FREQUENTLY ASKED QUESTIONS -- ANSWERS FROM CLASS COUNSEL Updated June 21, 2005

The following Qs&As have been developed in consultation with the Cooper legal team to efficiently respond to several commonly asked questions that the Alliance has received. Please note that unlike the Qs&As set forth on the IBM website, these have not been reviewed by or approved by IBM. And, as with the Qs&As set forth on the IBM website, this summary does not in any way alter the Settlement Agreement itself or the Notice sent to the class at the direction of the Court. The Settlement Agreement and only the Settlement Agreement governs the terms of the Settlement. Readers of this information are cautioned to rely solely on the Settlement Agreement and the Notice as posted at http://www.coopersettlement.com/subclass1and2/, and not on the information below, in analyzing the Settlement.

1. What is the meaning of Active Employee? The Settlement Agreement defines the term “Active Employee” as an individual who, on December 31, 2004, was a Grandfathered Individual as defined by the Plan.With certain limited exceptions, this refers to any employee who may be eligible to accrue benefits under the Plan after December 31, 2004.

2. Who are the “IBM Vanity Fair employees”? There was a relatively small group of employees (approximately 200) who transferred employment from Vanity Fair to IBM in the summer of 1999. Due to the unique circumstances of the timing of their transfer, the settlement includes a specific reference to those employees to make clear that they are included in the definition of “Active Employees.”

3. How many class members are there? In the parties’ joint effort to inform everyone who might possibly be impacted by the settlement, notice was mailed to approximately 278,000 current and former employees. However, the parties recognized that not all of those notified will be entitled to participate in the settlement. It is estimated, for example, that there may be as many as 20,000 individuals who were notified but are not entitled to a settlement benefit because they left IBM prior to vesting and experience a break in service of more than five years as of June 30, 2005. In addition, several hundred highly paid individuals may have their benefit under the settlement effectively offset by benefits provided by the IBM senior executive retirement plan. It will be impossible to know the exact number of people who will recover until we complete the February 2006 true-up described in the Notice.

4. When can I expect to receive my benefits from the settlement? The settlement agreement contemplates that the settlement benefits to which each Class Member is entitled will be paid within ninety (90) days after appeals process concludes. However, if you are employed by IBM at that time your settlement benefit will not be paid until you leave IBM.

5. Who decided what claims should be pursued on behalf of the Class? Prior to initiating this lawsuit in 1999, Class Counsel worked closely with the Class Representatives and a wide variety of others to identify all of the claims that could properly be asserted. The claims in this suit were filed in late 1999 and have been aggressively prosecuted against very difficult odds and a strong defense by IBM. Recently, at least one person has questioned why the Class did not pursue a claim for “willful and knowing violation of age discrimination laws.” The simple reason is that there is no such legal claim under ERISA available in these circumstances and the filing of such a claim would have been dismissed and likely treated as frivolous.

6. What remedies are available to the Class? The Class can only recover remedies in the Class Action for the unlawful aspects of the amendments--not all aspects of the amendments. IBM, like every other plan sponsor, is legally permitted to amend its Plan to reduce the level of benefits earned in the future regardless of the expectations of its employees. For example, IBM could have announced a freeze of all future benefit accruals for all employees in 1999. While that would have eliminated any future benefit accruals, it would not have been illegal. For that reason, even if the Class Claims were successful in prosecuting all available Class Claims not all of the retirement benefits anticipated prior to the 1995 and 1999 amendments would be restored to the Class Members.

Reflecting the difficulty and novelty of this litigation, no court has previously held that either a pension equity plan or a cash balance plan is age discriminatory (and several courts have refused to do so). For that same reason, no court has ever determined what the defendant should be required to do to remedy such a violation. Following the Court’s entry of its opinion in 2003, the Class asked the Court to enter an order requiring IBM to amend its Plan to correct for the illegal age discrimination by providing additional benefits to older employees to “make up” the difference between what they had received and what they would have received if they had been younger. IBM, in turn, argued that it should not have to make any increases for a wide variety of asserted legal reasons and that even if some relief was appropriate it should be dramatically less than what the Class proposed. While Chief Judge Murphy rejected IBM’s arguments that it should not be required to make any relief available, he did not rule what the appropriate remedy would be and indicated on several occasions that he considered it to be the most difficult aspect of the case.

In this context it is important to note that even if Chief Judge Murphy had agreed to the remedy requested by the Class and even if that remedy was affirmed on appeal, there are a variety of ways IBM could have dramatically reduced the benefits that would actually be paid to the Class members by billions of dollars by further amending the Plan following the completion of the litigation. In fact, one of the very significant benefits of the settlement is the fact that the settlement funds cannot be manipulated in that fashion by IBM. The Cooper settlement benefits will always be provided in addition to whatever other pension benefits the Class Member is entitled to receive (except for a handful of highly paid executives). That was a significant risk to the Class that was the subject of very difficult and hard fought negotiations and favorably resolved by the settlement.

7. Is it possible to compare the “loss” incurred by the Class Members as a result of the 1995 and 1999 Plan amendments to the recovery to be provided by the settlement? As a practical matter, the concept of “loss” can be very misleading in the context of evaluating the settlement. For example, while IBM is required under the settlement to pay an additional $620 million in Total Value if the Class is successful on appeal regarding the Always Cash Balance Claim, no Class Member suffered any “loss” due to the Always Cash Balance enhancement. The Class’ claim asserted that because IBM chose to establish opening cash balances on July 1, 1999, which gave employees the greater of their “accrued benefit” or a benefit calculated under an alternative formula which substantially enhanced the benefits of younger (but not older) employees, IBM violated the law and should be required to provide increased benefits to the older workers.

On the reverse side, it is clear that as a result of the 1995 and 1999 Plan amendments, certain Class Members who continued working at IBM were not going to receive the pension benefits they previously anticipated receiving. Some of that reduction in anticipated future benefits resulted from aspects of the amendments that were not subject to legal challenge. Other aspects of the amendments were subject to legal challenge—and were in fact challenged by the Class Representatives and Class Counsel. To make any attempted analysis even more problematic, the available legal remedy for each of those challenges differs. It is absolutely clear, however, that no matter how successful the Class might be in the litigation, no court was going to award a remedy that would fully make up the “loss” experienced by the Class Members if that loss is defined in terms of the difference between what the Class Members anticipated receiving before the 1995 and 1999 amendments and what they were entitled to receive after those changes. Thus, even if the Class Action had been 100% successful on both liability and remedies, the Class Members still would have suffered a very significant and unremedied reduction in benefits—or “loss”—from what they had expected to receive before the Plan amendments.

8. How was it determined which Class Members would be entitled to participate in the three separate funds? The settlement provides that IBM will pay an agreed upon minimum amount in Total Value of $314,293,000 (as of November 1, 2006) in settlement of the litigation no matter what the outcome of any further appellate proceedings. In addition, under the settlement agreement IBM is required to pay an additional amount of $620 million in the event the Class prevails on appeal on the Always Cash Balance Claim and yet another additional amount of $780 million in the event the Class prevails on appeal on the Cash Balance Claim.

The settlement is structured to reflect the specific claims asserted by the Class Representatives against the IBM Plan, as well as the manner by which the challenged practices impacted the individual Class Members. Thus, the Base Annuity is primarily intended to provide benefits to compensate Class Members adversely impacted by all of the Class Claims except the Always Cash Balance Claim and the Cash Balance Claim. The Decreasing Accrued Benefit Claim is, as a practical matter, irrelevant for this purpose because so far as Class Counsel can determine no Class Member was adversely impacted by that claim before IBM made the correction sought by the Class Representatives. It should be noted, however, that even listing each of these claims separately poses a risk that they might be seen as independent of each other. In reality, they are intertwined in a complex mix, with benefits received in connection with one challenged change affecting, either positively or negatively, the impact of remedies resulting from other issues. For that reason, it is inappropriate to pigeonhole the “value” of each of the claims in the manner some might prefer for simplicity.

9. Why does the settlement structure use service caps? First, service caps are generally recognized as legal unless they serve some inappropriate purpose. The service caps contained in the settlement formulas are not intended to penalize a longer service employee, rather they insure that all employees with over 20 years of service are treated the same at least with respect to service. For example, the 20 year service cap used in the calculation of the Base Annuity insures that long service individuals who are getting early retirement subsidies from the 1991 formula and/or the PCF do not receive a disproportionate share of the Base Annuity fund as they would if there was no cap on service.

The 20 year service cap and the reductions before age 38 used in connection with the Always Cash Balance Claim fund accomplish two things. In operation, the Always Cash Balance alternative formula essentially excluded service beyond 20 years. For someone with 20 years of service, the maximum benefit went to a 38 year old. In an effort to replicate the Always Cash Balance alternative formula but remove any age-based component, the settlement agreement keeps the service cap (as of July 1, 1999) and removes the age factor. That age 38 “cut-off” reflects the fact that beyond that age no one received an increase due to the alternative formula. The discounting interest rate addresses the issue presented by the fact that before that age the younger the employee the larger the benefit the employee received under the alternative formula.

10. Would IBM be required to pay Class Counsel for representing the Class Members if the Class won the case and there was no settlement? The Class Representatives and Class Counsel recognized from the beginning of the lawsuit that there was no reasonable expectation that the court would require IBM to pay for counsel representing the Class Members. This is because under the governing law in the Seventh Circuit Court of Appeals, whether a defendant such as IBM is required to pay statutory fees under ERISA is governed by the court’s decision in Quinn v. Blue Cross and & Blue Shield Ass’n., 161 F.3d 472, 478 (7^th Cir. 1998). Quinn sets out a five factor test to determine whether to award fees to the “prevailing party.” In general, the Class would be required to show that the losing party’s case or defense was asserted in bad faith and was interposed solely to harass the other side. Given that several other district courts have ruled that cash balance plans do not violate ERISA § 204(b) (1) (H), as well as the fact that Chief Judge Murphy repeatedly stated that the case was complex one that he believed would ultimately be resolved by the United States Supreme Court, as well as the fact that the IRS, the Treasury Department and the Department of Labor have failed to act to legally challenge pension equity plans and cash balance plans, it is unlikely that the Class could ever prove that IBM’s defense was not in good faith and was interposed solely for the purpose of harassment.

11. How will the Court determine the attorneys’ fees and reimbursement of costs for Class Counsel? If the trial court approves the settlement as “fair and reasonable,” the governing law in the Seventh Circuit Court of Appeals requires the trial court to determine the attorneys’ fee by doing the court’s best to estimate the terms of the contract that private plaintiffs would have negotiated with their lawyers, had bargaining occurred at the outset of the case when the risk of loss still existed. As the Seventh Circuit explained in its opinion in Matter of Continental Illinois Securities Litigation, 962 F.2d 566, 572 (7^th Cir. 1992), “[t]he object in awarding a reasonable attorneys fee…is to simulate the market… The class counsel are entitled to the fee they would have received had they handled a similar suit on a contingent fee basis with a similar outcome, for a paying client.”

Obviously, this case is very unique in terms of the extraordinary degree of risk involved and the highly specialized and complex nature of the litigation—which was no doubt why Class Counsel were the only knowledgeable and experienced pension class action counsel willing to take on this massive fight on any terms back in 1999. However, it is not the first large pension case in this court. As Chief Judge Murphy noted at the hearing regarding the Subclass 3 settlement in this same case, “we have a pretty substantial body of case law now built up on these complex cases and it seems as if 30 percent is just about the bench mark" for an appropriate contingent fee. Notwithstanding that “substantial body of case law,” Class Counsel is proposing a sliding scale contingent fee that it is significantly less than the 30 percent figure referenced by Chief Judge Murphy.

In considering the appropriate contingent fee to be awarded to Class Counsel for successfully representing the Class Members from 1999 to the present (and into the future), the court will presumably consider not only the complexity and novelty of the actual litigation—as well as the extraordinary resources available to the defendants to defend the case—but also the risks posed by the cash balance industry’s regulatory and statutory efforts. In that context, it is important to note that the battlefield in this case extended far beyond Chief Judge Murphy’s courtroom. The Class Representatives and Class Counsel also worked long and hard over many years to prevent the Treasury Department from taking actions that might have eliminated the Class Members’ recovery in this case. Similarly, the Class Representatives and Class Counsel have aggressively and successfully fought, and continue to fight, efforts in Congress to undermine the Class’ claims against IBM. Class Counsel testified in Congress, hired lobbyists and media consultants, worked with interested groups both supporting and opposing legislation, funded efforts to organize grass roots opposition and support for legislation, and counseled literally dozens if not hundreds of legislators and their staff members.

In short, Class Counsel has prosecuted this case for nearly 6 years against formidable odds and one of the world’s largest companies and most powerful industries--and to date has succeeded beyond anyone’s most optimistic prediction. But the fight is by no means over. First and foremost, the ultimate benefits available to the Class Members depend on the ability to prevail in both the Seventh Circuit and, if necessary, the United States Supreme Court. But the battle also continues on multiple fronts. Representative Boehner introduced proposed legislation on June 9, 2005, to legalize pension equity plans and cash balance plans. By its terms, the legislation purports to apply retroactively to the 1995 and 1999 IBM amendments. Thus, this expensive, time-consuming, difficult, and multi-faceted fight will go on for years even if the settlement is approved by Chief Judge Murphy.