EMPLOYMENT AGREEMENT FOR L. V. GERSTNER, JR.
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AGREEMENT, made and entered into as of the 26th day of March, 1993 by and between International Business Machines Corporation, a New York Corporation (together with its successors and assigns permitted under this Agreement, the 'Company'), and Louis V. Gerstner, Jr. (the 'Executive').
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive and to enter into an agreement embodying the terms of such employment (this 'Agreement') and the Executive desires to enter into this Agreement and to accept such employment, Subject to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Executive (individually a 'Party' and together the 'Parties') agree as follows:
(a) 'Affiliate' of a person or other entity shall mean a person or other entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified.
(b) 'Base Salary' shall mean the salary provided for in Section 4 below or any increased salary granted to the Executive pursuant to Section 4.
(c) 'Board' shall mean the Board of Directors of the Company.
(d) 'Cause' shall mean:
(i) the Executive is convicted of a felony involving moral turpitude; or
(ii) the Executive is guilty of willful gross neglect or willful gross misconduct in carrying out his duties under this Agreement, resulting, in either case, in material economic harm to the Company, unless the Executive believed in good faith that such act or nonact was in the best interests of the Company.
(e) A 'Change' shall mean the occurrence of any one of the following events:
(i) any 'person,' as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a 'beneficial owner,' as such term is used in Rule 13d-3 promulgated under that act, of 20% or more of the Voting Stock of the Company;
(ii) the majority of the Board consists of individuals other than Incumbent Directors, which tern means the members of the Board on the date of this Agreement; provided that any person becoming a direct or subsequent to such date whose election or nomination for election was supported by two-thirds of the directors who then comprised the Incumbent Directors shall be considered to be an Incumbent Director;
(iii) the Company adopts any plan of liquidation providing for the distribution of all or substantially all of its assets;
(iv) all or substantially all of the assets or business of the Company is disposed of pursuant to a merger, consolidation or other transaction (unless the shareholders of the Company immediately prior to such merger, consolidation or other transaction beneficially own, directly or
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( REMAINDER OF PRECEDING PAGE ) indirectly, in substantially the same proportion as they owned the Voting Stock of the Company, all of the Voting Stock or other ownership interests of the entity or entities, if any, that succeed to the business of the Company); or
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(v) the Company combines with another company and is the surviving corporation but, immediately after the combination, the shareholders of the Company immediately prior to the combination hold, directly or indirectly, 50% or less of the Voting Stock of the combined company (there being excluded from the number of shares held by such shareholders, but not from the Voting Stock of the combined company, any shares received by Affiliates of such other company in exchange for stock of such other company).
(f) 'Constructive Termination Without Cause' shall mean a termination of the Executive's employment at his initiative as provided in Section 11(d) below following the occurrence, without the Executive's prior written consent, of one or more of the following events (except in consequence of a prior termination):
(i) a reduction in the Executive's then current Base Salary or target award opportunity under the Company's 1989 Long-Term Performance Plan or long-term performance incentive or the termination or material reduction of any employee benefit or perquisite enjoyed by him (other than as part of an across-the-board reduction applicable to all executive officers of the Company);
(ii) the failure to elect or reelect the Executive to any of the positions described in Section 3 below or removal of him from any such position;
(iii) a material diminution in the Executive's duties or the assignment to the Executive of duties which are materially inconsistent with his duties or which materially impair the Executive's ability to function as the Chairman and Chief Executive Officer of the Company;
(iv) the failure to continue the Executive's participation in any incentive compensation plan unless a plan providing a substantially similar opportunity is substituted;
(v) the relocation of the Company's principal office, or the Executive's own office location as assigned to him by the Company, to a location more than 50 miles from Armonk, New York; or
(vi) the failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within 45 days after a merger, consolidation, sate or similar transaction.
(a) 'Disability' shall mean the Executive's inability to substantially perform his duties and responsibilities under this Agreement for a period of 180 consecutive days.
(h) 'Stock' shall mean the Common Stock of the Company.
(i) 'Subsidiary' of the Company shall mean any corporation of which the Company owns, directly or indirectly, more than 50% of the Voting Stock.
(j) 'Term of Employment' shall mean the period specified in Section 2 below.
(k) 'Trading Day' is a day on which the Stock is traded on the New York Stock Exchange.
(0 'Voting Stock' shall mean capital stock of any class or classes hiving general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation.
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2. Term of Employment.
The Company hereby employs the Executive, and the Executive hereby accepts such employment, for the period commencing April 1, 1993 and continuing until the earlier of (a) the date on which the Executive attains age 60 or (b) the termination of his employment in accordance with the terms of this Agreement.
3. Position, Duties and Responsibilities.
(a) During the Term of Employment, the Executive shall be employed as the Chairman and Chief Executive Officer of the Company and be responsible for the general management of the affairs of the
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Company. It is the intention of the parties that the Executive shall be elected to and serve as a member of the Board. The Executive, in carrying out his duties under this Agreement, shall report to the Board.
(b) Anything herein to the contrary notwithstanding, nothing shall preclude the Executive from (i) serving on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs, providing that such activities do not materially interfere with the proper performance of his duties and responsibilities as the Company's Chairman and Chief Executive Officer.
4. Base Salary.
The Executive shall be paid an annualized Base Salary, payable in accordance with the regular payroll practices of the Company, of $2,006,000. The Base Salary shall be reviewed no less frequently than annually for increase in the discretion of the Board and its Nominating and Executive Compensation Committee.
5. Annual Incentive Awards.
The Executive shall participate in the Company's 1989 Long-Term Performance Plan with an annual target award opportunity of at Least $1,500,000 and a minimum guaranteed award of $1,125,000 for t993. Such award for 1993 shall be paid to him on or before January 31, 1994.
6. Long-Term Incentive Programs.
(a) General. The Executive shall be eligible to participate in the long-term incentive programs of the Company on the same basis as other senior level executives of the Company. He shall, in any event, be entitled to the awards described in Sections 6(b) 2nd (c).
(b) Long-Term Incentive Awards. The Executive shall participate in the Company's long-term performance incentive with a target opportunity of at least $500,000 for each award. Such awards shall be made no less frequently than annually. The first performance period in respect of which the Executive shall receive a long-term performance incentive award shall be the three-year performance period commencing January 1, 1993.
(c) Stock Option Award. On or before the 60th Trading Day after the commencement of the Executive's employment, the Company shall grant the Executive a ten-year option, substantially in the form attached to this Agreement as Exhibit A, to purchase 500,000 shares of Stock (the 'Option').
7. Special Payments.
(a) When it is required that the Executive exercise the options granted to him by his present employer (3,171,320 shares at an exercise price of $5.00 per share and 40,000 shares at an exercise price of $7.50 per share) or any other time mutually agreed to by the Company and the Executive, he shall do so and sell the 3,211,320 shares to be received upon such exercise as promptly as practicable thereafter. If the Executive realizes less than an average of $8.125 per share or $9,935,375 in the aggregate, the Company shall promptly pay him the difference. In addition, the Company shall assist the Executive in. arranging any financing he may need in exercising the aforesaid options, including guaranteeing such financing, and make him whole on an after-tax basis on any interest he may incur on any borrowing for the purpose of exercising such options.
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C REMAINDER OF PRECEDING PAGE ) on the unexercisable portion of the option granted to him by his present employer on January 1, 1991 that he will forfeit upon termination of his employment with his present employer (1,160,000 shares at $7.50 per share), such spread to be the spread on the date he terminates employment with his present employer but in no event less than $.625 per share or an aggregate of $725,000.
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(c) The Company shall guarantee a price of $8.125 per share or an aggregate amount of $2,437,500 on the 300,000 shares of stock of the Executive's present employer purchased by the Executive in 1992 which are held as collateral for a loan by the Executive's present employer to the Executive of the purchase price of such shares. To the extent payment is required under this Section 7(c), the Company shall make payment promptly after the sale of such stock.
(d) The Company shall promptly pay the Executive $1,478,750 for the performance share award representing the equivalent of 182,000 shares of stock of the Executive present employer that he will forfeit upon termination of his employment with his present employer.
(e) The Company shall promptly pay the Executive $1,200,000 representing the value of both his Personal Retirement Account ('PRA') benefits and any PRA successor plan benefits that he will forfeit upon his termination of employment with his present employer. Upon final determination of such value, the Company shall pay the Executive any required additional amount or the Executive shall repay to the Company any excess, as the case may be.
(f) The Company shall pay the Executive $300,000 to keep him whole in respect of any benefits for services up to the date hereof under the Capital Investment Plan, the Supplemental Benefits Plan, the Additional Benefits Plan and any other savings plan, qualified or nonqualified, or his present employer that he will forfeit upon his termination of employment with his present employer. My amount in excess of $300,000 shall be paid promptly after final determination by the Company and the Executive that such amount is due.
(q) The Company shall promptly pay the Executive $500,000, representing one-quarter of the Executive's annual bonus opportunity at his present employer for 1993.
(h) The Company shall reimburse the Executive for (i) any amounts imputed to him for tax purposes for legal expenses related to this Agreement, (ii) up to $25,000 for 1993 financial and tax planning expenses incurred that would otherwise have been paid by Executive's former employer, and (iii) payments to purchase the automobile currently provided to Executive by his former employer; all such reimbursements to be made on an after-tax basis.
8. Employee Benefit Programs.
During the Term of Employment, the Executive shall be entitled to participate in all employee pension and welfare benefit plans and programs made available to the Company's Senior level executives or to its employees Generally, as such plans or programs may be in effect from time to time, including without limitation, pension, profit sharing, savings and other retirement plans or programs, medical, dental, hospitalization, short-term and long-term disability and Life insurance plans, accidental death and dismemberment protection, travel accident insurance, and any other pension or retirement plans or programs and any other 2mployee welfare benefit plans or programs that may be sponsored by the Company from time to time, including any plans that supplement the above listed types of plans or programs, whether funded or unfunded.
9. Supplemental Pension.
The Company shall provide the Executive with a pension benefit no less than the benefit that would have been provided to him under the supplemental pension as provided in Section 5.2 of the employment agreement dated March 10, 1989 between the Executive and his present employer, based upon the assumptions set forth in Exhibit B hereto, including, without limitation, the assumption that the covered compensation paid to him increases at the rate of 6% per year as shown in Exhibit B. The amount payable by the Company under
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this Section 9 if the Executive remains employed to age 60 shall be the amount to which the Executive would have been entitled at such date as shown in Column (9) of the Exhibit (i.e., $2,447,867) reduced by the amount to which he is presently entitled as indicated in Column (9) (i.e., approximately $1,180,000), and such amount shall accrue ratably over the period from the date hereof to the date the Executive reaches age 60. For example, if the Executive voluntarily
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terminates employment under Section 11(f) at the end of 1998, he shall be entitled to an annual benefit of approximately $1,267,000 ($2,447,000 minus $1,180,000) times a fraction, the numerator of which is the number of months from the date hereof to the end of 1998, and the denominator of which is the number of months from the date hereof to his 60th birthday. The Company's obligation under this Section 9 shall be offset by any other pension benefit paid to the Executive under the applicable defined benefit pension plans of the Company. The Executive's accrued benefits under this Section 9 shall be fully vested at all times regardless of the period of his employment under this Agreement, his compliance therewith or the circumstances of the termination of his employment. Except as provided herein, the supplemental pension arrangements under this Section 9, including without limitation, methods of payment, survivor's benefits, etc., shall be determined in accordance with the provisions of the aforesaid Section 5.2 of the Executive's employment agreement with his present employer.
10. Reimbursement of Business and Other Expenses.
The Executive is authorized to incur reasonable expenses in carrying out his
duties and responsibilities under this agreement and the Company shall promptly reimburse him for all business expenses incurred in connection with carrying out the business of the Company, subject to documentation in accordance with the Company's policy.
1. Termination of Employment.
(a) Termination Due to Death. In the event the Executive's employment is terminated due to his death, his estate or his beneficiaries, as the case may be, shall be entitled to:
(i) Base Salary for a period of 90 days fallowing the date of death;
(ii) annual incentive award for the year in which the Executive's death occurs based on the target award opportunity for such year, payable in a single installment promptly after his death;
(iii) Long-term performance incentive award for the performance period or periods in which the Executive was participating at the time of his death based on the target award opportunity for such period or periods, payable promptly after his death;
(iv) the balance of any incentive awards earned (but not yet paid);
(v) the continued right to exercise any stock option for the remainder of its term;
(vi) any pension survivor benefit that may become due pursuant to Section 9 above;
(vii) any amounts earned, accrued or owing but not yet paid under Section 7, 8 or 10 above; and;
(viii) other or additional benefits in accordance with applicable plans and programs of the Company.
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(b) Termination Due to Disability. In the event the Executive's employment is terminated due to his Disability, he shall be entitled in each case to the greater of the benefits under the then current IBM disability benefits plan or the following:
(i) an amount equal to the sum of 50% of Base Salary, at the annual rate in effect at termination of his employment, for 3 period ending with the end of the month in which he becomes 60, less the amount of any disability benefits provided to the Executive by the Company under any disability plan;
(ii) annual inceptive award for the year in which termination due to Disability occurs based on the target award opportunity for such year, Payable in a single installment promptly following termination due to Disability;
(iii) long-term performance incentive award for the per performance period or periods in which termination due to Disability occurs based on the target award opportunity for such period or periods, payable promptly following termination due to Disability;
(iv) the balance of any incentive awards earned (but not yet paid);
(vi) the continued right to exercise any stock option for the remainder of its term, such option to continue to become exercisable in accordance with the schedule set forth in the option;
(vi) any pension benefit that may become due pursuant to Section 5 above, offset by any payment in respect of the same period made pursuant to Section 11(b)(i);
(vii) any amounts earned, accrued or owing but not yet said under Section 7, 8 or 10 above;
(viii) continued accrual of credited service for the purpose of the pension benefit provided under Section 9 above during the period of the Executive's Disability or, if sooner, until the earlier of the Executive's election to commence receiving his pension under Section 9 above or his attainment of age 60;
(ix) continued participation in medical, dental, hospitalization and life insurance coverage and in all of the other employee plans and programs in which he was participating on the date of termination of his employment due to Disability until he attains age 60; and
(x) other or additional benefits in accordance with applicable clans and programs of the Company.
If the Executive is precluded from continuing his participation in any employee benefit plan or program and provided in clause (ix) above, he shall be provided the after-tax economic equivalent of the benefits provided under the plan or program in which he is unable to participate. The economic equivalent any benefit foregone shall be deemed to be the lowest cost that would be incurred by the Executive in obtaining such benefit himself on an individual basis.
In no event shall a termination of the Executive's employment for disability occur unless the Party terminating his employment gives written notice to the other Party in accordance with Section 23 below.
(c) Termination by the Company for Cause.
(i) A termination for Cause shall not take effect unless the
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provisions of this paragraph (i) are complied with. The Executive shall be given written notice by the Board of the intention to terminate him for Cause, such notice (A) to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Cause is based and (B) to be given within six months of the Board learning of such act or acts or failure or failures to act. The Executive shall have 10 days after the date that such written notice has been given to the Executive in which to cure such conduct, to the extent such cure is possible. If he fails to cure such conduct, the Executive shall then be entitled to a hearing before the Board. Such hearing shall be held within 15 days of ouch notice to the Executive, provided he requests such hearing
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Within 10 days of the written notice from the Board of the intention to terminate him for Cause. If, within five days following such hearing, the Executive is furnished written notice by the Board confirming that, in its judgment, grounds for Cause on the basis of the original notice exist, he shall thereupon be terminated for Cause.
(ii) In the event the Company terminates the Executive's employment for Cause, he shall be entitled to:
(A) the Base Salary through the date of the termination of his employment for Cause;
(B) any incentive awards earned (but not yet paid);
(C) any pension benefit that may become due pursuant to Section 9 above, determined as of the date of such termination;
(D) any amounts earned, accrued or owing but not yet paid under Section 7, 8 or 10 above; and
(E) other or additional benefits in accordance with applicable plans or programs of the Company.
(iii) Anything herein to the contrary notwithstanding, if following a termination of the Executive's employment by the Company for Cause based upon the conviction of the Executive for a felony involving moral turpitude, such conviction is overturned in a final determination on appeal, the Executive shall be entitled to the payments and the economic equivalent of the benefits the Executive would have received if his employment had been terminated by the Company without Cause.
(d) Termination Without Cause or Constructive Termination Without Cause. In the event the Executive's employment is terminated without Cause, other than due to Disability or death, or in the event there is a Constructive Termination Without Cause the Executive shall be entitled to:
(i) the Base Salary through the date of termination of the Executive's employment;
(ii) the Base Salary, at the annualized rate in effect on the date of termination of the Executive's employment (or in the event a reduction in Base Salary is the basis for a Constructive Termination Without Cause, then the Base Salary in effect immediately prior to such reduction), for a period of 36 months following such termination or until he attains age 60, whichever period is shorter; provided that at the Executive's option the Company shall pay him the present value of such salary continuation payments in a lump sum (using as the discount rate the Applicable Federal Rate for short-term Treasury obligations as published by the Internal Revenue Service for the month in which such termination occurs);
(iii) long-term performance incentive awards made to him prior to such termination of employment on the same basis as if the Executive continued in employment for the period in respect of which salary continuation payments are being made (with pro rata payment for the fraction or fractions of the applicable three-year performance periods) payout to be based on target award opportunity (or in the event a reduction in target award opportunity is the basis for a Constructive Termination Without Cause, then the target award opportunity in effect immediately prior to such reduction);
(iv) the balance of any incentive awards earned (but not yet paid);
(v) the right to exercise any stock option in full, whether or not
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fully exercisable at the date of his termination without Cause of Constructive Termination Without Cause, for the remainder of the original tern of such option;
(vi) any pension benefit that may become due pursuant to Section 9 above;
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(vii) any amounts earned, accrued or owing but not yet paid under Section 7, 8 or 10 above;
(viii) continued accrual of credited service for the purpose of the pension benefit provided under Section 9 above during the period he is receiving salary continuation payments (or in respect of which a lump-sum severance payment is made);
(ix) continued participation in all medical, dental, hospitalization and life insurance coverage and in other employee benefit plans or programs in which he was participating on the date of the termination of his employment until the earlier of:
(A) the end of the period during which he is receiving salary continuation payments (or in respect of which a lump-sum severance payment is made);
(B) the date, or dates, he receives equivalent coverage and benefits under the plans and programs of a subsequent employer (such coverages and benefits to be determined on a coverage-by-coverage, or benefit-by-benefit, basis);
provided that (x) if the Executive is precluded from continuing his participation in any employee benefit plan or program as provided in this clause (ix) of this Section 11(d), he shall be provided with the after-tax economic equivalent of the benefits provided under the plan or program in which he is unable to participate for the period specified in this clause (ix) of this Section 11(d), (y) the economic equivalent of any benefit foregone shall be deemed to be the lowest cost that would be incurred by the Executive in obtaining such benefit himself on an individual basis, and (z) payment of such after-tax economic equivalent shall be made quarterly in advance; and
(x) other or additional benefits in accordance with applicable plans and programs of the Company.
(e) Termination of Employment Following a Change in Control. If, following a Change in Control, the Executive's employment is terminate without Cause or there is a Constructive Termination Without Cause, the Executive shall be entitled to the payments and benefits provided in Section 11(d), provided that the salary continuation payments shall, be paid in a lump sum without any discount. Also, immediately following a Change in Control, all amounts, entitlements or benefits in which he is not yet vested shall become fully vested except to the extent such vesting would be inconsistent with the terms of the relevant plan.
(f) Voluntary Termination. In the event of a termination of employment by the Executive on his own initiative other than a termination due to death or Disability or a Constructive Termination without Cause, the Executive shall have the same entitlements as provided in Section 11(c)(ii) for a termination for Cause. A voluntary termination under this Section 11(f) shall be effective upon 30 days prior notice to the Company and shall not be deemed a breach of this Agreement.
(g) Limitation Following a Change in Control. In the event that the termination of the Executive's employment is for one of the reasons set forth in Section 11(e) above and the aggregate of all payments or benefits made or provided to the Executive under Section 11(e) above and under all other plans and programs of the Company (the 'Aggregate Payment') is determined to constitute a Parachute Payment, as such term is defined in Section 280G(b)(2) of the internal Revenue Code of 1986, as amended (the 'Code'), notwithstanding any other provision o' this Agreement to the contrary the aggregate amount of payments or benefits paid by the Company to the Executive pursuant to this
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(REMAINDER OF PRECEDING PAGE ) Agreement shall be reduced to the maximum amount (if any) that can be so provided without any portion of the Aggregate Payment being subject to any excise tax imposed by Section 4999 of the Code ('Excise Tax'), but in no event shall the aggregate amount of such payments or benefits he reduced under the preceding clause to an amount less than the aggregate amount of the payments or benefits to which the Executive would be entitled under Section 11(d) above without regard to Section 11(e) above. The determination of whether the Aggregate Payment constitutes a Parachute Payment and, if so, the amount to be paid to the Executive and the time of payment pursuant to this Section 11(g) shall be
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made by an independent auditor (the 'Auditor') jointly selected by the Company and the Executive and paid by the Company. The Auditor shall be a nationally recognized United States public accounting firm which has not, during the two years preceding the date of its selection, acted in any way on behalf of the Company or any Affiliate thereof. If the Executive and the Company cannot agree on the firm to serve as the Auditor, then the Executive and Company shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the auditor.
(h) No Mitigation; No Offset. In the event of any termination of employment under this Section 11, the Executive shall be under no obligation to Seek other employment and there hall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain except as specifically provided in this Section 11.
(i) Nature of Payments. Any amounts due under this Section 11 are in the nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty.
(a) The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, Suit or proceeding, whether civil, criminal, administrative or investigative (a 'Proceeding'), by reason of the fact that he is or was a director, officer or employee of the Company or is or was Serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity white serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by the Company's certificate of incorporation or bylaws or, if greater, by the laws of the State of New York, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company shall advance to the Executive all reasonable costs and expenses incurred by his in connection with a Proceeding within 20 days after receipt by the Company of a written request for such advance. Such request shall include an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.
(b) Neither Lie failure of the Company (including its board of directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by the Executive under Section 12(a) that indemnification of the Executive is proper because he has met the applicable standard of conduct, nor a determination by the Company (including its beard of directors, independent legal counsel or Stockholders) that the Executive has not met such applicable standard of conduct, shall create a presumption that the Executive has not met the applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.
13. Effect of Agreement on Other Benefits. Except as specifically
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provided in this Agreement, the existence of this agreement shall not prohibit or restrict the Executive's entitlement to full participation in the employee benefit and other plans or programs in which senior executives of the Company are eligible to participate.
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14. Assignability; Binding Nature
This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the Sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it shall take whatever action it legally can in order to cause such assignee or transferee to expressly assume the Liabilities, obligations and duties of the Company hereunder. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Section 20 below.
The Company represents and warrants that it is fully authorized and empowered to enter into this Agreement and that the performance of its obligations under this Agreement will not violate any agreement between it and any other person, firm or organization.
16. Entire Agreement.
This Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties with respect thereto.
17. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by the Executive and an authorized officer of the Company. No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Executive or an authorized officer of the Company, as the case may be.
In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Aqreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
The respective rights and obligations of the Parties hereunder shall survive any termination of the Executive's employment to the extent necessary to the intended presentation of such rights and obligations.
The Executive shall be entitled to select (and change, to the extent
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permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive's death by giving the Company written notice therefore. In the event of the Executive's death or a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.
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21. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted in accordance with the laws of New York without reference to principles of conflict of laws.
22. Resolution of Disputes.
Any disputes arising under or in connection with this Agreement shall, at the election of the Executive, be resolved by binding arbitration, to be held in New York City in accordance with the rules and procedures of the American Arbitration Association. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Costs of the arbitration or litigation, including, without limitation, attorneys' fees of both Parties, shall be borne by the Company, provided that if the arbitrator(s) determine that the claims or defenses of the Executive were without any reasonable basis, each Party shall bear his or its own costs.
Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such party may subsequently give such notice of
If to the Company:
International Business Machines Corporation
Attention: Senior Vice President--Personnel
If to the Executive:
Louis V. Gerstner, Jr.
The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.
BUSINESS MACHINES CORPORATION
s/ LOUIS V.
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BUSINESS MACHINES CORPORATION ('IBM')
You have been selected to receive the following stock option Grant as an award under Section 7(a) of the IBM 1989 Long-Term Performance Plan (the Plan'). Terms of the Plan are set forth in the Prospectus dated June 19, 1989 3rovided to you. This grant entitles you to purchase IBM Capital Stock in accordance with the following terms and conditions:
The Incentive Stock Option (ISO) grant shall become exercisable in two equal installments on the first and second anniversaries of this grant, and shall remain exercisable until expiration or cancellation as provided under the Plan.
The Nonstatutory (nonqualified) Stock Option grant shall become exercisable in four equal installments on the first, second, third and fourth anniversaries of this grant, and shall remain exercisable until expiration or cancellation as provided under the Plan.
Notwithstanding the foregoing, in the event of a change in control (as defined in your employment agreement dated as of March 26, 1993), all installments shall become fully exercisable and shall remain exercisable until expiration or cancellation as provided under the Plan.
Expiration of this grant shall be ten years from the date of grant, subject to earlier termination under Section 12 of the Plan, except as otherwise provided in this Agreement. Upon your retirement or death, as provided in Sections 12(a) and (c) of the Plan, or upon the termination of our employment (i) due to disability (as defined in your employment agreement dated as of March 26, 1993), (ii) without cause (as defined in such employment agreement) or (iii) in the event of a constructive termination without cause as defined in such employment agreement), all installments shall become fully exercisable and all unexercised options covered by this Agreement shall be exercisable for their full ten-year term.
By signing and returning this Agreement, you acknowledge having received and read a copy of the Plan and agree to comply with it, excluding Sections 8 and 13 which are not applicable to this Agreement, and with all applicable laws and regulations as well as the IBM rules concerning your personal investments.
INTERNATIONAL BUSINESS MACHINES CORPORATION
Agreed to and accepted by:
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ANALYSIS OF SUPPLEMENTAL PENSION BENEFIT FOR MR. A AT COMPANY R
* This is an estimate (actual bonus for 1989 not know). Total of $3,165,982 is derived from $3,064,058 average disclosed in 1993 proxy statement.
** $3,064,058 is disclosed in 1993 proxy statement Proxy statements for prior years have not been reviewed.
DATA STATED IN MILLIONS