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IBM Notice of 2009 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 3. Approval of long-term incentive performance terms for certain executives pursuant to section 162(m) of the Internal Revenue Code Equity compensation plan information 4. Stockholder proposal on cumulative voting 5. Stockholder proposal on executive compensation and pension income 6. Stockholder proposal on advisory vote on executive compensation

2008 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 2008 Outstanding Equity Awards at Fiscal Year-End Table.
  • See the 2008 Summary Compensation Table Narrative 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, 2008.

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, 2008.

Performance Share Units
  • Amounts in column (i) of the 2008 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 five years have ranged from 54% to 147%.
  • See Section 2 of the 2008 Compensation Discussion and Analysis, as well as the 2008 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.

2008 Outstanding PSU Award Payout Levels

Name Grant Date Threshold Target Maximum
S.J. Palmisano 05/08/2006 23,619 94,475 141,713
  05/08/2007 18,421 73,685 110,528
  05/08/2008 25,701 102,804 154,206
M. Loughridge 05/08/2006 4,688 18,750 28,125
  05/08/2007 6,263 25,053 37,580
  05/08/2008 5,725 22,898 34,347
M.E. Daniels 05/08/2006 3,906 15,625 23,438
  05/08/2007 4,790 19,158 28,737
  05/08/2008 4,907 19,627 29,441
S.A. Mills 05/08/2006 4,375 17,500 26,250
  05/08/2007 5,527 22,106 33,159
  05/08/2008 4,907 19,627 29,441
V.M. Rometty 05/08/2006 3,594 14,375 21,563
  05/08/2007 4,606 18,422 27,633
  05/08/2008 4,907 19,627 29,441
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 values 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.

2008 Outstanding equity awards at fiscal year-end table

 
  Option Awards
 
 Stock Awards(1)
Name
(a)		 Grant Date Number of Securities Underlying Unexercised Options(2) (#) Exercisable
(b)		 Number of Securities Underlying Unexercised Options(3) (#) Unexercisable
(c)		 Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
(d)		 Option Exercise Price($)
(e)		 Option Expiration Date
(f)		 Type of Award(1) Grant Date Number of Shares or Units of Stock That Have Not Vested(4)(#)
(g)		 Market Value of Shares or Units of Stock That Have Not Vested(4)($)
(h)		 Type of Award Grant Date Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(6)(#)
(i)		 Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(5)($)
(j)
S.J. Palmisano 02/29/2000 80,000 0 N/A $103.2500 02/28/2010 RRSU 07/27/1999 25,000 $2,104,000 PSU 05/08/2006 141,713 $11,926,566
  09/26/2000 100,000 0   120.1200 09/25/2010 RSU 05/08/2007 21,053 1,771,820 PSU 05/08/2007 110,528 9,302,036
  02/27/2001 90,000 0   104.7100 02/26/2011         PSU 05/08/2008 154,206 12,977,977
  02/26/2002 300,000 0   97.5900 02/25/2012                
  02/24/2004 250,000 0   105.9600 02/23/2014                
  03/08/2005 150,000 50,000   101.3300 03/07/2015                
  03/08/2005*  30,325 0   92.1200 03/07/2015                
  05/08/2006 44,065 44,065   91.0400 05/07/2016                
  05/08/2006*  0 63,628   82.7600 05/07/2016                
  05/08/2007*  0 58,264   102.8000 05/07/2017                
Total   1,044,390 215,957           46,053 $3,875,820     406,447 $34,206,579
M. Loughridge 02/29/2000 22,500 0 N/A $103.2500 02/28/2010 RRSU 03/07/2006 17,648 $1,485,256 PSU 05/08/2006 28,125 $2,367,000
  02/27/2001 24,500 0   104.7100 02/26/2011 RSU 05/08/2006 3,750 315,600 PSU 05/08/2007 37,580 3,162,733
  02/26/2002 28,462 0   97.5900 02/25/2012 RSU 05/08/2007 7,158 602,417 PSU 05/08/2008 34,347 2,890,644
  02/24/2004 28,232 0   105.9600 02/23/2014 RSU 05/08/2008 9,814 825,946        
  07/27/2004 20,000 0   94.4700 07/26/2014 RRSU 10/28/2008 16,667 1,402,695        
  03/08/2005 29,050 9,684   101.3300 03/07/2015                
  03/08/2005*  5,597 0   92.1200 03/07/2015                
  05/08/2006 13,993 13,993   91.0400 05/07/2016                
  05/08/2006*  0 8,402   82.7600 05/07/2016                
  05/08/2007*  0 8,701   102.8000 05/07/2017                
Total   172,334 40,780           55,037 $4,631,914     100,052 $8,420,377
M.E. Daniels 02/29/2000 27,000 0 N/A $103.2500 02/28/2010 RRSU 09/03/1999 5,000 $420,800 PSU 05/08/2006 23,438 $1,972,542
  02/27/2001 27,000 0   104.7100 02/26/2011 RRSU 12/06/2004 11,628 978,612 PSU 05/08/2007 28,737 2,418,506
  02/26/2002 31,802 0   97.5900 02/25/2012 RRSU 03/07/2006 11,765 990,142 PSU 05/08/2008 29,441 2,477,755
  02/25/2003 37,000 0   78.1300 02/24/2013 RSU 05/08/2006 3,125 263,000        
  02/24/2004 40,000 0   105.9600 02/23/2014 RSU 05/08/2007 5,474 460,692        
  03/08/2005 23,272 7,758   101.3300 03/07/2015 RRSU 12/18/2007 35,399 2,979,180        
  07/26/2005 12,126 4,042   92.5100 07/25/2015 RSU 05/08/2008 8,412 707,954        
  05/08/2006 11,660 11,661   91.0400 05/07/2016                
Total   209,860 23,461           80,803 $6,800,380     81,616 $6,868,803
S.A. Mills 02/29/2000 29,758 0 N/A $103.2500 02/28/2010 RRSU 11/03/1999 12,500 $1,052,000 PSU 05/08/2006 26,250 $2,209,200
  09/26/2000 25,000 0   120.1200 09/25/2010 RSU 05/08/2006 3,500 294,560 PSU 05/08/2007 33,159 2,790,661
  02/27/2001 50,000 0   104.7100 02/26/2011 RRSU 12/22/2006 12,346 1,039,039 PSU 05/08/2008 29,441 2,477,755
  02/26/2002 64,774 0   97.5900 02/25/2012 RSU 05/08/2007 6,316 531,555        
  02/25/2003 57,189 0   78.1300 02/24/2013 RSU 05/08/2008 8,412 707,954        
  02/24/2004 55,902 0   105.9600 02/23/2014                
  03/08/2005 37,235 12,412   101.3300 03/07/2015                
  03/08/2005*  4,523 0   92.1200 03/07/2015                
  05/08/2006 13,060 13,060   91.0400 05/07/2016                
  05/08/2006*  0 11,804   82.7600 05/07/2016                
  05/08/2007*  0 12,411   102.8000 05/07/2017                
Total   337,441 49,687           43,074 $3,625,108     88,850 $7,477,616
V.M. Rometty 02/29/2000 25,200 0 N/A $103.2500 02/28/2010 RRSU 10/22/1999 10,000 $841,600 PSU 05/08/2006 21,563 $1,814,742
  02/27/2001 25,200 0   104.7100 02/26/2011 RRSU 03/07/2006 17,648 1,485,256 PSU 05/08/2007 27,633 2,325,593
  02/26/2002 29,446 0   97.5900 02/25/2012 RSU 05/08/2006 2,875 241,960 PSU 05/08/2008 29,441 2,477,755
  02/24/2004 30,369 0   105.9600 02/23/2014 RSU 05/08/2007 5,264 443,018        
  03/08/2005 19,260 6,420   101.3300 03/07/2015 RRSU 12/18/2007 35,399 2,979,180        
  03/08/2005*  1,998 0   92.1200 03/07/2015 RSU 05/08/2008 8,412 707,954        
  07/26/2005 17,638 5,880   92.5100 07/25/2015                
  05/08/2006 10,728 10,728   91.0400 05/07/2016                
Total   159,839 23,028           79,598 $6,698,968     78,637 $6,618,090

(1) Type of Award:
PSU = Performance Share Unit
RSU = Restricted Stock Unit
RRSU = Retention Restricted Stock Unit

(2) Option awards shown in this column (other than those granted under the Buy-First Program) vested 25% per year on the first through the fourth anniversaries of the respective grant dates. Options granted under the Buy-First Program (indicated by an asterisk (*) in the Grant Date column) vested 100% on the third anniversary of the respective grant dates.

(3) 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 (under the Buy First Program) for Mr. Palmisano will vest in its entirety on May 8, 2010.

Vesting schedule for unexercisable options

  Vesting Schedule
Name Grant Date 2009 2010
S.J. Palmisano 03/08/2005 50,000  
  05/08/2006 63,628  
  05/08/2006 22,032 22,033
  05/08/2007   58,264
M. Loughridge 03/08/2005 9,684  
  05/08/2006 8,402  
  05/08/2006 6,996 6,997
  05/08/2007   8,701
M.E. Daniels 03/08/2005 7,758  
  07/26/2005 4,042  
  05/08/2006 5,830 5,831
S.A. Mills 03/08/2005 12,412  
  05/08/2006 11,804  
  05/08/2006 6,530 6,530
  05/08/2007   12,411
V.M. Rometty 03/08/2005 6,420  
  07/26/2005 5,880  
  05/08/2006 5,364 5,364

(4) The amounts shown in column (g) of the 2008 Outstanding Equity Awards at Fiscal Year-End Table are RSUs and RRSUs that have not yet vested. See 2008 Summary Compensation Table Narrative for additional information on these types of awards. The table below shows the vesting schedules for these outstanding awards. All awards below vest on the anniversary of the date of grant in the year indicated.

Vesting schedule for unvested RSUS and RRSUS

  Vesting Schedule
Name Type of Award Grant Date 2009 2010 2011 2012 2013
S.J. Palmisano RRSU 07/27/1999 25,000        
  RSU 05/08/2007 10,526 10,527      
M. Loughridge RRSU 03/07/2006 5,883   11,765    
  RSU 05/08/2006 3,750        
  RSU 05/08/2007 3,579 3,579      
  RSU 05/08/2008 3,271 3,271 3,272    
  RRSU 10/28/2008         16,667
M.E. Daniels RRSU 09/03/1999 5,000        
  RRSU 12/06/2004 11,628        
  RRSU 03/07/2006     11,765    
  RSU 05/08/2006 3,125        
  RSU 05/08/2007 2,737 2,737      
  RRSU 12/18/2007       35,399  
  RSU 05/08/2008 2,804 2,804 2,804    
S.A. Mills RRSU 11/03/1999 12,500        
  RSU 05/08/2006 3,500        
  RRSU 12/22/2006     12,346    
  RSU 05/08/2007 3,158 3,158      
  RSU 05/08/2008 2,804 2,804 2,804    
V.M. Rometty RRSU 10/22/1999 10,000        
  RRSU 03/07/2006   8,824 8,824    
  RSU 05/08/2006 2,875        
  RSU 05/08/2007 2,632 2,632      
  RRSU 12/18/2007       35,399  
  RSU 05/08/2008 2,804 2,804 2,804    

(5) Values in these columns are calculated by multiplying the number of units by the closing price of IBM stock on the last business day of the fiscal year ($84.16).

(6) The amounts shown in column (i) of the 2008 Outstanding Equity Awards at Fiscal Year-End Table are PSUs that have not yet vested. See 2008 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

  Vesting Schedule
Name Grant Date 2009 2010 2011
S.J. Palmisano 05/08/2006 141,713    
  05/08/2007   110,528  
  05/08/2008     154,206
M. Loughridge 05/08/2006 28,125    
  05/08/2007   37,580  
  05/08/2008     34,347
M.E. Daniels 05/08/2006 23,438    
  05/08/2007   28,737  
  05/08/2008     29,441
S.A. Mills 05/08/2006 26,250    
  05/08/2007   33,159  
  05/08/2008     29,441
V.M. Rometty 05/08/2006 21,563    
  05/08/2007   27,633  
  05/08/2008     29,441
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