EXHIBIT
10.3


Accelerated
Share Repurchase 

Schedule of Standard Terms and Conditions (this “Schedule”)


SECTION 1. Cover Letter.  Reference
is hereby made to the Cover Letter for Accelerated Share Repurchase to which
this Schedule is attached as Annex I (the “Cover Letter”
and, together with this Schedule, the “Agreement”),
between IBM International Group B.V., a Netherlands limited liability company
with its corporate seat in Amsterdam (the “Company”) and
the other party thereto (“Seller”), dated
May 25, 2007, pursuant to which Seller will sell to the Company, and the
Company will purchase from Seller for settlement on the  Purchase
Date, the Initial Shares of capital stock (the “Common Stock”),
par value $0.20 per share, of International Business Machines Corporation, a
New York corporation (“IBM”) at
the Purchase Price.


SECTION 2.  Definitions.  


As
used in this Schedule, the following terms shall have the following meanings:


“Agreement” has the meaning specified in Section 1.


“Average Purchase Price” means the
arithmetic average of the Daily Average Prices for all Trading Days during the Averaging
Period.


“Averaging Period” has the meaning specified in the Cover
Letter.


“Calculation Agent” has the meaning
specified in the Cover Letter.


“Common Stock” has the meaning specified in
Section 1.


“Company” has the meaning specified in Section
1.


“Company Election Notice” has the meaning specified in Section
5(a).


“Cover Letter” has the meaning specified in Section 1.


“Daily Average Price” means, (i) for any
Trading Day in the Averaging Period, the Reported VWAP for such Trading Day minus the Discount to VWAP or (ii) for any
Trading Day in the Valuation Period, the Reported VWAP for such Trading Day. 


“Designee” has the meaning specified in Section 14.


“Discount to VWAP” has the meaning specified in the Cover
Letter.


“EDCP Swaps” means the swaps set forth in Appendix A hereto.


“Exchange Act” means the Securities Exchange
Act of 1934, as amended.


“Extraordinary Dividend” has the meaning specified in Section
7(c).


“Federal Funds Rate” means, for any day, the rate on such day
for Federal Funds, as published by Bloomberg and found by pressing the
following letters “FEDSOPEN” followed by pressing the <Index> key and
pressing the following letters “HP” followed by pressing the <Go> 













key; provided that
if any such day is not a New York Banking Day, the Federal Funds Rate for such
day shall be the Federal Funds Rate for the immediately preceding New York
Banking Day.


“IBM” has the meaning specified in Section 1.


“IBM Entity” means IBM, the Company and each other subsidiary
of IBM.


“Initial Shares” has the meaning specified
in the Cover Letter.


“Internal Equity Transaction” means any transaction between
any IBM Entities relating to the Common Stock, including without limitation derivatives
such as equity hedges; provided that
such transaction does not include or result in, directly or indirectly, the
purchase or sale of Common Stock in the public market.


“ISDA Definitions” means the 2002 ISDA Equity Derivatives
Definitions, as published by the International Swaps and Derivatives
Association, Inc.  For purposes of all
references to the ISDA Definitions, the Issuer is IBM.


“Make-Whole Payment Shares” has the meaning
specified in Section 5(c).


“Maximum Deliverable Number” means the number
of Initial Shares, subject to adjustment pursuant to Section 7(d).


“Merger Event” has the meaning specified in the ISDA
Definitions.  For purposes of the ISDA
Definitions, the Shares are shares of Common Stock, the Issuer is IBM, the
Merger Date shall be deemed to be the Announcement Date and the final Valuation
Date (each as defined in the ISDA Definitions) shall be deemed to be the
scheduled last day of the Averaging Period. 


“Moody’s” has the meaning specified in Section 9.


“New York Banking Day” means any day except for a Saturday,
Sunday or a day on which the Federal Reserve Bank of New York is closed.


“NYSE” means the New York Stock Exchange or any successor.


“Payment Shares” means Registered Payment
Shares, Restricted Payment Shares or Make-Whole Payment Shares.


“Potential Adjustment Event” has the meaning specified in the
ISDA Definitions; provided that clauses (iii) and
(vii) of such definition are deleted.


“Private Placement Agreement” has the
meaning specified in Section 6(b)(iii).


“Prospectus” has the meaning specified in Section
6(a)(i).


“Purchase Completion Date” means the last day of the Averaging Period.


“Purchase Date” has the meaning specified in
the Cover Letter.


“Purchase Price” has the meaning specified
in the Cover Letter.


“Refund Shares” has the meaning specified in
Section 5(a)(i)(A).


“Registered Payment Shares” has the meaning
specified in Section 5(a)(ii).



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“Registered Share Daily Average Price” means, for any Trading
Day, the New York dollar volume weighted average price per share of Common
Stock for that Trading Day as reported on Bloomberg Page “IBM.N <Equity>
AQR” (or any successor thereto), or, in the event such price is not so reported
on such Trading Day for any reason, as reasonably determined by the Calculation
Agent; provided  that, in the event the Calculation Agent determines
pursuant to “Trading Day” below that a Trading Day during the Valuation Period
is a Trading Day only in part, the Calculation Agent shall determine the
Registered Share Daily Average Price for such partial Trading Day based on
transactions in the Common Stock on such partial Trading Day effected from the
opening of trading on the NYSE until the occurrence of the relevant disruption
pursuant to (ii) or (iii) of the definition of “Trading Day” and during the
period from the end of the relevant disruption to the scheduled close of
trading on the NYSE, and shall adjust any Valuation Fraction correspondingly.


“Registration Statement” has the meaning
specified in Section 6(a)(i).


“Regulation M” means Regulation M under the
Exchange Act.


“Remaining Scheduled Days” means the scheduled
number of Trading Days remaining in the Averaging Period or the Valuation
Period as of the time of any suspension of the Averaging Period or the Valuation
Period, as the case may be.


“Reported VWAP” means, for any Trading Day, the New York Rule
10b-18 dollar volume weighted average price per share of Common Stock for that
Trading Day as reported on Bloomberg Page “IBM.N <Equity> AQR SEC” (or
any successor thereto), or, in the event such price is not so reported on such
Trading Day for any reason, as reasonably determined by the Calculation Agent; provided  that,
in the event the Calculation Agent determines pursuant to “Trading Day” below
that a Trading Day during the Averaging Period or Valuation Period is a Trading
Day only in part, the Calculation Agent shall determine the Reported VWAP for
such partial Trading Day based on Rule 10b-18 eligible transactions in the
Common Stock on such partial Trading Day effected from the opening of trading
on the NYSE until the occurrence of the relevant disruption pursuant to (ii) or
(iii) of the definition of “Trading Day” and during the period from the end of
the relevant disruption to, but excluding, the last ten minutes prior to the
scheduled close of trading on the NYSE, and, if such partial Trading Day is
during the Averaging Period, shall base the Average Purchase Price on an
appropriately weighted average instead of the arithmetic average or, if such partial
Trading Day is during the Valuation Period, shall adjust any Valuation Fraction
correspondingly.


“Repurchase Cost” means the product of (i) the Average
Purchase Price multiplied by (ii)
the number of Initial Shares.


“Requirements” has the meaning specified in Section 3(c).


“Restricted Contact Personnel” has the meaning specified in
the Cover Letter.


“Restricted Payment Shares” has the meaning
specified in Section 5(a)(ii).


“Restricted Share Amount” means the quotient
of (i) the absolute value of the Settlement Amount divided by
(ii) the Restricted Share Value of a Restricted Payment Share. 


“Restricted Share Value” means, with respect
to any Restricted Payment Shares or Make-Whole Payment Shares, 95% of the value
thereof per share to the Seller, determined by the Calculation Agent by commercially
reasonable means.


“Rule 10b-18” means Rule 10b-18 under the
Exchange Act.



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“S&P” has the meaning specified in Section 9.


“Securities Act” means the Securities Act of
1933, as amended.


“Seller” has the meaning specified in Section
1.


“Seller’s Broker-Dealer Entity” means the entity, if any, specified
as such in the Cover Letter.


“Settlement Amount” means an amount equal to
the Purchase Price minus the
Repurchase Cost.


“Settlement Balance” has the meaning
specified in Section 5(c).


“Settlement Day” means any day that is not a
Saturday, a Sunday or a day on which banking institutions or trust companies in
The City of New York are authorized or obligated by law or executive order to
close.  A Settlement Day “corresponds” to
a Trading Day (including, without limitation, the Purchase Completion Date) if
it is the day for settlement of regular way transactions for equity securities
entered into on the NYSE on that Trading Day.


“Share Amount” means, for any Trading Day,
the quotient of (i) the product of (A) the Valuation Fraction multiplied by (B)
the absolute value of the Settlement Amount, divided by (ii) 100% of the Daily
Average Price for that Trading Day, in the case of Refund Shares pursuant to Section
5(a)(i)(A), or 97% of the Registered Share Daily Average Price for that Trading
Day, in the case of Registered Payment Shares pursuant to Section 5(a)(ii)(A).


“Share Settlement” means any settlement pursuant to Section
5(a)(i)(A), Section 5(a)(ii)(A) or Section 5(a)(ii)(B).


“Tender Offer” has the meaning specified in the ISDA
Definitions; provided, however, that the
reference to “10%” in the definition of such term is replaced by “50%”.


“Trading Day” means any day (i) other than a
Saturday, a Sunday or a day on which the NYSE is not open for business, (ii) during
which trading of any equity securities of IBM on the NYSE has not been
suspended and (iii) during which there has not been, in the Calculation Agent’s
judgment, a material limitation in the trading of Common Stock; provided that, notwithstanding anything to
the contrary in the Agreement, if any of the events enumerated in (ii) or (iii)
above occurs during the Averaging Period or the Valuation Period, the
Calculation Agent shall, if appropriate in light of the time or times during
the regular trading day that such event occurred and was continuing, either determine
that such date is a Trading Day only in part, in which case the Calculation
Agent shall make such adjustments as provided for under “Reported VWAP” or “Registered
Share Daily Average Price” above, or determine that such date is not a Trading
Day.  If the Calculation Agent determines
that such date is not a Trading Day and (a) such date falls during the
Averaging Period and (x) the Calculation Agent has determined that two or more
previously scheduled Trading Days during the Averaging Period were not Trading
Days or (y) such date falls after the 10th scheduled Trading Day prior to the scheduled
end of the Averaging Period or (b) such date falls during the Valuation Period,
then the Calculation Agent shall extend the Averaging Period or Valuation
Period, as the case may be, by one additional Trading Day.  The Seller shall notify the Company of any
such extension as soon as reasonably practicable, but in no event later than the
date that would have been the scheduled last Trading Day of the Averaging
Period or Valuation Period, as applicable, prior to such extension.  For the avoidance of doubt, if the Seller
suspends the Averaging Period or the Valuation Period for an entire day
pursuant to Section 3(c), such day shall not be considered a Trading Day. 



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“Transfer Agreement” has the meaning
specified in Section 6(a)(iv).


“Valuation Fraction” means a fraction, the
numerator of which is one and the denominator of which is the number of Trading
Days in the Valuation Period.


“Valuation Period” means, in the case of any
Share Settlement, the period commencing on the Trading Day immediately
following the Purchase Completion Date and ending on the 11th  Trading Day following, but excluding, the
Purchase Completion Date; provided that,
without limiting the generality of Section 3(c), in the case of settlement
pursuant to Section 5(a)(i)(A), if the Share Amount for any Trading Day would
exceed the number of shares of Common Stock that IBM could have purchased on
such Trading Day in compliance with the conditions set forth in Rule 10b-18,
then the Calculation Agent may extend the Valuation Period in a manner intended
to result in adjusted Share Amounts that do not exceed such Rule 10b-18
compliant number of shares of Common Stock, and adjust any Share Amounts as
appropriate to reflect such extension. The Seller shall notify the Company of
any such extension as soon as reasonably practicable, but in no event later
than the date that would have been the last Trading Day of the Valuation Period
prior to such extension.  For the
avoidance of doubt, if the Company elects either to receive a cash payment
pursuant to Section 5(a)(i)(B) or make a cash payment pursuant to Section
5(a)(ii)(C), there will be no Valuation Period.


SECTION 3.  Seller Purchases.  


(a)        The Initial Shares may be
sold short to the Company.  It is
understood that during the Averaging Period the Seller may purchase shares of
Common Stock in connection with the Agreement, which shares may be used to cover
all or a portion of such short sale, and if the Settlement Amount is greater
than zero, during the Valuation Period the Seller will purchase shares of
Common Stock to fulfill its obligations to deliver Refund Shares to the Company
pursuant to Section 5 in the event of a Share Settlement.  Such purchases will be conducted
independently of the Company. The timing of such purchases by the Seller, the number
of shares purchased by the Seller on any day, the price paid per share of
Common Stock pursuant to such purchases and the manner in which such purchases
are made, including without limitation whether such purchases are made on any
securities exchange or privately, shall be within the absolute discretion of
the Seller; provided, however, that the Seller may only conduct
purchases pursuant to this Section 3(a) during the Averaging Period and the
Valuation Period, respectively.  The
Seller shall (i) use good faith efforts to effect such purchases of Common
Stock in a manner that would, if the Seller were IBM or an affiliated purchaser
of IBM, be subject to the safe harbor provided by Rule 10b-18(b) (including,
without limitation, the once-a-week block exception contained in Rule
10b-18(b)(4)) or (ii) otherwise effect such purchases in a manner that the
Seller, in its discretion, believes is in compliance with applicable
requirements; it being understood that the Seller shall not be responsible for
reporting errors of the NYSE or third party reporting systems or other
circumstances beyond the Seller’s control.  


(b)        It is the intent of the
parties that this transaction comply with the requirements of Rule 10b5-1(c)(1)(i)(B)
of the Exchange Act, and the parties agree that the Agreement shall be
interpreted to comply with the requirements of Rule 10b5-1(c), and neither the
Seller nor the Company shall take any action that results in this transaction
not so complying with such requirements; provided, however, that
nothing herein shall be interpreted as making Seller responsible for any
failure by the Company to comply with the requirements of Rule 10b5-1(c).  Without limiting the generality of the
preceding sentence, the Company acknowledges and agrees that (A) the Company
does not have, and shall not attempt to exercise, any influence over how, when
or whether the Seller effects any purchases of Common Stock in connection with the
Agreement, (B) from and including the date of the Agreement to and including
the last Settlement Day under the Agreement, neither the Company nor its
officers or employees shall, directly or indirectly, communicate any material nonpublic
information regarding IBM or the Common Stock 



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to, or otherwise influence the trading decisions of,
any Restricted Contact Personnel, (C) the Company is entering into the
Agreement and the transactions contemplated by the Agreement in good faith and
not as part of a plan or scheme to evade compliance with federal securities
laws including, without limitation, Rule 10b-5 promulgated under the
Exchange Act and (D) the Company will not alter or deviate from the Agreement
or enter into or alter a corresponding hedging transaction with respect to the
Common Stock and will otherwise comply with Rule 10b5-1(c)(1)(i)(C).


(c)        In the event that the
Seller, in its discretion, determines that it is appropriate with regard to any
legal, regulatory or self-regulatory requirements or related policies and
procedures (whether or not such requirements, policies or procedures are
imposed by law or have been voluntarily adopted by the Seller, and including
without limitation Rule 10b-18, Rule 10b-5, Regulation 13D-G and Regulation 14E
under the Exchange Act, and Regulation M, collectively, the “Requirements”), for the Seller to refrain from purchasing
Common Stock or to purchase fewer than the number of shares of Common Stock
that the Seller would otherwise purchase on any Trading Day during the Averaging
Period or, if the Settlement Amount is greater than zero, the Valuation Period,
then the Seller may, in its discretion, elect that the Averaging Period or the
Valuation Period, as the case may be, be extended or suspended and extended as
appropriate with regard to any Requirements. 
If the Seller extends the Averaging Period or the Valuation Period
without suspending such period, the Seller shall as soon as reasonably
practicable, and in no event later than 4:30 p.m., New York City time, on the scheduled
Trading Day immediately preceding the date that would have been the last
Trading Day of the Averaging Period or Valuation Period without extension,
notify the Company of such extension and of the new scheduled last Trading Day
of the Averaging Period or Valuation Period, as applicable.  If the Seller suspends the Averaging Period
or the Valuation Period, the Seller shall notify the Company no later than 4:30
p.m., New York City time, on the date of such suspension.  At the end of such suspension the Seller
shall determine the number of Trading Days remaining in the Averaging Period or
the Valuation Period, as the case may be, which number shall not exceed the
Remaining Scheduled Days as of the time of such suspension. The Seller shall
notify the Company as soon as reasonably practicable, but in no event later
than the Trading Date immediately following the end of such suspension, of the
new scheduled last Trading Day of the Averaging Period or Valuation Period, as
applicable.


(d)        The Company agrees that
neither the Company nor any of its affiliates or agents shall take any action
that would cause Regulation M to be applicable to any purchases of Common
Stock, or any security for which the Common Stock is a reference security (as
defined in Regulation M), by IBM or any of its affiliated purchasers (as
defined in Regulation M) during the Averaging Period or, if the Settlement
Amount is greater than zero, the Valuation Period, unless the Company or its
affiliate has provided written notice to Seller of a planned “distribution” (as
defined in Regulation M) of Common Stock or any security for which Common Stock
is a reference security not later than the opening of trading on the first day
of the relevant “restricted period” (as defined in Regulation M).  The Company acknowledges that any such notice
may cause the Averaging Period or the Valuation Period, as the case may be, to
be suspended pursuant to Section 3(c). 
Accordingly, the Company acknowledges that its or such affiliate’s
actions in relation to any such announcement or transaction must comply with
the standards set forth in Section 3(b) and represents that it will not be
aware of material non-public information at the time it provides such notice to
Seller.


(e)        The Company acknowledges
that any public announcement (as defined in Rule 165(f) under the Securities
Act) of any merger, acquisition, or similar transaction involving a
recapitalization relating to IBM (other than any such transaction in which the
consideration consists solely of cash and there is no valuation period) may
cause the Averaging Period or the Valuation Period, as the case may be, to be
suspended pursuant to Section 3(c). 
Accordingly, the Company acknowledges that its or any affiliate’s actions
in relation to any such announcement or 



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transaction must comply with the standards set forth
in Section 3(b) and represents that it will not be aware of material non-public
information on the date of any such announcement.  


SECTION 4.  Company Purchases.  


On
any Trading Day prior to the last Settlement Day under the Agreement on which
the Seller is permitted to purchase shares of Common Stock pursuant to the
Agreement, without the prior written consent of the Seller, the Company shall
not directly or indirectly (including, without limitation, by means of a
cash-settled or other derivative instrument) purchase, offer to purchase, place
any bid or limit order that would effect a purchase of, or commence any tender
offer relating to, any shares of Common Stock (or an equivalent interest,
including a unit of beneficial interest in a trust or limited partnership or a
depository share) or any security convertible into or exchangeable for shares
of Common Stock except as contemplated in Section 17 below.  For purposes of clarification, Seller
acknowledges and agrees that purchases effected for an issuer “plan” by an “agent
independent of the issuer” (each as defined in Rule 10b-18) shall not be
prohibited by the Agreement.


SECTION 5.  Settlement.  


(a)        After the Purchase
Completion Date,


(i)                  if the Settlement
Amount is greater than zero and the Company has elected for the Seller to:


(A)               deliver Refund
Shares, the Seller shall transfer to the Company, for no additional
consideration, a number of shares of Common Stock equal to the sum of the Share
Amounts for each of the Trading Days in the Valuation Period (the “Refund Shares”) in the manner provided in Section
5(b), or 


(B)                make a cash
payment, the Seller shall make a cash payment to the Company in immediately
available funds in an amount equal to the Settlement Amount on the third
Trading Day following the Purchase Completion Date, and 


(ii)                 if the Settlement
Amount is less than zero and the Company has elected to:


(A)               deliver Registered
Payment Shares, the Company shall transfer to the Seller, for no additional
consideration, a number of shares of Common Stock, which will be registered for
resale in the manner set forth in Section 6(a), equal to the sum of the Share
Amounts for each of the Trading Days in the Valuation Period (the “Registered Payment Shares”) in the manner
provided in Section 5(b), 


(B)                deliver Restricted
Payment Shares, the Company shall transfer to the Seller, for no additional
consideration, a number of shares of Common Stock, which will not be registered
for resale, equal to the Restricted Share Amount (the “Restricted
Payment Shares”) on the Settlement Day corresponding to the Purchase
Completion Date in the manner provided in Section 5(b), and any Make-Whole
Payment Shares as provided in Section 5(c), or



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(C)                make a cash
payment, the Company shall make a cash payment to the Seller in immediately
available funds in an amount equal to the absolute value of the Settlement
Amount on the third Trading Day following the Purchase Completion Date.


No later than 8:00 p.m. New York City time on the last day of the
Averaging Period, the Company shall specify in a notice to Seller substantially
in the form set forth in Appendix B hereto (the “Company
Election Notice”) the Company’s election, if the Settlement Amount
is greater than zero, for the Seller to deliver Refund Shares or make a cash
payment or, if the Settlement Amount is less than zero, for the Company to
deliver Registered Payment Shares, to deliver Restricted Payment Shares or to
make a cash payment.  Once made, such
election will be irrevocable.  If the
Company fails to make such an election by the election deadline, the Company
shall have been deemed to have elected to receive or deliver, as the case may
be, a cash payment.  If the Company
elects to deliver Registered Payment Shares or Restricted Payment Shares
pursuant to this Section 5(a)(ii), the Calculation Agent shall have the right
to adjust the Settlement Amount to compensate the Seller for its cost of funds
at the Federal Funds Rate during the Valuation Period.


(b)      Delivery of Refund Shares,
Registered Payment Shares or Restricted Payment Shares shall be made as
follows:


(i)                  if Refund Shares
are to be transferred to the Company, the Seller shall deliver the shares to
the Company on the third Trading Day following the last day of the Valuation
Period,


(ii)                 if Registered
Payment Shares are to be transferred to the Seller, on each Settlement Day
corresponding to each Trading Day in the Valuation Period, the Company shall
deliver to the Seller a number of Registered Payment Shares equal to the Share
Amount for such Trading Day, and if the Share Amount for any Trading Day during
the Valuation Period includes fractional shares, in lieu of delivering the
fractional shares, the Company or the Seller (as the case may be) shall deliver
cash to the Seller or the Company, as the case may be, in an amount based on
the closing price of the Common Stock on the NYSE on that Trading Day, and


(iii)                if Restricted
Payment Shares are to be transferred to the Seller, on the Settlement Day
corresponding to the Purchase Completion Date, the Company shall deliver to the
Seller a number of Restricted Payment Shares equal to the Restricted Share
Amount, and the Company shall deliver any additional Make-Whole Payment Shares
as provided in Section 5(c).


(c)      If Restricted Payment Shares
are delivered in accordance with Section 5(b)(iii), on the Purchase Completion
Date a balance (the “Settlement Balance”)
shall be established with an initial balance equal to the absolute value of the
Settlement Amount.  Following the
delivery of Restricted Payment Shares or any Make-Whole Payment Shares, Seller
shall sell all such Restricted Payment Shares or Make-Whole Payment Shares in a
commercially reasonable manner during the Valuation Period.  At the end of each Trading Day upon which
sales have been made, the Settlement Balance shall be reduced by an amount
equal to 95% of the aggregate proceeds received by Seller upon the sale of such
Restricted Payment Shares or Make-Whole Payment Shares.  If, on any Trading Day, all Restricted
Payment Shares and Make-Whole Payment Shares have been sold and the Settlement
Balance has not been reduced to zero, the Company shall (i) deliver to Seller
or as directed by Seller on the Settlement Day corresponding to such Trading
Day an additional number of Shares (the “Make-Whole
Payment Shares”) equal to (x) the Settlement Balance as of such
Trading Day divided by (y) the Restricted Share Value of the Make-Whole 



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Payment Shares or (ii) promptly deliver to Seller cash in an amount
equal to the then remaining Settlement Balance. 
This provision shall be applied successively until either the Settlement
Balance is reduced to zero or the aggregate number of Restricted Payment Shares
and Make-Whole Payment Shares equals the Maximum Deliverable Number.  If the Settlement Balance has been reduced to
zero prior to the sale of all Restricted Payment Shares and Make-Whole Payment
Shares that have been delivered to the Seller, the Seller shall return any
unsold Restricted Payment Shares and Make-Whole Payment Shares to the Company.


SECTION 6.  Payment Shares.  


(a)      The Company may only deliver
Registered Payment Shares pursuant to Section 5(a)(ii)(A) subject to
satisfaction of the following conditions:


(i)                  a registration
statement covering public resale of the Registered Payment Shares by the Seller
and complying with the requirements of the Securities Act (the “Registration Statement”) shall have been
filed with the Securities and Exchange Commission under the Securities Act and
shall have become effective on or prior to the Purchase Completion Date, and no
stop order shall be in effect with respect to the Registration Statement; a
printed prospectus relating to the Registered Payment Shares (including any
prospectus supplement thereto, the “Prospectus”)
shall have been delivered to the Seller, in such quantities as the Seller shall
reasonably have requested, on or prior to the Purchase Completion Date;


(ii)                 the form and
content of the Registration Statement and the Prospectus (including, without
limitation, any sections describing the plan of distribution) shall be
satisfactory to the Seller;


(iii)                the Seller and its
agents, including the Seller’s Broker-Dealer Entity, if any, shall have been afforded
a commercially reasonable opportunity to conduct a due diligence investigation
with respect to IBM customary in scope for underwritten offerings of equity
securities of comparable issuers and the results of such investigation are
satisfactory to the Seller, in its discretion; and


(iv)                as of the Purchase
Completion Date, an agreement (the “Transfer
Agreement”) shall have been entered into among the Seller, the
Company and IBM in connection with the public resale of the Registered Payment
Shares by the Seller substantially similar to underwriting agreements customary
for underwritten offerings of equity securities of comparable issuers, in form
and substance commercially reasonably satisfactory to the Seller, which
Transfer Agreement shall include, without limitation, provisions substantially
similar to those contained in such underwriting agreements relating to the
indemnification of, and contribution in connection with the liability of, the
Seller and its affiliates.


If the Settlement Amount
is less than zero and the Company has elected to deliver Registered Payment
Shares and any of the above conditions is not satisfied as of the Purchase
Completion Date, the Company shall, in lieu of delivery of Registered Payment
Shares, either (x) make a cash payment to the Seller in immediately available
funds in an amount equal to the absolute value of the Settlement Amount on the
second Trading Day following the Purchase Completion Date and shall reimburse
the Seller for all reasonable out-of-pocket expenses it has incurred in
connection with due diligence and otherwise in connection with the anticipated
delivery of the Registered Payment Shares, including, without limitation, the
reasonable fees and expenses of outside counsel to the Seller incurred in
connection thereof or (y) deliver Restricted Payment Shares pursuant to Section
5(a)(ii)(B) and Make-Whole Payment Shares pursuant to Section 5(c), in which
case the Calculation Agent may make appropriate adjustments to the settlement
terms to compensate the 



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Seller for all reasonable
out-of-pocket expenses it has incurred in connection with due diligence and
otherwise in connection with the anticipated delivery of the Registered Payment
Shares, including, without limitation, the reasonable fees and expenses of outside
counsel to the Seller incurred in connection thereof.


(b)      If the Company elects to
deliver Restricted Payment Shares pursuant to Section 5(a)(ii)(B) and
Make-Whole Payment Shares pursuant to Section 5(c), then:


(i)                  all Restricted
Payment Shares and Make-Whole Payment Shares shall be delivered to the Seller
(or any affiliate of the Seller designated by the Seller) pursuant to the
exemption from the registration requirements of the Securities Act provided by
Section 4(2) thereof;


(ii)                 The Seller’s
Broker-Dealer Entity, if any, the Seller and any potential purchaser of any
such shares from the Seller (or any affiliate of the Seller designated by the
Seller) identified by the Seller’s Broker-Dealer Entity, if any, or the Seller
shall be afforded a commercially reasonable opportunity to conduct a due
diligence investigation with respect to IBM customary in scope for private placements
of equity securities and the results of such investigation are satisfactory to such
person, in its discretion; and


(iii)                the Company and
IBM shall enter into an agreement (a “Private
Placement Agreement”) with the Seller (or any affiliate of the
Seller designated by the Seller) in connection with the private placement of
such shares by the Company to the Seller (or any such affiliate) and the
private resale of such shares by the Seller (or any such affiliate),
substantially similar to private placement purchase agreements customary for
private placements of equity securities of comparable issuers, in form and
substance commercially reasonably satisfactory to the Seller or such affiliate,
which Private Placement Agreement shall include, without limitation, provisions
substantially similar to those contained in such private placement purchase
agreements relating to the indemnification of, and contribution in connection
with the liability of, the Seller and its affiliates, and shall provide for the
payment by the Company of all reasonable out-of-pocket expenses in connection
with such resale, including all fees and expenses of counsel for the Seller,
and shall contain representations, warranties and agreements of IBM and the
Company reasonably necessary or advisable to establish and maintain the
availability of an exemption from the registration requirements of the
Securities Act for such resales.


For the avoidance of
doubt nothing in this Section 6(b) shall be read as requiring the Company to
deliver cash in respect of the settlement of the transactions contemplated by
the Agreement. 


(c)      If the Company elects to
deliver Restricted Payment Shares pursuant to Section 5(a)(ii)(B) above, the
Company shall not take or cause to be taken any action that would make
unavailable either (i) the exemption set forth in Section 4(2) of the
Securities Act for the sale of any Restricted Payment Shares or Make-Whole
Payment Shares by the Company to the Seller or (ii) an exemption from the
registration requirements of the Securities Act reasonably acceptable to the
Seller for resales of Restricted Payment Shares and Make-Whole Payment Shares
by the Seller.


(d)      Notwithstanding the
provisions of Section 5(a) above, if the Company has elected to deliver any
Payment Shares hereunder, the Company shall not be required to deliver more
than the Maximum Deliverable Number of shares of Common Stock as Payment Shares
hereunder. 



 10
 









SECTION 7.  Adjustment of Terms.  


(a)      In the event (i) of any of
the following corporate events involving IBM or the Common Stock: bankruptcy,
insolvency, reorganization pursuant to Title 11 of the United States Code,
Merger Event, Tender Offer, issuance of any securities convertible or
exchangeable into share of Common Stock or Potential Adjustment Event or the
announcement of any such corporate event, (ii) the Seller determines, in its
reasonable discretion, that it is unable or it is impracticable to establish,
re-establish, substitute or maintain a hedge of its position in respect of the
transactions contemplated by the Agreement or (iii) the Seller determines, in
its reasonable discretion, that it is unable to borrow Common Stock at a rebate
rate greater than or equal to the Federal Funds Rate minus
35 basis points, then, in each case, the number of Trading Days in the Averaging
Period, any Daily Average Price and the Settlement Amount shall be subject to
adjustment by the Calculation Agent as in the exercise of its good faith
judgment it deems appropriate under the circumstances.  For the avoidance of doubt, no such
adjustment shall result in an obligation of the Company to make a cash payment
to Seller, it being understood that such adjustment may be reflected in the
cash amount payable at the Company’s election pursuant to Section 5(a)(ii)(C).


(b)      Notwithstanding the
authority provided to the Calculation Agent in subsection (a) of this Section 7,
in the event of a corporate event (such as certain reorganizations, mergers, or
other similar events) in which all holders of Common Stock may receive
consideration other than the common equity securities of the continuing or
surviving entity, the adjustments referred to in such subsection shall permit
the Company to satisfy its settlement obligations hereunder by delivering the
consideration received by holders of Common Stock upon such corporate event, in
such proportions as in the exercise of its good faith judgment the Calculation
Agent deems appropriate under the circumstances.


(c)      In the event that IBM
declares or pays any Extraordinary Dividend, the Seller shall have the right in
its discretion to accelerate the settlement of the transactions contemplated by
the Agreement by designating any date on or after the date of the declaration
of such Extraordinary Dividend as the “Acceleration Date”, in which event the
last day of the Averaging Period shall be accelerated to the Acceleration Date
(regardless of whether the Averaging Period Start Date has occurred prior to
the Acceleration Date), and the Average Purchase Price shall be determined as
if the Daily Average Price for all Trading Days that were, but for such
acceleration, scheduled to occur during the Averaging Period on or after the
Acceleration Date were the average per share price obtained by the Calculation
Agent from at least three experienced third party market participants as the
price at which such participant would offer to sell to the Seller a block of
shares of Common Stock (with such legal or other restrictions as the Seller may
in its reasonable judgment impose on such participant relating to the
acquisition of such block or, if such block may be sold short to the Seller,
the covering of such participant’s resulting short position) equal in number to
the Seller’s theoretical net short position in relation to the Agreement and
the transactions contemplated thereby as of the Acceleration Date, as
determined by the Calculation Agent.  “Extraordinary Dividend” means any dividend on the Common
Stock with an ex-dividend date that occurs from and including the date of the
Cover Letter through and including the last day of the Averaging Period, other
than an ordinary cash dividend of $0.40 per share with an ex-dividend date on
August 8, 2007, November 7, 2007 or February 6, 2008.


(d)      In the event that the
Company effects a share split of the Common Stock, the Maximum Deliverable
Number shall be adjusted to equal (i) the Maximum Deliverable Number prior to
such adjustment multiplied by (ii) (x) the number
of shares of Common Stock outstanding immediately after the effective date of
such share split divided by (y) the number of
shares of Common Stock outstanding immediately prior to the effective date of
such share split; provided that in no event shall
the Maximum Deliverable Number exceed three times the number of Initial Shares.



 11
 









SECTION 8.  Governing Law; Waiver of Jury
Trial.  


(a)      THE AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.  THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS
LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY SUIT OR
PROCEEDING ARISING OUT OF OR RELATING TO THE AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY.


(b)      EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY
WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE
AGREEMENT OR ANY TRANSACTION CONTEMPLATED THEREBY.


(c)      IBM International Group B.V. hereby appoints IBM as its agent for service
of process in any proceeding in any of the Federal and State courts located in
the Borough of Manhattan in connection with the Agreement.


SECTION 9.  Assignment and Transfer.  


The
rights and duties under the Agreement may not be assigned or transferred by the
Company or the Seller without the prior written consent of the other party; provided that the Seller may assign any of
such rights or duties hereunder to any affiliate of the Seller with a rating or
whose obligations are guaranteed by an affiliate with a rating for its long
term, unsecured and unsubordinated indebtedness of A+ or better by Standard and
Poor’s Rating Group, Inc. or its successor (“S&P”)
or A1 or better by Moody’s Investor Service, Inc. or its successor (“Moody’s”) or, if either S&P or Moody’s ceases to rate
such debt, at least an equivalent rating or better by a substitute rating
agency mutually agreed to by the Company and the Seller. 


SECTION 10.  No Condition of
Confidentiality.  


The
Seller and the Company hereby acknowledge and agree that the Seller has
authorized the Company to disclose the Agreement and the transactions
contemplated thereby to any and all persons, and there are no express or
implied agreements, arrangements or understandings to the contrary, and the
Seller hereby waives any and all claims to any proprietary rights with respect
to the Agreement and the transactions contemplated thereby, and authorizes the
Company to use any information that the Company receives or has received with
respect to the Agreement and the transactions contemplated thereby in any
manner.


SECTION 11.  Calculations.  


The
Calculation Agent shall make all calculations in respect of the Agreement and
shall promptly provide written notice of the same to the Company.


SECTION 12.  Acknowledgments, Representations,
Warranties and Agreements.  


(a)        The Company acknowledges
and agrees that it is not relying, and has not relied, upon the Seller or any
affiliate of the Seller with respect to the legal, accounting, tax or other
implications of the Agreement and that it has conducted its own analyses of the
legal, accounting, tax and other implications hereof.  The Company further acknowledges and agrees
that neither the Seller nor any affiliate of the Seller has acted as its
advisor in any capacity in connection with the Agreement or the transactions
contemplated thereby.  The Company is
entering into the Agreement with a full understanding of all of the terms and
risks hereof (economic and otherwise), has adequate expertise in financial
matters to evaluate those terms and risks and is capable of 



 12
 









assuming (financially and otherwise) those risks.
Without limiting the generality of the foregoing, the Company acknowledges that
the Seller is not making any representations or warranties with respect to the
treatment of the transactions contemplated by the Agreement under FASB
Statements 133, as amended, or 150, EITF Issue No. 00-19 (or any successor
issue statements) or under FASB’s Liabilities & Equity Project.


(b)      The Company represents and
warrants to Seller that (i) it has all corporate power and authority to enter
into the Agreement and to consummate the transactions contemplated thereby and
(ii) the Agreement has been duly authorized and validly executed and delivered
by the Company and constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally
and to general equitable principles.


(c)      The Company agrees that if
Payment Shares are delivered pursuant to Section 5(a)(ii) or Section 5(c), such
Payment Shares, when delivered, shall have been duly authorized and shall be
duly and validly issued, fully paid and nonassessable and free of preemptive or
similar rights, and such delivery shall pass title thereto free and clear of
any liens or encumbrances.


(d)      The Company represents and
warrants to the Seller that it is not entering into the Agreement to facilitate
a distribution of the Common Stock (or any security convertible into or
exchangeable for Common Stock) or in connection with a future issuance of
securities.


(e)      The Company represents and
warrants to the Seller that it is not entering into the Agreement to create
actual or apparent trading activity in the Common Stock (or any security
convertible into or exchangeable for Common Stock) or to raise or depress or
otherwise manipulate the price of the Common Stock (or any security convertible
into or exchangeable for Common Stock), in any case for the purpose of inducing
the purchase or sale of any such securities by others.


(f)       The Company represents and
warrants to the Seller that the execution and delivery by the Company of, and
the compliance by the Company with all of the provisions of, the Agreement and
the consummation of the transactions therein contemplated will not conflict
with or result in a breach of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement or any
other agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the property or assets of the Company is
subject, nor will such action result in any violation of the provisions of the
constitutive documents of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its properties.


(g)      The Company represents and
warrants to the Seller that no consent, approval, authorization, order,
registration, qualification or filing of or with any court or governmental
agency or body having jurisdiction over the Company or any of its properties is
required for the execution and delivery by the Company of, and the compliance
by the Company with all the terms of, the Agreement or the consummation by the
Company of the transactions contemplated thereby.


(h)      The Company represents and
warrants to the Seller as of the date of the Agreement and agrees that, as of
the date, if any, that the Company delivers a Company Election Notice to Seller
choosing Share Settlement, none of the Company and its officers and directors is,
or will be, as the case may be, aware of any material nonpublic information
regarding IBM or the Common Stock.



 13
 









(i)       The Company represents and
warrants to the Seller that the Company is not, and after giving effect to the
transactions contemplated by the Agreement, will not be, and “investment
company” as such term is defined in the Investment Company Act of 1940, as
amended.


(j)       For the avoidance of doubt,
the parties agree that the commissions incorporated in the definitions of Restricted
Share Amount and Restricted Share Value and in Section 5(c) above are commercially
reasonable fees for the Seller’s or Seller’s Broker-Dealer Entity’s, as the
case may be, activities in connection with Settlement under Section 5. 


SECTION 13.  Acknowledgments and Agreements
With Respect To Hedging and Market Activity.  


(a)      The Company acknowledges and
agrees that, subject to Section 13(c):


(i)                  During the Averaging
Period and, if applicable, the Valuation Period, the Seller and its affiliates
may buy or sell shares of Common Stock or other securities or buy or sell
options or futures contracts or enter into swaps or other derivative securities
in order to adjust its hedge position with respect to the transactions
contemplated by the Agreement;


(ii)                 The Seller and
its affiliates also may be active in the market for the Common Stock other than
in connection with hedging activities in relation to the transactions contemplated
by the Agreement;


(iii)                The Seller shall
make its own determination as to whether, when or in what manner any hedging or
market activities in IBM’s securities shall be conducted and shall do so in a
manner that it deems appropriate to hedge its price and market risk with
respect to the Daily Average Price and Reported VWAP; and


(iv)               Any market
activities of the Seller and its affiliates with respect to the Common Stock
may affect the market price and volatility of the Common Stock, as well as the
Daily Average Price and Reported VWAP, each in a manner that may be adverse to
the Company.


(b)      Each of the Company and the
Seller agrees that Non-Reliance as set forth in Section 13.1 of the ISDA
Definitions, Agreements and Acknowledgments Regarding Hedging Activities as set
forth in Section 13.2 of the ISDA Definitions and Additional Acknowledgments as
set forth in Section 13.4 of the ISDA Definitions shall be deemed to be
Applicable to the transactions contemplated by the Agreement as if the
Agreement were a confirmation that was governed by, and incorporated, such
Sections of the ISDA Definitions.


(c)      Subject to Section 12(e),
Seller represents and agrees that it is not entering into the Agreement, and will
not purchase shares of Common Stock in connection with the Agreement during the
Averaging Period or, if applicable, the Valuation Period or otherwise, to
create actual or apparent trading activity in the Common Stock (or any security
convertible into or exchangeable for Common Stock) or to raise or depress or
otherwise manipulate the price of Common Stock (or any security convertible
into or exchangeable for Common Stock), in any case for the purpose of inducing
the purchase or sale of any such securities by others; it being understood that
the Seller shall not be responsible for reporting errors of the NYSE or third
party reporting systems on which it may be relying. 



 14
 









SECTION 14.  Designation of Affiliate for
Transactions in Common Stock.  


The
Seller may designate any of its affiliates (the “Designee”)
to deliver or take delivery, as the case may be, and otherwise perform its
obligations to deliver or take delivery of, as the case may be, any shares of
Common Stock in respect of the transactions contemplated by the Agreement, and
the Designee may assume such obligations and the obligations of the Seller
under the Agreement with respect to such shares of Common Stock.  Such designation shall not relieve the Seller
of any of its obligations hereunder. 
Notwithstanding the previous sentence, if the Designee shall have indefeasibly
performed the obligations of the Seller hereunder, then the Seller shall be
discharged of its obligations to the Company to the extent of such
performance.  In addition, the parties
acknowledge and agree that every time that the Seller is described in this Schedule
as buying, selling or otherwise transacting with third parties in the Common
Stock, such buying, selling or transacting may be conducted by the Seller or
one or more of its affiliates.


SECTION 15.  No Collateral or Setoff. 


Notwithstanding any provision of the Agreement or any
other agreement between the parties to the contrary, the obligations of the
parties hereunder are not secured by any collateral.  Obligations under the Agreement shall not be
set off by either party against any other obligations of the other party or
that other party’s affiliate, whether arising under the Agreement, under any
other agreement between the parties hereto by operation of law or
otherwise.  


SECTION 16.  Equity Rights.  


The
Seller agrees that in the event of bankruptcy of the Company or IBM, the Seller
shall not have any rights or assert a claim in respect of the Agreement and the
transactions contemplated thereby that is senior in priority to the rights and
claims available to shareholders of Common Stock.


SECTION 17.  Other Derivatives.


Notwithstanding anything
to the contrary contained herein, the Seller:


(i)                  acknowledges
that it has been advised by the Company (A) that the EDCP Swaps are currently
outstanding and (B) that IBM Entities may have entered into one or more
Internal Equity Transactions;


(ii)                 agrees that the
EDCP Swaps and any such Internal Equity Transactions, the transactions
contemplated thereby and the performance by any IBM Entity of its obligations
thereunder shall not constitute a breach of any representation, warranty or
agreement by the Company under the Agreement;


(iii)                acknowledges and
agrees that the EDCP Swaps may be renewed, extended or amended at the
discretion of any IBM Entity during the Averaging Period and the Valuation
Period, if any, and without any notice to or consent of the Seller, and such
renewal, extension or amendment shall not constitute a breach of any
representation, warranty or agreement by the Company under the Agreement; provided,  however, that any such renewal,
extension or amendment does not include or result in, directly or indirectly, the
purchase or sale of Common Stock in the public market;


(iv)                acknowledges and
agrees that any existing Internal Equity Transactions may be renewed, extended
or amended at the discretion of any IBM Entity during the 



 15
 









Averaging Period and the
Valuation Period, if any, and without any notice to or consent of such Seller,
and such renewal, extension or amendment shall not constitute a breach of any
representation, warranty or agreement by the Company under the Agreement; provided,  however, that any such renewal,
extension or amendment does not include or result in, directly or indirectly, the
purchase or sale of Common Stock in the public market; and


(v)                acknowledges and
agrees that nothing in the Agreement shall prohibit the Company or any IBM
Entity from entering into any Internal Equity Transaction.



 16
 









APPENDIX A

[Exhibit Omitted]


APPENDIX B


IBM International Group B.V.

Johan Huizingalaan 765

1066 VH Amsterdam, the Netherlands


[     ], 200[ ]


[Seller]

[Address]

[Attn: [    ]]

[Phone]

[Fax]


Accelerated Share Repurchase 

Company Election Notice


Reference
is hereby made to the Cover Letter for Accelerated Share Repurchase (the “Cover
Letter” and, together with the Schedule
of Standard Terms and Conditions attached thereto, the “Agreement”)
between IBM International Group B.V., a Netherlands limited liability company
with its corporate seat in Amsterdam (the “Company”) and [Seller] (“Seller”), dated May 25, 2007.  Capitalized terms used but not defined
herein shall have the meaning assigned to them in the Agreement.


This
notice (this “Company Election Notice”) is a Company Election Notice
under the Agreement.


The
Company hereby informs the Seller that, pursuant to Section 5(a) of the
Schedule, the Company makes the following election under such section: [the
Seller shall [deliver Refund Shares] [make a cash payment]](1) [the Company
shall [deliver Registered Payment Shares] [deliver Restricted Payment Shares]
[make a cash payment]](2).


	
   

  	
  IBM INTERNATIONAL GROUP 

  
	
   

  	
  B.V.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 






(1) Applicable choices for election if the Settlement
Amount is greater than zero.


(2) Applicable choices for election if the Settlement
Amount is less than zero.



 17