Document:

Exhibit
10.1

EXECUTION
VERSION

$10,000,000,000

5-YEAR CREDIT
AGREEMENT

among

INTERNATIONAL BUSINESS
MACHINES CORPORATION

The Subsidiary Borrowers
Parties Hereto

The Several Lenders

from Time to Time Parties Hereto

JPMORGAN CHASE BANK,
N.A.,

as Administrative Agent

and

CITIBANK, N.A.,

as Syndication Agent

Dated
as of June 28, 2006

J.P. MORGAN SECURITIES
INC. and CITIGROUP GLOBAL MARKETS INC.,

as Joint Lead Arrangers and Joint Bookrunners

 

TABLE OF CONTENTS

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
   

  	
  DEFINITIONS

  	
   

  	
   

  	
  1

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  Defined Terms

  	
   

  	
   

  	
  1

  	
   

  	
   

  
	
  1.2

  	
   

  	
  Other Definitional Provisions

  	
   

  	
   

  	
  18

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
   

  	
  AMOUNT AND TERMS OF US$FACILITIES

  	
   

  	
   

  	
  18

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Revolving Credit Commitments

  	
   

  	
   

  	
  18

  	
   

  	
   

  
	
  2.2

  	
   

  	
  Procedure for Revolving Credit Borrowing

  	
   

  	
   

  	
  19

  	
   

  	
   

  
	
  2.3

  	
   

  	
  Conversion and Continuation Options for Revolving
  Credit Loans

  	
   

  	
   

  	
  19

  	
   

  	
   

  
	
  2.4

  	
   

  	
  Minimum Amounts and Maximum Number of Eurodollar
  Tranches

  	
   

  	
   

  	
  20

  	
   

  	
   

  
	
  2.5

  	
   

  	
  Swing Line Loans

  	
   

  	
   

  	
  20

  	
   

  	
   

  
	
  2.6

  	
   

  	
  Optional Prepayments of Revolving Credit Loans and
  Swing Line Loans

  	
   

  	
   

  	
  21

  	
   

  	
   

  
	
  2.7

  	
   

  	
  The Competitive Loans

  	
   

  	
   

  	
  22

  	
   

  	
   

  
	
  2.8

  	
   

  	
  Procedure for Competitive Loan Borrowing

  	
   

  	
   

  	
  22

  	
   

  	
   

  
	
  2.9

  	
   

  	
  Repayment
  of US$Loans; Evidence of Debt

  	
   

  	
   

  	
  25

  	
   

  	
   

  
	
  2.10

  	
   

  	
  Interest Rates
  and Payment Dates

  	
   

  	
   

  	
  25

  	
   

  	
   

  
	
  2.11

  	
   

  	
  Fees

  	
   

  	
   

  	
  26

  	
   

  	
   

  
	
  2.12

  	
   

  	
  Computation of
  Interest and Fees

  	
   

  	
   

  	
  26

  	
   

  	
   

  
	
  2.13

  	
   

  	
  Termination or
  Reduction of Revolving Credit Commitments

  	
   

  	
   

  	
  27

  	
   

  	
   

  
	
  2.14

  	
   

  	
  Inability to
  Determine Interest Rate

  	
   

  	
   

  	
  27

  	
   

  	
   

  
	
  2.15

  	
   

  	
  Pro Rata
  Treatment and Payments

  	
   

  	
   

  	
  27

  	
   

  	
   

  
	
  2.16

  	
   

  	
  Illegality

  	
   

  	
   

  	
  28

  	
   

  	
   

  
	
  2.17

  	
   

  	
  Requirements of Law

  	
   

  	
   

  	
  28

  	
   

  	
   

  
	
  2.18

  	
   

  	
  Taxes

  	
   

  	
   

  	
  31

  	
   

  	
   

  
	
  2.19

  	
   

  	
  Indemnity

  	
   

  	
   

  	
  33

  	
   

  	
   

  
	
  2.20

  	
   

  	
  Change of Lending
  Office

  	
   

  	
   

  	
  33

  	
   

  	
   

  
	
  2.21

  	
   

  	
  Extension of
  Termination Date

  	
   

  	
   

  	
  33

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  LOCAL CURRENCY
  FACILITIES

  	
   

  	
   

  	
  35

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Terms of Local
  Currency Facilities

  	
   

  	
   

  	
  35

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Currency
  Fluctuations, etc.

  	
   

  	
   

  	
  37

  	
   

  	
   

  
	
  3.3

  	
   

  	
  Refunding of
  Local Currency Loans

  	
   

  	
   

  	
  38

  	
   

  	
   

  
	
  3.4

  	
   

  	
  Existing Local
  Currency Facilities, etc.

  	
   

  	
   

  	
  40

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
   

  	
  40

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Organization; Powers

  	
   

  	
   

  	
  40

  	
   

  	
   

  
	
  4.2

  	
   

  	
  Authorization

  	
   

  	
   

  	
  40

  	
   

  	
   

  
	
  4.3

  	
   

  	
  Enforceability

  	
   

  	
   

  	
  40

  	
   

  	
   

  
	
  4.4

  	
   

  	
  Governmental Approvals

  	
   

  	
   

  	
  41

  	
   

  	
   

  
	
  4.5

  	
   

  	
  Financial Statements

  	
   

  	
   

  	
  41

  	
   

  	
   

  
	
  4.6

  	
   

  	
  No Material Adverse
  Change

  	
   

  	
   

  	
  41

  	
   

  	
   

  

 

 

 i
 

 

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.7

  	
   

  	
  No Material
  Litigation, etc.

  	
   

  	
   

  	
  41

  	
   

  	
   

  
	
  4.8

  	
   

  	
  Federal Reserve
  Regulations

  	
   

  	
   

  	
  41

  	
   

  	
   

  
	
  4.9

  	
   

  	
  Investment Company
  Act, etc.

  	
   

  	
   

  	
  42

  	
   

  	
   

  
	
  4.10

  	
   

  	
  Tax
  Returns

  	
   

  	
   

  	
  42

  	
   

  	
   

  
	
  4.11

  	
   

  	
  No Material
  Misstatements

  	
   

  	
   

  	
  42

  	
   

  	
   

  
	
  4.12

  	
   

  	
  ERISA

  	
   

  	
   

  	
  42

  	
   

  	
   

  
	
  4.13

  	
   

  	
  Use
  of Proceeds

  	
   

  	
   

  	
  42

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
   

  	
  CONDITIONS
  PRECEDENT

  	
   

  	
   

  	
  42

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Conditions to
  Initial US$Loans

  	
   

  	
   

  	
  42

  	
   

  	
   

  
	
  5.2

  	
   

  	
  Conditions to Each
  US$Loan

  	
   

  	
   

  	
  43

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
   

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  	
   

  	
  44

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Existence;
  Business and Properties

  	
   

  	
   

  	
  44

  	
   

  	
   

  
	
  6.2

  	
   

  	
  Financial
  Statements, Reports, etc.

  	
   

  	
   

  	
  45

  	
   

  	
   

  
	
  6.3

  	
   

  	
  Notices

  	
   

  	
   

  	
  46

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
   

  	
  NEGATIVE COVENANTS

  	
   

  	
   

  	
  46

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Limitation on
  Secured Debt and Sale and Leaseback Transactions

  	
   

  	
   

  	
  46

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Mergers,
  Consolidations and Sales of Assets

  	
   

  	
   

  	
  47

  	
   

  	
   

  
	
  7.3

  	
   

  	
  Margin
  Regulations

  	
   

  	
   

  	
  47

  	
   

  	
   

  
	
  7.4

  	
   

  	
  Consolidated
  Net Interest Expense Ratio

  	
   

  	
   

  	
  47

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
   

  	
  EVENTS OF DEFAULT

  	
   

  	
   

  	
  47

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
   

  	
  THE ADMINISTRATIVE AGENT

  	
   

  	
   

  	
  49

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Appointment

  	
   

  	
   

  	
  49

  	
   

  	
   

  
	
  9.2

  	
   

  	
  Delegation of Duties

  	
   

  	
   

  	
  50

  	
   

  	
   

  
	
  9.3

  	
   

  	
  Exculpatory Provisions

  	
   

  	
   

  	
  50

  	
   

  	
   

  
	
  9.4

  	
   

  	
  Reliance by
  Administrative Agent

  	
   

  	
   

  	
  50

  	
   

  	
   

  
	
  9.5

  	
   

  	
  Notice
  of Default

  	
   

  	
   

  	
  50

  	
   

  	
   

  
	
  9.6

  	
   

  	
  Non-Reliance
  on Administrative Agent and Other Lenders

  	
   

  	
   

  	
  50

  	
   

  	
   

  
	
  9.7

  	
   

  	
  Indemnification

  	
   

  	
   

  	
  51

  	
   

  	
   

  
	
  9.8

  	
   

  	
  Administrative
  Agent in Its Individual Capacity

  	
   

  	
   

  	
  51

  	
   

  	
   

  
	
  9.9

  	
   

  	
  Successor
  Administrative Agent

  	
   

  	
   

  	
  51

  	
   

  	
   

  
	
  9.10

  	
   

  	
  Syndication
  Agent

  	
   

  	
   

  	
  52

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
   

  	
  GUARANTEE

  	
   

  	
   

  	
  52

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Guarantee

  	
   

  	
   

  	
  52

  	
   

  	
   

  
	
  10.2

  	
   

  	
  No
  Subrogation

  	
   

  	
   

  	
  52

  	
   

  	
   

  
	
  10.3

  	
   

  	
  Amendments,
  etc. with respect to the Subsidiary Borrower Obligations

  	
   

  	
   

  	
  53

  	
   

  	
   

  
	
  10.4

  	
   

  	
  Guarantee
  Absolute and Unconditional

  	
   

  	
   

  	
  53

  	
   

  	
   

  
	
  10.5

  	
   

  	
  Reinstatement

  	
   

  	
   

  	
  54

  	
   

  	
   

  

 

 ii
 

 

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.6

  	
   

  	
  Payments

  	
   

  	
   

  	
  54

  	
   

  	
   

  
	
  10.7

  	
   

  	
  Judgments
  Relating to Guarantee

  	
   

  	
   

  	
  54

  	
   

  	
   

  
	
  10.8

  	
   

  	
  Independent
  Obligations

  	
   

  	
   

  	
  55

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
   

  	
  MISCELLANEOUS

  	
   

  	
   

  	
  55

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Amendments and Waivers

  	
   

  	
   

  	
  55

  	
   

  	
   

  
	
  11.2

  	
   

  	
  Notices

  	
   

  	
   

  	
  56

  	
   

  	
   

  
	
  11.3

  	
   

  	
  No Waiver;
  Cumulative Remedies

  	
   

  	
   

  	
  56

  	
   

  	
   

  
	
  11.4

  	
   

  	
  Survival of
  Representations and Warranties

  	
   

  	
   

  	
  57

  	
   

  	
   

  
	
  11.5

  	
   

  	
  Payment of Expenses

  	
   

  	
   

  	
  57

  	
   

  	
   

  
	
  11.6

  	
   

  	
  Participations

  	
   

  	
   

  	
  57

  	
   

  	
   

  
	
  11.7

  	
   

  	
  Transfers of
  Competitive Loans

  	
   

  	
   

  	
  58

  	
   

  	
   

  
	
  11.8

  	
   

  	
  Assignments

  	
   

  	
   

  	
  59

  	
   

  	
   

  
	
  11.9

  	
   

  	
  The Register;
  Disclosure; Pledges to Federal Reserve Banks

  	
   

  	
   

  	
  60

  	
   

  	
   

  
	
  11.10

  	
   

  	
  Changing
  Designations of Swing Line Lenders and Competitive Loan Lenders

  	
   

  	
   

  	
  60

  	
   

  	
   

  
	
  11.11

  	
   

  	
  Replacement of
  Lenders under Certain Circumstances

  	
   

  	
   

  	
  61

  	
   

  	
   

  
	
  11.12

  	
   

  	
  Adjustments; Set-off

  	
   

  	
   

  	
  61

  	
   

  	
   

  
	
  11.13

  	
   

  	
  Counterparts

  	
   

  	
   

  	
  62

  	
   

  	
   

  
	
  11.14

  	
   

  	
  Severability

  	
   

  	
   

  	
  62

  	
   

  	
   

  
	
  11.15

  	
   

  	
  Integration

  	
   

  	
   

  	
  62

  	
   

  	
   

  
	
  11.16

  	
   

  	
  GOVERNING
  LAW

  	
   

  	
   

  	
  62

  	
   

  	
   

  
	
  11.17

  	
   

  	
  Submission To
  Jurisdiction; Waivers

  	
   

  	
   

  	
  62

  	
   

  	
   

  
	
  11.18

  	
   

  	
  Judgments
  Relating to Subsidiary Borrowers

  	
   

  	
   

  	
  63

  	
   

  	
   

  
	
  11.19

  	
   

  	
  Acknowledgements

  	
   

  	
   

  	
  63

  	
   

  	
   

  
	
  11.20

  	
   

  	
  WAIVERS OF JURY TRIAL

  	
   

  	
   

  	
  64

  	
   

  	
   

  
	
  11.21

  	
   

  	
  Confidentiality

  	
   

  	
   

  	
  64

  	
   

  	
   

  
	
  11.22

  	
   

  	
  Binding
  Effect; Successors and Assigns

  	
   

  	
   

  	
  64

  	
   

  	
   

  
	
  11.23

  	
   

  	
  Incremental
  Revolving Credit Commitments

  	
   

  	
   

  	
  65

  	
   

  	
   

  
	
  11.24

  	
   

  	
  USA
  PATRIOT Act

  	
   

  	
   

  	
  65

  	
   

  	
   

  

 

 iii
 

 

 

	
  SCHEDULES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE
  1.1

  	
   

  	
  Revolving
  Credit Commitments and Swing Line Commitments of Lenders

  	
   

  	
   

  
	
  SCHEDULE
  6.2(c)

  	
   

  	
  Compliance
  Certificate

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A-1

  	
   

  	
  Form of
  Competitive Loan Confirmation

  	
   

  	
   

  
	
  EXHIBIT
  A-2

  	
   

  	
  Form of
  Competitive Loan Offer

  	
   

  	
   

  
	
  EXHIBIT
  A-3

  	
   

  	
  Form of
  Competitive Loan Request

  	
   

  	
   

  
	
  EXHIBIT
  B-1

  	
   

  	
  Form of
  Subsidiary Borrower Notice and Designation

  	
   

  	
   

  
	
  EXHIBIT
  B-2

  	
   

  	
  Form of
  Subsidiary Borrower Request

  	
   

  	
   

  
	
  EXHIBIT C

  	
   

  	
  Form of
  Closing Certificate

  	
   

  	
   

  
	
  EXHIBIT D-1

  	
   

  	
  Form of
  Opinion of Simpson Thacher & Bartlett LLP

  	
   

  	
   

  
	
  EXHIBIT D-2

  	
   

  	
  Form of
  Opinion of Assistant General Counsel of IBM

  	
   

  	
   

  
	
  EXHIBIT E

  	
   

  	
  Form of
  Assignment and Acceptance

  	
   

  	
   

  
	
  EXHIBIT F

  	
   

  	
  Form of
  Local Currency Facility Addendum

  	
   

  	
   

  
	
  EXHIBIT
  G-1

  	
   

  	
  Form of
  Revolving Credit Loan Promissory Note

  	
   

  	
   

  
	
  EXHIBIT G-2

  	
   

  	
  Form of
  Competitive Loan Promissory Note

  	
   

  	
   

  
	
  EXHIBIT
  H-1

  	
   

  	
  Form of
  Lender Addendum

  	
   

  	
   

  
	
  EXHIBIT
  H-2

  	
   

  	
  Form of
  Subsidiary Borrower Addendum

  	
   

  	
   

  
	
  EXHIBIT
  I-1

  	
   

  	
  Form of
  New Lender Supplement

  	
   

  	
   

  
	
  EXHIBIT
  I-2

  	
   

  	
  Form of
  Incremental Commitment Supplement

  	
   

  	
   

  
	
  EXHIBIT J

  	
   

  	
  Form of
  Extension Request

  	
   

  	
   

  
							

 

 

 iv

CREDIT AGREEMENT, dated as of June 28, 2006,
among INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation (“IBM”), each Subsidiary Borrower (as
hereinafter defined), the several banks and other financial institutions from
time to time parties to this Agreement (the “Lenders”),
JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders hereunder
(in such capacity, the “Administrative Agent”),
and CITIBANK, N.A., as syndication agent (in such capacity, the “Syndication Agent”).

The parties hereto hereby agree as follows:

SECTION 1.           DEFINITIONS

1.1 Defined
Terms. As used in this Agreement, the following terms shall have the
following meanings:

“ABR”: 
for any day, a rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:  “Prime
Rate” shall mean the rate of interest per annum publicly announced
from time to time by JPMorgan Chase Bank as its prime rate in effect at its
principal office in New York City (each change in the Prime Rate to be
effective on the date such change is publicly announced); “Base CD Rate” shall mean the sum of (a) the
product of (i) the Three-Month Secondary CD Rate and (ii) a fraction,
the numerator of which is one and the denominator of which is one minus the CD
Reserve Percentage and (b) the CD Assessment Rate; “Three-Month Secondary CD Rate” shall mean,
for any day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board through the public
information telephone line of the Federal Reserve Bank of New York (which rate
will, under the current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if such
rate shall not be so reported on such day or such next preceding Business Day,
the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not be
a Business Day, on the next preceding Business Day) by the Administrative Agent
from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it; “CD
Reserve Percentage” shall mean, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board, for determining the maximum reserve requirement for a Depositary
Institution (as defined in Regulation D of the Board) in respect of new non-personal
time deposits in Dollars having a maturity of 30 days or more; and “CD Assessment Rate” shall mean, for any
day, the annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as “well-capitalized” and within
supervisory subgroup “A” (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. § 327.3(e) (or any
successor provision) to the Federal Deposit Insurance Corporation (or any
successor) for such Corporation’s (or such successor’s) insuring time deposits
at offices of such institution in the United States. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base CD
Rate or the Federal Funds Effective Rate, or both, for any reason, including
the inability or failure of the Administrative Agent to obtain sufficient
quotations in accordance with the terms thereof, the ABR shall be determined
without regard to clause (b) or (c), or both, of the first sentence of
this definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. 

 

Any change in
the ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate,
the CD Reserve Percentage, the CD Assessment Rate or the Federal Funds
Effective Rate shall be effective on the effective day of such change in the
Prime Rate, the Three-Month Secondary CD Rate, the CD Reserve Percentage, the
CD Assessment Rate or the Federal Funds Effective Rate, respectively.

“ABR Loans”:  Loans the rate of interest applicable to
which is based upon the ABR.

“Act”: 
as defined in Section 11.24.

“Aggregate Outstanding Revolving Extensions of Credit”:  as to any Lender at any time, the aggregate
principal amount of all Revolving Credit Loans, Swing Line Loans and Local
Currency Loans (US$ Equivalent) made by such Lender then outstanding.

“Aggregate Outstanding US$ Revolving Extensions of
Credit”:  as to any Lender at
any time, the aggregate principal amount of all Revolving Credit Loans and
Swing Line Loans made by such Lender then outstanding.

“Agreement”:  this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.

“Applicable Eurodollar Margin”:  with respect to each Eurodollar Loan at any
date, the applicable percentage per annum set forth below based on the Status
on such date:

 

	
  Level I 

  Status

  	
   

  	
  Level II

  Status

  	
   

  	
  Level III

  Status

  	
   

  	
  Level IV

  Status

  	
   

  	
  Level V

  Status

  
	
  0.1100%

  	
   

  	
  0.1000%

  	
   

  	
  0.1900%

  	
   

  	
  0.5000%

  	
   

  	
  0.7000%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

“Applicable Index Rate” in respect of any
Index Rate Competitive Loan of a specified maturity requested pursuant to an
Index Rate Competitive Loan Request, the rate of interest, determined on the
basis of the rate for deposits in Dollars with a maturity comparable to the
maturity applicable to such Index Rate Competitive Loan, appearing on Page 3750
of the Telerate screen as of 11:00 A.M., London time, two Business Days
prior to the Borrowing Date in respect of such Index Rate Competitive Loan. In
the event that such rate does not appear on Page 3750 of the Telerate
Screen (or otherwise on such service), the “Applicable
Index Rate” shall be determined by reference to such other publicly
available service for displaying eurodollar rates as may be agreed upon by the
Administrative Agent and IBM or, in the absence of such agreement, the “Applicable Index Rate” shall instead be
the average (rounded upward, if necessary, to the nearest 1/16th of 1%) of the
respective rates notified to the Administrative Agent by each of the Reference
Lenders as the rate at which such Reference Lender is offered Dollar deposits
at or about 10:00 A.M., New York City time, two Business Days prior to the
Borrowing Date in respect of such Index Rate Competitive Loan, in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations in respect of its Eurodollar Loans are then being conducted for
delivery on such Borrowing Date with a maturity comparable to the maturity
applicable to such Index Rate Competitive Loan and in an amount comparable to
the amount of such Index Rate Competitive Loan.

“Attributable Debt”:  as of any date of determination, the present
value (discounted semiannually at the Attributable Interest Rate) of the
obligation of a lessee for rental payments pursuant to any Sale and Leaseback
Transaction (reduced by the amount of the rental obligations 

 2
 

 

of any
sublessee of all or part of the same property) during the remaining term of
such Sale and Leaseback Transaction (including any period for which the lease
relating thereto has been extended), such rental payments not to include
amounts payable by the lessee for maintenance and repairs, insurance, taxes,
assessments and similar charges and for contingent rents (such as those based
on sales). In the case of any Sale and Leaseback Transaction in which the lease
is terminable by the lessee upon the payment of a penalty, such rental payments
shall be considered for purposes of this definition to be the lesser of (a) the
rental payments to be paid under such Sale and Leaseback Transaction until the
first date (after the date of such determination) upon which it may be so
terminated plus the then applicable penalty upon such termination and (b) the
rental payments required to be paid during the remaining term of such Sale and
Leaseback Transaction (assuming such termination provision is not exercised).

“Attributable Interest Rate”:  as of the date of its determination, the
weighted average of the interest rates (or the effective rate in the case of
original issue discount securities or discount securities) of (a) all
Outstanding Securities (as such term is defined in the 1990 Indenture) of IBM
under the 1990 Indenture and all securities of IBM issued and outstanding (as
defined in the 1985 Indenture) under the 1985 Indenture to which Sections 6.05
and 6.06 of the 1985 Indenture apply (and whose application has not been
waived), or (b) at any time when no securities of IBM referred to in
clause (a) of this sentence are outstanding, all outstanding Loans and all
other outstanding Funded Debt of IBM.

“Available Revolving Credit Commitment”:  as to any Lender, at any time of
determination, an amount equal to such Lender’s Revolving Credit Commitment at
such time minus such Lender’s Aggregate Outstanding Revolving Extensions
of Credit at such time.

“Banking Day”:  in respect of any city, any day on which
commercial banks are open for business (including dealings in foreign exchange
and foreign currency deposits) in that city.

“Board”: 
the Board of Governors of the Federal Reserve System of the United
States (or any successor).

“Borrower”: 
as applicable, IBM or the relevant Subsidiary Borrower.

“Borrower Obligations”:  any and all obligations of any Borrower for
the payment of money hereunder or in respect hereof, whether absolute or
contingent (including, in the case of IBM, its obligations pursuant to the
guarantee contained in Section 10).

“Borrowing Date”:  any Business Day specified in a notice
pursuant to Section 2.2, 2.5 or 2.8 as a date on which the relevant
Borrower requests US$ Loans to be made hereunder and, for the purposes of Section 3,
any other date on which the relevant Borrower requests Local Currency Loans to
be made under a Local Currency Facility.

“Business Day”:  a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by
law to close, except that, when used in connection with a Eurodollar Loan or an
Index Rate Competitive Loan with respect to which the Eurodollar Rate or the
Applicable Index Rate is determined based upon the Telerate screen in
accordance with the definition of Eurodollar Rate or Applicable Index Rate, as
the case may be, “Business Day” shall mean any Business Day on which dealings
in foreign currencies and exchange between banks may be carried on in London,
England and New York, New York.

 3
 

 

“Calculation Date”:  (a) the last Business Day of each
calendar month and (b) at the Administrative Agent’s option in its sole
discretion, any Business Day on which a Borrower gives the Administrative Agent
a notice requesting US$ Loans to be made hereunder.

“Capital Lease”:  with respect to any Person, any obligation of
such Person to pay rent or other amounts under a lease with respect to any
property (whether real, personal or mixed) acquired or leased by such Person
that is required to be accounted for as a liability on a balance sheet of such
Person in accordance with GAAP.

“Code”: 
the Internal Revenue Code of 1986, as amended from time to time.

“Commitment Percentage”:  as to any Lender at any time, the percentage
which such Lender’s Revolving Credit Commitment then constitutes of the
aggregate Revolving Credit Commitments (or, at any time after the Revolving
Credit Commitments shall have expired or terminated, the percentage which the
aggregate principal amount of such Lender’s Loans then outstanding constitutes
of the aggregate principal amount of the Loans of all Lenders then
outstanding).

“Commitments”:  the collective reference to the Revolving
Credit Commitments and any commitments to make Local Currency Loans under any
Local Currency Facility.

“Competitive Loan”:  each loan made pursuant to Section 2.7.

“Competitive Loan Assignee”:  as defined in Section 11.7(a).

“Competitive Loan Assignment”:  any assignment by a Competitive Loan Lender
to a Competitive Loan Assignee of a Competitive Loan; any such Competitive Loan
Assignment to be registered in the Register must set forth, in respect of the
Competitive Loan Assignee thereunder, the full name of such Competitive Loan
Assignee, its address for notices, its lending office address (in each case
with telephone and facsimile transmission numbers) and payment instructions for
all payments to such Competitive Loan Assignee, and must contain an agreement
by such Competitive Loan Assignee to comply with the provisions of Sections
2.18, 2.20, 11.7 and 11.21.

“Competitive Loan Borrowing Period”:  the period from and including the Effective
Date until the earlier of (a) the date which is 14 days prior to the
Termination Date and (b) the last day of the Revolving Credit Commitment
Period.

“Competitive Loan Confirmation”:  each confirmation by the relevant Borrower of
its acceptance of Competitive Loan Offers, which Competitive Loan Confirmation
shall be substantially in the form of Exhibit A-1 and shall be
delivered to the Administrative Agent in writing or by facsimile transmission.

“Competitive Loan Lender”:  each Lender that has agreed to offer to make
Competitive Loans hereunder and each other Lender that shall hereafter be
designated as a Competitive Loan Lender in accordance with the provisions of
Sections 11.7 and 11.10.

“Competitive Loan Maturity Date”:  as to any Competitive Loan, the date
specified by the relevant Borrower pursuant to Section 2.8(d)(ii) in
its acceptance of the related Competitive Loan Offer.

 4
 

 

“Competitive Loan Offer”:  each offer by a Competitive Loan Lender to
make Competitive Loans pursuant to a Competitive Loan Request, which
Competitive Loan Offer shall contain the information specified in Exhibit A-2
and shall be delivered to the Administrative Agent by telephone, immediately
confirmed by facsimile transmission.

“Competitive Loan Request”:  each request by the relevant Borrower for
Competitive Loan Lenders to submit bids to make Competitive Loans, which
request shall contain the information in respect of such requested Competitive
Loans specified in Exhibit A-3 and shall be delivered to the
Administrative Agent in writing or by facsimile transmission, or by telephone,
immediately confirmed by facsimile transmission.

“Consolidated Adjusted Cash Flow”:  for any period, earnings before income taxes
of IBM and its consolidated Subsidiaries for such period, excluding gains or
losses from the divestiture or sale of a business, plus, to the extent
deducted in arriving at earnings before income taxes of IBM and its
consolidated Subsidiaries for such period, the sum of (i) Consolidated Net
Interest Expense, (ii) depreciation expense, (iii) amortization
expense and (iv) restructuring charges minus the sum of (a) cash
payments made during such period in respect of restructuring charges, (b) payments
made during such period for plant, rental machines and other property excluding
acquisitions of businesses (net of proceeds received during such period from
dispositions of plant, rental machines and other property excluding
divestitures or sales of businesses) and (c) investment in software for
such period, all as determined on a consolidated basis in accordance with GAAP
and, where applicable, determined by reference to the consolidated statement of
earnings or (including in the case of clauses (b) and (c) above)
statement of cash flows of IBM and its consolidated Subsidiaries.

“Consolidated Net Interest Expense”:  for any period, (a) total interest cost
of IBM and the Subsidiaries for such period minus (b) interest
income of IBM and the Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

“Consolidated Net Interest Expense Ratio”:  for any period, the ratio of Consolidated
Adjusted Cash Flow for such period to Consolidated Net Interest Expense for
such period.

“Consolidated Net Tangible Assets”:  at any date, the total assets appearing on
the consolidated statement of financial position of IBM and the Subsidiaries
most recently delivered to the Administrative Agent pursuant to Section 4.5,
6.2(a) or 6.2(b), as the case may be, less (a) all current
liabilities as shown on such statement and (b) intangible assets. As used
herein, “intangible assets” means
the value (net of any applicable reserves) as shown on or reflected in such
statement, of: (i) all trade names, trademarks, licenses, patents,
copyrights and goodwill; (ii) organizational and development costs; (iii) deferred
charges (other than prepaid items such as insurance, taxes, interest,
commissions, rents and similar items and tangible assets being amortized); and (iv) unamortized
debt discount and expense, less unamortized premium; but in no event shall the
term “intangible assets” include
program products.

“Controlled Person”:  any corporation, partnership or other entity
of which shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation, partnership or other
entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by IBM.

 5
 

 

“Debt”: 
with respect to any Person, without duplication, all indebtedness
representing money borrowed which is created, assumed, incurred or guaranteed
in any manner by such Person or for which such Person is otherwise responsible
or liable (whether by agreement to purchase indebtedness of, or to supply funds
to or invest in, others).

“Default”: 
any of the events specified in Section 8, whether or not any
requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“Dollars” and “$”:  dollars in lawful currency of the United
States of America.

“Domestic Subsidiary Borrower”:  any Subsidiary Borrower which (a) is
organized under the laws of the United States of America, any state, Territory
or possession thereof or the District of Columbia or (b) conducts a
substantial portion of its business or maintains a substantial portion of its
property or assets in any one or more of the foregoing jurisdictions.

“Effective Date”:  as defined in Section 11.22(a).

“ERISA”:  the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations
promulgated thereunder, as from time to time in effect.

“Eurodollar Loans”:  Revolving Credit Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.

“Eurodollar Rate”:  with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate of interest determined on the
basis of the rate for deposits in Dollars for a period equal to such Interest
Period commencing on the first day of such Interest Period appearing on Page 3750
of the Telerate screen as of 11:00 A.M., London time, two Business Days
prior to the beginning of such Interest Period. In the event that such rate
does not appear on Page 3750 of the Telerate Screen (or otherwise on such
service), the “Eurodollar Rate”
shall be determined by reference to such other publicly available service for
displaying eurodollar rates as may be agreed upon by the Administrative Agent
and IBM or, in the absence of such agreement, the “Eurodollar Rate” shall instead be the rate per annum equal
to the average (rounded upward, if necessary, to the nearest 1/16th of 1%) of
the respective rates notified to the Administrative Agent by each of the
Reference Lenders as the rate at which such Reference Lender is offered Dollar
deposits at or about 10:00 A.M., New York City time, two Business Days
prior to the beginning of such Interest Period, in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for delivery on the
first day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of its Eurodollar Loan to be outstanding
during such Interest Period.

“Eurodollar Tranche”:  the collective reference to Eurodollar Loans
the then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Eurodollar Loans
shall originally have been made on the same day).

“Event of Default”:  any of the events specified in Section 8,
provided that all requirements for the giving of notice and/or the lapse
of time have been satisfied.

“Exchange Rate”:  with respect to any Local Currency on a
particular date, the rate at which such Local Currency may be exchanged into
Dollars, as set forth on such date on the relevant Reuters currency page. In
the event that such rate does not appear on any Reuters 

 6
 

 

currency page,
the “Exchange Rate” with respect
to such Local Currency shall be determined by reference to such other publicly
available service for displaying exchange rates as may be agreed upon by the
Administrative Agent and IBM or, in the absence of such agreement, such “Exchange Rate” shall instead be the
Administrative Agent’s spot rate of exchange in the interbank market where its
foreign currency exchange operations in respect of such Local Currency are then
being conducted, at or about 10:00 A.M., local time, at such date for the
purchase of Dollars with such Local Currency, for delivery two Banking Days
later; provided, that if at the time of any such determination, for any
reason, no such spot rate is being quoted, the Administrative Agent may use any
reasonable method as it deems applicable to determine such rate, and such
determination shall be conclusive absent manifest error.

“Existing Credit Agreement”:  the Credit Agreement, dated as of May 27,
2004, among IBM, the subsidiary borrowers parties thereto, the lenders parties
thereto, JPMorgan Chase Bank, as administrative agent and, Citibank, N.A., as
syndication agent.

“Existing Termination Date”:  as defined in Section 2.21(c).

“Extension Request”:  as defined in Section 2.21(a).

“Extension Request Deadline”:  as defined in Section 2.21(b).

“Facility Fee Rate”:  for any day, the applicable rate per annum
set forth below based on the Status in effect on such day:

 

	
  Level I

  Status

  	
   

  	
  Level II

  Status

  	
   

  	
  Level III

  Status

  	
   

  	
  Level IV

  Status

  	
   

  	
  Level V

  Status

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.0400%

  	
   

  	
  0.0500%

  	
   

  	
  0.0600%

  	
   

  	
  0.1250%

  	
   

  	
  0.1750%

  

 

“Federal Funds Effective Rate”:  for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.

“Fixed Rate Competitive Loan Request”:  any Competitive Loan Request requesting the
Competitive Loan Lenders to offer to make Fixed Rate Competitive Loans.

“Fixed Rate Competitive Loans”:  Competitive Loans the rate of interest
applicable to which is equal to a fixed percentage rate per annum specified by
the Competitive Loan Lender making such Loan in its Competitive Loan Offer (as
opposed to a rate composed of the Applicable Index Rate plus or minus a
margin).

“Foreign Subsidiary Borrower”:  any Subsidiary Borrower other than a Domestic
Subsidiary Borrower.

“Funded Debt”:  any Debt maturing by its terms more than one
year from the date of the issuance thereof, including any Debt renewable or
extendible at the option of the obligor to a date later than one year from the
date of the original issuance thereof.

 7
 

 

“GAAP”: 
generally accepted accounting principles in the United States of America
in effect from time to time.

“Governmental Authority”:  any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.

“Incremental Commitment Supplement”:  as defined in Section 11.23(c).

“Indebtedness”:  with respect to any Person, without
duplication, (a) all indebtedness of such Person for borrowed money or for
the deferred purchase price of property or services other than indebtedness to
trade creditors and service providers incurred in the ordinary course of
business, (b) obligations, contingent or otherwise, of such Person in
connection with (i) letter of credit facilities or bankers’ acceptance
facilities and (ii) interest rate swap agreements, interest rate cap
agreements or similar arrangements used by a Person to fix or cap a floating
rate of interest to a negotiated maximum rate or amount, or other similar
facilities including currency swaps, (c) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e) all
obligations of such Person to pay rent or other amounts under a Capital Lease, (f) all
indebtedness referred to in clause (a), (b), (c), (d) or (e) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property owned
by such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness, and (g) all Indebtedness of others
guaranteed by such Person. For purposes of this Agreement, the amount of any
Indebtedness referred to in clause (b)(ii) of the preceding sentence shall
be the amounts, including any termination payments, required to be paid to a
counterparty rather than any notional amount with regard to which payments may
be calculated. For purposes of this Agreement, Indebtedness shall not include
any indebtedness or other obligations issued by any Person (or by a trust or
other entity established by such Person or any of its affiliates) which are
primarily serviced by the cash flows of a discrete pool of receivables, leases
or other financial assets which have been sold or transferred by IBM or any
Subsidiary in securitization transactions (“Securitization
Transactions”) which, in accordance with GAAP, are accounted for as
sales for financial reporting purposes. The definitions of Debt and
Indebtedness in this Section 1.1 shall be independent in construction,
interpretation and application.

“Index Rate Competitive Loan”:  Competitive Loans the rate of interest
applicable to which is equal to the Applicable Index Rate plus or minus a
margin.

“Index Rate Competitive Loan Request”:  any Competitive Loan Request requesting the
Competitive Loan Lenders to offer to make Index Rate Competitive Loans.

“Interest Payment Date”:  (a) as to any ABR Loan (other than Swing
Line Loans which do not constitute Unrefunded Swing Line Loans), the last day
of each March, June, September and December to occur while such Loan
is outstanding and the Termination Date, (b) as to any Swing Line Loan
which does not constitute an Unrefunded Swing Line Loan, the last day such Loan
is outstanding, (c) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, (d) as to any
Eurodollar Loan having an Interest Period longer than three months, each day
which is three months, or a whole multiple thereof, after the first day of such
Interest Period and the last day of such Interest Period, (e) as to any
Fixed Rate 

 8
 

 

Competitive
Loan, each interest payment date specified by the relevant Borrower for such
Loan in the related Competitive Loan Request (including, in any event, the
Competitive Loan Maturity Date in respect of such Loan) and (f) as to any
Index Rate Competitive Loan, (i) the Competitive Loan Maturity Date in
respect of such Loan and (ii) each date (if any) occurring prior to such
Competitive Loan Maturity Date which is three months, or a whole multiple
thereof, after the Borrowing Date in respect of such Loan.

“Interest Period”:  with respect to any Eurodollar Loan:

(a)  initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the relevant
Borrower in its notice of borrowing or notice of conversion, as the case may
be, given with respect thereto; and

(b)  thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months thereafter, as selected by the relevant Borrower
by irrevocable notice to the Administrative Agent not less than three Business
Days prior to the last day of the then current Interest Period with respect
thereto;

provided that, all of the foregoing provisions
relating to Interest Periods are subject to the following:

 (i)  if any Interest Period would
otherwise end on a day that is not a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately preceding
Business Day;

(ii)  any
Interest Period that would otherwise extend beyond the Termination Date shall
end on the Termination Date; and

(iii) 
any Interest Period that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month.

“Lender Addendum” means an instrument,
substantially in the form of Exhibit H-1, by which a Lender becomes
a party to this Agreement as of the Effective Date.

“Level I Status”:  exists at any date if, at such date, IBM has
a long-term senior unsecured debt rating of AA- or better by S&P or Aa3 or
better by Moody’s.

“Level II Status”:  exists at any date if, at such date,
Level I Status does not exist and IBM has a long-term senior unsecured
debt rating of A+ or better by S&P or A1 or better by Moody’s.

“Level III Status”:  exists at any date if, at such date, neither
Level I Status nor Level II Status exists and IBM has a long-term senior
unsecured debt rating of A- or better by S&P or A3 or better by Moody’s.

“Level IV Status”:  exists at any date if, at such date, neither
Level I Status, Level II Status nor Level III Status exists and IBM has a
long-term senior unsecured debt rating of BBB- or better by S&P or Baa3 or
better by Moody’s.

 

 9
 

 

 

“Level V Status”:  exists at any date if, at such date, none of
Level I Status, Level II Status, Level III Status or Level IV Status exists.

“Lien”: 
with respect to any asset, any mortgage, pledge, security interest,
lien, charge or other encumbrance whatsoever.

“Loan”: 
any US$ Loan or Local Currency Loan.

“Local Currency”:  Dollars and any currency other than Dollars
as to which an Exchange Rate may be calculated.

“Local Currency Facility”:  any credit facility designated as a “Local
Currency Facility” pursuant to a Local Currency Facility Addendum and providing
for borrowings in a Local Currency.

“Local Currency Facility Addendum”:  a Local Currency Facility Addendum received
by the Administrative Agent substantially in the form of Exhibit F and
conforming to the requirements of Section 3.

“Local Currency Facility Maximum Borrowing Amount”:  as defined in Section 3.1(b).

“Local Currency Facility Stated Maximum Borrowing Amount”:  the stated amount of any Local Currency
Facility Maximum Borrowing Amount, without giving effect to any reductions
thereof effected pursuant to Section 3.2(c) or (d).

“Local Currency Lender”:  any Lender (or, if applicable, any affiliate,
branch or agency thereof) party to a Local Currency Facility.

“Local Currency Lender Maximum Borrowing Amount”:  as defined in Section 3.1(b).

“Local Currency Lender Stated Maximum Borrowing Amount”:  the stated amount of any Local Currency
Lender Maximum Borrowing Amount, without giving effect to any reductions
thereof pursuant to Section 3.2(c) or (d).

“Local Currency Loan”:  any loan made pursuant to a Local Currency
Facility.

“Local Currency Loans (US$ Equivalent)”:  the US$ Equivalent of the relevant Local Currency
Loans.

“Margin Stock”:  as defined under Regulation U.

“Material Adverse Effect”:  a material adverse effect on (a) the
financial condition of IBM and the Subsidiaries taken as a whole or (b) the
validity or enforceability of this Agreement or the rights or remedies of the
Administrative Agent and the Lenders hereunder.

“Maximum Subsidiary Borrowing Amount”:  as defined in Section 5.2(d).

“Moody’s”: 
Moody’s Investors Service, Inc. and its successors.

“New Lender”:  as defined in Section 11.23(b).

“New Lender Supplement”:  as defined in Section 11.23(b).

 

 10

 

“1985 Indenture”:  the Indenture, dated as of July 15,
1985, between IBM and The Bank of New York (successor to Morgan Guaranty Trust
Company of New York), as Trustee.

“1990 Indenture”:  the Indenture, dated as of March 1,
1990, between IBM and The Bank of New York, as Trustee.

“Non-Excluded Taxes”:  as defined in Section 2.18(a).

 “Non-Extending
Lender”:  as defined in Section 2.21(b).

 “Participant”:  as defined in Section 11.6.

“Permitted Liens”:  (a)  pledges or deposits made to secure
obligations of IBM or a Restricted Subsidiary under workmen’s compensation laws
or similar legislation; (b) Liens imposed by law, such as materialmen’s,
mechanics’, carriers’, workmen’s, vendors’, repairmen’s or other like Liens
incurred in the ordinary course of business; (c) governmental (Federal,
state or municipal) Liens arising out of contracts for the purchase of products
of IBM or a Restricted Subsidiary, and deposits or pledges to obtain the
release of any of the foregoing Liens; (d) Liens created by or resulting
from any litigation or legal proceeding that is currently being contested in
good faith by appropriate proceedings; (e) leases made or existing on
Principal Property entered into in the ordinary course of business by IBM or a
Restricted Subsidiary; (f) landlords’ Liens under leases of Principal
Property to which IBM or a Restricted Subsidiary is a party; (g) zoning
restrictions, easements, licenses or restrictions on the use of Principal
Property or minor irregularities in the title thereto that in any such case do
not interfere materially with the use of such Principal Property by IBM or any
Restricted Subsidiary; (h) deposits in connection with bids, tenders or
contracts (other than for the payment of money) to which IBM or any Restricted
Subsidiary is a party; (i) deposits to secure public or statutory
obligations of IBM or any Restricted Subsidiary; (j) deposits in
connection with obtaining or maintaining self-insurance or to obtain the
benefits of any law, regulation or arrangement pertaining to unemployment
insurance, old age pensions, social security or similar matters; (k) deposits
of cash or obligations of the United States of America to secure surety, appeal
or customs bonds to which IBM or any Restricted Subsidiary is a party; and (l) Liens
for taxes or assessments or governmental charges or levies not yet due or
delinquent, or which can thereafter be paid without penalty, or which are being
contested in good faith by appropriate proceedings.

“Person”: 
an individual, partnership, limited liability company, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.

“Principal Property”:  any land, land improvements, buildings and
associated factory, laboratory and office equipment (excluding all products
marketed by IBM or any Subsidiary) constituting a manufacturing facility,
development facility, warehouse facility, service facility or office facility
(including any portion thereof), which facility (a) is owned by or leased
to IBM or any Restricted Subsidiary, (b) is located within the United
States, and (c) has an acquisition cost plus capitalized improvements in
excess of 0.15% of Consolidated Net Tangible Assets as of the date of such
determination, other than (i) any such facility, or portion thereof, which
has been financed by obligations issued by or on behalf of a state, a Territory
or a possession of the United States, or any political subdivision of any of
the foregoing, or the District of Columbia, the interest on which is, or at the
time of issuance of such obligations was determined by counsel to be,
excludable from the gross income of the holders thereof (other than a “substantial
user” of such facility or a “related person” as those terms were used in Section 147
of the Code) pursuant 

 11
 

 

to the
provisions of Section 103 and related Sections of the Code (or any similar
provisions hereafter enacted) as in effect at the time of issuance of such
obligations, (ii) any such facility which the Board of Directors of IBM,
or a duly authorized committee thereof, may by resolution declare is not of
material importance to IBM and the Restricted Subsidiaries, taken as a whole (provided
that IBM has delivered written notice of such declaration to the Administrative
Agent), and (iii) any such facility, or portion thereof, owned or leased
jointly or in common with one or more Persons other than IBM and any Subsidiary
and in which the interest of IBM and all Subsidiaries does not exceed 50%.

“Purchase Date”:  as defined in Section 2.21(c).

“Purchasing Lender”:  as defined in Section 11.8(a).

“Reference Lenders”:  JPMorgan Chase Bank, Citibank, N.A. and
Credit Suisse First Boston.

“Register”: 
as defined in Section 11.9(a).

“Regulation T”:  Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

“Regulation U”:  Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

“Regulation X”:  Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

“Required Lenders”:  at any date, the holders of more than 50% of
the aggregate Revolving Credit Commitments, or, if the Revolving Credit
Commitments have been terminated or for the purposes of determining whether to
accelerate the Loans pursuant to Section 8, of the aggregate unpaid
principal amount of the Loans.

“Requirement of Law”:  as to any Person, the Certificate of Incorporation
and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or assets or to which
such Person or any of its property or assets is subject.

“Reset Date”:  as defined in Section 3.2(a).

“Responsible Officer”:  the Chief Executive Officer, the Chief
Financial Officer, the Vice President and Treasurer, the Vice President and
Controller, any Assistant Controller and any Assistant Treasurer of IBM.

“Restricted Securities”:  any capital stock or Indebtedness of any
Restricted Subsidiary.

“Restricted Subsidiary”:  (a) any Subsidiary (i) which has
substantially all its property within the United States of America, (ii) which
owns or is a lessee of any property that would be a Principal Property but for
clause (a) of the definition of such term contained in this Section 1.1,
and (iii) in which the investment of IBM and all other Subsidiaries
exceeds 0.15% of Consolidated Net Tangible Assets as of the date of such
determination; provided, however, that 

 12
 

 

the term “Restricted
Subsidiary” shall not include (A) any Subsidiary (x) primarily
engaged in the business of purchasing, holding, collecting, servicing or
otherwise dealing in and with installment sales contracts, leases, trust
receipts, mortgages, commercial paper or other financing instruments, and any
collateral or agreements relating thereto, including in the business,
individually or through partnerships, of financing (whether through long-
or short-term borrowings, pledges, discounts or otherwise) the sales,
leasing or other operations of IBM and the Subsidiaries or any of them, or (y) engaged
in the business of financing the assets and operations of third parties, and (z) in
any case, not, except as incidental to such financing business, engaged in
owning, leasing or operating any property which but for this proviso would
qualify as Principal Property or (B) any Subsidiary acquired or organized
after July 15, 1985, for the purpose of acquiring the stock or business or
assets of any Person other than IBM or any Restricted Subsidiary, whether by
merger, consolidation, acquisition of stock or assets or similar transaction
analogous in purpose or effect, so long as such Subsidiary shall not have,
since such date, and does not hereafter acquire by merger, consolidation,
acquisition of stock or assets or similar transaction analogous in purpose or
effect all or any substantial part of the business or assets of IBM or any
Restricted Subsidiary; and (b) any other Subsidiary which is hereafter
designated by the Board of Directors of IBM, or a duly authorized committee
thereof, as a Restricted Subsidiary.

“Revolving Credit Borrowing Share”:  for any borrowing of Revolving Credit Loans,
with respect to any Lender, an amount equal to such Lender’s Adjusted Revolving
Credit Commitment Percentage of the amount of such borrowing. As used in this
definition, “Adjusted Revolving Credit Commitment Percentage” means, as to any
Lender, at any time of determination, the percentage which such Lender’s
Available Revolving Credit Commitment then constitutes of the aggregate
Available Revolving Credit Commitments of all Lenders at such time.

“Revolving Credit Commitment”:  as to any Lender, the obligation of such
Lender to make Revolving Credit Loans to the Borrowers hereunder in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender’s name on Schedule 1.1, as such amount may be
changed from time to time in accordance with the provisions of this Agreement.

“Revolving Credit Commitment Period”:  the period from and including the Effective
Date to but not including the Termination Date or such earlier date on which
the Revolving Credit Commitments shall terminate as provided herein.

“Revolving Credit Loans”:  as defined in Section 2.1.

“S&P”: 
Standard & Poor’s Ratings Services and its successors.

“Sale and Leaseback Transaction”:  any arrangement with any Person providing for
the leasing by IBM or any Restricted Subsidiary of any Principal Property
(whether such Principal Property is now owned or hereafter acquired) that has
been or is to be sold or transferred by IBM or such Restricted Subsidiary to
such Person, other than (a) temporary leases for a term, including
renewals at the option of the lessee, of not more than three years; (b) leases
between IBM and a Restricted Subsidiary or between Restricted Subsidiaries; and
(c) leases of Principal Property executed by the time of, or within 180
days after the latest of, the acquisition, the completion of construction or
improvement (including any improvements on property which will result in such
property becoming Principal Property), or the commencement of commercial
operation of such Principal Property.

 13
 

 

“SEC”: 
the Securities and Exchange Commission and any successor agency.

“Secured Debt”:  (a) Debt of IBM or a Restricted
Subsidiary which is secured by any Lien other than a Permitted Lien upon any
Principal Property or Restricted Securities and (b) Indebtedness of IBM or
a Restricted Subsidiary in respect of any conditional sale or other title
retention agreement covering Principal Property or Restricted Securities; but “Secured
Debt” shall not include any of the following:

(i)            Debt of IBM and the Restricted
Subsidiaries outstanding on July 15, 1985, secured by then existing Liens
upon, or incurred in connection with conditional sales agreements or other
title retention agreements with respect to, Principal Property or Restricted
Securities;

(ii)           Debt of IBM or a Restricted
Subsidiary secured by (A) purchase money Liens upon Principal Property or
Restricted Securities acquired after July 15, 1985, or (B) Liens
placed on Principal Property after July 15, 1985, during construction or
improvement thereof (including any improvements on property which resulted or
will result in such property becoming Principal Property) or placed thereon
within 180 days after the later of acquisition, completion of construction or
improvement or the commencement of commercial operation of such Principal
Property or improvement, or placed on Restricted Securities acquired after July 15,
1985, or (C) conditional sale agreements or other title retention agreements
with respect to any Principal Property or Restricted Securities acquired after July 15,
1985, if (in each case referred to in this subparagraph (ii)) (x) such
Lien or agreement secures all or any part of the Debt incurred for the purpose
of financing all or any part of the purchase price or cost of construction of
such Principal Property or improvement or Restricted Securities and (y) such
Lien or agreement does not extend to any Principal Property or Restricted
Securities other than the Principal Property or Restricted Securities so
acquired or the Principal Property, or portion thereof, on which the property
so constructed, or such improvement, is located; provided, however,
that the amount by which the aggregate principal amount of Debt secured by any
such Lien or agreement exceeds the cost to IBM or such Restricted Subsidiary of
the related acquisition, construction or improvement shall be considered to be “Secured
Debt”;

(iii)          Debt of IBM or a Restricted Subsidiary
secured by Liens on Principal Property or Restricted Securities, which Liens
exist at the time of acquisition (by any manner whatsoever) of such Principal
Property or Restricted Securities by IBM or a Restricted Subsidiary;

(iv)          Debt of Restricted Subsidiaries owing
to IBM or any other Restricted Subsidiary or Debt of IBM owing to any
Restricted Subsidiary;

(v)           in the case of any corporation which
becomes (by any manner whatsoever), as the case may be, a Restricted Subsidiary
after the Effective Date, Debt secured by Liens upon, or conditional sale
agreements or other title retention agreements with respect to, its property
which constitutes Principal Property or Restricted Securities, which Liens
shall have existed or exist, as the case may be, at the time such corporation
shall have become or becomes, as the case may be, a Restricted Subsidiary;

 14
 

 

(vi)          guarantees by IBM of Secured Debt and
Attributable Debt of any Restricted Subsidiaries and guarantees by a Restricted
Subsidiary of Secured Debt and Attributable Debt of IBM and any other Restricted
Subsidiaries;

(vii)         Debt arising from any Sale and
Leaseback Transaction;

(viii)        Debt secured by Liens on property of IBM
or a Restricted Subsidiary in favor of the United States of America, any state,
Territory or possession thereof, or the District of Columbia, or any
department, agency or instrumentality or political subdivision of the United
States of America or any state, Territory or possession thereof, or the
District of Columbia, or in favor of any other country or any political
subdivision thereof, if such Debt was incurred for the purpose of financing all
or any part of the purchase price or the cost of construction of the property
subject to such Liens; provided, however, that the amount by
which the aggregate principal amount of Debt secured by any such Lien exceeds
the cost to IBM or such Restricted Subsidiary of the related acquisition or
construction shall be considered to be “Secured Debt”; and

(ix)           the replacement, extension or renewal
(or successive replacements, extensions or renewals) of any Debt (in whole or
in part) excluded from the definition of “Secured Debt” by subparagraphs (i) through
(viii) above; provided, however, that no Lien securing, or
conditional sale or title retention agreement with respect to, such Debt shall
extend to or cover any Principal Property or any Restricted Securities, other
than such property which secured the Debt so replaced, extended or renewed
(plus improvements on or to any such Principal Property); provided, further,
however, that to the extent that such replacement, extension or renewal
increased or increases the principal amount of Debt secured by such Lien or was
or is in a principal amount in excess of the principal amount of Debt excluded
from the definition of “Secured Debt” by subparagraphs (i) through (viii) above,
the amount of such increase or excess shall be considered to be “Secured Debt”.

In no event
shall the foregoing provisions be interpreted to mean or their operation to
cause the same Debt to be included more than once in the calculation of “Secured
Debt” as that term is used herein.

“Securitization Transactions”:  as defined in the definition of Indebtedness.

“Significant Subsidiary”:  any Subsidiary that would be a “significant
subsidiary” within the meaning of Rule 1-02 of the SEC’s Regulation
S-X.

“Status”: 
as to IBM, the existence of Level I Status, Level II Status, Level III
Status, Level IV Status or Level V Status, as the case may be.

“Subsidiary”:  (a) any corporation of which IBM owns or
controls more than 50% of the outstanding Voting Stock or (b) any such
corporation of which such percentage of shares of outstanding Voting Stock
shall at the time be owned or controlled by IBM or one or more Subsidiaries as
defined in clause (a) or by one or more such Subsidiaries.

“Subsidiary Borrower”:  a Subsidiary or Controlled Person (a) which
is designated as a Subsidiary Borrower by IBM with the consent of the
Administrative Agent, (b) which has delivered to the Administrative Agent
a Subsidiary Borrower Request and (c) whose designation as a Subsidiary
Borrower has not been terminated pursuant to Section 5.2(d).

 15
 

 

“Subsidiary Borrower Addendum” means an
instrument, substantially in the form of Exhibit H-2, by which any
Subsidiary that is a Subsidiary Borrower on the Effective Date becomes a party
to this Agreement.

“Subsidiary Borrower Notice and Designation”:  a notice and designation, substantially in
the form of Exhibit B-1, which may be delivered by IBM, and received
and consented to by the Administrative Agent, and which shall identify a
Subsidiary Borrower and the Maximum Subsidiary Borrowing Amount with respect to
such Subsidiary Borrower, and shall be accompanied by a Subsidiary Borrower
Request.

“Subsidiary Borrower Obligations”:  with respect to each Subsidiary Borrower, the
unpaid principal of and interest on (including, without limitation, interest
accruing after the maturity of the Loans made to such Borrower and interest
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to such Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the US$ Loans and Local Currency Loans made to such Borrower
and all other obligations and liabilities of such Borrower to the
Administrative Agent or to any Lender, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, any Local Currency
Facility or any other document made, delivered or given in connection herewith
or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without limitation,
all fees, charges and disbursements of counsel (including the allocated costs
of internal counsel) to the Administrative Agent or to any Lender that are
required to be paid by such Borrower pursuant to this Agreement or any Local
Currency Facility) or otherwise.

“Subsidiary Borrower Request”:  a request, substantially in the form of Exhibit B-2,
which is received by the Administrative Agent in connection with a Subsidiary
Borrower Notice and Designation.

“Swing Line Borrower”:  IBM and, subject to the approval of the
Administrative Agent (which approval shall not be unreasonably withheld), any
Subsidiary Borrower designated as a “Swing Line Borrower” in the relevant
Subsidiary Borrower Notice and Designation.

“Swing Line Borrowing Share”:  for any borrowing of Swing Line Loans, with
respect to any Swing Line Lender, an amount equal to such Swing Line Lender’s
Adjusted Swing Line Commitment Percentage of the amount of such borrowing.

As used in
this definition:

“Adjusted Swing Line Commitment Percentage” means, as to any Swing Line
Lender, at any time of determination, the percentage which such Swing Line
Lender’s Available Swing Line Commitment then constitutes of the aggregate
Available Swing Line Commitments of all Swing Line Lenders at such time.

“Available Swing Line Commitment”: 
as to any Swing Line Lender, at any time of determination, an amount
equal to the lesser of (a) such Swing Line Lender’s Swing Line Commitment
at such time minus the aggregate principal amount of all Swing Line
Loans made by such Swing Line Lender then outstanding and (b) such Swing
Line Lender’s Revolving Credit Commitment at 

 16
 

 

such time minus such Swing Line Lender’s Aggregate Outstanding
Revolving Extensions of Credit at such time.

“Swing Line Commitment”:  as to any Swing Line Lender, the obligation
of such Lender to make Swing Line Loans to the Swing Line Borrowers hereunder
in an aggregate principal amount at any one time outstanding not to exceed the
amount set forth opposite such Swing Line Lender’s name on Schedule 1.1, as
such amount may be changed from time to time in accordance with the provisions
of this Agreement.

“Swing Line Lender”:  each of the Lenders that have agreed to make
Swing Line Loans hereunder as indicated on Schedule 1.1 and each other Lender
that shall hereafter be designated as a Swing Line Lender in accordance with
the provisions of Sections 11.8 and 11.10.

“Swing Line Loan”:  as defined in Section 2.5(a).

“Termination Date”:  June 28, 2011.

“Transactions”:  as defined in Section 4.2.

“Transferee”:  as defined in Section 11.9.

“Type”: 
(a) as to any Revolving Credit Loan, its nature as a ABR Loan or a
Eurodollar Loan and (b) as to any Competitive Loan, its nature as a Fixed
Rate Competitive Loan or an Index Rate Competitive Loan.

“Unrefunded Swing Line Loans”:  as defined in Section 2.5(c).

“US$ Equivalent”:  on any date of determination, with respect to
any amount in any Local Currency, the equivalent in Dollars of such amount,
determined by the Administrative Agent using the Exchange Rate with respect to
such Local Currency then in effect as determined pursuant to Section 3.

“US$ Facility Overage”:  an amount equal to the excess of (a) the
aggregate Revolving Credit Commitments over (b) the aggregate
amount of all Local Currency Facility Maximum Borrowing Amounts (determined, if
applicable, after giving effect to any reduction therein made pursuant to Section 3.2(c)).

“US$ Loan”: 
any Revolving Credit Loan, Swing Line Loan or Competitive Loan made
pursuant to this Agreement.

“US$ Revolving Credit Overage”:  with respect to any Lender, an amount equal
to the excess, if any, of (a) such Lender’s Revolving Credit Commitment over
(b) the aggregate Local Currency Lender Stated Maximum Borrowing Amounts
with respect to all Local Currency Facilities to which such Lender is a party.

“Voting Stock”:  with respect to any Person, outstanding
capital stock of such Person ordinarily (and apart from rights exercisable upon
the occurrence of any contingency) having the power to vote in the election of
directors of such Person.

 17
 

 

1.2           Other
Definitional Provisions. (a)  Unless otherwise specified therein, all
terms defined in this Agreement shall have the defined meanings when used in
any instrument, certificate or other
document made or delivered pursuant hereto.

(b)           As used herein and
in any instrument, certificate or other document made or delivered pursuant
hereto, accounting terms relating to IBM and the Subsidiaries not defined in Section 1.1
and accounting terms partly defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP, provided that,
if IBM notifies the Administrative Agent that IBM requests an amendment of any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof (or if the Administrative Agent
notifies IBM that the Required Lenders request an amendment of any provision
hereof for such purpose), regardless of whether such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be applied on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have
been withdrawn or such provision amended in accordance herewith.

(c)            The words “hereof”,
“herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section, Schedule and Exhibit references
are to this Agreement unless otherwise specified. References herein do not
include references to any provision of any Local Currency Facility or Loans
outstanding thereunder unless otherwise specified.

(d)           The meanings given
to terms defined herein shall be equally applicable to both the singular and
plural forms of such terms.

SECTION 2.           AMOUNT
AND TERMS OF US$ FACILITIES

2.1           Revolving Credit Commitments.
(a)  Subject to the terms and conditions hereof, each Lender severally
agrees to make revolving credit loans in Dollars (“Revolving
Credit Loans”) to any of IBM or any Subsidiary Borrower from time to
time during the Revolving Credit Commitment Period. During the Revolving Credit
Commitment Period each Borrower may use the Revolving Credit Commitments by
borrowing, prepaying the Revolving Credit Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof. Notwithstanding
anything to the contrary contained in this Agreement, in no event may Revolving
Credit Loans be borrowed under this Section 2 if, after giving effect
thereto, (i) the aggregate principal amount of the US$ Loans and Local
Currency Loans (US$ Equivalent) then outstanding would exceed the aggregate
Revolving Credit Commitments then in effect, (ii) the aggregate principal
amount of US$ Loans and Local Currency Loans (US$ Equivalent) made to any
Subsidiary Borrower then outstanding would exceed the Maximum Subsidiary
Borrowing Amount with respect to such Subsidiary Borrower set forth in the most
recent Subsidiary Borrower Notice and Designation delivered by IBM pursuant to Section 5.2(d) or
(iii) the aggregate principal amount of Revolving Credit Loans, Swing Line
Loans and Local Currency Loans (US$ Equivalent) made by any Lender then
outstanding would exceed such Lender’s Revolving Credit Commitment.

(b)           The Revolving Credit
Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans
or (iii) a combination thereof, as determined by the relevant Borrower and
notified to the Administrative Agent in accordance with Sections 2.2 and 2.3, provided
that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day
that is one month prior to the Termination Date.

 18
 

 

2.2           Procedure for Revolving Credit
Borrowing. Each Borrower may borrow under the Revolving Credit Commitments
during the Revolving Credit Commitment Period on any Business Day;
provided that such Borrower shall give the Administrative Agent irrevocable
notice (which notice must be received by the Administrative Agent prior to (a) 11:00 A.M.,
New York City time, three Business Days prior to the requested Borrowing Date,
if all or any part of the requested Revolving Credit Loans are to be initially
Eurodollar Loans or (b) 11:00 A.M., New York City time, one Business
Day prior to the requested Borrowing Date, otherwise), specifying (i) the
amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether
the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof
and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans,
the respective amounts of each such Loan and the respective lengths of the
initial Interest Periods therefor. Each borrowing under the Revolving Credit
Commitments shall be in a minimum aggregate principal amount of the lesser of (i) $50,000,000
or an integral multiple of $5,000,000 in excess thereof and (ii) the
aggregate amount of the then Available Revolving Credit Commitments. Upon
receipt of any such notice from any Borrower, the Administrative Agent shall
promptly notify each Lender of the aggregate amount of such borrowing and of
the amount of such Lender’s Revolving Credit Borrowing Share (if any) thereof. Each
Lender will make the amount of its Revolving Credit Borrowing Share of each
such borrowing available to the Administrative Agent for the account of the
relevant Borrower at the office of the Administrative Agent specified in Section 11.2
prior to 2:00 P.M., New York City time, on the Borrowing Date requested by
such Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the relevant Borrower by the
Administrative Agent crediting the account of such Borrower on the books of
such office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent; provided that if on the Borrowing Date of any Revolving
Credit Loans to be made to any Borrower, any Swing Line Loans made to such
Borrower shall be then outstanding, the proceeds of such Revolving Credit Loans
shall first be applied to pay in full such Swing Line Loans, with any remaining
proceeds to be made available to such Borrower as provided above.

2.3           Conversion and Continuation
Options for Revolving Credit Loans. (a)  Each Borrower may elect from
time to time to convert Eurodollar Loans to ABR Loans, by giving the
Administrative Agent at least one Business Day’s prior irrevocable notice of
such election; provided that if any such conversion of Eurodollar Loans is made
other than on the last day of an Interest Period with respect thereto, such
Borrower shall pay any amounts due to the Lenders pursuant to Section 2.19
as a result of such conversion. Each Borrower may elect from time to time to
convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at
least three Business Days’ prior irrevocable notice of such election. Any such
notice of conversion to Eurodollar Loans shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
notice the Administrative Agent shall promptly notify each Lender thereof. All
or any part of outstanding Eurodollar Loans or ABR Loans may be converted as
provided herein; provided that (i) no Loan may be converted into a
Eurodollar Loan when any Default or Event of Default has occurred and is
continuing and the Administrative Agent or the Required Lenders have determined
in its or their sole discretion that such a conversion is not appropriate, (ii) any
such conversion may only be made if, after giving effect thereto, Section 2.4
shall not have been contravened and (iii) no Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Termination Date.

(b)           Any Eurodollar Loans
may be continued as such upon the expiration of the then current Interest
Period with respect thereto by the relevant Borrower giving at least three
Business Days’ prior irrevocable notice to the Administrative Agent, in
accordance with the applicable provisions of the term “Interest Period” set forth in Section 1.1,
of the length of the next Interest Period to be applicable to such Loans; provided
that no Eurodollar Loan may be continued as such (i) when any Default or
Event of Default has occurred and is continuing and the Administrative Agent or
the Required Lenders have determined in its or their sole discretion that such
a continuation is not appropriate, (ii) if, after giving 

 19
 

 

effect thereto, Section 2.4 would be contravened
or (iii) after the date that is one month prior to the Termination Date
and provided, further, that if such Borrower shall fail to give
any required notice as described above in this Section 2.3 or if such
continuation is not permitted pursuant to the preceding proviso such Loans
shall automatically be converted to ABR Loans on the last day of such then
expiring Interest Period.

2.4           Minimum Amounts and Maximum Number
of Eurodollar Tranches. All borrowings, optional prepayments, conversions
and continuations of Eurodollar Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, (a) the
aggregate principal amount of the Eurodollar Loans comprising each Eurodollar
Tranche shall be equal to $50,000,000 or a whole multiple of $5,000,000 in
excess thereof and (b) there shall be no more than twenty Eurodollar
Tranches outstanding at any one time.

2.5           Swing Line Loans. (a) 
Subject to the terms and conditions hereof, each Swing Line Lender severally
agrees to make swing line loans in Dollars (individually, a “Swing Line Loan”;
collectively, the “Swing Line Loans”)
to any Swing Line Borrower from time to time during the Revolving Credit
Commitment Period in accordance with the procedures set forth in this Section 2.5;
provided, that (i) the aggregate outstanding principal amount of all Swing
Line Loans shall not exceed $2,000,000,000 at any one time, (ii) the
principal amount of any borrowing of Swing Line Loans may not exceed the
aggregate amount of the Available Revolving Credit Commitments of all Lenders
immediately prior to such borrowing, (iii) in no event may Swing Line
Loans be borrowed hereunder if, after giving effect thereto, (x) the
aggregate principal amount of Swing Line Loans, Revolving Credit Loans and
Local Currency Loans (US$ Equivalent) made by any Swing Line Lender then
outstanding would exceed such Swing Line Lender’s Revolving Credit Commitment, (y) the
aggregate principal amount of US$ Loans and Local Currency Loans (US$
Equivalent) made to any Subsidiary Borrower then outstanding would exceed the Maximum
Subsidiary Borrowing Amount with respect to such Subsidiary Borrower set forth
in the most recent Subsidiary Borrower Notice and Designation delivered by IBM
pursuant to Section 5.2(d) or (z) the aggregate principal amount
of Swing Line Loans made by any Swing Line Lender then outstanding would exceed
the Swing Line Commitment of such Swing Line Lender and (iv) in no event
may Swing Line Loans be borrowed hereunder if (x) the Administrative Agent
shall have received notice from the Required Lenders specifying that a Default
or Event of Default shall have occurred and be continuing and (y) such
Default or Event of Default shall not have been subsequently cured or waived. Amounts
borrowed by any Swing Line Borrower under this Section 2.5 may be repaid and,
up to but excluding the Termination Date, reborrowed. All Swing Line Loans
shall at all times be ABR Loans. The relevant Swing Line Borrower shall give
the Administrative Agent irrevocable notice of any Swing Line Loans requested
hereunder (which notice must be received by the Administrative Agent prior to
11:00 A.M., New York City time, on the requested Borrowing Date)
specifying (A) the amount to be borrowed, and (B) the requested
Borrowing Date. Upon receipt of such notice, the Administrative Agent shall
promptly notify each Swing Line Lender of the aggregate amount of such
borrowing and of the amount of such Swing Line Lender’s Swing Line Borrowing
Share (if any) thereof. Not later than 2:00 P.M., New York City time, on
the Borrowing Date specified in such notice each Swing Line Lender shall make
its Swing Line Borrowing Share of such Swing Line Loans available to the
Administrative Agent for the account of the relevant Swing Line Borrower at the
office of the Administrative Agent set forth in Section 11.2 in funds
immediately available to the Administrative Agent. The proceeds of such
borrowing will then be immediately made available to the relevant Swing Line
Borrower by the Administrative Agent crediting the account of such Swing Line
Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Swing Line Lenders and in like
funds as received by the Administrative Agent. The Administrative Agent and the
Swing Line Lenders acknowledge that the funding provisions in respect of the
Swing Line Commitments are material terms of this Agreement and that it is of
importance to the Swing Line Borrowers that the funding of Swing Line Loans be
made in a timely and efficient manner. Each borrowing pursuant to this Section 2.5

 

 20

 

shall be in a minimum aggregate principal amount of
the lesser of (i) $20,000,000 or an integral multiple of $5,000,000 in
excess thereof and (ii) the aggregate amount of the then Available Swing
Line Commitments.

(b)           Notwithstanding the
occurrence of any Default or Event of Default or noncompliance with the
conditions precedent set forth in Section 5 or the minimum borrowing
amounts specified in Section 2.2, if any Swing Line Loans shall remain
outstanding at 10:00 A.M., New York City time, on the seventh Business Day
following the Borrowing Date thereof and if by such time on such seventh
Business Day the Administrative Agent shall have received neither (i) a
notice of borrowing delivered by the relevant Swing Line Borrower pursuant to Section 2.2
requesting that Revolving Credit Loans be made pursuant to Section 2.1 on
the immediately succeeding Business Day in an amount at least equal to the
aggregate principal amount of such Swing Line Loans, nor (ii) any other
notice satisfactory to the Administrative Agent indicating such Swing Line
Borrower’s intent to repay all such Swing Line Loans on the immediately
succeeding Business Day with funds obtained from other sources, the
Administrative Agent shall be deemed to have received a notice from such Swing
Line Borrower pursuant to Section 2.2 requesting that ABR Loans be made
pursuant to Section 2.1 on such immediately succeeding Business Day in an
amount equal to the aggregate amount of such Swing Line Loans, and the
procedures set forth in Section 2.2 shall be followed in making such ABR
Loans, provided, that for the purposes of determining each Lender’s
Revolving Credit Borrowing Share with respect to such borrowing, the
outstanding principal amount of Swing Line Loans shall be deemed to be zero. The
proceeds of such ABR Loans shall be applied to repay such Swing Line Loans.

(c)           If, for any reason,
ABR Loans may not be, or are not, made pursuant to paragraph (b) of this Section 2.5
to repay Swing Line Loans as required by such paragraph, effective on the date
such ABR Loans would otherwise have been made, each Lender severally,
unconditionally and irrevocably agrees that it shall, without regard to the
occurrence of any Default or Event of Default, purchase a participating
interest in such Swing Line Loans (“Unrefunded
Swing Line Loans”) in an amount equal to the amount of ABR Loans
which would otherwise have been made by such Lender pursuant to paragraph (b) of
this Section 2.5. Each Lender will immediately transfer to the
Administrative Agent, in immediately available funds, the amount of its
participation, and the proceeds of such participation shall be distributed by
the Administrative Agent to each Swing Line Lender in such amount as will
reduce the amount of the participating interest retained by such Swing Line
Lender in its Swing Line Loans to the amount of the ABR Loans which were to
have been made by it pursuant to paragraph (b) of this Section 2.5. All
payments in respect of Unrefunded Swing Line Loans and participations therein
shall be made in accordance with Section 2.15.

2.6           Optional Prepayments of Revolving
Credit Loans and Swing Line Loans 
Each Borrower may at any time and from time to time prepay the Revolving
Credit Loans and the
Swing Line Loans (subject, in the case of Eurodollar Loans, to compliance with
the terms of Sections 2.4 and 2.19), in whole or in part, without premium or
penalty, upon at least one Business Day’s irrevocable notice to the
Administrative Agent, specifying the date and amount of prepayment and whether
the prepayment is of Eurodollar Loans (including the Eurodollar Tranche(s) to
which such prepayment is to be applied), ABR Loans or a combination thereof,
and, if of a combination thereof, the amount allocable to each, provided, that
notice of any prepayment of Swing Line Loans may be delivered to the
Administrative Agent as late as, but no later than, 12:00 Noon, New York City
time, on the date of such prepayment. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (except in the case of ABR
Loans) accrued interest to such date on the amount prepaid. Partial prepayments
of Revolving Credit Loans shall be in an aggregate principal amount of
$50,000,000 or a whole multiple of $5,000,000 in excess thereof (or, if less,
the remaining outstanding principal amount thereof). Partial prepayments of
Swing Line Loans shall be in an aggregate principal amount of 

 21
 

 

$20,000,000 or a whole multiple of $5,000,000 in
excess thereof (or, if less, the remaining outstanding principal amount
thereof).

2.7           The Competitive Loans. Subject
to the terms and conditions of this Agreement, each Borrower may borrow Competitive
Loans in Dollars from time to time during
the Competitive Loan Borrowing Period on any Business Day, provided, that in no
event may Competitive Loans be borrowed hereunder if, after giving effect
thereto (a) the aggregate principal amount of US$ Loans and Local Currency
Loans (US$ Equivalent) then outstanding would exceed the aggregate amount of
the Revolving Credit Commitments at such time or (b) the aggregate
principal amount of US$ Loans and Local Currency Loans (US$ Equivalent) made to
any Subsidiary Borrower then outstanding would exceed the Maximum Subsidiary
Borrowing Amount with respect to such Subsidiary Borrower set forth in the most
recent Subsidiary Borrower Notice and Designation delivered by IBM pursuant to Section 5.2(d).
Within the limits and on the conditions hereinafter set forth with respect to
Competitive Loans, each Borrower from time to time may borrow, repay and
reborrow Competitive Loans.

2.8           Procedure for Competitive Loan
Borrowing. (a)  The relevant Borrower shall request Competitive Loans
by delivering a Competitive Loan Request to the Administrative Agent, not later
than 12:00 Noon (New York City time) four Business Days prior to the proposed
Borrowing Date (in the case of an Index Rate Competitive Loan Request), and not
later than 10:00 A.M. (New York City time) one Business Day prior to the
proposed Borrowing Date (in the case of a Fixed Rate Competitive Loan Request).
Each Competitive Loan Request may solicit bids for Competitive Loans in an
aggregate principal amount of $20,000,000 or an integral multiple of $5,000,000
in excess thereof and having not more than three alternative maturity dates. The
maturity date for each Fixed Rate Competitive Loan shall be not less than 14
days nor more than 180 days after the Borrowing Date therefor and the maturity
date for each Index Rate Competitive Loan shall be not less than one month nor
more than six months after the Borrowing Date therefor, and in any event shall
be not later than the Termination Date. The Administrative Agent shall notify
each Competitive Loan Lender promptly by facsimile transmission of the contents
of each Competitive Loan Request received by the Administrative Agent.

(b)           In the case of an
Index Rate Competitive Loan Request, upon receipt of notice from the Administrative
Agent of the contents of such Competitive Loan Request, each Competitive Loan
Lender may elect, in its sole discretion, to offer irrevocably, subject to Section 5,
to make one or more Competitive Loans at the Applicable Index Rate plus or
minus a margin determined by such Competitive Loan Lender in its sole
discretion for each such Competitive Loan. Any such irrevocable offer shall be
made by delivering a Competitive Loan Offer to the Administrative Agent, before
10:30 A.M. (New York City time) on the day that is three Business Days
before the proposed Borrowing Date, setting forth:

(i)            the maximum amount of Competitive
Loans for each maturity date and the aggregate maximum amount of Competitive
Loans for all maturity dates which such Competitive Loan Lender would be
willing to make (which amounts may, subject to Section 2.7, exceed such
Competitive Loan Lender’s Revolving Credit Commitment); and

(ii)           the margin above or below the
Applicable Index Rate at which such Competitive Loan Lender is willing to make
each such Competitive Loan.

The Administrative Agent shall advise the relevant
Borrower before 11:00 A.M. (New York City time) on the date which is three
Business Days before the proposed Borrowing Date of the contents of each such
Competitive Loan Offer received by it. If the Administrative Agent, in its
capacity as a Competitive Loan Lender, shall elect, in its sole discretion, to
make any such Competitive Loan Offer, it shall advise the 

 22
 

 

relevant Borrower of the contents of its Competitive Loan
Offer before 10:15 A.M. (New York City time) on the date which is three
Business Days before the proposed Borrowing Date.

(c)           In the case of a
Fixed Rate Competitive Loan Request, upon receipt of notice from the
Administrative Agent of the contents of such Competitive Loan Request, each
Competitive Loan Lender may elect, in its sole discretion, to offer
irrevocably, subject to Section 5, to make one or more Competitive Loans
at a rate of interest determined by such Competitive Loan Lender in its sole discretion
for each such Competitive Loan. Any such irrevocable offer shall be made by
delivering a Competitive Loan Offer to the Administrative Agent before 9:30 A.M.
(New York City time) on the proposed Borrowing Date, setting forth:

(i)            the maximum amount of Competitive
Loans for each maturity date, and the aggregate maximum amount for all maturity
dates, which such Competitive Loan Lender would be willing to make (which
amounts may, subject to Section 2.7, exceed such Competitive Loan Lender’s
Revolving Credit Commitment); and

(ii)           the rate of interest at which such
Competitive Loan Lender is willing to make each such Competitive Loan.

The Administrative Agent shall advise the relevant
Borrower before 10:00 A.M. (New York City time) on the proposed Borrowing
Date of the contents of each such Competitive Loan Offer received by it. If the
Administrative Agent, in its capacity as a Competitive Loan Lender, shall
elect, in its sole discretion, to make any such Competitive Loan Offer, it
shall advise the relevant Borrower of the contents of its Competitive Loan
Offer before 9:15 A.M. (New York City time) on the proposed Borrowing
Date.

(d)           Before 11:30 A.M.
(New York City time) three Business Days before the proposed Borrowing
Date (in the case of Index Rate Competitive Loans) and before 10:30 A.M.
(New York City time) on the proposed Borrowing Date (in the case of Fixed Rate
Competitive Loans), the relevant Borrower, in its absolute discretion, shall:

(i)            cancel such Competitive Loan Request
by giving the Administrative Agent telephone notice to that effect, or

(ii)           by giving telephone notice to the
Administrative Agent (immediately confirmed by delivery to the Administrative
Agent of a Competitive Loan Confirmation in writing or by facsimile
transmission) (1) subject to the provisions of Section 2.8(e), accept
one or more of the offers made by any Competitive Loan Lender or Competitive
Loan Lenders pursuant to Section 2.8(b) or Section 2.8(c), as
the case may be, of the amount of Competitive Loans for each relevant maturity
date and (2) reject any remaining offers made by Competitive Loan Lenders
pursuant to Section 2.8(b) or Section 2.8(c), as the case may
be.

(e)           Each Borrower’s
acceptance of Competitive Loans in response to any Competitive Loan Request
shall be subject to the following limitations:

(i)            The amount of Competitive Loans
accepted for each maturity date specified by any Competitive Loan Lender in its
Competitive Loan Offer shall not exceed the maximum amount for such maturity
date specified in such Competitive Loan Offer;

(ii)           the aggregate amount of Competitive
Loans accepted for all maturity dates specified by any Competitive Loan Lender
in its Competitive Loan Offer shall not 

 23
 

 

exceed the aggregate maximum amount specified
in such Competitive Loan Offer for all such maturity dates;

(iii)          a Borrower may not accept offers for
Competitive Loans for any maturity date in an aggregate principal amount in
excess of the maximum principal amount requested in the related Competitive
Loan Request; and

(iv)          if a Borrower accepts any of such
offers, (1) it must accept such offers based solely upon pricing for such
relevant maturity date (including any amounts which shall be payable to the
relevant Competitive Loan Lender in respect of the relevant Competitive Loans
pursuant to Section 2.17) and upon no other criteria whatsoever and (2) if
(x) two or more Competitive Loan Lenders submit offers for any maturity
date at identical pricing and such Borrower accepts any of such offers but does
not wish to (or by reason of the limitations set forth in Section 2.7 or
in this Section 2.8, cannot) borrow the total amount offered by such
Competitive Loan Lenders with such identical pricing, such Borrower shall
accept offers from all of such Competitive Loan Lenders in amounts allocated
among them pro  rata according to the amounts offered by such
Competitive Loan Lenders (or as nearly pro  rata as shall be
practicable after giving effect to the requirement that Competitive Loans made
by a Competitive Loan Lender on a Borrowing Date for each relevant maturity
date shall be in a principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof) or (y) a Competitive Loan Lender submits
offers for multiple maturity dates specifying a maximum aggregate principal amount
for all maturity dates, and the relevant Borrower accepts offers from such
Competitive Loan Lender for more than one maturity date, then such Borrower
shall instruct the Administrative Agent how to apportion such Borrower’s
acceptances among such offers for different maturity dates to the extent, if
any, necessary to provide for acceptance of offers from such Competitive Loan
Lender equal to but not exceeding such specified maximum aggregate amount.

(v)           If the relevant Borrower notifies the
Administrative Agent that a Competitive Loan Request is cancelled pursuant to Section 2.8(d)(i),
the Administrative Agent shall give prompt telephone notice thereof to the
Competitive Loan Lenders.

(f)            If the relevant
Borrower accepts pursuant to Section 2.8(d)(ii) one or more of the
offers made by any one or more Competitive Loan Lenders, the Administrative
Agent promptly shall notify each Competitive Loan Lender which has made such a
Competitive Loan Offer of (i) the aggregate amount of such Competitive
Loans to be made on such Borrowing Date for each maturity date, (ii) the
acceptance or rejection of any offers to make such Competitive Loans made by
such Competitive Loan Lender and (iii) in the case of Index Rate
Competitive Loans, the Applicable Index Rate in respect thereof. Before 12:00
Noon (New York City time) on the Borrowing Date specified in the applicable
Competitive Loan Request, each Competitive Loan Lender whose Competitive Loan
Offer has been accepted shall make available to the Administrative Agent at its
office set forth in Section 11.2 the amount of Competitive Loans to be
made by such Competitive Loan Lender, in immediately available funds. The
Administrative Agent will make such funds available to the relevant Borrower as
soon as practicable on such date at the Administrative Agent’s aforesaid
address. As soon as practicable after each Borrowing Date, the Administrative
Agent shall notify each Competitive Loan Lender of the aggregate amount of
Competitive Loans advanced on such Borrowing Date, the respective maturity
dates thereof and the respective interest rates applicable thereto.

 24
 

 

(g)           Nothing in Section 2.7
or this Section 2.8 shall be construed as a right of first offer in favor
of the Lenders or to otherwise limit the ability of any Borrower to request and
accept credit facilities from any Person (including any of the Lenders).

2.9           Repayment of US$ Loans; Evidence
of Debt. (a)  Each Borrower hereby unconditionally promises to pay to
the Administrative Agent for the account of the relevant Lenders (i) on the
Termination Date (or such earlier date as the US$ Loans become due and payable
pursuant to Section 2.6 or Section 8), the unpaid principal amount of
each US$ Loan (including, without limitation, each Swing Line Loan) made to it
by each such Lender and (ii) on the Competitive Loan Maturity Date in
respect thereof, the unpaid principal amount of each Competitive Loan made to
it by each such Lender. No Borrower shall have the right to prepay any
principal amount of any Competitive Loan. Each Borrower hereby further agrees
to pay interest in immediately available funds at the office of the
Administrative Agent on the unpaid principal amount of the US$ Loans from time
to time from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in Section 2.10.

(b)           Each Lender shall
maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of each Borrower to the appropriate lending office
of such Lender resulting from each US$ Loan made by such lending office of such
Lender from time to time, including the amounts of principal and interest
payable and paid to such lending office of such Lender from time to time under
this Agreement.

(c)           The Administrative
Agent shall maintain the Register pursuant to Section 11.9(a), and a
subaccount for each Lender, in which Register and subaccounts (taken together)
shall be recorded (i) the amount of each US$ Loan made hereunder, whether
such US$ Loan is a Revolving Credit Loan, a Swing Line Loan or a Competitive
Loan, the Type of each US$ Loan made and the Interest Period or maturity date
(if any) applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from each Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder from each Borrower and each Lender’s share thereof.

(d)           The entries made in
the Register and accounts maintained pursuant to paragraphs (b) and (c) of
this Section 2.9 shall, to the extent permitted by applicable law, be
prima facie evidence of the existence and amounts of the obligations of each
Borrower therein recorded; provided, however, that the failure of
any Lender or the Administrative Agent to maintain such account, such Register
or such subaccount, as applicable, or any error therein, shall not in any
manner affect the obligation of any Borrower to repay (with applicable
interest) the US$ Loans made to such Borrower by such Lender in accordance with
the terms of this Agreement.

2.10         Interest Rates and Payment Dates.
(a)  Each Eurodollar Loan shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate determined for such Interest Period plus the Applicable
Eurodollar Margin. Interest in respect of Eurodollar Loans shall accrue from
and including the first day of an Interest Period to but excluding the last day
of such Interest Period.

(b)           Each ABR Loan shall
bear interest at a rate per annum equal to the ABR.

(c)           Each Competitive
Loan shall bear interest for each day from the applicable Borrowing Date to
(but excluding) the applicable Competitive Loan Maturity Date at the rate of
interest specified in the Competitive Loan Offer accepted by the relevant Borrower
in connection with such Competitive Loan.

 25
 

 

(d)           If all or a portion
of (i) the principal amount of any Loan, (ii) any interest payable
thereon or (iii) any facility fee or other amount payable hereunder shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum which
is (x) in the case of overdue principal (except as otherwise provided in
clause (y) below), the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this Section 2.10 plus 2% or (y) in
the case of principal of any Competitive Loan which remains overdue past the
stated maturity date thereof, or any overdue interest, facility fee or other
amount, the rate described in Section 2.10(b) plus 2%, in each
case from the date of such non-payment to (but excluding) the date on
which such amount is paid in full (as well after as before judgment).

(e)           Interest shall be
payable in arrears on each Interest Payment Date, provided that interest
accruing pursuant to Section 2.10(d) shall be payable from time to
time on demand.

2.11         Fees. (a)  IBM agrees to
pay to the Administrative Agent, for the account of each Lender, a facility fee
for each day during the Revolving Credit Commitment Period.
Such fee shall be payable quarterly in arrears on the last day of each March,
June, September and December and on the Termination Date and shall be
computed for each day during such period at a rate per annum equal to the
Facility Fee Rate in effect on such day on the aggregate amount of the
Revolving Credit Commitments in effect on such day (or, if the Revolving Credit
Commitments shall have been terminated, on the average aggregate outstanding
principal amount of the Loans on such day).

(b)           IBM shall pay to the
Administrative Agent, for its own account, the fees in the amounts and on the
dates previously agreed to in writing by IBM.

2.12         Computation of Interest and Fees.
(a)  Facility fees and interest (other than interest calculated on the basis
of the Prime Rate) shall be calculated on the basis of a 360-day year for
the actual days elapsed. Interest calculated on the basis of the Prime Rate
shall be calculated on the basis of a 365- (or 366-, as the case
may be) day year for the actual days elapsed. The Administrative Agent shall as
soon as practicable notify the relevant Borrower and the Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a US$
Loan resulting from a change in the ABR shall become effective as of the
opening of business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the relevant Borrower
and the Lenders of the effective date and the amount of each such change in
interest rate.

(b)           Each determination
of an interest rate by the Administrative Agent pursuant to any provision of
this Agreement shall be conclusive and binding on the Borrowers and the Lenders
in the absence of manifest error. The Administrative Agent shall, at the request
of the relevant Borrower, deliver to such Borrower a statement showing the
quotations furnished by the Reference Lenders (if any) used by the
Administrative Agent in determining any interest rate with respect to a
Eurodollar Loan or an Index Rate Competitive Loan.

(c)           If any Reference
Lender shall for any reason no longer have a Revolving Credit Commitment, such
Reference Lender shall thereupon cease to be a Reference Lender, and if, as a
result, there shall only be one Reference Lender remaining, the Administrative
Agent (with the consent of IBM) shall, by notice to the Borrowers and the
Lenders, designate another Lender as a Reference Lender so that there shall at
all times be at least two Reference Lenders.

(d)           Each Reference
Lender shall use its best efforts to furnish quotations of rates to the
Administrative Agent on a timely basis as contemplated hereby. If any of the
Reference Lenders shall be unable or shall otherwise fail to supply such rates
to the Administrative Agent upon its request, the rate 

 26
 

 

of interest shall, subject to the provisions of Section 2.14,
be determined on the basis of the quotations of the remaining Reference Lenders
or Reference Lender.

2.13         Termination or Reduction of
Revolving Credit Commitments. IBM shall have the right, upon not less than
three Business Days’ irrevocable notice to the Administrative Agent, to
terminate the Revolving Credit Commitments or, from time to time, to reduce the
amount of the Revolving Credit Commitments; provided that no such termination
or reduction of Revolving Credit Commitments shall be permitted if, after
giving effect thereto and to any repayments of the Loans made on the effective
date thereof, (a) the aggregate principal amount of the US$ Loans and
Local Currency Loans (US$ Equivalent) then outstanding would exceed the
aggregate Revolving Credit Commitments then in effect or (b) the aggregate
principal amount of Revolving Credit Loans, Swing Line Loans and Local Currency
Loans (US$ Equivalent) made by any Lender then outstanding would exceed such
Lender’s Revolving Credit Commitment. Any such reduction shall be in an amount
equal to $50,000,000 or a whole multiple of $5,000,000 in excess thereof and
shall reduce permanently the Revolving Credit Commitments then in effect.

2.14         Inability to Determine Interest Rate.
If prior to the first day of any Interest Period:

(a)           the Administrative Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrowers) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, or

(b)           the Administrative Agent shall have
received notice from the Required Lenders that the Eurodollar Rate determined
or to be determined for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as conclusively certified by such Lenders) of
making or maintaining their affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or telephonic
notice thereof to the Borrowers and the Lenders as soon as practicable
thereafter. If such notice is given (x) any Eurodollar Loans requested to
be made on the first day of such Interest Period shall be made as ABR Loans and
(y) any US$ Loans that, on the first day of such Interest Period, were to
have been converted to or continued as Eurodollar Loans shall be continued as
or converted to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made or continued as
such, nor shall any Borrower have the right to convert ABR Loans to Eurodollar
Loans.

2.15         Pro Rata Treatment and Payments.
(a)  Each reduction of the Revolving Credit Commitments of the Lenders
shall be made pro rata according to the Lenders’ respective Commitment
Percentages. Each payment (including each prepayment other than any prepayment
made pursuant to Section 3.2(f)) by a Borrower on account of principal of
and interest on Revolving Credit Loans which are ABR Loans shall be made pro
rata according to the respective outstanding principal amounts of such ABR
Loans then held by the Lenders. Each payment (including each prepayment other
than any prepayment made pursuant to Section 3.2(f)) by a Borrower on
account of principal of and interest on Eurodollar Loans designated by a
Borrower to be applied to a particular Eurodollar Tranche shall be made pro
rata according to the respective outstanding principal amounts of such
Eurodollar Loans then held by the Lenders. Each payment (including each
prepayment other than any prepayment made pursuant to Section 3.2(f)) by
any Swing Line Borrower on account of principal of and interest on Swing Line
Loans shall be made pro rata according to the respective outstanding principal
amounts of the Swing Line Loans or participating interests therein, as the case
may be, then held by the relevant Lenders. All payments (including prepayments)
to be made by a Borrower hereunder, whether on account of principal, interest, 

 27
 

 

fees or otherwise, shall be made without setoff or
counterclaim and shall be made prior to 12:00 Noon, New York City time, on the
due date thereof to the Administrative Agent, for the account of the Lenders,
at the Administrative Agent’s office specified in Section 11.2, in Dollars
and in immediately available funds. The Administrative Agent shall distribute
such payments to the Lenders promptly upon receipt in like funds as received. If
any payment hereunder (other than payments on Eurodollar Loans or Index Rate
Competitive Loans) becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. If any payment on a Eurodollar Loan or
an Index Rate Competitive Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day (and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension) unless the
result of such extension would be to extend such payment into another calendar
month, in which event such payment shall be made on the immediately preceding
Business Day. The provisions of this Section 2.15(a) shall, to the
extent applicable, be subject to the procedures set forth in Section 2.21.

(b)           Unless the
Administrative Agent shall have been notified in writing by any Lender prior to
a borrowing that such Lender will not make the amount that would constitute its
share of such borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Lender is making such amount
available to the Administrative Agent, and the Administrative Agent may, in
reliance upon such assumption, make available to the relevant Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available
to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this Section 2.15(b) shall
be conclusive in the absence of manifest error. If such Lender’s share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to ABR Loans hereunder, on demand, from the relevant
Borrower.

2.16         Illegality. Notwithstanding any
other provision herein, if the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof
shall make it unlawful for any Lender to make or maintain Eurodollar Loans or
Index Rate Competitive Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be cancelled, (b) such Lender’s Revolving Credit Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
ABR Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by law and (c) the
relevant Borrower shall, with respect to any Index Rate Competitive Loan of
such Lender, take such action as such Lender may reasonably request.

2.17         Requirements of Law. (a) 
If the adoption of or any change in any Requirement of Law applicable to any
Lender or in the interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the Effective Date (or,
in the case of Index Rate Competitive Loans, made subsequent to acceptance by a
Borrower of such Loan):

(i)   shall subject any Lender to any tax of any
kind whatsoever with respect to this Agreement or any Eurodollar Loan or Index
Rate Competitive Loan made by it, or change the 

 28
 

 

basis of taxation of payments to such Lender
in respect thereof (except for taxes covered by Section 2.18 and net
income taxes and franchise taxes imposed in lieu of income taxes);

(ii)  shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition of funds by,
any office of such Lender which is not otherwise included pursuant to Section 2.17(c) in
the determination of the Eurodollar Rate or the Applicable Index Rate, as the
case may be; or

(iii) shall impose on such Lender any other
condition;

and the result of any of the foregoing is to increase
the cost to such Lender, by an amount which such Lender deems to be material,
of making, converting into, continuing or maintaining Eurodollar Loans or Index
Rate Competitive Loans, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the relevant Borrower shall promptly pay such
Lender, upon its demand, any additional amounts necessary to compensate such
Lender for such increased cost or reduced amount receivable. If any Lender
becomes entitled to claim any additional amounts pursuant to this Section 2.17(a),
it shall promptly notify the relevant Borrower, through the Administrative
Agent, of the event by reason of which it has become so entitled.

(b)           If any Lender shall
have determined that any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by such
Lender or any corporation controlling such Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any Governmental
Authority, in each case made subsequent to the Effective Date, does or shall
have the effect of reducing the rate of return on such Lender’s or such
corporation’s capital as a consequence of its obligations hereunder to a level
below that which such Lender or such corporation could have achieved but for
such application or compliance (taking into consideration such Lender’s or such
corporation’s policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, after submission by such
Lender to the relevant Borrower (with a copy to the Administrative Agent) of a
written request therefor, such Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.

(c)           Each Borrower agrees
to pay to each Lender which requests compensation under this Section 2.17(c) (by
notice to such Borrower), on the last day of each Interest Period with respect
to any Eurodollar Loan made by such Lender or on the Competitive Loan Maturity
Date with respect to any Index Rate Competitive Loan made by such Lender, as
the case may be, so long as such Lender shall be required to maintain reserves
against “Eurocurrency liabilities” under Regulation D of the Board (or, so long
as such Lender may be required by the Board or by any other Governmental
Authority to maintain reserves against any other category of liabilities which
includes deposits by reference to which the interest rate on Eurodollar Loans
or Index Rate Competitive Loans is determined as provided in this Agreement or
against any category of extensions of credit or other assets of such Lender
which includes any Eurodollar Loans or Index Rate Competitive Loans), an
additional amount (determined by such Lender and notified to the relevant
Borrower) representing such Lender’s calculation or, if an accurate calculation
is impracticable, reasonable estimate (using such reasonable means of
allocation as such Lender shall determine) of the actual costs, if any,
incurred by such Lender during such Interest Period or during the period such
Index Rate Competitive Loan was outstanding (a “Competitive Loan Period”), as the case may be, as a result
of the applicability of the foregoing reserves to such Eurodollar Loans or
Index Rate Competitive Loans, which amount in any event shall not exceed the
product of the following for each day of such Interest Period or Competitive
Loan Period:

 29
 

 

(i)            the principal amount of the
Eurodollar Loans or Index Rate Competitive Loans, as the case may be, made by
such Lender to which such Interest Period or Competitive Loan Period relates
and outstanding on such day; and

(ii)           the difference between (x) a
fraction the numerator of which is the Eurodollar Rate or the Applicable Index
Rate, as the case may be (expressed as a decimal) applicable to such Eurodollar
Loan or Index Rate Competitive Loan, and the denominator of which is one minus
the maximum rate (expressed as a decimal) at which such reserve requirements
are imposed by the Board or other Governmental Authority on such date minus (y) such
numerator; and

(iii)          a fraction the numerator of which is
one and the denominator of which is 360.

Any Lender which gives notice under this Section 2.17(c) shall
promptly withdraw such notice (by written notice of withdrawal given to the
Administrative Agent and the relevant Borrowers) in the event such Lender is no
longer required to maintain such reserves or the circumstances giving rise to
such notice shall otherwise cease to exist. Notwithstanding the foregoing, no
Lender shall be entitled to request compensation under this Section 2.17(c) with
respect to any Index Rate Competitive Loan if it shall have obtained actual
knowledge of the change giving rise to such request at the time of submission
of such Lender’s Competitive Loan Offer pursuant to which such Competitive Loan
shall have been made, unless notice of such Lender’s entitlement to such
compensation shall have been furnished to the relevant Borrower at or prior to
such time.

(d)           A certificate as to any
additional amounts payable pursuant to this Section 2.17 submitted by any
Lender, through the Administrative Agent, to the relevant Borrower shall
specify in reasonable detail the basis for the request for compensation of such
additional amounts and the method of computation thereof and shall be
conclusive in the absence of manifest error. Subject to the provisions of the
next succeeding sentence, the relevant Borrower shall (except as otherwise
provided in Section 2.17(c)) pay each Lender the amount shown as due on
any such certificate delivered by it within 30 days after receipt thereof. Notwithstanding
any other provision of this Section 2.17, (i) each Lender shall be
entitled to compensation under this Section 2.17 for only such costs as
are incurred or reductions as are suffered as to which a certificate has been
delivered in accordance with the terms of this paragraph (d) within 90
days after such Lender obtained actual knowledge of such costs or reductions and (ii) a Borrower shall not be
required to compensate a Lender pursuant to this Section 2.17 for any
increased costs or reductions incurred more than 90 days prior to the date that
such Lender notifies such Borrower of the change giving rise to such increased
costs or reductions and of such Lender’s intention to claim compensation
therefor; provided that, if the change giving rise to such increased
costs or reductions is retroactive, then the 90-day period referred to in
this clause (ii) shall be extended to include the period of retroactive
effect thereof. Each Lender agrees to use its best efforts to notify the
relevant Borrower as promptly as practicable after obtaining knowledge of any
such costs or reductions. The obligations of the Borrowers pursuant to this Section 2.17
shall survive the termination of this Agreement and the payment of the US$
Loans and all other amounts payable hereunder.
Notwithstanding any other provision of this Section 2.17, no Lender shall
demand compensation for any increased cost or reduction or other amount
referred to above if such demand would be arbitrary or exceptional in light of
similar circumstances under comparable provisions of other credit agreements.

(e)           Notwithstanding the foregoing, no
Lender shall be entitled to request compensation under Section 2.17(a) or
2.17(b) with respect to any Competitive Loan if it shall have obtained
actual knowledge of the change giving rise to such request at the time of, or
such change shall have been publicly announced prior to, submission of such
Lender’s Competitive Loan Offer pursuant to

 

 30

 

which such Competitive Loan shall have been made,
unless notice of such Lender’s entitlement to such compensation shall have been
furnished to the relevant Borrower at or prior to such time.

2.18         Taxes.
(a)  Unless otherwise required by applicable law, all payments made by the
Borrowers under this Agreement shall be made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Administrative Agent, any Lender or any Transferee as a
result of a present or former connection between the Administrative Agent or
such Lender (or Transferee) and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing authority thereof or
therein (other than any such connection arising solely from the Administrative
Agent or such Lender (or Transferee) having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement). If
any such non-excluded taxes, levies, imposts, duties, charges, fees deductions
or withholdings (“Non-Excluded Taxes”) are required
to be withheld from any amounts payable to the Administrative Agent or any
Lender (or Transferee) hereunder, the amounts so payable to the Administrative
Agent or such Lender (or Transferee) shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (or Transferee) (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement; provided,
however, that no Borrower shall be required to increase any such amounts
payable to any Lender (or Transferee) that is not organized under the laws of
the United States of America or a state thereof if such Lender (or Transferee)
fails to comply with the requirements of Section 2.18(b); and provided
further, however, that no Transferee shall be entitled to receive any greater
payment under this paragraph (a) than the transferor would have been
entitled to receive with respect to the right assigned, participated or
otherwise transferred. Whenever any Non-Excluded Taxes are payable by any
Borrower, as promptly as possible thereafter such Borrower shall send to the
Administrative Agent for its own account or for the account of such Lender (or
Transferee), as the case may be, a certified copy of an original official
receipt received by such Borrower showing payment thereof. If any Borrower
fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority
or fails to remit to the Administrative Agent the required receipts or other
required documentary evidence, such Borrower shall indemnify the Administrative
Agent and the Lenders (or Transferees) for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender (or
Transferee) as a result of any such failure. The obligations contained in this Section 2.18
shall survive the termination of this Agreement and the payment of all other
amounts payable hereunder.

(b)           Each Lender (or
Transferee) that is not incorporated under the laws of the United States of
America or a state thereof shall:

(i)            on the date it becomes a Lender or
Transferee, deliver to IBM and the Administrative Agent (A) two duly
completed copies of United States Internal Revenue Service Form W-8BEN
or W-8ECI, or successor applicable form, as the case may be, and shall
certify that it is entitled to receive payments under this Agreement without
deduction or withholding (or at a reduced rate of deduction or withholding) of
any United States Federal income taxes and (B) an Internal Revenue Service
Form W-8BEN or W-9, or successor applicable form, as the case
may be and shall certify that it is entitled to an exemption from United States
backup withholding tax;

(ii)           deliver to IBM and the Administrative
Agent two further copies of any such form or certification on or before the
date that any such form or certification described above expires or becomes
obsolete and after the occurrence of any event requiring a change in the most
recent form previously delivered by it to IBM; and

 31
 

 

(iii)          obtain such extensions of time for
filing and complete such forms or certifications as may reasonably be requested
by IBM or the Administrative Agent;

except that the forms and certificates described in
clauses (ii) and (iii) above shall not be required if any change in
Requirement of Law has occurred prior to the date on which any such delivery
would otherwise be required which renders all such forms inapplicable or which
would prevent such Lender (or Transferee) from duly completing and delivering
any such form with respect to it and such Lender (or Transferee) so advises IBM
and the Administrative Agent. If the form provided by a Lender at the time such
Lender first becomes a party to this Agreement indicates a United States
federal withholding tax rate on any payments under this Agreement in excess of
zero, then withholding tax at such rate or any subsequent lower rate shall not
be treated as a “Non-Excluded Tax” as defined in Section 2.18(a) at
such time or any time thereafter with respect to such Lender or any Transferee
of such Lender and the relevant Borrower or the Administrative Agent shall
withhold such tax from payments to such Lender or Transferee, as the case may
be, at the applicable rate.

(c)           Each Person that
shall become a Participant pursuant to Section 11.6, a Competitive Loan
Assignee pursuant to Section 11.7, or a Lender pursuant to Section 11.8,
including for this purpose a Lender that arranges a US$ Loan through or
transfers a US$ Loan to a different branch of such Lender, shall, upon the
effectiveness of the related designation or transfer, be required to provide
all of the forms and statements required pursuant to this Section 2.18,
provided that in the case of a Participant such Participant shall furnish all
such required forms and statements to the Lender from which the related
participation shall have been purchased.

(d)           If any Lender (or
Transferee) or the Administrative Agent shall become aware that it is entitled
to receive a refund or credit (such credit to include any increase in any
foreign tax credit) as a result of Non-Excluded Taxes (including any penalties
or interest with respect thereto) as to which it has been indemnified by any
Borrower pursuant to this Section 2.18, it shall promptly notify such
Borrower of the availability of such refund or credit and shall, within 30 days
after receipt of a request by such Borrower, apply for such refund or credit at
such Borrower’s expense, and in the case of any application for such refund or
credit by such Borrower, shall, if legally able to do so, deliver to such
Borrower such certificates, forms or other documentation as may be reasonably
necessary to assist such Borrower in such application. If any Lender (or
Transferee) or the Administrative Agent receives a refund or credit (such
credit to include any increase in any foreign tax credit) in respect to any
Non-Excluded Taxes as to which it has been indemnified by any Borrower pursuant
to this Section 2.18, it shall promptly notify such Borrower of such
refund or credit and shall, within 30 days after receipt of such refund or the
benefit of such credit (such benefit to include any reduction of the taxes for
which any Lender (or Transferee) or the Administrative Agent would otherwise be
liable due to any increase in any foreign tax credit available to such Lender
(or Transferee) or the Administrative Agent), repay the amount of such refund
or benefit of such credit (with respect to the credit, as determined by the
Lender, Transferee or Administrative Agent in its sole, reasonable judgment) to
such Borrower (to the extent of amounts that have been paid by such Borrower
under this Section 2.18 with respect to Non-Excluded Taxes giving rise to
such refund or credit), plus any interest received with respect thereto, net of
all reasonable out-of-pocket expenses of such Lender (or Transferee) or the
Administrative Agent and without interest (other than interest actually
received from the relevant taxing authority or other Governmental Authority
with respect to such refund or credit); provided, however, that
such Borrower, upon the request of such Lender (or Transferee) or the
Administrative Agent, agrees to return the amount of such refund or benefit of
such credit (plus interest) to such Lender (or Transferee) or the
Administrative Agent in the event such Lender (or Transferee) or the
Administrative Agent is required to repay the amount of such refund or benefit
of such credit to the relevant taxing authority or other Governmental
Authority.

 32
 

 

2.19         Indemnity. Each Borrower agrees
to indemnify each Lender and to hold each Lender harmless from any loss or
expense which such Lender may sustain or incur
as a consequence of (a) default by such Borrower in making a borrowing of
Eurodollar Loans or Competitive Loans, or in the conversion into or
continuation of Eurodollar Loans, after such Borrower has given a notice
requesting or accepting the same in accordance with the provisions of this
Agreement, (b) default by such Borrower in making any prepayment after
such Borrower has given a notice thereof in accordance with the provisions of
this Agreement, or (c) the making of a prepayment of Eurodollar Loans or
Competitive Loans on a day which is not the last day of an Interest Period or
the applicable Competitive Loan Maturity Date, as the case may be, with respect
thereto. Such indemnification may include an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on the amount
so prepaid, or not so borrowed, converted or continued, for the period from the
date of such prepayment or of such failure to borrow, convert or continue to
the last day of the relevant Interest Period (or proposed Interest Period) or,
in the case of Competitive Loans, the applicable Competitive Loan Maturity Date
(or proposed Competitive Loan Maturity Date), in each case at the applicable
rate of interest for such Loans provided for herein (excluding, however, the
Applicable Margin or any positive margin applicable to Index Rate Competitive
Loans included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender
on such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. The obligations contained in
this Section 2.19 shall survive the termination of this Agreement and the
payment of all other amounts payable hereunder.

2.20         Change of Lending Office. Each
Lender (or Transferee) agrees that, upon the occurrence of any event giving
rise to the operation of Section 2.16, 2.17 or 2.18 with respect to such Lender (or
Transferee), it will, if requested by IBM, use reasonable efforts (subject to
overall policy considerations of such Lender (or Transferee)) to designate
another lending office for any Loans affected by such event with the object of
avoiding the consequences of such event; provided, that such designation is
made on terms that, in the sole judgment of such Lender, cause such Lender and
its lending office(s) to suffer no material economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section 2.20
shall affect or postpone any of the obligations of any Borrower or the rights
of any Lender (or Transferee) pursuant to Section 2.16, 2.17 and 2.18.

2.21         Extension of Termination Date.
(a)  IBM may, by written request (an “Extension Request”)
to the Administrative Agent, substantially in the form of Exhibit J, delivered at any time during
the 60-day period preceding each anniversary of the Effective Date,
request that the Lenders extend the Termination Date then in effect by one
year, provided, that, in the case of each Extension Request other than the
first Extension Request made hereunder, an Extension Request shall have been
made and approved in accordance with this Section 2.21 prior to each
previous anniversary of the Effective Date.

(b)           Upon receipt of an
Extension Request, the Administrative Agent shall promptly notify each Lender
thereof, and each Lender shall notify the Administrative Agent in writing by
the deadline (the “Extension Request
Deadline”) specified in such Extension Request, which deadline shall
in any case not be later than 5:00 P.M., New York City time, on the date
which is 30 days after delivery of such Extension Request, of such Lender’s
election, in its sole discretion, (i) to extend the Termination Date by
one year (provided that the Termination Date shall be so extended only to the
extent expressly provided in paragraph (c) below) or (ii) not to
extend the Termination Date by one year (any Lender not electing to extend, a “Non-Extending Lender”). Any Lender that
fails to notify the Administrative Agent in writing of its election by the
Extension Request Deadline shall be deemed to be a Non-Extending Lender.

(c)           If Lenders whose
Revolving Credit Commitments aggregate at least 51% of the Revolving Credit
Commitments of all Lenders agree to extend the Termination Date by one year,
then the 

 33
 

 

Termination Date shall automatically be so extended, provided
that any Lender that became a Non-Extending Lender pursuant to any previous
Extension Request shall be deemed to be a Non-Extending Lender in respect of
each subsequent Extension Request, and provided, further, that if
all Lenders do not agree to extend the Termination Date, then (i) IBM
shall have the right to cancel any such extension by so notifying the
Administrative Agent within five Business Days after the relevant Extension
Request Deadline, in which case the Termination Date then in effect shall not
be extended and (ii) in the event that such extension is not so cancelled,
then, with respect to each Non-Extending Lender, IBM shall either (directly or,
where applicable, through the relevant Subsidiary Borrowers):

(x)  (i) during
the six-month period preceding the Termination Date in effect on the date of
the relevant Extension Request (the “Existing
Termination Date”), on each date on which US$ Loans are borrowed or
continued as, or converted into, Eurodollar Loans having an Interest Period
ending after the Existing Termination Date, repay the portion of such
Non-Extending Lender’s Loans which would otherwise have been part of such
borrowing, continuation or conversion and permanently reduce such Non-Extending
Lender’s Revolving Credit Commitment by a like amount, (ii) on the
Existing Termination Date, terminate the Revolving Credit Commitment and Swing
Line Commitment (if any) of such Non-Extending Lender and repay the then
outstanding US$ Loans made by such Non-Extending Lender, together with accrued
but unpaid interest, facility fees and all other amounts then due and payable
to such Non-Extending Lender hereunder, including, without limitation, amounts
payable pursuant to Section 2.19, and (iii) on the Existing
Termination Date either (A) terminate the Commitments of such
Non-Extending Lender under any Local Currency Facility and repay the then
outstanding Local Currency Loans made by such Non-Extending Lender, together
with accrued but unpaid interest, facility fees and all other amounts then due
and payable to such Non-Extending Lender under any Local Currency Facility or (B) to
the extent the option described in clause (A) above is not exercised,
obtain the written agreement of such Non-Extending Lender that the loans and
other obligations outstanding under each relevant Local Currency Facility shall
on the Existing Termination Date automatically cease to be subject to the terms
of this Agreement (including the guarantee of IBM contained in Section 10);
or

(y) 
on or prior to the date which is 90 days after the relevant Extension Request
Deadline, or, if earlier, the Termination Date then in effect, cause one or
more banks or other financial institutions to purchase at par, pursuant to Section 11.8,
such Non-Extending Lender’s Revolving Credit Commitment and outstanding US$
Loans (which purchase shall be accompanied by payment of accrued but unpaid
interest, facility fees and all other amounts then due 

 34
 

 

and payable to such
Non-Extending Lender hereunder, including, without limitation, amounts payable
pursuant to Section 2.19), in which case such Non-Extending Lender shall,
promptly upon request by IBM, agree to transfer its Revolving Credit Commitment
and US$ Loans upon the terms and subject to the conditions of Section 11.8
to such banks or other financial institutions (provided that the registration
and processing fee referred to therein shall be paid by either IBM or the
relevant transferee); provided, that on the date (the “Purchase Date”) of any such purchase of
such Non-Extending Lender’s Revolving Credit Commitment and US$ Loans, such
Non-Extending Lender’s Swing Line Commitment (if any) shall be terminated, and provided,
further, that on the Purchase Date either (A) the Commitments of
such Non-Extending Lender under any Local Currency Facility shall be terminated
or purchased and the then outstanding Local Currency Loans made by such
Non-Extending Lender shall be repaid or purchased (which repayment or purchase
shall be accompanied by payment of accrued but unpaid interest, facility fees
and all other amounts then due and payable to such Non-Extending Lender under
any Local Currency Facility), in each case on terms satisfactory to such
Non-Extending Lender, or (B) to the extent the option described in clause (A) above
is not exercised, IBM shall have obtained the written agreement of such
Non-Extending Lender that the loans and other obligations outstanding under
each relevant Local Currency Facility shall on such Purchase Date automatically
cease to be subject to the terms of this Agreement (including the guarantee of
IBM contained in Section 10).

SECTION 3.           LOCAL
CURRENCY FACILITIES

3.1           Terms of Local Currency Facilities.
(a)  Subject to the provisions of this Section 3, each Lender hereby
agrees that IBM may in its discretion from time to time designate any credit
facility to which any one or more Borrowers and any one or more Lenders is a
party as a “Local Currency Facility”, with the
consent of each such Lender in its sole discretion, by delivering a Local
Currency Facility Addendum to the Administrative Agent executed by IBM and each
such Borrower and executed or acknowledged in writing by each such Lender,
provided, that on the effective date of such designation (i) an Exchange
Rate with respect to each Local Currency covered by such Local Currency
Facility shall be determinable by reference to the Reuters currency pages (or
comparable publicly available screen) and (ii) no Event of Default shall
have occurred and be continuing. Concurrently with the delivery of a Local
Currency Facility Addendum, IBM or the relevant Borrower shall furnish to the
Administrative Agent or its counsel copies of all documentation executed and
delivered by any Borrower in connection therewith, together with, if
applicable, an English translation thereof (provided, that IBM may instead
furnish an English translation of a summary term sheet in respect thereof
describing all material terms thereof so long as an English translation of all
such documentation is furnished to the Administrative Agent or its counsel
within 90 days after the date of delivery of such Local Currency Facility
Addendum). Except as otherwise provided in this Section 3, the terms and
conditions of each Local Currency Facility shall be determined by mutual
agreement of the relevant Borrower(s) and Local Currency Lender(s). The
documentation governing each Local Currency Facility shall contain an express
acknowledgement that such Local Currency Facility shall be subject to the
provisions of this Section 3. Each of IBM and, by agreeing to any Local
Currency Facility designation as contemplated hereby, each relevant Local
Currency Lender (if any) which is an affiliate, branch or agency of a Lender,
acknowledges and agrees that each reference in this Agreement to any Lender
shall, to the extent applicable, be deemed to be a reference to such Local
Currency Lender. In the event of any inconsistency between the terms of this
Agreement and the terms of any Local Currency Facility, the terms of this
Agreement shall prevail. Each of IBM, each relevant Subsidiary Borrower and
each relevant Local Currency Lender confirms that each reference to the “IBM
Credit Agreement” (or any comparable term) in the documentation governing each
Local Currency Facility shall mean and be a reference to this Agreement.

(b)           The documentation
governing each Local Currency Facility shall set forth (i) the maximum
amount (expressed in Dollars) available to be borrowed from all Local Currency
Lenders under such Local Currency Facility (as the same may be reduced from
time to time pursuant to Section 3.2(c) or (d), a “Local Currency Facility Maximum Borrowing Amount”) and (ii) with
respect to each Local Currency Lender party to such Local Currency Facility,
the maximum amount (expressed in Dollars) available to be borrowed from such
Local Currency Lender thereunder (as the same may be reduced from time to time
pursuant to Section 3.2(c) or (d), a “Local
Currency Lender Maximum Borrowing Amount”). In no event shall (i) the
aggregate of all Local Currency Facility Stated Maximum Borrowing Amounts at
any time exceed $5,000,000,000 or (ii) the aggregate of all Local Currency
Lender Stated Maximum Borrowing Amounts in respect of any Local Currency Lender
at any time exceed such Lender’s Revolving Credit Commitment. The making of
Local Currency Loans by a Local Currency Lender under 

 35
 

 

a Local
Currency Facility shall under no circumstances reduce the amount available to
be borrowed from such Lender under any other Local Currency Facility to which
such Lender is a party.

(c)           Except as otherwise
required by applicable law, in no event shall the Local Currency Lenders party
to a Local Currency Facility have the right to accelerate the Local Currency
Loans outstanding thereunder, or to terminate their Commitments (if any) to
make such Loans prior to the stated termination date in respect thereof,
except, in each case, in connection with an acceleration of the Loans or a
termination of the Commitments pursuant to Section 8 of this Agreement, provided,
that nothing in this paragraph (c) shall be deemed to require any Local
Currency Lender to make a Local Currency Loan if the applicable conditions
precedent to the making of such Local Currency Loan set forth in the relevant
Local Currency Facility have not been satisfied. No Local Currency Loan may be
made under a Local Currency Facility if (i) an Event of Default shall have
occurred and be continuing or would result therefrom, (ii) the Termination
Date has occurred or (iii) after giving effect thereto, (x) the
aggregate principal amount of the US$ Loans and Local Currency Loans (US$
Equivalent) then outstanding would exceed the aggregate Revolving Credit
Commitments then in effect, (y) the aggregate principal amount of US$
Loans and Local Currency Loans (US$ Equivalent) made to any Subsidiary Borrower
then outstanding would exceed the Maximum Subsidiary Borrowing Amount with
respect to such Subsidiary Borrower set forth in the most recent Subsidiary
Borrower Notice and Designation delivered by IBM pursuant to Section 5.2(d) or
(z) the aggregate principal amount of Revolving Credit Loans, Swing Line
Loans and Local Currency Loans (US$ Equivalent) made by any Lender then
outstanding would exceed such Lender’s Revolving Credit Commitment.

(d)           The relevant Local
Currency Lenders, or, if so specified in the relevant Local Currency Facility,
an agent acting on their behalf, shall furnish to the Administrative Agent,
immediately upon its request, a statement setting forth the outstanding Local
Currency Loans made under such Local Currency Facility and the amount and terms
of any pending prepayment notices or borrowing requests received by such
Lenders or agent through the date of the Administrative Agent’s request.

(e)           The relevant
Borrower shall furnish to the Administrative Agent or its counsel copies of any
amendment, supplement or other modification (including any change in commitment
amounts or in the Lenders participating in any Local Currency Facility) to the
terms of any Local Currency Facility promptly after the effectiveness thereof
(together with, if applicable, an English translation thereof). If any such
amendment, supplement or other modification to a Local Currency Facility shall (i) add
a Lender as a Local Currency Lender thereunder or (ii) change the Local
Currency Facility Stated Maximum Borrowing Amount or any Local Currency Lender
Stated Maximum Borrowing Amount with respect thereto, IBM shall promptly
furnish an appropriately revised Local Currency Facility Addendum, executed by
IBM, the relevant Borrower and the affected Local Currency Lenders (or any
agent acting on their behalf), to the Administrative Agent and the Lenders
(through the Administrative Agent).

(f)            IBM may terminate
its designation of a facility as a Local Currency Facility, with the consent of
each Local Currency Lender party thereto in its sole discretion, by written
notice to the Administrative Agent, which notice shall be executed by IBM, the
relevant Borrower and each Lender party to such Local Currency Facility (or any
agent acting on their behalf). Once notice of such termination is received by
the Administrative Agent, such Local Currency Facility and the loans and other
obligations outstanding thereunder shall immediately cease to be subject to the
terms of this Agreement (including the guarantee of IBM contained in Section 10).
Notwithstanding anything to the contrary in this Agreement, any loans made
under a Local Currency Facility at any time when an exchange rate with respect
to the relevant Local Currency cannot be calculated by the Administrative Agent
in accordance with the definition of “Exchange
Rate” contained in Section 1.1 shall be deemed not to
constitute “Local 

 36
 

 

Currency Loans” for the purposes of this
Agreement unless and until an exchange rate with respect to such loans may be
so calculated.

(g)           Nothing in this Section 3
shall be deemed to limit the ability of IBM or any of the Subsidiaries or
Controlled Persons to enter into credit facilities which do not constitute
Local Currency Facilities.

3.2           Currency Fluctuations, etc.
(a)  No later than 2:00 P.M., New York City time, on each Calculation
Date, the Administrative Agent shall (i) determine the Exchange Rate as of such
Calculation Date with respect to each Local Currency covered by a Local
Currency Facility and (ii) give notice thereof to the Lenders, IBM and the
relevant Borrowers. Except as otherwise provided in Section 3.3, the
Exchange Rates so determined shall become effective on the first Business Day
immediately following the relevant Calculation Date (a “Reset Date”)
and shall remain effective until the next succeeding Reset Date.

(b)           No later than 2:00 P.M.,
New York City time, on each Reset Date and each Borrowing Date, the
Administrative Agent shall (i) determine the US$ Equivalent of the Local
Currency Loans then outstanding under each Local Currency Facility (after
giving effect to any Local Currency Loans to be made or repaid on such date)
and (ii) notify the Lenders, IBM and the relevant Borrowers of the results
of such determination.

(c)           If, on any Reset
Date or any Borrowing Date (after giving effect to (i) any Loans to be
made or repaid on such date and (ii) any amendment, supplement or other
modification to any Local Currency Facility effective on such date of which the
Administrative Agent has received notice), the Aggregate Outstanding US$
Revolving Extensions of Credit of any Lender exceed the US$ Revolving Credit
Overage of such Lender (the amount of such excess, the “US$ Revolving Credit Excess”), then the
Local Currency Lender Maximum Borrowing Amount under each Local Currency Facility
to which such Lender is a party shall be reduced on such date by an amount
equal to the product of such US$ Revolving Credit Excess times a
fraction the numerator of which shall equal the Local Currency Lender Stated
Maximum Borrowing Amount under such Local Currency Facility and the denominator
of which shall equal the aggregate of the Local Currency Lender Stated Maximum
Borrowing Amounts under all Local Currency Facilities to which such Lender is a
party. After giving effect to any such reduction in Local Currency Lender
Maximum Borrowing Amounts, the Local Currency Facility Maximum Borrowing Amount
with respect to each Local Currency Facility shall in turn be reduced to an
amount equal to the aggregate of the Local Currency Lender Maximum Borrowing Amounts
of all Local Currency Lenders party to such Local Currency Facility. Reductions
in Local Currency Lender Maximum Borrowing Amounts and Local Currency Facility
Maximum Borrowing Amounts pursuant to this paragraph (c) shall be
effective until the amount thereof shall be recalculated by the Administrative
Agent on the next succeeding Reset Date or Borrowing Date, and shall not be
deemed to reduce the stated amount of any Commitment of any Local Currency
Lender in respect of any Local Currency Facility.

(d)           If, on any Reset
Date or Borrowing Date (after giving effect to (i) any Loans to be made or
repaid on such date, (ii) any amendment, supplement or other modification
to any Local Currency Facility effective on such date of which the
Administrative Agent has received notice and (iii) any changes in any
Local Currency Lender Maximum Borrowing Amounts effected pursuant to Section 3.2(c) on
such date), the aggregate outstanding principal amount of the US$ Loans exceeds
the US$ Facility Overage (the amount of such excess, the “US$ Facility Excess”), then the Local
Currency Facility Maximum Borrowing Amount under each Local Currency Facility
shall be reduced on such date by an amount equal to the product of such US$
Facility Excess times a fraction the numerator of which shall equal the
Local Currency Facility Stated 

 37
 

 

Maximum
Borrowing Amount under such Local Currency Facility and the denominator of
which shall equal the aggregate of the Local Currency Facility Stated Maximum
Borrowing Amounts with respect to all Local Currency Facilities. Each such
reduction in the Local Currency Facility Maximum Borrowing Amount under a Local
Currency Facility shall in turn reduce the respective Local Currency Lender
Maximum Borrowing Amounts of each Local Currency Lender party to such Local
Currency Facility, pro  rata on the basis of the respective Local
Currency Lender Stated Maximum Borrowing Amounts of such Lenders. Reductions in
Local Currency Facility Maximum Borrowing Amounts and Local Currency Lender
Maximum Borrowing Amounts pursuant to this paragraph (d) shall be
effective until the amount thereof shall be recalculated by the Administrative
Agent on the next succeeding Reset Date or Borrowing Date, and shall not be
deemed to reduce the stated amount of any Commitment of any Local Currency
Lender in respect of any Local Currency Facility.

(e)           If, on any Reset
Date, the US$ Equivalent of the Local Currency Loans outstanding under a Local
Currency Facility exceeds an amount equal to 105% of the Local Currency
Facility Maximum Borrowing Amount with respect thereto (after giving effect to
any reductions therein effected pursuant to Section 3.2(c) or (d) on
such date), then the relevant Borrower shall, within three Business Days after
notice thereof from the Administrative Agent, (i) increase the Local
Currency Facility Stated Maximum Borrowing Amount with respect to such Local
Currency Facility in accordance with Section 3.1(e) and/or (ii) prepay
such Local Currency Loans in accordance with the terms of the relevant Local
Currency Facilities in an aggregate amount such that, after giving effect
thereto, (x) the US$ Equivalent of all such Local Currency Loans shall be
equal to or less than such Local Currency Facility Maximum Borrowing Amount and
(y) the US$ Equivalent of the Local Currency Loans of each relevant Local
Currency Lender shall be equal to or less than such Local Currency Lender’s
Local Currency Lender Maximum Borrowing Amount with respect to such Local
Currency Facility.

(f)            If, on any Reset
Date, the Aggregate Outstanding Revolving Extensions of Credit of any Lender
exceed an amount equal to 105% of such Lender’s Revolving Credit Commitment,
then, within three Business Days after notice thereof from the Administrative
Agent, IBM shall prepay and/or cause the Subsidiary Borrowers to prepay the
Loans in accordance with this Agreement or the relevant Local Currency
Facilities, as the case may be, in an aggregate amount such that, after giving
effect thereto, the Aggregate Outstanding Revolving Extensions of Credit of such
Lender shall be equal to or less than such Lender’s Revolving Credit
Commitment.

(g)           The Administrative
Agent shall promptly notify the relevant Lenders of the amount of any
reductions in Local Currency Facility Maximum Borrowing Amounts or Local Currency
Lender Maximum Borrowing Amounts, and the amount of any prepayments, required
pursuant to paragraph (c), (d), (e) or (f) of this Section 3.2.

3.3           Refunding of Local Currency Loans.
(a)  Notwithstanding noncompliance with the conditions precedent set forth
in Section 5, if any Local Currency Loans are outstanding on (i) any
date on which an Event of Default pursuant to Section 8(f) or (g) shall
have occurred with respect to IBM, (ii) any date (the “Acceleration Date”) on which the Commitments shall have been
terminated and/or the Loans shall have been declared immediately due and
payable pursuant to Section 8 or (iii) any date on which an Event of
Default pursuant to Section 8(a)(ii) shall have occurred and be
continuing for three or more Business Days and, in the case of clause (iii) above,
any Local Currency Lender party to the affected Local Currency Facility shall
have given notice thereof to the Administrative Agent requesting that the Local
Currency Loans (“Affected Local Currency Loans”)
outstanding thereunder be refunded pursuant to this Section 3.3, then, at
10:00 A.M., New York City time, on the second Business Day immediately
succeeding (x) the date on which such Event of Default occurs (in the case
of clause (i) above), (y) such Acceleration Date (in the case of
clause (ii) above) or (z) the date on which such notice is received
by the Administrative Agent (in the case of clause (iii) above), the
Administrative Agent shall be deemed to have received a notice from IBM (or any
one or more Subsidiary Borrowers designated by the Administrative Agent after
consultation with IBM, provided, that any Subsidiary Borrower so designated 

 38
 

 

shall
in each case be the relevant Subsidiary Borrower party to the relevant Local
Currency Facility unless otherwise agreed by the requisite Local Currency
Lenders party to such Local Currency Facility) pursuant to Section 2.2
requesting that ABR Loans be made pursuant to Section 2.1 on such second
Business Day in an aggregate amount equal to the US$ Equivalent of the aggregate
amount of all Local Currency Loans (in the case of clause (i) or (ii) above)
or the Affected Local Currency Loans (in the case of clause (iii) above)
(calculated on the basis of Exchange Rates determined by the Administrative
Agent on the Business Day immediately preceding such second Business Day), and
the procedures set forth in Section 2.2 shall be followed in making such
ABR Loans, provided, that (x) for the purposes of determining each Lender’s
Revolving Credit Borrowing Share of such borrowing, the outstanding principal
amount of Local Currency Loans or Affected Local Currency Loans, as the case
may be, shall be deemed to be zero and (y) each Lender’s Revolving Credit
Borrowing Share of such borrowing shall be reduced to the extent (if any)
necessary to prevent the Aggregate Outstanding Revolving Extensions of Credit
of such Lender from exceeding its Revolving Credit Commitment after giving
effect to such borrowing. The proceeds of such ABR Loans shall be applied to
repay such Local Currency Loans; it being understood, however, that IBM (or
such designated Borrower or Borrowers) shall have the right to make payment
through the original Borrower or Borrowers of such Local Currency Loans and
become a creditor of such original Borrower or Borrowers to the extent of such
proceeds.

(b)           If, for any reason,
ABR Loans may not be made pursuant to paragraph (a) of this Section 3.3
to repay Local Currency Loans as required by such paragraph, effective on the
date such ABR Loans would otherwise have been made, (i) the principal
amount of each relevant Local Currency Loan shall be converted into Dollars
(calculated on the basis of Exchange Rates determined by the Administrative
Agent as of the immediately preceding Business Day) (“Converted Local Currency Loans”) and (ii) each
Lender severally, unconditionally and irrevocably agrees that it shall purchase
in Dollars a participating interest in such Converted Local Currency Loans in
an amount equal to the amount of ABR Loans which would otherwise have been made
by such Lender pursuant to paragraph (a) of this Section 3.3. Each
Lender will immediately transfer to the Administrative Agent, in immediately
available funds, the amount of its participation, and the proceeds of such
participation shall be distributed by the Administrative Agent to each relevant
Local Currency Lender in such amount as will reduce the amount of the
participating interest retained by such Local Currency Lender in the Converted
Local Currency Loans to the amount of the ABR Loans which were to have been
made by it pursuant to paragraph (a) of this Section 3.3. All
Converted Local Currency Loans shall bear interest at the rate which would
otherwise be applicable to ABR Loans. Each Lender shall share on a pro  rata
basis (calculated by reference to its participating interest in such Converted
Local Currency Loans) in any interest which accrues thereon and in all
repayments thereof.

(c)           If, for any reason,
ABR Loans may not be made pursuant to paragraph (a) of this Section 3.3
to repay Local Currency Loans as required by such paragraph and the principal
amount of any Local Currency Loans may not be converted into Dollars in the
manner contemplated by paragraph (b) of this Section 3.3, (i) the
Administrative Agent shall determine the US$ Equivalent of such Local Currency
Loans (calculated on the basis of Exchange Rates determined by the
Administrative Agent as of the Business Day immediately preceding the date on
which ABR Loans would otherwise have been made pursuant to said paragraph (a))
and (ii) effective on the date on which ABR Loans would otherwise have
been made pursuant to said paragraph (a), each Lender severally,
unconditionally and irrevocably agrees that it shall purchase in Dollars a
participating interest in such Local Currency Loans in an amount equal to the
amount of ABR Loans which would otherwise have been made by such Lender
pursuant to paragraph (a) of this Section 3.3. Each Lender will
immediately transfer to the Administrative Agent, in immediately available
funds, the amount of its participation, and the proceeds of such participation
shall be distributed by the Administrative Agent to each relevant Local
Currency Lender in such amount as will reduce the US$ Equivalent as of such
date of the amount of the participating interest retained by such Local
Currency Lender in such Local Currency Loans to the amount of the ABR Loans
which were to 

 39
 

 

have been made
by it pursuant to paragraph (a) of this Section 3.3. Each Lender
shall share on a pro  rata basis (calculated by reference to its
participating interest in such Local Currency Loans) in any interest which
accrues thereon, in all repayments of principal thereof and in the benefits of
any collateral furnished in respect thereof and the proceeds of such
collateral.

3.4           Existing Local
Currency Facilities, etc.  Each of IBM, each Subsidiary Borrower, each
Lender and the Administrative Agent acknowledges and agrees that (a) effective as of
the Effective Date, the “Commitments” under the Existing Credit Agreement shall
be terminated, (b) each “Local Currency Facility” entered into pursuant to
the Existing Credit Agreement shall, effective on the Effective Date,
automatically constitute a Local Currency Facility hereunder, (c) without
limiting the generality of clause (b) above (and notwithstanding the
termination of the “Commitments” under the Existing Credit Agreement), all “Local
Currency Loans” outstanding pursuant to the Existing Credit Agreement on the
Effective Date shall constitute Local Currency Loans outstanding pursuant
hereto and (d) each reference to the Existing Credit Agreement in any
document relating to any such Local Currency Facility shall be deemed to be a
reference to this Agreement.

SECTION 4.           REPRESENTATIONS
AND WARRANTIES

To induce the Administrative Agent and the Lenders to
enter into this Agreement and to make the Loans, IBM hereby represents and
warrants, and each Subsidiary Borrower represents and warrants (to the extent
specifically applicable to such Subsidiary Borrower), to the Administrative
Agent and each Lender that:

4.1           Organization; Powers. Each of
IBM, each Significant Subsidiary and each Subsidiary Borrower (a) is duly
organized, validly existing and in good standing under the laws of the jurisdiction of
its organization, (b) has all requisite power and authority to own its
property and assets and to carry on its business in all material respects as
now conducted and as proposed to be conducted, (c) is qualified to do
business in every jurisdiction where such qualification is required, except
where the failure so to qualify would not, individually or in the aggregate,
result in a Material Adverse Effect, and (d) in the case of each Borrower,
has the power and authority to execute, deliver and perform its obligations
under this Agreement and each other agreement or instrument contemplated hereby
to which it is or will be a party and to borrow hereunder.

4.2           Authorization. The execution,
delivery and performance by each Borrower of this Agreement and the borrowings
and other transactions contemplated hereby (collectively,
the “Transactions”) (a) have been duly
authorized by all requisite corporate or other organizational action and, if
required, stockholder action and (b) will not (i) violate (A) any
provision of law, statute, material rule or material regulation, or of the
certificate or articles of incorporation or other constitutive documents or
by-laws of IBM, any Significant Subsidiary or any Subsidiary Borrower, (B) any
material order of any Governmental Authority or (C) any provision of any
material indenture, material agreement or other material instrument to which
IBM, any Significant Subsidiary or any Subsidiary Borrower is a party or by
which any of them or any of their property is or may be bound, (ii) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument or (iii) except as contemplated hereby, result in the creation
or imposition of any Lien upon or with respect to any property or assets now owned
or hereafter acquired by IBM, any Significant Subsidiary or any Subsidiary
Borrower.

4.3           Enforceability. This Agreement
has been duly executed and delivered by each Borrower and constitutes a legal,
valid and binding obligation of each Borrower enforceable against each such Borrower in
accordance with its terms, except as enforceability may be limited by (a) any
applicable

 

 40

 

bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer, or similar laws
relating to or affecting creditors’ rights generally and (b) general
principles of equity.

4.4           Governmental Approvals. No
action, consent or approval of, registration or filing with, or any other
action by, any Governmental Authority is or will be required in connection with the
Transactions, except (a) such as have been made or obtained and are in
full force and effect or as to which the failure to be made or obtained or to
be in full force and effect would not result, individually or in the aggregate,
in a Material Adverse Effect and (b) such periodic and current reports, if
any, as (i) are required to disclose the Transactions and (ii) will
be filed with the SEC on a timely basis.

4.5           Financial Statements. IBM has
heretofore furnished to the Lenders its consolidated statement of financial
position and related consolidated statements of earnings, cash flows and stockholders’
equity as of and for the fiscal year ended December 31, 2005, audited by
and accompanied by the opinion of PricewaterhouseCoopers, independent
accountants. Such financial statements present fairly the financial position,
results of operations, cash flows and changes in stockholders’ equity of IBM
and the Subsidiaries in accordance with GAAP.

4.6           No Material Adverse Change. Except
as publicly disclosed in filings by IBM with the SEC prior to the Effective
Date, between December 31, 2005 and the Effective Date, there has been no
development or event which has had a Material Adverse Effect.

4.7           No Material Litigation, etc.
(a)  Except as set forth in the Form 10-K of IBM for its fiscal
year ended December 31, 2005 or the Form 10-Q of IBM for the
fiscal quarter ended March 31,
2006, no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of IBM, threatened by or
against IBM or any of the Subsidiaries or against any of its or their
respective properties, assets or revenues as of the Effective Date (i) with
respect to this Agreement or any of the Transactions, or (ii) which
involves a probable risk of an adverse decision which would materially restrict
the ability of IBM to comply with its obligations under this Agreement.

(b)           None of IBM or the
Significant Subsidiaries is in violation of any law, rule or regulation,
or in default with respect to any order, judgment, writ, injunction or decree
of any Governmental Authority, where such violation or default has resulted or
could reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect.

4.8           Federal Reserve Regulations.
(a)  No Borrower is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or carrying
Margin Stock.

(b)           No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose which entails a violation of, or which is inconsistent with, the
provisions of Regulation T, U or X.

(c)           After giving effect
to the application of the proceeds of each Loan, not more than 25% of the value
of the assets of IBM and the Subsidiaries (as determined in good faith by IBM)
subject to the provisions of Section 7.1 will consist of or be represented
by Margin Stock. In the event any portion of the Loans made to any Borrower
constitutes a “purpose credit” within the meaning of Regulation U and the Loans
are directly or indirectly secured by any Margin Stock pursuant to the
operation of Section 7.1, then, at the time of any borrowing which
increases the outstanding amount of Loans, the aggregate “maximum loan value”
(within the meaning of Regulation U) of all Margin Stock and all collateral
other than Margin Stock which directly or indirectly secures the Loans will be
greater than the aggregate principal amount of Loans and other extensions of
credit to all Borrowers (whether 

 41
 

 

made by the
Lenders or other Persons) which are subject to Regulation T, U or X and which
are directly or indirectly secured by such Margin Stock or other collateral.

4.9           Investment Company Act, etc. No
Borrower is (a) an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) subject to
regulation under the Federal Power Act or (except as contemplated by Section 4.8)
any foreign, federal, state or local statute or regulation limiting such
Borrower’s ability to incur Borrower Obligations.

4.10         Tax Returns. Each of IBM and the
Significant Subsidiaries has filed or caused to be filed all Federal, state and
local tax returns required to have been filed by it and has paid or caused to be paid all taxes
shown to be due and payable on such returns or on any assessments received by
it except taxes, assessments, fees, liabilities, penalties or charges that are
being contested in good faith by appropriate proceedings and for which IBM or
Significant Subsidiary shall have set aside on its books reserves in accordance
with GAAP.

4.11         No Material Misstatements. The
written information, reports, financial statements, exhibits and schedules
furnished by or on behalf of any Borrower to the Administrative Agent or any
Lender in connection with this Agreement and the Transactions or included
herein or delivered pursuant hereto, taken as a whole, do not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

4.12         ERISA. Each Borrower is in
compliance with all material provisions of ERISA, except to the extent that all
failures to be in compliance could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.

4.13         Use of Proceeds. The proceeds of
all US$ Loans will be used by the Borrowers for general corporate purposes.

SECTION 5.           CONDITIONS
PRECEDENT

5.1           Conditions to Initial US$ Loans.
The agreement of each Lender to make the initial US$ Loan requested to be made
by it is subject to the satisfaction, on or prior to the date of such US$
Loan, of the following conditions precedent:

(a)           Effective Date; Existing Credit
Agreement. (i) The Effective Date shall have occurred in accordance
with Section 11.22 and (ii) subject to Section 3.4, the Existing
Credit Agreement shall have been terminated (and the parties hereto hereby
waive compliance with any provision of the Existing Credit Agreement requiring
advance notice of such termination).

(b)           Closing Certificate. The
Administrative Agent shall have received a certificate of IBM, dated the
Effective Date, substantially in the form of Exhibit C, with appropriate
insertions and attachments, satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of IBM.

(c)           Fees. The Administrative Agent
shall have received the fees to be received on or prior to the Effective Date
referred to in Section 2.11(b).

 42
 

 

(d)           Legal Opinions. The
Administrative Agent shall have received the following executed legal opinions,
with a copy for each Lender:

(i)            the executed legal opinion of
Simpson Thacher & Bartlett LLP, counsel to the Administrative Agent,
substantially in the form of Exhibit D-1; and

(ii)           the executed legal opinion of Andrew
Bonzani, Esq., Vice President and Assistant General Counsel of IBM,
substantially in the form of Exhibit D-2.

5.2           Conditions to Each US$ Loan. The
agreement of each Lender to make any US$ Loan requested to be made by it on any
date (including, without limitation, its initial US$ Loan) is subject to
the satisfaction of the following conditions precedent:

(a)           Notice. The Administrative
Agent shall have received notice of such borrowing in conformity with the
applicable requirements of this Agreement.

(b)           Representations and Warranties.
Each of the representations and warranties made by any Borrower in or pursuant
to this Agreement shall be true and correct in all material respects on and as
of such date as if made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date.

(c)           No Default. No Default or
Event of Default shall have occurred and be continuing on such date or shall
occur after giving effect to the borrowing of the US$ Loans requested to be
made on such date.

(d)           Subsidiary Borrower Notice and Designation; Subsidiary
Borrower Request.

(i)            If the relevant Borrower is a Subsidiary Borrower, IBM
shall have delivered to the Administrative Agent a Subsidiary Borrower Notice
and Designation for such Subsidiary Borrower specifying the maximum amount (the
“Maximum Subsidiary Borrowing Amount”)
which may be borrowed by such Subsidiary Borrower, and such Subsidiary Borrower
shall have furnished to the Administrative Agent a Subsidiary Borrower Request.
Following the delivery of a Subsidiary Borrower Notice and Designation, if the
designation of such Subsidiary Borrower obligates the Administrative Agent or
any Lender to comply with “know your customer” or similar identification
procedures in circumstances where the necessary information is not already
available to it, IBM shall, promptly upon the request of the Administrative
Agent or any Lender, supply such documentation and other evidence as is
reasonably requested by the Administrative Agent or any Lender in order for the
Administrative Agent or such Lender to carry out and be satisfied it has
complied with the results of all necessary “know your customer” or other
similar checks under all applicable laws and regulations. If the relevant
Borrower is a Subsidiary Borrower, in the case of the initial borrowing by such
Subsidiary Borrower, such Subsidiary Borrower shall have notified the Lenders
(through the Administrative Agent) of its intent to give notice of a borrowing
pursuant to Section 2.2 at least two Business Days prior to the date it
intends to give notice of such borrowing.

(ii)           If IBM shall designate a Foreign Subsidiary Borrower
hereunder any Lender may, with notice to the Administrative Agent and IBM,
fulfill its Commitment by causing an affiliate of such Lender to act as the
Lender in respect of such Foreign Subsidiary Borrower (and such Lender shall,
to the extent of Loans made to such Foreign 

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Subsidiary Borrower, be deemed for all purposes
hereof to have pro tanto assigned such Loans to such affiliate in compliance
with the provisions of Section 11.8).

(iii)          IBM may from time to time deliver a subsequent Subsidiary
Borrower Notice and Designation with respect to such Subsidiary Borrower,
countersigned by such Subsidiary Borrower, for the purpose of changing the
Maximum Subsidiary Borrowing Amount specified therein or terminating such
Subsidiary Borrower’s designation as such, so long as (i) in the case of
any reduction of any Maximum Subsidiary Borrowing Amount, on the effective date
of such reduction, the aggregate principal amount of US$ Loans and Local
Currency Loans (US$ Equivalent) made to such Subsidiary Borrower shall not
exceed the Maximum Subsidiary Borrowing Amount as so reduced and (ii) in
the case of any termination of such designation, on the effective date of such
termination, all Subsidiary Borrower Obligations in respect of such Subsidiary
Borrower shall have been paid in full or shall have been assigned to another
Subsidiary Borrower in accordance with the relevant Local Currency Facility to
which such assignee Subsidiary Borrower is a party. In addition, if on any date
a Subsidiary Borrower shall cease to be a Subsidiary or Controlled Person, all
Subsidiary Borrower Obligations in respect of such Subsidiary Borrower shall
automatically become due and payable on such date and no further Loans may be
borrowed by such Subsidiary Borrower hereunder or under any Local Currency
Facility.

Each borrowing of a US$ Loan by a Borrower shall
constitute a representation and warranty by such Borrower (and, in the case of
a Subsidiary Borrower, IBM) as of the date of such US$ Loan that the conditions
contained in paragraphs (b) and (c) of this Section 5.2 have
been satisfied.

Notwithstanding any other
provision of this Agreement, no Lender shall be obligated to make any Loan to
IBM, if (i) the adoption of any law, rule or regulation after the
date of this Agreement, (ii) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (iii) compliance by any Lender
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement, shall make it unlawful for such Lender to make such Loan to IBM.

Notwithstanding any other
provision of this Agreement, no Lender shall be obligated to make any Loan to a
Subsidiary Borrower if any law, rule, regulation or interpretation or
application thereof by any Governmental Authority, or compliance by any Lender
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority shall make it unlawful for such Lender to
make such Loan to such Subsidiary Borrower.

SECTION 6.           AFFIRMATIVE
COVENANTS

IBM and each Subsidiary Borrower agrees that, so long
as the Commitments remain in effect, any Loan remains outstanding and unpaid or
any other amount is owing to any Lender or the Administrative Agent hereunder,
it shall and (in the case of IBM) shall cause each of the Significant
Subsidiaries to:

6.1           Existence; Business and Properties.
(a)  Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its legal existence, except as would not cause
or result in a Default or Event of Default under this Agreement.

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(b)           Do or cause to be
done all things reasonably necessary to preserve and keep in full force and
effect the rights, licenses, permits, franchises, authorizations, patents,
copyrights, trademarks and trade names material to the conduct of its business;
except in each case where the failure to do so would not result in a Material
Adverse Effect; and at all times maintain and preserve all property material to
the conduct of its business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times; provided, however, that
nothing in this Section 6.1(b) shall prevent IBM, any Subsidiary or
any Subsidiary Borrower from (x) discontinuing any of its businesses no
longer deemed advantageous to it or discontinuing the operation and maintenance
of any of its properties no longer deemed useful in the conduct of its business
or (y) selling or disposing of any assets, Subsidiaries or capital stock
thereof, in a transaction not prohibited by Section 7.2.

6.2           Financial Statements, Reports, etc.
In the case of IBM, furnish to the Administrative Agent for distribution to the
Lenders:

(a)           as soon as available and in any event
within 90 days after the end of each fiscal year, copies of the report filed by
IBM with the SEC on Form 10-K in respect of such fiscal year, each
accompanied by IBM’s annual report in respect of such fiscal year or, if IBM is
not required to file such a report in respect of such fiscal year, the
consolidated statements of financial position and related consolidated
statements of earnings, cash flows and stockholders’ equity of IBM and the
Subsidiaries, as of the close of such fiscal year, all audited by
PricewaterhouseCoopers or other independent accountants of recognized national
standing and accompanied by an opinion of such accountants to the effect that
such consolidated financial statements fairly present the financial position,
results of operations, cash flows and changes in stockholders’ equity of IBM
and the Subsidiaries, in accordance with GAAP;

(b)           as soon as available and in any event
within 50 days after the end of each of the first three quarterly periods of
each fiscal year, copies of the unaudited quarterly reports filed by IBM with
the SEC on Form 10-Q in respect of such quarterly period, or if IBM
is not required to file such a report in respect of such quarterly period, the
unaudited consolidated statements of financial position and related unaudited
consolidated statements of earnings, cash flows and stockholders’ equity of IBM
and the Subsidiaries, as of the close of such fiscal quarter, certified by a
Responsible Officer of IBM as fairly presenting the financial position, results
of operations, cash flows and changes in stockholders’ equity of IBM and the
Subsidiaries, in accordance with GAAP, subject to normal year-end audit
adjustments which are not expected to be material in amount;

(c)           concurrently with any delivery of
financial statements by IBM described in paragraph (a) or (b) above
(whether contained in a report filed with the SEC or otherwise), a certificate
of a Responsible Officer of IBM substantially in the form of Schedule 6.2(c);

(d)           promptly after the same become
publicly available, copies of (i) all financial statements, notices,
reports and proxy materials distributed to stockholders of IBM and (ii) all
reports on Form 10-K, 10-Q and 8-K (or their
equivalents) filed by IBM with the SEC (or with any Governmental Authority
succeeding to any or all of the functions of the SEC) pursuant to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder; provided, that documents required to
be furnished under this paragraph (d) shall be deemed furnished when made
available via the EDGAR (or any successor) system of the SEC;

 45
 

 

(e)           promptly, from time to time, such other
publicly available documents and information regarding the operations, business
affairs and financial condition of IBM, any Significant Subsidiary or any
Subsidiary Borrower, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender (through the Administrative Agent) may
reasonably request; and

(f)            within ten Business Days after the
occurrence thereof, written notice of any change in Status; provided
that the failure to provide such notice shall not delay or otherwise affect any
change in the Applicable Eurodollar Margin or other amount payable hereunder
which is to occur upon a change in Status pursuant to the terms of this
Agreement.

With respect to the documents referred to in
paragraphs (a) through (e) above, IBM shall furnish such number of
copies as the Administrative Agent or the Lenders shall reasonably require for
distribution to their personnel in connection with this Agreement.

6.3           Notices. Promptly after any
Responsible Officer or the Director of Treasury Operations of IBM obtains
knowledge thereof, give notice to the Administrative Agent and each Lender of the occurrence of any
Default or Event of Default, accompanied by a statement of a Responsible
Officer setting forth details of the occurrence referred to therein and stating
what action the relevant Borrower proposes to take with respect thereto.

SECTION 7.           NEGATIVE
COVENANTS

IBM and, in the case of Sections 7.2 and 7.3, each
Subsidiary Borrower agrees that, so long as the Commitments remain in effect,
any Loan remains outstanding and unpaid or any other amount is owing to any
Lender or the Administrative Agent hereunder:

7.1           Limitation on Secured Debt and
Sale and Leaseback Transactions. (a)  IBM will not create, assume,
incur or guarantee, and will not permit any Restricted Subsidiary to create,
assume, incur or guarantee, any Secured Debt without making provision whereby
all Borrower Obligations shall be secured equally and ratably with (or prior
to) such Secured Debt (together with, if IBM shall so determine, any other Debt
of IBM or such Restricted Subsidiary then existing or thereafter created which
is not by its terms subordinate to the Borrower Obligations) so long as such
Secured Debt shall be outstanding unless such Secured Debt, when added to (a) the
aggregate amount of all Secured Debt then outstanding (not including in this
computation Secured Debt if the Borrower Obligations are secured equally and
ratably with (or prior to) such Secured Debt and further not including in this
computation any Secured Debt which is concurrently being retired) and (b) the
aggregate amount of all Attributable Debt then outstanding pursuant to Sale and
Leaseback Transactions entered into by IBM after July 15, 1985, or entered
into by a Restricted Subsidiary after July 15, 1985, or, if later, the
date on which it became a Restricted Subsidiary (not including in this
computation any Attributable Debt which is concurrently being retired), would
not exceed 10% of Consolidated Net Tangible Assets.

(b)           IBM will not, and
will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction unless (a) the sum of (i) the Attributable Debt to be
outstanding pursuant to such Sale and Leaseback Transaction, (ii) all
Attributable Debt then outstanding pursuant to all other Sale and Leaseback
Transactions entered into by IBM after July 15, 1985, or entered into by a
Restricted Subsidiary after July 15, 1985, or, if later, the date on which
it became a Restricted Subsidiary, and (iii) the aggregate of all Secured
Debt then outstanding (not including in this computation Secured Debt if the
Borrower Obligations are secured equally and ratably with (or prior to) such
Secured Debt) would not exceed 10% of Consolidated Net Tangible Assets or (b) an
amount equal to the greater of (i) the net 

 46
 

 

proceeds to
IBM or the Restricted Subsidiary of the sale of the Principal Property sold and
leased back pursuant to such Sale and Leaseback Transaction and (ii) the
amount of Attributable Debt to be outstanding pursuant to such Sale and Leaseback
Transaction, is applied to the retirement of Funded Debt of IBM or any
Restricted Subsidiaries (other than Funded Debt which is subordinated to the
Loans or which is owing to IBM or any Restricted Subsidiaries) within 180 days
after the consummation of such Sale and Leaseback Transaction.

7.2           Mergers, Consolidations and Sales
of Assets. (a)  No Borrower will consolidate with or merge with or
into any other Person (unless, in the case of any Subsidiary Borrower, such
Subsidiary Borrower’s designation as such is terminated pursuant to Section 5.2(d) concurrently
with such transaction), except that, so long as no Default or Event of Default
shall have occurred and be continuing or would result therefrom, IBM may merge
with any other U.S. corporation and each Subsidiary Borrower may merge with any
other Person, provided that (i) in the case of any such merger involving
IBM, IBM is the surviving corporation, (ii) in the case of any such merger
involving a Subsidiary Borrower, the surviving corporation assumes all of such
Borrower’s obligations under this Agreement and remains a “Subsidiary
Borrower” and (iii) on the date of consummation of any merger
involving IBM, IBM shall deliver to the Administrative Agent a certificate of a
Responsible Officer of IBM demonstrating that, on a pro forma basis determined
as if such merger had been consummated on the date occurring twelve months
prior to the last day of the most recently ended fiscal quarter, IBM would have
been in compliance with Section 7.4 as of the last day of such fiscal
quarter.

(b)           IBM will not sell,
convey or otherwise transfer all or substantially all of its properties or
assets to any Person, provided that this paragraph (b) shall not
prohibit IBM from entering into a merger transaction expressly permitted by Section 7.2(a).

7.3           Margin Regulations. (a) 
No Borrower will permit any part of the proceeds of any Loan to be used in any
manner that would result in a violation of, or be inconsistent with, the provisions of
Regulation T, U or X. No Borrower will take, or permit the Subsidiaries to
take, any action at any time that would (A) result in a violation of the
substitution and withdrawal requirements of Regulation T or U, in the event the
same should become applicable to any Loans or this Agreement or (B) cause
the representations and warranties contained in Section 4.8 at any time to
be other than true and correct.

(b)           Whenever required to
ensure compliance with Regulations T, U and X or requested by the
Administrative Agent or one or more Lenders, each Borrower will furnish to the
Administrative Agent and each Lender a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation
U, and any other notice or form required under Regulation U, the statements
made and information contained in which shall be sufficient, in the good faith
opinion of each Lender, to permit the extensions of Loans hereunder in
compliance with Regulation U.

7.4           Consolidated Net Interest Expense
Ratio. IBM will not permit the Consolidated Net Interest Expense Ratio, for
any period of four consecutive fiscal quarters taken as a single
accounting period (commencing with the period of four consecutive fiscal
quarters ending June 30, 2006), to be less than 2.20 to 1.0.

SECTION 8.           EVENTS
OF DEFAULT

If any of the following events shall occur and be
continuing:

 47
 

 

 

(a)           (i) Any Borrower shall (x) fail
to pay any principal of any US$ Loan when due in accordance with the applicable
terms of this Agreement or (y) fail to pay any interest on any US$ Loan,
or any fee or other amount payable hereunder or under any Local Currency
Facility (other than as provided in clause (ii) below), within five
Business Days after any such interest, fee or other amount becomes due in
accordance with the terms hereof or thereof; or (ii) any Borrower shall
fail to pay any principal of or interest on any Local Currency Loan when due in
accordance with the applicable terms of the relevant Local Currency Facility
and such default shall continue unremedied for a period of three Business Days
(in the case of principal) or five Business Days (in the case of interest)
after written notice thereof shall have been given to IBM by the Administrative
Agent or any affected Local Currency Lender (with a copy to the Administrative
Agent); or

(b)           Any representation or warranty made
or deemed made by any Borrower herein or in any Local Currency Facility or
which is contained in any certificate, document or financial or other statement
furnished by it at any time pursuant to this Agreement or any Local Currency
Facility shall prove to have been incorrect in any material respect on or as of
the date made or deemed made; or

(c)           IBM shall default in the observance
or performance of the agreement contained in Section 7.4; or

(d)           Any Borrower shall default in the
observance or performance of any other agreement contained in this Agreement or
in any Local Currency Facility or any other event or condition constituting a
default under any Local Currency Facility shall occur (in each case other than
as provided in paragraphs (a) through (c) of this Section 8),
and such default shall continue unremedied for a period of 30 days after
written notice thereof shall have been given to IBM by the Administrative Agent
or the Required Lenders; or

(e)           IBM or any Significant Subsidiary
shall default in the payment of any principal or interest, regardless of
amount, due in respect of any Indebtedness in an aggregate principal amount of
$400,000,000 or more, when and as the same shall become due and payable (after
the expiration of any applicable grace period); or

(f)            An involuntary proceeding shall be
commenced or an involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of IBM or any Significant
Subsidiary, or of a substantial part of the property or assets of IBM or any
Significant Subsidiary, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law, (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for IBM or any Significant Subsidiary or for a substantial part of the
property or assets of IBM or any Significant Subsidiary or (iii) the
winding-up or liquidation of IBM or any Significant Subsidiary; and such
proceeding or petition shall continue undismissed for 90 days or an order or
decree approving or ordering any of the foregoing shall be entered; or

(g)           IBM or any Significant Subsidiary
shall (i) voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (ii) consent to the institution
of, or fail to contest in a timely and appropriate manner, any proceeding or
the filing of any petition described in paragraph (f) of this Section 8,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for IBM or any
Significant Subsidiary or for a 

 48
 

 

substantial part of the property or assets of
IBM or any Significant Subsidiary, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v) make
a general assignment for the benefit of creditors, or (vi) take any action
for the purpose of effecting any of the foregoing; or

(h)           One or more judgments for the payment
of money which are due and payable in an aggregate amount of $400,000,000
(exclusive of any amount thereof covered by insurance so long as such coverage
is not being disputed) or more shall be rendered by a court of competent
jurisdiction against IBM, any Significant Subsidiary or any combination of IBM
and Significant Subsidiaries and the same shall remain undischarged for a
period of 60 days during which execution shall not be effectively stayed (for
this purpose, a judgment shall effectively be stayed during a period when it is
not yet due and payable), or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of IBM or any Significant Subsidiary
to enforce any such judgment, provided however, that any judgment or other
action in Cooper et al vs. The IBM Personal Pension Plan and IBM Corporation
shall be exempt from the application of this Section 8(h) until such
judgment is a final judgment not subject to any further appeals, and IBM or any
Significant Subsidiary fails to pay such judgment due and payable by IBM or any
Significant Subsidiary within 60 days after the date mandated by the court for
the payment of such judgment; or

(i)            The guarantee contained in Section 10
shall cease, for any reason, to be in full force and effect or IBM shall so
assert;

then, and in any such event, (A) if such event is
an Event of Default specified in paragraph (f) or (g) above with
respect to IBM, automatically the Commitments shall immediately terminate and
the Loans (with accrued interest thereon) and all fees and other amounts owing
under this Agreement and the Local Currency Facilities shall immediately become
due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken:  (i) with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to IBM declare the
Commitments to be terminated forthwith, whereupon such Commitments shall
immediately terminate; and (ii) with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to IBM, declare the Loans (with accrued
interest thereon) and all fees and other amounts owing under this Agreement and
the Local Currency Facilities to be due and payable forthwith, whereupon the
same shall immediately become due and payable. Except as expressly provided
above in this Section 8, presentment, demand, protest and all other
notices of any kind are hereby expressly waived.

SECTION 9.           THE
ADMINISTRATIVE AGENT

9.1           Appointment. Each Lender
hereby irrevocably designates and appoints JPMorgan Chase Bank as the agent of
such Lender under this Agreement, and each such
Lender irrevocably authorizes JPMorgan Chase Bank, as the Administrative Agent
for such Lender, to take such action on its behalf under the provisions of this
Agreement and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement, together
with such other powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary elsewhere in this Agreement, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any Local Currency Facility or otherwise
exist against the Administrative Agent.

 49
 

 

9.2           Delegation of Duties. The
Administrative Agent may execute any of its duties under this Agreement by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.

9.3           Exculpatory Provisions. Neither
the Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement (except for its or such Person’s own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by any Borrower or
any officer thereof contained in this Agreement or any Local Currency Facility
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in connection
with, this Agreement or any Local Currency Facility or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any Local Currency Facility or for any failure of any Borrower to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any Local Currency Facility, or to inspect the
properties, books or records of any Borrower.

9.4           Reliance by Administrative Agent.
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, without limitation,
counsel to any Borrower), independent accountants and other experts selected by
the Administrative Agent. The Administrative Agent may deem and treat the
Lender specified in the Register with respect to any amount owing hereunder as
the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Administrative
Agent. The Administrative Agent shall be fully justified in failing or refusing
to take any action under this Agreement unless it shall first receive such
advice or concurrence of the Required Lenders or all Lenders, as the case may
be, as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of
the Required Lenders, or all Lenders, as the case may be, and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Lenders and all future holders of the obligations owing by any Borrower
hereunder.

9.5           Notice of Default. The
Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Administrative Agent has
received notice from a Lender or a Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a “notice
of default”. In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall promptly give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Lenders.

9.6           Non-Reliance on
Administrative Agent and Other Lenders. Each Lender expressly acknowledges
that neither the Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representations or
warranties to it and that

 

 50

 

no
act by the Administrative Agent hereinafter taken, including any review of the
affairs of any Borrower, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and made its own decision to
make its Loans and enter into this Agreement and any Local Currency Facilities.
Each Lender also represents that it will, independently and without reliance
upon the Administrative Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement or any Local Currency Facility, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
any Borrower which may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates.

9.7           Indemnification. The Lenders
agree to indemnify the Administrative Agent in its capacity as such (to the
extent not reimbursed by the Borrowers and without limiting the obligation of the Borrowers
to do so), ratably according to their respective Commitment Percentages in
effect on the date on which indemnification is sought under this Section 9.7
(or, if indemnification is sought after the date upon which the Revolving
Credit Commitments shall have terminated and the US$ Loans shall have been paid
in full, ratably in accordance with their Commitment Percentages immediately
prior to such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the amounts owing hereunder)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement or any documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Administrative Agent under or in
connection with any of the foregoing; provided that (a) no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Administrative
Agent and (b) in the event that the Administrative Agent is reimbursed by
any Borrower for any amount paid to it by the Lenders pursuant to this Section 9.7,
the amount of such reimbursement shall in turn be paid over to the Lenders on a
ratable basis. The agreements in this Section 9.7 shall survive the
payment of the Loans and all other amounts payable hereunder.

9.8           Administrative Agent in Its
Individual Capacity. Each of the Administrative Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrowers as though the Administrative Agent were not the
Administrative Agent hereunder. With respect to its Loans made or renewed by
it, the Administrative Agent shall have the same rights and powers under this
Agreement as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms “Lender” and “Lenders” shall include the Administrative Agent in its
individual capacity.

9.9           Successor Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent
as provided below, the Administrative Agent may resign as
Administrative Agent at any time by giving notice to the Lenders and IBM. If
the Administrative Agent shall resign as Administrative Agent under this
Agreement, then the Required Lenders shall appoint from 

 51
 

 

among
the Lenders a successor administrative agent for the Lenders, which successor
administrative agent shall be subject to the approval of IBM (which approval
shall not be unreasonably withheld). If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent shall have given notice
of its resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent from among the Lenders,
which successor administrative agent shall be subject to the approval of IBM
(which approval shall not be unreasonably withheld). Upon the acceptance of any
appointment as Administrative Agent hereunder by a permitted successor, such
successor administrative agent shall succeed to the rights, powers and duties
of the Administrative Agent, and the term “Administrative Agent”
shall mean such successor administrative agent effective upon such appointment
and approval, and the former Administrative Agent’s rights, powers and duties
as Administrative Agent shall be terminated, without any other or further act
or deed on the part of such former Administrative Agent or any of the parties
to this Agreement or any holders of the obligations owing hereunder. After any
retiring Administrative Agent’s resignation as Administrative Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.

9.10         Syndication Agent. The
Syndication Agent shall not have any duties or responsibilities hereunder in
its capacity as such.

SECTION 10.         GUARANTEE

10.1         Guarantee. In order to induce
the Administrative Agent and the Lenders to execute and deliver this Agreement
and to make or maintain the Loans, and in consideration
thereof, IBM hereby unconditionally and irrevocably guarantees, as primary
obligor and not merely as surety, to the Administrative Agent, for the ratable
benefit of the Lenders, the prompt and complete payment and performance by each
Subsidiary Borrower when due (whether at stated maturity, by acceleration or
otherwise) of the Subsidiary Borrower Obligations, and IBM further agrees to
pay any and all reasonable expenses (including, without limitation, all
reasonable fees, charges and disbursements of counsel) which may be paid or
incurred by the Administrative Agent or by the Lenders in enforcing, or
obtaining advice of counsel in respect of, any of their rights under the
guarantee contained in this Section 10. The guarantee contained in this Section 10,
subject to Section 10.5, shall remain in full force and effect until the
Subsidiary Borrower Obligations are paid in full and the Commitments are
terminated, notwithstanding that from time to time prior thereto any Subsidiary
Borrower may be free from any Subsidiary Borrower Obligations.

IBM agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability under this Section 10, it will notify the
Administrative Agent and such Lender in writing that such payment is made under
the guarantee contained in this Section 10 for such purpose. No payment or
payments made by any Subsidiary Borrower or any other Person or received or
collected by the Administrative Agent or any Lender from any Subsidiary
Borrower or any other Person by virtue of any action or proceeding or any
setoff or appropriation or application, at any time or from time to time, in
reduction of or in payment of the Subsidiary Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of IBM
under this Section 10 which, notwithstanding any such payment or payments,
shall remain liable for the unpaid and outstanding Subsidiary Borrower
Obligations until, subject to Section 10.5, the Subsidiary Borrower Obligations are paid in
full and the Commitments are terminated.

10.2         No
Subrogation. Notwithstanding any payment made by IBM pursuant to this Section 10
or any set-off or application of funds of IBM by the Administrative Agent or any Lender in 

 52
 

 

connection with the guarantee contained in this Section 10,
IBM shall not be entitled to be subrogated to any of the rights of the
Administrative Agent or any Lender against any Subsidiary Borrower or any
collateral security or guarantee or right of offset held by the Administrative
Agent or any Lender for the payment of the Subsidiary Borrower Obligations, nor
shall IBM seek or be entitled to seek any contribution or reimbursement from
any Subsidiary Borrower in respect of payments made by IBM under this Section 10,
until all amounts owing to the Administrative Agent and the Lenders on account
of the Subsidiary Borrower Obligations are paid in full and the Commitments are
terminated. If any amount shall be paid to IBM on account of such subrogation
rights at any time when all of the Subsidiary Borrower Obligations shall not
have been paid in full, such amount shall be held by IBM in trust for the
Administrative Agent and the Lenders, segregated from other funds of IBM, and
shall, forthwith upon receipt by IBM, be turned over to the Administrative
Agent in the exact form received by IBM (duly indorsed by IBM to the
Administrative Agent, if required), to be applied against the Subsidiary
Borrower Obligations, whether matured or unmatured, in such order as the
Administrative Agent may determine. The
provisions of this Section 10.2 shall survive the term of the guarantee
contained in this Section 10 and the payment in full of the Subsidiary
Borrower Obligations and the termination of the Commitments.

10.3         Amendments,
etc. with respect to the Subsidiary Borrower Obligations. IBM shall remain
obligated under this Section 10 notwithstanding that, without any reservation of rights
against IBM, and without notice to or further assent by IBM, any demand
for payment of or reduction in the principal amount of any of the Subsidiary
Borrower Obligations made by the Administrative Agent or any Lender may be
rescinded by the Administrative Agent or such Lender, and any of the Subsidiary
Borrower Obligations continued, and the Subsidiary Borrower Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered or released by the
Administrative Agent or any Lender, and this Agreement and any other documents
executed and delivered in connection herewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Lenders (or the
Required Lenders, as the case may be) may deem advisable from time to time, and
any collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Subsidiary Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any lien at any time held by it as security for the
Subsidiary Borrower Obligations or for the guarantee contained in this Section 10
or any property subject thereto.

10.4         Guarantee Absolute and Unconditional.
IBM waives any and all notice of the creation, renewal, extension or accrual of
any of the Subsidiary Borrower Obligations and notice of
or proof of reliance by the Administrative Agent or any Lender upon the
guarantee contained in this Section 10 or acceptance of the guarantee
contained in this Section 10; the Subsidiary Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 10; and all dealings between IBM or
the Subsidiary Borrowers, on the one hand, and the Administrative Agent and the
Lenders, on the other, shall likewise be conclusively presumed to have been had
or consummated in reliance upon the guarantee contained in this Section 10.
IBM waives diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon IBM or any Subsidiary Borrower with respect to
the Subsidiary Borrower Obligations. To the full extent permitted by law, the
guarantee contained in this Section 10 shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity or enforceability of this Agreement, any Local Currency Facility, any
of the Subsidiary Borrower Obligations or any collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Lender, (b) the legality
under applicable Requirements of Law of repayment by the relevant Subsidiary
Borrower of any Subsidiary Borrower Obligations or the adoption of any
Requirement of Law 

 53
 

 

purporting
to render any Subsidiary Borrower Obligations null and void, (c) any
defense, setoff or counterclaim (other than a defense of payment or performance
by the applicable Subsidiary Borrower) which may at any time be available to or
be asserted by IBM against the Administrative Agent or any Lender, (d) any
change in ownership of the relevant Subsidiary Borrower, any merger or
consolidation of the relevant Subsidiary Borrower into another Person or any
loss of the relevant Subsidiary Borrower’s separate legal identity or
existence, or (e) any other circumstance whatsoever (with or without
notice to or knowledge of IBM or any Subsidiary Borrower) which constitutes, or
might be construed to constitute, an equitable or legal discharge of any
Subsidiary Borrower for any Subsidiary Borrower Obligations, or of IBM under the
guarantee contained in this Section 10, in bankruptcy or in any other
instance. When the Administrative Agent or any Lender is pursuing its rights
and remedies under this Section 10 against IBM, the Administrative Agent
or any Lender may, but shall be under no obligation to, pursue such rights and
remedies as it may have against any Subsidiary Borrower or any other Person or
against any collateral security or guarantee for the Subsidiary Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to pursue such other rights or remedies or
to collect any payments from any Subsidiary Borrower or any such other Person
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of any Subsidiary Borrower or any such
other Person or of any such collateral security, guarantee or right of offset,
shall not relieve IBM of any liability under this Section 10, and shall
not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Administrative Agent and the Lenders
against IBM.

10.5         Reinstatement. The guarantee
contained in this Section 10 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Subsidiary
Borrower Obligations is rescinded or must otherwise be restored or returned by
the Administrative Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Subsidiary Borrower or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, any Subsidiary Borrower or any substantial
part of its property, or otherwise, all as though such payments had not been
made.

10.6         Payments. IBM hereby agrees that
any payments in respect of the Subsidiary Borrower Obligations pursuant to this
Section 10 will be paid to the Administrative
Agent without setoff or counterclaim in Dollars (in the case of Subsidiary
Borrower Obligations arising under this Agreement) or, at the option of the
relevant Local Currency Lender(s), in Dollars or in the relevant Local Currency
(in the case of Subsidiary Borrower Obligations arising under any Local Currency
Facility), at (a) the office of the Administrative Agent specified in Section 11.2
(in the case of Subsidiary Borrower Obligations arising under this Agreement)
or (b) at the office specified for payments under the relevant Local
Currency Facility or such other office as shall have been specified by the
relevant Local Currency Lender(s) in each case to the extent permitted by
applicable law (in the case of Subsidiary Borrower Obligations arising under
any Local Currency Facility).

10.7         Judgments Relating to Guarantee.
(a)  If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due under the guarantee contained in this Section 10
in one currency into another currency, IBM agrees, to the fullest extent that
it may effectively do so, that the rate of exchange used shall be that at which
in accordance with normal banking procedures in the relevant jurisdiction the
relevant Lender (or agent acting on its behalf) could purchase the first
currency with such other currency for the first currency on the Banking Day
immediately preceding the day on which final judgment is given.

(b)           The obligations of
IBM in respect of any sum due under the guarantee contained in this Section 10
shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in
which such sum is denominated in accordance with this Section 10 (the “Agreement 

 54
 

 

Currency”), be discharged only to the extent
that, on the Banking Day following receipt by any Lender (or agent acting on
its behalf) (the “Applicable Creditor”)
of any sum adjudged to be so due in the Judgment Currency, the Applicable
Creditor may in accordance with normal banking procedures in the relevant
jurisdiction purchase the Agreement Currency with the Judgment Currency; if the
amount of the Agreement Currency so purchased is less than the sum originally
due to the Applicable Creditor in the Agreement Currency, IBM agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss, provided, that if the amount of
the Agreement Currency so purchased exceeds the sum originally due to the
Applicable Creditor, the Applicable Creditor agrees to remit such excess to IBM.
The obligations of IBM contained in this Section 10.7 shall survive the
termination of the guarantee contained in this Section 10 and the payment
of all amounts owing hereunder.

10.8         Independent Obligations. The
obligations of IBM under the guarantee contained in this Section 10 are
independent of the obligations of each Subsidiary Borrower, and a separate action
or actions may be brought and prosecuted against IBM whether or not the
relevant Subsidiary Borrower be joined in any such action or actions. IBM
waives, to the full extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the relevant Subsidiary Borrower or other circumstance which
operates to toll any statute of limitations as to such Subsidiary Borrower
shall operate to toll the statute of limitations as to IBM.

SECTION 11.         MISCELLANEOUS

11.1         Amendments and Waivers. Neither
this Agreement nor any terms hereof may be amended, supplemented or modified
except in accordance with the provisions
of this Section 11.1. The Required Lenders may, or, upon receipt of
written consent of the Required Lenders to all terms thereof, the
Administrative Agent may, from time to time, (a) enter into with the
Borrowers written amendments, supplements or modifications hereto for the
purpose of adding any provisions to this Agreement or changing in any manner
the rights of the Lenders or of the Borrowers hereunder or thereunder or (b) waive,
on such terms and conditions as the Required Lenders or the Administrative
Agent, as the case may be, may specify in such instrument, any of the
requirements of this Agreement or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the amount or extend the
scheduled date of maturity of any US$ Loan, or reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any payment
thereof or increase the amount or extend the expiration date of any Lender’s
Revolving Credit Commitment or Swing Line Commitment, in each case without the
consent of each Lender directly affected thereby, or (ii) reduce any
amounts payable to any Lender pursuant to Section 2.5(b), 2.5(c), 3.3 or
10 (including, without limitation, pursuant to any release of the guarantee
contained in Section 10), or increase any amounts payable by any Lender
pursuant to Section 2.5(b), 2.5(c) or 3.3, in each case without the
consent of each Lender materially and adversely affected thereby, or (iii) amend,
modify or waive any provision of this Section 11.1 or reduce the
percentage specified in the definition of Required Lenders, or consent to the
assignment or transfer by any Borrower of any of its rights and obligations
under this Agreement, in each case without the written consent of all the
Lenders, or (iv) amend, modify or waive any provision of Section 9
without the written consent of the then Administrative Agent. Any such waiver
and any such amendment, supplement or modification shall apply equally to each
of the Lenders and shall be binding upon the Borrowers, the Lenders, the
Administrative Agent and all future holders of the obligations owing hereunder.
In the case of any waiver, the Borrowers, the Lenders and the Administrative
Agent shall be restored to their former position and rights hereunder, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.

 55
 

 

11.2         Notices. All notices, requests
and demands to or upon the respective parties hereto to be effective shall be
in writing (including by telecopy), and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered by hand, or three Business Days after being deposited in the mail,
postage prepaid, or, in the case of telecopy notice, when received, addressed
as follows in the case of IBM and the Administrative Agent, as set forth in the
relevant Subsidiary Borrower Notice and Designation in the case of the
Subsidiary Borrowers and as notified by each Lender to the Administrative Agent
in the case of the Lenders, or to such other address as may be hereafter
notified by the respective parties hereto and any future holders of the
obligations owing hereunder:

 

	
  IBM:

  	
   

  	
  INTERNATIONAL BUSINESS MACHINES CORPORATION

  One New Orchard Road

  Armonk, New York 10504

  Attention: Vice President and Treasurer

  Telecopy: 914-499-2883

  

  With a copy to CHQ Legal Department

  Telecopy: 914-499-6445

  
	
  The Administrative Agent:

  	
   

  	
  JPMORGAN LOAN AND
  AGENCY SERVICES GROUP

  Loan & Agency Services - Account Manager

  Shadia Aminu

  1111 Fannin St., 10th Floor, Houston TX 77002

  Phone: 713-750-7933

  Fax: 713-750-2358

  E-mail: shadia.O.aminu@jpmchase.com

  

  With copies to:

  

  JPMORGAN CHASE BANK

  John Kowalczuk

  270 Park Avenue, 4th Floor

  New York NY 10017

  E-mail: john.kowalczuk@jpmorgan.com

  Telephone: (212) 270-6782

  Fax: (212) 270-4584

  

  JPMORGAN CHASE BANK

  Padmini Persaud

  270 Park Avenue, 15th Floor

  New York NY 10017

  E-mail: padmini.persaud@jpmorgan.com

  Telephone: (212) 270-6155

  Fax: (212) 270-4164

  
	
   

  	
   

  	
   

  

 

provided that any notice, request or
demand to or upon the Administrative Agent or the Lenders pursuant to Section 2.2,
2.3, 2.5, 2.6, 2.8 or 2.13 shall not be effective until received.

11.3         No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege 

 56
 

 

hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.

11.4         Survival of Representations and
Warranties. All representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the US$ Loans hereunder.

11.5         Payment of Expenses. Each of IBM
and, as applicable, each Subsidiary Borrower agrees (a) to pay or
reimburse the Administrative Agent for all its reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and any
other documents prepared in connection herewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of a single counsel
to the Administrative Agent, (b) to pay or reimburse each Lender and the
Administrative Agent for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement and any such other documents, including, without limitation, the
reasonable fees and disbursements of separate counsel to the Administrative
Agent and to each Lender, and (c) to pay, indemnify, and hold each Lender
and the Administrative Agent harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay
in paying, stamp, excise and other similar taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of,
or consummation or administration of any of the transactions contemplated by,
or any amendment, supplement or modification of, or any waiver or consent under
or in respect of, this Agreement and any such other documents, and (d) to
pay, indemnify, and hold each Lender, the Administrative Agent and their
respective directors, officers, employees and agents (each, an “indemnified person”) harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements, including reasonable fees and
disbursements of counsel, incurred by or asserted against such indemnified
person which arise out of or in connection with any claim, litigation or
proceeding relating to this Agreement or any such other documents, any Loan or any
actual or proposed use of proceeds of any Loan or any of the Transactions, or
any failure by any Borrower to repay any Local Currency Loans or other
obligations owing under any Local Currency Facility when due in accordance with
the terms of such Local Currency Facility (all the foregoing in this clause
(d), collectively, the “indemnified liabilities”),
provided, that no Borrower shall have any obligation hereunder to any
indemnified person with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of such indemnified person and provided
further, that nothing contained in this Section 11.5 (other than Section 11.5(c))
shall require IBM or any Subsidiary Borrower to pay any taxes of any
indemnified person or any Transferee or any indemnity with respect thereto. The
agreements in this Section 11.5 shall survive repayment of the Loans and
the payment of all other amounts payable hereunder.

11.6         Participations. Any Lender may,
in the ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities (each, a “Participant”)
participating interests in any US$ Loan owing to such Lender, any Revolving
Credit Commitment of such Lender or any other interest of such Lender hereunder.
In the event of any such sale by a Lender of a participating interest to a
Participant, such Lender’s obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such obligation owing to it hereunder for all purposes under this
Agreement, and the Borrowers and the Administrative Agent shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and 

 57
 

 

obligations
under this Agreement. In no event shall any Participant under any such
participation have any right to approve any amendment or waiver of any
provision of this Agreement, or any consent to any departure by any Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the US$ Loans or any fees payable
hereunder, postpone the date of the final maturity of the US$ Loans, or release
the guarantee contained in Section 10, in each case to the extent subject
to such participation. Each Borrower agrees that, while an Event of Default
shall have occurred and be continuing, if amounts outstanding under this
Agreement are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement, provided that, in purchasing such participating interest,
such Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 11.12 as fully as if it were a
Lender hereunder. Each Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.16, 2.17, 2.18 and 2.19 with respect to
its participation in the Revolving Credit Commitments and the US$ Loans
outstanding from time to time as if it was a Lender; provided that, in the case
of Section 2.18, such Participant shall have complied with the
requirements of said Section and provided, further, that no Participant
shall be entitled to receive any greater amount pursuant to any such Section than
the transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.

11.7         Transfers of Competitive Loans.
(a)  Any Competitive Loan Lender, in the ordinary course of its business
and in accordance with applicable law, at any time may assign to one or more
banks or other entities (each, a “Competitive Loan Assignee”)
any Competitive Loan owing to such Competitive Loan Lender, pursuant to a
Competitive Loan Assignment executed by the assignor Competitive Loan Lender
and the Competitive Loan Assignee.

(b)           Upon such execution,
from and after the date of such Competitive Loan Assignment, the Competitive
Loan Assignee shall be deemed, to the extent of the assignment provided for in
such Competitive Loan Assignment, and subject to the provisions of Sections
11.7(c) and 11.7(d), to have the same rights and benefits of payment and
enforcement with respect to such Competitive Loan (including, without
limitation, the applicable rights set forth in Sections 2.16, 2.17, 2.18 and
2.19) and the same rights of setoff and obligation to share pursuant to Section 11.12
as it would have had if it were a Competitive Loan Lender hereunder.

(c)           Unless such
Competitive Loan Assignment shall otherwise specify and a copy of such
Competitive Loan Assignment shall have been delivered to the Administrative
Agent for its acceptance and recording in the Register in accordance with Section 11.9(a),
the assignor under the Competitive Loan Assignment shall act as collection
agent for the Competitive Loan Assignee thereunder, and the Administrative
Agent shall pay all amounts received from the relevant Borrower which are
allocable to the assigned Competitive Loan directly to such assignor without
any liability to such Competitive Loan Assignee.

(d)           A Competitive Loan
Assignee under a Competitive Loan Assignment shall not, by virtue of such
Competitive Loan Assignment, become a party to this Agreement or a “Competitive Loan Lender”, or have any
rights to consent to or refrain from consenting to any amendment, waiver or
other modification of any provision of this Agreement or any related document; provided
that (i) the assignor under such Competitive Loan Assignment and such
Competitive Loan Assignee may, in their discretion, agree between themselves
upon the manner in which such assignor will exercise its rights under this
Agreement and any related document, and (ii) if a copy of such Competitive
Loan Assignment shall have been delivered to the Administrative Agent for its
acceptance and recording in the Register in 

 58
 

 

accordance
with Section 11.9(a), no such amendment, waiver or modification may reduce
or postpone any payment of principal or interest in respect of any Competitive
Loan assigned to such Competitive Loan Assignee without the written consent of
such Competitive Loan Assignee.

(e)           If a Competitive
Loan Assignee has caused a Competitive Loan Assignment to be recorded in the
Register in accordance with Section 11.9(a), such Competitive Loan
Assignee may thereafter, in the ordinary course of its business and in
accordance with applicable law, assign the relevant Competitive Loans to any
Competitive Loan Lender, to any affiliate or subsidiary of such Competitive
Loan Assignee or to any other financial institution that has total assets in
excess of $1,000,000,000 and that in the ordinary course of its business
extends credit of the same type as the Competitive Loans, and the foregoing
provisions of this Section 11.7 shall apply, mutatis  mutandis,
to any such assignment by a Competitive Loan Assignee. Except in accordance
with the preceding sentence, Competitive Loans may not be further assigned by a
Competitive Loan Assignee, subject to any legal or regulatory requirement that
the Competitive Loan Assignee’s assets must remain under its control.

(f)            Upon its receipt of
a Competitive Loan Assignment executed by an assignor Competitive Loan Lender
and a Competitive Loan Assignee, together with payment to the Administrative
Agent of a registration and processing fee of $3,500 (which shall not be
payable by any Borrower), the Administrative Agent promptly shall (i) accept
such Competitive Loan Assignment, (ii) record the information contained
therein in the Register and (iii) give notice of such acceptance and
recordation to the assignor Competitive Loan Lender, the Competitive Loan
Assignee and the relevant Borrower.

11.8         Assignments. (a)  Subject
to clause (ii) of the second sentence of Section 3.1(b), any Lender
may, in the ordinary course of its business and in accordance with applicable law, at any time and from
time to time assign to any affiliate of such Lender or, with the consent of IBM
and the Administrative Agent (which consent in each case shall not be
unreasonably withheld), to any other Lender or to an additional bank, financial
institution or other entity (each, a “Purchasing Lender”)
all or any part of its rights and obligations under this Agreement pursuant to
an Assignment and Acceptance, substantially in the form of Exhibit E,
executed by such Purchasing Lender and such assigning Lender (and, in the case
of a Purchasing Lender that is not an affiliate of the relevant assigning
Lender, by IBM and the Administrative Agent) and delivered to the
Administrative Agent for its acceptance and recording in the Register,
provided, that except in the case of an assignment of all of a Lender’s rights
and obligations under this Agreement, the amount of the Revolving Credit
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $10,000,000 or such
lesser amount as may be consented to by IBM and the Administrative Agent and
provided, further, that a Swing Line Lender may so assign all or a portion of
such rights and obligations to a Person that shall become a Swing Line Lender
hereunder only if notice of the designation of such new Swing Line Lender shall
have been delivered to the Administrative Agent prior to such assignment. Upon
such execution, delivery, acceptance and recording, from and after the
effective date determined pursuant to such Assignment and Acceptance, (x) the
Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of
a Lender hereunder with a Revolving Credit Commitment (and, if applicable, a
Swing Line Commitment) as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender’s rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto).

(b)           Upon its receipt of
an Assignment and Acceptance executed by an assigning Lender and a Purchasing
Lender (and, in the case of a Purchasing Lender that is not an affiliate of the
relevant assigning Lender, by IBM and the Administrative Agent) together with
payment to the 

 59
 

 

Administrative
Agent of a registration and processing fee of $3,500 (which shall not be payable
by any Borrower), the Administrative Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and IBM.

11.9         The Register; Disclosure; Pledges to
Federal Reserve Banks. (a)  The Administrative Agent shall maintain at
its address referred to in Section 11.2 a copy of each Competitive Loan
Assignment and Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of (i) the names and
addresses of the Lenders, the Revolving Credit Commitments and Swing Line
Commitments of the Lenders, and the principal amount of the US$ Loans owing to
each Lender from time to time and (ii) with respect to each Competitive
Loan Assignment delivered to the Administrative Agent, the name and address of
the Competitive Loan Assignee and the principal amount of each Competitive Loan
owing to such Competitive Loan Assignee. The entries in the Register shall be
conclusive, in the absence of clearly demonstrable error, and the Borrowers,
the Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as the owner of the US$ Loan recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers at any reasonable time and from time to time upon reasonable
prior notice.

(b)           Each Borrower
authorizes each Lender to disclose to any Participant, Competitive Loan
Assignee or Purchasing Lender (each, a “Transferee”)
and any prospective Transferee, subject to the provisions of Section 11.21
(whether or not, in the case of any Person that is a prospective Transferee,
such Person in fact becomes a Transferee), any and all financial information in
such Lender’s possession concerning the Borrowers and their respective
affiliates which has been delivered to such Lender by or on behalf of any
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of any Borrower in connection with such Lender’s credit
evaluation of the Borrowers and their respective affiliates prior to becoming a
party to this Agreement.

(c)           Nothing herein shall
prohibit any Lender from pledging or assigning all or any portion of its Loans
to any Federal Reserve Bank in accordance with applicable law. In order to
facilitate such pledge or assignment, each Borrower hereby agrees that, upon
request of any Lender at any time and from time to time after such Borrower has
made its initial borrowing hereunder, such Borrower shall provide to such
Lender, at such Borrower’s own expense, a promissory note, substantially in the
form of Exhibit G-1 or G-2, as the case may be, evidencing the
Revolving Credit Loans, Swing Line Loans or Competitive Loans, as the case may
be, owing to such Lender.

11.10       Changing Designations of Swing Line
Lenders and Competitive Loan Lenders. (a)  IBM shall have the right to
change the designation of a Lender or Swing Line Lender to (i) cause
a Lender to become a Swing Line Lender, (ii) change the Swing Line
Commitment of a Swing Line Lender (so long as, after giving effect thereto, (x) such
Swing Line Commitment does not exceed such Lender’s Revolving Credit Commitment
and (y) the aggregate amount of the Swing Line Commitments shall not
exceed $2,000,000,000) or (iii) cause a Swing Line Lender to cease to be a
Swing Line Lender, provided that no such change shall become effective unless (x) the
Lender affected thereby shall in its sole discretion have agreed in writing to
such change and (y) prior written notification thereof shall have been
delivered to the Administrative Agent and, in the case of clause (i) above,
the Administrative Agent shall have approved of such designation (which
approval shall not be unreasonably withheld).

(b)           IBM shall have the
right to change the designation of a Lender or Competitive Loan Lender to (i) cause
a Lender to become a Competitive Loan Lender or (ii) cause a Competitive
Loan Lender to cease to be a Competitive Loan Lender, provided that no
such change shall become effective unless (x) the Lender affected thereby
shall in its sole discretion have agreed in writing to such change and (y) prior
written notification thereof shall have been delivered to the Administrative
Agent and, in the

 

 60

 

case of clause
(i) above, the Administrative Agent shall have approved of such
designation (which approval shall not be unreasonably withheld).

11.11       Replacement of Lenders under Certain
Circumstances. IBM shall be permitted to replace any Lender which (a) requests
reimbursement for amounts owing pursuant to Section 2.17
or 2.18 (other than with respect to Index Rate Competitive Loans), (b) is
affected in the manner described in Section 2.16 (other than with respect
to Index Rate Competitive Loans) and as a result thereof any of the actions
described in said Section is required to be taken, (c) defaults in
its obligation to make Revolving Credit Loans or Swing Line Loans hereunder or (d) fails to consent to any proposed
amendment, modification, termination, waiver or consent with respect to any
provision hereof that requires the unanimous approval of all of the Lenders,
the approval of all of the Lenders affected thereby or the approval of a class
of Lenders, in each case in accordance with the terms of Section 11.1, so
long as the consent of the Required Lenders shall have been obtained with
respect to such amendment, modification, termination, waiver or consent,
with a replacement bank or other financial institution; provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event
of Default shall have occurred and be continuing at the time of such
replacement, (iii) IBM shall repay (or the replacement bank or institution
shall purchase, at par) all Loans and other amounts owing to such replaced
Lender prior to the date of replacement, (iv) IBM shall be liable to such
replaced Lender under Section 2.19 if any Eurodollar Loan owing to such
replaced Lender shall be prepaid (or purchased) other than on the last day of
the Interest Period relating thereto or any Competitive Loan owing to such
replaced Lender shall be paid other than on the relevant Competitive Loan
Maturity Date, (v) the replacement bank or institution, if not already a
Lender, and the terms and conditions of such replacement, shall be reasonably
satisfactory to the Administrative Agent, (vi) the replaced Lender shall
be obligated to make such replacement in accordance with the provisions of Section 11.8
(provided that IBM shall be obligated to pay the registration and processing
fee referred to therein), (vii) until such time as such replacement shall
be consummated, IBM shall pay all additional amounts (if any) required pursuant
to Section 2.17 or 2.18, as the case may be, and (viii) any such
replacement shall not be deemed to be a waiver of any rights which IBM, the
Administrative Agent or any other Lender shall have against the replaced
Lender.

11.12       Adjustments; Set-off. (a)  If
any Lender (a “benefitted Lender”) shall at any
time receive any payment of all or part of its US$ Loans, or interest thereon,
or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 8(f) or
(g), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender’s US$ Loans that are then due and payable, or interest thereon, such
benefitted Lender shall purchase at par for cash from the other Lenders a participating
interest in such portion of each such other Lender’s US$ Loan, or shall provide
such other Lenders with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably with each of
the Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.

(b)           In addition to any
rights and remedies of the Lenders provided by law, each Lender shall have the
right, without prior notice to any Borrower, any such notice being expressly
waived by each Borrower to the extent permitted by applicable law, upon any
amount becoming due and payable by any Borrower hereunder (whether at the
stated maturity, by acceleration or otherwise) to set-off and appropriate
and apply against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or
the account of the relevant Borrower. Each Lender agrees promptly to notify IBM
and the Administrative Agent after any such 

 61
 

 

set-off
and application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such set-off and
application.

11.13       Counterparts. This Agreement may
be executed by one or more of the parties to this Agreement on any number of
separate counterparts (including by telecopy),
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. A set of the copies of this Agreement signed by all
the parties shall be lodged with IBM and the Administrative Agent.

11.14       Severability. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.

11.15       Integration. This Agreement
represents the agreement of the Borrowers, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Administrative Agent or any Lender
relative to subject matter hereof not expressly set forth or referred to herein.

11.16       GOVERNING LAW. THIS AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

11.17       Submission To Jurisdiction; Waivers.
Each Borrower hereby irrevocably and unconditionally:

(a)           submits for itself
and its property in any legal action or proceeding relating to this Agreement,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New
York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;

(b)           consents that any
such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same;

(c)           in the case of each
Subsidiary Borrower, designates and directs IBM at its offices at One New
Orchard Road, Armonk, New York, as its agent to receive service of any and all
process and documents on its behalf in any legal action or proceeding referred
to in paragraph (a) of this Section 11.17 in the State of New York
and agrees that service upon such agent shall constitute valid and effective
service upon such Subsidiary Borrower and that failure of IBM to give any
notice of such service to any such party shall not affect or impair in any way
the validity of such service or of any judgment rendered in any action or
proceeding based thereon;

(d)           in the case of each
Subsidiary Borrower, to the extent that such Subsidiary Borrower has or
hereafter may acquire any immunity (sovereign or otherwise) from any legal
action, suit or proceeding, from jurisdiction of any court or from set-off or
any legal process (whether service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
with respect to itself or any of its property or assets, waives and agrees not
to plead or claim 

 62
 

 

such immunity
in respect of its obligations under this Agreement (it being understood that
the waivers contained in this paragraph (d) shall have the fullest extent
permitted under the Foreign Sovereign Immunities Act of 1976, as amended, and
are intended to be irrevocable and not subject to withdrawal for the purposes
of such Act);

(e)           agrees that service
of process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such Borrower at its address referred to in Section 11.2
or at such other address of which the Administrative Agent shall have been
notified pursuant thereto;

(f)            agrees that nothing
herein shall affect the right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any other jurisdiction; and

(g)           waives, to the
maximum extent not prohibited by law, any right it may have to claim or recover
in any legal action or proceeding referred to in this Section any special,
exemplary, punitive or consequential damages.

11.18       Judgments Relating to Subsidiary
Borrowers. (a)  If, for the purpose of obtaining judgment in any
court, it is necessary to convert a sum owing hereunder by any Subsidiary Borrower to
any party hereto or any holder of the obligations of such Subsidiary Borrower
hereunder into another currency, such Subsidiary Borrower agrees, to the
fullest extent that it may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures in the
relevant jurisdiction such party or holder could purchase Dollars with such
other currency for Dollars on the Banking Day immediately preceding the day on
which final judgment is given.

(b)           The obligations of
each Subsidiary Borrower in respect of any sum due to any party hereto or any
holder of the obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in
a currency (the “Judgment Currency”)
other than Dollars, be discharged only to the extent that, on the Banking Day
following receipt by the Applicable Creditor of any sum adjudged to be so due
in the Judgment Currency, the Applicable Creditor may in accordance with normal
banking procedures in the relevant jurisdiction purchase Dollars with the
Judgment Currency; if the amount of Dollars so purchased is less than the sum
originally due to the Applicable Creditor in Dollars, such Subsidiary Borrower
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify the Applicable Creditor against such loss, provided, that if
the amount of Dollars so purchased exceeds the sum originally due to the
Applicable Creditor, the Applicable Creditor agrees to remit such excess to
such Subsidiary Borrower. The obligations of the Subsidiary Borrowers contained
in this Section 11.18 shall survive the termination of this Agreement and
the payment of all other amounts owing hereunder.

11.19       Acknowledgements. Each Borrower
hereby acknowledges that:

(a)           it has been advised by counsel in the
negotiation, execution and delivery of this Agreement;

(b)           neither the Administrative Agent nor
any Lender has any fiduciary relationship with or duty to any Borrower arising
out of or in connection with this Agreement, and the relationship between
Administrative Agent and Lenders, on one hand, and the Borrowers, on the other
hand, in connection herewith or therewith is solely that of debtor and
creditor; and

(c)           no joint venture is created hereby or
otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Borrowers and the Lenders.

 63
 

 

11.20       WAIVERS OF JURY TRIAL.
EACH OF THE BORROWERS, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM THEREIN.

11.21       Confidentiality. Each Lender
agrees to keep confidential any written or oral information (a) provided
to it by or on behalf of any Borrower or any of the Subsidiaries pursuant to or in
connection with this Agreement or (b) obtained by such Lender based on a
review of the books and records of any Borrower or any of the Subsidiaries;
provided that nothing herein shall prevent any Lender from disclosing any such
information (i) to the Administrative Agent or any other Lender, (ii) to
any Transferee or prospective Transferee or any swap counterparty so long as
delivery of such information is made subject to the requirement that such
information be kept confidential in the manner contemplated by this Section 11.21,
(iii) to its employees or affiliates involved in the administration of
this Agreement or any Local Currency Facility, directors, agents, attorneys,
accountants and other professional advisors (each of which shall be instructed
to hold the same in confidence), (iv) upon the request or demand of any
Governmental Authority having jurisdiction over such Lender, (v) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (vi) which has
been publicly disclosed other than in breach of this Agreement, or (vii) in
connection with the exercise of any remedy hereunder or under any Local
Currency Facility. It is
understood and agreed that IBM, its Subsidiaries and their respective
affiliates may rely upon this Section 11.21 for any purpose, including
without limitation to comply with Regulation FD promulgated by the SEC.

11.22       Binding Effect; Successors and Assigns.
(a)  This Agreement shall become effective on the date (the “Effective Date”) on which (i) it shall have been executed and delivered by a
duly authorized officer of each of IBM and the Administrative Agent and (ii) the
Administrative Agent shall have received an executed Lender Addendum (or a copy
thereof by facsimile transmission) from each Person listed on Schedule 1.1, provided,
that, notwithstanding the foregoing, in the event that a Lender Addendum has
not been duly executed and delivered by each Person listed on Schedule 1.1 on
the date (which shall be no earlier than the date hereof) on which this
Agreement shall have been executed and delivered by each of IBM and the
Administrative Agent, this Agreement shall nevertheless become effective on
such date with respect to those Persons which have executed and delivered a
Lender Addendum on or before such date if IBM shall (after consultation with
the Administrative Agent) have designated one or more Persons (the “Designated Lenders”) to assume, in the aggregate, all of the
Revolving Credit Commitments which would have been held by the Persons listed
on Schedule 1.1 (the “Non-Executing Persons”)
which have not so executed a Lender Addendum (subject to each such Designated
Lender’s prior written consent in its sole discretion). Schedule 1.1 shall
automatically be deemed to be amended to reflect the respective Revolving
Credit Commitments of the Designated Lenders and the omission of the
Non-Executing Persons as Lenders hereunder. The Administrative Agent shall
notify the Lenders of the Effective Date promptly after the occurrence thereof,
which notice shall be accompanied, if applicable, with a copy of Schedule 1.1
revised to give effect to any deemed amendments thereto made pursuant to this Section 11.22(a).
IBM agrees on behalf of each existing Subsidiary Borrower that the provisions
of this Agreement shall apply to each such Subsidiary Borrower whether or not
such Subsidiary Borrower has executed a Subsidiary Borrower Addendum, provided,
that IBM agrees to deliver to the Administrative Agent an executed Subsidiary
Borrower Addendum for each such Subsidiary Borrower as promptly as practicable
after the Effective Date.

(b)           This Agreement shall
be binding upon and inure to the benefit of the Borrowers, the Lenders, the
Administrative Agent, all future permitted holders of the obligations hereunder
and their respective successors and permitted assigns, except that no Borrower
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender. Each 

 64
 

 

reference herein to any Lender shall, to the extent
applicable, be deemed to be a reference to any affiliate, branch or agency of
any Lender which is a Local Currency Lender.

11.23       Incremental Revolving Credit
Commitments. (a)  IBM and any one or more Lenders (including New
Lenders) may from time to time agree that such Lenders shall provide incremental
Revolving Credit Commitments by executing and delivering to the Administrative
Agent one or more Incremental Commitment Supplements or, in the case of New
Lenders, New Lender Supplements.

(b)           Any additional bank,
financial institution or other entity which is not already a Lender, with the
consent of IBM and the Administrative Agent (which consent, in the case of the
Administrative Agent, shall not be unreasonably withheld), can elect to become
a party to this Agreement and obtain a Revolving Credit Commitment; such party
shall execute a New Lender Supplement (each, a “New Lender Supplement”) with IBM and the Administrative
Agent, substantially in the form of Exhibit I-1, whereupon such
bank, financial institution or other entity (herein called a “New Lender”) shall become a Lender for all
purposes and to the same extent as if originally a party hereto and shall be
bound by and entitled to the benefits of this Agreement.

(c)           Any Lender (other
than any New Lender) which agrees to provide an incremental Revolving Credit
Commitment pursuant to this Section 11.23 shall execute an Incremental
Commitment Supplement (each, an “Incremental
Commitment Supplement”) with IBM and the Administrative Agent,
substantially in the form of Exhibit I-2, whereupon such Lender
shall be bound by and entitled to the benefits of this Agreement with respect
to the incremental Revolving Credit Commitment specified therein, and Schedule
1.1 shall be deemed to be amended to reflect such incremental Revolving Credit
Commitment.

(d)           If, on the date upon
which any Lender (including any New Lender) provides an incremental Revolving
Credit Commitment pursuant to this Section 11.23, there is an unpaid
principal amount of Revolving Credit Loans, IBM shall borrow Revolving Credit
Loans from such Lender in an amount determined by reference to the amount of
each Type of Revolving Credit Loan (and, in the case of Eurodollar Loans, of
each Eurodollar Tranche) which would then have been outstanding from such
Lender if (i) each such Type or Eurodollar Tranche had been borrowed on
the date such Lender’s incremental Revolving Credit Commitment was provided, in
each case after giving effect thereto and (ii) the aggregate amount of
each such Type or Eurodollar Tranche requested to be so borrowed had been
increased to the extent necessary to give effect, with respect to such Lender,
to the borrowing allocation provisions of Section 2.2. Any Eurodollar Loan
borrowed pursuant to the preceding sentence shall bear interest at a rate equal
to the respective interest rates then applicable to the Eurodollar Loans of the
other Lenders in the same Eurodollar Tranche.

(e)           Notwithstanding
anything to the contrary in this Section 11.23, (i) the aggregate
amount of incremental Revolving Credit Commitments provided pursuant to this Section 11.23
shall not exceed $2,000,000,000 and (ii) no Lender shall have any
obligation to provide an incremental Revolving Credit Commitment unless it
agrees to do so in its sole discretion.

11.24       USA PATRIOT Act. Each Lender
hereby notifies the Borrowers that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify
and record information that identifies the Borrowers, which information
includes the name and address of the Borrowers and other information that will
allow such Lender to identify the Borrowers in accordance with the Act.

 65
 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.

 

	
  

  	
  INTERNATIONAL
  BUSINESS MACHINES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jesse J. Greene, Jr.

  
	
   

  	
   

  	
  Title:
  Vice President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, N.A., as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John Kowalczuk

  
	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  CITIBANK,
  N.A., as Syndication Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Anish Shah

  
	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  	
   

  

 

 66

 

SCHEDULE 1.1

TO 5-YEAR CREDIT AGREEMENT

	
   

  	
   

  	
  Revolving Credit

  Commitment

  	
   

  	
  Swing Line

  Commitment

  	
   

  
	
  JPMorgan Chase
  Bank, N.A.

  	
   

  	
  $

  	
  515,000,000

  	
   

  	
  $

  	
  400,000,000

  	
   

  
	
  Citibank, N.A.

  	
   

  	
  $

  	
  515,000,000

  	
   

  	
  $

  	
  400,000,000

  	
   

  
	
  Barclays Bank
  PLC

  	
   

  	
  $

  	
  460,000,000

  	
   

  	
  $

  	
  200,000,000

  	
   

  
	
  The Bank of
  Tokyo-Mitsubishi UFJ, Ltd., New York Branch

  	
   

  	
  $

  	
  276,000,000

  	
   

  	
  $

  	
  60,000,000

  	
   

  
	
  Mitsubishi UFJ
  Trust and Banking Corporation

  	
   

  	
  $

  	
  184,000,000

  	
   

  	
  $

  	
  40,000,000

  	
   

  
	
  BNP Paribas

  	
   

  	
  $

  	
  460,000,000

  	
   

  	
  $

  	
  200,000,000

  	
   

  
	
  Deutsche Bank AG
  New York Branch

  	
   

  	
  $

  	
  460,000,000

  	
   

  	
  $

  	
  200,000,000

  	
   

  
	
  HSBC Bank USA,
  National Association

  	
   

  	
  $

  	
  460,000,000

  	
   

  	
   

  	
   

  
	
  Mizuho Corporate
  Bank, Ltd.

  	
   

  	
  $

  	
  460,000,000

  	
   

  	
  $

  	
  200,000,000

  	
   

  
	
  Banca Intesa SpA

  	
   

  	
  $

  	
  310,000,000

  	
   

  	
   

  	
   

  
	
  Banco Bilbao
  Vizcaya Argentaria S.A.

  	
   

  	
  $

  	
  310,000,000

  	
   

  	
   

  	
   

  
	
  Sanpaolo IMI SpA

  	
   

  	
  $

  	
  310,000,000

  	
   

  	
   

  	
   

  
	
  UBS Loan Finance
  LLC

  	
   

  	
  $

  	
  310,000,000

  	
   

  	
   

  	
   

  
	
  ABN AMRO Bank,
  N.V.

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
   

  	
   

  
	
  Banco Santander
  Central Hispano S.A. New
  York Branch

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
   

  	
   

  
	
  Bank of America,
  N.A.

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
  $

  	
  200,000,000

  	
   

  
	
  Credit Suisse,
  Cayman Islands Branch

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
   

  	
   

  
	
  Lehman
  Commercial Paper Inc.

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
   

  	
   

  
	
  Morgan Stanley
  Bank

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
   

  	
   

  
	
  Sumitomo Mitsui
  Banking Corporation

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
   

  	
   

  
	
  William Street
  Commitment Corporation

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
   

  	
   

  
	
  Bayerische
  Hypo-Und Vereinsbank, AG, New York Branch

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
   

  	
   

  
	
  Calyon New York
  Branch

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
   

  	
   

  
	
  Fortis Capital
  Corporation

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
   

  	
   

  
	
  PNC Bank,
  National Association

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
  $

  	
  100,000,000

  	
   

  
	
  Royal Bank of
  Canada

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
   

  	
   

  
	
  The Royal Bank
  of Scotland plc

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
   

  	
   

  
	
  Standard
  Chartered Bank

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
   

  	
   

  
	
  Banca Monte dei
  Paschi di Siena S.p.A.

  	
   

  	
  $

  	
  120,000,000

  	
   

  	
   

  	
   

  
	
  Banca Popolare
  di Milano

  	
   

  	
  $

  	
  120,000,000

  	
   

  	
   

  	
   

  
	
  Bank of Montreal

  	
   

  	
  $

  	
  120,000,000

  	
   

  	
   

  	
   

  
	
  Banca di Roma –
  New York Branch

  	
   

  	
  $

  	
  120,000,000

  	
   

  	
   

  	
   

  
	
  Societe Generale

  	
   

  	
  $

  	
  120,000,000

  	
   

  	
   

  	
   

  
	
  Nordea Bank of
  Finland PLC, New York

  	
   

  	
  $

  	
  120,000,000

  	
   

  	
   

  	
   

  
	
  Bank of China,
  New York Branch

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  The Bank of New
  York

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  CIBC Inc.

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  Mellon Bank,
  N.A.

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  The Northern
  Trust Company

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  Raiffeisen
  Zentralbank Osterreich AG

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  State Street
  Bank and Trust Company

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  Svenska
  Handelsbanken AB

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  Toronto Dominion
  (Texas) LLC

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  U.S. Bank, N.A.

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  Wells Fargo
  Bank, NA

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  
	
  WestPac Banking
  Corporation

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
   

  	
   

  

 

SCHEDULE
6.2(c) TO

5-YEAR CREDIT AGREEMENT

[FORM OF COMPLIANCE CERTIFICATE]

COMPLIANCE CERTIFICATE

[For the Fiscal Quarter ending ________, 20__]

[For the Fiscal Year ending ________, 20__]

Pursuant to Section 6.2(c) of the 5-Year
Credit Agreement, dated as of June 28, 2006 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”; terms
defined therein being used herein as therein defined unless otherwise defined
herein), among International Business Machines Corporation (“IBM”), the
Subsidiary Borrowers parties thereto, the Lenders parties thereto, JPMorgan
Chase Bank, N.A., as Administrative Agent, and Citibank, N.A., as Syndication
Agent, the undersigned, the duly elected, qualified and acting Responsible
Officer of IBM, hereby certifies that:

(a)           During the period of four consecutive
fiscal quarters ended on __________ __, 20__, such Responsible Officer has
obtained no knowledge of any Default or Event of Default except as
follows:  ____________________.

[The financial statements
referred to in Section 6.2(b) of the Credit Agreement which are
delivered concurrently with the delivery of this Compliance Certificate fairly
present the financial position, results of operations, cash flows and changes
in stockholders’ equity of IBM and the Subsidiaries, in accordance with GAAP,
subject to normal year-end audit adjustments which are not expected to be
material in amount.]*

(b)           The covenant calculation set forth
below is based on IBM’s [unaudited] [audited] balance sheet and statements of
earnings, cash flows and stockholders’ equity for the fiscal [quarter] [year]
ended ________ __, 20__, a copy of which is attached hereto.

*                    Insert
only in Compliance Certificates accompanying financial statements delivered
pursuant to Section 6.2(b) of the Credit Agreement.

1.             Consolidated
Net Interest Expense Ratio (Section 7.4)

The ratio of

1.
          the
difference between

A.    the
sum of

	
  (1)

  	
   

  	
  earnings before income taxes of IBM and its
  consolidated Subsidiaries for the period of four consecutive fiscal quarters
  ended on the date referred to in paragraph (b) above, excluding gains or
  losses from the divestiture or sale of a business

  	
   

  	
  $_____________

  
	
  (2)

  	
   

  	
  Consolidated Net
  Interest Expense (to the extent deducted in arriving at earnings before
  income taxes)

  	
   

  	
  $_____________

  
	
  (3)

  	
   

  	
  depreciation expense
  (to the extent deducted in arriving at earnings before income taxes)

  	
   

  	
  $_____________

  
	
  (4)

  	
   

  	
  amortization expense
  (to the extent deducted in arriving at earnings before income taxes)

  	
   

  	
  $_____________

  
	
  (5)

  	
   

  	
  restructuring charges
  made after the Effective Date (to the extent deducted in arriving at earnings
  before income taxes)

  	
   

  	
  $_____________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total of (1), (2), (3), (4) and (5) above

  	
   

  	
  $_____________

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

and

B.            the
sum of

	
  (1)

  	
   

  	
  cash payments made during such period in respect of
  restructuring charges made after the Effective Date

  	
   

  	
  $_____________

  
	
  (2)

  	
   

  	
  payments made during
  such period for plant, rental machines and other property excluding acquisitions
  of businesses (net of proceeds received during such period from dispositions
  of plant, rental machines and other property investment excluding
  divestitures or sales of businesses)

  	
   

  	
  $_____________

  
	
  (3)

  	
   

  	
  investment in software
  for such period

  	
   

  	
  $_____________

  

 

 2
 

 

	
  

  	
   

  	
   

  	
  Total of (1), (2) and (3) above

  	
   

  	
  $_____________

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
  equals

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
  C.

  	
   

  	
  Consolidated Adjusted Cash Flow

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (A. minus B.)

  	
   

  	
  $____________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  to

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
  the difference between

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A.

  	
   

  	
  total interest cost of IBM and the Subsidiaries for
  such period

  	
   

  	
  $_____________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  and

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  interest income of IBM and the Subsidiaries for such
  period

  	
   

  	
  $_____________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  equals

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Consolidated Net Interest Expense

  	
   

  	
  $_____________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  the Consolidated Net Interest Expense Ratio

  (Ratio of Consolidated Adjusted Cash Flow (i)(C.) to

  Consolidated Net Interest Expense (ii)(C.))

  	
   

  	
  $_____________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  IN WITNESS WHEREOF, the undersigned has hereto set
  his name

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:                                    ,
  20    

  	
   

  	
   

  
											

 

 

	
  .

  	
   

  	
   

  
	
   

  	
  Title:
  [Responsible Officer

  	
   

  
	
   

  	
            of
  IBM]

  	
   

  

 

 3

EXHIBIT A-1
TO

5-YEAR CREDIT AGREEMENT

[FORM OF COMPETITIVE LOAN CONFIRMATION]

___________, 20__                       

JPMorgan Chase Bank, N.A., as Administrative Agent

270 Park Avenue

New York, New York  10017

Reference is made to the 5-Year Credit Agreement,
dated as of June 28, 2006, among International Business Machines
Corporation, the Subsidiary Borrowers parties thereto, the Lenders parties
thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Citibank,
N.A., as Syndication Agent (as the same may be amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”). Terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement.

In accordance with Section 2.8(d) of the
Credit Agreement, the undersigned accepts and confirms the offers by
Competitive Loan Lender(s) to make Competitive Loans to the undersigned on
___________, 20__ [Competitive Loan Borrowing Date] under Section 2.8(b) [index
rate] or 2.8(c) [fixed rate] in the (respective) amount(s) set forth
on the attached list of Competitive Loans offered.

 

	
  

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Borrower]

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  

 

[Borrower must attach Competitive Loan offer list
prepared by Administrative Agent with accepted amount entered by the Borrower
to right of each Competitive Loan offer].

 

 

 

EXHIBIT A-2
TO

5-YEAR CREDIT AGREEMENT

[FORM OF COMPETITIVE LOAN OFFER]

JPMorgan Chase Bank, N.A., as Administrative Agent                                                                                _________, 20__

270 Park Avenue

New York, New York  10017

Reference is made to the 5-Year Credit
Agreement, dated as of June 28, 2006, among International Business
Machines Corporation, the Subsidiary Borrowers parties thereto, the Lenders
parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and
Citibank, N.A., as Syndication Agent (as the same may be amended, supplemented
or otherwise modified from time to time, the “Credit Agreement”). Terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement. In accordance with Section 2.8(b) [index
rate] or 2.8(c) [fixed rate] of the Credit Agreement, the undersigned
Competitive Loan Lender offers to make Competitive Loans thereunder in the
following amounts with the following maturity dates:

	
  Competitive

  Loan Date: __________, 20__

  	
  Aggregate Maximum Amount: $_________

  
	
  Maturity Date 1:

       __________, 20__

  	
  Maximum Amount: $__________

  $________ offered at _______*

  $________ offered at _______*

  
	
  Maturity Date 2:

       __________, 20__

  	
  Maximum Amount: $__________

  $________ offered at _______*

  $________ offered at _______*

  
	
  Maturity Date 3:

       __________, 20__

  	
  Maximum Amount: $__________

  $________ offered at _______*

  $________ offered at _______*

  

 

Very truly yours,

[NAME OF COMPETITIVE LOAN
LENDER]

By:                                                                                                          

Name:                                                                                                     

Title:                                                                                                       

Telephone No.:                                                                                     

Fax No.:                                                                                                  

 

 

*              Insert
the interest rate offered for the specified loan amount.  In the case of Index Rate Competitive Loans,
insert a margin bid.  In the case of
Fixed Rate Competitive Loans, insert a fixed rate bid.

 

 

EXHIBIT A-3
TO

5-YEAR CREDIT AGREEMENT

[FORM OF COMPETITIVE LOAN REQUEST]

_______________,
20__

JPMorgan Chase Bank, N.A., as Administrative Agent

270 Park Avenue

New York, New York  10017

Reference is made to the 5-Year Credit
Agreement, dated as of June 28, 2006, among International Business
Machines Corporation, the undersigned, the Subsidiary Borrowers parties
thereto, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, and Citibank, N.A., as Syndication Agent (as the same may
be amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”). Terms defined in the Credit Agreement and used herein shall
have the meanings given to them in the Credit Agreement.

This is [an Index Rate] [a Fixed Rate] Competitive
Loan Request** pursuant to Section 2.8(a) of the Credit Agreement
requesting quotes for the following Competitive Loans:

 

	
   

  	
   

  	
  Loan 1

  	
   

  	
  Loan 2

  	
   

  	
  Loan 3

  	
   

  
	
  Aggregate
  Principal Amount

  	
   

  	
  $

  	
  __________

  	
   

  	
  $

  	
  __________

  	
   

  	
  $

  	
  _________

  	
   

  
	
  Borrowing Date

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest Period***

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maturity Date****

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest Payment Dates*****

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
											

 

 

Very truly yours,

[Name of Borrower]

By:____________________________

Title:

 

 

 

**                                       Pursuant
to the Credit Agreement, a Competitive Loan Request may be transmitted in writing
or by facsimile transmission, or by telephone, immediately confirmed by
facsimile transmission.  In any case, a
Competitive Loan Request shall contain the information specified in the second
paragraph of this form.

***                                Insert
only in an Index Rate Competitive Loan Request.

****                         In an
Index Rate Competitive Loan Request, insert last day of Interest Period.

*****    Insert only in a Fixed Rate Competitive Loan
Request.

 

EXHIBIT B-1
TO

5-YEAR CREDIT AGREEMENT

[FORM OF SUBSIDIARY BORROWER NOTICE AND
DESIGNATION]

SUBSIDIARY BORROWER NOTICE AND DESIGNATION

To:                          JPMorgan
Chase Bank, N.A., as Administrative Agent

From:                      International
Business Machines Corporation

1.             This Subsidiary Borrower Notice and
Designation is being delivered to you pursuant to Section 5.2(d) of
the 5-Year Credit Agreement, dated as of June 28, 2006, among
International Business Machines Corporation, the Subsidiary Borrowers parties
thereto, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, and Citibank, N.A., as Syndication Agent (as the same may
be amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”). Terms defined in the Credit Agreement and used herein shall
have the meanings given to them in the Credit Agreement.

2.             The effective date of this Subsidiary
Borrower Notice and Designation will be ___________ __, 20__.

3.             [Please be advised that the following
Subsidiary or  Controlled Person is
hereby designated as a Subsidiary Borrower [and a Swing Line Borrower] and such
Subsidiary or Controlled Person is authorized to use the credit facilities
provided for under Sections 2.1[, 2.5] and 2.7 of the Credit Agreement up to
the aggregate amount set forth opposite its name below:

	
  Name and
  Address 

  of Subsidiary Borrower

  	
   

  	
  Maximum Subsidiary

  Borrowing Amount*]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

[3.            Please
be advised that the designation of the following Subsidiary or Controlled
Person as a Subsidiary Borrower is terminated effective on the date referred to
in paragraph 2 above.]

INTERNATIONAL BUSINESS

MACHINES CORPORATION

By:
__________________________

Title:

*                    If desired,
IBM may specify separate Maximum Subsidiary Borrowing Amounts for US$ Loans and
Local Currency Loans (US$ Equivalent), which, in either case, may be $0.

 

 

[Name of Subsidiary
Borrower]**

By:
__________________________

Title:

 

Accepted and Acknowledged:

JPMORGAN CHASE BANK, N.A., as

Administrative Agent

By:________________________

Title:

**           Subsidiary Borrower signature
necessary only in the case of termination of designation or any change in the
Maximum Subsidiary Borrowing Amount.

 

 2

EXHIBIT B-2
TO

5-YEAR CREDIT AGREEMENT

[FORM OF SUBSIDIARY BORROWER REQUEST]

SUBSIDIARY BORROWER REQUEST

To:                          JPMorgan
Chase Bank, N.A., as Administrative Agent

From:                      [Name
of Subsidiary Borrower]

1.             This Subsidiary Borrower Request is
being delivered to you pursuant to Section 5.2(d) of the 5-Year
Credit Agreement, dated as of June 28, 2006, among International Business
Machines Corporation (“IBM”), the Subsidiary Borrowers parties thereto,
the Lenders parties thereto, JPMorgan Chase Bank, N.A., as Administrative
Agent, and Citibank, N.A., as Syndication Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”).
Terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.

2.             The undersigned refers to the
Subsidiary Borrower Notice and Designation effective ____________ __, 20__ (the
“Effective Date”) delivered by IBM to you in which the undersigned is
designated a Subsidiary Borrower and hereby confirms that by its execution of
this Subsidiary Borrower Request, the undersigned acknowledges that it has
received a copy of the Credit Agreement, confirms that the representations and
warranties contained in Section 4 of the Credit Agreement (except the
representations and warranties contained in Sections 4.6 and 4.7) are true and
correct as to the undersigned as of the Effective Date hereof and agrees that,
from and after the Effective Date, it shall be a party to the Credit Agreement
and shall to be bound, as a “Borrower”, by all of the provisions
thereof.

[NAME OF SUBSIDIARY
BORROWER]

By:_______________________

Title:

 

 

EXHIBIT C TO

5-YEAR CREDIT AGREEMENT

FORM OF CLOSING CERTIFICATE

Pursuant to Section 5.1(b) of the 5-Year
Credit Agreement, dated as of June 28, 2006  (the “Credit Agreement”; unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement), among
International Business Machines Corporation, a New York corporation (“IBM”),
the Subsidiary Borrowers parties thereto, the Lenders parties thereto, JPMorgan
Chase Bank, N.A., as Administrative Agent, and Citibank, N.A., as Syndication
Agent, the undersigned [____________] of IBM hereby certifies as follows:

1.             The representations and warranties
of IBM contained in the Credit Agreement or in any certificate, document or
financial or other statement furnished by or on behalf of IBM pursuant to or in
connection with the Credit Agreement are true and correct in all material
respects on and as of the date hereof with the same effect as if made on the
date hereof except for representations and warranties stated to relate to a
specific earlier date, in which case such representations and warranties were
true and correct in all material respects as of such earlier date;

2.             No Default or Event of Default has
occurred and is continuing as of the date hereof or after giving effect to any
Loans to be made on the date hereof;

3.             ____________________ is and at all
times since _____________________ 20__, has been the duly elected and qualified
[Assistant] Secretary of IBM and the signature set forth on the signature line
for such officer below is such officer’s true and genuine signature;

and the undersigned [Assistant] Secretary of IBM
hereby certifies as follows:

4.             There are no liquidation or
dissolution proceedings pending or to my knowledge threatened against IBM, nor
to my knowledge has any other event occurred affecting or threatening the
corporate existence of IBM;

5.             IBM is a corporation duly
organized, validly existing and in good standing under the laws of
[____________];

6.             Attached hereto as Exhibit A
is a complete and correct copy of resolutions duly adopted by the Board of
Directors (or a duly authorized committee thereof) of IBM on _________, 20__;
such resolutions have not in any way been amended, modified, revoked or
rescinded and have been in full force and effect since their adoption to and
including the date hereof and are now in full force and effect; such
resolutions are the only corporate proceedings of IBM now in force relating to
or affecting the matters referred to therein;

 

7.             Attached hereto as Exhibit B
is a complete and correct copy of the by-laws of IBM as in effect at all times
since _________________, 20__ to and including the date hereof; and attached
hereto as Exhibit C is a true and complete copy of the certificate of
incorporation of IBM as in effect at all times since ___________________, 20__
to and including the date hereof; and

8.             The following persons are now duly
elected and qualified officers of IBM holding the offices indicated next to
their respective names below, and such officers have held such offices with IBM
at all times since ________________, 20__ to and including the date hereof, and
the signatures appearing opposite their respective names below are the true and
genuine signatures of such officers, and each of such officers is duly
authorized to execute and deliver on behalf of IBM the Credit Agreement and any
certificate or other document to be delivered by IBM pursuant to the Credit
Agreement:

	
  Name

  	
   

  	
  Office

  	
   

  	
  Signature

  
	
   

  	
   

  	
  [_________]

  	
   

  	
   

  
	
   

  	
   

  	
  [Assistant]
  Secretary

  	
   

  	
   

  

 

IN WITNESS WHEREOF, the undersigned have hereto set
our names

 

	
  

  	
   

  	
   

  	
   

  	
   

  
	
  Title:
  [___________]

   

  Date:
  ______________, 20__

  	
   

  	
  Title:
  [Assistant] Secretary

  	
   

  	
   

  

 

 

EXHIBIT
D-1 TO THE

5-YEAR CREDIT AGREEMENT

[FORM OF OPINION OF
SIMPSON THACHER & BARTLETT LLP]

June 28,
2006

To:                       JPMorgan
Chase Bank, N.A., as

Administrative Agent under

the Credit Agreement referred to below

                                         270
Park Avenue

New York, New York 10017

                                         The
Lenders listed on Schedule I hereto

Re:                        The
5-Year Credit Agreement, dated as of June 28, 2006 (the “Credit
Agreement”), among International Business Machines Corporation, a New York
corporation (“IBM”),the Subsidiary Borrowers parties thereto, the
Lenders parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent,
and Citibank, N.A., as Syndication Agent.

Ladies
and Gentlemen:

We
have acted as special counsel to the Administrative Agent in connection with
the execution and delivery of the Credit Agreement.

This
opinion is delivered to you pursuant to Section 5.1(d)(i) of the
Credit Agreement. Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.

In
arriving at the opinion expressed below, we have examined (a) a
counterpart of the Credit Agreement, signed by IBM and the Administrative Agent
and (b) such documents as we have deemed necessary or appropriate for the
purposes of this opinion.

In
such examination, we have assumed the genuineness of all signatures, the
authenticity, regularity and completeness of all documents submitted to us as
originals, the completeness of all documents submitted to us as duplicates or
as certified or conformed copies and the conformity of such documents to the
original documents.

We
have also assumed that the Credit Agreement has been duly executed and
delivered by IBM, that IBM is duly incorporated and validly existing under the
laws of its jurisdiction of

 

incorporation
and has the corporate power and authority to execute, deliver and perform its
obligations under the Credit Agreement, that IBM is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended, that the
execution, delivery and performance by IBM of the Credit Agreement have been
duly authorized by all necessary corporate action on the part of IBM, do not
contravene its certificate of incorporation or by-laws or similar
organizational documents or violate, or require any consent not obtained under,
any applicable law or regulation or any order, writ, injunction or decree of
any court or other Governmental Authority binding upon IBM and do not violate,
or require any consent not obtained under, any contractual obligation applicable
to or binding upon IBM, and that the Credit Agreement constitutes a valid and
legally binding obligation of the Administrative Agent, the Lenders and each
Subsidiary Borrower.

Based
upon the foregoing, and subject to the qualifications and comments set forth
below, we are of the opinion that, insofar as the law of the State of New York
is concerned, the Credit Agreement (including the guarantee contained in Section 10
thereof) constitutes a valid and legally binding obligation of IBM, enforceable
against IBM in accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing, except that we express no
opinion as to (a) Section 11.17(b) of the Credit Agreement
insofar as it relates to an action brought in the United States District Court
for the Southern District of New York and note that such matters may be raised
by such court; (b) any indemnification obligations of IBM under the Credit
Agreement to the extent such obligations might be deemed to be inconsistent
with public policy; (c) the provisions of Section 11.6 of the Credit
Agreement purporting to grant to Participants a right to set-off; (d) any
provision of the Credit Agreement that purports to establish an evidentiary
standard for determinations by the Lenders or the Administrative Agent; (e) Section 11.12(b) of
the Credit Agreement to the extent that it provides for (i) a right of
set-off in respect of participating interests purchased pursuant to Section 11.12(a) of
the Credit Agreement, (ii) a right of set-off in respect of claims,
credits or other obligations that are contingent or (iii) a right of
set-off in respect of Borrower Obligations against deposits, indebtedness or
other obligations of any entity other than the entity to which such Borrower
Obligations are payable; (f) Section 10.7 or Section 11.17(d) of
the Credit Agreement; or (g) any Local Currency Facility.

With
respect to our opinion as to the guarantee contained in Section 10 of the
Credit Agreement, we note that (i) a New York statute provides that with
respect to a foreign currency obligation, a court of the State of New York
shall render a judgment or decree in such foreign currency and such judgment or
decree shall be converted into currency of the United States at the rate of
exchange prevailing on the date of entry of such judgment or decree and (ii) with
respect to a foreign currency obligation, a United States Federal court in New
York may award judgment in United States dollars, provided that we express no
opinion as to the rate of exchange such

 2
 

 

court
would apply.

We
do not express any opinion herein concerning any law other than the law of the
State of New York.

This
opinion has been rendered solely for your benefit in connection with the Credit
Agreement and the transactions contemplated thereby and may not be relied upon
by you for any other purpose, or relied upon by or furnished to any other
Person, firm or corporation without our prior written consent.

Very
truly yours,

SIMPSON
THACHER & BARTLETT LLP

 

 3

 

SCHEDULE I

THE LENDERS

 

EXHIBIT D-2
TO

5-YEAR CREDIT AGREEMENT

FORM OF OPINION OF
ASSISTANT GENERAL COUNSEL OF IBM

June 28, 2006          

International Business
Machines Corporation

$10,000,000,000 5-Year Credit Agreement

dated as of June 28, 2006

Ladies and Gentlemen:

I am Andrew Bonzani, Assistant General Counsel of
International Business Machines Corporation, a New York corporation (“IBM”),
and have advised IBM in connection with the $10,000,000,000 5-Year Credit
Agreement dated as of June 28, 2006 (the “Credit Agreement”), among IBM,
each Subsidiary Borrower (as defined therein), the several banks and other
financial institutions from time to time party thereto (the “Lenders”),
JPMorgan Chase Bank, N.A., as Administrative Agent, and Citibank, N.A., as
Syndication Agent. Capitalized terms not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.

In connection with this opinion, I have investi­gated
such questions of law, received such information from officers and
representatives of IBM and the Subsidiary Borrowers and examined such
certificates of public officials, corporate documents and records of IBM and
the Subsidiary Borrowers and other documents as I have deemed necessary or
appropriate for the purposes of this opinion. I have relied, with respect to
certain factual matters not constituting conclusions of law, on the
representations and warranties of IBM and the Subsidiary Borrowers contained in
the Credit Agreement and assume compliance on the part of each such corporation
with its covenants and agreements under the Credit Agreement.

In rendering my opinion, I have assumed (i) the
due authorization, execution and delivery of the Credit Agreement by all
parties thereto (other than IBM), (ii) the authenticity of all documents
submitted to me as originals and (iii) the conformity to original
documents of all documents submitted to me as copies.

Based upon the foregoing, I am of opinion that:

1.           IBM
has been duly incorporated and is validly existing and in good standing under
the laws of the State of New York and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where the
failure to so qualify would have a Material Adverse Effect. IBM has the
requisite corporate power and authority to own its properties and assets and to
carry on its business in all material respects as now conducted. Each
Significant Subsidiary has been duly incorporated and is validly existing and
in good standing under the laws of the jurisdiction of its incorporation and is
duly qualified as a foreign

 1
 

corporation and in good standing under the laws of
each jurisdiction where the failure to so qualify would have a Material Adverse
Effect. Each Significant Subsidiary has the requisite corporate power and
authority to lease the property it operates under lease and to carry on its
business in all material respects as now conducted.

2.           The
execution, delivery and performance by IBM of the Credit Agreement (including,
without limitation, Section 10 thereof) and the Transactions (a) are
within the corporate power of IBM; (b) have been duly authorized by all
requisite corporate action; (c) do not (i) violate (A) any
provisions of law, statute, material rule or material regulation of the
United States or the State of New York, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of IBM or any
Significant Subsidiary, (B) to the best of my knowledge, any material
order of any United States Federal or New York Governmental Authority or (C) any
provision of any material indenture or other material agreement or material
instrument known to me to which IBM or any Significant Subsidiary is a party or
by which any of them or any of their property is or may be bound, (ii) conflict
with, or result in a breach of or constitute (alone or with notice or lapse of
time or both) a default under any such material indenture or other material
agreement or material instrument or (iii) except as contemplated by Section 7.1
of the Credit Agreement, result in the creation or imposition of any Lien upon
or with respect to any property or assets now owned or hereafter acquired by
IBM or any Significant Subsidiary; and (d) do not require the consent or
approval of, or any registration or filing with, or any other action by, any
United States Federal or New York Governmental Authority or any other person
party to those agreements described above other than (i) those that have
been made or obtained and are in full force and effect or as to which the
failure to be made or obtained or to be in full force and effect would not
result, individually or in the aggregate, in a Material Adverse Effect, (ii) such
periodic and current reports, if any, as are required to be filed with the SEC
to disclose the Credit Agreement or the Transactions contemplated thereunder
and (iii) such filings as may hereafter be required pursuant to the
provisions of Section 7.1 of the Credit Agreement to perfect security
interests securing the Borrower Obligations.

3.           The
Credit Agreement (including, without limitation, Section 10 thereof) has
been duly executed and delivered by IBM.

4.           The
Credit Agreement constitutes the legal, valid and binding obligation of IBM,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and by general principles of equity (including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing) regardless of whether considered in a proceeding in equity or at law,
and except that (a) insofar as provisions of the Credit Agreement provide
for indemnification, the enforcement thereof may be limited by public policy
considerations, (b) I express no opinion as to (i) Section 11.12(b) of
the Credit Agreement to the extent that it provides for (A) a right of
set-off in respect of participating interests purchased pursuant to Section 11.12(a) of
the Credit Agreement, (B) a right of set-off in respect of claims, credits
or other obligations that are contingent or (C) a right of set-off
in respect of Borrower Obligations against deposits, indebtedness or other
obligations of any entity other than the entity to which such Borrower
Obligations are payable, or (ii) the fourth sentence of Section 11.6
of the Credit Agreement, (c) I express no opinion as to (i)

 2
 

whether a United States Federal court or a court of
the State of New York would render a money judgment in a currency other than
United States Dollars or enforce a judgment expressed in a foreign currency in
a currency other than United States Dollars and (ii) the rate of exchange
a United States Federal court or a court of the State of New York would apply, (d) I
express no opinion as to (i) Section 11.17(b) of the Credit
Agreement insofar as it relates to an action brought in the United States
District Court for the Southern District of New York and note that such matters
may be raised by such court or (ii) Section 11.17(d) of the
Credit Agreement and (e) I express no opinion as to Section 10.7 of
the Credit Agreement.

5.           IBM
is not an “investment company” as defined in, or subject to regulation under,
the Investment Company Act of 1940.

6.           The
use of proceeds of any Loan under the Credit Agreement, in the manner
contemplated in the Credit Agreement, will not entail a violation of any of the
provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System.

7.           To
the best of my knowledge after due inquiry, except as set forth in the Form 10-K
of IBM for its fiscal year ended December 31, 2005 or the Form 10-Q
of IBM for the fiscal quarter ended March 31, 2006, there are no actions,
suits or proceedings at law or in equity or by or before any arbitrator or
Governmental Authority now pending or threatened by or against IBM or any of
the Significant Subsidiaries or against any of its or their respective
properties or revenues as of the date hereof (i) which involve the Credit
Agreement or any of the actions contemplated thereby or (ii) as to which
there is a probable risk of an adverse decision which would materially restrict
the ability of IBM to comply with its obligations under the Credit Agreement.

I express no opinion herein as to (i) any Local
Currency Facility or (i) the creation, perfection, priority or
enforceability of any lien or security interest that may hereafter be granted
to secure the Borrower Obligations pursuant to the provisions of Section 7.1
of the Credit Agreement. In rendering the opinions expressed in paragraphs 2
and 4 above, I have assumed with your permission that no Lender and no assignee
or transferee of any Loan or participation therein will be a “broker” or “dealer”
(as defined in Sections 3(a)(4) and 3(a)(5) of the Securities Exchange
Act of 1934) or any other person which is a “creditor” as defined in Regulation
T.

          I am
admitted to practice in the State of New York and express no opinion as to
matters governed by any laws other than the laws of the State of New York and
the Federal laws of the United States of America.

Very truly yours,

Andrew Bonzani

Each of the Lenders Party to the

Credit Agreement Referred to Above

 3
 

In care of JPMorgan Chase Bank, N.A. as Administrative
Agent

270 Park Avenue

New York, NY 10017

 

 4

EXHIBIT E TO

5-YEAR CREDIT AGREEMENT

FORM OF ASSIGNMENT AND ACCEPTANCE

Reference is made to the 5-Year Credit
Agreement, dated as of June 28, 2006 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among
International Business Machines Corporation (“IBM”), the Subsidiary Borrowers
parties thereto, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, and Citibank, N.A., as Syndication Agent. Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.

The Assignor identified on Schedule 1 (the “Assignor”)
and the Assignee identified on Schedule 1 (the “Assignee”) agree as
follows:

1.             The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor, as of
the Effective Date (as defined below), an interest (the “Assigned Interest”)
specified on SCHEDULE 1 in and to
the Assignor’s rights and obligations under the Credit Agreement with respect
to those credit facilities contained in the Credit Agreement as are set forth
on SCHEDULE 1 (individually, an “Assigned
Facility”; collectively, the “Assigned Facilities”), in a principal
amount for each Assigned Facility as set forth on SCHEDULE 1.

2.             The Assignor (a) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, or any instrument or document
furnished pursuant thereto, other than that it has not created any adverse
claim upon the interest being assigned by it hereunder and that such interest
is free and clear of any such adverse claim, and (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of IBM, any of its Subsidiaries or any other obligor or the
performance or observance by IBM, any of its Subsidiaries or any other obligor
of any of their respective obligations under the Credit Agreement or any
instrument or document furnished pursuant hereto or thereto.

3.             The Assignee (a) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance; (b) confirms
that it has received a copy of the Credit Agreement, together with copies of
the financial statements delivered pursuant to Section 4.5 thereof and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it has made and will, independently and without reliance upon the
Assignor, the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit

 1
 

Agreement or any instrument or document furnished
pursuant hereto or thereto; (d) appoints and authorizes the Administrative
Agent to take such action as administrative agent on its behalf and to exercise
such powers and discretion under the Credit Agreement or any instrument or
document furnished pursuant hereto or thereto as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions
of the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to Section 2.18(b) of
the Credit Agreement.

4.             The effective date of this Assignment and Acceptance
shall be as specified on SCHEDULE 1
(the “Effective Date”). Following the execution of this Assignment and
Acceptance, it will be delivered to the Administrative Agent for acceptance by
it and recording by the Administrative Agent pursuant to Section 11.9 of
the Credit Agreement, effective as of the Effective Date (which shall not,
unless otherwise agreed to by the Administrative Agent, be earlier than five
Business Days after the date of such acceptance and recording by the
Administrative Agent).

5.             Upon such acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments in respect of
the Assigned Interest (including payments of principal, interest, fees and
other amounts) to the Assignee whether such amounts have accrued prior to the
Effective Date or accrue subsequent to the Effective Date. The Assignor and the
Assignee shall make all appropriate adjustments in payments by the
Administrative Agent for periods prior to the Effective Date or with respect to
the making of this assignment directly between themselves.

6.             From and after the Effective Date, (a) the Assignee
shall be a party to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.

7.             THIS ASSIGNMENT AND ACCEPTANCE
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the parties hereto have caused
this Assignment and Acceptance to be executed as of the date first above
written by their respective duly authorized officers on Schedule 1 hereto.

 

 2

SCHEDULE 1

TO ASSIGNMENT AND ACCEPTANCE

RELATING TO THE 5-YEAR CREDIT AGREEMENT, DATED AS OF JUNE 28, 2006,

AMONG INTERNATIONAL BUSINESS MACHINES CORPORATION, THE SUBSIDIARY BORROWERS
PARTIES THERETO, THE LENDERS PARTIES THERETO,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT, AND

CITIBANK, N.A., AS SYNDICATION AGENT

 

Name of
Assignor:

Name of
Assignee:

Effective
Date of Assignment:

Principal
Amount Assigned:  $                                

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

	
  [Name of Assignee]

  	
   

  	
  [Name of Assignor]

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
  Title:

  
					

 

 1
 

 

 

 

	
  

  	
   

  	
  Consented To:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INTERNATIONAL BUSINESS MACHINES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JPMORGAN CHASE BANK, N.A., as

  Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Consents required only to the extent expressly
  provided for in Section 11.8 of the Credit Agreement.]

  
	
   

  	
   

  	
   

  
	
  Accepted for
  Recordation in the Register:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  JPMORGAN CHASE
  BANK, N.A., as

  Administrative Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name: 

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
						

 

 

 2

EXHIBIT F TO

5-YEAR CREDIT AGREEMENT

[FORM OF LOCAL CURRENCY FACILITY ADDENDUM]

LOCAL CURRENCY FACILITY ADDENDUM

To:          JPMorgan Chase Bank, N.A., as
Administrative Agent

From:      International Business Machines
Corporation

1.             This Local Currency Facility Addendum
is being delivered to you pursuant to Section 3.1(a) of the 5-Year
Credit Agreement, dated as of June 28,
2006, among International Business Machines Corporation, the Subsidiary
Borrowers parties thereto, the Lenders parties thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and Citibank, N.A., as Syndication Agent (as the
same may be amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”). Terms defined in the Credit Agreement and used herein shall
have the meanings given to them in the Credit Agreement.

2.             The effective date (the “Effective
Date”) of this Local Currency Facility Addendum will be                                            , 20      .

3.             Please be advised that, as of the
Effective Date, the credit facility described below is hereby designated as a “Local
Currency Facility” for the purposes of the Credit Agreement.

Type
of Facility:(1)

 

	
  Local Currenc(y)(ies):

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Local
  Currency Facility

  	
   

  	
   

  	
   

  	
   

  
	
  Stated
  Maximum Borrowing Amount:

  	
   

  	
   

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Local
  Currency

  	
   

  	
   

  	
   

  	
  Local Currency Lender Stated

  
	
  Facility
  Lenders:

  	
   

  	
  Name of Lender

  	
   

  	
  Maximum Borrowing Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  
	
  List of
  Documentation Governing

  	
   

  	
   

  	
   

  	
   

  
	
  Local
  Currency Facility

  	
   

  	
   

  	
   

  	
   

  
	
  (the
  “Documentation”):(2)

  	
   

  	
   

  	
   

  	
   

  

(1)           Insert short description of terms of
Local Currency Facility.

(2)                                  Copies
of the Documentation must accompany the Local Currency Facility Addendum,
together with, if applicable, an English translation thereof (provided, that
IBM may instead furnish a summary term sheet in English so long as an English
translation of the Documentation is furnished to the Administrative Agent or
its counsel within 90 days after the date of delivery of the Local Currency
Facility Addendum).

 

4.             IBM hereby represents and warrants
that (i) as of the Effective Date, an Exchange Rate with respect to each
Local Currency covered by such Local Currency Facility is determinable by
reference to the Reuters currency pages (or comparable publicly available
screen), (ii) the Documentation complies in all respects with the
requirements of Section 3 of the Credit Agreement and (iii)                              
of                             (3)
contains an express acknowledgement that such Local Currency Facility shall be
subject to the provisions of Section 3 of the Credit Agreement.

	
  

  	
  INTERNATIONAL BUSINESS MACHINES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
  Accepted and
  Acknowledged:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  JPMORGAN CHASE
  BANK, N.A., as Administrative Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

(3)           Provide citation to
relevant provision from the Documentation.

 

 

 2

EXHIBIT G-1
TO

5-YEAR CREDIT AGREEMENT

[FORM OF REVOLVING CREDIT LOAN PROMISSORY NOTE](1)

REVOLVING CREDIT LOAN PROMISSORY NOTE

	
  $

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
  , 20     

  

 

FOR VALUE RECEIVED, the undersigned, [NAME OF
BORROWER], a                
corporation (the “Borrower”), hereby unconditionally promises to pay to
the order of [NAME OF LENDER] (the “Lender”) at the office of JPMorgan
Chase Bank, N.A. (together with its successors in such capacity, the “Administrative
Agent”), located at 270 Park Avenue, New York, New York 10017, in lawful
money of the United States of America and in immediately available funds, on
the Termination Date the principal amount of (a) [AMOUNT IN WORDS] DOLLARS
($       ), or, if less, (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by the
Lender to the Borrower pursuant to Section 2.1 of the Credit Agreement, as
hereinafter defined. The Borrower further agrees to pay interest in like money
at such office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in Section 2.10 of
such Credit Agreement.

The holder of this promissory note is authorized to
endorse on the schedules annexed hereto and made a part hereof or on a
continuation thereof which shall be attached hereto and made a part hereof the
date, Type and amount of each Revolving Credit Loan made pursuant to the Credit
Agreement and the date and amount of each payment or prepayment of principal
thereof, each continuation thereof, each conversion of all or a portion thereof
to another Type and, in the case of Eurodollar Loans, the length of each
Interest Period with respect thereto. Each such endorsement shall constitute prima
facie evidence of the accuracy of the information endorsed. The failure
to make any such endorsement or any error in such endorsement shall not affect
the obligations of the Borrower in respect of any Revolving Credit Loan.

This promissory note (a) has been issued pursuant
to Section 11.9(c) of the 5-Year Credit Agreement, dated as of June 28, 2006 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among
International Business Machines Corporation (“IBM”), the Subsidiary
Borrowers parties thereto, the Lenders parties thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and Citibank, N.A., as Syndication Agent, (b) is
subject to the provisions of the Credit Agreement and (c) is subject to
prepayment in whole or in part as provided in the Credit Agreement.

 

(1)           With appropriate modifications, this
form may be used to evidence Swing Line Loans.

 

 1
 

Upon the occurrence of any one or more of the Events
of Default specified in the Credit Agreement, all amounts then remaining unpaid
on this promissory note shall become, or may be declared to be, immediately due
and payable, all as provided in the Credit Agreement.

All parties now and hereafter liable with respect to
this promissory note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all other notices of
any kind.

Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.

THIS PROMISSORY NOTE SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.

[NAME OF BORROWER]

	
  

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  

 

 2

 

Schedule A

to Revolving Credit Note

 

LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS

	
  Date

  	
   

  	
  Amount of 

  ABR Loans

  	
   

  	
  Amount

  Converted to

  ABR Loans

  	
   

  	
  Amount of

  Principal of ABR

  Loans Repaid

  	
   

  	
  Amount of

  ABR Loans

  Converted to

  Eurodollar Loans

  	
   

  	
  Unpaid 

  Principal

  Balance of

  ABR Loans

  	
   

  	
  Notation

  Made By

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

Schedule B

to Revolving Credit Note

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF
EURODOLLAR LOANS

	
  Date

  	
   

  	
  Amount of

  Eurodollar

  Loans

  	
   

  	
  Amount 

  Converted to

  Eurodollar

  Loans

  	
   

  	
  Interest

  Period and

  Eurodollar

  Rate with

  Respect

  Thereto

  	
   

  	
  Amount of

  Principal of

  Eurodollar

  Loans Repaid

  	
   

  	
  Amount of

  Eurodollar

  Loans

  Converted to

  ABR Loans

  	
   

  	
  Unpaid

  Principal

  Balance of 

  Eurodollar

  Loans

  	
   

  	
  Notation

  Made By

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT G-2
TO

5-YEAR CREDIT AGREEMENT

[FORM OF COMPETITIVE LOAN PROMISSORY NOTE]

COMPETITIVE LOAN PROMISSORY NOTE

	
  $

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
                     ,
  20    

  

 

FOR VALUE RECEIVED, the undersigned, [NAME OF
BORROWER], a                     
corporation (the “Borrower”), hereby unconditionally promises to pay to
the order of [NAME OF LENDER]  (the “Competitive
Loan Lender”) at the office of JPMorgan Chase Bank, N.A. (together with its
successors in such capacity, the “Administrative Agent”), located at 270
Park Avenue, New York, New York 10017, in lawful money of the United States of
America and in immediately available funds, the principal amount of (a) [AMOUNT
IN WORDS]   DOLLARS
($                ),
or, if less, (b) the aggregate unpaid principal amount of each Competitive
Loan which is made by the Competitive Loan Lender to the Borrower pursuant to Section 2.7
of the Credit Agreement, as hereinafter defined. The principal amount of each
Competitive Loan evidenced hereby shall be payable on the maturity date
therefor set forth on the schedule annexed hereto and made a part hereof or on
a continuation of such schedule which shall be attached hereto and made a part
hereof (the “Grid”). The Borrower further agrees to pay interest in like
money at such office on the unpaid principal amount of each Competitive Loan
evidenced hereby, at the rate per annum set forth in respect of such
Competitive Loan on the Grid, calculated on the basis of a year of 360 days and
actual days elapsed from the date of such Competitive Loan until the due date
thereof (whether at the stated maturity, by acceleration or otherwise), except
as otherwise provided in Section 2.10 of the Credit Agreement. Interest on
each Competitive Loan evidenced hereby shall be payable on the date or dates
set forth in respect of such Competitive Loan on the Grid. Competitive Loans
evidenced by this promissory note may not be prepaid.

The holder of this promissory note is authorized to
endorse on the Grid the date, amount, interest rate, interest payment dates and
maturity date in respect of each Competitive Loan made pursuant to Section 2.7
of the Credit Agreement, and each payment of principal with respect thereto. Each
such endorsement shall constitute prima  facie evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
or any error in such endorsement shall not affect the obligations of the
Borrower in respect of such Competitive Loan.

This promissory note has been issued pursuant to Section 11.9(c) of
the 5-Year Credit Agreement, dated as of June 28, 2006 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among
International Business Machines Corporation (“IBM”), the Subsidiary
Borrowers parties thereto, the Lenders parties thereto, 

 

 

JPMorgan Chase Bank, N.A., as Administrative Agent,
and Citibank, N.A., as Syndication Agent, and is subject to the provisions of
the Credit Agreement.

Upon the occurrence of any one or more of the Events
of Default, all amounts then remaining unpaid on this promissory note shall
become, or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.

All parties now and hereafter liable with respect to
this promissory note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all other notices of
any kind.

Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.

THIS PROMISSORY NOTE SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

 

	
  

  	
  [NAME OF BORROWER]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  

 

 2

 

SCHEDULE OF COMPETITIVE LOANS

[NAME
OF BORROWER], as Borrower

5-Year Credit Agreement dated as of June 28, 2006

	
  Date of Loan

  	
   

  	
  Amount

  of Loan

  	
   

  	
  Interest

  Rate

  	
   

  	
  Interest

  Payment

  Dates

  	
   

  	
  Maturity

  Date

  	
   

  	
  Payment

  Date

  	
   

  	
  Authorization

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

EXHIBIT H-1
TO

5-YEAR CREDIT AGREEMENT

[FORM OF LENDER ADDENDUM]

LENDER ADDENDUM

5-YEAR CREDIT AGREEMENT

The undersigned (i) agrees to all of the
provisions of the 5-Year Credit Agreement, dated as of June 28,
2006, among International Business Machines Corporation, the Subsidiary
Borrowers parties thereto, the Lenders parties thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and certain other parties (as the same may be
amended, supplemented or otherwise modified from time to time, the “Credit Agreement”),
(ii) becomes a party thereto, as a Lender, with an obligation (A) to
make Revolving Credit Loans to the Borrowers in an aggregate principal amount
not to exceed the amount of its Revolving Credit Commitment as set forth
opposite the undersigned Lender’s name in Schedule 1.1 to the Credit Agreement,
as such amount may be changed from time to time as provided in the Credit
Agreement, and (B) if so indicated on Schedule 1.1, to make Swing Line
Loans to the Swing Line Borrowers pursuant to Section 2.5 of the Credit
Agreement in an aggregate principal amount not to exceed the amount of its
Swing Line Commitment as set forth opposite the undersigned Lender’s name in
Schedule 1.1 to the Credit Agreement, as such amount may be changed from time
to time as provided in the Credit Agreement, and (iii) confirms that it
has received the financial statements referred to in Section 4.5 of the
Credit Agreement. Capitalized terms defined in the Credit Agreement shall have
their respective defined meanings herein.

	
   

  	
  Name of Lender:

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  Dated as of June 28, 2006

  	
   

  
					

 

 1

                                                                                                                                                                                                                 

EXHIBIT H-2
TO

5-YEAR CREDIT AGREEMENT

[FORM OF SUBSIDIARY BORROWER ADDENDUM]

SUBSIDIARY BORROWER ADDENDUM

The undersigned hereby (i) agrees to all of the
provisions of the 5-Year Credit Agreement, dated as of June 28, 2006
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among International Business Machines Corporation, the
Subsidiary Borrowers parties thereto, the Lenders parties thereto, JPMorgan
Chase Bank, N.A., as Administrative Agent, and Citibank, N.A., as Syndication
Agent, (ii) becomes a party thereto, as a “Subsidiary Borrower” and a “Borrower”,
and agrees that it shall be bound, as a “Subsidiary Borrower” and a “Borrower”,
by all of the provisions thereof, and (iii) confirms that the
representations and warranties (to the extent they are specifically applicable
to the undersigned) contained in Section 4 of the Credit Agreement (except
the representations and warranties contained in Sections 4.6 and 4.7) are true
and correct as to the undersigned as of the date hereof. Capitalized terms
defined in the Credit Agreement shall have their respecti  ve defined meanings herein.

	
  

  	
  Name of Subsidiary Borrower:

  	
   

  
	
   

  	
   

  	
   

  

 

	
  

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

Dated as of June 28,
2006

 

EXHIBIT I-1
TO

5-YEAR CREDIT AGREEMENT

[FORM OF NEW LENDER SUPPLEMENT]

SUPPLEMENT, dated             ,
20      to the 5-Year
Credit Agreement, dated as of June 28, 2006 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among
International Business Machines Corporation (“IBM”), the Subsidiary Borrowers
parties thereto, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, and Citibank, N.A., as Syndication Agent.

W I T N E S S E T H :

WHEREAS, the Credit Agreement provides in Section 11.23(b) thereof
that any bank, financial institution or other entity, although not originally a
party thereto, may become a party to the Credit Agreement with the consent of
IBM and the Administrative Agent (which consent, in the case of the
Administrative Agent, shall not be unreasonably withheld) by executing and
delivering to IBM and the Administrative Agent a supplement to the Credit
Agreement in substantially the form of this Supplement; and

WHEREAS, the undersigned was not an original party to
the Credit Agreement but now desires to become a party thereto;

NOW, THEREFORE, the undersigned hereby agrees as
follows:

1.     The undersigned agrees to be bound by the provisions of the
Credit Agreement, and agrees that it shall, on the date this Supplement is
accepted by IBM and the Administrative Agent, become a Lender for all purposes
of the Credit Agreement to the same extent as if originally a party thereto,
with a Revolving Credit Commitment of $                    .

2.     The undersigned (a) represents and warrants that it is
legally authorized to enter into this Supplement; (b) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements delivered pursuant to Section 4.5 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Supplement; (c) agrees that it
has made and will, independently and without reliance upon the Administrative Agent
or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement or any instrument or
document furnished pursuant hereto or thereto; (d) appoints and authorizes
the Administrative Agent to take such action as administrative agent on its
behalf and to exercise such powers and discretion under the Credit Agreement or
any instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by
the provisions of the Credit Agreement and will perform in accordance with its
terms all the 

 

obligations which by the terms of the Credit Agreement
are required to be performed by it as a Lender including, without limitation,
if it is organized under the laws of a jurisdiction outside the United States,
its obligation pursuant to Section 2.18(b) of the Credit Agreement.

3.     The undersigned’s address for notices for the purposes of the
Credit Agreement is as follows:

4.     Terms defined in the Credit Agreement shall have their defined
meanings when used herein.

IN WITNESS WHEREOF, the undersigned has caused this
Supplement to be executed and delivered by a duly authorized officer on the
date first above written.

	
  

  	
  [INSERT NAME OF LENDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  

 

	
  Accepted this
          day of

                       ,
  20  .

  	
   

  
	
   

  	
   

  
	
  INTERNATIONAL
  BUSINESS MACHINES CORPORATION

  	
   

  

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

	
  Accepted this
       day of
                  ,
  20  .

  	
   

  
	
   

  	
   

  
	
  JPMORGAN CHASE
  BANK, N.A., as Administrative Agent

  	
   

  

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

 2

EXHIBIT I-2
TO

5-YEAR CREDIT AGREEMENT

[FORM OF INCREMENTAL COMMITMENT SUPPLEMENT]

SUPPLEMENT, dated                        ,
to the 5-Year Credit Agreement, dated as of June 28, 2006 (as
amended from time to time, the “Credit Agreement”), among International
Business Machines Corporation (“IBM”), the Subsidiary Borrowers parties
thereto, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, and Citibank, N.A., as Syndication Agent.

W I T N E S S E T H :

WHEREAS, the Credit Agreement provides in Section 11.23(c) thereof
that any Lender may increase the amount of its Revolving Credit Commitment by
executing and delivering to IBM and the Administrative Agent a supplement to
the Credit Agreement in substantially the form of this Supplement; and

WHEREAS, the undersigned now desires to increase the
amount of its Revolving Credit Commitment under the Credit Agreement;

NOW THEREFORE, the undersigned hereby agrees as
follows:

1.     The undersigned agrees, subject to the terms and conditions of
the Credit Agreement, that on the date this Supplement is accepted by IBM and
the Administrative Agent it shall have its Revolving Credit Commitment
increased by $                  ,
thereby making the amount of its Revolving Credit Commitment $                  .

2.     Terms defined in the Credit Agreement shall have their defined
meanings when used herein.

 

IN WITNESS WHEREOF, the undersigned has caused this
Supplement to be executed and delivered by a duly authorized officer on the
date first above written.

	
  

  	
  [INSERT NAME OF LENDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  

 

	
  Accepted this
          day of

                       ,
  20  .

  	
   

  
	
   

  	
   

  
	
  INTERNATIONAL
  BUSINESS MACHINES CORPORATION

  	
   

  

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

	
  Accepted this
       day of
                  ,
  20  .

  	
   

  
	
   

  	
   

  
	
  JPMORGAN CHASE
  BANK, N.A., as Administrative Agent

  	
   

  

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 2

 

EXHIBIT J TO

5-YEAR CREDIT AGREEMENT

[FORM OF EXTENSION REQUEST]

                        ,
20      

JPMorgan Chase Bank,
N.A., as Administrative Agent

270 Park Avenue

New York, New York 10017

Reference is made to the 5-Year Credit
Agreement, dated as of June 28, 2006 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among
International Business Machines Corporation (“IBM”), the Subsidiary
Borrowers parties thereto, the Lenders parties thereto, JPMorgan Chase Bank, N.A.,
as Administrative Agent, and Citibank, N.A., as Syndication Agent. Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.

Pursuant to Section 2.21(a) of the Credit
Agreement, we hereby request that the Lenders extend the Termination Date now
in effect by a period of one year, to the date June       ,
20   . The Extension Request Deadline related to this Extension
Request shall be
                      ,
20    .(1)

The undersigned
represents that as of the date of this Extension Request (i) the
representations and warranties of IBM contained in the Credit Agreement are
true and correct in all material respects with the same effect as if made on
the date hereof (except to the extent such representations and warranties
expressly relate to an earlier date) and (ii) no Default or Event of
Default has occurred and is continuing.

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTERNATIONAL
  BUSINESS MACHINES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  

 

(1)                                  The
Extension Request Deadline shall be no later than 30 days after delivery of
this Extension Request to the Administrative Agent.Exhibit 10.3

EXECUTION
VERSION

AMENDMENT
NUMBER TWO

TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This AMENDMENT NUMBER TWO TO AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”)
is entered into as of June 23, 2006, by WELLS
FARGO FOOTHILL, INC., a California
corporation (“Lender”), and IMAGE ENTERTAINMENT, INC.,
a Delaware corporation, f/k/a Image Entertainment, Inc., a California
corporation, (“Borrower”), with reference to the following:

WHEREAS,
Borrower and Lender are parties to that certain Amended and Restated Loan and
Security Agreement, dated as of August 10, 2005 (as amended, restated,
supplemented, or otherwise modified from time to time, the “Loan Agreement”);

WHEREAS,
Borrower has requested that Lender make certain amendments to the Loan
Agreement, grant certain consents, and grant a waiver of certain Events of
Default that have occurred under the Loan Agreement; and

WHEREAS,
subject to the terms and conditions set forth herein, Lender is willing to make
the amendments and grant the consents and waiver requested by Borrower.

NOW, THEREFORE,
in consideration of the foregoing and the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:

1.     Defined Terms. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Loan Agreement, as amended hereby.

2.     Amendments to Loan Agreement.

(a)           Section 3.5 of
the Loan Agreement is hereby amended and restated in its entirety as
follows:

3.5           Early Termination by
Borrower. The provisions of Section 3.3 that allow
termination of this Agreement by Borrower only on the Renewal Date and certain
anniversaries thereof notwithstanding, Borrower has the option, at any time
upon one hundred twenty (120) days prior written notice to Foothill, to
terminate this Agreement by paying to Foothill, in full in cash, the
Obligations (including an amount equal to 105% of the undrawn amount of the
L/Cs or L/C Guarantees), together with a premium (the “Early Termination
Premium”) equal to:  (a) on or
before June 30, 2007, the sum of one and one-half percent (1.50%) times
the Maximum Revolving Credit Amount plus one and one-half percent (1.50%) times
the principal amount of any Capital Expenditure Loans outstanding as of the

 

effective date of
the termination of this Agreement; (b) after June 30, 2007 but on or
before June 30, 2008, the sum of one percent (1.00%) times the Maximum
Revolving Credit Amount plus one percent (1.00%) times the principal amount of
any Capital Expenditure Loans outstanding as of the effective date of the
termination of this Agreement; (iii) after June 30, 2008, the sum of
one-half of one percent (0.50%) times the Maximum Revolving Credit Amount plus
one-half of one percent (0.50%) times the principal amount of any Capital
Expenditure Loans outstanding as of the effective date of the termination of
this Agreement.

(b)           Section 6.12(a) of
the Loan Agreement is hereby amended and restated in its entirety as
follows:

(a)           EBITDA. (i) Borrower shall not
have two consecutive fiscal quarters of EBITDA losses (exclusive of the
quarters ending June 30, 2005, March 31, 2006, and June 30,
2006) and (ii) Borrower shall maintain EBITDA, for each fiscal period set
forth below, of not less than the amount indicated below opposite such fiscal
period:

	
  for the immediately
  preceding twelve-month period ending 06/30/06

  	
   

  	
  $

  	
  3,500,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 09/30/06

  	
   

  	
  $

  	
  3,750,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 12/31/06

  	
   

  	
  $

  	
  4,250,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 03/31/07

  	
   

  	
  $

  	
  4,250,000

  	
   

  
	
  for the immediately
  preceding twelve-month period ending 06/30/07 and for each twelve-month
  period ending at each fiscal quarter end thereafter

  	
   

  	
  $

  	
  5,000,000

  	
   

  

 

3.     Consents. Lender hereby
consents to (a) Borrower’s entering into that certain Replication
Agreement, with Sonopress LLC, a Delaware limited liability company (the “Sonopress
Replication Agreement”), in form and substance satisfactory to Agent in its
sole discretion (it being understood between the parties that the form of
agreement attached hereto as Exhibit B is satisfactory to Agent),
and (b) notwithstanding anything to the contrary in Section 7.2
of the Loan Agreement, Borrower’s incurrence of a lien in connection with the
Sonopress Replication Agreement so long as such lien is (i) expressly
junior and subordinate to Lender’s lien in Borrower Collateral and (ii) subject
to a subordination agreement satisfactory to Lender in its sole discretion.

4.     Waiver. Lender hereby waives
the Event of Default that has occurred as a result of the failure by Borrower
to comply with Section 6.12(a) of the Loan Agreement with
respect to the fiscal period ending March 31, 2006.

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5.     Conditions Precedent to Amendment.
The satisfaction of each of the following shall constitute conditions
precedent to the effectiveness of this Amendment and each and every provision
hereof:

(a)           Lender
shall have received this Amendment, duly executed by the parties hereto, and
the same shall be in full force and effect.

(b)           Lender
shall have received a reaffirmation and consent substantially in the form
attached hereto as Exhibit A, duly executed and delivered by each
Guarantor.

(c)           Lender
shall have received an amendment fee in the amount of $20,000, which amount
Borrower authorizes Lender to charge to the Loan Account.

(d)           The
representations and warranties herein and in the Loan Agreement and the other
Loan Documents shall be true and correct in all material respects on and as of
the date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date).

(e)           No
Default or Event of Default shall have occurred and be continuing on the date
hereof, nor shall result from the consummation of the transactions contemplated
herein.

(f)            No
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the consummation of the transactions contemplated
herein shall have been issued and remain in force by any Governmental Authority
against Borrower, any Guarantor, or Lender.

6.     Release. Borrower hereby
waives, releases, remises and forever discharges Lender, each of its
Affiliates, and each of its officers, directors, employees, and agents
(collectively, the “Releasees”), from any and all claims, demands,
obligations, liabilities, causes of action, damages, losses, costs and expenses
of any kind or character, known or unknown, past or present, liquidated or
unliquidated, suspected or unsuspected, which Borrower ever had, now has or
might hereafter have against any such Releasee which relates, directly or
indirectly, to the Loan Agreement or any other Loan Document, or to any acts or
omissions of any such Releasee with respect to the Loan Agreement or any other
Loan Document, or to the lender-borrower relationship evidenced by the Loan
Documents. As to each and every claim released hereunder, Borrower hereby
represents that it has received the advice of legal counsel with regard to the
releases contained herein, and having been so advised, Borrower specifically
waives the benefit of the provisions of Section 1542 of the Civil Code of
California which provides as follows:

“A GENERAL RELEASE DOES
NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

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As to each and every
claim released hereunder, Borrower also waives the benefit of each other
similar provision of applicable federal or state law, if any, pertaining to
general releases after having been advised by its legal counsel with respect
thereto.

7.     Representations and Warranties.
Borrower represents and warrants to Lender that (a) the execution,
delivery, and performance of this Amendment and of the Loan Agreement, as
amended hereby, (i) are within its powers, (ii) have been duly
authorized by all necessary action, and (iii) are not in contravention of
any law, rule, or regulation applicable to it, or any order, judgment, decree,
writ, injunction, or award of any arbitrator, court, or Governmental Authority,
or of the terms of its Governing Documents, or of any contract or undertaking
to which it is a party or by which any of its properties may be bound or
affected; (b) this Amendment and the Loan Agreement, as amended hereby,
are legal, valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms; and (c) no Default or
Event of Default has occurred and is continuing on the date hereof or as of the
date upon which the conditions precedent set forth herein are satisfied.

8.     Choice of Law. The validity
of this Amendment, its construction, interpretation and enforcement, the rights
of the parties hereunder, shall be determined under, governed by, and construed
in accordance with the laws of the State of California.

9.     Counterpart Execution. This Amendment
may be executed in any number of counterparts, all of which when taken together
shall constitute one and the same instrument, and any of the parties hereto may
execute this Amendment by signing any such counterpart. Delivery of an executed
counterpart of this Amendment by telefacsimile or electronic mail shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile or electronic mail also shall deliver an original executed
counterpart of this Amendment, but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment.

10.   Effect on Loan Documents.

(a)           The
Loan Agreement, as amended hereby, and each of the other Loan Documents shall
be and remain in full force and effect in accordance with their respective
terms and hereby are ratified and confirmed in all respects. The execution,
delivery, and performance of this Amendment shall not operate, except as
expressly set forth herein, as a modification or waiver of any right, power, or
remedy of Lender under the Loan Agreement or any other Loan Document. The
waivers, consents, and modifications herein are limited to the specifics
hereof, shall not apply with respect to any facts or occurrences other than
those on which the same are based, shall not excuse future non-compliance with
the Loan Documents, and shall not operate as a consent to any further or other
matter under the Loan Documents.

(b)           Upon
and after the effectiveness of this Amendment, each reference in the Loan
Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or words of like
import referring to the Loan Agreement, and each reference in the other Loan
Documents to “the Loan Agreement”, “thereunder”, “therein”, “thereof” or words
of like import referring to

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the Loan Agreement, shall
mean and be a reference to the Loan Agreement as modified and amended hereby.

(c)           To
the extent that any terms and conditions in any of the Loan Documents shall
contradict or be in conflict with any terms or conditions of the Loan
Agreement, after giving effect to this Amendment, such terms and conditions are
hereby deemed modified or amended accordingly to reflect the terms and
conditions of the Loan Agreement as modified or amended hereby.

(d)           This
Amendment is a Loan Document.

11.   Entire Agreement. This
Amendment embodies the entire understanding and agreement between the parties
hereto with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous agreements or understandings with respect to the
subject matter hereof, whether express or implied, oral or written.

[signature page follows]

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IN WITNESS
WHEREOF, the parties have entered into this Amendment as of the date first
above written.

	
  

  	
   

  	
  IMAGE ENTERTAINMENT, INC.,

  	 

	
   

  	
   

  	
  a Delaware corporation

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
  /s/ JEFF M. FRAMER

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Financial Officer

  
						

 

[SIGNATURE PAGE TO
AMENDMENT NUMBER TWO TO

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT]

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  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
  /s/ Terri Le

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  

 

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Exhibit A

REAFFIRMATION AND
CONSENT

Dated as of June 23,
2006

Reference hereby
is made to that certain Amendment Number Two to Loan and Security Agreement,
dated as of the date hereof (the “Amendment”), between Wells Fargo
Foothill, Inc. (“Lender”), and Image Entertainment, Inc. (“Borrower”).
Capitalized terms used herein shall have the meanings ascribed to them in that
certain Amended and Restated Loan and Security Agreement, dated as of August 10,
2005 (as amended, restated, supplemented, or otherwise modified from time to
time, the “Loan Agreement”), between Borrower and Lender. Each of the
undersigned hereby (a) represents and warrants that the execution and
delivery of this Reaffirmation and Consent are within its powers, have been
duly authorized by all necessary action, and are not in contravention of any
law, rule, or regulation applicable to it, or any order, judgment, decree,
writ, injunction, or award of any arbitrator, court, or Governmental Authority,
or of the terms of its Governing Documents, or of any contract or undertaking
to which it is a party or by which any of its properties may be bound or
affected, (b) consents to the amendment of the Loan Agreement set forth in
the Amendment and any waivers granted therein; (c) acknowledges and
reaffirms all obligations owing by it to Lender under any Loan Document to
which it is a party; (d) agrees that each Loan Document to which it is a
party is and shall remain in full force and effect, and (e) ratifies and
confirms its consent to any previous amendments of the Loan Agreement and any
previous waivers granted with respect to the Loan Agreement. Although each of
the undersigned have been informed of the matters set forth herein and have
acknowledged and agreed to same, each of the undersigned understands that
Lender shall have no obligation to inform the undersigned of such matters in
the future or to seek the undersigned’s acknowledgement or agreement to future
amendments, waivers, or modifications, and nothing herein shall create such a
duty.

[signature page follows]

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       IN WITNESS
WHEREOF, the undersigned have executed this Reaffirmation and Consent as of the
date first set forth above.

 

	
  

  	
  HOME VISION ENTERTAINMENT, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JEFF M. FRAMER

  
	
   

  	
  Name: Jeff M. Framer

  
	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EGAMI MEDIA, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JEFF M. FRAMER

  
	
   

  	
  Name: Jeff M. Framer

  
	
   

  	
  Title: Chief Financial Officer

  

 

[SIGNATURE PAGE TO
REAFFIRMATION AND CONSENT TO AMENDMENT NUMBER TWO TO

AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT]

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Exhibit B

FORM OF
SONOPRESS REPLICATION AGREEMENT

 

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