IBM Corporate Business Conduct Guidelines, 9/93

This book provides the essential guidelines you need to understand your responsibilities, including your obligation to comply with the law and to advise IBM management of anything that is not in compliance with the law.

As IBM employees, we frequently encounter a variety of ethical and legal questions. The way we decide these issues should be consistent with IBM's basic values and principles. IBM expects all employees to obey the law and to act ethically. This booklet provides general guidance for resolving a variety of legal and ethical questions for employees of IBM and its subsidiaries. Employees who work in marketing and specialized areas such as government procurement and regulatory matters (e.g. environmental, export, tax and customs) must also comply with additional functional guidelines.

Our industry continues to undergo significant changes. As a whole, these changes make the ways in which we do business more complex. Because of the continuing need to reassess and clarify our practices, the contents of this booklet will be kept online and updated as required.

Each section of this booklet covers an area in which we have responsibilities to IBM as employees:

• Personal conduct and protection of IBM's assets
• Obligations in conducting IBM's business with other people and organizations
• Conflicts of interest and other considerations affecting IBM that may arise on our own time
• Competition law as it relates to IBM and to each of us.

Because rapid changes in our industry constantly pose new ethical and legal considerations, no set of guidelines should be considered the absolute last word under all circumstances. If you have any questions about interpreting or applying these guidelines--or about guidelines and procedures published by IBM operating units, subsidiaries or specific functions--it is your responsibility to consult your manager or IBM legal counsel.

When is your personal conduct a concern to IBM? What are your obligations regarding IBM assets? What should you be aware of when recording and reporting information?

If you are aware of an unlawful or unethical situation, IBM has several ways in which you can bring this to the company's attention. Your manager is the best place to start, but you can also contact IBM legal counsel or use the Speak Up program. Or, you can use the Open Door policy which allows you to pursue your issue with any higher level of management. All employee reports of unlawful or unethical conduct will be investigated promptly. IBM will not tolerate threats or acts of retaliation or retribution against employees for using these communications channels.

IBM's basic belief of respect for the individual has led to a strict regard for the privacy and dignity of each employee. However, when IBM management determines that your personal conduct on or off the job adversely affects your performance, that of other employees, or the legitimate interests of the company, it may become a concern to IBM. Employees who are found to have engaged in unlawful or unethical behavior are subject to disciplinary measures, including dismissal.

IBM strives to provide all employees with a healthy, safe and productive work environment. This work environment extends beyond such physical conditions as well-swept floors or the absence of hazards in a laboratory or a plant. The IBM work climate also must be free from discrimination and harassment based on race, color, religion, sex, sexual orientation, age, national origin, disability, veteran status or other factors that are unrelated to IBM's legitimate business interests. IBM will not tolerate sexual advances, actions, comments, or any other conduct in the workplace that creates, in the judgment of IBM management, an intimidating or otherwise offensive environment. Similarly, the use of racial or religious slurs--or any other remarks, jokes, or conduct that, in the judgment of IBM management encourages or permits an offensive work environment--will not be tolerated.

If you believe that you are subject to such conduct, you should bring such activity to the attention of the company, either by informing your manager or using the Speak Up program or the Open Door policy. All employee complaints of such conduct will be investigated promptly. Employees who are found to have engaged in harassment or discrimination, or to have misused their positions of authority in this regard, are subject to disciplinary measures, including dismissal.

Some other activities that are prohibited because they clearly are not conducive to a good work environment are: (1) threats, (2) violent behavior, (3) the possession of weapons of any type, and (4) the use, distribution, sale or possession of illegal drugs or any other controlled substance, except for approved medical purposes. In addition, employees should not be on IBM premises or in the IBM work environment if they are under the influence of or affected by such illegal drugs, controlled substances used for non-medical purposes, or alcohol. Employees who engage in any of these prohibited activities are subject to disciplinary action, including dismissal.

IBM collects or maintains personal information which relates to your employment, including medical and benefit information. Access to such information is restricted to people with a need to know. Personal information is released outside IBM or its agents only with employee approval, except to verify employment or to satisfy the legitimate requirements of a successor to IBM's business operations or in response to appropriate investigatory or legal requirements. Employees who are responsible for maintaining personal information and those who are provided access to such information must ensure that the information is not disclosed in violation of IBM's policies or practices.

IBM has a large variety of assets. Many are of great value to IBM's competitiveness and success as a business. They include not only our extremely valuable proprietary information, but also our physical assets. IBM proprietary information pertains to intellectual property, typically the product of the ideas and hard work of many talented IBM people. It also includes the confidential data entrusted to many employees in connection with their jobs.

Protecting all of these assets is very important. Their loss, theft or misuse jeopardizes the future of IBM.

For this reason, you are personally responsible not only for protecting IBM property entrusted to you, but also for helping to protect the company's assets in general. Here is where your awareness of security procedures can play a critical role. You should be alert to any situations or incidents that could lead to the loss, misuse or theft of company property. And you should report all such situations to the security department or your manager as soon as they come to your attention.

What types of assets should you be concerned about protecting? And what are your responsibilities in this regard?

Proprietary information is information that is the property of IBM and is usually classified under the IBM classification system. Such information includes the business, financial, marketing, and service plans associated with products. It also includes personnel information, medical records, and salary data. Other proprietary information includes: designs; engineering and manufacturing know-how and processes; IBM business and product plans with outside vendors and alliance companies; a variety of internal databases, and patent applications and copyrighted material, such as software.

Much of this information is called intellectual property, and represents the product of the ideas and efforts of many of your fellow employees. Also, it has required substantial investments by IBM in planning, research and development. obviously, if competitors could secure proprietary information such as product design specifications without making the same substantial investment in research and engineering, they would be getting a free ride on IBM's investment. Pricing information and marketing plans are also highly useful to competitors.

The value of this proprietary information is well known to many people in the information industry. Besides competitors, they include industry and security analysts, members of the press, consultants, customers, and other so-called "IBM watchers." Some of these individuals will obtain information any way they can. Regardless of the circumstances, IBM alone is entitled to determine who may possess its proprietary information and what use may be made of it, except for specific legal requirements such as the publication of certain reports.

As an IBM employee, you probably have access to information that the company considers proprietary. Given the widespread interest in IBM--and the increasingly competitive nature of the industry--the chances are you probably have contact with someone interested in acquiring information in your possession. So it's very important not to use or disclose proprietary information except as authorized by IBM, and to provide adequate safeguards to prevent the loss of such information.

The unintentional disclosure of proprietary information can be just as harmful as intentional disclosure.

To avoid unintentional disclosure, never discuss with any unauthorized person proprietary information that has not been made public by IBM. This information includes unannounced products, prices, earnings, procurement plans, business volumes and capital requirements. Also included are: confidential product performance data; marketing and service strategies; business plans; and other confidential information. Furthermore, you should not discuss confidential information even with authorized IBM employees if you are in the presence of others who are not authorized--for example, at a trade show reception or in a public area such as an airplane. This also applies to discussions with family members or with friends, who might innocently or inadvertently pass the information on to someone else.

Finally, keep in mind that harmful disclosure may start with the smallest leak of bits of information. Such fragments of information you disclose may be pieced together with fragments from other sources to form a fairly complete picture.

If someone outside the company asks you questions about IBM or its business activities, either directly or through another person, do not attempt to answer them unless you are certain you are authorized to do so. If you are not authorized, refer the person to the appropriate source within the company. Industry analysts should be referred to IBM Consultant Relations as soon as possible. Under no circumstances should you continue contact without guidance from IBM Consultant Relations. If you are approached by security analysts or investors, you should refer them to your local communications manager or to the office of the Treasurer. If you receive a request for information or to conduct an interview from an attorney, an investigator, or any law enforcement officer, and it concerns IBM's business, you should refer the request to IBM legal counsel. Similarly, unless you have been authorized to talk to reporters, or to anyone else writing about or otherwise covering the company or the industry, direct the person to the information specialist in your communications department. If you do not know what functional area the questioner should be referred to, ask your manager.

Besides your obligation not to disclose any IBM confidential information to anyone outside the company, you are also required as an employee to use such information only in connection with IBM's business. These obligations apply whether or not you developed the information yourself. And they apply by law in virtually all countries where IBM does business.

When you joined IBM, you were required to sign an agreement under which you, as an employee of IBM, assumed specific obligations relating to the treatment of confidential information. Under the agreement, when you are employed in a managerial, technical, engineering, product planning, programming, scientific or other professional capacity, you assign to IBM the rights to any ideas, inventions and computer programs and documents that you develop if they relate to the company's actual or anticipated business, or either result from or are suggested by any work assigned to you by IBM. Subject to the laws of each country, this obligation applies no matter where or when--at work or after hours--such intellectual property is created. The existence of this intellectual property must be reported to IBM, and the property must be protected like any other proprietary information of the company. However, if you believe that your idea, invention or computer program neither falls within the area of IBM's actual or anticipated business interests, nor resulted from nor was suggested by any of your work assignments in IBM, you should discuss the matter with your local intellectual property law department. You may request a written disclaimer of ownership from IBM. Throughout your IBM employment you should provide your local intellectual property law department with copies of any patent you have applied for or obtained.

In most cases, the copyrights in employee-generated works of authorship, such as manuals and computer programs, are automatically owned by IBM through operation of law. In other cases, title to the copyrights is given to IBM by contractual provisions. IBM considers it important to limit the distribution of copyrightable material within IBM to that in which the copyright is owned by or appropriately licensed to IBM. To ensure that material not owned by IBM is appropriately licensed, IBM may request a license from you before you will be permitted to place copyrightable material into or on any IBM-owned distribution channel, including internal mail and electronic channels such as conferencing disks, VM or PROFS. This license may be requested whether you or IBM actually owns the material. If there is a question of ownership, you should consult your manager before you distribute material in IBM through any distribution channel. Your manager may consult IBM legal counsel to determine whether you will be permitted to place the material in the particular distribution channel.

If you leave the company for any reason, including retirement, you may not disclose or misuse IBM confidential information. Also, IBM's ownership of intellectual property that you created while you were an IBM employee continues after you leave the company.

Regrettably, there have been significant cases in which IBM's intellectual property has been wrongfully taken or misused. In some of these instances, IBM has not limited its response to disciplinary action against offending employees, but has taken legal action against everyone involved as well. Also, a number of individuals, including former IBM employees, have been prosecuted for their actions by government authorities and convicted of crimes for their part in stealing information. IBM will continue to take every step necessary, including legal measures, to protect its assets.

IBM equipment, systems, facilities, corporate charge cards and supplies must be used only for conducting IBM's business or for purposes authorized by management. Personal items, messages or information that you consider private should not be placed or kept in telephone systems, office systems, offices, work spaces, desks, credenzas or file cabinets; IBM management may gain access to these areas when required. Employees should not search for or retrieve articles from another employee's work space without prior approval from management.

An increasing number of employees own equipment that uses IBM supplies such as ribbons and diskettes. Since these supplies are readily available at company work locations, the question of making personal use of them frequently arises. The answer is clear: employees may not use IBM supplies for personal use.

The increasing reliance placed on internal information and communications facilities in carrying out IBM business makes it absolutely essential to ensure their integrity. Like other IBM assets, these facilities and the information they make available through a wide variety of data bases should be used only for conducting IBM business or for purposes authorized by management. Their unauthorized use, whether or not for personal gain, is a misappropriation of IBM assets. While IBM conducts audits to help ensure that company systems, networks and databases are being used properly, it's your responsibility to make sure that each use you make of any IBM system is authorized and proper.

You should record and report all information accurately and honestly. Every employee records information of some kind and submits it to the company. For example: a secretary fills out a time card; an engineer fills out a product test report; a marketing representative reports equipment installed; a financial analyst records revenues and costs; a scientist prepares a research report; a field engineer completes a service call record. Expense accounts are another important record. Employees are entitled to reimbursement for reasonable expenses but only if those expenses are actually incurred. To submit an expense account for meals not eaten, miles not driven, airline tickets not used, or for any other expense not incurred is dishonest reporting and is prohibited.

Dishonest reporting of information to organizations and people outside the company also is strictly prohibited. It could lead to civil or even criminal liability for you and IBM. This includes not only reporting information inaccurately but also organizing it in a way that is intended to mislead or misinform those who receive it. Employees must ensure that they do not make false or misleading statements in external financial reports, environmental monitoring reports and other documents submitted to or maintained for government agencies, or status reports on contracts, particularly in situations where IBM is selling goods or providing services to the government.

What business conduct, legal and ethical issues might you encounter in dealing with outside organizations and people? What are the proper ways of handling these issues?

Today, IBM is engaged in a variety of business relationships with other companies and organizations, including authorized business partners, alliance companies and other equipment manufacturers. More than one kind of relationship often exists between IBM and these organizations at the same time. For example, a firm that is an IBM customer or alliance partner may concurrently be a supplier and an IBM competitor. No matter what type of organization you are dealing with or what its relationship is to IBM, you should always observe the following general standards.

IBM has achieved its size through legitimate business success over many years. And there is certainly no need to apologize for it. That said, you should never use the fact of IBM's size to intimidate or threaten another person or organization. In other words, do not throw IBM's weight around in dealing with other companies, organizations or the public.

However, there is nothing wrong with citing legitimate advantages that accrue from our size--as long as such assertions are accurate and free from misleading statements. For example, it is permissible to discuss the advantages that derive from large-scale buying, selling, servicing and manufacturing. Whenever you are discussing any aspects of IBM's size, you should make sure that your statements are accurate and relevant, and not misleading. For example, you may discuss IBM's national service coverage or the broad range of our product offerings as long as such references are accurate and relevant in demonstrating IBM's capability to meet a particular customer's need.

IBM will continue to compete vigorously in bidding for government and commercial business, If circumstances require modified pricing or service terms, the modifications must be specifically approved by the appropriate level of management. Never extend any modified service or contract terms to government or commercial enterprises without prior authorization.

IBM extends appropriate terms to each type of customer, For example, distributors, dealers, other equipment manufacturers and end users purchase certain IBM equipment under different terms. However, within each category, IBM endeavors to conduct its business so that all customers who are procuring under similar business conditions are treated fairly.

You also must treat all suppliers fairly. In deciding among competing suppliers, weigh all the facts impartially. You should do so whether you are in a purchasing job, a branch office or any other part of the business--and whether you are buying millions of parts or just a few, or contracting for a small repair job or any other service.

Whether or not you are in a position to influence decisions involving the evaluation or selection of suppliers, you must not exert or attempt to exert influence to obtain "special treatment" on behalf of a particular supplier. Even to appear to do so can undermine the integrity of our established procedures. IBM uses a competitive evaluation process to maintain equity in selecting suppliers. Prices and other information submitted by suppliers and IBM's evaluation of that information are confidential to IBM. Employees and former employees may not use any of this information outside of IBM without written permission from management. It is essential that suppliers competing for IBM's business have confidence in the integrity of our selection process.

Seeking reciprocity is contrary to IBM policy and may also be unlawful. In other words, you should not tell a prospective supplier that your decision to purchase its goods or services is contingent on the supplier's agreement to purchase IBM products or services. To avoid allegations of reciprocal dealing, do not tell a prospective customer that IBM deserves its business because of IBM's purchases from that customer.

This does not mean that an IBM customer is precluded from being an IBM supplier. It simply means that IBM's decision to buy goods and services from a supplier must be made independently from that supplier's decision to purchase IBM products and services.

IBM employees should make known to appropriate levels of management any allegations that government procurement laws have been violated. This may be done directly through your manager, through the Open Door or Speak Up programs, through IBM legal counsel, marketing or business practices or any other established channels.

Retribution against employees for reporting such allegations will not be tolerated. Subject to any applicable legal requirements, employee anonymity and confidentiality will be protected.

If you work in a marketing or service activity, IBM asks you to compete not just vigorously and effectively, but fairly as well.

It has long been IBM's policy to sell products and services on their merits, not by disparaging competitors, their products or their services. False or misleading statements and innuendoes are improper. Don't make comparisons that unfairly cast the competitor in a bad light. Such conduct only invites disrespect from customers and complaints from competitors. In short, stress the advantages of IBM products and services, and be sure that all comparisons are fair and accurate.

IBM does not disclose unannounced offerings to a prospect or a customer that have not been disclosed to customers generally. There are exceptions. one is when the national interest is involved. Another is when a customer works with IBM under a formal agreement to develop or test new products, programs, services or distribution plans. In addition, IBM will make limited disclosures to provide planning direction to customers.

For these exceptions and other special situations, there are specific procedures to be followed. And for each, appropriate authorization must be obtained.

If a competitor already has a firm order from a customer for an application, it is IBM practice not to market IBM products or services for that application before it is installed.

What is a "firm order '? Letters of intent, free trials, conditional agreements and similar arrangements usually are not considered firm orders- unconditional contracts are. Generally, if a firm order does not exist, you may sell to that customer. However, this is a complicated subject, and as a result it is often difficult to determine if a firm order actually exists. When a situation is unclear, seek advice from your marketing practices or business practices department or IBM legal counsel.

Frequently, other organizations have more than one relationship with IBM. For example, a distributor may be both an IBM customer and a competitor. Another organization may be an IBM supplier and customer at the same time. A few organizations may even be suppliers, competitors, distributors, and end users of IBM products. In addition, IBM has relationships with many other types of organizations that continue to emerge in our industry. They include leasing companies, software houses, distributors, dealers, banks and other financial institutions, remarketers, equipment manufacturers, maintenance companies, systems integrators, third-party programmers and many others who compete with, buy from or sell to IBM. In any dealings, it is important that you understand the various relationships involved.

Generally, you should deal with another organization in only one relationship at a time. For example, if you are buying from another company, don't try to sell to it at the same time. That could form the basis for a possible allegation of reciprocal dealing, which, as previously mentioned, should be avoided.

IBM has various relationships with complementary third parties to facilitate the installation of IBM offerings. These complementary third parties are outside organizations that provide end users with information-handling solutions that use or rely upon an IBM offering. If your responsibilities bring you into contact with these third parties, you must follow the marketing and services guidelines published by your function that describe the appropriate conduct in dealing with IBM authorized remarketers, IBM authorized assistants and reference organizations. In addition to their complementary offerings, some of these third parties market products that compete with IBM. When such a situation arises, you must exercise caution and follow established guidelines.

Because many companies have multiple relationships with IBM, it is important to recognize when a company you are dealing with, as a supplier or a customer, is also an IBM competitor. Such relationships require extra care. It is inevitable that you, other IBM employees, and competitors will, from time to time, meet, talk, and attend the same industry or association meetings. Many of these contacts are perfectly acceptable as long as established procedures are followed. Acceptable contacts include: sales to other companies in our industry; purchases from them; participation in approved joint bids; and attendance at business shows, standards organizations and trade associations. But even these contacts require caution.

In all contacts with competitors, avoid discussing pricing policy, terms and conditions, costs, inventories, marketing and product plans, market surveys and studies, production plans and capabilities--and of course, any other proprietary or confidential information.

Collaboration or discussion of these subjects with competitors can be illegal. If a competitor raises any of them, even lightly or with apparent innocence, you should object, stop the conversation immediately, and tell the competitor that under no circumstances can you discuss these matters. If necessary, you should leave the meeting.

In summary, disassociate yourself and IBM from participation in any possibly illegal activity with competitors; confine your communication to what is clearly legal and proper. Finally, report immediately any incident associated with a prohibited subject to IBM legal counsel.

In the normal course of business, it's not unusual to acquire information about many other organizations, including competitors. Doing so is a normal business activity and is not unethical in itself. In fact, IBM quite properly gathers this kind of information for such purposes as extending credit and evaluating suppliers. The company also collects information on competitors from a variety of legitimate sources to evaluate the relative merits of its own products, services, and marketing methods. This activity is proper and necessary in a competitive system.

There are, however, limits to the ways that information should be acquired and used, especially information about competitors. No company should employ improper means to acquire a competitor's trade secrets or other confidential information. Flagrantly illegal practices such as industrial espionage, trespassing, burglary, wiretapping and stealing are obviously wrong. But so is hiring a competitor's employees to get confidential information. Improper solicitation of confidential data from a competitor's employees or from IBM customers is wrong. IBM will not tolerate any form of questionable intelligence-gathering.

Information about other companies should be treated with sensitivity and discretion. Such information is often about individuals. And other companies are rightly concerned about their reputations and the privacy of their people. Adverse information with no business use should not be kept or maintained.

When working with sensitive information about other companies, you should use that information in the proper context and make it available only to other IBM employees with a legitimate need to know. In presenting such information, you should disclose the identity of the organization or individuals only if it is necessary. If disclosure is not necessary, you should present the information in the aggregate or by some other means.

Other organizations, like IBM, have intellectual property they want to protect. So do individuals. Also like IBM, they are sometimes willing to disclose their confidential information for a particular purpose. If you are on the receiving end of another party's confidential information, you must proceed with caution to prevent any accusations that IBM misappropriated or misused the information.

Restrictions on Its Use

To avoid the risk of IBM being accused of misappropriating or misusing someone's confidential or restricted information, there are certain steps you should take before receiving such information. The receipt of confidential or restricted information (whether oral, visual or written) must not take place until the terms of its use have been formally agreed to by IBM and the other party. That means a written agreement approved by IBM legal counsel. Furthermore, unless otherwise delegated, establishing such an agreement for the receipt of confidential or restricted information of another party will require the prior written approval of an appropriate IBM executive. Once another party's confidential or restricted information is properly in your hands, you must not use, copy, distribute or disclose that information unless you do so in accordance with the terms of the agreement.

In any case, do not take the status of information for granted. If you have information in your possession that you believe may be confidential to a third party or may have restrictions placed on its use, you should consult immediately with IBM legal counsel.

Special care should be taken in acquiring software from others. As intellectual property, software is protected by copyright, and may also be protected by patent, trade secret or as confidential information. Such software includes computer programs, databases and related documentation owned by the party you are dealing with or by another party. Before you accept software or sign a license agreement, you must follow established procedures. The terms and conditions of such license agreements--such as provisions not to copy or distribute programs--must be strictly followed. Also, if you acquire software for your personally owned equipment, you should not copy any part of such software in any development work you do for IBM, place such software on any IBM-owned computer system, or generally bring such software onto IBM premises.

IBM and many other companies have trademarks--words, names, symbols or devices--that are used to identify and distinguish the company's products. Some trademarks are registered in the U.S. Patent and Trademark office; others are not. For example, the block plain letters "IBM" and the IBM striped logotype are registered trademarks of IBM Corporation, indicated by an "(R)". The term "SAA" is also a trademark of IBM, but it is not registered. Its trademark status is indicated by "TM". There may be additional or different trademark designations outside of the U.S. In all countries, it is important that IBM trademarks and the trademarks of other companies be acknowledged and used properly. Specifically, you should always insure that the trademark is spelled correctly and written the way the owner of the trademark writes it. You should avoid using the trademark as a generic name and should use the trademark as an adjective. Also, you should properly acknowledge the trademark in publications by indicating the first time the name or word is mentioned, that the particular name or word is a trademark of IBM or another company.

You should consult your local intellectual property law department if you have questions on the proper use of a trademark.

Gifts offered to or exchanged by employees of different companies vary widely. They can range from widely distributed advertising novelties of nominal value, which you may give or accept, to bribes, which you unquestionably may not give or accept.

You may pay for or accept customary business amenities such as meals, provided the expenses involved are kept at a reasonable level and are not prohibited by law or known customer business practice. Suppliers, including IBM, frequently find it necessary to provide education and executive briefings for their customers. It's all right to provide or accept some services in connection with this type of activity. For example, transportation in IBM's or a supplier's plane to and from company locations as well as food and lodging at company facilities, generally is acceptable, although subject to management approval, However, IBM generally expects its employees to use commercial carriers and facilities.

Neither you nor any member of your family may solicit or accept from a supplier or customer money or a gift that is, or could be reasonably construed to be, connected with IBM's business relationship with that supplier or customer. Gifts include not only material goods, but also services, promotional premiums or discounts on personal purchases of goods or services. However, unless IBM has specified to the contrary, you may accept promotional premiums and discounts offered by transportation companies, hotels, auto rental agencies, and restaurants if they are based upon membership in bonus programs for individuals and are offered to travelers generally. Furthermore, you may accept a gift of nominal value, such as an advertising novelty, when it is customarily offered to others having a similar relationship with the customer or supplier. If you have any doubts about a particular situation, you should consult with your manager.

If you are offered money or a gift, or if either arrives at your home or office, tell your manager immediately. Appropriate arrangements will be made to return or dispose of what has been received, and the supplier or customer will be reminded of IBM's gift policy.

When authorized by IBM, marketing people may refer customers to third-party vendors such as IBM authorized remarketers, IBM authorized assistants' third-party software organizations or financing houses. However, IBMers may not accept any fee, commission or other compensation for this activity from anyone except IBM.

You may not give money or any gift to an executive, official or employee of any supplier, customer, government agency or any other organization if doing so could reasonably be construed as having any connection with IBM's business relationship. U.S. law makes bribery of foreign officials who have discretionary authority illegal and provides for criminal sanctions against those who fail to comply. This prohibition applies to both improper payments made directly by U.S. companies and their officers and those made indirectly through persons who may act for the company, In addition, U.S. law prohibits the offering or acceptance of "kickbacks,"! that is, anything of value offered or accepted for the purpose of obtaining favorable treatment in connection with a government contract. In countries where local customs call for giving gifts to customers or others on special occasions, you may, with prior approval, present gifts that are lawful, appropriate, and of nominal value, provided the action cannot be construed as seeking special favor.

What is acceptable practice in the commercial business environment, such as providing education, transportation, entertainment or other things of value, may be entirely unacceptable, and may even violate certain federal, state or local laws and regulations, in dealings with government employees or those who act on the government's behalf. Therefore, you must be aware of and adhere to the relevant laws and regulations governing relations between government customers and suppliers.

As a general guideline, during the course of a government agency procurement, you and others competing for that procurement should not try to improperly influence the decisions of, or obtain restricted information from, government procurement officials, including those who act on the government's behalf. Specifically, you should not undertake directly or indirectly any of the following activities during a government procurement:

• Discuss or offer employment or business opportunities that could personally benefit procurement officials
• Offer or provide gratuities in connection with procurement activity, and/or
• Solicit or obtain proprietary or source selection information

Furthermore, certain legal restrictions may exist with respect to the hiring by IBM of former employees of the government who participated personally and substantially on behalf of the government in a federal agency procurement. You should consult with IBM management and IBM legal counsel before attempts are made to hire any such persons.

Finally, you and others acting on IBM's behalf should promptly report, through established channels, any actual or possible violations by IBM or others involved in the procurement.

Besides these general guidelines, it is your responsibility to understand and follow any additional guidelines that your functional area or IBM unit may have--whether you are in marketing, engineering, manufacturing, purchasing, or you represent IBM in some other capacity.

IBM's policy is to comply with all laws and regulations that apply to its business. As you conduct IBM's business, you may encounter a variety of legal issues, particularly in the areas described below. If you have questions on specific laws or regulations contact your local IBM legal counsel.

IBM is in a "high technology" industry. As a result, IBM technology in the form of products and all technical data relating to the design, production and use of those products is subject to U.S. and foreign export control laws and regulations. That means that when IBM products and technical data are exported, IBM must obtain an export authorization from the U.S. or appropriate foreign government.

While most employees are not likely to be involved in the direct export of IBM products or data, you should be aware of how export law affects the company. Export laws apply to all international transactions, including intercompany, with suppliers, other equipment manufacturers, and alliance companies--any relationship where IBM will be involved in exporting commodities, technical data, software, technical assistance and similar support.

It is against the law and IBM policy to facilitate the unauthorized export of IBM technology. If you have questions on export related issues, talk with your manager or your local Export Regulation Coordinator or contact the Export Regulation Office.

U.S. law prohibits IBM from complying with or supporting a foreign country's boycott of another country which is "friendly" to the United States. In addition, IBM is required to report promptly to the U.S. Government any request to support or to furnish information concerning a boycott. A foreign country or an entity associated with the country could make the request in a bid invitation, purchase contract, letters of credit, or orally in connection with a transaction. If you receive or learn of a boycott or related information request, report it to your manager or IBM legal counsel.

As a major importer, IBM must comply with import regulations and requirements when engaging in international trade. if you are involved with importing--such as development process activity requiring non-U.S. sourcing or customer activity requiring the shipment of parts to another country--you need to be aware of such regulations and requirements. A failure to comply with the law can result in fines, penalties, imprisonment and/or a loss of import privileges. If you have questions about U.S. imports, contact the International Purchasing Office and Distribution Center in Boulder, Colorado. For questions about non-U.S. imports, contact the local country's import department.

IBM is committed to environmental affairs leadership worldwide. We will comply with all environmental laws. If there is no law or if the law does not protect the environment, we will set and adhere to stringent standards of our own.

If you are involved with processes that affect the environment, you must perform your job conscientiously. Examples include measuring, recording or reporting discharges and emissions to the environment or handling hazardous wastes. It is up to you to comply with environmental regulations and permits and to maintain IBM standards.

As an employee, you have a role to play in protecting the environment. If you become aware of any violation of environmental law or any action that may appear to conceal such a violation, you should immediately report the matter to your manager or directly to IBM legal counsel.

What personal activities or circumstances outside work might conflict with your job responsibilities at IBM? What factors should you consider to avoid a possible conflict of interest?

Your private life is very much your own. Still, a conflict of interest may arise if you engage in any activities or advance any personal interests at the expense of IBM's interests. It's up to you to avoid situations in which your loyalty may become divided. Each individuals situation is different, and in evaluating your own, you will have to consider many factors. The most common types of conflicts are addressed here to help you make informed decisions.

An obvious conflict of interest is providing assistance to an organization that markets products and services in competition with IBM's current or potential products or service offerings. You may not, without IBM's consent, work for such an organization as an employee, a consultant, or as a member of its board of directors. Such activities are prohibited because they divide your loyalty between IBM and that organization.

Today, many IBM employees are engaged on their own time in routine activities that involve personal computers, software or other products that IBM offers to its customers. Generally, such activities do not result in a conflict of interest. However, employees should be careful not to become engaged in activities that do conflict with IBM's business interests.

Obviously, you may not commercially market products or services in competition with IBM's current or potential product offerings. Such marketing activities are "commercial" if you receive direct or indirect remuneration of any kind. Although marketing competing products and services commercially creates unacceptable conflicts of interest, performing such activities on a noncommercial basis is usually permissible. However, it would not be permissible if IBM decides that such activity has or may have more than a minimal impact on its current or future business.

Because IBM is rapidly expanding into new lines of business and new areas of interest, the company must constantly redraw lines of acceptable activity. It is unlikely that you will find definitive answers to many of your questions regarding the boundaries of acceptable activity in published guidelines. It is therefore your responsibility to consult with your management or IBM legal counsel to determine whether your planned activity will compete with any of IBM's actual or potential product lines. This should be done before you pursue any activity that might create a conflict of interest with IBM.

Generally, you may not be a supplier to IBM, represent a supplier to IBM, work for a supplier to IBM, or be a member of its board of directors while you are an employee of IBM. In addition, you may not accept money or benefits of any kind for any advice or services you may provide to a supplier in connection with its business with IBM. Also, you may not work on any products or services offered by a supplier to IBM.

You may not perform outside work or solicit such business on IBM premises or while working on IBM time, including time you are given with pay to handle personal matters. Also, you are not permitted to use IBM equipment, telephones, materials, resources or proprietary information for any outside work.

IBM encourages employees to be active in the civic life of their communities. However, such service may, at times, place you in a situation that poses a conflict of interest with IBM. As a board or committee member, you may, for example, be confronted with a decision involving IBM. It might be a decision to purchase IBM equipment or services. Or it might be a decision by a board of tax assessors or a zoning board that affects IBM property. In such circumstances, your interest in IBM and your obligation to the civic organization might pull you in opposite directions. Should you abstain in such a situation?

There are several considerations. The law may require you to abstain, depending on your position in IBM and whether you stand to gain personally from the decision. On the other hand, there may be circumstances in which the law does not permit you to abstain. Before making your decision, you should get advice from the civic organization's lawyer and from IBM legal counsel.

If the law does not require you to abstain, your participation in such a decision or vote may still cause substantial embarrassment to you, to the board or committee, or to IBM. In considering the possible consequences of your decision, it may be helpful to ask yourself the following questions: How might the story be reported by the press, and how might your fellow townspeople react to such a story? Should you abstain to preserve the public trust in your objectivity and integrity? And, will IBM be needlessly embarrassed by your vote either for or against its interest? Whether or not you finally abstain, you should make it clear that you are an IBM employee and thereby head off any charges of trying to conceal your association with IBM. And, if you decide to abstain, state clearly that you are doing so because there would be a conflict of interest--or the appearance of one--if you did not.

Generally, you are the person in the best position to decide whether or not you should abstain. And how you handle the decision is up to you. it follows, of course, that you bear the responsibility for your decision.

IBM will not make contributions or payments to political parties or candidates. In many countries, political contributions by corporations are illegal. IBM will not make such gifts, even in countries where they are legal. Also, the company will not provide any other form of support that may be considered a contribution.

In this regard, your work time is the equivalent of such a contribution. Therefore, you will not be paid by IBM for any time spent running for public office, serving as an elected official or campaigning for a political candidate, unless required by law. You can, however, take reasonable time off without pay for such activities, if your IBM duties permit the time off and it is approved by your manager. You also may use vacation time for political activity, or you may be able to make up political-activity time outside your regular work schedule.

When you speak out on public issues, make sure that you do so as an individual. Don't give the appearance that you are speaking or acting on IBM's behalf.

You should not have a financial interest in any organization that IBM does business with if that interest might cause you to have a conflict of interest with IBM. Such organizations include suppliers, competitors, customers, distributors and alliance companies.

To determine whether an improper interest exists, ask yourself the following questions:

• What is the extent of the competition or the nature of the relationship between IBM and the other company? If the other company is in more than one line of business, how significant is the part that competes with or supplies IBM?
• What is the size of my investment in relation to my salary and other family income, including income from other investments?
• Is it significant enough to cause me to take some action as an IBM employee to protect or enhance my investment?
• Given the nature of my job in IBM, could my actions as an IBM employee affect the value of my investment in the other company? Could my actions significantly enhance my investment, even if it is a relatively modest one?

A financial interest is improper if the combination of your job, the amount of your investment, and the particular company in which you invested could--when viewed objectively by another person--influence your actions as an IBM employee.

In the case of a supplier or alliance company, if you have anything to do, either directly or indirectly, in deciding whether IBM does business with that company, you should not have any financial interest at all in the company. You should not evade these guidelines on investments by acting indirectly through anyone else.

Investments in closely held organizations--typically, closely held corporations, partnerships or even sole proprietorships--raise additional concerns over those in publicly traded companies. That is because of the closer ties of investors to most closely held organizations. For example, there are generally relatively few investors, or owners, of such companies, giving each a greater stake in its ownership; the investors often have a chance to participate in the company's day-to-day operations; and the investors may be perceived to be closely identified with the company.

This relatively close relationship may give the appearance to competitors of the closely held organization that it derives some benefit from IBM. Such a relationship may also give the appearance to IBM employees that the investing employee is using IBM's time, facilities, or confidential information for the benefit of the closely held company. For these reasons, employees may not make any investment in a closely held organization that is a competitor, supplier, distributor, or organization that remarkets IBM products, such as Industry Remarketers. Exceptions must be specifically approved by management with the advice of IBM legal counsel.

In the course of your employment with IBM, you may become aware of information about IBM or other companies that has not been made public. The use of such nonpublic, or "inside,, information about IBM or another company for your own financial benefit not only is unethical, but also may be a violation of law. U.S law prohibits insider trading and deceptive practices in stocks and securities; these prohibitions may apply outside the United States. IBM will not tolerate the improper use of inside information. Here are some examples of how you 'd the improper use of inside information:

• If you know that IBM is about to announce a new product or make a purchasing decision that could affect the price of the stock of a competitor or supplier, you should not buy or sell the stock of that company until after the information becomes public.
• Similarly, if you know that IBM is about to make an announcement that could affect the price of its own stock, you should not buy or sell IBM stock on the open market until after the announcement.
• You should not buy or sell the stock of a customer or alliance company based on any inside information you have about that company.
• If you have nonpublic information that IBM is about to build a new facility or expand an existing facility, you should not invest in land or in any business near the new site.
• You should not disclose inside information to IBM employees who do not have a business need to know or to anyone outside of IBM.

As with investments, you should not evade these guidelines by acting through anyone else.

With the growth in two-career families and the expansion of the industry, you may find yourself in a situation where your spouse, another member of your immediate family, or someone else you are close to is a competitor or supplier of IBM, or is employed by one. While everyone is entitled to choose and pursue a career, such situations call for extra sensitivity to security, confidentiality and conflicts of interest. The closeness of the relationship might lead you to inadvertently compromise IBM's interests.

There are several factors to consider in assessing such a situation. Among them are the relationship between IBM and the other company, the nature of your responsibilities as an IBM employee and those of the person close to you, and the access each of you has to your respective employer's confidential information.

You should also be aware that the situation, however harmless it may appear to you, could arouse suspicions among your associates that might affect your working relationships. The very appearance of a conflict of interest can create problems, regardless of the behavior of the IBM employee involved. To remove any such doubts or suspicions, you should review your specific situation with your manager to assess the nature and extent of any concern and how it can be resolved. Frequently, any risk to IBM's interests is sufficiently remote that your manager need only remind you to guard against inadvertently disclosing IBM confidential information. However, in some instances, a change in the job responsibilities of one of the people involved may be necessary.

What are competition laws? Why do most countries have them? What should you do to assure compliance with them?

Laws governing competition exist in most of the industrialized countries in which IBM does business. The purpose of competition laws, which also may be known as antitrust, monopoly, fair trade or cartel laws, is to prevent interference with the functioning of a competitive market system. While the purpose of such laws is primarily economic, their effect is often seen as going beyond consumer welfare to protect other values of society, including individual freedoms.

Under these laws, companies may not enter into agreements with other companies, however informally, that unreasonably restrict the functioning of the competitive system. A good example of such a prohibited agreement is one between competitors to charge the same price for their products. Other examples include: agreements between competitors to divide markets, to divide customers or to control their production; a company's agreement with its suppliers that they will not sell to its competitors, or with its distributors that they will not handle competitive products. These and any other agreements that would limit competition are highly questionable if not outright illegal.

All contracts and arrangements between IBM and other persons and companies should be reviewed by IBM legal counsel, except for arrangements already approved by IBM legal counsel. These exceptions include standard practices and procedures, as well as standard types of contracts such as sales and purchasing agreements.

Companies also may violate competition laws without acting jointly with other companies. For example, they may take actions that unreasonably restrict the competitive process. If one of the leaders in an industry takes such actions, it may illegally monopolize or attempt to monopolize its industry or unlawfully abuse its dominant position. For example, prices that such a company sets for its products or services are frequently alleged to be in violation of competition laws.

No prices, whether special or standard, should be established within IBM without prior review by IBM legal counsel in order to avoid charges that the prices are "predatory," "discriminatory," "collusive," "abusive," "unfair" or otherwise in violation of competition laws. Other individual actions by companies also may be alleged to violate competition laws. These laws frequently may be unclear in their application to any particular action. To avoid violations, companies must take into account the purpose of the particular action, its effect on competitors, its business justification, and other factors to ensure that the action is not unreasonably restricting competition.

This is obviously an imprecise standard. So, once again, IBM legal counsel should be consulted throughout the consideration of any action of competitive significance.

IBM's policy is to comply fully with competition laws throughout the world. You can help by adhering to the business conduct guidelines in this booklet, by being sensitive to the possibility of legal concerns under competition laws, and by raising any such concerns with IBM legal counsel.