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.
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:
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 infrastructuresfrom 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 systemsfrom transportation to water, energy and telecommunicationsrun 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 systemsSystem z, converged System p and System xare 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
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 averagecountries 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:
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 servicespages 122 to 126.
Financial information by geographic areaspage 125.
Amount spent during each of the last three years on R&D activitiespage 103.
Financial information regarding environmental activitiespages 97 and 98.
The number of persons employed by the registrantpage 56.
The management discussion overviewpages 19 and 20.
Available informationpages 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 |
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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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.
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.
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.
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
|
1,725,379 | $ | 121.71 | 1,725,379 | $ | 9,031,145,176 | |||||||
November 1, 2009
|
12,952,318 | $ | 125.68 | 12,952,318 | $ | 7,403,282,907 | |||||||
December 1, 2009
|
10,027,838 | $ | 128.66 | 10,027,838 | $ | 6,113,066,348 | |||||||
Total |
24,705,535 | $ | 126.61 | 24,705,535 | |||||||||
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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.
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.
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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 InformationCommittees 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 Information2009 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 SecuritiesSecurity Ownership of Certain Beneficial Owners" and "Ownership of SecuritiesCommon 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
RSUsRestricted Stock Units, including Retention Restricted Stock Units
PSUsPerformance Share Units
DCEAP SharesShares under the DCEAP (see plan description below)
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
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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 InformationBoard of Directors" and "General InformationCertain 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.
Item 15. Exhibits, Financial Statement Schedules:
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).
Page
|
Schedule
Number |
|
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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.
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. |
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|
|
|
|
|
|
The Certificate of Incorporation of IBM is Exhibit 3.2 to Form 8-K filed April 27, 2007, and is hereby incorporated by reference. |
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|
|
|
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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(9) |
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Voting trust agreement |
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Not applicable |
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(10) |
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Material contracts |
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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.* | |||||||
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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.* |
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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.* |
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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.* |
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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.* |
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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.* |
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Board of Directors compensatory plans, as described under the caption "General Information2009 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.* |
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The IBM Non-Employee Directors Stock Option Plan, contained in Registration Statement 33-60227 on Form S-8, is hereby incorporated by reference.* |
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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.* | |||||||
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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.* |
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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.* |
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10.1 |
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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.* |
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Amendment No. 1 to the IBM 401(k) Plus Plan, a compensatory plan, as approved September 11, 2009.* |
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10.2 |
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Amendment No. 2 to the IBM 401(k) Plus Plan, a compensatory plan, as approved November 16, 2009.* |
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10.3 |
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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. |
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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.* |
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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. |
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(11) |
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Statement re computation of per share earnings |
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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. |
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23
Reference Number per Item 601 of Regulation S-K | Description of Exhibits |
Exhibit Number
in this Form 10-K |
|||||
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(12) | Statement re computation of ratios | 12 | |||||
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(13) |
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Annual report to security holders** |
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13 |
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(18) |
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Letter re: change in accounting principles |
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Not applicable |
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(19) |
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Previously unfiled documents |
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Not applicable |
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(21) |
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Subsidiaries of the registrant |
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21 |
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(22) |
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Published report regarding matters submitted to vote of security holders |
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Not applicable |
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(23.1) |
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Consent of experts |
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23.1 |
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(24.1) |
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Powers of attorney |
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24.1 |
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(24.2) |
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Resolution of the IBM Board of Directors authorizing execution of this report by Powers of Attorney |
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24.2 |
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(28) |
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Information from reports furnished to state insurance regulatory authorities |
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Not applicable |
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(31.1) |
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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 |
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31.1 |
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(31.2) |
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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 |
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31.2 |
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(32.1) |
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Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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(32.2) |
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Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2 |
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(101) |
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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 |
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101 |
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24
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) |
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By: |
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/s/ SAMUEL J. PALMISANO Samuel J. Palmisano Chairman of the Board, President and Chief Executive Officer |
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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
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Title
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Date
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||
---|---|---|---|---|
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/s/ SAMUEL J. PALMISANO
|
Chairman of the Board, President and Chief Executive Officer |
February 23, 2010 | ||
/s/ MARK LOUGHRIDGE
|
Senior Vice President, Chief Financial Officer |
February 23, 2010 |
||
/s/ 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
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 | |||||
S-1
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 |
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ARTICLE II MEETINGS OF STOCKHOLDERS |
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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 |
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ARTICLE III BOARD OF DIRECTORS |
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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 |
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ARTICLE IV EXECUTIVE AND OTHER COMMITTEES |
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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 |
ARTICLE V OFFICERS |
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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 |
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ARTICLE VI CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. |
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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 |
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ARTICLE VII SHARES |
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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 |
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ARTICLE VIII OFFICES |
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SECTION 1. |
Principal Office |
18 |
SECTION 2. |
Other Offices |
18 |
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ARTICLE IX Waiver of Notice |
18 |
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ARTICLE X Fiscal Year |
19 |
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ARTICLE XI Seal |
19 |
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ARTICLE XII Amendments |
19 |
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
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.
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. |
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· |
Proof of notice of meeting or of waiver thereof. |
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· |
Appointment of inspectors of election, if necessary. |
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· |
A quorum being present. |
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· |
Reports. |
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· |
Election of directors proposed by the Corporations Board of Directors, as set forth in the Corporations proxy statement. |
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· |
Other business specified in the notice of the meeting. |
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· |
Voting. |
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· |
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 Corporations 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.
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 stockholders 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 Corporations proxy statement released to stockholders in connection with the prior years 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 years proxy statement, a stockholders 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 stockholders 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 Corporations proxy materials shall comply with the requirements of Rule 14a-8 under Regulation 14A of the Securities Exchange Act of 1934, as amended.
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 stockholders 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 stockholders 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 stockholders 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
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.
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 Chairmans absence therefrom, the President, or in the case of the Presidents 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
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 Boards 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.
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
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
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.
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 Officers 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.
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.
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
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 persons 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.
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.
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 owners 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.
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 Boards 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 stockholders 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.
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.
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 |
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1.01. |
Name of Plan and Effective Date |
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1.02. |
Purpose |
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1.03. |
Legal Status |
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1.04. |
Section 409A |
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ARTICLE II. DEFINITIONS |
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ARTICLE III. ELIGIBILITY |
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3.01. |
Eligibility for Elective Deferrals |
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3.02. |
Eligibility for Matching and Match Maximizer Contributions |
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3.03. |
Eligibility for Automatic Contributions and Transition Credits |
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3.04. |
Eligibility for Section 415 Excess Credits |
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3.05. |
Eligibility for Discretionary Awards |
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ARTICLE IV. ELECTIVE DEFERRALS AND MATCHING CONTRIBUTIONS |
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4.01. |
Elective Deferrals |
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4.02. |
Matching Contributions |
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ARTICLE V. NON-ELECTIVE CREDITS |
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5.01. |
Automatic Contributions |
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5.02. |
Transition Credits |
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5.03. |
Section 415 Excess Credits |
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5.04. |
Discretionary Awards |
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ARTICLE VI. VESTING, DEEMED INVESTMENT OF ACCOUNTS |
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6.01. |
Individual Accounts |
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6.02. |
Vesting of Accounts |
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6.03. |
Deemed Investment of Accounts |
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ARTICLE VII. FORFEITURE AND RIGHT OF RECOVERY OF COMPANY CONTRIBUTIONS |
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7.01. |
In General |
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7.02. |
Detrimental Activity |
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7.03. |
Applicable Company Contributions |
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7.04. |
Timing |
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7.05. |
Delegation of Authority |
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7.06. |
Chief Human Resources Officer |
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7.07. |
Non-Exclusive Remedies |
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7.08. |
Severability |
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ARTICLE VIII. PAYMENT OF GRANDFATHERED AMOUNTS |
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8.01. |
Grandfathered Treatment of Grandfathered Amounts |
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8.02. |
Payment of Grandfathered Amounts Upon Death |
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8.03. |
Options for Payment of Grandfathered Amounts Upon Termination of Employment |
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8.04. |
Payment of Grandfathered Amounts Upon Termination of Employment |
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ARTICLE IX. PAYMENT OF NON-GRANDFATHERED AMOUNTS |
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9.01. |
Payment of Non-Grandfathered Amounts Upon Death |
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9.02. |
Form of Payment for Non-Grandfathered Amounts Paid Upon a 409A Separation from Service |
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9.03. |
Electing and Changing Payment Options for Non-Grandfathered Amounts |
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9.04. |
Payment of Non-Grandfathered Upon a 409A Separation from Service |
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9.05. |
Special Rules for Payment of Non-Grandfathered Amounts Upon a 409A Separation from Service in First Quarter of 2008 |
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9.06. |
Valuation of Non-Grandfathered Accounts |
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9.07. |
Effect of Rehire on Non-Grandfathered Payments |
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ARTICLE X. ADMINISTRATION |
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10.01. |
Amendment or Termination |
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10.02. |
Responsibilities |
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ARTICLE XI. GENERAL PROVISIONS |
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11.01. |
Funding |
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11.02. |
No Contract of Employment |
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11.03. |
Facility of Payment |
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11.04. |
Withholding Taxes |
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11.05. |
Nonalienation |
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11.06. |
Administration |
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11.07. |
Construction |
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ARTICLE XII. CLAIMS PROCEDURE |
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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 Participants 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 Employees 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 Employees 409A Separation from Service (except amounts paid in the pay period in which the Employees 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 Participants death. Each Participants Beneficiary under the Plan shall be the person or persons designated as the Participants 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 Participants death, or if no designated beneficiary under the Plan survives the Participant, the Participants Beneficiary shall be the person or persons determined to be the Participants 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.
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 Participants 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 Employees 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 Participants 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 Participants Post-2004 Elective Deferral Account pursuant to a Participants 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
without first incurring a 409A Separation from Service shall continue to be considered to be an Employee solely for purposes of the individuals eligibility during such Deferral Period to make Elective Deferrals (but not for purposes of the individuals 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 Employees 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 Employees eligible compensation under the 401(k) Plan for such payroll period determined without regard to the Pay Limit, over (B) the Eligible Employees 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 Companys 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.
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 Employees 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 Employees 409A Separation from Service (except amounts paid in the pay period in which the Employees 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 Employees 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 IBMs 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 committees duties.
Plan Year means the calendar year.
Pre-2005 Accounts means a Participants 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.
Post-2004 Accounts means a Participants 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 Employees 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 Employees 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 Employees 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 Employees 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
(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 Participants 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 Companys established personnel practices.
Transition Credit means a credit to a Participants Account as described in Section 5.02.
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).
For example, if an individual receives a hardship withdrawal on June 1, 2009, the individuals 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 individuals 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.
provided that the sum of (1) and (2) shall not exceed the Elective Deferrals credited to the Eligible Employee for such payroll period.
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 Employees Post-2004 Elective Deferral Account for the portion of the Plan Year after the Eligible Employees Program Eligibility Date, to
(ii) the sum, aggregated for the portion of the Plan Year that is after the Eligible Employees Program Eligibility Date and determined as of the date the applicable payroll period ends , of (A) the Eligible Employees Elective Deferrals, (B) the Eligible Employees 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 Employees Excess 401(k) Eligible Pay plus the Eligible Employees Elective Deferrals, each aggregated only for the portion of the Plan Year that is after the Eligible Employees 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.
Solely for purposes of this subsection (a), termination of employment includes the date on which a Participant begins to receive LTD Benefits.
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.
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.
For purposes of this Section 9.04, a valid payment election is a payment election made at least six months before the Participants 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 Participants valid payment election shall be his or her valid payment election for his or her Pre-2005 Accounts, if any.
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 IBMs chief human resources officer on a regular basis .
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.
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 .
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 Plans failure to satisfy the requirements of Section 409A of the Code, or as a result of the Plans failure to satisfy any other applicable requirements for the deferral of tax.
IBM EXECUTIVE DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
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Page(s) |
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ARTICLE 1. DEFINITIONS |
1 |
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ARTICLE 2. PARTICIPATION |
4 |
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2.01 |
ELIGIBILITY |
4 |
2.02 |
PARTICIPATION |
4 |
2.03 |
APPLICATION OF THIS ARTICLE AFTER 2007 |
5 |
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ARTICLE 3. CONTRIBUTIONS |
6 |
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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 |
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ARTICLE 4. INVESTMENT OF DEFERRALS AND DEFERRAL ACCOUNTS |
10 |
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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 |
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ARTICLE 5. PAYMENT OF ACCOUNTS |
12 |
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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 |
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ARTICLE 6. GENERAL PROVISIONS |
15 |
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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 |
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ARTICLE 7. MANAGEMENT AND ADMINISTRATION |
18 |
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7.01 |
AMENDMENT OR TERMINATION |
18 |
7.02 |
RESPONSIBILITIES |
18 |
7.03 |
APPLICATION OF THIS ARTICLE AFTER 2007 |
20 |
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ARTICLE 8. CLAIMS PROCEDURE |
21 |
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ARTICLE 9. PAYMENT OF NON-GRANDFATHERED DEFERRED SHARES ON OR AFTER JANUARY 1, 2008 |
22 |
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9.01 |
PURPOSE |
22 |
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 |
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The following words and phrases as used herein have the following meanings unless a different meaning is required by the context:
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 Companys 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.
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 individuals Account.
For each payroll period that an Eligible Employee has Compensation beginning on or after the effective date of an Eligible Employees 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 Employees 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 Employees 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 Participants 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.
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 Participants Deferrals for the payroll period; provided however, that no Company Matching Contributions will be made for a Participants Deferrals in excess of 6% of the Participants 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 Participants 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 Participants Deferrals for the payroll period; provided, however, that in neither case shall Company Matching Contributions be made for a Participants Deferrals in excess of 6% of the Participants 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).
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.
A Participants 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 Participants 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 Participants Company Account after retirement will be treated as if they were transferred to the Participants Deferral Account for purposes of this Article 3.04 and Article 4.
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.
The Committee shall maintain, or cause to be maintained, records showing the individual balances of each Participants Accounts. Periodically, each Participant shall be furnished with a statement setting forth the value of his or her Accounts.
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 Participants deferral election and shall be credited to the Participants 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.
After December 31, 2007:
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.
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 Participants Deferrals are covered under the IBM Buy-First Executive Equity Program, such Deferrals are subject to the investment limitations specified under that program.
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.
The Committee may impose such additional rules and limitations upon transfers between investment funds as the Committee may consider necessary or appropriate.
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.
A Participant shall receive payment of his or her Accounts upon the Participants (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.
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:
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-
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 Participants 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 Participants 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.
Before January 1, 2008, each Participants Beneficiary under this Plan shall automatically be the person or persons designated as the Participants 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 Participants death, or if no designated Beneficiary survives the Participant, the Participants Beneficiary shall be deemed to be the Participants beneficiary according to the provisions of the Savings Plan.
On or after January 1, 2008, each Participants Beneficiary under the Plan shall be the person or persons designated as the Participants 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 Participants death, or if no designated beneficiary under the Plan survives the Participant, the Participants Beneficiary shall be the person or persons determined to be the Participants 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 Participants death pursuant to this Article 5.03; provided however, that the Beneficiary is alive at the time of the Participants death.
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
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 Participants 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.
This ARTICLE 5 shall apply on and after January 1, 2008 only with respect to Grandfathered Amounts.
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 Employees 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.
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 minors 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.
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.
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 Participants Account that the Plan Administrator determines must be complied with under applicable law shall not be considered a violation of this provision.
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 partys sole discretion and shall be final, binding, and conclusive on all interested persons.
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.
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 Participants Accounts that is not attributable to Deferred Shares.
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 Committees 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.
Each person or group of persons shall be responsible for discharging only the duties assigned to it by the terms of the Plan.
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.
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 Participants Accounts that is not attributable to Deferred Shares.
Before January 1, 2008, IBMs 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.
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).
The following words and phrases used in this ARTICLE 9 have the following meanings unless a different meaning is required by the context:
For purposes of this definition, year of service means a year of Eligibility Service as defined in the IBM Personal Pension Plan.