International Business Machines (IBM)

Dividend Equivalents

IBM shall not pay dividend equivalents on cash-settled or stock-settled unvested RSU awards.

ii.             RSUs Other Than Cash-Settled RSUs

DIVIDEND EQUIVALENTS

·      Amounts represent dividend equivalents paid in cash to the named executive officers in 2008 on RSUs granted before January 1, 2008 that have not yet vested and on any shares of IBM stock for which the officers deferred receipt under the Excess 401(k) Plus Plan.

·      Dividend equivalents are paid on unvested RSUs and RRSUs granted prior to January 1, 2008 and on Deferred IBM Shares, in each case, at the same rate and at the same time as the dividends paid to IBM stockholders. IBM does not pay dividend equivalents on PSUs or stock options.

·      See the 2008 Nonqualified Deferred Compensation Narrative for a description of the nonqualified deferred compensation plan, including Deferred IBM Shares.

Dividend Equivalents

·                  Amounts represent dividend equivalents paid in cash to the named executive officers in 2007 on their RSUs that have not yet vested and on any shares of IBM stock for which the officers deferred receipt under the EDCP (Deferred IBM Shares).

·                  Dividend equivalents are paid on unvested RSUs granted prior to 2008 and Deferred IBM Shares at the same rate and at the same time as the dividends paid to IBM stockholders.

·                  IBM does not pay dividend equivalents on PSUs or stock options.

·                  See the 2007 Nonqualified Deferred Compensation Narrative for a description of the EDCP, including Deferred IBM Shares.

PERQUISITES

The following describes perquisites (and their aggregate incremental cost calculations) provided to the named executive officers in 2007.

Dividend Equivalents

        IBM shall not pay dividend equivalents on cash or stock settled unvested RSU awards.

7