<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
IBM
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Dear Stockholders,
You are cordially invited to attend the Annual Meeting of Stockholders on
Tuesday, April 29, at 10 a.m., in the Dallas Convention Center, Dallas, Texas.
At this year's Annual Meeting you will be asked to approve, among other things,
certain amendments to IBM's Certificate of Incorporation to increase the number
of authorized shares. Your approval of these amendments is necessary to
effectuate a two-for-one stock split declared by the IBM Board of Directors on
January 28, 1997. In addition, you will also be asked to approve IBM's 1997
Long-Term Performance Plan, which provides for incentive and other awards that
are designed to provide participants with an increased proprietary interest in
our Company. Your vote on these matters is important and we appreciate your
continued support.
Please sign, date, and return the enclosed Proxy Card in the envelope provided
as soon as possible so that your shares can be voted at the meeting in
accordance with your instructions. If you plan to attend the meeting, please
mark the box where indicated on the Proxy Card. If you will need special
assistance at the meeting because of a disability, please contact the Office of
the Secretary, Armonk, N.Y. 10504.
Very truly yours,
/s/ Louis V. Gerstner, Jr.
Louis V. Gerstner, Jr.
Chairman of the Board
YOUR VOTE IS IMPORTANT
Please Sign, Date, and Return Your Proxy Card
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
2
<PAGE>
International Business Machines Corporation
Armonk, New York 10504
March 17, 1997
Notice of Meeting
The Annual Meeting of Stockholders of International Business Machines
Corporation will be held on Tuesday, April 29, 1997, at 10 a.m., in the Dallas
Convention Center, 650 South Griffin Street, Dallas, Texas. The items of
business are:
1. Election of directors for a term of one year.
2. Ratification of the appointment of auditors.
3. Amendment of the Certificate of Incorporation to increase authorized shares
and effect a two-for-one common stock split.
4. Adoption of IBM 1997 Long-Term Performance Plan.
5. Such other matters, including one stockholder proposal, as may properly
come before the meeting.
These items are more fully described in the following pages, which are hereby
made a part of this Notice. Only stockholders of record at the close of business
on March 11, 1997, are entitled to vote at the meeting. Stockholders are
reminded that shares cannot be voted unless the signed Proxy Card is returned or
other arrangements are made to have the shares represented at the meeting.
/s/ John E. Hickey
John E. Hickey
Vice President and Secretary
This Proxy Statement and the accompanying form of Proxy Card are being mailed
beginning on or about March 17, 1997, to stockholders entitled to vote. The IBM
1996 Annual Report, which includes financial statements, is being mailed with
this Proxy Statement. Kindly notify First Chicago Trust Company of New York,
Mail Suite 4688, P.O. Box 2530, Jersey City, N.J. 07303-2530, telephone
201-324-0405, if you did not receive a report, and a copy will be sent to you.
3
<PAGE>
Table of Contents
Page
1. Election of Directors for a Term of One Year 5
General Information:
. Board of Directors 8
. Committees of the Board 8
. Other Relationships 10
. Directors' Compensation 10
. Section 16(a) Beneficial Ownership Reporting Compliance 11
. Common Stock and Total Stock-based Holdings 11
Report on Executive Compensation 00
. Summary Compensation Table 00
. Performance Graph 00
2. Ratification of Appointment of Auditors 00
3. Amendment of the Certificate of Incorporation to Increase
Authorized Shares and Effect a Two-for-One Common Stock Split 00
4. Adoption of IBM 1997 Long-Term Performance Plan 00
5. Stockholder Proposal 00
Other Business 00
Proxies and Voting at the Meeting 00
Appendix A: Proposed Amendment to Article THREE
of the Certificate of Incorporation 00
Appendix B: IBM 1997 Long-Term Performance Plan 00
Appendix C: IBM 1997 Long-Term Performance Plan
-Federal Income Tax Consequences 00
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
1. Election of Directors for a Term of One Year
The Board proposes the election of the following directors of the
Company for a term of one year. Following is information about each
nominee, including biographical data for at least the last five years.
Should one or more of these nominees become unavailable to accept
nomination or election as a director, the individuals named as Proxies
on the enclosed Proxy Card will vote the shares that they represent
for the election of such other persons as the Board may recommend,
unless the Board reduces the number of directors.
[PHOTO] CATHLEEN BLACK, 52, is president of Hearst Magazines, a division of
The Hearst Corporation, a diversified communications company. She is a
member of IBM's Directors and Corporate Governance Committee. Prior to
joining Hearst Magazines, she was president and chief executive
officer of the Newspaper Association of America from 1991 to 1996,
president, then publisher, of USA TODAY from 1983 to 1991, and also
executive vice president/marketing for Gannett Company, Inc. (USA
TODAY parent company) from 1985 to 1991. She is a director of The
Hearst Corporation, The Coca-Cola Company, the Advertising Council and
a trustee of the University of Notre Dame. Ms. Black became an IBM
director in 1995.
[PHOTO] HAROLD BROWN, 69, is a counselor, Center for Strategic and
International Studies, Washington, D.C., and a general partner in
Warburg, Pincus & Company, a venture banking and money management
firm. He is chairman of IBM's Directors and Corporate Governance
Committee and a member of IBM's Executive Committee. He is a former
U.S. Secretary of the Air Force. He is a director of Alumax Inc.,
Cummins Engine Company, Inc., Philip Morris Companies Inc., and
Mattel, Inc.; a member of the National Academy of Sciences and the
National Academy of Engineering; and a trustee and president emeritus
of the California Institute of Technology. Dr. Brown was an IBM
director from 1972 to 1977. After serving as U.S. Secretary of
Defense, he became an IBM director again in 1981.
[PHOTO] JUERGEN DORMANN, 57, is chairman of the management board of Hoechst
AG, a chemicals and pharmaceuticals company. He is a member of IBM's
Audit Committee. Mr. Dormann joined Hoechst in 1963 and was elected
finance and accounting director in 1987 and to his present position in
1994. He is a director of Allianz Lebensversicherungs AG. Mr. Dormann
became an IBM director in 1996.
5
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
[PHOTO] LOUIS V. GERSTNER, JR., 55, is chairman of the Board and chief
executive officer of IBM and chairman of IBM's Executive Committee.
From 1989 until joining IBM, he was chairman of the board and chief
executive officer of RJR Nabisco Holdings Corp., an international
consumer products company. From 1985 to 1989, Mr. Gerstner was
president of American Express Company, and from 1983 to 1989, he was
chairman and chief executive officer of American Express Travel
Related Services Co., Inc. He is a member of the board of directors of
Bristol-Myers Squibb Company and The New York Times Company. Mr.
Gerstner is vice chairman of the board of the New American School
Development Corp., a director of The Council on Foreign Relations and
a member of the Smithsonian Board of Regents. Mr. Gerstner became an
IBM director in 1993.
[PHOTO] NANNERL O. KEOHANE, 56, is president and professor of political
science at Duke University. She is a member of IBM's Directors and
Corporate Governance Committee. She was formerly president of
Wellesley College, and a former faculty member at Swarthmore College
and Stanford University. She is a member of The Council on Foreign
Relations and the American Academy of Arts and Sciences, and a trustee
of the Colonial Williamsburg Foundation. Dr. Keohane is a member of
the MIT Corporation and has served as vice president of the American
Political Science Association. Dr. Keohane became an IBM director in
1986.
[PHOTO] CHARLES F. KNIGHT, 61, is chairman, chief executive officer and
president of Emerson Electric Co., an electronics company. He is
chairman of IBM's Executive Compensation and Management Resources
Committee and a member of IBM's Executive Committee. He joined Emerson
Electric in 1972 as vice chairman and was elected chief executive
officer in 1973, chairman in 1974 and president in 1995. Prior to
joining Emerson, he was president of Lester B. Knight & Associates,
Inc., a consulting engineering firm. He is a director of SBC
Communications Inc., Anheuser Busch Companies, Inc., and The British
Petroleum Company p.l.c. Mr. Knight became an IBM director in 1993.
[PHOTO] LUCIO A. NOTO, 58, is chairman and chief executive officer of Mobil
Corporation, an oil, gas and petrochemical company. He is a member of
IBM's Audit Committee. Mr. Noto joined Mobil in 1962 and was elected
to Mobil's board in 1988. He was elected chief financial officer in
1989, president and chief operating officer in 1993, and to his
present position in 1994. He also serves as chairman of Mobil's
executive committee. Mr. Noto is a member of The Council on Foreign
Relations and a member of the Board of Trustees of the Urban
Institute. He became an IBM director in 1995.
6
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
[PHOTO] JOHN B. SLAUGHTER, 63, is president of Occidental College. He is a
member of IBM's Audit Committee. He is a former chancellor of the
University of Maryland and a former director of the National Science
Foundation. He is a director of the Atlantic Richfield Company, Avery
Dennison Corporation, Monsanto Company, and Northrop Grumman
Corporation. He is a member of the National Academy of Engineering, a
member of the American Academy of Arts and Sciences, a fellow of the
American Association for the Advancement of Science, a fellow of the
Institute of Electrical and Electronics Engineers, and a member of the
Hall of Fame of the American Society for Engineering Education. Dr.
Slaughter became an IBM director in 1988.
[PHOTO] ALEX TROTMAN, 63, is chairman and chief executive officer of the Ford
Motor Company, an automotive manufacturer. He is a member of IBM's
Executive Compensation and Management Resources Committee. Mr. Trotman
joined Ford of Britain in 1955 and was elected president of Ford
Asia-Pacific in 1983 and chairman of Ford of Europe in 1988. He became
president and chief operating officer of Ford Automotive Group and a
director in 1993. He was subsequently elected to his present position
in 1993. Mr. Trotman is a director of the New York Stock Exchange. Mr.
Trotman became an IBM director in 1994.
[PHOTO] LODEWIJK C. VAN WACHEM, 65, is chairman of the supervisory board of
Royal Dutch Petroleum Company, an oil, gas and petrochemical company.
He is chairman of IBM's Audit Committee and a member of IBM's
Executive Committee. In 1992, Mr. van Wachem retired as president of
Royal Dutch Petroleum, a post he had held since 1982. He is a director
of ATCO Ltd., ABB Asea Brown Boveri Ltd., and Zurich
Versicherungs-Gesellschaft; and a member of the supervisory boards of
Akzo Nobel N.V., Philips Electronics N.V., and Bavarian Motor Works
A.G. Mr. van Wachem became an IBM director in 1992.
[PHOTO] CHARLES M. VEST, 55, is president and professor of mechanical
engineering at the Massachusetts Institute of Technology. He is a
member of IBM's Executive Compensation and Management Resources
Committee. Dr. Vest was formerly the provost and vice president for
Academic Affairs of the University of Michigan. He is a director of E.
I. du Pont de Nemours and Company, a fellow of the American
Association for the Advancement of Science, a member of the National
Academy of Engineering and the Corporation of Woods Hole Oceanographic
Institution, and a trustee of Wellesley College. Dr. Vest became an
IBM director in 1994.
7
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
General Information
Board of Directors
The Board of Directors is responsible for supervision of the overall affairs of
the Company. To assist it in carrying out its duties, the Board has delegated
certain authority to several committees. Consistent with the Company's
long-standing practice, the majority of the Board, 10 of the 11 current
directors, are outside directors who are neither officers nor employees of IBM
or its subsidiaries. In the opinion of the Board, each of the outside directors
is independent of management and free of any relationship with the Company that
would interfere with his or her exercise of independent judgment in performing
the duties of a director.
In addition, the Audit Committee, the Directors and Corporate Governance
Committee, and the Executive Compensation and Management Resources Committee are
composed entirely of outside directors. The committees of the Board, as well as
the full Board, have access to outside consultants and experts as needed in
connection with their deliberations.
The Board of Directors held 10 meetings during 1996. Overall attendance at Board
and committee meetings was 92 percent. Attendance was at least 78 percent for
each director. Following the Annual Meeting, the Board will consist of 11
directors. In the interim between Annual Meetings, the Board has the authority
under the By-laws to increase or decrease the size of the Board and fill
vacancies.
Committees of the Board
The Executive Committee, the Audit Committee, the Directors and Corporate
Governance Committee, and the Executive Compensation and Management Resources
Committee are the standing committees of the Board of Directors.
Executive
Directors Compensation and
and Corporate Management
Executive Audit Governance Resources
- -----------------------------------------------------------------------------
L.V. Gerstner, Jr.* L.C. van Wachem* H. Brown* C.F. Knight*
H. Brown J. Dormann C. Black A. Trotman
C.F. Knight L.A. Noto N.O. Keohane C.M. Vest
L.C. van Wachem J.B. Slaughter
*Chairman
Executive Committee
The Executive Committee is empowered to act for the full Board in intervals
between Board meetings, with the exception of certain matters that by law may
not be delegated. The committee meets as necessary, and all actions by the
committee are reported at the next Board of Directors meeting. The committee did
not meet in 1996.
8
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Audit Committee
The Audit Committee is responsible for reviewing reports of the Company's
financial results, audits, internal controls, and adherence to its Business
Conduct Guidelines in compliance with federal procurement laws and regulations.
The committee recommends to the Board of Directors the selection of the
Company's outside auditors and reviews their procedures for ensuring their
independence with respect to the services performed for the Company.
The Audit Committee is composed of outside directors who are not officers or
employees of IBM or its subsidiaries. In the opinion of the Board, these
directors are independent of management and free of any relationship that would
interfere with their exercise of independent judgment as members of this
committee. The committee held four meetings in 1996.
Directors and Corporate Governance Committee
The Directors and Corporate Governance Committee is responsible for recommending
qualified candidates to the Board for election as directors of the Company,
including the slate of directors that the Board proposes for election by
stockholders at the Annual Meeting.
The committee advises and makes recommendations to the Board on all matters
concerning directorship practices, including retirement policies and
compensation for non-employee directors, and recommendations concerning the
functions and duties of the committees of the Board.
The committee reviews and considers the Company's position and practices on
significant issues of corporate public responsibility, such as equal employment
opportunity, protection of the environment, and philanthropic contributions, and
it reviews and considers stockholder proposals dealing with issues of public or
social interest. Members of this committee are outside directors who are not
officers or employees of IBM or its subsidiaries. In the opinion of the Board,
these directors are independent of management and free of any relationship that
would interfere with their exercise of independent judgment as members
of this committee. The committee held four meetings in 1996.
Stockholders wishing to recommend director candidates for consideration by the
committee may do so by writing to the Secretary of the Corporation, giving the
recommended candidate's name, biographical data, and qualifications.
Executive Compensation and Management Resources Committee
The Executive Compensation and Management Resources Committee has responsibility
for administering and approving all elements of compensation for elected
corporate officers and certain other senior management positions. It also
approves, by direct action or through delegation, participation in and all
awards, grants, and related actions under the provisions of the IBM Stock Option
Plans and the Long-Term Performance Plans, reviews changes in the IBM Retirement
Plan primarily affecting IBM corporate officers, and manages the operation and
administration of the IBM Extended Tax Deferred Savings Plan and the IBM
Supplemental Executive Retirement Plan. The committee reports to stockholders on
executive compensation items as required by the Securities and Exchange
Commission (page xx). The committee has responsibility for reviewing the
Company's management resources programs and for recommending qualified
candidates to the Board for election as officers.
9
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Members of this committee are outside directors who are not officers or
employees of IBM or its subsidiaries and are not eligible to participate in any
of the plans or programs that the committee administers. In the opinion of the
Board, these directors are independent of management and free of any
relationship that would interfere with their exercise of independent judgment as
members of this committee. The committee held four meetings in 1996.
Other Relationships
The Company and its subsidiaries purchase services, supplies, and equipment in
the normal course of business from many suppliers and similarly sell and lease
IBM products and services to many customers. In some instances, these
transactions occur between IBM and other companies for whom members of IBM's
Board serve as executive officers. In 1996, none of these transactions was
individually significant or reportable.
The Company has renewed its directors and officers indemnification insurance
coverage. This insurance covers directors and officers individually where
exposures exist other than those for which the Company is able to provide direct
indemnification. These policies run from June 30, 1996, through June 30, 1997,
at a total cost of $619,354. The primary carrier is Federal Insurance Company.
Directors' Compensation
Directors who are not employees of the Company receive an annual retainer of
$60,000 and each committee chairman receives an additional annual retainer of
$5,000. Sixty percent of the annual retainer fees is paid in Promised Fee Shares
of IBM common stock under the Directors Deferred Compensation and Equity Award
Plan (the "DCEAP"). Under the DCEAP, outside directors may defer all or part of
their remaining cash compensation to selected later years, to be paid either
with interest at a rate equal to the rate on 26-week U.S. Treasury bills updated
each January and July, or in Promised Fee Shares, with dividends used to buy
additional Promised Fee Shares. Promised Fee Shares are valued based on the
market price of IBM common stock and are payable in the form of IBM shares or
cash. All amounts under the DCEAP are to be paid only upon retirement or other
completion of service as a director. Employee directors receive no additional
compensation for service on the Board of Directors or its committees.
Under the IBM Non-Employee Directors Stock Option Plan, each outside director
receives an annual grant of options to purchase 1,000 shares of IBM common
stock. The exercise price of the options is the fair
market value of IBM common stock on the date of grant and each option has a term
of ten years and becomes exercisable in four equal installments commencing on
the first anniversary of the date of grant and continuing for the three
successive anniversaries thereafter. In the event of the retirement (as defined
in the plan) or death of an outside director, all options granted to such
director shall become immediately exercisable. Outside directors are provided
group life insurance of up to $50,000 and travel accident insurance in the
amount of $300,000. Directors are also eligible to participate in the Company's
Matching Grants Program on the same basis as the Company's employees.
The Directors and Corporate Governance Committee of the Board periodically
reviews IBM's director compensation practices and compares them against the
practices of the largest U.S. companies in terms of
10
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
market capitalization. In performing this review, the Committee focuses on
ensuring that the Company's outside directors have a proprietary stake in the
Company and that the interests of the directors continue to be closely aligned
with the interests of the Company's stockholders. The Committee believes that
the Company's total director compensation package continues to be competitive
with the compensation offered by other companies and is fair and appropriate in
light of the responsibilities and obligations of the Company's outside
directors.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during 1996 all reports for the Company's executive
officers and directors that were required to be filed under Section 16 of the
Securities Exchange Act of 1934 were timely filed, except that a report was not
timely filed to reflect a purchase of IBM Common Stock by Mr. Knight.
Common Stock and Total Stock-based Holdings
The following table reflects shares of IBM common stock, as well as all other
IBM stock-based holdings, which are beneficially owned by IBM's directors and
nominees, the executive officers named in the Summary Compensation Table on page
00, and the directors and executive officers as a group, as of December 31,
1996.
The Table indicates whether voting power and investment power in IBM common
stock are solely exercisable by the person named or shared with others. Voting
power includes the power to direct the voting of the shares held, and investment
power includes the power to direct the disposition of shares held. Also shown
are shares over which the named person could have acquired such powers within 60
days. Since some shares may appear under both the voting and investment power
columns, and since other types of holdings are listed only in the Stock or
Total column, the individual columns will not add across to the Total column.
The Table indicates the alignment of these individuals' personal financial
interests with the interests of the Company's stockholders because the value of
their holdings will increase or decrease in line with the price of IBM stock.
11
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
<TABLE>
<CAPTION>
Voting Power Investment Power Acquirable Total
--------------------------------- within 60 Stock-based
Name Sole Shared Sole Shared Stock(1) days(2) holdings(3)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. Black 1,000 81 1,744 81 1,825 0 1,912
H. Brown 0 600 8,336 600 8,936 250 12,224
J. Dormann 1,000 0 1,277 0 1,277 0 1,277
L.V. Gerstner, Jr. xxx xxx xxx xxx xxx xxx xxx
N.O. Keohane 0 498 3,848 498 4,346 250 5,385
C.F. Knight 2,434 0 4,385 0 4,385 250 5,092
Executive A xxx xxx xxx xxx xxx xxx xxx
L.A. Noto 1,366 613 2,340 613 2,952 250 3,325
J.B. Slaughter 50 0 3,210 0 3,210 250 4,435
Executive B xxx xxx xxx xxx xxx xxx xxx
Executive C xxx xxx xxx xxx xxx xxx xxx
Executive D xxx xxx xxx xxx xxx xxx xxx
A. Trotman 1,000 1,000 1,976 1,000 2,976 250 3,391
L.C. van Wachem 1,000 0 1,798 0 1,798 250 2,795
C.M. Vest 100 0 696 0 696 250 1,147
- -----------------------------------------------------------------------------------------
Directors and
executive officers
as a group(4) xxx xxx xxx xxx xxx* xxx* xxx
- -----------------------------------------------------------------------------------------
</TABLE>
* The total of these two columns represents less than 1% of the outstanding
shares. No individual's beneficial holdings totaled more than 1/5 of 1% of
the outstanding shares. These holdings do not include 1,428,569 shares held
by the IBM Retirement Plan Trust Fund, over which the members of the Board
have the right to acquire shared investment power by withdrawing authority
now delegated to the Retirement Plans Committee, a management committee.
The directors and officers included in the table disclaim beneficial
ownership of shares beneficially owned by family members who reside in
their households. The shares are reported in such cases on the presumption
that the individual may share voting and/or investment power because of the
family relationship.
(1) For executive officers, this column includes shares shown in the "Voting
Power" and "Investment Power" columns as well as shares of restricted stock
held by the executive. For non-employee directors, this column includes
shares earned and accrued under the Directors Deferred Compensation and
Equity Award Plan. They have no voting power over such shares and
investment power only with regard to Promised Fee Shares that are acquired
as a result of deferring fees paid to them. Fractional shares attributable
to participation in this plan are not shown.
(2) Shares that can be purchased under an IBM stock option plan.
(3) This column shows the total IBM stock-based holdings, including the
securities shown in the "Stock" column and the "Acquirable within 60 days"
column, as well as other IBM stock-based interests, including, as
appropriate, employee contributions into the IBM Stock Fund under the IBM
Extended Tax Deferred Savings Plan ("ETDSP") and all Company matching
contributions under the ETDSP. This column also includes the Promised Fee
Shares payable in cash that were credited to the non-employee directors in
connection with the elimination of pension payments to such directors.
(4) None of the directors or executive officers own any IBM preferred stock.
12
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Report on Executive Compensation
(To Come)
13
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(To Come)
14
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(To Come)
15
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Compensation for the Chairman and Chief Executive Officer
(To Come)
Charles F. Knight (chairman)
Alex Trotman
Charles M. Vest
16
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
<TABLE>
<CAPTION>
Summary Compensation Table (To Come)
- ------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------
Other Restricted Securities
Name and Annual Stock Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Awards Options(#) Payouts Compensation
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L.V. Gerstner, Jr. 1996 $ xxx $ xxx $ x $ xxx xxx $ xxx $ xxx
Chairman and CEO 1995 2,000,000 2,775,000 0 7,044,375 100,000 1,274,663 138,000
1994 2,000,000 2,600,000 0 0 225,000 0 7,755,055
Executive A 1996 xxx xxx xxx xxx xxx xxx xxx
Title 1995 xxx xxx xxx xxx xxx xxx xxx
1994 xxx xxx xxx xxx xxx xxx xxx
Executive B 1996 xxx xxx xxx xxx xxx xxx xxx
Title 1995 xxx xxx xxx xxx xxx xxx xxx
1994 xxx xxx xxx xxx xxx xxx xxx
Executive C 1996 xxx xxx xxx xxx xxx xxx xxx
Title 1995 xxx xxx xxx xxx xxx xxx xxx
1994 xxx xxx xxx xxx xxx xxx xxx
Executive D 1996 xxx xxx xxx xxx xxx xxx xxx
Title 1995 xxx xxx xxx xxx xxx xxx xxx
1994 xxx xxx xxx xxx xxx xxx xxx
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Stock Option/SAR Grants in Last Fiscal Year (To Come)
- -----------------------------------------------------------------------------------------------------------------
Individual Grants
----------------------------------------------------
Potential Realizable Value at
Number % of Total Assumed Annual Rates of
of Securities Options/SARs Stock Price Appreciation for
Underlying Granted to Exercise Ten-Year Option Term
Options/SARs Employees in Price Expiration --------------------------------------
Name Granted Fiscal Year per Share Date 0% 5% 10%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
L.V. Gerstner, Jr. xxx x.xx% $ x.xx x/xx/xx $ xxx $ xxx $ xxx
Executive A xxx x.xx% x.xx x/xx/xx xxx xxx xxx
Executive B xxx x.xx% x.xx x/xx/xx xxx xxx xxx
Executive C xxx x.xx% x.xx x/xx/xx xxx xxx xxx
Executive D xxx x.xx% x.xx x/xx/xx xxx xxx xxx
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Increase in market value of IBM common stock for all stock- 5%(to $xxx/share) 10%(to $xxx/share)
holders at assumed annual rates of stock price appreciation ----------------- ------------------
(as used in the table above) from $x.xx per share, over the $xx.x billion $xx.x billion
ten-year period, based on xx.xx million shares outstanding on
December 31, 1996.
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Options/SAR Values (To Come)
- -----------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Shares Options/SARs at Fiscal Year-End Options/SARs at Fiscal Year-End
Acquired on Value ---------------------------------------------------------------------
Name Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
L.V. Gerstner, Jr. xxx $ xxx xxx xxx $ xxx $ xxx
Executive A xxx xxx xxx xxx xxx xxx
Executive B xxx xxx xxx xxx xxx xxx
Executive C xxx xxx xxx xxx xxx xxx
Executive D xxx xxx xxx xxx xxx xxx
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
18
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
<TABLE>
<CAPTION>
Long-Term Incentive Plans-Awards in Last Fiscal Year (To Come)
- --------------------------------------------------------------------------------------------------
Performance or Estimated Future Payouts under
Number of Other Period Non-Stock Price-Based Plans
Shares, Units Until Maturation ----------------------------------------
Name or Other Rights or Payout Threshold(#) Target(#) Maximum(#)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
L.V. Gerstner, Jr. xxx 1/9x-12/9x xxx xxx xxx
Executive A xxx 1/9x-12/9x xxx xxx xxx
Executive B xxx 1/9x-12/9x xxx xxx xxx
Executive C xxx 1/9x-12/9x xxx xxx xxx
Executive D xxx 1/9x-12/9x xxx xxx xxx
- ---------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Retirement Plan
(To Come)
20
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Other Deferred Compensation Plans
The IBM Tax Deferred Savings Plan (the "TDSP") allows all eligible employees to
defer up to 12% of their income on a tax favored basis into a tax exempt trust
pursuant to Internal Revenue Service guidelines. IBM matches these deferrals at
the rate of 50% for the first 6% of compensation deferred. The employee accounts
are invested by the plan trustee in up to eight investment funds, including an
IBM Stock Fund, as directed by the employees. Corporate officers have
participated in the TDSP since its inception in 1983 on the same basis as all
other employees except that they could not participate in the IBM Stock Fund
investment option. Commencing February 1, 1995, officers are now permitted to
invest in the TDSP's IBM Stock Fund consistent with the Company's increased
emphasis on stock ownership. Internal Revenue Service limits on the TDSP
preclude in 1997 an annual investment of more than $9,500 or an eligible
compensation base of more than $160,000 for any one employee.
IBM has established the Extended Tax Deferred Savings Plan (the "ETDSP"),
effective January 1, 1995, which allows any executive, including officers, whose
rate of compensation is at least $150,000 annually or who is a member of the
Senior Management Group, to defer additional monies and receive a Company match
on the same basis as the TDSP except that the Company match for the ETDSP is
credited only in units of IBM common stock which are not transferable to other
investment alternatives during employment. In addition, participants can defer
all or a portion of their annual incentive until retirement under the ETDSP. In
the event that the salary of a Company officer who is subject to the limits of
Section 162 (m) of
21
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
the Code exceeds $1,000,000, such officer may defer up to 100 percent of his or
her salary. The ETDSP is not funded and participants are general creditors of
the Company. All investments in the ETDSP earn income based on the results of
the actual TDSP funds' performance but the income is paid out of Company funds
rather than the actual returns on a dedicated investment portfolio.
Employment Agreements and Change-in-Control Arrangements
The Company entered into an employment agreement with Mr. Gerstner as of March
26, 1993, whereby he serves as the chairman and chief executive officer of the
Company. Effective January 1, 1996, the employment agreement was amended to
provide that Mr. Gerstner's annual salary is at least $1,500,000, his annual
incentive target award opportunity is at least $2,000,000, and his annual
long-term performance incentive target award opportunity is at least $1,500,000.
In addition, the agreement provides Mr. Gerstner with an annual pension at age
60 from IBM of approximately $1,140,000.
In the event of termination without cause, or due to a "change-in-control" of
the Company, as defined in the agreement, Mr. Gerstner would receive 36 months
salary, prorated incentive payments, the right to exercise all stock options,
and other specified benefits. The Company has no other change-in-control
arrangements with any of its executive officers. There are no employment
agreements with the named executive officers, other than Mr. Gerstner, that
provide for their continuing service.
22
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Performance Graph
Comparison of Five-Year Cumulative Total Return for
IBM, S&P 500 Stock Index, and S&P Computers (Hardware) Index (excluding IBM)
S & P Computers
S & P 500 (Hardware) Index
IBM Common Stock Stock Index (excluding IBM)
- -----------------------------------------------------------------------
1991 100 100 100
1992 60 108 111
1993 69 118 111
1994 92 120 146
1995 115 165 218
1996 193 203 263
The above graph compares the five-year cumulative total return for IBM common
stock with the comparable cumulative return of two indexes. Since IBM is a
company within the Standard & Poor's ("S&P") 500 Stock Index, the Securities and
Exchange Commission's proxy rules require the use of that Index. Under those
rules, the second index used for comparison may be a published industry or
line-of-business index. In IBM's case, the S&P Computers (Hardware) Index
(excluding IBM), shown above, is such an index. Prior to June 1996, the S&P
Computers (Hardware) Index had been known as the S&P Computer Systems Index.
The graph assumes $100 invested on December 31, 1991, in IBM common stock and
$100 invested at that same time in each of the S&P indexes. The comparison
assumes that all dividends are reinvested.
23
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
2. Ratification of Appointment of Auditors
The Board of Directors has appointed the firm of Price Waterhouse LLP,
independent accountants, to be IBM's auditors for the year 1997 and recommends
to stockholders that they vote for ratification of that appointment.
Price Waterhouse LLP served in this capacity for the year 1996. Its
representative will be present at the Annual Meeting and will have an
opportunity to make a statement and be available to respond to appropriate
questions.
The appointment of auditors is approved annually by the Board and subsequently
submitted to the stockholders for ratification. The decision of the Board is
based on the recommendation of the Audit Committee, which reviews and approves
in advance the audit scope, the types of nonaudit services, and the estimated
fees for the coming year. The committee also reviews and approves proposed
nonaudit services to ensure that they will not impair the independence of the
accountants.
Before making its recommendation to the Board for appointment of Price
Waterhouse LLP, the Audit Committee carefully considered that firm's
qualifications as auditors for the Company. This included a review of its
performance in prior years, as well as its reputation for integrity and
competence in the fields of accounting and auditing. The committee has expressed
its satisfaction with Price Waterhouse LLP in all of these respects. The
committee's review included inquiry concerning any litigation involving Price
Waterhouse LLP and any proceedings by the Securities and Exchange Commission
against the firm. In this respect, the committee has concluded that the ability
of Price Waterhouse LLP to perform services for the Company is in no way
adversely affected by any such investigation or litigation.
THE IBM BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
24
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
3. Amendment of the Certificate of Incorporation to Increase Authorized Shares
and Effect a Two-for-One Stock Split
On January 28, 1997, the Board of Directors unanimously adopted a resolution
declaring it advisable to amend the Company's Certificate of Incorporation to
increase the number of shares of stock that the Company has the authority to
issue to an aggregate of 2,025,000,000 shares, of which 1,875,000,000 would be
capital stock, $0.50 par value per share ("common stock"), and 150,000,000 of
which would continue to be preferred stock, $0.01 par value per share (the
"Amendments"). The Board of Directors further directed that the Amendments be
submitted for consideration by stockholders at the Company's Annual Meeting. In
the event the Amendments are approved by stockholders, the Company will
thereafter amend the Certificate of Incorporation (the "Certificate") with the
New York State Secretary of State reflecting such Amendments, which will become
effective at the close of business on the date the Certificate is accepted for
filing by the Secretary of State. The text of Article THREE of the Certificate,
as proposed to be amended, is set forth in Appendix A, on page xx of this Proxy
Statement.
On January 28, 1997, the Board of Directors also unanimously adopted a
resolution authorizing and declaring, subject to approval by stockholders of the
Amendments, a two-for-one Stock Split, which split will provide one share of
common stock for each authorized share of common stock outstanding and reserved
for issuance to common stockholders of record at the close of business on May 9,
1997 or as soon thereafter as is administratively practicable (the Stock Split
Record Date).
In the event stockholders approve the Amendments, the Company will be authorized
to amend Article THREE of the Company's Certificate to increase the number of
shares of common stock which the Company is authorized to issue from 750,000,000
to 1,875,000,000 and to decrease the par value per share of such stock from
$1.25 per share to $0.50 per share. Approval of the Amendments will also permit
the Company to effect the split of the common stock of the Company. STOCKHOLDER
APPROVAL OF AN INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK IS
REQUIRED IN ORDER FOR THE PROPOSED TWO-FOR-ONE STOCK SPLIT TO BE EFFECTED, AND
IF THE PROPOSED AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION ARE NOT
APPROVED BY THE STOCKHOLDERS, THE STOCK SPLIT CANNOT BE EFFECTED. If the
proposed amendments to the Certificate are adopted, each share of common stock,
$1.25 par value, held of record as of the close of business on the Stock Split
Record Date will be changed into two shares of common stock, $0.50 par value.
The split of the Company's common stock will also include shares reserved for
issuance under various stock option and other plans including all shares of
common stock authorized for issuance under the 1997 IBM Long-Term Performance
Plan being submitted herein for stockholder approval (the LTPP) [see pages
xx-xx], as well as those shares held by the Company as Treasury shares on such
date.
As of December 31, 1996, there were 509,070,542 shares of issued common stock,
of which 507,981,009 were outstanding and 1,089,533 were Treasury shares. Of the
240,929,458 authorized but unissued shares, a total of 66,009,022 shares were
reserved for issuance under Company stock purchase, option and other benefit
plans for employees and directors, and the remaining 174,920,436 shares were
unreserved. Shares issued pursuant to the proposed Stock Split will have the
same rights as currently outstanding shares of common stock. Holders of common
stock do not have preemptive rights to subscribe to additional securities that
may be issued by the Company, which means that current
25
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
stockholders do not have a prior right to purchase any new issue of common stock
of the Company in order to maintain their proportionate ownership interest.
The Board believes that the proposed two-for-one split in the issued common
stock will result in a market price that should be more attractive to a broader
spectrum of investors, particularly individual investors. Based on figures as of
December 31, 1996, of the 1,875,000,000 shares of common stock which would be
authorized, 1,018,141,084 shares would be required to effectuate the two-for-one
split of the common shares outstanding and in treasury. The aggregate number of
shares that may be sold under each of the Company's stock option, employee
benefit and incentive plans, the number of shares covered by outstanding options
and restricted stock awards under such Plans, and the exercise price of such
options, will also be proportionately adjusted to reflect the Stock Split. For
example, the Stock Split will have the effect of doubling the number of shares
of common stock issuable upon exercise of options and other rights granted under
the Company's stock and option plans, and of reducing by one-half the option
price per share with respect to such options and rights. The number of shares of
restricted stock granted to Company employees and directors and common stock
equivalents held by directors, officers and employees will also be doubled
accordingly.
The Board of Directors also believes that it is in the Company's best interests
to increase the number of authorized but unissued shares of common stock in
order to have additional shares available for issuance to meet the Company's
future business needs as they arise. Other than the shares which are required to
effect the Stock Split, the Company's management has no present arrangements,
agreements, understandings or plans for the issuance or use of the additional
shares proposed to be authorized by the Amendments. The Board believes the
availability of such additional shares will provide the Company with the
flexibility to issue common stock for a variety of other proper corporate
purposes as the Board of Directors may deem advisable without further action by
the Company's stockholders, except as may be required by law, regulation or
stock exchange rule. These purposes could include, among other things, the sale
of stock to obtain additional capital funds, the purchase of property, the
acquisition or merger into the Company of other companies, the use of additional
shares for various equity compensation and other employee benefit plans, the
declaration of stock dividends or distributions, and other BONA FIDE corporate
purposes. Were these situations to arise, the issuance of additional shares of
common stock could have a dilutive effect on earnings per share, and, for a
person who does not purchase additional shares to maintain his or her PRO RATA
interest, on a stockholder's percentage voting power in the Company.
Although an increase in the authorized shares of common stock could, under
certain circumstances, also be construed as having an anti-takeover effect (for
example, by diluting the stock ownership of a person seeking to effect a change
in the composition of the Board of Directors or contemplating a tender offer or
other transaction for the combination of the Company with another company), the
current
26
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Proposal to amend the Certificate is not in response to any effort to accumulate
the Company's stock or to obtain control of the Company by means of a merger,
tender offer, solicitation in opposition to management or otherwise. In
addition, the Proposal is not part of any plan by management to recommend a
series of similar amendments to the Board of Directors and the stockholders.
Finally, the Board does not currently contemplate recommending the adoption of
any other amendments to the Certificate which could be construed to affect the
ability of third parties to take over or change control of the Company.
In addition to the Company's common stock, the Company's Certificate of
Incorporation currently empowers the Board of Directors to authorize the
issuance of one or more series of preferred stock without stockholder approval.
Pursuant to this authorization, the Company has issued one series of preferred
stock, and, as of December 31, 1996, a total of 2,610,711 shares of
Series A 7 1/2% Preferred Stock were outstanding. NO CHANGE TO THE COMPANY'S
PREFERRED STOCK AUTHORIZATION IS REQUESTED BY THIS AMENDMENT. EXISTING SERIES A
PREFERRED SHAREHOLDERS DO NOT HAVE PREEMPTIVE RIGHTS, NOR ANY OTHER
PARTICIPATORY RIGHTS WITH RESPECT TO THE MATTERS COVERED BY THIS PROPOSAL.
In the event this Proposal is approved, certificates representing shares of the
Company's common stock issued prior to the time the Stock Split becomes
effective will continue to represent the same number of shares of the Company's
stock as they did prior to such time. Each common stockholder of record at the
close of business on the Stock Split Record Date will be entitled to receive one
additional share of common stock for each share of common stock held on such
date.
EXISTING CERTIFICATES WILL CONTINUE TO REPRESENT THE NUMBER OF SHARES EVIDENCED
THEREBY. EXISTING CERTIFICATES WILL NOT BE EXCHANGED FOR NEW CERTIFICATES.
PLEASE DO NOT RETURN ANY CERTIFICATES TO THE COMPANY OR OUR TRANSFER AGENT.
------
If the Proposal is approved, the Company will also apply to the New York Stock
Exchange, as well as various other exchanges upon which the Company's common
stock is listed, for the continued listing of the Company's common stock on a
split basis.
The Company has been advised by its Tax Counsel that under U.S. federal income
tax laws the receipt of additional shares of common stock in the Stock Split
will not constitute taxable income to the stockholders. In addition, the cost or
other tax basis to a stockholder of each old share held immediately prior to the
split will be divided equally between the corresponding two shares held
immediately after the split, and the holding period for each of the two shares
will include the period for which the corresponding old share was held. The laws
of jurisdictions other than the United States may impose income taxes on the
receipt by a stockholder of additional shares of common stock resulting from the
split. Stockholders subject to such other laws should consult with their own tax
advisors for additional information.
If a stockholder elects to sell or purchase shares of the Company's common stock
following the effectuation of the Stock Split, stock transfer taxes, if
applicable, may be higher in a transaction involving an equivalent aggregate
market value, because of the greater number of shares involved, and the broker-
27
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
age commissions associated with such activities may also be higher. Stockholders
may wish to determine from their brokers the taxes and commissions applicable
for the additional number of shares.
Financial Statements are not included in this Proxy Statement, as they are not
deemed material to the exercise of prudent judgment with respect to the proposed
amendment of the Company's Certificate of Incorporation and the Stock Split.
SINCE THE AMENDMENTS AND THE STOCK SPLIT ARE IN THE BEST INTEREST of THE COMPANY
AND ITS SHAREHOLDERS, THE IBM BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
28
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
4. Adoption of the IBM 1997 Long-Term Performance Plan
The Board of Directors has adopted the IBM 1997 Long-Term Performance Plan
("1997 LTPP") and is recommending that stockholders approve the 1997 LTPP at the
Annual Meeting. The 1997 LTPP provides for incentive and other awards that are
designed to foster a proprietary interest in the growth and performance of the
Company.
The 1997 LTPP permits the grant of any form of award, including, but not
limited to, stock options, stock appreciation rights ("SARs") and stock and
cash awards, whether granted singly, in combination or in tandem. During any
five year period, no participant may receive stock options or SARs with
respect to an aggregate of more than 2,500,000 shares. Stock options will be
granted at an exercise price of not less than 100% of fair market value (as
defined in the plan) on the date of grant and it is expected that options and
SARs will be granted for periods of 10 years or less. The 1997 LTPP also
permits the grant of other awards in stock or denominated in units of stock,
which may be subject to restrictions on transfer and forfeiture provisions.
The maximum number of shares of common stock that may be issued under stock
awards under the 1997 LTPP (other than those shares issued as a form of
payment for other compensation awards under any other plan of the Company)
will not exceed 20% of the aggregate number of shares available under the
1997 LTPP.
If approved by stockholders, the Board has authorized for issuance under the
1997 LTPP [25,000,000] shares of common stock, which is 5% of the Company's
outstanding shares of common stock on February [xx], 1997. The fair market value
of the Company's common stock on that day was $xxx per share. Subject to
stockholder approval of Proposal 3, as set forth beginning on page xx hereof,
the shares available for issuance under the 1997 LTPP shall be doubled to
reflect the proposed two-for-one stock split.
For purposes of determining the number of shares of Capital Stock issued
under the Plan, no shares shall be deemed issued until they are actually
delivered to a Participant, or such other person in accordance with Section
10. Shares covered by Awards that either wholly or in part are not earned, or
that expire or are forfeited, terminated, canceled, settled in cash, payable
solely in cash or exchanged for other awards, shall be available for future
issuance under Awards. Further, shares tendered to or withheld by the Company
in connection with the exercise of stock options, or the payment of tax
withholding on any Award, shall also be available for future issuance under
Awards.
At the 1994 Annual Meeting, stockholders approved the 1994 Long-Term Performance
Plan ("1994 LTPP") to replace the 1989 Long-Term Performance Plan. As of
February [xx], 1997, [X,000,000] shares remained available for grant under the
1994 LTPP, and the Company intends to continue to grant awards under that 1994
LTPP until the shares are exhausted or the plan expires.
It is intended that the 1997 LTPP will generally be administered by the
Executive Compensation and Management Resources Committee (or any successor
committee), which is constituted in compliance with the rules and regulations
issued under the federal securities laws and the Internal Revenue Code. In
administering the 1997 LTPP, the Committee has the full power to select
participants, to interpret the provisions of the plan, to grant waivers of
award restrictions, to continue or accelerate the exercisability, vesting or
payment of an
29
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Award and to adopt such rules, regulations and guidelines for carrying out
the 1997 LTPP as it may deem necessary or proper. The Committee may delegate
certain of its duties, power and authority to officers of the Company,
pursuant to such conditions and limitations as the Committee may establish.
The 1997 LTPP may be amended by the Board, except that it may not be amended
to increase the maximum number of shares that may be issued under the 1997
LTPP (except for adjustments pursuant to Section 14 of the 1997 LTPP) or to
permit the granting of stock options or stock appreciation rights with
exercise or grant prices lower than those specified in Section 6 of the 1997
LTPP, without stockholder approval.
Awards under the 1997 LTPP may be made to employees of, and other individuals
providing services to, the Company. Participants in the 1997 LTPP will be
recommended by their management and the Committee intends to review and act
on all 1997 LTPP grants and awards for elected officers and certain other
senior management positions. Subject to stockholder approval of the 1997
LTPP, the Committee intends to delegate to the chief executive officer, the
authority to make grants and awards, waive restrictions and take other
actions under the 1997 LTPP for certain other eligible participants. As the
participants in the 1997 LTPP will be selected by the Committee and
management in their discretion, it is not possible to indicate the number or
names of positions or participants who may be eligible for awards under the
1997 LTPP and no allocation or other determination has been made as to the
types or amounts of awards that may be made. During 1996, options to purchase
[xxx] shares were granted to employees under the 1994 LTPP, including options
to purchase [xxx] shares granted to executive officers as a group. In 1996,
the number of performance stock units representing Long-Term Performance
Incentive awards granted to all participants and executive officers was [xxx]
and [xxx], respectively. Further, a total of [xxx] restricted stock units
were granted in 1996, including [xxx] units for executive officers. For
additional information on awards in 1996 to the named executive officers,
refer to the tables on pages xx-xx. No awards under the 1994 LTPP were made
to directors who are not executive officers.
On February [xx], 1997, options to purchase [xxx] shares at [$xxx] per share
were granted under the 1994 LTPP to employees of the company, including options
to purchase [xxx] shares granted to executive officers as a group and [#s for
each of the named executive officers]. In addition, [xxx] performance stock
units representing Long-Term Performance Incentive awards were granted to all
participants, including [xxx] units to executive officers as a group and [#s for
each of the named executive officers.]
As discussed in the Report on Executive Compensation, the 1997 LTPP has been
designed to meet the requirements of section 162(m) of the Internal Revenue
Code for stock options and SARs. At the Company's 1995 Annual Meeting,
stockholders approved terms adopted by the Committee under which other
long-term incentive compensation payable under the 1994 LTPP would qualify
for an exception from the limitations on deductibility set forth in section
162(m). The Committee will continue to make long-term performance incentive
awards under the 1997 LTPP pursuant to those terms. The foregoing shall not
preclude the Committee from making other compensation payments under
different terms even if they do not qualify for tax deductibility under
section 162(m).
The foregoing summary of the terms and features of the 1997 LTPP is qualified by
reference to the 1997 LTPP itself. The 1997 LTPP is printed in its entirety as
Appendix B on page xx and the federal income tax consequences of the issuance
and exercise of options and SARs are summarized in Appendix C beginning on
page xx. THE IBM BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
30
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
5. Stockholder Proposal
Stockholder proposals may be submitted for inclusion in IBM's 1998 proxy
material after the 1997 Annual Meeting but received no later than 5 p.m. EST on
November 18, 1997. Proposals must be in writing and sent via registered,
certified, or express mail to: Office of the Secretary, International Business
Machines Corporation, One Old Orchard Road, Armonk, N.Y. 10504. Facsimile or
other forms of electronic submissions will not be accepted.
Management carefully considers all proposals and suggestions from stockholders.
When adoption is clearly in the best interests of the Company and stockholders,
and can be accomplished without stockholder approval, the proposal is
implemented without inclusion in the proxy material.
Examples of stockholder proposals and suggestions that have been adopted over
the years include stockholder ratification of the appointment of auditors,
improved procedures involving dividend checks and stockholder publications, and
changes or additions to the proxy material concerning such matters as
abstentions from voting, appointment of alternative proxy, inclusion of a table
of contents, proponent disclosure, and secrecy of stockholder voting.
MANAGEMENT OPPOSES THE FOLLOWING PROPOSAL FOR THE REASONS STATED AFTER THE
PROPOSAL.
Stockholder Proposal on Executive Compensation
Management has been advised that Mrs. Evelyn Y. Davis, Watergate Office
Building, 2600 Virginia Avenue, N.W., Suite 215, Washington, D.C. 20037, the
owner of 50 shares, intends to submit the following proposal at the meeting:
RESOLVED: "That the stockholders recommend that the Board take the necessary
step that IBM specifically identify by name and corporate title in all future
proxy statements those executive officers, not otherwise so identified, who are
contractually entitled to receive in excess of $250,000 annually as a base
salary, together with whatever other additional compensation bonuses and other
cash payments were due them."
REASONS: "In support of such proposed Resolution it is clear that the
shareholders have a right to comprehensively evaluate the management in the
manner in which the Corporation is being operated and its resources utilized."
"At present only a few of the most senior executive officers are so identified,
and not the many other senior executive officers who should contribute to the
ultimate success of the Corporation." "Through such additional identification
the shareholders will then be provided an opportunity to better evaluate the
soundness and efficacy of the overall management."
"If you AGREE, please mark your proxy FOR this proposal."
- -------------------------------------------------------------------------------
THE IBM BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
The Proposal is not currently relevant to the Company since it calls for
disclosure of contractual employment obligations which are already FULLY
disclosed in this Proxy Statement. In this connection, Mr. Gerstner, the
Chairman and Chief Executive Officer of the Company, is the ONLY executive
officer with an employment
31
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
contract who is entitled to receive a salary and other amounts on account of his
employment with the Company. Mr. Gerstner's employment contract, as well as
other details of his compensation arrangements, is already described on pages
xx-xx of this Proxy Statement in full compliance with the regulations of the
Securities and Exchange Commission. Moreover, under these same regulations, the
Company already provides detailed information about the overall compensation
arrangements of its four other highest paid executive officers. The Executive
Compensation and Management Resources Committee of the Board, which is comprised
SOLELY of non-employee directors, reviews and approves the compensation of all
executive officers of the Company. Since implementation of the Proposal would
add nothing to the Company's current disclosures, and since the Proposal
attempts to impose future obligations beyond what is required by the law as well
as beyond what other companies disclose, the Board believes the Proposal is
unnecessary and should be rejected. The Board believes that the existing
disclosure adequately and fairly describes the compensation structure for IBM's
executive officers as well as furnishes an informed basis for IBM stockholders
to evaluate the Company's use of compensation to motivate and retain its key
personnel. THE BOARD THEREFORE RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
32
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Other Business
Management knows of no other matters that may properly be, or are likely to be,
brought before the meeting. If other proper matters are introduced, the
individuals named as Proxies on the enclosed Proxy Card will vote shares it
represents.
Proxies and Voting at the Meeting
The $1.25 par value capital stock of the Company (its common stock) is its only
class of security entitled to vote at the April 29, 1997, meeting. Each
stockholder of record at the close of business on March 11, 1997, is entitled to
one vote for each share held. The Proxy Card covers the number of shares to be
voted, including any shares held for participants in the IBM Dividend
Reinvestment Plan and Employees Stock Purchase Plans. On February xx, 1997,
there were xxx,xxx,xxx common shares outstanding and entitled to be voted.
Directors are elected by a plurality of votes cast. A majority of the votes
cast is required to ratify the appointment of auditors and to recommend that
the Board consider adoption of a stockholder proposal. Under the law of New
York, IBM's state of incorporation, "votes cast" at a meeting of stockholders
by the holders of shares entitled to vote are determinative of the outcome of
the matter subject to vote. Abstentions, broker non-votes, and withheld votes
will not be considered "votes cast" based on current state law requirements
and IBM's Certificate of Incorporation and By-laws. The amendment of the
Company's Certificate of Incorporation and the adoption of the IBM 1997
Long-Term Performance Plan each require the favorable vote of the holders of
a majority of all outstanding shares of common stock of the Company, pursuant
to the requirements of the New York Business Corporation Law.
All stockholder meeting proxies, ballots, and tabulations that identify
individual stockholders are kept secret, and no such document shall be available
for examination, nor shall the identity or the vote of any stockholder be
disclosed except as may be necessary to meet legal requirements under the laws
of New York, IBM's state of incorporation. Votes are counted by employees of
First Chicago Trust Company of New York, IBM's independent transfer agent and
registrar, and certified by the Inspectors of Election who are employees of
Corporation Trust Company.
Shares cannot be voted unless a signed Proxy Card is returned or other specific
arrangements are made to have shares represented at the meeting. Any stockholder
giving a proxy may revoke it at any time before it is voted. If a stockholder
wishes to give a proxy to someone other than the individuals named as Proxies on
the Proxy Card, he or she may cross out the names appearing on the enclosed
Proxy Card, insert the name of some other person, sign, and give the Proxy Card
to that person for use at the meeting.
Stockholders are encouraged to specify their choices by marking the appropriate
boxes on the enclosed Proxy Card. Shares will be voted in accordance with such
instructions. However, it is not necessary to
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
mark any boxes if you wish to vote in accordance with the Board of Directors'
recommendations; merely sign, date, and return the Proxy Card in the enclosed
envelope.
Solicitation of proxies is being made by the Company through the mail, in
person, and by telecommunications. The cost thereof will be borne by the
Company. In addition, management has retained Morrow & Co., Inc., to assist in
soliciting proxies for a fee of approximately $35,000, plus reasonable
out-of-pocket expenses.
/s/ John E. Hickey
John E. Hickey
Vice President and Secretary
March 17, 1997
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
APPENDIX A.
Proposed Amendment to Article THREE of the Company's Certificate of
Incorporation
Resolved: that the Company's Certificate of Incorporation be amended by
restating Article THREE thereof to read as follows:
The aggregate number of shares that the Corporation shall have authority to
issue is 2,025,000,000 shares, consisting of 1,875,000,000 shares of the par
value of $0.50 per share, which shall be designated "capital stock" and
150,000,000 shares of the par value of $0.01 per share, which shall be
designated "preferred stock."
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(blank)
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
APPENDIX B.
IBM 1997 Long-Term Performance Plan
1. Objectives.
The IBM 1997 Long-Term Performance Plan (the "Plan") is designed to attract,
motivate and retain selected employees of, and other individuals providing
services to, the Company. These objectives are accomplished by making long-term
incentive and other awards under the Plan, thereby providing Participants with a
proprietary interest in the growth and performance of the Company.
2. Definitions.
(a) "Awards" - The grant of any form of stock option, stock appreciation
right, stock or cash award, whether granted singly, in combination or in
tandem, to a Participant pursuant to such terms, conditions, performance
requirements, limitations and restrictions as the Committee may establish
in order to fulfill the objectives of the Plan.
(b) "Award Agreement" - An agreement between the Company and a Participant
that sets forth the terms, conditions, performance requirements,
limitations and restrictions applicable to an Award.
(c) "Board" - The Board of Directors of International Business Machines
Corporation ("IBM").
(d) "Capital Stock" or "stock" - Authorized and issued or unissued Capital
Stock of IBM, at such par value as may be established from time to time.
(e) "Code" - The Internal Revenue Code of 1986, as amended from time to
time.
(f) "Committee" - The committee designated by the Board to administer the
Plan.
(g) "Company" - IBM and its affiliates and subsidiaries including
subsidiaries of subsidiaries and partnerships and other business ventures
in which IBM has an equity interest.
(h) "Fair Market Value" - The average of the high and low prices of Capital
Stock on the New York Stock Exchange for the date in question, provided
that, if no sales of Capital Stock were made on said exchange on that date,
the average of the high and low prices of Capital Stock as reported for the
most recent preceding day on which sales of Capital Stock were made on
said exchange.
(i) "Participant" - An individual to whom an Award has been made under the
Plan. Awards may be made to any employee of, or any other individual
providng services to, the Company. However, incentive stock options may
be granted only to individuals who are employed by IBM or by a subsidiary
corporation (within the meaning of Section 424(f) of the Code) of IBM,
including a subsidiary that becomes such after the adoption of the Plan.
3. Capital Stock Available for Awards.
The number of shares that may be issued under the Plan for Awards granted wholly
or partly in stock during the term of the Plan is [25,000,000]. Shares of
Capital Stock may be made available from the authorized but unissued shares of
the Company or from shares held in the Company's treasury and not reserved for
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
some other purpose. For purposes of determining the number of shares of
Capital Stock issued under the Plan, no shares shall be deemed issued until
they are actually delivered to a Participant, or such other person in
accordance with Section 10. Shares covered by Awards that either wholly or in
part are not earned, or that expire or are forfeited, terminated, canceled,
settled in cash, payable solely in cash or exchanged for other awards, shall
be available for future issuance under Awards. Further, shares tendered to or
withheld by the Company in connection with the exercise of stock options, or
the payment of tax withholding on any Award, shall also be available for
future issuance under Awards.
4. Administration.
The Plan shall be administered by the Committee, which shall have full power to
select Participants, to interpret the Plan, to grant waivers of Award
restrictions, to continue, accelerate or suspend exercisability, vesting or
payment of an Award and to adopt such rules, regulations and guidelines for
carrying out the Plan as it may deem necessary or proper. These powers include,
but are not limited to, the adoption of modifications, amendments, procedures,
subplans and the like as are necessary to comply with provisions of the laws and
regulations of the countries in which the Company operates in order to assure
the viability of Awards granted under the Plan and to enable Participants
regardless of where employed to receive advantages and benefits under the Plan
and such laws and regulations.
5. Delegation of Authority.
The Committee may delegate to officers of the Company its duties, power and
authority under the Plan pursuant to such conditions or limitations as the
Committee may establish, except that only the Committee or the Board may select,
and grant Awards to, Participants who are subject to Section 16 of the
Securities Exchange Act of 1934.
6. Awards.
The Committee shall determine the type or types of Award(s) to be made to each
Participant and shall set forth in the related Award Agreement the terms,
conditions, performance requirements, and limitations applicable to each Award.
Awards may include but are not limited to those listed in this Section 6. Awards
may be granted singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement or payment of, or as alternatives
to, grants, rights or compensation earned under any other plan of the Company,
including the plan of any acquired entity. During any five year period, no
Participant may receive, under the Plan, stock options or stock appreciation
rights with respect to an aggregate of more than 2,500,000 shares.
(a) Stock Option - A grant of a right to purchase a specified number of
shares of Capital Stock the exercise price of which shall be not less than
100% of Fair Market Value on the date of grant of such right, as determined
by the Committee, provided that, in the case of a stock option granted
retroactively in
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<PAGE>
tandem with or as substitution for another award granted under any plan of
the Company, the exercise price may be the same as the purchase or
designated price of such other award. A stock option may be in the form of
an incentive stock option ("ISO") which, in addition to being subject to
applicable terms, conditions and limitations established by the Committee,
complies with Section 422 of the Code. The number of shares of stock that
shall be available for issuance under ISO's granted under the Plan is
limited to [xxx] million.
(b) Stock Appreciation Right - A right to receive a payment, in cash and/or
Capital Stock, equal in value to the excess of the Fair Market Value of a
specified number of shares of Capital Stock on the date the stock
appreciation right (SAR) is exercised over the grant price of the SAR,
which shall not be less than 100% of the Fair Market Value on the date of
grant of such SAR, as determined by the Committee, provided that, in the
case of a SAR granted retroactively in tandem with or as substitution for
another award granted under any plan of the Company, the grant price may be
the same as the exercise or designated price of such other award.
(c) Stock Award - An Award made in stock and denominated in units of stock.
The maximum number of shares of Capital Stock that may be issued under
Stock Awards (other than as a form of payment for compensation earned under
any other plan of the Company) shall not exceed 20% of the aggregate number
of shares available for issuance under Awards. All or part of any stock
award may be subject to conditions established by the Committee, and set
forth in the Award Agreement, which may include, but are not limited to,
continuous service with the Company, achievement of specific business
objectives, increases in specified indices, attaining growth rates, and
other comparable measurements of the Company performance. An Award made in
stock or denominated in units of stock that is subject to restrictions on
transfer and/or forfeiture provisions may be referred to as an Award of
"Restricted Stock," "Restricted Stock Units" or "Long-Term Performance
Incentive" units.
(d) Cash Award - An Award denominated in cash with the eventual payment
amount subject to future service and such other restrictions and conditions
as may be established by the Committee, and as set forth in the Award
Agreement, including, but not limited to, continuous service with the
Company, achievement of specific business objectives, increases in
specified indices, attaining growth rates, and other comparable
measurements of Company performance.
At the Company's 1995 Annual Meeting, shareholders approved terms adopted by the
Committee under which long-term incentive compensation payable under the
Company's 1994 Long-Term Performance Plan would qualify for an exception from
the limitations on deductibility set forth in section 162(m) of the Code. The
Committee shall continue to make long-term performance incentive awards under
the Plan pursuant to those terms. The foregoing shall not preclude the Committee
from making other compensation payments under different terms even if they do
not qualify for tax deductibility under section 162(m).
7. Payment of Awards.
Payment of Awards may be made in the form of cash, stock or combinations thereof
and may include such restrictions as the Committee shall determine. Further,
with Committee approval, payments may be deferred, either in the form of
installments or as a future lump-sum payment, in accordance with such
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
procedures as may be established from time to time by the Committee. Any
deferred payment, whether elected by the Participant or specified by the Award
Agreement or the Committee, may require the payment to be forfeited in
accordance with the provisions of Section 13 of the Plan. Dividends or dividend
equivalent rights may be extended to and made part of any Award denominated in
stock or units of stock, subject to such terms, conditions and restrictions as
the Committee may establish. The Committee may also establish rules and
procedures for the crediting of interest on deferred cash payments and dividend
equivalents for deferred payments denominated in stock or units of stock. At the
discretion of the Committee, a Participant may be offered an election to
substitute an Award for another Award or Awards of the same or different type.
8. Stock Option Exercise.
The price at which shares of Capital Stock may be purchased under a stock option
shall be paid in full at the time of the exercise in cash or, if permitted by
the Committee, by means of tendering Capital Stock or surrendering another Award
or any combination thereof. The Committee shall determine acceptable methods of
tendering Capital Stock or other Awards and may impose such conditions on the
use of Capital Stock or other Awards to exercise a stock option as it deems
appropriate.
9. Tax Withholding.
Prior to the payment or settlement of any Award, the Participant must pay, or
make arrangements acceptable to the Company for the payment of, any and all
federal, state and local tax withholding that in the opinion of the Company
is required by law. The Company shall have the right to deduct applicable
taxes from any Award payment and withhold, at the time of delivery or vesting
of shares under the Plan, an appropriate number of shares for payment of
taxes required by law or to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for withholding of such
taxes.
10. Transferability.
No Award or any other benefit under the Plan shall be transferable or
assignable, or payable to or exercisable by, anyone other than the
Participant to whom it was granted, except (i) by will or by the laws of
descent and distribution, (ii) as a result of the disability of a Participant
or (iii) that the Committee (in the form of an Award Agreement or otherwise)
may permit transfers of Awards by gift or otherwise to a member of a
Participant's immediate family and/or trusts whose beneficiaries are members
of the Participant's immediate family, or to such other persons or entities
as may be approved by the Committee. Notwithstanding the foregoing, in no
event shall ISOs be transferable or assignable other than by will or by the
laws of descent and distribution.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
11. Amendment, Modification, Suspension or Discontinuance of the Plan.
The Board may amend, modify, suspend or terminate the Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other purpose
permitted by law. Subject to changes in law or other legal requirements that
would permit otherwise, the Plan may not be amended without the consent of the
holders of a majority of the shares of Capital Stock then outstanding, to (i)
increase the aggregate number of shares of Capital Stock that may be issued
under the Plan (except for adjustments pursuant to Section 14 of the Plan), or
(ii) permit the granting of stock options or SARs with exercise or grant
prices lower than those specified in Section 6.
12. Termination of Employment.
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.
13. Cancellation and Rescission of Awards
(a) Unless the Award Agreement specifies otherwise, the Committee may cancel,
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
other applicable provisions of the Award Agreement and the Plan, or if the
Participant engages in any "Detrimental Activity." For purposes of this Section
13, "Detrimental Activity" shall include: (i) the rendering of services for any
organization or engaging directly or indirectly in any business which is or
becomes competitive with the Company, or which organization or business, or the
rendering of services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of the Company; (ii) the
disclosure to anyone outside the Company, or the use in other than the Company's
business, without prior written authorization from the Company, of any
confidential information or material, as defined in the Company's Agreement
Regarding Confidential Information and Intellectual Property, relating to the
business of the Company, acquired by the Participant either during or after
employment with the Company; (iii) the failure or refusal to disclose promptly
and to assign to the Company, pursuant to the Company's Agreement Regarding
Confidential Information and Intellectual Property, all right, title and
interest in any invention or idea, patentable or not, made or conceived by the
Participant during employment by the Company, relating in any manner to the
actual or anticipated business, research or development work of the Company or
the failure or refusal to do anything reasonably necessary to enable the
Company to secure a patent where appropriate in the United States and in their
countries; (iv) activity that results in termination of the Participant's
employment for cause; (v) a violation of any rules, policies, procedures or
guidelines of the Company,
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
including but not limited to the Company's Business Conduct Guidelines; (vi) any
attempt directly or indirectly to induce any employee of the Company to be
employed or perform services elsewhere or any attempt directly or indirectly to
solicit the trade or business of any current or prospective customer, supplier
or partner of the Company; (vii) the Participant being convicted of, or entering
a guilty plea with respect to, a crime, whether or not connected with the
Company; or (viii) any other conduct or act determined to be injurious,
detrimental or prejudicial to any interest of the Company.
(b) Upon exercise, payment or delivery pursuant to an Award, the Participant
shall certify in a manner acceptable to the Company that he or she is in
compliance with the terms and conditions of the Plan. In the event a Participant
fails to comply with the provisions of paragraphs (a)(i)-(viii) of this Section
13 prior to, or during the six months after, any exercise, payment or delivery
pursuant to an Award, such exercise, payment or delivery may be rescinded within
two years thereafter. In the event of any such rescission, the Participant shall
pay to the Company the amount of any gain realized or payment received as a
result of the rescinded exercise, payment or delivery, in such manner and on
such terms and conditions as may be required.
14. Adjustments.
In the event of any change in the outstanding Capital Stock of the Company by
reason of a stock split, stock dividend, combination or reclassification of
shares, recapitalization, merger, or similar event, the Committee may adjust
proportionately: (a) the number of shares of Capital Stock (i) available for
issuance under the Plan, (ii) available for issuance under ISO's, (iii) for
which Awards may be granted to an individual Participant, and (iv) covered by
outstanding Awards denominated in stock or units of stock; (b) the exercise
and grant prices related to outstanding Awards; and (c) the appropriate Fair
Market Value and other price determinations for such Awards. In the event of
any other change affecting the Capital Stock or any distribution (other than
normal cash dividends) to holders of Capital Stock, such adjustments in the
number and kind of shares and the exercise, grant and conversion prices of
the affected Awards as may be deemed equitable by the Committee, including
adjustments to avoid fractional shares, shall be made to give proper effect
to such event. In the event of a corporate merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation, the
Committee shall be authorized to cause IBM to issue or assume stock options,
whether or not in a transaction to which Section 424(a) of the Code applies,
by means of substitution of new stock options for previously issued stock
options or an assumption of previously issued stock options. In such event,
the aggregate number of shares of Capital Stock available for issuance under
Awards under Section 3 will be increased to reflect such substitution or
assumption.
15. Miscellaneous.
(a) Any notice to the Company required by any of the provisions of the Plan
shall be addressed to the chief human resources officer of IBM in writing, and
shall become effective when it is received.
(b) The Plan shall be unfunded and the Company shall not be required to
establish any special account or fund or to otherwise segregate or encumber
assets to ensure payment of any Award.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(c) Nothing contained in the Plan shall prevent the Company from adopting other
or additional compensation arrangements or plans, subject to shareholder
approval if such approval is required, and such arrangements or plans may be
either generally applicable or applicable only in specific cases.
(d) No Participant shall have any claim or right to be granted an Award under
the Plan and nothing contained in the Plan shall be deemed or be construed to
give any Participant the right to be retained in the employ of the Company or to
interfere with the right of the Company to discharge any Participant at any time
without regard to the effect such discharge may have upon the Participant under
the Plan. Except to the extent otherwise provided in any plan or in an Award
Agreement, no Award under the Plan shall be deemed compensation for purposes of
computing benefits or contributions under any other plan of the Company.
(e) The Plan and each Award Agreement shall be governed by the laws of the State
of New York , excluding any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of the Plan to the
substantive law of another jurisdiction. Unless otherwise provided in the Award
Agreement, recipients of an Award under the Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of New York,
County of Westchester, to resolve any and all issues that may arise out of or
relate to the Plan or any related Award Agreement.
(f) In the event that a Participant or the Company brings an action to enforce
the terms of the Plan or any Award Agreement and the Company prevails, the
Participant shall pay all costs and expenses incurred by the Company in
connection with that action, including reasonable attorneys' fees, and all
further costs and fees, including reasonable attorneys' fees incurred by the
Company in connection with collection.
(g) The Committee and any officers to whom it may delegate authority under
Section 5 shall have full power and authority to interpret the Plan and to make
any determinations thereunder, including determinations under Section 13, and
the Committee's or such officer's determinations shall be binding and
conclusive. Determinations made by the Committee or any such officer under the
Plan need not be uniform and may be made selectively among individuals, whether
or not such individuals are similarly situated.
(h) If any provision of the Plan is or becomes or is deemed invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended or limited in scope to conform to applicable laws
or, in the discretion of the Committee, it shall be stricken and the remainder
of the Plan shall remain in full force and effect.
(i) The Plan shall become effective on the date it is approved by the holders
of a majority of the shares of Capital Stock then outstanding.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(blank)
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
APPENDIX C.
IBM 1997 Long-Term Performance Plan
Federal Income Tax Consequences
The Company has been advised by counsel that, in general, under the Internal
Revenue Code, as presently in effect, a Participant will not be deemed to
recognize any income for federal income tax purposes at the time an option or
SAR is granted or a restricted stock award is made, nor will the Company be
entitled to a tax deduction at that time. However, when any part of an option
or SAR is exercised, when restrictions on restricted stock lapse, or when an
unrestricted stock award is made, the federal income tax consequences may be
summarized as follows:
1. In the case of an exercise of a stock option other than an ISO, the
optionee will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the shares on the exercise date over the
option price.
2. In the case of an exercise of a SAR, the Participant will generally
recognize ordinary income on the exercise date in an amount equal to any cash
and the fair market value of any unrestricted shares received.
3. In the case of an exercise of an option or SAR payable in restricted stock,
or in the case of an award of restricted stock, the immediate federal income tax
effect for the recipient will depend on the nature of the restrictions.
Generally, the fair market value of the stock will not be taxable to the
recipient as ordinary income until the year in which his or her interest in the
stock is freely transferable or is no longer subject to a substantial risk of
forfeiture. However, the recipient may elect to recognize income when the stock
is received, rather than when his or her interest in the stock is freely
transferable or is no longer subject to a substantial risk of forfeiture. If the
recipient makes this election, the amount taxed to the recipient as ordinary
income is determined as of the date of receipt of the restricted stock.
4. In the case of ISO's, there is generally no tax liability at time of
exercise. However, the excess of the fair market value of the stock on the
exercise date over the option price is included in the optionee's income for
purposes of the alternative minimum tax. If no disposition of the ISO stock
is made before the later of one year from the date of exercise and two years
from the date of grant, the optionee will realize a long-term capital gain or
loss upon a sale of the stock, equal to the difference between the option
price and the sale price. If the stock is not held for the required period,
ordinary income tax treatment will generally apply to the excess of the fair
market value of the stock on the date of exercise (or, if less, the amount of
gain realized on the disposition of the stock) over the option price, and the
balance of any gain or any loss will be treated as capital gain or loss
(long-term or short-term, depending on whether the shares have been held for
more than one year).
5. Upon the exercise of a stock option other than an ISO, the exercise of a
SAR, the award of stock, or the recognition of income on restricted stock, the
Company will generally be allowed an income tax deduction equal to the ordinary
income recognized by a Participant. The Company will not receive an income tax
deduction as a result of the exercise of an ISO, provided that the ISO stock is
held for the required period as described above. When a cash payment is made
pursuant to the Award, the recipient will recognize the
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
amount of the cash payment as ordinary income, and the Company will generally
be entitled to a deduction in the same amount.
6. The Company may not deduct compensation of more than $1,000,000 that is paid
in a taxable year to an individual who, on the last day of the taxable year, is
the Company's chief executive officer or among one of its four other highest
compensated officers for that year. The deduction limit, however, does not
apply to certain types of compensation, including qualified performance-based
compensation. The Company believes that compensation attributable to stock
options and stock appreciation rights granted under the 1997 LTPP will be
treated as qualified performance-based compensation and therefore will not be
subject to the deduction limit.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
48
<PAGE>
/ / / / / /
IBM LOGO
Dear IBM Stockholder:
YOUR VOTE IS IMPORTANT. ATTACHED IS YOUR 1997 IBM PROXY CARD. PLEASE READ
BOTH SIDES OF THE CARD, AND MARK, SIGN AND DATE IT. DETACH AND RETURN IT
PROMPTLY USING THE ENCLOSED ENVELOPE. WE URGE YOU TO VOTE YOUR SHARES.
You are invited to attend the Annual Meeting of Stockholders on Tuesday,
April 29, 1997, at 10 a.m. in the Dallas Convention Center, 650 South Griffin
St., Dallas, Texas. If you plan to attend the Annual Meeting, you should mark
the box provided on the attached Proxy Card. An admission ticket is attached
for your convenience.
As part of IBM's ongoing efforts to reduce expenses, we are asking our
stockholders to permit IBM to send only one copy of stockholder publications
to their household. If you are receiving multiple copies of stockholder
reports at your address and wish to eliminate them for the account shown on
the attached Proxy Card, please mark the box provided on the card. You will
continue to receive your proxy mailings for shares held in this account.
Thank you very much for your cooperation and continued loyalty as an IBM
Stockholder.
/s/ John E. Hickey
John E. Hickey
Vice President and Secretary
<TABLE>
9926
<S> <C>
PROXY IDENTIFYING NO.
Please mark your
votes as in this
/X/ example
IBM's Directors recommend a vote FOR proposals 1, 2, 3, and 4 and
PROXY CARD AGAINST stockholder proposal 5. SHARES WILL BE SO VOTED UNLESS
OTHERWISE INDICATED.
- -------------------------------------------------------------------------------------------------
IBM Directors recommend a vote FOR proposals 1, 2, 3 and 4
- -------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR AGAINST FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of 2. Ratification of 4. Adoption of the IBM
Directors / / / / appointment / / / / / / 1997 Long-Term / / / / / /
(see reverse) of auditors Performance Plan
(page xx) (page )
3. Amendment to
certificate of / / / / / / 5. Stockholder Proposal on
incorporation executive compensation / / / / / /
(page xx ) (page )
Will Attend Annual Meeting / /
Discontinue Mailing Publications
to this Account / /
SIGNATURE(S) DATE
--------------------------------------- ---------------
PLEASE SIGN AND DATE HERE, DETACH AND RETURN IN ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
ADMISSION TICKET THIS IS YOUR ADMISSION TICKET FOR THE ANNUAL
TO THE 1997 ANNUAL MEETING OF MEETING OF STOCKHOLDERS TO BE HELD ON
IBM STOCKHOLDERS TUESDAY, APRIL 29, 1997, AT 10 A.M. IN THE
DALLAS CONVENTION CENTER, 650 SOUTH GRIFFIN
ST., DALLAS, TEXAS.
STOCKHOLDERS MUST HAVE A TICKET FOR ADMISSION
TO THE MEETING. THIS TICKET IS ISSUED TO THE
STOCKHOLDER WHOSE NAME APPEARS ON IT AND
IS NON-TRANSFERABLE.
[IBM LOGO]
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
P [IBM LOGO] INTERNATIONAL BUSINESS MACHINES PROXY SOLICITED BY THE BOARD OF DIRECTORS
R CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS
O ARMONK, NEW YORK 10504 APRIL 29, 1997
X
Y Louis V. Gerstner, Jr., Lawrence R. Ricciardi, and John E. Hickey, or any of them individually and each of them
with the power of substitution, are hereby appointed Proxies of the undersigned to vote all common stock of
International Business Machines Corporation owned on the record date by the undersigned at the Annual Meeting of
C Stockholders to be held in the Dallas Convention Center, Dallas, Texas, at 10 a.m. on Tuesday, April 29, 1997, or
A any adjournment thereof, upon such business as may properly come before the meeting, including the items on the
R reverse side of this form as set forth in the Notice of 1997 Annual Meeting and Proxy Statement dated March 17,
D 1997.
ELECTION OF DIRECTORS, NOMINEES:
C. Black, H. Brown, J. Dormann, L.V. Gerstner, Jr., N.O. Keohane, C.F. Knight, L.A. Noto, J.B. Slaughter,
A. Trotman, L.C. van Wachem, C.M. Vest
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