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IBM Notice of 2008 Annual Meeting and Proxy Statement

1. Election of directors for a term of one year General information: Executive compensation:
Report of the audit committee of the board of directors Audit and non-audit fees 2. Ratification of appointment of independent registered public accounting firm Stockholder proposals 3. Stockholder proposal on cumulative voting 4. Stockholder proposal on executive compensation 5. Stockholder proposal on board committee on human Rights 6. Stockholder proposal on special meetings 7. Stockholder proposal on advisory vote on executive compensation

2007 Outstanding equity awards at fiscal year-end narrative

Option awards (Columns (b)–(f))

  • The Grant Date for each of the outstanding option awards has been included to facilitate understanding of the vesting schedules.
  • Additionally, a Total line has been included for each named executive officer to provide the reader with a better understanding of the total number of options outstanding in each category (exercisable and unexercisable).
  • IBM has not granted any option awards that are Equity Incentive Plan Awards; therefore no amounts are reported in column (d) of the 2007 Outstanding Equity Awards at Fiscal Year-End Table.
  • See the 2007 Summary Compensation Table Narrative above for more details on option awards.

Stock awards (Columns (g)–(j))

General Information
The Grant Date for each of the outstanding RSU and RRSU awards (column (g)) and PSU awards (column (i)) has been included to facilitate understanding of the vesting schedules.

Number of Shares or Units of Stock That Have Not Vested (Column (g))
The amounts in this column are the number of RSUs and RRSUs that were outstanding as of December 31, 2007.

Market Value of Shares or Units of Stock That Have Not Vested (Column (h))
The amounts in this column are the value of RSUs and RRSUs disclosed in column (g), calculated by multiplying the number of units by the closing price of IBM stock on the last business day of the fiscal year.

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (Column (i))
The amounts in this column are the number of PSUs that were outstanding as of December 31, 2007.

Performance Share Units

  • Amounts in column (i) of the 2007 Outstanding Equity Awards at Fiscal Year-End Table reflect the maximum number possible for each PSU award.
  • The maximum payout level is 150% of target, and the program has not paid out at the maximum level since the 1995-1997 performance period (which paid out in February 1998).
  • The performance criteria for IBM’s PSU program is based on cumulative three-year rolling targets. Therefore, measuring annual performance against these targets, which is required by the SEC rules, is not meaningful.
  • Payouts in the last 5 years have ranged from 54% to 147%.
  • See Section 2 of the 2007 Compensation Discussion and Analysis as well as the 2007 Summary Compensation Table Narrative for a detailed description of the PSU program including payout calculations.
  • The table below provides the payout levels for all of the outstanding PSU awards for each of the named executive officers.

2007 Outstanding PSU Award Payout Levels

Name Grant Date Threshold Target Maximum

S.J. Palmisano 3/08/2005 8,374 33,495 50,243
5/08/2006 23,619 94,475 141,713
5/08/2007 18,421 73,685 110,528
M. Loughridge 3/08/2005 1,622 6,487 9,731
5/08/2006 4,688 18,750 28,125
5/08/2007 6,263 25,053 37,580
S.A. Mills 3/08/2005 2,079 8,315 12,473
5/08/2006 4,375 17,500 26,250
5/08/2007 5,527 22,106 33,159
M.E. Daniels 3/08/2005 1,889 7,555 11,333
5/08/2006 3,906 15,625 23,438
5/08/2007 4,790 19,158 28,737
D.T. Elix 3/08/2005 2,392 9,569 14,354
5/08/2006 4,531 18,125 27,188
5/08/2007 5,527 22,106 33,159

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (Column (j))
The amounts in this column are the value of PSUs disclosed in column (i), calculated by multiplying the number of units by the closing price of IBM stock on the last business day of the fiscal year.

2007 Outstanding Equity Awards at Fiscal Year-End Table

Option Awards Stock Awards
Name(a) Grant Date Number of Securities Underlying Unexercised Options(1)(#) Exercisable(b) Number of Securities Underlying Unexercised Options(2)(#) Unexercisable(c) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options(#)(d) Option Exercise Price($)(e) Option Expiration Date(f) Grant Date Number of Shares or Units of Stock That Have Not Vested(3)(#)(g) Market Value of Shares or Units of Stock That Have Not Vested(4)($)(h) Grant Date Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5)(#)(i) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(4)($)(j)

(1) All fully vested option grants in this column vested 25% per year on the first through the fourth anniversaries of the respective grant dates.

(2) The table below shows the vesting schedule for all unexercisable options. All options vest on the anniversary of the grant date in the year indicated. For example, the May 8, 2007 option grant below for Mr. Palmisano will vest in its entirety on May 8, 2010.

(3) The amounts shown in column (g) of the 2007 Outstanding Equity Awards at Fiscal Year-End Table are RSUs and RRSUs that have not yet vested. See 2007 Summary Compensation Table Narrative for additional information on these awards. The table below shows the vesting schedules for these outstanding awards, all of which are RSUs except where otherwise indicated. All awards below vest on the anniversary of the date of grant in the year indicated.
S.J. Palmisano 2/23/1999 100,000 0 N/A $ 88.9550 2/22/2009 7/27/1999 25,000 $ 2,702,500 3/8/2005 50,243 $ 5,431,268
2/29/2000 80,000 0 103.2500 2/28/2010 5/8/2007 31,579 3,413,690 5/8/2006 141,713 15,319,175
9/26/2000 100,000 0 120.1200 9/25/2010 5/8/2007 110,528 11,948,077
2/27/2001 90,000 0 104.7100 2/26/2011
2/26/2002 300,000 0 97.5900 2/25/2012
2/25/2003 250,000 0 78.1300 2/24/2013
2/24/2004 187,500 62,500 105.9600 2/23/2014
3/8/2005 100,000 100,000 101.3300 3/7/2015
3/8/2005 0 30,325 92.1200 3/7/2015
5/8/2006 22,032 66,098 91.0400 5/7/2016
5/8/2006 0 63,628 82.7600 5/7/2016
5/8/2007 0 58,264 102.8000 5/7/2017
Total 1,229,532 380,815 56,579 $ 6,116,190 302,484 $ 32,698,520
M. Loughridge 2/23/1999 14,700 0 N/A $ 88.9550 2/22/2009 3/7/2006 17,648 $ 1,907,749 3/8/2005 9,731 $ 1,051,921
2/29/2000 22,500 0 103.2500 2/28/2010 5/8/2006 7,500 810,750 5/8/2006 28,125 3,040,313
2/27/2001 24,500 0 104.7100 2/26/2011 5/8/2007 10,737 1,160,670 5/8/2007 37,580 4,062,398
2/26/2002 28,462 0 97.5900 2/25/2012
5/1/2002 10,388 0 83.1600 4/30/2012
2/25/2003 28,881 0 78.1300 2/24/2013
2/24/2004 21,174 7,058 105.9600 2/23/2014
7/27/2004 15,000 5,000 94.4700 7/26/2014
3/8/2005 19,367 19,367 101.3300 3/7/2015
3/8/2005 0 5,597 92.1200 3/7/2015
5/8/2006 6,996 20,990 91.0400 5/7/2016
5/8/2006 0 8,402 82.7600 5/7/2016
5/8/2007 0 8,701 102.8000 5/7/2017
Total 191,968 75,115 35,885 $ 3,879,169 75,436 $ 8,154,632
S.A. Mills 2/23/1999 29,438 0 N/A $ 88.9550 2/22/2009 11/3/1999 12,500 $ 1,351,250 3/8/2005 12,473 $ 1,348,331
2/29/2000 29,758 0 103.2500 2/28/2010 5/8/2006 7,000 756,700 5/8/2006 26,250 2,837,625
9/26/2000 25,000 0 120.1200 9/25/2010 12/22/2006 12,346 1,334,603 5/8/2007 33,159 3,584,488
2/27/2001 50,000 0 104.7100 2/26/2011 5/8/2007 9,474 1,024,139
2/26/2002 64,774 0 97.5900 2/25/2012
2/25/2003 57,189 0 78.1300 2/24/2013
2/24/2004 41,926 13,976 105.9600 2/23/2014
3/8/2005 24,823 24,824 101.3300 3/7/2015
3/8/2005 0 4,523 92.1200 3/7/2015
5/8/2006 6,530 19,590 91.0400 5/7/2016
5/8/2006 0 11,804 82.7600 5/7/2016
5/8/2007 0 12,411 102.8000 5/7/2017
Total 329,438 87,128 41,320 $ 4,466,692 71,882 $ 7,770,444
M.E. Daniels 2/23/1999 28,200 0 N/A $ 88.9550 2/22/2009 9/3/1999 5,000 $ 540,500 3/8/2005 11,333 $ 1,225,097
2/29/2000 27,000 0 103.2500 2/28/2010 12/6/2004 11,628 1,256,987 5/8/2006 23,438 2,533,648
2/27/2001 27,000 0 104.7100 2/26/2011 3/7/2006 17,648 1,907,749 5/8/2007 28,737 3,106,470
2/26/2002 31,802 0 97.5900 2/25/2012 5/8/2006 6,250 675,625
2/25/2003 37,000 0 78.1300 2/24/2013 5/8/2007 8,211 887,609
2/24/2004 30,000 10,000 105.9600 2/23/2014 12/18/2007 35,399 3,826,632
3/8/2005 15,515 15,515 101.3300 3/7/2015
7/26/2005 8,084 8,084 92.5100 7/25/2015
5/8/2006 5,830 17,491 91.0400 5/7/2016
Total 210,431 51,090 84,136 $ 9,095,102 63,508 $ 6,865,215
D.T. Elix 2/23/1999 46,200 0 N/A $ 88.9550 2/22/2009 5/8/2006 7,250 $ 783,725 3/8/2005 14,354 $ 1,551,667
2/29/2000 50,000 0 103.2500 2/28/2010 5/8/2007 9,474 1,024,139 5/8/2006 27,188 2,939,023
2/27/2001 65,000 0 104.7100 2/26/2011 5/8/2007 33,159 3,584,488
2/26/2002 70,663 0 97.5900 2/25/2012
2/25/2003 67,082 0 78.1300 2/24/2013
2/24/2004 49,181 16,394 105.9600 2/23/2014
3/8/2005 28,568 28,569 101.3300 3/7/2015
3/8/2005 0 6,458 92.1200 3/7/2015
5/8/2006 6,763 20,290 91.0400 5/7/2016
5/8/2006 0 9,263 82.7600 5/7/2016
5/8/2007 0 8,455 102.8000 5/7/2017
Total 383,457 89,429 16,724 $ 1,807,864 74,701 $ 8,075,178

Vesting Schedule for Unexercisable Options

Name Grant Date 2008 2009 2010

S.J. Palmisano 2/24/2004 62,500
3/8/2005 50,000 50,000
3/8/2005 30,325
5/8/2006 22,033 22,032 22,033
5/8/2006 63,628
5/8/2007 58,264
M. Loughridge 2/24/2004 7,058
7/27/2004 5,000
3/8/2005 9,683 9,684
3/8/2005 5,597
5/8/2006 6,997 6,996 6,997
5/8/2006 8,402
5/8/2007 8,701
S.A. Mills 2/24/2004 13,976
3/8/2005 12,412 12,412
3/8/2005 4,523
5/8/2006 6,530 6,530 6,530
5/8/2006 11,804
5/8/2007 12,411
M.E. Daniels 2/24/2004 10,000
3/8/2005 7,757 7,758
7/26/2005 4,042 4,042
5/8/2006 5,830 5,830 5,831
D.T. Elix 2/24/2004 16,394
3/8/2005 14,284 14,285
3/8/2005 6,458
5/8/2006 6,763 6,763 6,764
5/8/2006 9,263
5/8/2007 8,455

Vesting Schedule for Unvested RSUs and RRSUs

Name Grant Date 2008 2009 2010 2011 2012

S.J. Palmisano 7/27/1999
(RRSU)		 25,000
5/8/2007 10,526 10,526 10,527
M. Loughridge 3/7/2006
(RRSU)		 5,883 11,765
5/8/2006 3,750 3,750
5/8/2007 3,579 3,579 3,579
S.A. Mills 11/3/1999
(RRSU)		 12,500
5/8/2006 3,500 3,500
12/22/2006
(RRSU)		 12,346
5/8/2007 3,158 3,158 3,158
M.E. Daniels 9/3/1999
(RRSU)		 5,000
12/6/2004
(RRSU)		 11,628
3/7/2006
(RRSU)		 5,883 11,765
5/8/2006 3,125 3,125
5/8/2007 2,737 2,737 2,737
12/18/2007
(RRSU)		 35,399
D.T. Elix 5/8/2006 3,625 3,625
5/8/2007 3,158 3,158 3,158

(4) Values in these columns are calculated by multiplying the fiscal year-end IBM stock price ($108.10) by the number of shares or units indicated.

(5) The amounts shown in column (i) of the 2007 Outstanding Equity Awards at Fiscal Year-End Table are PSUs that have not yet vested. See 2007 Summary Compensation Table Narrative for additional information on PSUs. The table below shows the vesting schedules for these outstanding PSU awards (reflecting maximum payout), all of which vest on February 1 of the year indicated.

Vesting Schedule for Unvested PSUs

Name Grant Date 2008 2009 2010

S.J. Palmisano 3/8/2005 50,243
5/8/2006 141,713
5/8/2007 110,528
M. Loughridge 3/8/2005 9,731
5/8/2006 28,125
5/8/2007 37,580
S.A. Mills 3/8/2005 12,473
5/8/2006 26,250
5/8/2007 33,159
M.E. Daniels 3/8/2005 11,333
5/8/2006 23,438
5/8/2007 28,737
D.T. Elix 3/8/2005 14,354
5/8/2006 27,188
5/8/2007 33,159
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IBM 2007 Annual Report

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