Other 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.

In connection with Mr. Palmisano's retirement from the Company effective December 1, 2012, the Board approved certain arrangements that were disclosed by the Company in September 2012. These arrangements are also described in the 2012 Compensation Discussion & Analysis. From time to time, the Company may have employees who are related to our executive officers or directors. As noted in the discussion above on "General Information — 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, an adult child of Mr. M. E. Daniels (Senior Vice President and Group Executive, Services) and a sibling of Dr. J.E. Kelly III (Senior Vice President and Director, Research) are employed by the Company in non-executive positions. Further, a brother-in-law of Mr. M. Loughridge (Senior Vice President and Chief Financial Officer, Finance and Enterprise Transformation) and the spouse of Mr. T.S. Shaughnessy (Senior Vice President, GTS Services Delivery) are executives of the Company. None of the above-referenced family member employees are executive officers of IBM. Each employee mentioned above received compensation in 2012 between $120,000 and $500,000. Additionally, in 2012 the above-referenced family members of Messrs. Eskew, Daniels, Loughridge and Shaughnessy each received an equity grant. The compensation 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 2013 Proxy Statement)

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, 2012 through June 30, 2013, at a total cost of approximately $6.6 million. The primary carrier is XL Specialty Insurance Company. Between February 1, 2012 and January 31, 2013, payments in the amount of approximately $22,000 were made pursuant to this liability insurance.

(This information reflects the 2013 Proxy Statement)