Certain transactions and relationships

Under the Company’s written related person transactions policy, information about transactions involving related persons is assessed by the independent directors on IBM’s Board. Related persons include IBM directors and executive officers, as well as immediate family members of directors and officers, and beneficial owners of more than five percent of the Company’s common stock. If the determination is made that a related person has a material interest in any Company transaction, then the Company’s independent directors would review, approve or ratify it, and the transaction would be required to be disclosed in accordance with the SEC rules. If the related person at issue is a director of IBM, or a family member of a director, then that director would not participate in those discussions. In general, the Company is of the view that the following transactions with related persons are not significant to investors because they take place under the Company’s standard policies and procedures: the sale or purchase of products or services in the ordinary course of business and on an arm’s-length basis; the employment by the Company where the compensation and other terms of employment are determined on a basis consistent with the Company’s human resources policies; and any grants or contributions made by the Company under one of its grant programs and in accordance with the Company’s corporate contributions guidelines.

IBM entered into a consulting agreement with Ms. L.S. Sanford, an executive officer of the Company, in connection with her retirement from IBM on December 31, 2014. For a period of one year after Ms. Sanford’s retirement, she may be asked, from time to time, to provide services to the Company as an independent contractor. The fee for such services would be $5,000 per day for each day she provides four or more hours of services and $2,500 per day for each day that she provides less than four hours of services. From time to time, the Company may have employees who are related to our executive officers or directors. As noted in the discussion above in “General Information—IBM Board of Directors,” Mr. Eskew’s son is employed by the Company. He is an executive of the Company (not an executive officer). In addition, a brother-in-law of Mrs. V.M. Rometty (Chairman and CEO) and the wife of Mr. M. Jetter (Senior Vice President, IBM Global Technology Services) are employed as executives of the Company. The wife of Mr. R.J. Picciano (Senior Vice President, IBM Analytics) is also employed by the Company in a non-executive position. None of the above-referenced family member employees are executive officers of IBM. Each employee mentioned above received compensation in 2014 between $120,000 and $850,000. Additionally, in 2014, the above-referenced family members of Mrs. Rometty and Messrs. Eskew and Jetter each received equity grants. The compensation, equity grants and other terms of employment of each of the family member employees noted above are determined on a basis consistent with the Company’s human resources policies.

(This information reflects the 2015 Proxy Statement)

Certain information about insurance and indemnification

The Company has renewed its directors and officers indemnification insurance coverage. This insurance covers directors and officers individually where exposures exist other than those for which the Company is able to provide indemnification. This coverage runs from June 30, 2014 through June 30, 2015, at a total cost of approximately $6.8 million. The primary carrier is XL Specialty Insurance Company.

(This information reflects the 2015 Proxy Statement)

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