all persons who are stockholders, the number of shares of stock held, and the date when the stockholder became the owner of record thereof.

 

SECTION 3.  Transfers of Stock.  Transfers of shares of stock of the Corporation shall be made on the record of stockholders of the Corporation only upon authorization by the registered holder thereof, or by an attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates for such shares properly endorsed, provided such shares are represented by a certificate, or accompanied by a duly executed stock transfer power and the payment of all taxes thereon.  The person in whose names shares of stock shall stand on the record of stockholders of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfers of shares shall be made for collateral security and not absolutely and written notice thereof shall be given to the Secretary or to such transfer agent or transfer clerk, such fact shall be stated in the entry of the transfer.

 

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SECTION 4.  Regulations.  The Board may make such additional rules and regulations as it may deem expedient, not inconsistent with these By-laws, concerning the issue, transfer and registration of certificated or uncertificated shares of stock of the Corporation.  It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them.

 

SECTION 5.  Fixing of Record Date.  The Board shall fix a time not exceeding sixty nor less than ten days prior to the date then fixed for the holding of any meeting of the stockholders or prior to the last day on which the consent or dissent of the stockholders may be effectively expressed for any purpose without a meeting, as the time as of which the stockholders entitled to notice of and to vote at such meeting or whose consent or dissent is required or may be expressed for any purpose, as the case may be, shall be determined, and all persons who were holders of record of voting stock at such time, and no others, shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be.  The Board may fix a time not exceeding sixty days preceding the date fixed for the payment of any dividend or the making of any distribution or the allotment of rights to subscribe for securities of the Corporation, or for the delivery of evidences of rights or evidences of interests arising out of any change, conversion or exchange of capital stock or other securities, as the record date for the determination of the stockholders entitled to receive any such dividend, distribution, allotment, rights or interests, and in such case only the stockholders of record at the time so fixed shall be entitled to receive such dividend, distribution, allotment, rights or interests.

 

SECTION 6.  Lost, Destroyed or Mutilated Certificates.  The holder of any certificate representing shares of stock of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of such certificate, and the Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it which the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated, and the Corporation may, in its discretion, require such owner or the owner’s legal representatives to give to the Corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties as the Board in its absolute discretion shall determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate, or the issuance of such new certificate. Anything to the contrary notwithstanding, the Corporation, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to legal proceedings under the laws of the State of New York.

 

SECTION 7.  Inspection of Records.  The record of stockholders and minutes of the proceedings of stockholders shall be available for inspection, within the limits and subject to the conditions and restrictions prescribed by applicable law.

 

17



 

SECTION 8.  Auditors.  The Board shall employ an independent public or certified public accountant or firm of such accountants who shall act as auditors in making examinations of the consolidated financial statements of the Corporation and its subsidiaries in accordance with generally accepted auditing standards. The auditors shall certify that the annual financial statements are prepared in accordance with generally accepted accounting principles, and shall report on such financial statements to the stockholders and directors of the Corporation. The Board’s selection of auditors shall be presented for ratification by the stockholders at the annual meeting. Directors and officers, when acting in good faith, may rely upon financial statements of the Corporation represented to them to be correct by the officer of the Corporation having charge of its books of account, or stated in a written report by the auditors fairly to reflect the financial condition of the Corporation.

 

ARTICLE VIII

 

OFFICES

 

SECTION 1.  Principal Office.  The principal office of the Corporation shall be at such place in the Town of North Castle, County of Westchester and State of New York as the Board shall from time to time determine.

 

SECTION 2.  Other Offices.  The Corporation may also have an office or offices other than said principal office at such place or places as the Board shall from time to time determine or the business of the Corporation may require.

 

ARTICLE IX

 

WAIVER OF NOTICE

 

Whenever under the provisions of any law of the State of New York, the Certificate of Incorporation or these By-laws or any resolution of the Board or any committee thereof, the Corporation or the Board or any committee thereof is authorized to take any action after notice to the stockholders, directors or members of any such committee, or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of any period of time, if, at any time before or after such action shall be completed, such notice or lapse of time shall be waived by the person or persons entitled to said notice or entitled to participate in the action to be taken, or, in the case of a stockholder, by an attorney thereunto authorized. Attendance at a meeting requiring notice by any person or, in the case of a stockholder, by the stockholder’s attorney, agent or proxy, shall constitute a waiver of such notice on the part of the person so attending, or by such stockholder, as the case may be.

 

18



 

ARTICLE X

 

FISCAL YEAR

 

The fiscal year of the Corporation shall end on the thirty-first day of December in each year.

 

ARTICLE XI

 

SEAL

 

The Seal of the Corporation shall consist of two concentric circles with the IBM logotype appearing in bold face type within the inner circle and the words ‘International Business Machines Corporation’ appearing within the outer circle.

 

ARTICLE XII

 

AMENDMENTS

 

These By-laws may be amended or repealed or new By-laws may be adopted by the stockholders at any annual or special meeting, if the notice thereof mentions that amendment or repeal or the adoption of new By-laws is one of the purposes of such meeting. These By-laws, subject to the laws of the State of New York, may also be amended or repealed or new By-laws may be adopted by the affirmative vote of a majority of the Board given at any meeting, if the notice thereof mentions that amendment or repeal or the adoption of new By-laws is one of the purposes of such meeting.

 

19


 



EXHIBIT 10.1

 

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

 

 

 

IBM EXCESS 401(k) PLUS PLAN

 

Amended and Restated Effective January 1, 2010

(except as otherwise provided herein)

 

 

 



 

TABLE OF CONTENTS

 

ARTICLE I. INTRODUCTION

1

 

 

 

 

 

1.01.

Name of Plan and Effective Date

1

 

 

 

 

 

1.02.

Purpose

1

 

 

 

 

 

1.03.

Legal Status

1

 

 

 

 

 

1.04.

Section 409A

1

 

 

 

 

ARTICLE II. DEFINITIONS

3

 

 

 

 

ARTICLE III. ELIGIBILITY

9

 

 

 

 

 

3.01.

Eligibility for Elective Deferrals

9

 

 

 

 

 

3.02.

Eligibility for Matching and Match Maximizer Contributions

9

 

 

 

 

 

3.03.

Eligibility for Automatic Contributions and Transition Credits

9

 

 

 

 

 

3.04.

Eligibility for Section 415 Excess Credits

10

 

 

 

 

 

3.05.

Eligibility for Discretionary Awards

10

 

 

 

 

ARTICLE IV. ELECTIVE DEFERRALS AND MATCHING CONTRIBUTIONS

11

 

 

 

 

 

4.01.

Elective Deferrals

11

 

 

 

 

 

4.02.

Matching Contributions

12

 

 

 

 

ARTICLE V. NON-ELECTIVE CREDITS

14

 

 

 

 

 

5.01.

Automatic Contributions

14

 

 

 

 

 

5.02.

Transition Credits

14

 

 

 

 

 

5.03.

Section 415 Excess Credits

14

 

 

 

 

 

5.04.

Discretionary Awards

14

 

 

 

 

ARTICLE VI. VESTING, DEEMED INVESTMENT OF ACCOUNTS

15

 

 

 

 

 

6.01.

Individual Accounts

15

 

 

 

 

 

6.02.

Vesting of Accounts

15

 

 

 

 

 

6.03.

Deemed Investment of Accounts

15

 



 

ARTICLE VII. FORFEITURE AND RIGHT OF RECOVERY OF COMPANY CONTRIBUTIONS

18

 

 

 

 

 

7.01.

In General

18

 

 

 

 

 

7.02.

Detrimental Activity

18

 

 

 

 

 

7.03.

Applicable Company Contributions

19

 

 

 

 

 

7.04.

Timing

19

 

 

 

 

 

7.05.

Delegation of Authority

19

 

 

 

 

 

7.06.

Chief Human Resources Officer

19

 

 

 

 

 

7.07.

Non-Exclusive Remedies

20

 

 

 

 

 

7.08.

Severability

20

 

 

 

 

ARTICLE VIII. PAYMENT OF GRANDFATHERED AMOUNTS

20

 

 

 

 

 

8.01.

Grandfathered Treatment of Grandfathered Amounts

20

 

 

 

 

 

8.02.

Payment of Grandfathered Amounts Upon Death

20

 

 

 

 

 

8.03.

Options for Payment of Grandfathered Amounts Upon Termination of Employment

20

 

 

 

 

 

8.04.

Payment of Grandfathered Amounts Upon Termination of Employment

21

 

 

 

 

ARTICLE IX. PAYMENT OF NON-GRANDFATHERED AMOUNTS

22

 

 

 

 

 

9.01.

Payment of Non-Grandfathered Amounts Upon Death

22

 

 

 

 

 

9.02.

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

22

 

 

 

 

 

9.03.

Electing and Changing Payment Options for Non-Grandfathered Amounts

23

 

 

 

 

 

9.04.

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

25

 

 

 

 

 

9.05.

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

26

 

 

 

 

 

9.06.

Valuation of Non-Grandfathered Accounts

26

 

2



 

 

9.07.

Effect of Rehire on Non-Grandfathered Payments

27

 

 

 

 

ARTICLE X. ADMINISTRATION

28

 

 

 

 

 

10.01.

Amendment or Termination

28

 

 

 

 

 

10.02.

Responsibilities

28

 

 

 

 

ARTICLE XI. GENERAL PROVISIONS

30

 

 

 

 

 

11.01.

Funding

30

 

 

 

 

 

11.02.

No Contract of Employment

30

 

 

 

 

 

11.03.

Facility of Payment

30

 

 

 

 

 

11.04.

Withholding Taxes

31

 

 

 

 

 

11.05.

Nonalienation

31

 

 

 

 

 

11.06.

Administration

31

 

 

 

 

 

11.07.

Construction

31

 

 

 

 

ARTICLE XII. CLAIMS PROCEDURE

32

 

3



 

ARTICLE I. INTRODUCTION

 

1.01.       Name of Plan and Effective Date.   The IBM Executive Deferred Compensation Plan (the “EDCP”) was renamed and restated as the “IBM Excess 401(k) Plus Plan” (the “Plan”), effective as of January 1, 2008 (the “Effective Date”), except as provided in Section 1.04, below, with respect to amounts earned before the Effective Date.  This amended and restated plan document is effective as of January 1, 2010, except as otherwise provided herein. In addition, the EDCP plan document in effect prior to the Effective Date (the “EDCP document”) continues to govern the portion of the Plan consisting of “deferred shares” (as defined in the EDCP document).  The EDCP document is Appendix A.

 

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

 

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

 

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

 

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

 

1.04.       Section 409A.

 

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

 

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

 



 

Exhibit A

 

the Effective Date, to the terms of the EDCP, as amended, including, for example, the requirement that any payment to a 409A Key Employee (as defined in ARTICLE II) that would otherwise be paid in the first six months after a separation from service was instead paid in the seventh month.  Notwithstanding anything to the contrary in this Section 1.04, in no event shall the Company, its officers, directors, employees, parents, subsidiaries, or affiliates be liable for any additional tax, interest, or penalty incurred by a Participant or Beneficiary as a result of the Plan’s failure to satisfy the requirements of Section 409A of the Code, or as a result of the Plan’s failure to satisfy any other applicable requirements for the deferral of tax.

 

2



 

ARTICLE II. DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Board” means the Board of Directors of IBM.

 

3



 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.  All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Effective Date” means the initial effective date of the Plan, which is January 1, 2008.

 

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

 

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

 

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

 

4



 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5



 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Plan Year” means the calendar year.

 

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

 

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

 

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

 

6


 

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

 

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

 

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

 

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

 

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

 

“Retirement-Eligible Participant” means a Participant who:

 

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

 

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

 

7



 

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

 

For purposes of this definition, “year of service” means a year of “Eligibility Service” as defined in the IBM Personal Pension Plan.  In addition, for purposes of Section 8.04 (payment of grandfathered amounts upon termination of employment), this definition of “Retirement-Eligible Participant” is applied by replacing “409A Separation from Service” with “termination of employment.”  Furthermore, the conditions in (a), (b), and/or (c) above are modified to the extent necessary to be consistent with the retirement-eligibility criteria in the EDCP.

 

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

 

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

 

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

 

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

 

8



 

ARTICLE III. ELIGIBILITY

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.03.        Eligibility for Automatic Contributions and Transition Credits.

 

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

 

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

 

9



 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE IV. ELECTIVE DEFERRALS AND MATCHING CONTRIBUTIONS

 

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

 

(a)  Amount of Elective Deferrals .

 

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE V. NON-ELECTIVE CREDITS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE VI. VESTING, DEEMED INVESTMENT OF ACCOUNTS

 

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

 

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

 

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

 

(a)  Deemed Investment Options Available .

 

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

 

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

 

(3)  Amounts Attributable to Buy-First Executive Equity Program . Any portion of a Participant’s Post-2004 Elective Deferral Account that is attributable to a Participant’s deferrals under the EDCP through the IBM Buy-First Executive Equity Program before the Effective Date (and related

 

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

 

(b)  Elections for Deemed Investment Options.

 

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

 

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

 

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

 

i.     Transfers must be made in multiples of 1%, provided that the minimum amount transferred shall be $250 if that is greater than 1% (provided, however, that the Plan Administrator may specify a different percentage and/or a different dollar amount to be applied in this paragraph);
 
ii.    Any restrictions on transfers into or out of investment funds that apply under the 401(k) Plan shall also apply under the Plan; and

 

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

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

 

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ARTICLE VII. FORFEITURE AND RIGHT OF RECOVERY OF COMPANY CONTRIBUTIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.05.       Delegation of Authority.

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE VIII. PAYMENT OF GRANDFATHERED AMOUNTS

 

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

 

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

 

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

 

(a)  Forms of Payment.   A Participant may elect, at the time and in the manner described in subsection (b), below, to have the value of his or her Pre-2005 Accounts paid under one of the following options, subject to the limits in Section 8.04, below (regarding retirement-eligibility and $25,000 cash-out limit):

 

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

 

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

 

(3) From two to 10 annual installments (as elected by the Participant), each paid as of the last business day in January beginning

 

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with the January immediately following the calendar year in which the Participant’s termination from employment occurs, until the elected number of installments have been paid.

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE IX. PAYMENT OF NON-GRANDFATHERED AMOUNTS

 

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

 

9.02.       Form of Payment for Non-Grandfathered Amounts Paid Upon a 409A Separation from Service.   A Participant may elect, at the time and in the manner described in Section 9.03, below, to have the value of his or her Post-2004 Accounts paid under one of the following options, subject to the limits in Section 9.04, below (regarding delays for 409A Key Employees) and Section 9.05, below (special rules for separations during the first quarter of 2008):

 

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

 

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

 

(c) From two to 10 annual installments (as elected by the Participant), each paid as of the last business day in January beginning with the January immediately following the calendar year in which the Participant’s 409A Separation from Service occurs, until the elected number of installments have been paid, subject to Section 9.04(c) (involuntary cash-outs).  This installment option is treated as the entitlement to a single payment for purposes of Treasury Regulation section 1.409A-2(b)(2)(iii).

 

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

 

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

 

(a)  Election of Payment Option.   A Participant shall elect a payment option for his or her Post-2004 Accounts in the form and manner prescribed by the Plan Administrator and during whichever of the following election periods applies to the Participant (except as provided in Section 9.05, below, with respect to a separation during the first quarter of 2008):

 

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

 

i.              is eligible to make Elective Deferrals in 2008;
 
ii.           on October 31, 2007, had a balance in his or her EDCP Accounts; or
 
iii.        on October 31, 2007, had a valid EDCP election on file for deferrals in 2007.
 

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

 

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

 

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

 

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

 

i.              was hired by the Company before September 1, 2007 and has been employed continuously since his or her hire date;
 
ii.           was not, during the Plan Year of such credit or any previous Plan Year beginning on or after the Effective Date, eligible to make an Elective Deferral;
 
iii.        was not previously eligible to elect a payment option under this subsection (a);
 
iv.       has not, in any calendar year prior to the calendar year of the contribution, accrued a benefit or deferred compensation under a plan as determined under Treas. Reg. § 1.409A-2(a)(7)(iii).
 

(b)  Irrevocability and Default Payment Option .  If a Participant does not make an election under paragraphs (a)(1), (a)(2), or (a)(3), above (including a Participant who is not eligible to make an election under any of those paragraphs), the Participant’s initial payment election shall be the payment option described in subsection 9.02(a) (immediate lump sum), above.  A Participant’s initial payment election (including the default option described in the previous sentence) becomes irrevocable, and can be changed only in accordance with subsection (c), below, after (i) the deadline specified in paragraphs (a)(1) or (a)(3), for Participants eligible to make elections under those paragraphs, and (ii) December 31 of the Plan Year preceding the Plan Year in which the Participant first earns a credit under the Plan, for all other Participants.

 

(c)  Changing Payment Options .  A Participant may elect, in the form and manner prescribed by the Plan Administrator, to change the Participant’s initial payment option determined under this Section 9.03, provided that:

 

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

 

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

 

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

 

24



 

i.              only once during 2008; and
 
ii.           only once on or after January 1, 2009.
 

9.04.       Payment of Non-Grandfathered Amounts Upon a 409A Separation from Service.   The value of a Participant’s Post-2004 Accounts shall be paid to the Participant upon his or her 409A Separation from Service on or after the Effective Date in the form and at the time provided in Sections 9.02 and 9.03, above (except as provided in Section 9.05, below (special rules for first quarter of 2008)), subject to the following:

 

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

 

(b)  Death of Participant After 409A Separation from Service .  If the death of a Participant (including a 409A Key Employee described in subsection (a), above) occurs before the payment date for any lump sum or installment provided for under the applicable payment option, payment shall be made to the Participant’s Beneficiary as provided in Section 9.01.

 

(c)  Involuntary Cash-Out .  If (i) the applicable payment option is the installment option described in subsection 9.02(c), above, and (ii) the aggregate value of all of the Participant’s Accounts under the Plan (including, for this purpose, “deferred shares” as defined in the EDCP) determined as of the date of his or her 409A Separation from Service is less than 50% of the Pay Limit in effect for the calendar year in which the Participant’s 409A Separation from Service occurs, the value of the Participant’s Post-2004 Accounts shall be distributed in a lump sum on the start date that would otherwise have applied for the elected installments, taking into account any applicable delay for a 409A Key Employee described in subsection (a), above.

 

25



 

9.05.       Special Rules for Payment of Non-Grandfathered Amounts Upon a 409A Separation from Service in First Quarter of 2008.   If a Participant’s 409A Separation from Service occurs on or after January 1, 2008, and before April 1, 2008, the Participant’s Post-2004 Accounts shall be paid to the Participant in the form and at the time described below, except that such payments shall be subject to Section 9.04(a) (delay for 409A Key Employees) and Section 9.04(b) (death of Participant after 409A Separation from Service):

 

(a)  Non-Retirement-Eligible or Benefit Is Less than $25,000 .  If the Participant is not a Retirement-Eligible Participant or if the aggregate value of all of the Participant’s Accounts under the Plan (including, for this purpose, “deferred shares” as defined in the EDCP) is less than $25,000 as of the date of his or her 409A Separation from Service, the Participant’s Post-2004 Accounts shall be paid in an immediate lump sum as described in Section 9.02(a), above;

 

(b)  Retirement-Eligible Without Valid Payment Election .  If the Participant is a Retirement-Eligible Participant but has not made a valid payment election, the Participant’s Post-2004 Accounts shall be paid in a lump sum as of the last business day in January immediately following the calendar year of the Participant’s 409A Separation from Service as described in Section 9.02(b), above, provided that the aggregate value of all of the Participant’s Accounts under the Plan (including, for this purpose, “deferred shares” as defined in the EDCP) is at least $25,000 as of the date of his or her 409A Separation from Service.

 

(c)  Retirement-Eligible With Valid Payment Election .  If the Participant is a Retirement-Eligible Participant and has made a valid payment election, the Participant’s Post-2004 Accounts shall be paid in accordance with the payment option elected, as described in Section 9.02, above, provided that the aggregate value of all of the Participant’s Accounts under the Plan (including, for this purpose, “deferred shares” as defined in the EDCP) is at least $25,000 as of the date of his or her 409A Separation from Service.

 

For purposes of this Section 9.04, a valid payment election is a payment election made at least six months before the Participant’s 409A Separation from Service in a manner prescribed by the Plan Administrator.  If a Participant did not make a valid payment election for his or her Post-2004 Accounts, the Participant’s valid payment election shall be his or her valid payment election for his or her Pre-2005 Accounts, if any.

 

9.06.       Valuation of Non-Grandfathered Accounts.   For purposes of determining the amount of any payment of the Participant’s Post-2004 Accounts, the Participant’s Post-2004 Accounts will be valued as of the date the payment is processed, except that if payment is required under the terms of the Plan to be made as of the last business day in January of a Plan Year (for example, pursuant to Section 9.02(b)), the Participant’s Post-2004 Accounts with respect to such payment shall be valued as of such last business day in January.  For purposes of determining the amount of any annual installment payment of the Participant’s Post-2004 Accounts, the

 

26



 

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

 

9.07.       Effect of Rehire on Non-Grandfathered Payments.   If a Participant becomes eligible for a payment of benefits on account of a 409A Separation from Service and is rehired as an Employee before his or her Post-2004 Accounts have been distributed in full, payments shall be made as if the Participant had not been rehired.  If the Participant again becomes eligible to make Elective Deferrals or receive Company Contributions following his or her rehire, the Plan Administrator shall arrange separate accounting for Elective Deferrals and Company Contributions (and related earnings, gains, or losses) credited to the Participant’s Post-2004 Accounts following the Participant’s rehire, and the Participant’s opportunity to make an initial distribution election under subsection 9.03(a)(2) (election in Plan Year before initial eligibility) shall be determined without regard to the benefits earned under the Plan prior to the Participant’s rehire.

 

27



 

ARTICLE X. ADMINISTRATION

 

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

 

10.02.     Responsibilities.

 

(a) The following persons and groups of persons shall severally have the authority to control and manage the operation and administration of the Plan as herein delineated:

 

(1) the Board,

 

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

 

( 3) the Plan Administrator and each person on any committee serving as the Plan Administrator.

 

Each person or group of persons shall be responsible for discharging only the duties assigned to it by the terms of the Plan.

 

(b) The Board shall be responsible only for approval of a resolution in accordance with Section 10.01 to amend or terminate the Plan.

 

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

 

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

 

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

 

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

 

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

 

28



 

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

 

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

 

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

 

29



 

ARTICLE XI.  GENERAL PROVISIONS

 

11.01.     Funding.

 

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

 

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

 

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

 

11.03.     Facility of Payment.   In the event the Plan Administrator determines that any Participant or Beneficiary receiving or entitled to receive benefits under the Plan is incompetent to care for his or her affairs and in the absence of the appointment of a legal guardian of the property of the incompetent, benefit payments due under the Plan (unless prior claim thereto has been made by a duly qualified guardian, committee, or other legal representative) may be made to the spouse, parent, brother or sister, or other person, including a hospital or other institution, deemed by the Plan Administrator to have incurred or to be liable for expenses on behalf of such incompetent.  In the absence of the appointment of a legal guardian of the property of a minor, any minor’s share of benefits payable under the Plan may be paid to such adult or adults as in the opinion of the Plan Administrator have assumed the custody and principal support of such minor.  The Plan Administrator, however, in its sole discretion, may require that a legal guardian for the property of such incompetent or minor be appointed before authorizing the payment of benefits in such situation.  Benefit payments made under the Plan in accordance with determinations of the Plan Administrator pursuant to this Section 11.03 shall be a complete discharge of any obligation arising under the Plan with respect to such benefit payments.

 

30



 

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

 

11.05.     Nonalienation.   No benefits payable under the Plan shall be subject to alienation, sale, transfer, assignment, pledge, attachment, garnishment, lien, levy, or like encumbrance.  No benefit under the Plan shall in any manner be liable for or subject to the debts or liabilities of any person entitled to benefits under the Plan. On and after the Effective Date, compliance with any domestic relations order relating to a Participant’s Account that the Plan Administrator determines must be complied with under applicable law shall not be considered a violation of this provision; provided, however, that an administrative fee determined by the Plan Administrator shall be deducted from any Participant’s Account that is subject to a domestic relations order.

 

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

 

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

 

31



 

ARTICLE XII.   CLAIMS PROCEDURE

 

If a Participant or Beneficiary believes he or she is entitled to have received benefits but has not received them, the Participant or Beneficiary must accept any payment made under the Plan and make prompt and reasonable, good faith efforts to collect the remaining portion of the payment, as determined under Treas. Reg. § 1.409A-3(g).  For this purpose (and as determined under such regulation), efforts to collect the payment will be presumed not to be prompt, reasonable, good faith efforts, unless the Participant or Beneficiary provides notice to the Plan Administrator within 90 days of the latest date upon which the payment could have been timely made in accordance with the terms of the Plan and the regulations under Code Section 409A, and unless, if not paid, the Participant or Beneficiary takes further enforcement measures within 180 days after such latest date.  In addition, a Participant or Beneficiary must exhaust any other claims procedures established by the Plan Administrator before initiating litigation.

 

32


 

Appendix A

 

 

 

IBM EXECUTIVE DEFERRED COMPENSATION PLAN

 

Amended and Restated Effective January 1, 2000

Incorporating Amendments Effective Through January 1, 2008

 

 

 



 

INTRODUCTION

 

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

 

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

 

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

 

D.            Section 409A .

 

(1)           Grandfathered Amounts .  Benefits earned and vested under the Plan before January 1, 2005, as adjusted for earnings, gains, or losses on those benefits (“Grandfathered Amounts”) are treated as grandfathered for purposes of Section 409A of the Code.  Grandfathered Amounts (including Grandfathered Amounts attributable to Deferred Shares) are subject to the terms of the Plan in effect on October 3, 2004, except to the extent such terms have been or are hereafter amended in a manner that does not constitute a “material modification,” as determined under Section 409A of the Code.  An amendment described in the preceding sentence may be accomplished through an amendment to this Plan document and/or through an amendment to the Excess Plan (or any successor plan) document.  For recordkeeping purposes, Grandfathered Amounts shall be accounted for separately.

 

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

 

1



 

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

 

(B)           On and after January 1, 2008:

 

(i)            Non-Grandfathered Amounts that are not attributable to Deferred Shares shall be distributed in accordance with the provisions of the Excess Plan (or any successor plan).
 
(ii)           Non-Grandfathered Amounts that are attributable to Deferred Shares shall be distributed in accordance with the provisions of ARTICLE 9 of this Plan.
 

Notwithstanding anything to the contrary in this Paragraph D, in no event shall the Company, its officers, directors, employees, parents, subsidiaries, or affiliates be liable for any additional tax, interest, or penalty incurred by a Participant or Beneficiary as a result of the Plan’s failure to satisfy the requirements of Section 409A of the Code, or as a result of the Plan’s failure to satisfy any other applicable requirements for the deferral of tax.

 

2



 

IBM EXECUTIVE DEFERRED COMPENSATION PLAN

 

TABLE OF CONTENTS

 

 

 

Page(s)

 

 

 

ARTICLE 1.          DEFINITIONS

1

 

 

 

ARTICLE 2.           PARTICIPATION

4

 

 

 

2.01

ELIGIBILITY

4

2.02

PARTICIPATION

4

2.03

APPLICATION OF THIS ARTICLE AFTER 2007

5

 

 

 

ARTICLE 3.          CONTRIBUTIONS

6

 

 

 

3.01

AMOUNT OF DEFERRAL CONTRIBUTIONS

6

3.02

MATCHING CONTRIBUTIONS

7

3.03

ADDITIONAL COMPANY CONTRIBUTIONS

7

3.04

INVESTMENT OF ACCOUNTS

7

3.05

VESTING OF ACCOUNTS

8

3.06

INDIVIDUAL ACCOUNTS

8

3.07

DEFERRAL OF RSUS OR PERFORMANCE SHARE UNITS

8

3.08

APPLICATION OF THIS ARTICLE AFTER 2007

8

 

 

 

ARTICLE 4.          INVESTMENT OF DEFERRALS AND DEFERRAL ACCOUNTS

10

 

 

 

4.01

DEEMED SAVINGS PLAN INVESTMENTS; PARTICIPANT CONTROL

10

4.02

CHANGE OF INVESTMENT SELECTION ON FUTURE DEFERRALS

10

4.03

CHANGE OF INVESTMENT SELECTION ON EXISTING DEFERRAL ACCOUNTS

10

4.04

APPLICATION OF THIS ARTICLE AFTER 2007

11

 

 

 

ARTICLE 5.          PAYMENT OF ACCOUNTS

12

 

 

 

5.01

COMMENCEMENT OF DEFERRAL PAYMENTS

12

5.02

METHOD OF PAYMENT

12

5.03

DESIGNATION OF BENEFICIARY

13

5.04

DISTRIBUTIONS TO SPECIFIED EMPLOYEES

13

5.05

APPLICATION OF THIS ARTICLE AFTER 2007

14

 

 

 

ARTICLE 6.          GENERAL PROVISIONS

15

 

 

 

6.01

FUNDING

15

6.02

NO CONTRACT OF EMPLOYMENT

15

6.03

FACILITY OF PAYMENT

16

6.04

WITHHOLDING TAXES

16

6.05

NONALIENATION

16

6.06

ADMINISTRATION

16

6.07

CONSTRUCTION

17

6.08

APPLICATION OF THIS ARTICLE AFTER 2007

17

 

 

 

ARTICLE 7.          MANAGEMENT AND ADMINISTRATION

18

 

 

 

7.01

AMENDMENT OR TERMINATION

18

7.02

RESPONSIBILITIES

18

7.03

APPLICATION OF THIS ARTICLE AFTER 2007

20

 

 

 

ARTICLE 8.          CLAIMS PROCEDURE

21

 

 

 

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

22

 

 

 

9.01

PURPOSE

22

 

i



 

9.02

DEFINITIONS

22

9.03

PAYMENT UPON DEATH

22

9.04

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

23

9.05

ELECTING AND CHANGING PAYMENT OPTIONS

23

9.06

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

25

9.07

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

25

 

ii



 

ARTICLE 1.   DEFINITIONS

 

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

 

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

 

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

 

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

 

1.04                            Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time.  All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.

 

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

 

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

 

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

 

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

 

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

 

1



 

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

 

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

 

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

 

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

 

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

 

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

 

1.16                            Domestic Subsidiary ” shall mean a Subsidiary organized and existing under the laws of the United States or any state, territory, or possession thereof; provided however, that the Plan shall not be deemed to cover the employees of any Domestic Subsidiary unless authorized by the Company’s chief human resources officer.

 

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

 

1.18                            Effective Date ” shall mean January 1, 1995.

 

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

 

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

 

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

 

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

 

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

 

2



 

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

 

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

 

1.26                            Plan Administrator ” shall mean a person or a committee appointed pursuant to ARTICLE 7 which shall be responsible for reporting, recordkeeping, and related administrative requirements.  If appointed as a committee, any one of the members of the committee may act individually on behalf of the committee to fulfill the committee’s duties.  As of the Effective Date, the Director of Executive Compensation has been appointed as the Plan Administrator.

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE 2.   PARTICIPATION

 

2.01                            Eligibility

 

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

 

2.02                            Participation

 

(a)           No later than the end of the calendar year immediately preceding the first day of the calendar year during which an Eligible Employee desires to have contributions credited on his or her behalf pursuant to Article 3.01, an Eligible Employee must execute a Deferral Election Agreement authorizing Deferrals under this Plan for such year in accordance with the provisions of Article 3.01.
 
(b)           If an Eligible Employee becomes an employee of the Company during a calendar year, he or she may execute a Deferral Election Agreement as soon as practical after his or her date of hire.  Effective January 1, 2005, a new Eligible Employee may execute a Deferral Election Agreement within 30 days after becoming eligible.  The Deferral Election Agreement shall apply to Compensation earned by the Eligible Employee in the payroll periods beginning after such agreement is submitted to the Committee.
 
(c)           Each Deferral Election Agreement under the Plan shall be irrevocable for the calendar year to which it relates.
 
(d)           Irrespective of whether an employee has made the election described above, any employee who has been selected by the Committee to have Company Contributions credited on his or her behalf pursuant to Article 3.03 shall be a Participant.
 
(e)           As a condition to participation in the Plan, a Participant may also be required by the Committee to provide such other information as the Committee may deem necessary to properly administer the Plan.
 
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(f)            A DCP Participant’s Deferral Election Agreement with respect to his or her annual incentive payment for calendar year 2005 must be made on or before June 30, 2005 (in compliance with the rule for performance pay under Section 409A of the Code).  A DCP Participant’s Deferral Election Agreement with respect to his or her annual incentive payment for a calendar year that begins after December 31, 2005 must be made before the beginning of such calendar year.
 

2.03                            Application of this Article After 2007

 

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

 

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ARTICLE 3.   CONTRIBUTIONS

 

3.01                            Amount of Deferral Contributions

 

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

 

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

 

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3.02                            Matching Contributions

 

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

 

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

 

3.03                            Additional Company Contributions

 

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

 

3.04                            Investment of Accounts

 

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

 

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3.05                            Vesting of Accounts

 

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

 

3.06                            Individual Accounts

 

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

 

3.07                            Deferral of RSUs or Performance Share Units

 

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

 

3.08                            Application of this Article After 2007

 

After December 31, 2007:

 

(a)            Deferrals with respect to annual incentive payments paid during the first quarter of 2008 shall be determined and credited to Participants’ Accounts in accordance with Participant Deferral Election Agreements made in 2006 for payments with respect to 2007 pursuant to Articles 2.02 and 3.01, and such deferrals shall be credited under the Excess Plan (and any matching or other contributions with respect to such deferrals shall be determined under the Excess Plan);
 
(b)            Deferred Shares shall continue to be credited as units of IBM stock in accordance with elections made by Participants on or before December 31, 2007 pursuant to Article 3.07; and
 
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(c)             Articles 3.04 through 3.06 shall continue to apply with respect to Grandfathered Amounts.
 

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

 

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ARTICLE 4.   INVESTMENT OF DEFERRALS AND DEFERRAL ACCOUNTS

 

4.01                            Deemed Savings Plan Investments; Participant Control

 

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

 

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

 

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

 

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

 

4.02                            Change of Investment Selection on Future Deferrals

 

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

 

4.03                            Change of Investment Selection on Existing Deferral Accounts

 

(a)            Before January 1, 2008, with regard to a Participant’s existing Deferral Account balance, a Participant may elect to transfer balances among the available Savings Plan investment funds once per month; provided however, that the portion of the Deferral Account of a Company officer that is allocated to the IBM Stock Fund may not be transferred to another investment fund while the officer remains in Company employment.  The Participant must make this election in the manner and pursuant to the rules prescribed by the Committee and Plan Administrator.
 
(b)            On or after January 1, 2008, a Participant may elect, in such form and at such time in advance as may be prescribed by the Plan Administrator, to transfer balances in his or her Deferral Account among the available Savings Plan investment funds, provided that:
 
(ii)          Transfers must be made in multiples of 1%, provided that the minimum amount transferred shall be $250 if that is greater than 1% (provided, however, that the Plan Administrator may specify a different percentage and/or a different dollar amount to be applied in this paragraph); and
 
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(iii)        Any restrictions on transfers into or out of investment funds that apply under the Savings Plan shall also apply under the Plan.
 

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

 

4.04                            Application of this Article After 2007

 

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

 

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ARTICLE 5.   PAYMENT OF ACCOUNTS

 

5.01                            Commencement of Deferral Payments

 

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

 

5.02                            Method of Payment

 

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

 

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

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

 

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

 

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

 

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

 

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

 

5.03                            Designation of Beneficiary

 

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

 

On or after January 1, 2008, each Participant’s Beneficiary under the Plan shall be the person or persons designated as the Participant’s Beneficiary under the Plan, in the form and manner prescribed by the Plan Administrator.  If no such beneficiary designation is in effect under the Plan at the time of the Participant’s death, or if no designated beneficiary under the Plan survives the Participant, the Participant’s Beneficiary shall be the person or persons determined to be the Participant’s beneficiary under the Savings Plan (including the default beneficiary rules under the latter plan, if no beneficiary is designated under that plan).

 

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

 

5.04                            Distributions to Specified Employees

 

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

 

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

 

5.05                            Application of this Article After 2007

 

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

 

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ARTICLE 6.   GENERAL PROVISIONS

 

6.01                            Funding

 

(a)             All amounts payable in accordance with this Plan shall constitute a general unsecured obligation of the Company.  Such amounts, as well as any administrative costs relating to the Plan, shall be paid out of the general assets of the Company, to the extent not paid by a grantor trust established pursuant to paragraph (b) below.  In the sole discretion of the Committee, a Participant’s Accounts may be reduced to reflect allocable administrative expense.
 
(b)            IBM may, for administrative reasons, establish a grantor trust for the benefit of Participants participating in the Plan.  The assets of said trust will be held separate and apart from other Company funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions:
 
(i)           The creation of said trust shall not cause the Plan to be other than “unfunded” for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended;
 
(ii)        The Company shall be treated as “grantor” of said trust for purposes of Section 677 of the Code; and
 
(iii)        Said trust agreement shall provide that its assets may be used to satisfy claims of the Company’s general creditors in the event of its insolvency, and the rights of such general creditors are enforceable by them under federal and state law.
 
(c)            Neither the Company nor the Committee guarantees the investment alternatives available under the Plan in any manner against loss or depreciation.
 

6.02                            No Contract of Employment

 

Nothing herein contained shall be deemed to give any employee the right to be retained in the service of the Company or an Affiliate or to interfere with the right of the Company or an Affiliate to discharge any employee at any time without regard to the effect that such discharge may have upon the employee under the Plan.  Nothing appearing in or done pursuant to the Plan shall be held or construed to create a contract of employment with the Company, to obligate the Company to continue the services of any Employee, or to affect or modify any Employee’s terms of employment in any way or to give any person any legal or equitable right or interest in the Plan or any part thereof or distribution therefrom or against the Company except as expressly provided herein.

 

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6.03                            Facility of Payment

 

In the event the Plan Administrator determines that any Participant or Beneficiary receiving or entitled to receive benefits under the Plan is incompetent to care for his or her affairs and in the absence of the appointment of a legal guardian of the property of the incompetent, benefit payments due under the Plan (unless prior claim thereto has been made by a duly qualified guardian, committee, or other legal representative) may be made to the spouse, parent, brother or sister, or other person, including a hospital or other institution, deemed by the Plan Administrator to have incurred or to be liable for expenses on behalf of such incompetent.  In the absence of the appointment of a legal guardian of the property of a minor, any minor’s share of benefits payable under the Plan may be paid to such adult or adults as in the opinion of the Plan Administrator have assumed the custody and principal support of such minor.

 

The Plan Administrator, however, in its sole discretion, may require that a legal guardian for the property of any such incompetent or minor be appointed before authorizing the payment of benefits in such situation. Benefit payments made under the Plan in accordance with determinations of the Plan Administrator pursuant to this ARTICLE 6 shall be a complete discharge of any obligation arising under the Plan with respect to such benefit payments.

 

6.04                            Withholding Taxes

 

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

 

6.05                            Nonalienation

 

No benefits payable under the Plan shall be subject to alienation, sale, transfer, assignment, pledge, attachment, garnishment, lien, levy, or like encumbrance.  No benefit under the Plan shall in any manner be liable for or subject to the debts or liabilities of any person entitled to benefits under the Plan.  However, compliance with any domestic relations order relating to a Participant’s Account that the Plan Administrator determines must be complied with under applicable law shall not be considered a violation of this provision.

 

6.06                            Administration

 

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

 

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6.07                            Construction

 

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

 

6.08                            Application of this Article After 2007

 

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

 

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ARTICLE 7.   MANAGEMENT AND ADMINISTRATION

 

7.01                            Amendment or Termination

 

This Plan may be amended from time to time for any purpose permitted by law or terminated at any time by written resolution of the Board or the Committee, but only if the Committee’s action is not materially inconsistent with a prior action of the Board.

 

The authority to amend or terminate the Plan shall include the authority to amend the procedure for amending or terminating the Plan and the authority to amend or terminate any related instrument or agreement.

 

7.02                            Responsibilities

 

(a)             The following persons and groups of persons shall severally have the authority to control and manage the operation and administration of the Plan as herein delineated:
 
(i)               the Board,
 
(ii)             the Committee,
 
(iii)            the chief human resources officer, and
 
(iv)            the Plan Administrator and each person on any committee serving as the Plan Administrator.
 

Each person or group of persons shall be responsible for discharging only the duties assigned to it by the terms of the Plan.

 

(b)             The Board shall be responsible only for designating those persons who will serve on the Committee and for approval of any resolution to amend or terminate the Plan.
 
(c)             The Committee may, pursuant to a duly adopted resolution, delegate to the chief financial officer or the chief human resources officer, the Treasurer, the Plan Administrator or any other officer or employee of IBM, authority to carry out any decision, directive, or resolution of the Committee.
 
(d)             The Committee shall appoint one or more executives employed by IBM to serve as Plan Administrator or as a committee to fulfill the function of Plan Administrator.  In the sole discretion of the Plan Administrator, the Plan Administrator shall have the full power and authority to:

 

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

 

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(ii)             adopt any amendments to the Plan that are required by law;
 
(iii)            interpret the Plan consistent with the terms and intent thereof; and
 
(iv)            resolve any possible ambiguities, inconsistencies, and omissions.
 

All such determinations and interpretations shall be in accordance with the terms and intent of the Plan, and the Plan Administrator shall report such actions to the Committee on a regular basis.  Additionally, the chief human resources officer shall appoint and designate such other IBM employees as may be needed to provide adequate staff services to the Committee and the Plan Administrator.

 

(e)              The Committee and the Plan Administrator may engage the services of accountants, attorneys, actuaries, investment consultants, and such other professional personnel as are deemed necessary or advisable to assist them in fulfilling their responsibilities under the Plan.  The Committee, the Plan Administrator, and their delegates and assistants will be entitled to act on the basis of all tables, valuations, certificates, opinions, and reports furnished by such professional personnel.
 
(f)              Effective July 31, 2001, the chief human resources officer of IBM, in addition to the powers set forth in Article 7.02(d), shall have the full power and authority to adopt and implement changes to the Plan relating to:
 
(i)              amending the Plan to conform, to the extent he or she deems appropriate, to the Savings Plan, including but not limited to the authority to make changes related to maximum deferral percentages of pay, the amount of IBM match provided based on deferral percentage selected by the Participant, and vesting provisions;
 
(ii)             the form and timing of distributions available under the Plan, including the procedures for distribution elections and rules regarding default distributions;
 
(iii)            deferral elections, including the manner and timing of such elections;
 
(iv)            the integration of other deferred compensation liabilities relating to newly hired or acquired employees; and
 
(v)             any Plan administration rules that are consistent with the intent of the Plan and do not materially change the Company’s liability.

 

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7.03                            Application of this Article After 2007

 

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

 

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ARTICLE 8.   CLAIMS PROCEDURE

 

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

 

Effective January 1, 2008, if a Participant or Beneficiary believes he or she is entitled to have received benefits with respect to his or her Non-Grandfathered Amounts that are attributable to Deferred Shares but has not received them, the Participant or Beneficiary must accept any payment made under the Plan and make prompt and reasonable, good faith efforts to collect the remaining portion of the payment, as determined under Treas. Reg. § 1.409A-3(g).  For this purpose (and as determined under such regulation), efforts to collect the payment will be presumed not to be prompt, reasonable, good faith efforts, unless the Participant or Beneficiary provides notice to the Plan Administrator within 90 days of the latest date upon which the payment could have been timely made in accordance with the terms of the Plan and the regulations under Code Section 409A, and unless, if not paid, the Participant or Beneficiary takes further enforcement measures within 180 days after such latest date.  In addition, a Participant or Beneficiary must exhaust any other claims procedures established by the Plan Administrator before initiating litigation.

 

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

 

9.01                            Purpose

 

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

 

9.02                            Definitions

 

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

 

(a)              409A Key Employee ” has the meaning described in the IBM Section 409A Umbrella Document.
 
(b)             409A Separation from Service ” has the meaning described in the IBM Section 409A Umbrella Document.
 
(c)             Pay Limit ” means, for a Plan Year, the limit on compensation that may be taken into account under a tax-qualified plan as determined under Code Section 401(a)(17).
 
(d)             Retirement-Eligible Participant ” means a Participant who:
 
(i)               when his or her 409A Separation from Service occurs, is (A) at least age 55 with at least 15 years of service, (B) at least age 62 with at least 5 years of service, (C) at least age 65 with at least 1 year of service, or (D) begins to receive benefits under the Company’s long-term disability plan;
 
(ii)             as of June 30, 1999, had at least 25 years of service and, when his or her 409A Separation from Service occurs, has at least 30 years of service; or
 
(iii)            as of June 30, 1999, was at least age 40 with at least 10 years of service and, when his or her 409A Separation from Service occurs, has at least 30 years of service.
 

For purposes of this definition, “year of service” means a year of “Eligibility Service” as defined in the IBM Personal Pension Plan.

 

9.03                            Payment Upon Death